Document:

Exhibit

10.4

 

INDENTURE (this “Indenture”)

dated as of March 26, 2003, by and among BROADWING INC., an Ohio corporation

(the “Company”), the Guarantors (as hereinafter defined) listed on the

signature pages hereof as Guarantors; and The Bank of New York, a New York

banking corporation, as trustee (the “Trustee”).

 

Each party agrees as

follows for the benefit of the other parties and for the equal and ratable

benefit of the Holders of (a) the Company’s Senior Subordinated Discount Notes

due 2009 issued on the date hereof (such notes, the “Initial Notes”) and

(b) if and when issued as provided in the Exchange and Registration Rights

Agreement (as defined in Appendix A hereto (the “Appendix”)) or

in this Indenture, the Company’s Senior Subordinated Discount Notes due 2009

issued in the Registered Exchange Offer in exchange for any Initial Notes or

otherwise as provided in this Indenture (the “Exchange Notes” and

together with the Initial Notes issued hereunder, the “Notes,” such term

to include any such notes issued in exchange or replacement therefor).  Except as otherwise provided herein, the

Notes shall be limited to $441,628,051.27 in aggregate principal amount at

Maturity.

 

ARTICLE 1.

 

DEFINITIONS

AND ACCOUNTING TERMS

 

SECTION 1.01.              Definitions.  As used herein, the following terms shall

have the meanings specified herein unless the context otherwise requires:

 

“Accredited

Investor” means any Person that is an “accredited investor” within the

meaning of Rule 501(a) under the Securities Act.

 

“Accreted Value” means,

with respect to the Initial Notes and the Exchange Notes of the same series, as

of any date (the “Specified Date”), the amount provided below for each $1,000

principal amount at Maturity of such Notes:

 

(a)           if the Specified Date occurs on one of the following dates

(each, an “Accrual Date”), the Accreted Value shall equal the amount set

forth below under the “Accreted Value” column for such Accrual Date:

 

	

  Accrual Date

  	

   

  	

  Accreted

  Value

  	

   

  
	

  June

  30, 2003

  	

   

  	

  $

  	

  800.54

  	

   

  
	

  December

  31, 2003

  	

   

  	

  $

  	

  816.55

  	

   

  
	

  June

  30, 2004

  	

   

  	

  $

  	

  832.88

  	

   

  
	

  December

  31, 2004

  	

   

  	

  $

  	

  849.54

  	

   

  
	

  June

  30, 2005

  	

   

  	

  $

  	

  866.53

  	

   

  
	

  December

  31, 2005

  	

   

  	

  $

  	

  883.86

  	

   

  
	

  June

  30, 2006

  	

   

  	

  $

  	

  901.53

  	

   

  
	

  December

  31, 2006

  	

   

  	

  $

  	

  919.56

  	

   

  
	

  June

  30, 2007

  	

   

  	

  $

  	

  937.96

  	

   

  
	

  January

  20, 2008

  	

   

  	

  $

  	

  958.96

  	

   

  
	

  Stated

  Maturity (January 20, 2009)

  	

   

  	

  $

  	

  1,000.00

  	

   

  

 

1

 

; or

 

(b)           if the Specified Date occurs before the first Accrual

Date, the Accreted Value shall equal the sum of (A) the original issue price of

$792.52 per $1,000 of

principal amount at Maturity of the Notes and (B) an amount equal to the

product of (1) the Accreted Value for the first Accrual Date less such original

issue price multiplied by (2) a fraction, the numerator of which is the number

of days elapsed from the Closing Date to the Specified Date, using a 360-day

year of twelve 30-day months, and the denominator of which is the number of

days from the Closing Date to the first Accrual Date using a 360-day year of

twelve 30-day months.  In the event the

Trustee is required to take any action which requires the calculation described

in the preceding sentence, upon request by the Trustee, the Company shall

calculate such Accreted Value and set forth such amount in an Officers’

Certificate; or

 

(c)           if the Specified Date occurs between two Accrual Dates,

the Accreted Value shall equal the sum of (A) the Accreted Value for the

Accrual Date immediately preceding such Specified Date and (B) an amount equal

to the product of (1) the Accreted Value for the immediately following Accrual

Date less the Accreted Value for the immediately preceding Accrual Date

multiplied by (2) a fraction, the numerator of which is the number of days

elapsed from the immediately preceding Accrual Date to the Specified Date,

using a 360-day year of twelve 30-day months, and the denominator of which is

180.  In the event the Trustee is

required to take any action which requires the calculation described in the

preceding sentence, upon request by the Trustee, the Company shall calculate

such Accreted Value and set forth such amount in an Officers’ Certificate; or

 

(d)           if the Specified Date occurs after the last Accrual Date,

the Accreted Value will equal $1,000.

 

If an

Event of Default has occurred and is continuing on or prior to the Specified

Date, the Accreted Value on such date shall be increased (until such time as no

Event of Default is continuing) by an amount equal to the product of (A) a

fraction, the numerator of which is the number of days, using a 360-day year of

twelve 30-day months, since the immediately preceding Accrual Date during which

such Event of Default occurred and was continuing and the denominator of which

is 360, multiplied by (B) 0.0075.

 

“Acquired

Indebtedness” means, with respect to any specified Person,

(i) Indebtedness of any other Person existing at the time such other

Person is merged with or into or became a Restricted Subsidiary of such

specified Person, including, without limitation, Indebtedness Incurred in

connection with, or in contemplation of, such other Person merging with or into

or becoming a Restricted Subsidiary of such specified Person, and

(ii) Indebtedness secured by a Lien encumbering any asset acquired by such

specified Person at the time such asset is acquired by such specified Person.

 

2

 

“Adjusted

EBITDA” means for the applicable period of measurement of the Company and

its Restricted Subsidiaries, (i) Consolidated EBITDA for such period minus

(ii) Capital Expenditures of the Company and its Restricted Subsidiaries for such

period, on a consolidated basis.

 

“Affiliate”

means, with respect to any specified Person, any other Person directly or

indirectly controlling or controlled by or under direct or indirect common

control with such specified Person.  For

purposes of this definition, “control” (including, with correlative

meanings, the terms “controlling,” “controlled by” and “under

common control with”), as used with respect to any specified Person, shall

mean the possession, directly or indirectly, of the power to direct or cause

the direction of the management or policies of such Person, whether through the

ownership of voting securities, by agreement or otherwise; provided, however,

that, for purposes of Section 5.06 only, in the case of the Company or

any of its Subsidiaries beneficial ownership of 10% or more of the Voting Stock

in the Company or such Subsidiary, as the case may be, shall be deemed to be

control.  Notwithstanding the foregoing,

in no event will the Purchasers or any Holder, any lender under the Credit Agreement,

any holder of Convertible Subordinated Notes or any holder of Senior Notes, or

any of their respective Affiliates be deemed to be an Affiliate of the Company

or any of its Subsidiaries solely by virtue of purchasing or holding any Notes

or being such a lender, or holding any Convertible Subordinated Notes or Senior

Notes.

 

“Affiliate

Transaction” is defined in Section 5.06.

 

“Alternative

Mezzanine Debt” is defined in Section 5(l) of the Purchase Agreement.

 

“Appendix”

is defined in the recitals.

 

“Applicable

Capital Lease Amount” means $41,300,000 as of September 30, 2002, which

amount shall increase by $30,000,000 on the Closing Date and on December 31,

2003 and by $15,000,000 on December 31, 2004, up to a maximum aggregate amount

of $116,300,000.

 

“Applicable

Law” means all laws, statutes, rules, regulations and orders of, and

legally binding interpretations by, any Governmental Authority and judgments,

decrees, injunctions, writs, permits, orders or like governmental action of any

Governmental Authority applicable to the Company or any of its Subsidiaries or

any of their properties, assets or operations, excluding Environmental Laws.

 

“Applicable

Percentage” means for purposes of Section 5.02(C), (a) prior to the

Distribution Date, 25% and (b) after the Distribution Date, 50%.

 

“Asset

Disposition” means the disposition by the Company or any Restricted

Subsidiary of the Company whether by sale, issuance, lease (as lessor (other

than under operating leases)), transfer, loss, damage, destruction, condemnation

or other transaction (including any merger or consolidation) or series of

related transactions of any of the following: 

(a) any of the Capital Stock of any of the Company’s Restricted

Subsidiaries, (b) all or substantially all of the assets of the Company or any

of its Restricted Subsidiaries (it being

 

3

 

understood and agreed that the disposition of the BCI

Group or any assets of the BCI Group does not constitute a disposition of all

or substantially all of the assets of the Company or any of its Restricted

Subsidiaries) or (c) any other assets of the Company or any of its Restricted

Subsidiaries.  Notwithstanding the

foregoing, Asset Dispositions shall be deemed not to include (i) a

transfer of assets by (x) the Company to a Wholly Owned Restricted Subsidiary

of the Company, or by a Restricted Subsidiary of the Company to the Company or

to another Wholly Owned Restricted Subsidiary of the Company or (y) the Company

or a Restricted Subsidiary to CBW, or by CBW to the Company or to another

Wholly Owned Restricted Subsidiary of the Company; provided that the

aggregate amount of all such transfers to CBW, together with the amount of all

Permitted Investments made pursuant to clause (i)(A)(y) of the definition

thereof, shall not exceed 5% of Consolidated Total Assets, (ii) an

issuance of Capital Stock by a Subsidiary of the Company to the Company or to a

Restricted Subsidiary of the Company, (iii) a Restricted Payment that is

permitted by the provisions of Section 5.02, (iv) a Permitted

Investment, (v) any conversion of Cash Equivalents into cash or any other

form of Cash Equivalents, (vi) any foreclosure on assets, (vii) sales or

dispositions of past due accounts receivable or notes receivable in the Ordinary

Course of Business, (viii) transactions permitted under Article 6

hereof, (ix) grants of credits and allowances in the Ordinary Course of

Business, (x) operating leases or the sublease of real or personal property or

licenses of intellectual property, in each case, on commercially reasonable

terms entered into in the Ordinary Course of Business, (xi) trade-ins or

exchanges of equipment or other fixed assets, (xii) the sale and leaseback of

any assets within 180 days of the acquisition thereof, (xiii) sales of damaged,

worn-out or obsolete equipment or assets that, in the Company’s reasonable

judgment, are no longer either used or useful in the business of the Company or

its Subsidiaries, (xiv) dispositions of inventory in the Ordinary Course

of Business; (xv) the disposition of cash or investment securities in the

ordinary course of management of the investment portfolio of the Company and

its applicable Subsidiaries; (xvi) sales of assets with a fair market value of

less than $250,000; or (xvii) sales of other assets with a fair market value

not to exceed $10,000,000 in the aggregate in any fiscal year.

 

“Asset

Sale Offer” is defined in Section 4.10(a).

 

“Attributable

Debt” in respect of a Sale and Leaseback Transaction means, at the time of

determination, the present value (discounted at the implicit rate of interest

borne by the Notes including any pay-in-kind interest and amortization

discount) determined in accordance with GAAP of the obligation of the lessee

for net rental payments during the remaining term of the lease included in such

Sale and Leaseback Transaction (including any period for which such lease has

been extended or may, at the option of the lessor, be extended).

 

“Bankruptcy

Law” means Title 11 of the United States Code or any similar federal or

state bankruptcy, insolvency, reorganization or other law for the relief of

debtors.

 

“BCI”

means Broadwing Communications Inc., a Delaware corporation.

 

“BCI

Group” means BCI and its Subsidiaries.

 

“BCSI”

means Broadwing Communications Services Inc., a Subsidiary of BCI.

 

4

 

“Blockage

Notice” is defined in Section 8.03.

 

“Blockage

Period” is defined in Section 8.03.

 

“Board”

and “Board of Directors” means, as to any Person, the board of directors,

the board of advisors (or similar governing body) of such Person.

 

“Business

Day” means any day other than a Legal Holiday.

 

“Capital

Expenditures” means, for any period and with respect to any Person, the

aggregate of all expenditures by such Person and its Subsidiaries for the

acquisition or leasing of fixed or capital assets or additions to fixed or

capital assets (including replacements, capitalized repairs and improvements

during such period) which should be capitalized under GAAP on a consolidated balance

sheet of such Person and its Subsidiaries.

 

“Capitalized

Lease Obligation” means, at the time any determination thereof is to be

made, an obligation that is required to be classified and accounted for as a

capitalized lease for financial reporting purposes in accordance with GAAP, and

the amount of Indebtedness represented by such obligation shall be the

capitalized amount of such obligation determined in accordance with GAAP; and

the Stated Maturity thereof shall be the date of the last payment of rent or

any other amount due under such lease.

 

“Capital

Stock” of any Person means any and all shares, interests, warrants,

options, participations or other equivalents of or interests in (however

designated) equity of such Person, including any Preferred Stock but excluding

any debt securities including those convertible into such equity.

 

“Cash

Equivalents” means (i) 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 (1) year from the date of acquisition thereof;

(ii) commercial paper maturing no more than one (1) year from the date of

acquisition and, issued by a corporation organized under the laws of the United

States that has a rating of at least A-1 from S&P or at least P-1 from

Moody’s; (iii) time deposits maturing no more than thirty (30) days from the

date of creation, certificates of deposit, money market deposits or bankers’ acceptances

maturing within one (1) year from the date of acquisition 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, surplus and undivided profits of

not less than $250,000,000; (iv) repurchase obligations with a term of not more

than 30 days for underlying securities of the types described in

clause (i) above entered into with a bank meeting the qualifications

described in clause (iii) above; (v) deposits or investments in mutual or

similar funds offered or sponsored by brokerage or other companies having

membership in the Securities Investor Protection Corporation and having combined

capital and surplus of not less than $250,000,000; and (vi) other money market

accounts or mutual funds which invest primarily in the securities described

above.

 

“CBT”

means Cincinnati Bell Telephone Company, an Ohio corporation.

 

5

 

“CBT

Assets” means any assets of CBT (including Capital Stock of the

Subsidiaries of CBT) and any of its Subsidiaries (including Capital Stock of

the Subsidiaries of such Subsidiaries). 

To the extent any CBT Asset is transferred to another Restricted

Subsidiary of the Company in a transaction that does not constitute an Asset

Disposition, such asset shall remain a CBT Asset for purposes of this

Indenture.

 

“CBW”

means Cincinnati Bell Wireless LLC, an Ohio limited liability company.

 

“CBW

Assets” means any assets of CBW Co. (including Capital Stock of the

Subsidiaries of CBW and Spectrum Assets) and any of its Subsidiaries (including

Capital Stock of the Subsidiaries of such Subsidiaries). To the extent any CBW

Asset is transferred to another Restricted Subsidiary of the Company in a

transaction that does not constitute an Asset Disposition, such asset shall

remain a CBW Asset for purposes of this Indenture.

 

“CBW

Co.” means Cincinnati Bell Wireless Company, an Ohio corporation.

 

“Centralized

Cash Management System” means the cash management system referred to in

Section 5.02(f)(ix) of the Credit Agreement as in effect on the date hereof and

described in Schedule 5.01(r) thereof.

 

“Change

of Control” means the occurrence of any of the following:  (a) the sale, lease, transfer,

conveyance or other disposition (other than by way of merger or consolidation),

in one or more related transactions, of all or substantially all of the

properties and assets of the Company and its Subsidiaries, taken as a whole (it

being understood and agreed that the disposition of the BCI Group does not

constitute a disposition of all or substantially all of the properties and

assets of the Company and its Subsidiaries, taken as a whole), to any Person unless:

(x) pursuant to such transaction such assets are changed into or exchanged for,

in addition to any other consideration, securities of such Person that

represent immediately after such transaction at least a majority of the

aggregate voting power of the Voting Stock of such Person and (y) no “person”

(as such term is used in Section 13(d)(3) of the Exchange Act) or “group”

(within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) is the

beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,

except that such person or group shall be deemed to have “beneficial ownership”

of all shares that any such person or group has the right to acquire, whether

such right is exercisable immediately or only after the passage of time),

directly or indirectly, of more than 35% of either the total economic value of

such Person or the total voting power of the Voting Stock of such Person;

(b) the adoption of a plan relating to the liquidation or dissolution of

the Company; (c) any “person” (as such term is used in Section 13(d)(3) of the

Exchange Act) or “group” (within the meaning of Rules 13d-3 and 13d-5 under the

Exchange Act) is or becomes the beneficial owner (as defined in Rules 13d-3 and

13d-5 under the Exchange Act, except that such person or group shall be deemed

to have “beneficial ownership” of all shares that any such person or group has

the right to acquire, whether such right is exercisable immediately or only

after the passage of time), directly or indirectly, of more than 35% of either the

total economic value of the Company’s outstanding Capital Stock or the total

voting power of the Voting Stock of the Company; (d) during any period of two

consecutive years, individuals who at the beginning of such period constituted

the Board of Directors of the Company (together with any new directors whose

election by such Board of Directors of the Company or whose nomination for

election by the shareholders of the Company, was approved

 

6

 

by a majority vote of the directors of the Company

then still in office who were either directors at the beginning of such period

or whose election or nomination for election was previously so approved) cease

for any reason to constitute a majority of the Board of Directors of the

Company then in office; (e) the merger or consolidation of the Company with or

into another Person or the merger of another Person with or into the Company,

and the securities of the Company that are outstanding immediately prior to

such transaction and that represent 100% of the aggregate voting power of the

Voting Stock of the Company are changed into or exchanged for cash, securities

or property, unless: (x) pursuant to such transaction such securities

are changed into or exchanged for, in addition to any other consideration,

securities of the surviving Person or transferee that represent immediately

after such transaction, at least a majority of the aggregate voting power of

the Voting Stock of the surviving Person or transferee and (y) no “person” (as

such term is used in Section 13(d)(3) of the Exchange Act) or “group” (within

the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) is the beneficial

owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that

such person or group shall be deemed to have “beneficial ownership” of all

shares that any such person or group has the right to acquire, whether such

right is exercisable immediately or only after the passage of time), directly

or indirectly, of more than 35% of either the total economic value of such

surviving Person or transferee or the total voting power of the Voting Stock of

such surviving Person or transferee; or (f) any “change of control” as defined

in the Convertible Subordinated Indenture to the extent not waived by holders

of the Convertible Subordinated Notes.

 

“Change

of Control Offer” is defined in Section 4.09(a).

 

“Change

of Control Payment” is defined in Section 4.09(a).

 

“Change

of Control Payment Date” is defined in Section 4.09(b)(ii).

 

“Cincinnati

Bell Group” means the Company and its Restricted Subsidiaries.

 

“Closing

Date” is defined in the Purchase Agreement.

 

“Code”

means the Internal Revenue Code of 1986, as amended from time to time, and the

rules and regulations promulgated thereunder from time to time.

 

“Commission”

means the Securities and Exchange Commission, as from time to time constituted,

created under the Exchange Act or, if at any time after the execution of this

Indenture such Commission is not existing and performing the duties now

assigned to it under the Exchange Act, the body performing such duties at such

time.

 

“Common

Stock” of any Person means any and all shares, units, interests or other

participations in, and other equivalents (however designated and whether voting

or non-voting) of such Person’s common stock whether outstanding on the Closing

Date or issued after the Closing Date, and includes, without limitation, all

series and classes of such common stock.

 

“Company”

is defined in the preamble.

 

“Consolidated”

or “consolidated” (including the correlative term “consolidating”)

or on a “consolidated basis,” when used with reference to any financial

term in this Indenture

 

7

 

(but not when used with respect to any Tax Return or

tax liability), means the consolidation for two or more Persons of the amounts

signified by such term for all such Persons, with inter-company items

eliminated in accordance with GAAP.

 

“Consolidated Adjusted Debt” means the sum of

(a) Indebtedness of the Company and its Restricted Subsidiaries (exclusive of

Indebtedness under the Convertible Subordinated Notes and Indebtedness referred

to in clauses (iv) (unless such Indebtedness is required to be recorded as

liability on the consolidated balance sheet of the Company and its Restricted

Subsidiaries in accordance with GAAP) and (viii) of the definition thereof)

determined on a consolidated basis in accordance with GAAP, plus (b) the amount

of reserves of the Company and its Restricted Subsidiaries then outstanding in

excess of $35,000,000 against any income tax liabilities.

 

“Consolidated

Adjusted Debt to Adjusted EBITDA Ratio” means, as of any date of

determination, the ratio of (a) Consolidated Adjusted Debt as of such date to

(b) Adjusted EBITDA for the applicable four-quarter period ending on the last

day of the most recently ended quarter for which consolidated financial

statements of the Company and its Restricted Subsidiaries are, or should have

been, available in accordance with the Transaction Documents.

 

“Consolidated EBITDA”

means for the applicable period of measurement, the Consolidated Net Income of

the Company and its Restricted Subsidiaries on a consolidated basis, plus,

without duplication, the following for the Company and its Restricted

Subsidiaries to the extent deducted in calculating such Consolidated Net

Income:  (i) Consolidated Interest

Expense for such period, plus (ii)  provisions for taxes based on

income, plus (iii) total depreciation expense, plus (iv) total

amortization expense, plus (v) other non-cash items reducing

Consolidated Net Income (excluding any such non-cash item to the extent that it

represents an accrual or reserve for potential cash items in any future period

or amortization of a prepaid cash item) less other non-cash items

increasing Consolidated Net Income (excluding any such non-cash item to the

extent it represents the reversal of an accrual or reserve for potential cash

item in any prior period), plus (vi) charges taken in accordance with

SFAS 142, plus (vii) all net cash extraordinary losses less net

cash extraordinary gains, plus (vii) all restructuring charges set forth

on Schedule 1.1(a).

 

“Consolidated EBITDA

to Consolidated Interest Ratio” means as of any date of determination the

ratio of (a) Consolidated EBITDA to (b) Consolidated Interest Expense, in each

case, for the applicable four-quarter period ending on the last day of the most

recently ended quarter for which consolidated financial statements of the

Company and its Restricted Subsidiaries are, or should have been, available in

accordance with the Transaction Documents.

 

“Consolidated

Interest Expense” means for the applicable period of measurement of the

Company and its Restricted Subsidiaries on a consolidated basis, the aggregate

interest expense for such period determined in accordance with GAAP (including

all commissions, discounts, fees and other charges in connection with standby

letters of credit and similar instruments) for the Company and its Restricted

Subsidiaries on a consolidated basis, but excluding all amortization of

financing fees and other charges incurred by the Company and its Restricted

Subsidiaries in connection with the issuance of Indebtedness.

 

8

 

“Consolidated

Net Income” means for any period the net income (or loss) before provision

for dividends on Preferred Stock of the Company and its Restricted Subsidiaries

on a consolidated basis for such period determined in conformity with GAAP, but

excluding, without duplication, the following clauses (a) through (f) to the

extent included in the computations thereof: 

(a) the income (or loss) of any Person accrued prior to the date it

becomes a Restricted Subsidiary of the Company or is merged into or

consolidated with the Company or any of its Restricted Subsidiaries or that

Person’s assets are acquired by the Company or any of its Restricted

Subsidiaries; (b) the income (or loss) of any Person (other than the Company or

a Restricted Subsidiary) in which such Person has an interest except to the

extent of the amount of dividends or other distributions actually paid to the

Company or a Restricted Subsidiary (which amount shall be included in

Consolidated Net Income); (c) the income of any Restricted Subsidiary of the

Company to the extent that the declaration or payment of dividends or similar

distributions by that Restricted Subsidiary of that income is not at the time

permitted by operation of the terms of its charter or any agreement,

instrument, judgment, decree, order, statute, rule or governmental regulation

applicable to that Restricted Subsidiary (except to the extent of the amount of

dividends or similar distributions actually lawfully paid to the Company or a

Restricted Subsidiary); (d) any after tax gains or losses attributable to Asset

Dispositions or returned surplus assets of any pension plan; (e) (to the extent

not included in clauses (a) through (d) above) (i) any net extraordinary gains

or net extraordinary losses or (ii) any net non-recurring gains or

non-recurring losses to the extent attributable to Asset Dispositions, the

exercise of options to acquire Capital Stock and the extinguishment of

Indebtedness; and (f) cumulative effect of a change in accounting principles.

 

“Consolidated

Total Assets” means, as at any date of determination, the aggregate amount

of assets reflected on the consolidated balance sheet of the Company and its

Restricted Subsidiaries (excluding, however, for the avoidance of doubt the

assets of the BCI Group) prepared in accordance with GAAP most recently

delivered to the Holders pursuant to Section 4.02 hereof or Section 9

of the Purchase Agreement.

 

“Convertible

Preferred Stock” means the 12 1⁄2% Series B Junior Exchangeable Preferred

Stock Due 2009 of BCI and the 6 3⁄4% Cumulative Convertible Preferred Stock of

the Company.

 

“Convertible

Subordinated Notes” means those certain 6 3⁄4% Convertible Subordinated Notes

due 2009 of the Company issued pursuant to the Convertible Subordinated

Indenture with an original aggregate issue price of $400,000,000, and any such

notes issued in exchange or replacement therefor.

 

“Convertible

Subordinated Indenture” means the indenture relating to the Convertible

Subordinated Notes dated as of July 21, 1999, between the Company and the Bank

of New York, as Trustee.

 

“Credit

Agreement” means the Amendment and Restatement of the Credit Agreement,

dated as of November 9, 1999, as amended and restated as of January 12, 2000

and as of the date hereof, as amended, by and among the Company, BCSI, the

lenders party thereto from time to time, Bank of America, N.A., as syndication

agent, Citicorp USA, Inc., as administrative agent and certain other agents,

together with the related documents thereto

 

9

 

(including, without limitation, any guarantee

agreements and security documents), in each case as such agreement or

agreements may be amended (including any amendment and restatement thereof),

restated, supplemented, replaced, restructured, waived, Refinanced or otherwise

modified from time to time, including any amendment, supplement, modification

or agreement adding Subsidiaries of the Company as additional borrowers or

guarantors thereunder or extending the maturity of, Refinancing, replacing or

otherwise restructuring all or any portion of the Indebtedness under such

agreement or any successor or replacement agreement, and whether by the same or

any other agent, lender or group of lenders or one or more agreements,

contracts, indentures or otherwise; provided

that, except as provided in the next proviso, in no event may such agreement be

amended (including any amendment and restatement thereof), supplemented,

replaced, restructured, Refinanced or otherwise modified to increase the amount

of borrowings permitted to be Incurred pursuant to Section 5.04(b)(vii);

and, provided, further, however,

that, in addition to the Indebtedness Incurred pursuant to Section

5.04(b)(vii), Other Senior Indebtedness (to the extent permitted to be

Incurred pursuant to the definition thereof) may be Incurred, in whole or in

part, under the Credit Agreement.

 

“Credit

Documents” means the Credit Agreement, any Secured Hedge Agreement that is

secured under (and as defined in) the Credit Agreement, and all certificates,

instruments, financial and other statements and other documents and agreements

made or delivered from time to time in connection therewith and related

thereto.

 

“Currency

Agreement” means any foreign exchange contract, currency swap agreement or

other similar agreement or arrangement designed to protect the Company or any

Subsidiary of the Company against fluctuations in currency values.

 

“Custodian”

is defined in Section 7.01.

 

“Definitive

Note” is defined in the Appendix.

 

“Default”

means any event, act or condition that is, or with the giving of notice, lapse

of time or both would constitute, an Event of Default.

 

“Depositary”

is defined in the Appendix.

 

“Designated

Senior Indebtedness” means (i) Indebtedness under or in respect of the

Credit Agreement and (ii) any other Indebtedness constituting Senior

Indebtedness which, at the time of determination, has an aggregate principal

amount of at least $25,000,000 and is specifically designated in the instrument

evidencing such Senior Indebtedness as “Designated Senior Indebtedness” by the

Company.

 

“Disqualified

Capital Stock” means that portion of any Capital Stock which, by its terms

(or by the terms of any security into which it is convertible or for which it

is exchangeable at the option of the holder thereof), or upon the happening of

any event (other than an event which would constitute a Change of Control or

Asset Disposition), matures (excluding any maturity as the result of an

optional redemption by the issuer thereof) or is mandatorily redeemable,

pursuant to a sinking fund obligation or otherwise, or is redeemable at the

sole option of the holder thereof (except, in each case, upon the occurrence of

a Change of Control or Asset Disposition) on or prior to the Stated Maturity.

 

10

 

“Distribution

Date” means the date on which (a) the Notes become Widely Held or (b) a

Positive Credit Event occurs.

 

“Environmental

Laws” means all applicable foreign, federal, state or local laws, statutes,

common law duties, rules, regulations, ordinances and codes, together with all

administrative orders, requests, licenses, authorizations and permits of, and

agreements with, any Governmental Authorities, in each case relating to

environmental, health, safety and land use matters; including, without

limitation, the Comprehensive Environmental Response, Compensation and

Liability Act of 1980, the Clean Air Act, the Federal Water Pollution Control

Act of 1972, the Solid Waste Disposal Act, the Federal Resource Conservation

and Recovery Act, the Toxic Substances Control Act, and the Emergency Planning

and Community Right-to-Know Act.

 

“Event

of Default” is defined in Section 7.01.

 

“Excess

Proceeds” is defined in Section 5.05(b).

 

“Exchange

Act” means the Securities Exchange Act of 1934, as amended.

 

“Exchange

and Registration Rights Agreement” is defined in the Appendix.

 

“Exchange

Guarantees” means the Guarantees of the Exchange Notes issued in the

Registered Exchange Offer.

 

“Exchange

Notes” is defined in the recitals.

 

“Existing

BCSI Loan” means Indebtedness of BCSI Incurred under the Credit Agreement

prior to the date of this Indenture and any Indebtedness of BCSI Incurred under

the Credit Agreement for the purpose of making interest payments on (w) the

Existing BCSI Loan, (x) any Indebtedness of the BCI Group Incurred under the

Credit Agreement after the date of this Indenture subject to the limitations

set forth in Section 5.11(a), (y) BCI’s 9% Senior Subordinated Notes Due

2008 or (z) BCI’s 12 1⁄2% Senior Series B Notes due 2005.

 

“Existing

Indebtedness” all Indebtedness of the Company and its Restricted

Subsidiaries existing as of the Closing Date (after giving effect to the

redemption, repurchase, repayment or prepayment of Indebtedness out of the

proceeds of the Notes); provided

that for purposes of Section 5.04(b), Existing Indebtedness shall not

include Indebtedness of the type permitted to be Incurred by Section

5.04(b)(iii) and (v).

 

“fair

market value” means, with respect to any asset or property, the price which

could be negotiated in an arm’s-length transaction between a willing seller and

a willing and able buyer.  Unless otherwise expressly required elsewhere

in this Indenture, fair market value will be determined in good faith (i) for

transactions involving an aggregate consideration equal to or less than $30,000,000,

by a Responsible Officer of the Company, as evidenced, in the case of any such

transaction involving consideration greater than $3,000,000, by an Officers’

Certificate and (ii) for transactions involving an aggregate consideration in

excess of $30,000,000, by the Board of Directors of the Company, as evidenced

by a resolution of the Board of Directors, and in the case of both clause (i)

and (ii), such determination shall be conclusive absent a manifest error.

 

11

 

“fiscal

year” means a fiscal year of the Company and its Restricted Subsidiaries

ending on December 31 of any calendar year.

 

“GAAP”

means United States generally accepted accounting principles as of the Closing

Date set forth in the opinions and pronouncements of the Accounting Principles

Board of the American Institute of Certified Public Accountants and statements

and pronouncements of the Financial Accounting Standards Board or in such other

statements by such other entity as have been approved by a significant segment

of the accounting profession.

 

“Global

Notes Legend” is defined in the Appendix.

 

“Governmental

Authority” means (a) the government of the United States of America or

any State or other political subdivision thereof, (b) any government or

political subdivision of any other jurisdiction in which the Company or any of

its Subsidiaries conducts all or any part of its business, or which properly

asserts jurisdiction over any properties of the Company or any of its

Subsidiaries or (c) any entity properly exercising executive, legislative,

judicial, regulatory or administrative functions of any such government.

 

“Guarantee”

means a guarantee (other than by endorsement of negotiable instruments for

collection or deposit in the ordinary course of business), direct or indirect,

in any manner (including, without limitation, letters of credit and

reimbursement agreements in respect thereof), of all or any part of any

Indebtedness.

 

“Guaranteed

Obligations” is defined in Section 11.01(a).

 

“Guarantor”

means any Restricted Subsidiary of the Company that has provided a guarantee of

the Obligations with respect to the Notes.

 

“Holder”

means a Person in whose name a Note is registered at the Registrar.

 

“Incur”

is defined in Section 5.04(a).

 

“Indebtedness”

means, with respect to any Person, without duplication:  (i) the principal of and premium (if any) in

respect of indebtedness of such Person for borrowed money (including, without

limitation, Senior Indebtedness); (ii) the principal of and premium (if any) in

respect of indebtedness of such Person evidenced by bonds, debentures, notes or

other similar instruments; (iii) all Attributable Debt and all Capitalized

Lease Obligations of such Person; (iv) all obligations of such Person issued or

assumed as the deferred purchase price of property, all conditional sale

obligations and all obligations under any title retention agreement, in each

case to the extent the purchase price is due more than six (6) months from the

date the obligation is Incurred (but excluding trade accounts payable and other

accrued liabilities arising in the Ordinary Course of Business); (v) all

obligations for the reimbursement of any obligor on any letter of credit,

banker’s acceptance or similar credit transaction; (vi) Guarantees and other

contingent obligations in respect of Indebtedness referred to in clauses (i)

through (v) above and clause (viii) below; (vii) all obligations of any other

Person of the type referred to in clauses (i) through (v) which are secured by any

Lien on any property or asset of such Person, the amount of such obligation

being deemed to be the lesser of the fair market value of such property or

asset or the amount of the obligation so secured; (viii) all obligations under

Currency Agreements and

 

12

 

all Interest Swap Obligations of such Person; and (ix)

all obligations represented by a Disqualified Capital Stock of such

Person.  The Indebtedness of any Person shall include the Indebtedness of any partnership

or joint venture in which such Person is a general partner or joint venturer,

but only to the extent to which there is recourse to such Person for the

payment of such Indebtedness.

 

“Indenture”

is defined in the preamble.

 

“Independent

Qualified Party” means an investment banking firm, accounting firm or

appraisal firm, in each case, of national standing; provided, however,

that such firm is not an Affiliate of the Company; and, provided, further,

that for transactions involving consideration of $100,000,000 or more, the term

“Independent Qualified Party” shall be limited to an investment banking

firm of national standing only, unless, with respect to any such

transaction, (x) the Company delivers to the Trustee and the Required Holders

an Officers’ Certificate to the effect that no investment bank will opine on

commercially reasonable terms on such transaction and that it proposes instead

to engage an accounting firm of national standing (and stating the identity of

such accounting firm) and (y) within fifteen (15) days after the delivery of

such Officers’ Certificate the Company does not receive a written notice from

the Required Holders reasonably objecting to the Company’s proposal set forth

in the Officers’ Certificate, in which case the term “Independent Qualified

Party” for such transaction may also include such accounting firm.

 

“Initial

Notes” is defined in the recitals.

 

“Institutional

Accredited Investor” is defined in the Appendix.

 

“Interest

Coverage Test” is defined in Section 5.04.

 

“Interest

Payment Date” is defined in Exhibit A.

 

“Interest

Swap Obligations” means the Obligations of any Person pursuant to any

arrangement with any other Person, whereby, directly or indirectly, such Person

is entitled to receive from time to time periodic payments calculated by

applying either a floating or a fixed rate of interest on a stated notional

amount in exchange for periodic payments made by such other Person calculated

by applying a fixed or a floating rate of interest on the same notional amount

and shall include, without limitation, any interest rate protection agreement,

interest rate future agreement, interest rate option agreement, interest rate

swap agreement, interest rate cap agreement, interest rate collar agreement,

interest rate hedge agreement or other similar agreement or arrangement to

which such Person is party or of which it is a beneficiary.

 

“Investment”

means (i) any direct or indirect purchase or other acquisition by the Company

or any of its Restricted Subsidiaries of any beneficial interest in, including

stock, partnership interest or other Capital Stock of, or ownership interest

in, any other Person; and (ii) any direct or indirect loan, advance or capital

contribution by the Company or any of its Restricted Subsidiaries to any other

Person, including all indebtedness and accounts receivable from that other

Person that did not arise from sales to or services provided to that other

Person in the Ordinary Course of Business. 

For purposes of Section 5.02: (i) “Investment” shall include

and be valued at the fair market value of the net assets of any Restricted

Subsidiary of the

 

13

 

Company (to the extent of the Company’s percentage

ownership therein) at the time that such Restricted Subsidiary is designated an

Unrestricted Subsidiary of the Company and shall exclude the fair market value

of the net assets of any Unrestricted Subsidiary of the Company (to the extent

of the Company’s percentage ownership therein) at the time that such

Unrestricted Subsidiary is designated a Restricted Subsidiary of the Company;

and (ii) the amount of any Investment shall be the original cost of such

Investment plus the cost of all additional Investments by the Company or any of

its Restricted Subsidiaries, without any adjustments for increases or decreases

in value, or write-ups, write-downs or write-offs with respect to such

Investment, reduced (other than for purposes of calculations under Section

5.11) by the payment of dividends or distributions in connection with such

Investment or any other amounts received in respect of such Investment; provided

that no such payment of dividends or distributions or receipt of any such other

amounts shall reduce the amount of any Investment if such payment of dividends

or distributions or receipt of any such amounts would be included in

Consolidated Net Income.

 

“Legal

Holiday” means a Saturday, a Sunday or a day on which banking institutions

in New York or Ohio or at a place of payment are authorized by law, regulation

or executive order to remain closed.  If

any payment date in respect of the Notes is a Legal Holiday at a place of

payment, payment may be made at that place on the next succeeding day that is

not a Legal Holiday, and no interest shall accrue for the intervening period.

 

“Leverage

Test” is defined in Section 5.04.

 

“Lien”

means any lien, mortgage, pledge, security interest, charge, encumbrance or

governmental levy or assessment of any kind, whether voluntary or involuntary

(including any conditional sale or other title retention agreement and any

lease in the nature thereof).

 

“Material

Adverse Effect” means (a) a material adverse change in, or a material

adverse effect upon, the operations, business, properties, condition (financial

or otherwise) or prospects of the Company and its Restricted Subsidiaries taken

as a whole or (b) the material impairment of the ability of the Company or any

Guarantor that constitutes a Material Restricted Subsidiary to perform in any

material respect its material obligations under any Transaction Document to

which it is a party or of any Holder to enforce any Transaction Document in any

material respect or collect any of the Obligations thereunder.

 

“Material

Restricted Subsidiary” means a Restricted Subsidiary that constitutes a

Material Subsidiary.

 

“Material

Subsidiary” means any Subsidiary that is or would be a “significant

subsidiary” of the Company within the meaning of Rule 1-02 of Regulation S-X

promulgated by the Commission.

 

“Maturity”,

when used with respect to any Note, means the date on which the principal of

such Note becomes due and payable as therein or herein provided, whether at the

Stated Maturity or by declaration of acceleration, call for redemption or

otherwise (including in connection with any offer to purchase that this

Indenture requires the Company to make).

 

“Moody’s”

means Moody’s Investors Service, Inc.

 

14

 

“Net

Proceeds” means cash proceeds actually received by the Company or any of

its Restricted Subsidiaries from any Asset Disposition (including insurance

proceeds, awards of condemnation, and payments under notes or other debt

securities received in connection with any Asset Disposition), net of (a) the

costs of such sale, issuance, lease, transfer or other disposition (including

all legal, title and recording tax expenses, commissions and other fees and

expenses incurred and all Taxes required to be paid or accrued as a liability

under GAAP as a consequence of such sale, lease or transfer), (b) amounts

applied to repayment of Indebtedness (other than revolving credit Indebtedness

under the Credit Agreement, without a corresponding reduction in the revolving

credit commitment) secured by a Lien on the asset or property disposed of, (c)

if such Asset Disposition involves the sale of a discrete business or product

line, any accrued liabilities of such business or product line required to be

paid or retained by the Company or any of its Restricted Subsidiaries as part

of such disposition, (d) appropriate amounts to be provided by the Company or a

Restricted Subsidiary, as the case may be, as a reserve, in accordance with

GAAP, against any liabilities associated with an Asset Disposition and retained

by the Company or such Restricted Subsidiary, as the case may be, after such

Asset Disposition, including, without limitation, pension and benefit

liabilities, liabilities related to environmental matters or liabilities under

any indemnification obligations associated with such Asset Disposition and (e)

all distributions and other payments required to be made to minority interest

holders in Subsidiaries or joint ventures as a result of such Asset

Disposition, but only to the extent required by constituent documents of such

Subsidiary or such joint venture.

 

“Note

Amounts” means principal, premium (if any), interest (including interest

accruing on or after the filing of any petition in bankruptcy or for

reorganization relating to the Company whether or not a claim for post-filing

interest is allowed in such proceedings), fees and all other amounts owing

under the Notes or in respect of the Notes (whether under the Notes or under

the Indenture or the Purchase Agreement, as the case may be).

 

“Note

Registration” shall mean the first to occur of (i) the consummation of a

Registered Exchange Offer and (ii) the effectiveness of a Shelf Registration

Statement filed with the Commission.

 

“Notes”

is defined in the recitals.

 

“Notes

Custodian” is defined in the Appendix.

 

“Notice

of Default” is defined in Section 9.05.

 

“Obligations”

means all obligations for principal, premium (if any), interest, penalties,

fees, indemnification, reimbursements, damages and other liabilities payable

under the documentation governing any Indebtedness.

 

“Offer

Amount” is defined in Section 4.10(c).

 

“Offer

Period” is defined in Section 4.10(a).

 

“Officers’

Certificate” of the Company means a certificate signed on behalf of the

Company by two Persons, one of which shall be any of the following: the

Chairman of the Board, the Chief Executive Officer, the President, the Chief

Operating Officer, the Chief

 

15

 

Financial Officer, the Chief Accounting Officer or the

Treasurer (or any such other officer that performs similar duties) of the

Company, and the other one shall be any of the following: the Chairman of the

Board, the Chief Executive Officer, the President, the Chief Operating Officer,

any Vice President, the Chief Financial Officer, the Chief Accounting Officer,

the Treasurer, the Assistant Treasurer, Controller, the Secretary or an

Assistant Secretary (or any such other officer that performs similar duties) of

the Company.  One of the officers

signing an Officers’ Certificate given pursuant to Section 4.06

shall be the principal executive, financial or accounting officer or treasurer

of the Company.

 

“Opinion

of Counsel” means a written opinion from legal counsel who is acceptable to

the Trustee.  The counsel may be an

employee of or counsel to the Company or Guarantor or the Trustee.

 

“Ordinary

Course of Business” means, in respect of any transaction involving the

Company or any Restricted Subsidiary of the Company, the ordinary course of

such Person’s business, as conducted by any such Person in accordance with past

practice and undertaken by such Person in good faith.

 

“Other

Senior Indebtedness” means, (a) prior to the Distribution Date, any

Indebtedness of the Company which: (i) is Incurred after the date hereof; (ii)

is stated as being senior to the Notes; (iii) may be Incurred only if immediately

after the Incurrence of such Indebtedness, the Consolidated Adjusted Debt to

Adjusted EBITDA Ratio is less than 3.5 to 1.00; and (iv) when aggregated with

all Indebtedness Incurred and outstanding prior to the date such Indebtedness

is Incurred under the Credit Agreement (without regard to Indebtedness Incurred

pursuant to the second proviso to the definition thereof), the Senior Notes and

Other Senior Indebtedness, does not exceed $1,500,000,000; and (b) after the

Distribution Date, any Indebtedness of the Company Incurred after the

Distribution Date that does not constitute Indebtedness of the type described

in clauses (i) through (vii), inclusive, of the second sentence of the

definition of “Senior Indebtedness”.

 

“Paying

Agent” is defined in Section 2.03.

 

“Payment

in Full” for purposes of Articles 8 and 12, (a) when used

with respect to Senior Indebtedness under the Credit Agreement, means that such

Senior Indebtedness is paid in full in cash and (b) when used with respect to

any other Senior Indebtedness, means that such Senior Indebtedness is paid in

full in cash or Cash Equivalents; and the terms “Paid in Full” or Pay

in Full” shall have correlative meanings.

 

“Permits”

means all licenses, permits, certificates of need, approvals and authorizations

from all Governmental Authorities required to lawfully conduct a business.

 

“Permitted

Acquisition” means the purchase by the Company or a Restricted Subsidiary

of the Company of all or substantially all of the assets of a Person whose

primary business is the same, related, ancillary or complementary to the

business in which the Company and its Restricted Subsidiaries were engaged on

the date of this Indenture, or any Investment by the Company or any Restricted

Subsidiary of the Company in a Person, if as a result of such Investment (i)

such Person and each Subsidiary of such Person becomes (x) a Restricted

 

16

 

Subsidiary of the Company whose primary business is

the same, related, ancillary or complementary to the business in which the

Company and its Restricted Subsidiaries were engaged on the date of this

Indenture and (y) a Guarantor hereunder or (ii) such Person is merged,

consolidated or amalgamated with or into, or transfers or conveys substantially

all of its assets to, or is liquidated into, a Restricted Subsidiary of the

Company and whose primary business is the same, related, ancillary or

complementary to the business in which the Company and its Subsidiaries were

engaged in on the date of this Indenture; provided that at the time of such purchase

or Investment, (x) no Default or Event of Default exists or would be caused

upon the consummation thereof and (y) in the case of Permitted Acquisitions

involving any consideration other than the Common Stock of the Company, after

giving effect to such Permitted Acquisition, the Company can Incur $1.00 of

Indebtedness under Section 5.04(a).

 

“Permitted

Adjustments” means, for the purpose of calculating the Leverage Test and

the Interest Coverage Test, pro forma adjustments arising out of events

(including cost savings resulting from head count reduction, closure of

facilities and similar restructuring charges) which are directly attributable

to a specific transaction, are factually supportable and are expected to have a

continuing impact, which (a) would be permitted by Article 11 of

Regulation S-X promulgated under the Securities Act and as interpreted by

the staff of the Commission or (b) after the Distribution Date, have been

realized or are reasonably expected to be realized within six (6) months

following any such transaction; provided

that, in either case, such adjustments are set forth in an Officers’

Certificate signed by the Company’s chief financial officer and another officer

which states (i) the amount of such adjustment or adjustments, (ii) that such

adjustment or adjustments are based on the reasonable good faith beliefs of the

officers executing such Officers’ Certificate at the time of such execution and

(iii) that any related Incurrence of Indebtedness is permitted pursuant to the

Indenture.

 

“Permitted Asset Swap” means any transfer of

properties or assets by the Company or any of its Restricted Subsidiaries in

which the consideration received by the transferor consists of like properties

or assets to be used in the business of the Company or its Restricted

Subsidiaries in the same or similar manner as such transferred properties or

assets; provided that (i) the

fair market value (determined in good faith by the Board of Directors of the

Company) of properties or assets received by the Company or any of its

Restricted Subsidiaries in connection with such Permitted Asset Swap is at

least equal to the fair market value (determined in good faith by the Board of

Directors of the Company) of properties or assets transferred by the Company or

such Restricted Subsidiary in connection with such Permitted Asset Swap and

(ii) the aggregate fair market value of assets transferred by the Company in

connection with all Permitted Asset Swaps after the Closing Date does not

exceed 10% of Consolidated Total Assets.

 

“Permitted

Investments” means:

 

(i)            (A) any Investment in (including,

without limitation, loans and advances to) (x) the Company or a Wholly Owned

Restricted Subsidiary of the Company and whose primary business is the same,

related, ancillary or complementary to the business in which the Company and

its Subsidiaries were engaged in on the date of such Investment and (y) CBW; provided

that the aggregate amount of all such investments in CBW, together with the

amount of all Asset Dispositions made pursuant to clause (i)(y)

 

17

 

of the second

sentence of the definition thereof, shall not exceed 5% of Consolidated Total

Assets and (B) any acquisition by the Company or a Wholly Owned Restricted

Subsidiary of the Company of beneficial interest in a Restricted Subsidiary of

the Company from another Restricted Subsidiary of the Company or the Company;

 

(ii)           any Investment in Cash Equivalents or

the Notes;

 

(iii)          any Investment related to or arising

out of a Permitted Acquisition;

 

(iv)          any Investment which results from the

receipt of non-cash consideration from an asset sale made pursuant to and in

compliance with the provisions of Section 5.05 or from any sale or other

disposition of assets not constituting an Asset Disposition hereunder;

 

(v)           payroll, travel and similar advances

to cover matters that are expected at the time of such advances ultimately to

be treated as expenses for accounting purposes and that are made in the

Ordinary Course of Business;

 

(vi)          receivables owing to the Company or

any Restricted Subsidiary if created or acquired in the Ordinary Course of

Business and payable or dischargeable in accordance with customary trade terms;

provided, however, that such trade terms may include

such concessionary trade terms as the Company or any such Restricted Subsidiary

deems reasonable under the circumstances;

 

(vii)         loans and advances to employees made in

the Ordinary Course of Business not to exceed $1,000,000 in the aggregate at

any time outstanding; provided, however, for purposes of this definition,

“advances” will not restrict advances for travel, moving or relocation expenses

to employees advanced and repaid in the Ordinary Course of Business;

 

(viii)        loans and advances not to exceed

$1,000,000 at any time outstanding to employees of the Company or its

Subsidiaries for the purpose of funding the purchase of Capital Stock of the

Company by such employees;

 

(ix)           any Investments received as part of

the settlement of litigation or in satisfaction of extensions of credit to any

Person otherwise permitted under this Indenture pursuant to the reorganization,

bankruptcy or liquidation of such Person or a good faith settlement of debts by

said Person;

 

(x)            any Investment existing on the date

of this Indenture, any Investment received as a distribution in respect of such

existing Investment and any Investment received in exchange for such existing

Investment; provided that, in the

case of an exchange, the fair market value (as determined in good faith by the

Board of Directors of the Company) of the Investment being exchanged is at

least equal to the fair market value (as determined in good faith by the Board

of Directors of the Company) of the Investment for which such Investment is

being exchanged;

 

18

 

(xi)           Investments of a Person or any of its

Subsidiaries existing at the time such Person becomes a Restricted Subsidiary

of the Company or at the time such Person merges or consolidates with the

Company or any of its Restricted Subsidiaries, in either case in compliance

with this Indenture; provided such Investments were not made by such Person in

connection with or in anticipation or contemplation of such Person becoming a

Restricted Subsidiary of the Company or such merger or consolidation;

 

(xii)          Investments made in connection with

purchase price adjustments or contingent purchase price payments paid in

connection with Investments otherwise permitted under this Indenture;

 

(xiii)         Investments in stock, obligations or

securities received in settlement of debts created in the Ordinary Course of

Business or in satisfaction of judgments;

 

(xiv)        Investments by the Company or any

Restricted Subsidiary pursuant to an Interest Rate Swap Obligation or a

Currency Agreement permitted by clauses (i), (iv), (vi) or (viii) of Section 5.04(b);

 

(xv)         Investments consisting of debits and

credits between Broadwing Financial LLC and the Company, its Restricted

Subsidiaries and, subject to Section 5.11, its Unrestricted Subsidiaries

pursuant to the Centralized Cash Management System;

 

(xvi)        Investments consisting of loans,

advances and payables due from suppliers or customers made by the Company or

its Restricted Subsidiaries in the Ordinary Course of Business;

 

(xvii)       Investments that may be deemed to arise

out from the cashless exercise by employees of the Company of rights, options

or warrants to purchase Capital Stock of the Company;

 

(xviii)      Investments permitted to be made by Section

5.11;

 

(xix)         Investments the consideration paid for

which consists solely of Capital Stock (other than Disqualified Capital Stock)

of the Company;

 

(xx)          Investments (other than Investments in any member of the BCI Group) in

an aggregate amount of $10,000,000 for any Investments valued as of the date

such Investment is made, including, without limitation, joint ventures;

and

 

(xxi)         Investments the consideration for which

was paid by a Person other than the Company or any of its Restricted

Subsidiaries, without recourse to the Company or its Restricted Subsidiaries.

 

“Permitted

Liens” means:

 

19

 

(i)            Liens to secure the performance of

statutory obligations, surety or appeal bonds, letters of credit or other obligations

of a like nature incurred in the Ordinary Course of Business;

 

(ii)           Liens for Taxes, assessments and

governmental charges, levies or claims that are (x) not yet due and payable or

(y) which are due and payable and are being contested in good faith by

appropriate proceedings so long as such proceedings stay enforcement of such

Liens;

 

(iii)          any Lien arising out of a judgment or

award not constituting an Event of Default under Section 7.01;

 

(iv)          statutory Liens of landlords,

carriers, warehousemen, mechanics, materialmen, workmen, repairmen and other

similar liens imposed by law, which are incurred in the Ordinary Course of

Business for sums not more than thirty (30) days delinquent or which are being

contested in good faith by appropriate proceedings so long as such contest

stays enforcement of such Liens;

 

(v)           survey exceptions, easements,

rights-of-way, zoning restrictions and other similar charges or encumbrances in

respect of real property not interfering in any material adverse respect with

the ordinary conduct of the business of the Company or any of its Restricted

Subsidiaries;

 

(vi)          any interest or title of a lessor

under any Capitalized Lease Obligation; provided that such Liens do not extend to

any property or asset which is not leased property subject to such Capitalized

Lease Obligation;

 

(vii)         Liens securing Capitalized Lease

Obligations and purchase money Indebtedness permitted pursuant to Section

5.04(b)(iii); provided, however, that in the case of purchase money

Indebtedness (a) the Indebtedness shall not exceed the cost of such property or

assets and shall not be secured by any property or assets of the Company or any

Restricted Subsidiary of the Company other than the property and assets so

acquired, constructed, repaired, added to or improved and (b) the Lien securing

such Indebtedness shall be created within 180 days after the date of such

acquisition or,

completion of construction, repair, improvement, addition or commencement of

full operation of the property subject to the Lien or, in the case of a

Refinancing of any purchase money Indebtedness, within 180 days of such

Refinancing;

 

(viii)        Liens upon specific items of inventory

or other goods and proceeds of any Person securing such Person’s obligations in

respect of bankers’ acceptances issued or created for the account of such

Person to facilitate the purchase, shipment or storage of such inventory or

other goods;

 

(ix)           Liens securing reimbursement

obligations with respect to commercial letters of credit which encumber

documents and other property relating to such letters of credit and products

and proceeds thereof;

 

20

 

(x)            Liens in favor of customs and

revenue authorities arising as a matter of law to secure payment of customs

duties in connection with the importation of goods;

 

(xi)           Liens arising from filing Uniform

Commercial Code financing statements regarding leases;

 

(xii)          Liens in existence on the date hereof;

 

(xiii)         Liens on property or shares of Capital

Stock of another Person at the time such other Person becomes a Subsidiary of

such Person; provided, however, that such Liens are not created,

Incurred or assumed in connection with, or in contemplation of, such other

Person becoming a Subsidiary;

 

(xiv)        leases, subleases, licenses and

sublicenses of the type referred to in clause (x) in the second sentence

of the definition of “Asset Disposition” granted to third parties in the

Ordinary Course of Business;

 

(xv)         banker’s liens and rights of offset of

the holders of Indebtedness of the Company or any Restricted Subsidiary on

monies deposited by the Company or any Restricted Subsidiary with such holders

of Indebtedness in the Ordinary Course of Business of the Company or any such

Restricted Subsidiary;

 

(xvi)        Liens securing obligations under

Interest Swap Obligations or Currency Agreements so long as such obligations

relate to Indebtedness that is, and is permitted under this Indenture, to be

secured by a Lien on the same property securing such obligations;

 

(xvii)       Liens to secure any Refinancing (or

successive Refinancings) as a whole, or in part, of any Indebtedness secured by

any Lien referred to in the foregoing clauses (vii), (xii), (xiii) and

(xvi); provided, however, that (i) such new Lien shall be

limited to all or part of the same property that secured the original Lien

(plus improvements to or on such property) and (ii) the Indebtedness

secured by such Lien at such time is not increased to any amount greater than

the sum of (1) the outstanding principal amount or, if greater, committed

amount of the Indebtedness secured by Liens described under clauses (vii),

(xii), (xiii) or (xvi) at the time the original Lien became a Permitted Lien

under this Indenture and (2) an amount necessary to pay any fees and

expenses, including premiums related to such Refinancings;

 

(xviii)      pledges or deposits to secure obligations

under workers’ compensation laws or similar legislation or to secure public or

statutory obligations;

 

(xix)         Liens on property at the time such

Person or any of its Subsidiaries acquires the property, including any

acquisition by means of a merger or consolidation with or into such Person or a

Subsidiary or such Person; provided,

however, that such Liens are not

created, Incurred or assumed in connection with, or in contemplation of, such

acquisition; provided, further, however,

that the Liens may not extend to any other property owned by such Person or any

of its Subsidiaries; and

 

21

 

(xx)          other Liens that do not, in the aggregate,

attach to a material portion of the assets of the Company or any of its

Restricted Subsidiaries and do not secure obligations in an aggregate amount in

excess of $5,000,000.

 

“Permitted

Refinancing Indebtedness” means any Indebtedness of the Company or any of

its Restricted Subsidiaries issued in exchange for, or the net proceeds of

which are used to Refinance, other Indebtedness of any such Persons; provided,

however,

that (i) the principal  amount of

such Permitted Refinancing Indebtedness does not exceed the principal amount

(or, if issued at original issue discount, the aggregate accreted value) plus

accrued interest and premium, if any (set forth in the original instrument

representing such Indebtedness), of the Indebtedness so exchanged or Refinanced

(plus the amount of reasonable fees and expenses incurred in connection

therewith); (ii) such Permitted Refinancing Indebtedness has a final

maturity date on or later than the final maturity date of, and has a Weighted

Average Life to Maturity equal to or greater than the Weighted Average Life to

Maturity of, at the time of such Refinancing, the Indebtedness being exchanged

or Refinanced; (iii) if the Indebtedness being exchanged or Refinanced is

subordinated in right of payment to the Notes, such Permitted Refinancing

Indebtedness is subordinated in right of payment to the Notes on terms at least

as favorable to the Holders of Notes as those contained in the documentation

governing the Indebtedness being exchanged or Refinanced; (iv) such Permitted

Refinancing Indebtedness is Incurred by the Person who is the obligor on the

Indebtedness being exchanged or Refinanced; and (v) in the case of Permitted

Refinancing Indebtedness in respect of Convertible Subordinated Notes, such

Permitted Refinancing Indebtedness will have an effective yield thereon not

exceeding 10% per annum.  “Permitted

Refinancing Indebtedness” shall not include Indebtedness under the Credit

Agreement which may be Refinanced in accordance with the definition thereof.

 

“Person”

means any individual, corporation, partnership, joint venture, association,

joint-stock company, limited liability company, trust, unincorporated

organization or government or agency or political subdivision thereof

(including any subdivision or ongoing business of any such entity or

substantially all of the assets of any such entity, subdivision or business).

 

“Positive

Credit Event”  means the Company having a long term (a) senior implied debt

rating of at least BB+ from S&P and Ba1 from Moody’s and (b) senior subordinated

debt rating of at least BB- from S&P and Ba3 from Moody’s; provided that if, after the occurrence of

the Positive Credit Event, the Notes are not Widely Held and the Company’s

senior implied and senior subordinated debt ratings have been downgraded below

the rating levels set forth in this definition of “Positive Credit Event”,

the provisions of this Indenture applicable prior to the Distribution Date

shall govern beginning after such ratings downgrade as if the Distribution Date

has not occurred, until such time as the Notes become Widely Held or another

Positive Credit Event occurs.

 

“Preferred

Stock” of any Person means any Capital Stock of such Person that has

preferential rights to any other Capital Stock of such Person with respect to

dividends or redemptions or upon liquidation, and shall include the 63⁄4%

Convertible Preferred Stock of the Company.

 

22

 

“Purchase

Agreement” means the Purchase Agreement, dated as of December 9, 2002, by

and among the Company and the Purchasers.

 

“Purchase

Date” is defined in Section 4.10(c).

 

“Purchasers”

is defined in the Appendix.

 

“QIB”

is defined in the Appendix.

 

“Redemption

Date,” when used with respect to any Note to be redeemed, means the date

fixed for such redemption by or pursuant to this Indenture and the Notes.

 

“Redemption

Price,” when used with respect to any Note to be redeemed, means the price

at which such Note is to be redeemed pursuant to this Indenture and the Notes.

 

“Refinance”

means, in respect of any security or Indebtedness, to refinance, extend, renew,

refund, repay, prepay, redeem, defease or retire, or to issue a security or

Indebtedness in exchange or replacement for, such security or Indebtedness in

whole or in part.  “Refinanced” and

“Refinancing” shall have correlative meanings.

 

“Registered

Exchange Offer” is defined in the Appendix.

 

“Registrar”

is defined in Section 2.03.

 

“Registration

Default” is defined in Exhibit A.

 

“Regular

Record Date” is defined in Exhibit A.

 

“Regulation S”

is defined in the Appendix.

 

“Representative”

means the trustee, agent, representative (if any), or, in the absence of any of

the foregoing, the holders of the majority in principal amount of, any issue of

Senior Indebtedness.

 

“Required

Holders” means Holders holding more than 50% of the then outstanding

aggregate principal amount at Maturity of the Notes (exclusive of Notes then

owned directly or indirectly by the Company, or any of its Subsidiaries or

Affiliates).

 

“Responsible

Officer” means the chief executive officer, the president, the chief

financial officer, the principal accounting officer or the treasurer (or the

equivalent of any of the foregoing) of the Company or any of its Subsidiaries

or any other officer, partner or member (or person performing similar

functions) of the Company or any of its Subsidiaries responsible for overseeing

the administration of, or reviewing compliance with, all or any portion of this

Indenture.

 

“Restricted

Investment” means an Investment other than a Permitted Investment.

 

“Restricted

Notes Legend” is defined in the Appendix.

 

23

 

“Restricted

Payments” is defined in Section 5.02.

 

“Restricted

Subsidiary” of any Person means any Subsidiary of such Person which at the

time of determination is not an Unrestricted Subsidiary.

 

“Rule 501”

is defined in the Appendix.

 

“Rule

144A” is defined in the Appendix.

 

“Sale

and Leaseback Transaction” means any direct or indirect arrangement with

any Person or to which any such Person is a party, providing for the leasing to

the Company or a Restricted Subsidiary of any property, whether owned by the

Company or any Restricted Subsidiary at the Closing Date or later acquired,

which has been or is to be sold or transferred by the Company or such

Restricted Subsidiary to such Person or any other Person from whom funds have

been or are to be advanced by such Person on the security of such property.

 

“Securities

Act” is defined in the Appendix.

 

“Senior

Indebtedness” means (a) principal, premium (if any), interest (including

interest accruing on or after the filing of any petition in bankruptcy or for

reorganization relating to the Company whether or not a claim for post-filing

interest is allowed in such proceedings), fees and all other amounts owing

under or in respect of the Credit Agreement, (b) Indebtedness under the

Senior Notes and (c) the Other Senior Indebtedness.  Notwithstanding the foregoing, “Senior

Indebtedness” shall not include: 

(i) any obligations (other than with respect to any guarantee

Obligations under the Credit Agreement) of the Company to a Subsidiary of the

Company; (ii) obligations to trade creditors and other amounts incurred in

connection with obtaining goods, materials or services; (iii) obligations represented

by Disqualified Capital Stock; (iv) any liability for federal, state,

local or other taxes owed or owing by the Company; (v) that portion of any

Indebtedness Incurred in violation of the provisions set forth in Section 5.04

(but, as to any such obligation, no such violation shall be deemed to exist for

purposes of this clause (v) if the holder(s) of such obligation or their

representative shall have received an officers’ certificate of the Company to

the effect that the Incurrence of such Indebtedness does not (or, in the case

of revolving credit indebtedness, that the Incurrence of the entire committed

amount thereof at the date on which the initial borrowing thereunder is made

would not) violate such provisions of this Agreement; (vi) Indebtedness which,

when Incurred and without respect to any election under Section 1111(b) of

Title 11, United States Code, is without recourse to the Company; and

(vii) any Indebtedness which is, by its express terms, subordinated in

right of payment to any other Indebtedness of the Company or its Subsidiaries.

 

“Senior

Notes” means those certain 71⁄4% Senior Notes due 2023 of the Company issued

pursuant to an indenture dated as of July 1, 1993 in the aggregate principal

amount of $50,000,000, and any such notes issued in exchange or replacement

therefor.

 

“Senior

Subordinated Indebtedness” means the Notes and any other Indebtedness of

the Company permitted hereunder which expressly ranks pari passu to the payment and performance

of the Notes.

 

“series”

means any series of Notes outstanding under this Indenture.

 

24

 

“Shelf

Registration Statement” is defined in the Appendix.

 

“Special

Interest” is defined in Exhibit A.

 

“Spectrum

Assets” means the E-Block spectrum licenses granted by the Federal

Communications Commission or any spectrum license owned by CBW Co. for which

the E-Block may be exchanged.

 

“S&P”

means Standard & Poor’s Ratings Services, a division of McGraw-Hill

Companies, Inc.

 

“Stated

Maturity,” when used with respect to any Note or any installment of

interest thereon, means the date specified in this Indenture or such Note as

the scheduled fixed date on which the Accreted Value of such Note or such

installment of interest is due and payable and shall not include any contingent

obligation to repay, redeem or repurchase any such interest or principal prior

to the date originally scheduled for payment thereof.

 

“Stated

Maturity Date” is defined in Exhibit A.

 

“Subordinated

Indebtedness” means (i) the Convertible Subordinated Notes, (ii) any

Indebtedness of the Company permitted hereunder Incurred by the Company after

the date hereof or outstanding as of the date hereof which is not Senior

Indebtedness or Senior Subordinated Indebtedness, and (iii) any Indebtedness of

the Company permitted hereunder which is expressly subordinated to and junior

to the payment and performance of the Notes.

 

“Subsidiary”

means, with respect to any Person, (i) any corporation, association or other

business entity of which more than 50% of the total voting power of shares of

Capital Stock 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 such Person or one or more of

the other Subsidiaries of that Person (or a combination thereof) and (ii) any

partnership (A) the sole general partner or the managing general partner of

which is such Person or a Subsidiary of such Person or (B) the only general

partners of which are such Person or of one or more Subsidiaries of such Person

(or any combination thereof).  Any

Person becoming a Subsidiary of the Company after the date of this Indenture

shall be deemed to have Incurred all of its outstanding Indebtedness on the date

it becomes a Subsidiary.

 

“Successor

Company” is defined in Section 6.01.

 

“Taxes”

means all federal, state, local or foreign income, gross receipts, windfall

profits, severance, property, production, sales, use, license, excise,

franchise, employment, withholding or other taxes, duties or assessments of any

kind whatsoever imposed on any Person, together with any interest, additions or

penalties with respect thereto and any interest in respect of such additions or

penalties and includes any liability for Taxes of another Person by contract,

as a transferee or successor, under Treasury regulation Section 1.1502-6 or

analogous state, local or foreign law provision or otherwise.

 

25

 

“Tax

Returns” means all reports and returns (including elections, declarations,

disclosures, schedules, estimates and information returns) required to be filed

with respect to Taxes.

 

“TIA”

means the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb), as

amended from time to time.

 

“Transaction

Documents” is defined in the Purchase Agreement.

 

“Transfer

Restricted Notes” is defined in the Appendix.

 

“Trigger

Date” is defined in the Exchange and Registration Rights Agreement.

 

“Trustee”

is defined in the preamble.

 

“Trust

Officer” means, when used with respect to the Trustee, the president, any

vice president (whether or not designated by a number or a word or words added

before or after the title “vice president”), the secretary, any assistant

secretary, the treasurer, any assistant treasurer, or any other officer of the

Trustee in its Corporate Trust Administration Department customarily performing

functions similar to those performed by any of the above designated officers

and also means, with respect to a particular corporate trust matter, any other

officer to whom such matter is referred because of his or her knowledge of and

familiarity with the particular subject.

 

“United

States” shall have the meaning assigned to such term in Regulation S.

 

“U.S.

Government Obligations” means direct obligations (or certificates

representing an ownership interest in such obligations) of the United States of

America (including any agency or instrumentality thereof) for the payment of

which the full faith and credit of the United States of America is pledged and

that are not callable or redeemable at the issuer’s option.

 

“Unrestricted

Subsidiary” means (i) any member of the BCI Group; provided that after the consummation of

the sale of all or substantially all of the assets of BCI’s Subsidiaries or the

consummation of a confirmed plan of reorganization under Chapter 11 of the

United States Bankruptcy Code with respect to BCI, the Company may designate

Broadwing Telecommunications Inc. as a Restricted Subsidiary by written notice

to the Trustee and the Holders; (ii) any Subsidiary of a Person that at the

time of determination shall be or continue to be designated an Unrestricted

Subsidiary by the Board of Directors of such Person in the manner provided

below; and (iii) any Subsidiary of an Unrestricted Subsidiary.

 

The

Board of Directors of the Company may designate any Subsidiary (including any

newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary

unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on

any property of, the Company or any other Subsidiary of the Company that is not

a Subsidiary of the Subsidiary to be so designated; provided that subject to Section

5.11:  (i) the Company certifies to

the Holders that such designation complies with Section 5.02; and

(ii) each Subsidiary to be so designated and each of its Subsidiaries (other

than any member of the BCI Group, except as provided in

 

26

 

clause (i) of this definition) has not at the time of

designation, and does not thereafter, Incur any Indebtedness pursuant to which

the lender has recourse to any of the assets of the Company or any of its

Restricted Subsidiaries.

 

The

Board of Directors of the Company may designate any Unrestricted Subsidiary to

be a Restricted Subsidiary only if:  (i)

immediately after giving effect to such designation, the Company can Incur

$1.00 of Indebtedness under Section 5.04(a); and (ii) immediately before

and immediately after giving effect to such designation, no Default or Event of

Default shall have occurred and be continuing; provided

that, notwithstanding the foregoing, except as provided in clause (i) of this

definition, the Board of Directors may not designate any member of the BCI

Group to be a Restricted Subsidiary.

 

Any

such designation by the Board of Directors of the Company shall be evidenced to

the Holders by promptly filing with the Holders a copy of the Board Resolution

giving effect to such designation and an officers’ certificate certifying that

such designation complied with the foregoing provisions.

 

“Voting

Stock” of a Person means all classes of Capital Stock or other interests

(including partnership interests) of such Person then outstanding and normally

entitled (without regard to the occurrence of a contingency) to vote in the

election of directors, managers or trustees thereof.

 

“Warrant

Agreement” is defined in the Purchase Agreement.

 

“Warrants”

is defined in the Purchase Agreement.

 

“Weighted

Average Life to Maturity” means, when applied to any Indebtedness at any

date, the number of years obtained by dividing (i) the sum of the products

obtained by multiplying (A) the amount of each then remaining installment,

sinking fund, serial maturity or other required payments of principal,

including payment at final maturity, in respect thereof, by (B) the number of

years (calculated to the nearest one-twelfth) that will elapse between such

date and the making of such payment, by (ii) the then outstanding principal

amount of such Indebtedness.

 

“Wholly

Owned Restricted Subsidiary” of any Person means any Wholly Owned

Subsidiary of such Person which at the time of determination is a Restricted

Subsidiary of such Person.

 

“Widely

Held” means, with respect to the Notes, that (a) the Purchasers no longer

hold more than 50% of the then outstanding aggregate principal amount at

Maturity of the Notes (exclusive of Notes then owned directly or indirectly by

the Company, or any of its Subsidiaries or Affiliates) and (b) the Company (i)

reasonably believes after due inquiry the number of beneficial owners (as

defined in Rule 13d-3 under the Exchange Act) of the Notes (counting for the

purpose of this definition all Holders that are Affiliates of each other as one

beneficial owner) equals or exceeds twenty-five (25) and (ii) if requested by

the Required Holders, delivers to the Required Holders and the Trustee an

Officers’ Certificate executed by the Responsible Officer describing in

reasonable details the grounds for such belief and the procedures used by the

Company to count the number of beneficial owners.  For avoidance of doubt, the Trustee’s

 

27

 

obligations under clause (ii) of this definition shall

be limited solely to keeping such Officers’ Certificate on file with the

Trustee and in no event shall the Trustee be liable for the contents of such

Officers’ Certificate nor shall it be required to deliver such Officers’

Certificate to the Holders.

 

“Wholly

Owned Subsidiary” of any Person means a Subsidiary of such Person all of

the outstanding Capital Stock or other ownership interests of which shall at

the time be owned by such Person or by one or more Wholly Owned Subsidiaries of

such Person or by such Person and one or more Wholly Owned Subsidiaries of such

Person.

 

SECTION

1.02.      Incorporation by Reference of Trust

Indenture Act.  This Indenture is

subject to the mandatory provisions of the TIA, which are incorporated by

reference in and made a part of this Indenture.  The following TIA terms have the following meanings:

 

“indenture securities”

means the Initial Notes, the Exchange Notes and the Exchange Guarantees.

 

“indenture security

holder” means a Holder.

 

“indenture to be

qualified” means this Indenture.

 

“indenture trustee” or

“institutional trustee” means the Trustee.

 

“obligor” on the

indenture securities means the Company and any other obligor on the indenture

securities.

 

All other TIA terms used

in this Indenture that are defined by the TIA, defined by TIA reference to

another statute or defined by Commission rule have the meanings assigned to

them by such definitions.

 

SECTION

1.03.      Rules of Construction.  Unless the context otherwise requires:

 

(a)           a term has the meaning assigned to

it;

 

(b)           an accounting term not otherwise

defined has the meaning assigned to it in accordance with GAAP;

 

(c)           “or” is not exclusive;

 

(d)           “including” means including without

limitation;

 

(e)           “to” and “until” each mean “to but

excluding”;

 

(f)            any definition of or reference to

any agreement, instrument or other document herein shall be construed as

referring to such agreement, instrument or other document as from time to time

amended, supplemented or otherwise modified (subject to any restrictions on

such amendments, supplements or modifications set forth herein);

 

28

 

(g)           any reference herein to any Person

shall be construed to include such Person’s successors and assigns;

 

(h)           words in the singular include the

plural and words in the plural include the singular;

 

(i)            unsecured Indebtedness shall not be

deemed to be subordinate or junior to secured Indebtedness merely by virtue of

its nature as unsecured Indebtedness;

 

(j)            the principal amount of any

non-interest bearing or other discount security at any date shall be the

principal amount thereof that would be shown on a balance sheet of the issuer

dated such date prepared in accordance with GAAP; and

 

(k)           the principal amount of any Preferred

Stock shall be (i) the maximum liquidation value of such Preferred Stock

or (ii) the maximum mandatory redemption or mandatory repurchase price

with respect to such Preferred Stock, whichever is greater.

 

ARTICLE 2.

 

THE NOTES

 

SECTION 2.01.              Form

and Dating.  Provisions relating to

the Initial Notes and the Exchange Notes to be issued in exchange for the

Initial Notes or otherwise as provided in this Indenture are set forth in the

Appendix, which is hereby incorporated in and expressly made a part of this

Indenture.  The Initial Notes and such

Exchange Notes shall be a separate series of Notes.  The Initial Notes and the Trustee’s certificate of

authentication shall each be substantially in the form of Exhibit A

hereto, which is hereby incorporated in and expressly made a part of this

Indenture.  The Exchange Notes to be

issued in exchange for the Initial Notes or otherwise pursuant to this

Indenture and the Trustee’s certificate of authentication shall be

substantially in the form of Exhibit B hereto, which is hereby

incorporated in and expressly made a part of this Indenture.  The Notes may have notations, legends or

endorsements required by law, stock exchange rule, agreements to which the

Company is subject, if any, or usage (provided that any such notation, legend

or endorsement is in a form acceptable to the Company).  Each Note shall be dated the date of its

authentication.  The Notes shall be

issuable only in registered form without interest coupons and only in

denominations of $1,000 (in principal amount at Maturity) and multiples

thereof.  The Initial Notes and the

Exchange Notes shall be treated as a single class for all purposes under this

Indenture, including, without limitation, waivers, amendments, redemptions and

offers to purchase.

 

SECTION 2.02.              Execution

and Authentication.  One officer

shall sign the Notes for the Company by manual or facsimile signature.

 

If an officer whose

signature is on a Note no longer holds that office at the time the Trustee

authenticates the Note, the Note shall be valid neverthe­less.

 

A Note shall not be valid

until an authorized signatory of the Trustee manually signs the certificate of

authentication on the Note.  The

signature shall be con­clusive evidence that the Note has been authenticated

under this Indenture.

 

29

 

The Trustee shall, upon

written direction of the Company, authenticate and make available for delivery

Notes as set forth in the Appendix.

 

The Trustee may appoint

an authenticating agent reasonably acceptable to the Company to authenticate

the Notes.  Any such appointment shall

be evidenced by an instrument signed by a Trust Officer, a copy of which shall

be furnished to the Company.  Unless

limited by the terms of such appoint­ment, an authenticating agent may authenti­cate

Notes whenever the Trustee may do so. 

Each reference in this Indenture to authentication by the Trustee

includes authentication by such agent. 

An authenticating agent has the same rights as any Registrar, Paying

Agent or agent for service of notices and demands.

 

SECTION 2.03.              Registrar

and Paying Agent.  (a) the Company

shall maintain an office or agency where Notes may be presented for

registration of transfer or for exchange (the “Registrar”) and an office

or agency where Notes may be presented for payment (the “Paying Agent”).  The Registrar shall keep a register of the

Notes and of their transfer and exchange. 

The Company may have one or more co-registrars and one or more

additional paying agents.  The term

“Paying Agent” includes any additional paying agent, and the term “Registrar”

includes any co-registrars.  The Company

initially appoints the Trustee as (i) Registrar and Paying Agent in connection

with the Notes and (ii) the Notes Custodian with respect to the Global

Exchange Notes (as defined in the Appendix).

 

(b)           the Company shall enter into an

appropriate agency agreement with any Registrar or Paying Agent not a party to

this Indenture, which shall incorporate the terms of the TIA.  The agreement shall implement the provisions

of this Indenture that relate to such agent. 

The Company shall notify the Trustee in writing of the name and address

of any such agent.  If the Company fails

to maintain a Registrar or Paying Agent, the Trustee shall act as such and

shall be entitled to appropriate compensation therefor pursuant to Section

9.07.  The Company or any of its

domestically organized Wholly Owned Restricted Subsidiaries (other than any

member of the BCI Group) may act as Paying Agent or Registrar.

 

(c)           the Company may remove any Registrar

or Paying Agent upon written notice to such Registrar or Paying Agent and to

the Trustee; provided, however, that no such removal shall become

effective until (i) acceptance of an appointment by a successor as evidenced by

an appropriate agreement entered into by the Company and such successor

Registrar or Paying Agent, as the case may be, and delivered to the Trustee or

(ii) notification to the Trustee that the Trustee shall serve as Registrar or

Paying Agent until the appointment of a successor in accordance with clause (i)

above.  The Registrar or Paying Agent

may resign at any time upon written notice to the Company and the Trustee; provided,

however, that the Trustee may resign as Paying Agent or Registrar

only if the Trustee also resigns as Trustee in accordance with Section 9.08.

 

SECTION 2.04.              Paying

Agent to Hold Money in Trust.  On or

prior to each due date of the principal of and interest on any Note, the

Company shall deposit with, or to an account maintained by, the Paying Agent

(or if the Company or a Subsidiary is acting as Paying Agent, segregate and

hold in trust for the benefit of the Persons entitled thereto) a sum sufficient

to pay such principal and interest when so becoming due.  The Company shall require each Paying Agent

(other than the Trustee) to agree in writing that the Paying Agent shall hold

in trust for the

 

30

 

benefit

of Holders or the Trustee all money held by the Paying Agent for the payment of

principal of or interest on the Notes and shall promptly notify the Trustee in

writing of any default by the Company in making any such payment.  If the Company or a Subsidiary of the

Company acts as Paying Agent, it shall segregate the money held by it as Paying

Agent and hold it as a separate trust fund. 

The Company at any time may require a Paying Agent to pay all money held

by it to the Trustee and to account for any funds disbursed by the Paying

Agent.  Upon complying with this Section 2.04,

the Paying Agent shall have no further liability for the money delivered to the

Trustee.

 

SECTION 2.05.              Holder

Lists.  The Trustee  shall preserve in as current a form as is

reasonably practicable the most recent list available to it of the names and

addresses of Holders.  If the Trustee is

not the Registrar, the Company shall furnish, or cause the Registrar to

furnish, to the Trustee, in writing at least five Business Days before each

Interest Payment Date and at such other times as the Trustee may request in

writing, a list in such form and as of such date as the Trustee may reasonably

require of the names and addresses of Holders.

 

SECTION 2.06.              Transfer

and Exchange.  The Notes shall be

issued in registered form and shall be transferable only upon the surrender of

a Note for registration of transfer and in compliance with the Appendix.  When a Note is presented to the Registrar

with a request to register a transfer, the Registrar shall register the

transfer as requested if its requirements therefor are met.  When Notes are presented to the Registrar

with a request to exchange them for an equal principal amount of Notes of other

denominations, the Registrar shall make the exchange as requested if the same

requirements are met.  To permit

registration of transfers and exchanges, the Company shall execute and the

Trustee shall authenticate Notes at the Registrar’s request.  The Company may require payment of a sum

sufficient to pay all taxes, assessments or other governmental charges in

connection with any transfer or exchange pursuant to this Section 2.06.  The Company shall not be required to make

and the Registrar need not register transfers or exchanges of Notes selected

for redemption (except, in the case of Notes to be redeemed in part, the

portion thereof not to be redeemed) or any Notes for a period of 15 days before

a selection of Notes to be redeemed.

 

Prior to the due

presentation for registration of transfer of any Note, the Company, the

Guarantors, the Trustee, the Paying Agent and the Registrar may deem and treat

the Person in whose name a Note is registered as the absolute owner of such

Note for the purpose of receiving payment of principal of and (subject to

paragraph 2 of the Notes) interest, if any, on such Note and for all other

purposes whatsoever, whether or not such Note is overdue, and none of the

Company, the Guarantors, the Paying Agent, the Trustee or the Registrar shall

be affected by notice to the contrary.

 

Any Holder of a Global

Exchange Note shall, by acceptance of such Global Exchange Note, agree that

transfers of beneficial interest in such Global Exchange Note may be effected

only through a book-entry system maintained by (a) the Holder of such

Global Exchange Note (or its agent) or (b) any Holder of a beneficial

interest in such Global Exchange Note, and that ownership of a beneficial

interest in such Global Exchange Note shall be required to be reflected in a

book entry.

 

31

 

All Notes issued upon any

transfer or exchange pursuant to the terms of this Indenture shall evidence the

same debt and shall be entitled to the same benefits under this Indenture as

the Notes surrendered upon such transfer or exchange.

 

SECTION 2.07.              Replacement

Notes.  If a mutilated Note is

surrendered to the Registrar or if the Holder of a Note claims that the Note

has been lost, destroyed or wrongfully taken, the Company shall issue and the

Trustee shall authenticate a replacement Note if the requirements of

Section 8-405 of the New York Uniform Commercial Code are met, such that

the Holder (a) satisfies the Company or the Trustee within a reasonable

time after such Holder has notice of such loss, destruction or wrongful taking

and the Registrar does not register a transfer prior to receiving such

notification, (b) makes such request to the Company or the Trustee  prior to the Note being acquired by a

protected purchaser as defined in Section 8-303 of the New York Uniform

Commercial Code (a “protected purchaser”) and (c) satisfies any other

reasonable requirements of the Trustee. 

If required by the Trustee or the Company, such Holder shall furnish an

indemnity bond sufficient in the judgment of the Trustee to protect the

Company, the Trustee, the Paying Agent and the Registrar from any loss that any

of them may suffer if a Note is replaced. 

The Company and the Trustee may charge the Holder for their expenses in

replacing a Note.  In the event any such

mutilated, lost, destroyed or wrongfully taken Note has become or is about to

become due and payable, the Company in its discretion may pay such Note instead

of issuing a new Note in replacement thereof.

 

Every replacement Note is

an additional obligation of the Company.

 

The provisions of this Section 2.07

are exclusive and shall preclude (to the extent lawful) all other rights and

remedies with respect to the replacement or payment of mutilated, lost,

destroyed or wrongfully taken Notes.

 

SECTION 2.08.              Outstanding

Notes.  Notes outstanding at any

time are all Notes authenticated by the Trustee except for those canceled by

it, those delivered to it for cancellation and those described in this Section 2.08

as not outstanding.  Subject to Section 14.06,

a Note does not cease to be outstanding because the Company or an Affiliate of

the Company holds the Note.

 

If a Note is replaced

pursuant to Section 2.07, it ceases to be outstanding unless the

Trustee and the Company receive proof satisfactory to them that the replaced

Note is held by a protected purchaser.

 

If the Paying Agent

segregates and holds in trust, in accordance with this Indenture, on a

Redemption Date, the Stated Maturity Date or maturity date money sufficient to

pay all principal and interest and Special Interest, if any, payable on that

date with respect to the Notes (or portions thereof) to be redeemed or

maturing, as the case may be, and the Paying Agent is not prohibited from

paying such money to the Holders on that date pursuant to the terms of this

Indenture, then on and after that date such Notes (or portions thereof) cease

to be outstanding and inter­est on them ceases to accrue.

 

SECTION 2.09.              Temporary

Notes.  Until Definitive Notes are

ready for delivery, the Company may prepare and the Trustee shall authenticate

temporary Notes.  Temporary Notes

 

32

 

shall be

substantially in the form of Definitive Notes but may have variations that the

Company considers appropriate for temporary Notes.  Without unreasonable delay, the Company shall prepare and the

Trustee shall authenticate Definitive Notes and deliver them in exchange for

temporary Notes upon surrender of such temporary Notes at the office or agency

of the Company, without charge to the Holder.

 

SECTION 2.10.              Cancellation.  The Company at any time may deliver Notes to

the Trustee for cancellation.  The

Registrar and the Paying Agent shall forward to the Trustee any Notes

surrendered to them for registration of transfer, exchange or payment.  The Trustee and no one else shall cancel all

Notes surrendered for registration of transfer, exchange, payment or

cancellation and shall dispose of canceled Notes in accordance with its

customary procedures or deliver canceled Notes to the Company pursuant to

written direction by an officer.  The

Company may not issue new Notes to replace Notes it has redeemed, paid or

delivered to the Trustee for cancellation. 

The Trustee shall not authenticate Notes in place of canceled Notes

other than pursuant to the terms of this Indenture.

 

SECTION 2.11.              Defaulted

Interest.  If the Company defaults

in a payment of interest or Special Interest, if any, on the Notes, the Company

shall pay the defaulted interest (plus interest on such defaulted interest to

the extent lawful) in any lawful manner. 

The Company may pay the defaulted interest to the Persons who are

Holders on a subsequent special record date. 

The Company shall fix or cause to be fixed any such special record date

and payment date to the reasonable satisfaction of the Trustee and shall

promptly mail or cause to be mailed to each Holder a notice that states the

special record date, the payment date and the amount of defaulted interest to

be paid.

 

SECTION 2.12.              CUSIP

Numbers.  The Company in issuing the

Notes may use Committee on Uniform Securities Identification Procedures numbers

(the “CUSIP numbers”) (if then generally in use) and, if so, the Trustee

shall use CUSIP numbers in notices of redemption as a convenience to Holders; provided,

however, that any such notice may state that no representation is

made as to the correctness of such numbers either as printed on the Notes or as

contained in any notice of a redemption and that reliance may be placed only on

the other identification numbers printed on the Notes, and any such redemption

shall not be affected by any defect in or omission of such numbers.

 

ARTICLE 3.

 

REDEMPTION

 

SECTION 3.01.              Notices

to Trustee.  If the Company elects

to redeem Notes pursuant paragraph 5 of the Notes or is obligated to purchase

Notes pursuant to Section 4.09 or Section 4.10, it

shall notify the Trustee in writing of the Redemption Date and the principal

amount at Maturity of Notes to be redeemed. 

The redemption provisions of paragraph 5 of the Notes are fully

incorporated herein.  The Trustee may

conclusively rely on an Officers’ Certificate and the calculations given

therein in making any redemption in accordance with paragraph 5 of the Notes.

 

33

 

The Company shall give

each notice to the Trustee provided for in this Section 3.01 at least 45

days before the Redemption Date unless the Trustee consents to a shorter

period.  Such notice shall be

accompanied by an Officers’ Certificate and an Opinion of Counsel from the

Company to the effect that such redemption will comply with the conditions

herein.  If fewer than all the Notes are

to be redeemed, the record date relating to such redemption shall be selected

by the Company and given to the Trustee, which record date shall be not fewer

than 15 days after the date of notice to the Trustee.  Any such notice may be canceled at any time

prior to notice of such redemption being mailed to any Holder and shall thereby

be void and of no effect.

 

SECTION 3.02.              Selection

of Notes To Be Redeemed.  If fewer

than all the Notes are to be redeemed, the Trustee shall select the Notes to be

redeemed pro rata from all of the Holders. 

The Trustee shall make the selection from outstanding Notes not

previously called for redemption.  The

Trustee may select for redemption portions of the principal amount at Maturity

of Notes that have denominations larger than $1,000.  Notes and portions of them the Trustee selects shall be in

principal amounts at maturity of $1,000 or a multiple thereof.  Provisions of this Indenture that apply to

Notes called for redemption also apply to portions of Notes called for

redemption.  The Trustee shall notify

the Company promptly of the Notes or por­tions of Notes to be redeemed.

 

SECTION 3.03.              Notice

of Redemption.  (a) At least

30 days but not more than 60 days before a date for redemp­tion of Notes,

the Company shall mail a notice of redemption by first-class mail, to each

Holder of Notes to be redeemed at such Holder’s registered address.

 

The notice shall identify

the Notes to be redeemed and shall state:

 

(i)            the Redemption Date;

 

(ii)           the Redemption Price and the amount

of accrued interest (including amounts to be accreted to principal of the

Notes) to the Redemption Date;

 

(iii)          the name and address of the Paying

Agent;

 

(iv)          that Notes called for redemption must

be surrendered to the Paying Agent to collect the Redemption Price;

 

(v)           if fewer than all the outstanding

Notes are to be redeemed, the certificate numbers and principal amount at Maturity

of the particular Notes to be redeemed;

 

(vi)          that, unless the Company defaults in

making such redemption payment or the Paying Agent is prohibited from making

such payment pursuant to the terms of this Indenture, interest and any Special

Interest on Notes (or portion thereof) called for redemption ceases to accrue

on and after the Redemption Date;

 

(vii)         the CUSIP number, if any, printed on

the Notes being redeemed; and

 

34

 

(viii)        that no representation is made as to the

correctness or accuracy of the CUSIP number, if any, listed in such notice or

printed on the Notes.

 

(b)           At the Company’s written request, the

Trustee shall give the notice of redemption in the Company’s name and at the

Company’s expense.  In such event, the

Company shall provide the Trustee with the information required by this Section 3.03.

 

SECTION 3.04.              Effect

of Notice of Redemption.  Once

notice of redemption is mailed, Notes called for redemption become due and

payable on the Redemption Date and at the Redemption Price stated in the

notice.  Upon surrender to the Paying

Agent, such Notes shall be paid at the Redemption Price stated in the notice,

plus accrued interest and Special Interest, if any, to the Redemption Date; provided,

however, that if the Redemption Date is after a Regular Record Date

and on or prior to the Interest Payment Date, the accrued interest and Special

Interest, if any, shall be payable to the Holder of the redeemed Notes

registered on the relevant Regular Record Date.  Failure to give notice or any defect in the notice to any Holder

shall not affect the validity of the notice to any other Holder.

 

SECTION 3.05.              Deposit

of Redemption Price.  Prior to 10:00

a.m. (New York City time) on the Redemption Date, the Company shall deposit

with the Paying Agent (or, if the Company or a Subsidiary is the Paying Agent,

shall segregate and hold in trust) money sufficient to pay the Redemption Price

of, and accrued interest and Special Interest, if any, on all Notes to be redeemed

on that date other than Notes or portions of Notes called for redemption that

have been delivered by the Company to the Trustee for cancellation.  On or after the Redemption Date, interest

shall cease to accrue on Notes or portions thereof called for redemption so

long as the Company has deposited with the Paying Agent funds sufficient to pay

the principal of, plus accrued and unpaid interest and Special Interest, if

any, on, the Notes to be redeemed, unless the Paying Agent is prohibited from

making such payment pursuant to the terms of this Indenture.

 

SECTION 3.06.              Notes

Redeemed in Part.  Upon surrender of

a Note that is redeemed in part, the Company shall execute and the Trustee

shall authenticate for the Holder (at the Company’s expense) a new Note equal

in principal amount at Maturity to the unredeemed portion of the principal

amount at Maturity of the Note surrendered.

 

SECTION 3.07.               Tender

of Notes in Exercise of Warrants. 

The Warrant Agreement provides that the holder of a Warrant may exercise

such Warrant by surrendering a Note or a portion thereof then held by such

holder in payment of the exercise price for all Warrant Shares then exercised

equal to 100% of that portion of the Accreted Value of such Notes, which the

Holder thereof directs the Company to accept in payment of such exercise

price.  To the extent the Accreted Value

of such surrendered Note is greater than the aggregate amount of the exercise

price for all Warrant Shares then paid for by surrender thereof (exclusive of

the portion of such exercise price paid for by accrued interest, if any, on

such Surrendered Note), the Company shall deliver a new Note to the tendering

Holder thereof, in accordance with the provisions of this Indenture, dated the

date of the original issuance of the tendered Note, in the principal amount to

maturity which bears the same proportion to the principal amount at maturity of

such surrendered Note immediately prior to acceptance by the Company as the

remaining portion of the Accreted Value of such surrendered Note bears to the

Accreted Value of such surrendered Note immediately prior to acceptance by the

Company.  On the date the Company

accepts such

 

35

 

surrendered

Note in payment of the exercise price for the Warrants, the Company shall pay

all accrued and unpaid interest on the Accreted Value of the Notes cancelled

pursuant to this Section 3.07 up to but excluding such Redemption Date.

 

ARTICLE 4.

 

AFFIRMATIVE

COVENANTS

 

SECTION 4.01.              Payment

of Notes.

 

(a)           The Company shall pay the principal

of and interest on the Notes on or before the dates and in the manner provided

in the Notes and in this Indenture. 

Principal of and interest on the Notes shall be considered paid on the

date due if on such date the Trustee or the Paying Agent holds in accordance

with this Indenture money sufficient to pay all principal of and interest on

the Notes then due and the Trustee or the Paying Agent, as the case may be, is

not prohibited from paying such money to the Holders on that date pursuant to

the terms of this Indenture.

 

(b)           The Company shall pay interest on

overdue principal of the Notes at the rate specified therefor in the Notes and

shall pay interest on overdue installments of interest at the same rate to the

extent lawful.

 

SECTION 4.02.              Commission

Reports.  Whether or not required by

the reporting requirements of Section 13 or 15(d) of the Exchange Act, so long

as the Notes are outstanding, the Company shall file with the Commission, and

provide the Trustee, Holders and prospective Holders (upon request) within 15

days after it files or is required to file them with the Commission, copies of

its annual report and the information, documents and other reports that are

specified in Section 13 and 15(d) of the Exchange Act.  In addition, the Company shall furnish to

the Trustee and the Holders, promptly upon their becoming available, copies of

the annual report to shareholders and any other information provided by the

Company to its public shareholders generally. 

The Company also shall comply with the other provisions of TIA §

314(a).  The receipt by the Trustee of

any such reports and documents pursuant to this Section shall not constitute

notice or constructive notice of any information contained in such documents or

determinable from information contained in such documents, including the

Company’s compliance with any covenants hereunder (as to which the Trustee is

entitled to rely exclusively on Officers’ Certificates).

 

SECTION 4.03.              Preservation

of Corporate Existence.  The Company

shall do or cause to be done all things necessary to preserve and keep in full

force and effect (a) its corporate existence, and the corporate, limited

liability company, partnership or other existence of each of its Restricted

Subsidiaries, in accordance with the respective organizational documents (as

the same may be amended from time to time) of the Company or any such

Restricted Subsidiary (it being understood that legal name change may be made

based upon reasonable discretion of the Company) and (b) the rights

(charter and statutory) and licenses of the Company and its Restricted

Subsidiaries; provided, however, that the Company shall not be required to

preserve or keep in full force and effect any such right or license, or the

corporate, limited liability company,

 

36

 

partnership

or other existence of any of its Restricted Subsidiaries if the loss thereof

does not and would not reasonably be expected to result in a Material Adverse

Effect.

 

SECTION 4.04.              Maintenance

of Properties.  The Company will

cause all properties used or useful in the conduct of its business or the

business of any of its Restricted Subsidiaries to be maintained and kept in

good condition, repair and working order, ordinary wear and tear excepted, and

will cause to be made all necessary repairs, renewals and replacements thereof,

all as in the judgment of the Company may be necessary so that the business

carried on in connection therewith may be properly conducted; provided,

however,  that the foregoing

shall not prevent the Company from discontinuing the operation or maintenance

of any of such properties if such discontinuance does not and would not

reasonably be expected to result in a Material Adverse Effect.

 

SECTION 4.05.              Taxes

 

(a)           Payment of Taxes and Other Claims.  The Company shall pay or discharge or cause

to be paid or discharged, before the same shall become delinquent, (i) all

material Taxes for which the Company or any of its Restricted Subsidiaries could

be liable and (ii) all lawful claims for labor, materials and supplies

which, if unpaid, might by law become a Lien upon the property of the Company

or any of its Restricted Subsidiaries; provided, however, that the Company shall

not be required to pay or discharge or cause to be paid or discharged any such

Tax or claim whose amount, applicability or validity is being contested in good

faith by appropriate proceedings, provided that appropriate reserves

therefor are established in the Company’s consolidated financial statements in

accordance with GAAP.

 

(b)           Tax Returns.  The Company and its Restricted Subsidiaries

shall timely file or cause to be filed when due all material Tax Returns that

are required to be filed by or with respect to the Company or any of its

Subsidiaries for taxable years ending after the Closing Date and shall pay any

Taxes due in respect of such Tax Returns except as permitted under Section

4.05(a).

 

(c)           Transfer Taxes.  All transfer, transfer gains, documentary,

sales, use, stamp, registration and other similar Taxes and fees (including

costs and expenses relating to such Taxes) incurred in connection with the

consummation of the transactions contemplated by this Indenture shall be borne

by the Company.  The Holders shall

reasonably cooperate with the Company in the preparation and filing of any such

Tax Returns and other documentation.

 

SECTION 4.06.              Compliance

Certificate.  The Company shall

deliver to the Trustee within (a) 50 days after the end of each of the

first three fiscal quarters of the Company’s fiscal year, and (b) within 95

days of the end of the fiscal year of the Company, an Officers’ Certificate

made on behalf of the Company stating that in the course of the performance by

the signers of their duties as officers of the Company they would normally have

knowledge of any Default and whether or not the signers know of any Default

that occurred during such period.  If

they do, the certificate shall describe the Default, its status and what action

the Company is taking or proposes to take with respect thereto.  The Company also shall comply with

Section 314(a)(4) of the TIA.

 

37

 

SECTION 4.07.              Compliance

with Law.  The Company will, and

will cause each of its Restricted Subsidiaries to, comply with all Applicable

Laws and all Environmental Laws and will obtain and maintain, and will cause

each of its Restricted Subsidiaries to obtain and maintain, all Permits

necessary to the ownership of their respective properties or to the conduct of

their respective businesses, except where and to the extent the failure to so

comply with Applicable Laws and all Environmental Laws or to obtain and

maintain in effect any such Permits could not, individually or in the

aggregate, reasonably be expected to have a Material Adverse Effect.

 

SECTION 4.08.              Insurance.  The Company shall cause its Restricted

Subsidiaries to maintain, with financially sound and reputable insurers,

insurance with respect to their respective properties and business against such

casualties and contingencies, of such types, on such terms and in such amounts

(including deductibles, co-insurance and self-insurance, if adequate reserves

are maintained with respect thereto) as is customary in the case of entities

engaged in a similar businesses and owning similar properties in the same

general areas in which the Company and its Restricted Subsidiaries operate.

 

SECTION 4.09.              Offer

to Repurchase Upon Change of Control.

 

(a)           Upon the occurrence of a Change of

Control, the Company shall make an offer (a “Change of Control Offer”)

to each Holder to repurchase all or any part (equal to $1,000 of principal

amount at Maturity or a multiple thereof) of each Holder’s Notes at an offer

price in cash equal to 101% of the Accreted Value thereof, plus accrued and

unpaid interest thereon, if any, as of the Change of Control Payment Date (the

“Change of Control Payment”) in accordance with the terms set forth

below; provided, however, that, notwithstanding the

occurrence of a Change of Control, the Company shall not be obligated to

purchase the Notes pursuant to this Section 4.09 in the event that it has

exercised its right to redeem all the Notes under paragraph 5 of the

Notes.  The Company shall comply with the

requirements of Rule 14e-1 under the Exchange Act and any other securities

laws and regulations thereunder to the extent such laws and regulations are

applicable in connection with the repurchase of the Notes as a result of a

Change of Control, and the Company shall not be in violation of this Indenture

by reason of any act required by such rule or other Applicable Law.

 

(b)           Within 30 days following any

Change of Control, the Company shall mail a notice to each Holder stating:

 

(i)            that the Change of Control Offer is

being made pursuant to this Section 4.09 and that all Notes

tendered will be accepted for payment;

 

(ii)           the purchase price and the purchase

date, which shall be at least 10 Business Days but no more than

60 days from the date on which the Company mails notice of the Change of

Control (the “Change of Control Payment Date”);

 

(iii)          that Holders electing to have any

Notes purchased pursuant to a Change of Control Offer shall be required to

surrender the Notes, with the form entitled “Option of Holder to Elect

Purchase” on the reverse of the Notes completed, to the

 

38

 

Paying Agent for such purpose, at the address

specified in the notice prior to the close of business on the third Business

Day preceding the Change of Control Payment Date;

 

(iv)          that Holders will be entitled to

withdraw their election if the Company or its designated agent for such

purpose, receives, not later than the close of business on the second Business

Day preceding the Change of Control Payment Date, a facsimile transmission or

letter setting forth the name of the Holder, the principal amount of Notes

delivered for purchase, and a statement that such Holder is withdrawing his

election to have the Notes purchased; and

 

(v)           other information required to be

included pursuant to Section 3.03.

 

(c)           On the Change of Control Payment

Date, the Company shall, to the extent lawful, (i) accept for payment all Notes

or portions thereof properly tendered pursuant to the Change of Control Offer

and (ii) pay to the Holders of Notes or portions thereof so tendered an amount

equal to the Change of Control Payment in respect of all Notes or portions

thereof so tendered.  The Company shall

promptly mail or deliver by wire transfer to each Holder of Notes so tendered

the Change of Control Payment for such Notes, and the Company shall promptly

execute and mail (or cause to be transferred by book-entry) to each Holder a

new Note equal in principal amount to any unpurchased portion of the Notes

surrendered, if any; provided, however, that each such new Note

shall be in a principal amount at Maturity of $1,000 or a multiple thereof.

 

(d)           In the event that at the time of such

Change of Control the terms of any Senior Indebtedness restrict or prohibit the

repurchase of Notes pursuant to this Section 4.09, then prior to

the mailing of the notice to Holders provided for in Section 4.09(b)

but in any event within 30 days following any Change of Control, the

Company shall (i) repay in full all such Senior Indebtedness or offer to repay

in full all such Senior Indebtedness and repay such Senior Indebtedness of each

lender or holder who has accepted such offer or (ii) obtain the requisite

consent under such Senior Indebtedness to permit the repurchase of the Notes as

provided for in Section 4.09(c).

 

(e)           The Company shall not be required to

make a Change of Control Offer upon a Change of Control if a third party makes

the Change of Control Offer in a manner, at the times and otherwise in

compliance with the requirements set forth in this Section 4.09 and

such third party purchases all Notes validly tendered and not withdrawn under

such Change of Control Offer.

 

SECTION 4.10.               Offer

to Purchase by Application of Excess Proceeds.

 

(a)           In the event that, pursuant to Section

5.05, the Company shall be required to commence an offer to all Holders to

purchase Notes (an “Asset Sale Offer”), it shall follow the procedures

specified in this Section 4.10. 

Each Asset Sale Offer shall remain open for not less than ten (10)

Business Days nor more than sixty (60) days immediately following its

commencement, except to the extent that a longer period is required by

Applicable Law (the “Offer Period”).

 

39

 

(b)           Upon the commencement of an Asset

Sale Offer, the Company shall send, by first class mail, a notice to each of

the Holders which shall contain all instructions and materials necessary to

enable such Holders to tender Notes pursuant to the Asset Sale Offer.  The Asset Sale Offer shall be made to all

Holders.  The notice, which shall govern

the terms of the Asset Sale Offer, shall state:

 

(i)            that

the Asset Sale Offer is being made pursuant to this Section 4.10 and Section

5.05 and the length of time the Asset Sale Offer shall remain open;

 

(ii)           the

Offer Amount and the Purchase Date;

 

(iii)          that

Holders electing to have a Note purchased pursuant to any Asset Sale Offer

shall be required to surrender the Note, with the form entitled “Option of

Holder to Elect Purchase” on the reverse of the Note completed to the Company

at the address specified in the notice at least three Business Days before the

Purchase Date;

 

(iv)          that

Holders shall be entitled to withdraw their election if the Company receives,

not later than the second Business Day prior to the expiration of the Offer Period,

a facsimile transmission or letter setting forth the name of the Holder, the

principal amount of the Note the Holder delivered for purchase and a statement

that such Holder is withdrawing his election to have such Note purchased; and

 

(v)           other

information required to be included pursuant to Section 3.03.

 

(c)           On or before the Business Day

immediately after the termination of the Offer Period (the “Purchase Date”),

the Company shall, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary,

Notes or portions thereof tendered pursuant to the Asset Sale Offer with an

Accreted Value equal to the Accreted Value required to be purchased pursuant to

Section 5.05 plus accrued and unpaid interest, if any, thereon to the

Purchase Date (the “Offer Amount”) or, if the Accreted Value of Notes

tendered is less than the Offer Amount, the Company shall purchase all Notes

tendered in response to the Asset Sale Offer. 

Payment for any Notes so purchased shall be made in the same manner as interest

payments are made.  The Company shall

promptly (but in any case not later than five (5) Business Days after the

Purchase Date) mail or deliver by wire transfer to each tendering Holder an

amount equal to the purchase price of the Notes tendered by such Holder and

accepted by the Company for purchase, and the Company shall promptly issue a

new Note and deliver it to such Holder, in a principal amount at Maturity equal

to any unpurchased portion of the Note surrendered.  Any Note not so accepted shall be promptly mailed or delivered by

the Company to the Holder thereof.

 

SECTION 4.11.              Other

Covenants.  The Company hereby

agrees, to the extent reasonably practicable but subject to the limitations set

forth in Section 5.11:

 

(a)           To maintain the books and records of

the Cincinnati Bell Group separate from the BCI Group;

 

(b)           Not to commingle assets of the

Cincinnati Bell Group with those of the BCI Group, except as permitted to be

invested to effect the Centralized Cash Management

 

40

 

System

pursuant to Section 5.02(f)(ix) of the Credit Agreement, as in effect on

the date of this Indenture;

 

(c)           To maintain separate financial

statements of the Cincinnati Bell Group from those of the BCI Group, which

financial statements need not (except as provided in Section 9 of the

Purchase Agreement) be separately audited or reviewed by an independent

accounting firm;

 

(d)           To observe all material corporate,

partnership or limited liability company (as applicable) formalities;

 

(e)           Not to pay the salaries of the

Cincinnati Bell Group employees with funds of the BCI Group and vice versa,

except, in the case of payments of salaries of management employees of the BCI

Group with the funds of the Cincinnati Bell Group, for any such payments made

in the Ordinary Course of Business;

 

(f)            Other than as required under the

Credit Documents or pursuant to the terms of any documents governing Existing

Indebtedness, not to guarantee or become obligated for the debts of the BCI

Group or hold out its credit as being available to satisfy the obligations of

the BCI Group;

 

(g)           Other than as required under the

Credit Documents or pursuant to the terms of any documents governing Existing

Indebtedness, not to pledge the assets of the Cincinnati Bell Group for the

benefit of the BCI Group; and

 

(h)           To hold itself out as a separate

entity from the BCI Group.

 

SECTION 4.12.              Further

Assurances.  The Company shall, upon

the request of Holders, execute and deliver such further instruments and do

such further acts as may be reasonably necessary or proper to carry out more

effectively the provisions of this Indenture.

 

SECTION 4.13.              Future

Guarantors.  Subject to Section

11.02(b), the Company shall cause each Restricted Subsidiary that is (a)

acquired or formed after the Closing Date and is a Restricted Subsidiary that

is also a guarantor under the Credit Agreement or (b) an existing Restricted

Subsidiary that becomes a guarantor under the Credit Agreement to become a

Guarantor, and, if applicable, to execute and deliver to the Trustee a

supplemental guarantee in the form of Exhibit C pursuant to which such

Restricted Subsidiary will guarantee payment of the Notes.

 

SECTION 4.14.              Approvals.  The Company agrees to exercise commercially

reasonable efforts, and shall cause its Restricted Subsidiaries to exercise

commercially reasonable efforts, to obtain any approval of the Federal

Communications Commission, any public utility or service commission or any

other Governmental Authority for any action or transaction contemplated by this

Indenture that is then required by Applicable Law, except where the failure to

obtain any such approval could not, individually and in the aggregate,

reasonably be expected to have a Material Adverse Effect.

 

41

 

ARTICLE 5.

 

NEGATIVE

COVENANTS APPLICABLE TO COMPANY AND ITS SUBSIDIARIES

 

SECTION 5.01.              Stay,

Extension and Usury Laws.  The

Company covenants (to the extent that it may lawfully do so) that it shall not

at any time insist upon, plead, or in any manner whatsoever claim or take the

benefit or advantage of, any stay, extension or usury law wherever enacted, now

or at any time hereafter in force, that may affect the covenants or the

performance of its obligations under the Notes or this Indenture, and the

Company (to the extent that it may lawfully do so) hereby expressly waives all

benefit or advantage of any such law, and covenants (to the extent that it may

lawfully do so) that it shall not, by resort to any such law, hinder, delay or

impede the execution of any power herein granted to the Holders, but shall

suffer and permit the execution of every such power as though no such law has

been enacted.

 

SECTION 5.02.              Restricted

Payments.  (a) The Company shall

not, and shall not permit any of its Restricted Subsidiaries to, (i) declare or

make any dividend payment or other distribution of assets, properties, cash,

rights, obligations or securities on account of any shares of any class of

Capital Stock (including any payment in connection with a merger or

consolidation involving the Company or any of its Restricted Subsidiaries),

except (x) dividends or distributions payable solely in its Capital Stock

(other than Disqualified Capital Stock or Capital Stock convertible into or

exchangeable for Disqualified Capital Stock) and (y) dividends or distributions

payable to the Company or to a Restricted Subsidiary (and, if the Restricted

Subsidiary making such dividend or distribution has equityholders other than

the Company or another Restricted Subsidiary, to such equityholders on a pro

rata basis), (ii) purchase, redeem or otherwise acquire for value any

shares of Capital Stock of the Company or any of its Restricted Subsidiaries

now or hereafter outstanding held by a Person other than the Company or another

Restricted Subsidiary, (iii) make any payment or prepayment of principal of,

premium, if any, interest, redemption, exchange, purchase, retirement,

defeasance, sinking fund or other payment with respect to, any Subordinated

Indebtedness prior to scheduled maturity, scheduled payment, scheduled

repayment or scheduled sinking fund payment thereof (except redemption,

exchange, purchase, retirement, defeasance, sinking fund or other payment

within six months of the final maturity thereof; provided that no such redemption, exchange, purchase,

retirement, defeasance, sinking fund or other payment may be made prior to the

final maturity may be made with respect to the Convertible Subordinated Notes)

or (iv) make any Restricted Investments (the items described in clauses (i),

(ii), (iii), and (iv) are referred to as “Restricted

Payments”); except that the Company or any Restricted Subsidiary of the

Company may make a Restricted Payment if at the time of and after giving effect

to such Restricted Payment;

 

(A)          no Default or Event of Default shall

have occurred and be continuing or would occur as a consequence thereof; and

 

(B)           the Company could, at the time such

Restricted Payment was made and after giving pro forma effect thereto as if

such Restricted Payment had been made at the beginning of the applicable

four-fiscal quarter period, have been permitted to Incur at least $1.00 of

additional Indebtedness pursuant to Section 5.04(a) hereof; and

 

42

 

(C)           such Restricted Payment, together

with the aggregate of all other Restricted Payments made by the Company and its

Restricted Subsidiaries after the date of this Indenture (excluding Restricted

Payments permitted by Section 5.02(b)(i) through (v), inclusive, (viii)

and (ix)), is less than the sum, without duplication, of (1) the

Applicable Percentage of the Consolidated Net Income for the period (taken as

one accounting period) from the beginning of (x) if the Closing Date occurs in

the first half of a fiscal quarter, such fiscal quarter or (y) if the Closing

Date occurs in the second half of a fiscal quarter, the fiscal quarter

commencing after the Closing Date, in each case, to the end of the Company’s

most recently ended fiscal quarter for which internal financial statements of

the Company and its Restricted Subsidiaries are, or should have been, available

in accordance with the Transaction Documents at the time of such Restricted

Payment (or, if such Consolidated Net Income for such period is a deficit, less

100% of such deficit), plus (2) to the extent that any Restricted

Investment that was made after the date of this Indenture is sold for cash or

otherwise liquidated or repaid for cash, the lesser of (x) the cash return of

capital with respect to such Restricted Investment (less the cost of

disposition, if any) and (y) the initial amount of such Restricted Investment, plus

(3) the amount equal to the net reduction in Investments in Unrestricted

Subsidiaries resulting from the redesignation of Unrestricted Subsidiaries as

Restricted Subsidiaries (valued as provided in the definition of the

“Investment”), plus (4) net cash dividends or other net cash

distributions paid to the Company or any Restricted Subsidiary from

Unrestricted Subsidiaries (for the avoidance of doubt, only to the extent not

included in clause (1) above) but only for the purpose of making (x) prior to

the Distribution Date, Restricted Investments and (y) after the Distribution

Date any Restricted Payments (whether or not constituting Restricted

Investments), plus (5) the aggregate Net Proceeds received by the

Company from the issue or sale of its Capital Stock (other than Disqualified

Capital Stock) or other capital contributions subsequent to the date of this

Indenture (other than Net Proceeds received from an issuance or sale of such

Capital Stock to a Subsidiary of the Company or an employee stock ownership

plan, option plan or similar trust to the extent such sale to an employee stock

ownership plan, option plan or similar trust is financed by loans from or

guaranteed by the Company or any Restricted Subsidiary), but only for the

purpose of making (x) prior to the Distribution Date, Restricted Investments

and (y) after the Distribution Date any Restricted Payments (whether or not

constituting Restricted Investments), plus (6) aggregate net cash

proceeds received by the Company from the issue or sale since the Closing Date

of debt securities that have been converted into Capital Stock (other than

Disqualified Capital Stock) of the Company, but only for the purpose of making

(x) prior to the Distribution Date, Restricted Investments and (y) after the

Distribution Date any Restricted Payments (whether or not constituting

Restricted Investments).

 

(b)           The foregoing provisions shall not

prohibit any of the following if no Default or Event of Default shall have

occurred and be continuing immediately after any such transaction:

 

43

 

(i)            the

defeasance, redemption or repurchase of (x) Subordinated Indebtedness with the

net cash proceeds from an Incurrence of Permitted Refinancing Indebtedness or

the substantially concurrent sale (other than to a Subsidiary of the Company)

of Capital Stock of the Company or (y) Convertible Preferred Stock or other Capital

Stock of the Company with the net cash proceeds from the substantially

concurrent sale (other than to a Subsidiary of the Company) of Capital Stock of

the Company (other than the Disqualified Capital Stock);

 

(ii)           the

pro rata redemption or repurchase by any Restricted Subsidiary of the Company

of its Common Stock;

 

(iii)          the

making by the Company of regularly scheduled payments in respect of any

Subordinated Indebtedness permitted hereby in accordance with the terms of, and

only to the extent required by, and subject to the subordination provisions

contained in, any agreement pursuant to which such Subordinated Indebtedness

was issued; provided that the

regularly scheduled payments in respect of Convertible Subordinated Notes

permitted by this clause (iii) may not exceed an effective rate of 10% per

annum;

 

(iv)          the

making by the Company and its Restricted Subsidiaries of Permitted

Acquisitions;

 

(v)           the

making by the Company of (x) regularly scheduled dividend payments in respect

of 6 3⁄4% Cumulative Convertible Preferred Stock of the Company in accordance

with the terms thereof and (y) regularly scheduled interest payments (excluding

any common and non-redeemable preferred equity component thereof) in respect of

Alternative Mezzanine Debt in accordance with the terms thereof;

 

(vi)          dividends

paid within 60 days after the date of declaration thereof if at such date

of declaration such dividend would have complied with Section 5.02(a);

 

(vii)         the

repurchase or other acquisition of shares of, or options to purchase shares of,

common stock of the Company or any of its Subsidiaries from employees, former

employees, directors or former directors of the Company or any of its

Subsidiaries (or permitted transferees of such employees, former employees,

directors or former directors), pursuant to the terms of the agreements

(including employment agreements) or plans (or amendments thereto) approved by

the Board of Directors of the Company under which such individuals purchase or

sell or are granted the option to purchase or sell, shares of such common

stock; provided, however, that the aggregate amount of such repurchases shall

not exceed $2,000,000 in any calendar year;

 

(viii)        the issuance of common stock of the Company to officers,

directors and employees as part of compensation arrangements;

 

(ix)           the

making by the Company and its Restricted Subsidiaries of other Restricted

Payments not to exceed $5,000,000 in the aggregate since the date of this

Indenture; and

 

44

 

(x)            the

making by the Company and its Restricted Subsidiaries of Restricted Payments

permitted to be made by Section 5.11.

 

(c)           The amount of all Restricted Payments

(other than cash) shall be the fair market value (evidenced by a resolution of

the Board of Directors set forth in an Officers’ Certificate delivered to the

Trustee) on the date of the Restricted Payment of the asset(s) proposed to be

transferred by the Company or such Subsidiary, as the case may be, pursuant to

the Restricted Payment.

 

SECTION 5.03.              Dividend

and Other Payment Restrictions Affecting Subsidiaries.  The Company shall not, and shall not permit

any of its Restricted Subsidiaries to, directly or indirectly, create or

otherwise cause or suffer to exist or become effective any encumbrance or

restriction on the ability of any Restricted Subsidiary of the Company to

(a)(i) pay dividends or make any other distributions to the Company with

respect to any Capital Stock of such Restricted Subsidiary or any other

interest or participation in, or measured by, such Restricted Subsidiary’s

profits, or (ii) pay any Indebtedness owed by such Restricted Subsidiary

to the Company or any of the Company’s other Restricted Subsidiaries,

(b) make loans or advances to the Company or any of the Company’s Restricted

Subsidiaries or (c) transfer any of such Restricted Subsidiary’s

properties or assets to the Company or any of the Company’s Restricted

Subsidiaries, except for such encumbrances or restrictions existing under or by

reason of (i) existing Indebtedness and agreements listed on Schedule

5.03, in each case, as in effect on the date of this Indenture,

(ii) the Credit Documents as in effect as of the date of this Indenture,

and any amendments, modifications, restatements, renewals, increases,

supplements, refundings, replacements or Refinancings thereof permitted

hereunder, provided,

however, that such amendments, modifications, restatements,

renewals, increases, supplements, refundings, replacements or Refinancings are

not materially more restrictive with respect to such provisions than those

contained in the Credit Documents on the date hereof, (iii) this Indenture

and the Notes, (iv) Applicable Law, (v) any encumbrance or

restriction (1) that restricts in a customary manner the subletting,

assignment or transfer of any property or asset that is subject to a lease,

license or similar contract or (2) contained in security agreements

securing Indebtedness of the Company or a Restricted Subsidiary to the extent

such encumbrance or restriction restricts the transfer of the property subject

to such security agreements, (vi) capital leases or purchase money

obligations for property acquired in the Ordinary Course of Business that

impose restrictions of the nature described in clause (v) above on the property

so acquired, (vii) Permitted Refinancing Indebtedness; provided,

however, that such restrictions contained in the agreements

governing such Permitted Refinancing Indebtedness are not materially more

restrictive than those contained in the agreements governing the Indebtedness

being Refinanced, (viii) any instrument governing Indebtedness, Capital

Stock or assets of a Person acquired by the Company or any of the Company’s

Restricted Subsidiaries as in effect at the time of such acquisition (except to

the extent such instrument was created or such Indebtedness was Incurred in

connection with or in contemplation of such acquisition), which encumbrance or

restriction is not applicable to any Person, or the properties or assets of any

Person, other than the Person, or the property or assets of the Person, so

acquired, provided

that, in the case of Indebtedness, such Indebtedness was permitted

by the terms of this Indenture to be Incurred, (ix) secured Indebtedness

otherwise permitted to be Incurred pursuant to this Indenture that limits the

right of the debtor thereunder to dispose of the assets securing such

Indebtedness, (x) contracts for the sale of assets, including without

limitation customary restrictions with respect to a Subsidiary

 

45

 

pursuant

to an agreement that has been entered into for the sale or disposition of all

or substantially all of the Capital Stock or assets of such Subsidiary,

(xi) restrictions on deposits or minimum net worth requirements imposed by

customers under contracts entered into in the Ordinary Course of Business,

(xii) customary provisions in joint venture agreements, licenses and leases and

other similar agreements entered into in the Ordinary Course of Business,

(xiii) any encumbrance or restriction contained in an agreement evidencing

Indebtedness of a Restricted Subsidiary permitted to be Incurred subsequent to

the Closing Date pursuant to Section 5.04; provided, however,

that such encumbrance or restriction applies only in the event of and during

the continuance of a default contained in such agreement and (xiv) any

encumbrances or restrictions of the type referred to in

clauses (a), (b) and (c) above imposed by any amendments, modifications,

restatements, renewals, increases, supplements, refundings, replacements or

refinancings of the contracts, instruments or obligations referred to in

clauses (i) through (xiii) above; provided

that such amendments, modifications, restatements, renewals, increases,

supplements, refundings, replacements or refinancings are, in the good faith

judgment of the Board of Directors of the Company, no more restrictive with

respect to such dividend and other payment restrictions than those contained in

the dividend or other payment restrictions prior to such amendment,

modification, restatement, renewal, increase, supplement, refunding,

replacement or refinancing.

 

SECTION 5.04.              Incurrence

of Indebtedness and Issuance of Preferred Stock

 

(a)           The Company shall not, and shall not

permit any of its Restricted Subsidiaries to, directly or indirectly, create,

incur, issue, assume, Guarantee or otherwise become directly or indirectly

liable, contingently or otherwise (including by operation of law), with respect

to (collectively, “Incur”) any Indebtedness (including Acquired

Indebtedness) and shall not permit any of its Restricted Subsidiaries to issue

any Preferred Stock; provided, however, that the Company and the

Guarantors may Incur Indebtedness (including Acquired Indebtedness), and the

Company and the Guarantors may guarantee such Indebtedness, if immediately

after the Incurrence of such Indebtedness, both (i) prior to the Distribution

Date, the Consolidated EBITDA to Consolidated Interest Ratio for the most

recent four full fiscal quarter period for which consolidated financial

statements of the Company and its Restricted Subsidiaries are, or should have

been, available in accordance with the Transaction Documents is 3.0 to 1.00 or

greater (this test is referred to herein as the “Interest Coverage Test”),

and (ii) the Consolidated Adjusted Debt to Adjusted EBITDA Ratio is less than

(A) 4.75 to 1.00 if such Incurrence occurs on or prior to December 31, 2002,

(B) 4.5 to 1.00 if such Incurrence occurs on or after January 1, 2003 and on or

prior December 31, 2003, (C) 4.25 to 1.00 if such Incurrence occurs on or after

January 1, 2004 and on or prior December 31, 2004 or (D) 4.00 to 1.00 if such

Incurrence occurs on or after January 1, 2005 (the test set forth in

sub-paragraph (ii) hereof is referred to herein as “Leverage Test”).  For the purpose of the calculation of the

Leverage Test (both before and after the Distribution Date) and, prior to the

Distribution Date, the Interest Coverage Test, with respect to any period

included in such calculation, Consolidated EBITDA, the components of

Consolidated Interest Expense, and Consolidated Adjusted Debt and Capital

Expenditures shall be calculated with respect to such period by the Company in

good faith on a pro forma basis (including and consistent with Permitted

Adjustments), giving effect to any Permitted Acquisition, Asset Disposition or

Incurrence or redemption or repayment of Indebtedness that has given rise to

the need for such calculation, has occurred during such period or has occurred

after such period and on or prior to the date of such calculation (each a “Subject

 

46

 

Transaction”), including, with regards to

Permitted Acquisitions and Asset Dispositions, by using the historical

financial statements of any business so acquired or to be acquired or sold or

to be sold and the consolidated financial statements of the Company and its

Restricted Subsidiaries which shall be reformulated as if such Subject

Transaction, and any Indebtedness Incurred or redeemed or repaid in connection

therewith, had been consummated or Incurred or redeemed or repaid at the

beginning of such period (and assuming that such Indebtedness bears interest

during any portion of the applicable measurement period prior to the relevant

acquisition at the weighted average of the interest rates applicable to

outstanding revolving loans under the Credit Agreement Incurred during such

period).

 

(b)           The foregoing provisions shall not

apply to:

 

(i)            the

Incurrence by the Company and its Restricted Subsidiaries of the Existing

Indebtedness (including, without limitation, all pay-in-kind interest under the

Convertible Subordinated Indenture; provided

that the Company will not permit the rate of interest on the Convertible

Subordinated Notes to exceed of 10% per annum);

 

(ii)           the

Incurrence by the Company and its Restricted Subsidiaries of the Indebtedness

represented by the Notes and the Guarantees (including the Exchange Guarantees)

thereof, as the case may be;

 

(iii)          the

Incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness

represented by (A) Capitalized Lease Obligations, mortgage financings or

purchase money Indebtedness, in each case, Incurred for the purpose of

financing all or any part of the purchase price or cost of construction, repair,

addition to or improvement of property, plant or equipment used in the business

of the Company or such Subsidiary, in an aggregate principal amount, together

with the principal amount of all Indebtedness incurred pursuant to clause (xx)

below, not to exceed (without duplication) the Applicable Capital Lease Amount

at any one time outstanding and (B) other short-term purchase money

Indebtedness the term of which does not exceed six (6) months, in an aggregate

principal amount not to exceed (without duplication) $10,000,000 at any one

time outstanding;

 

(iv)          the

Incurrence by the Company or any of its Restricted Subsidiaries of Permitted

Refinancing Indebtedness in exchange for, or the net proceeds of which are used

to extend, Refinance, renew, replace, defease or refund, Indebtedness that was

permitted by this Indenture to be Incurred by the Company or such Restricted

Subsidiary;

 

(v)           the

Incurrence by the Company or any of its Restricted Subsidiaries of intercompany

Indebtedness (A) between or among the Company and any Wholly Owned Restricted

Subsidiaries of the Company and CBW (provided

that, in the case of Indebtedness incurred by CBW, such intercompany

Indebtedness shall not exceed $300,000,000 at any time outstanding) and (B)

consisting of debits and credits among the Company and its Restricted

Subsidiaries pursuant to the Centralized Cash Management System; provided, however,

that (1) any intercompany Indebtedness which is borrowed by the Company or a

Restricted Subsidiary from a Restricted Subsidiary that is not a

 

47

 

Guarantor shall be expressly subordinated to the Notes and

(2) (x) any subsequent issuance or transfer of Capital Stock that results in

any such Indebtedness being held by a Person other than the Company or a Wholly

Owned Restricted Subsidiary of the Company or CBW, or (y) any sale or other

transfer of any such Indebtedness to a Person other than the Company, a Wholly

Owned Restricted Subsidiary of the Company or CBW, or a lender or agent upon

exercise of remedies under a pledge of such Indebtedness under the Credit

Documents, shall be deemed, in each case of the foregoing clauses (2)(x) and

(y), to constitute an Incurrence of such Indebtedness by the Company or such

Restricted Subsidiary, as the case may be;

 

(vi)          the

Incurrence by the Company or any of its Restricted Subsidiaries of Interest

Swap Obligations that are Incurred for the purpose of fixing or hedging

interest rate risk with respect to any floating rate Indebtedness that is permitted

by the terms of this Indenture to be outstanding;

 

(vii)         the

Incurrence by the Company and its Restricted Subsidiaries of Indebtedness

evidenced by the Credit Documents (and the Guarantees thereof by the Company

and the Company’s Subsidiaries) in a principal amount not exceeding

$1,705,041,000 less the amount of all term loan repayments and permanent

reductions of term and revolving loan commitments actually made under the

Credit Agreement; provided that,

to the extent that the loans under the Credit Agreement are repaid (and

corresponding commitments are permanently reduced) with the proceeds of the New

Notes (as defined in the Credit Agreement) other than the Notes and such New

Notes were Incurred pursuant to this clause (vii), such repayment shall not

reduce the aggregate amount of Indebtedness permitted to be Incurred pursuant

to this clause (vii); and, provided,

further, that, notwithstanding

the limitations set forth in this clause (vii), in the event of any permanent

reduction or repayment of the Credit Agreement’s revolving facility, the

Company and its Restricted Subsidiaries shall have the right to obtain

additional commitments under, and extend the maturity of, such revolving

facility (and Incur additional revolving Indebtedness pursuant to such

additional commitments) in an amount not exceeding the amount of such permanent

reduction; provided that the

aggregate amount of all such additional commitments obtained by the Company and

its Restricted Subsidiaries since the date of this Indenture does not exceed

$100,000,000;

 

(viii)        the Incurrence by the Company or any of its Restricted

Subsidiaries of Indebtedness under Currency Agreements;

 

(ix)           the

Incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness

arising from the honoring by a bank or other financial institution of a check,

draft or similar instrument inadvertently (except in the case of daylight

overdrafts) drawn against insufficient funds in the Ordinary Course of

Business;

 

(x)            the

Incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness

of the Company or any of its Restricted Subsidiaries represented by letters of

credit for the account of the Company or such Restricted Subsidiary, as the

case may be, in order to provide security for workers’ compensation

 

48

 

claims, payment obligations in connection with self-insurance

or similar requirements in the Ordinary Course of Business;

 

(xi)           the

Incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness

in respect of performance bonds, bankers’ acceptances, workers’ compensation

claims, completion guarantees, letters of credit surety or appeal bonds,

payment obligations in connection with self-insurance or similar obligations Incurred

in the Ordinary Course of Business;

 

(xii)          the

Guarantee by the Company or any of its Restricted Subsidiaries of Indebtedness

of the Company or a Restricted Subsidiary of the Company that was permitted to

be Incurred by another provision of this Section 5.04;

 

(xiii)         Indebtedness arising from agreements of the Company or a

Restricted Subsidiary of the Company providing for indemnification, adjustment

of purchase price or similar obligations, in each case, Incurred in connection

with an Asset Disposition permitted by this Indenture or a Permitted

Acquisition or other sale or disposition of assets permitted under this

Indenture;

 

(xiv)        Indebtedness

arising from agreements of the Company or a Restricted Subsidiary of the

Company (including the Exchange and Registration Rights Agreement, and similar

contractual undertakings) providing for indemnification and payment of expenses

relating to the registration under the Securities Act of the sale of Capital

Stock of the Company or the Notes;

 

(xv)         Indebtedness

permitted to be Incurred by Section 5.11;

 

(xvi)        the

Incurrence of Indebtedness by the Company as a result of its indemnification

obligations permitted pursuant to Section 5.06(c) and Section 5.06(d);

 

(xvii)       endorsement of negotiable instruments for deposit or

collection or similar transactions in the ordinary course of business;

 

(xviii)      Indebtedness of a Restricted Subsidiary that is not a Guarantor

Incurred and outstanding on or prior to the date on which such Restricted

Subsidiary was acquired by the Company (other than Indebtedness Incurred in

contemplation of, in connection with, as consideration in, or to provide all or

any portion of the funds or credit support utilized to consummate, the

transaction or series of related transactions pursuant to which such Restricted

Subsidiary became a Subsidiary of or was otherwise acquired by the Company); provided, however,

that on the date that such Restricted Subsidiary is acquired by the Company,

the Company would have been able to Incur $1.00 of additional Indebtedness (x)

prior to the Distribution Date, pursuant to the definition of the “Other Senior

Indebtedness” (without regard to the dollar limit set forth therein) and

pursuant to Section 5.04(a) and (y) after the Distribution Date,

pursuant to Section 5.04(a), in each case, after giving effect to the

Incurrence of such Indebtedness pursuant to this clause (xviii);

 

49

 

(xix)         the

Incurrence by the Company of unsecured short-term Indebtedness in the Ordinary

Course of Business in the form of swing lines of credit and overdraft

protection lines of credit in an aggregate principal amount not to exceed

$20,000,000; provided that the

amount of Indebtedness permitted to be incurred pursuant to clause (vii) above

shall be reduced by the amount of Indebtedness outstanding pursuant to this

clause (xix);

 

(xx)          in

the case of CBT, the Incurrence by CBT of Indebtedness to finance Capital

Expenditures mandated by the Ohio, Indiana or Kentucky Public Utilities

Commission; provided that (x) at

the time such Capital Expenditures must be made, CBT is not permitted to Incur

Indebtedness under any other provision of this Section 5.04 and does not

have sufficient internally-generated funds to make such Capital Expenditures

and (y) the aggregate amount of such Indebtedness at any one time outstanding,

together with all Indebtedness outstanding pursuant to Section

5.04(b)(iii)(A) does not exceed the Applicable Capital Lease Amount;

 

(xxi)         the

Incurrence of Attributable Debt with respect to Sale and Leaseback Transactions

by CBW and CBT of towers and associated equipment, cabling, antennae and other

appurtenances thereto, in each case, used in the operation of CBW’s wireless

business; provided that the proceeds of such Indebtedness shall be used

to prepay Indebtedness under the Credit Agreement in accordance with Section

5.05;

 

(xxii)        in the case of CBW Co., the incurrence of Indebtedness

secured by, and recourse only to, the Spectrum Assets not to exceed $60,000,000

in aggregate principal amount at any time outstanding; provided that the

proceeds of such Indebtedness shall be used to prepay Indebtedness under the

Credit Agreement; and

 

(xxiii)       the Incurrence on the Closing Date of the Alternative

Mezzanine Debt.

 

(c)           For purposes of determining

compliance with this Section 5.04, in the event that an item of

Indebtedness meets the criteria of more than one of the categories of

Indebtedness described in clauses (i) through (xxi) of the immediately

preceding paragraph or is entitled to be Incurred pursuant to Section

5.04(a), the Company shall, in its sole discretion, classify (or later

reclassify) such item of Indebtedness in any manner that complies with Section 5.04

and will only be required to include the amount and type of such Indebtedness

in one of such clauses of Section 5.04(b) or pursuant to Section

5.04(a).  Accrual of interest,

accretion of accreted value, amortization of original issue discount, the

payment of interest on any Indebtedness in the form of additional Indebtedness

with the same terms as the Indebtedness on which such interest is being paid

and any other issuance of securities paid-in-kind shall not be deemed to be an

Incurrence of Indebtedness for purposes of Section 5.04.  In addition, the Company may, at any time,

change the classification of an item of Indebtedness (or any portion thereof)

to any other clause of Section 5.04(b) or to Indebtedness properly

Incurred under Section 5.04(a)  provided that the Company would be

permitted to Incur such item of Indebtedness (or portion thereof) pursuant to

such other clause of this Section 5.04(b) or Section 5.04(a), as

the case may be, at such time of reclassification.

 

50

 

(d)           Notwithstanding anything herein to

the contrary, the Company shall not, and shall not permit any of its Restricted

Subsidiaries to, Incur or permit to exist any Indebtedness entered into after

the date of this Indenture unless, subject to the proviso of clause (i) to the

definition of the “Unrestricted Subsidiary,” the documents governing

such Indebtedness designate each member of the BCI Group as an “unrestricted

subsidiary” (or provide for equivalent treatment of the BCI Group if

designation of unrestricted subsidiaries is not customary for such type of Indebtedness)

and restricts the dealings among the Company and its Restricted Subsidiaries,

on the one hand, and the BCI Group, on the other hand, at least to the same

extent and with the same effect as under this Indenture and consistent with

Sections 5.01(t) and 5.02 (insofar as it relates to the Permitted Obligations

and Permitted BCI Transactions (each as defined in the Credit Agreement)) of

the Credit Agreement as in effect on the date of this Indenture.

 

SECTION 5.05.              Asset

Dispositions.

 

(a)           The Company shall not, and shall not

permit any of its Restricted Subsidiaries to, consummate any Asset Disposition

(provided

that the sale, lease, conveyance or other disposition of all or substantially

all of the assets of the Company and its Restricted Subsidiaries taken as a

whole shall be governed by the provisions of Article 6 and not by the

provisions of this Section 5.05) unless all of the following

conditions are met:  (i)  the

aggregate fair market value of assets sold or otherwise disposed of in Asset

Dispositions in any fiscal year of the Company does not exceed $20,000,000; provided that the limitation of this

clause (i) shall not apply to: (1) prior to the Distribution Date, Asset

Dispositions that do not involve CBT Assets or CBW Assets, the Net Proceeds of

which are applied substantially concurrently with the receipt thereof, in

accordance with clause (c) below; (2) after the Distribution Date, Asset

Dispositions that do not involve CBT Assets, the Net Proceeds of which are

applied substantially concurrently with the receipt thereof, in accordance with

clause (c) below; (3) Asset Dispositions by CBW Co. of Spectrum Assets, so long

as Net Proceeds of such Asset Dispositions are applied substantially

concurrently with the receipt thereof, in accordance with clause (c) below; (4)

Asset Dispositions by CBW and CBT of towers and associated equipment, cabling,

antennae and other appurtenances thereto, in each case, used in the operations

of CBW’s wireless business, so long as such Asset Dispositions are made as Sale

and Leaseback Transactions and the Net Proceeds of such Asset Dispositions are

applied substantially concurrently with the receipt thereof, in accordance with

clause (c) below; and (5) Permitted Asset Swaps;  (ii) the consideration received is at least equal to the

fair market value of such assets (except as the result of (x) any foreclosure

or sale by the lenders under the Credit Documents or (y) Net Proceeds received

from an insurer or a Governmental Authority, as the case may be, in the event

of loss, damage, destruction or condemnation); (iii) in the case of Asset

Dispositions that are not Permitted Asset Swaps, at least 80% of the

consideration received is cash or Cash Equivalents; and (iv) prior to the

Distribution Date, no Default or Event of Default then exists or shall result

from such Asset Disposition; provided, however, that the amount of

(x) any liabilities (as shown on the Company’s or such Restricted

Subsidiary’s most recent balance sheet) of the Company or any Restricted

Subsidiary that are assumed by the transferee of any such assets pursuant to

any arrangement releasing the Company or such Restricted Subsidiary from

further liability and (y) any securities, notes or other obligations

received by the Company or any such Restricted Subsidiary from such transferee

that are converted by the Company or such Restricted Subsidiary into cash or

Cash

 

51

 

Equivalents

within 90 days after the Asset Disposition (to the extent of the cash

received), shall be deemed to be cash for purposes of this provision.

 

(b)           Subject to clause (a)(i) above,

within 365 days after the receipt of any Net Proceeds from an Asset

Disposition, the Company or the Restricted Subsidiary making such Asset

Disposition, as the case may be, may, at its option, apply such Net Proceeds

(i) to permanently reduce Senior Indebtedness or any Indebtedness of the

Restricted Subsidiaries of the Company which are not Guarantors, or to purchase

the Notes (with the consent of the Holders thereof to the extent required) or

Indebtedness ranking pari passu with the Notes (and to

correspondingly reduce commitments with respect thereto, to the extent

applicable) or (ii) to the acquisition of a controlling interest in

another business, the making of Capital Expenditures or the investment in or

acquisition of other long-term assets, in each case, in the same or a similar

line of business as the Company and its Subsidiaries engaged in at the time

such assets were sold or in a business reasonably related, complementing or

ancillary thereto or a reasonable expansion thereof.  Pending the final application of any such Net Proceeds, the

Company may temporarily reduce revolving credit Indebtedness under the Credit

Agreement or otherwise invest such Net Proceeds in any manner that is not

prohibited by this Indenture.  Any Net

Proceeds from Asset Dispositions that are not applied or invested as provided

in the first sentence of this paragraph shall be deemed to constitute “Excess

Proceeds.”  When the aggregate amount

of Excess Proceeds exceeds in any fiscal year $5,000,000, the Company shall

make an Asset Sale Offer pursuant to Section 4.10 to purchase the

maximum Accreted Value of Notes that may be purchased out of the Excess

Proceeds, at an offer price in cash in an amount equal to 100% of the

outstanding Accreted Value thereof, plus accrued and unpaid interest, thereon

to the date of purchase, in accordance with the procedures set forth in Section 4.10;

provided, however, that if the Company elects (or is

required by the terms of any other Senior Subordinated Indebtedness), such

Asset Sale Offer may be made ratably to purchase the Notes and other Senior

Subordinated Indebtedness of the Company. 

Upon completion of such offer to purchase, the amount of Excess Proceeds

shall be reset at zero.

 

(c)           Subject to clause (a)(i) above, Net

Proceeds from Asset Dispositions in excess of the $20,000,000 per fiscal year

limitation set forth in Section 5.05(a)(i) shall be applied,

substantially concurrently with the receipt thereof, to permanently reduce

Senior Indebtedness.  Any such Net

Proceeds remaining after all Senior Indebtedness has been permanently repaid

shall constitute the Excess Proceeds with respect to which an Asset Sale Offer

pursuant to Section 4.10 shall be made as provided in the foregoing

clause (b).

 

(d)           Notwithstanding anything herein to

the contrary, the Company shall not, and shall not permit any of its Restricted

Subsidiaries to, consummate any Asset Disposition involving any Capital Stock

of CBT or any of CBT’s Restricted Subsidiaries, other than pursuant to a

transaction governed by the provisions of Article 6.

 

52

 

SECTION 5.06.               Transactions

with Affiliates.  The Company will

not and will not permit any of its Restricted Subsidiaries directly or

indirectly to enter into or permit to exist any transaction (including the

purchase, sale, lease or exchange of any property or the rendering of any

management, consulting, investment banking, advisory or other similar services)

with any Affiliate of the Company or with any director, officer or employee of

the Company or any Restricted Subsidiary (each of the foregoing, an “Affiliate

Transaction”), except:

 

(a)           the performance of any of the

Transaction Documents as in effect as of the date of this Indenture or the

consummation of any transaction contemplated thereby (including pursuant to any

amendment thereto so long as any such amendment is not disadvantageous to the

Holders of the Notes in any material respect);

 

(b)           transactions (i) in the ordinary

course of the business of the Company or any of its Restricted Subsidiaries and

upon terms which are not materially less favorable to the Company or such

Restricted Subsidiary than would be obtained in a comparable arm’s length

transaction with a Person that is not an Affiliate of the Company and

(ii) with respect to which the Company delivers to the Trustee

(A) with respect to any Affiliate Transaction involving aggregate

consideration in excess of $3,000,000, a resolution of the Board of Directors

of the Company set forth in an Officers’ Certificate certifying that such

Affiliate transaction complies with clause (i) above and that such

Affiliate Transaction has been approved by a majority of the disinterested members

of the Board of Directors of the Company, and (B) with respect to any

Affiliate Transaction or series of Affiliate Transactions involving in excess

of $30,000,000, an opinion as to the fairness of such Affiliate Transaction to

the Company from a financial point of view issued by an Independent Qualified

Party;

 

(c)           payment of customary compensation to

officers, employees, consultants and investment bankers for services actually

rendered to the Company or such Restricted Subsidiary, including indemnity;

 

(d)           payment of director’s fees plus

expenses and customary indemnification of directors;

 

(e)           the payment of the fees, expenses and

other amounts payable by the Company and its Restricted Subsidiaries in

connection with the transactions contemplated by the Transaction Documents that

were disclosed to the Purchasers on or prior to the Closing Date;

 

(f)            transactions undertaken pursuant to

the agreements set forth on Schedule 5.06, copies of which shall have

been provided to the Purchasers prior to the Closing Date;

 

(g)           Restricted Payments permitted by Section 5.02

and Permitted Investments;

 

(h)           transactions (x) between or among the

Company and its Restricted Subsidiaries, (y) between and among the Restricted

Subsidiaries and (z) between or among the Company and/or its Subsidiaries

pursuant to the Centralized Cash Management System;

 

(i)            any licensing agreement or similar

agreement entered into in the Ordinary Course of Business relating to the use

of technology or intellectual property between any of the Company and its

Subsidiaries, on the one hand, and any company or other Person which is an

 

53

 

Affiliate

of the Company or its subsidiaries by virtue of the fact that Person has made

an Investment in or owns any Capital Stock of such company or other Person

which are fair to the Company or its Restricted Subsidiaries, in the reasonable

determination of the Board of Directors, or are on terms at least as favorable

as might reasonably have been obtained at such time from an unaffiliated party;

 

(j)            the issuance of payments, awards or

grants, in cash or otherwise, pursuant to, or the funding of, employment

arrangements approved by the Board of Directors of the Company in good faith

and customary loans and advances to employees of the Company, or any Restricted

Subsidiary of the Company to the extent otherwise permitted in this Indenture;

 

(k)           transactions with the BCI Group

(other than those set forth in clause (l) below) (A) set forth on Schedule

5.06 or (B) permitted by Section 5.11, in each case, so long as such

transactions are conducted in the Ordinary Course of Business and upon terms

which are not less favorable to the Company or such Restricted Subsidiary than

would be obtained in a comparable arm’s length transaction with a Person that

is not an Affiliate of the Company; and

 

(l)            sale of services by the BCI Group to

the Company and its Restricted Subsidiaries, so long as the prices for such

services are consistent with past practices, are upon terms which are not less

favorable to the Company or such Restricted Subsidiary than would be obtained

in a comparable arm’s length transaction with a Person that is not an Affiliate

of the Company and are based on rate cards and wholesale prices approved

semiannually by the Board of Directors.

 

SECTION 5.07.               Limitation

on Liens.  The

Company shall not, and shall not permit any Restricted Subsidiary to, directly

or indirectly, create, incur, assume or suffer to exist any Lien (other than

(a) Liens securing the Guarantee by the Company and the Restricted Subsidiaries

of Indebtedness Incurred and other Obligations under the Credit

Documents, (b) Liens securing any Senior Indebtedness (including Attributable

Debt, if applicable) and (c) Permitted Liens) on any asset now owned or

hereafter acquired to secure any Indebtedness of the Company or such Restricted

Subsidiary; provided that the

Company or any Restricted Subsidiary may create, incur or assume Lien to secure

any Indebtedness or a Guarantee thereof, so long as concurrently with the

incurrence or assumption of such Lien the Company or such Restricted Subsidiary

effectively provides that the Notes shall be secured equally and ratably with

(or prior and senior to, in the case of Liens with respect to Subordinated

Indebtedness) such Indebtedness, so long as such Indebtedness shall be so

secured.

 

SECTION 5.08.              Limitation

on Issuances and Sales of Capital Stock of Subsidiaries.  The Company shall not, and shall not permit

any Restricted Subsidiary to, transfer, convey, sell, issue, lease or otherwise

dispose of any Capital Stock of any Restricted Subsidiary to any Person (other

than to the Company or another Restricted Subsidiary of the Company), unless

(a) prior to the Distribution Date, such transfer, conveyance, sale, lease or other

disposition is of (x) all the Capital Stock of such Restricted Subsidiary or

(y) Capital Stock of a Restricted Subsidiary that is a Guarantor and (b) such

transfer, conveyance, sale, lease or other disposition shall be made in

accordance with the provisions of Section 5.05, including the provisions

of Section 5.05 governing the application of Net Proceeds from such

transfer, conveyance, sale, lease or other disposition; provided, however,

that (i) this Section 5.08 shall not restrict any pledge of Capital

 

54

 

Stock of

the Company and its Restricted Subsidiaries securing Indebtedness under the

Credit Documents or other Indebtedness permitted to be secured by Section

5.07 and (ii) clause (a) above does not apply to (x) to the issuances of

Capital Stock of CBW pursuant to capital calls in accordance with the

provisions of CBW’s organizational documents in existence on the date of this

Indenture and (y) any other sales and issuances of Capital Stock of CBW so long

as CBW remains a Restricted Subsidiary of the Company.

 

SECTION 5.09.               Prohibition

on Incurrence of Senior Subordinated Debt. 

The Company shall not, and shall not permit any Restricted Subsidiary

that is a Guarantor to, Incur or suffer to exist Indebtedness that is senior in

right of payment to the Notes or said Guarantor’s Guarantee, as the case may

be, and subordinate in right of payment to any other Indebtedness of the

Company or such Guarantor, as the case may be.

 

SECTION 5.10.               Conduct

of Business.  The Company shall not

and shall not permit any of its Subsidiaries directly or indirectly to engage

in any business other than business of the type engaged in at the date hereof

and any business reasonably related, complementing or ancillary thereto or a

reasonable expansion thereof.

 

SECTION 5.11.               Restrictions

on Dealings with BCI Group.  (a) The

Company hereby acknowledges and agrees that each member of the BCI Group is

hereby designated as an Unrestricted Subsidiary.  Notwithstanding any provision contained in this Indenture, the

Company shall not, without the consent of the Required Holders, redesignate any

member of the BCI Group as a Restricted Subsidiary.  Furthermore, no member of the Cincinnati Bell Group may (1) make

any Restricted Payment to, (2) issue Capital Stock of any member of the

Cincinnati Bell Group to, (3) make any Investment in (including, without

limitation, by (x) becoming an obligor, whether directly or by way of Guarantee

on any Indebtedness to or for the benefit of any member of the BCI Group, (y)

purchasing an asset for the BCI Group without charge or allocation to the BCI

Group or (z) making any payments in respect of operating expenses or net

operating losses of the BCI Group (including payments for direct expenses of

the BCI Group that are made by the Cincinnati Bell Group and not charged or

allocated to the BCI Group or payments made by the Cincinnati Bell Group for

shared expenses that are not charged or allocated to the BCI Group)) or (4)

allow any tax reimbursement for the benefit of, any member of the BCI Group

unless, immediately following such payment, Incurrence, allowance or payment:

 

(i)            no

Default or Event of Default shall then have occurred or be continuing; and

 

(ii)           the

aggregate amount of all such Restricted Payments, Indebtedness, Investments,

issuances, allowances and payments made after October 1, 2002 shall not exceed

in the aggregate the sum of (A) $118,000,000, plus (B) net cash

dividends or net cash distributions (including, without limitation, net cash

payments under any intercompany notes issued by the BCI Group to the Company

and its Restricted Subsidiaries) made by any member of the BCI Group to the

Company or any other member of the Cincinnati Bell Group after October 1, 2002,

plus (C) the aggregate amount of Revolving Credit Borrowings (as defined under

the Credit Agreement) made under Section 5.02(e)(ix)(E) of the Credit

Agreement (as in effect on the date hereof).

 

55

 

(b)           The foregoing restrictions shall not

apply to, without duplication, (q) Permitted Obligations (as defined in the

Credit Agreement on the date hereof) and any transactions set forth on Schedule

5.11(b), (r) any customary non-cash transition arrangements or other

related services provided for the benefit of a buyer in connection with a

disposition of any properties or assets of the BCI Group, (s) the accrual and

capitalization of interest on intercompany notes issued by the BCI Group to the

Company or its Restricted Subsidiaries, (t) the issuance of Capital Stock of

the Company (other than Disqualified Capital Stock) and the related payment of

up to $1,000,000 in cash in exchange for shares of BCI’s 12 1⁄2% Series B Junior

Exchangeable Preferred Stock Due 2009 or BCI’s 9% Senior Subordinated Notes due

2008 (the “9% BCI Notes”) or, in the case of the 9% BCI Notes, the

issuance of Capital Stock of the Company (other than Disqualified Stock) or

Indebtedness Incurred in compliance with Section 5.04 the net proceeds

of which are used, substantially contemporaneously with such issuance, to

redeem such 9% BCI Notes, (u) guarantees by the Company and its Restricted

Subsidiaries of the Existing BCSI Loan, (v) Liens on assets of the Company and

its Restricted Subsidiaries to secure the Existing BCSI Loan, (w) (1) scheduled

principal and interest payments made or guaranteed by the Company or any of its

Restricted Subsidiaries in respect of the Existing BCSI Loan (or capital

contributions made solely for the purpose of funding such payments), (2)

scheduled interest payments with respect to the 9% BCI Notes and BCI’s

12 1⁄2% Senior Series B Notes due 2005 and (3) the redemption of BCI’s

12 1⁄2% Senior Series B Notes due 2005 outstanding on the date hereof at the

applicable redemption premium pursuant to the documentation governing such

notes as in effect on the date hereof, (x) payments made by the Company or any

of its Restricted Subsidiaries under the guarantee of the Existing BCSI Loan,

(y) non-cash payments made in the form of reductions in the principal amount of

any intercompany notes issued by the BCI Group to the Company or its Restricted

Subsidiaries in respect of net operating losses of the BCI Group used by the

Company and its Restricted Subsidiaries or other Investments in the form of

reduction of such intercompany notes and (z) the payment by the BCI Group of

non-cash management fees to the Cincinnati Bell Group in an amount not to

exceed $2,000,000 per quarter.

 

SECTION 5.12.              Sale

of Assets of the BCI Group. 

Notwithstanding any provision contained in this Indenture, the execution

and delivery of the Agreement for the Purchase and Sale of Assets dated as of

February 22, 2003 (the “BCSI Purchase Agreement”) by and between BCSI,

Broadwing Communications Services of Virginia, Inc., Broadwing Communications

Real Estate Services LLC, Broadwing Services LLC, IXC Business Services LLC,

Broadwing Logistics LLC, Broadwing Telecommunications Inc., IXC Internet

Services, Inc., and MSM Associates, Limited Partnership, on the one side, and C

III Communications, LLC, and C III Communications Operations, LLC, on the other

side, and the performance by the Company and its Subsidiaries of all

transactions contemplated thereby shall be permitted by, and shall not

constitute a Default or Event of Default under, this Indenture.

 

ARTICLE 6.

 

SUCCESSOR

COMPANY

 

Notwithstanding

anything in this Indenture to the contrary:

 

56

 

SECTION 6.01.               Merger,

Consolidation, or Sales of Assets of the Company.  The Company shall not consolidate or merge with or into (whether

or not the Company is the surviving corporation), or directly and/or indirectly

through its Subsidiaries sell, assign, transfer, lease, convey or otherwise

dispose of all or substantially all of the properties and assets of the Company

and its Restricted Subsidiaries taken as a whole in one or more related

transactions, to any other Person, unless:

 

(a)           the resulting, surviving or

transferee Person (the “Successor Company”) shall be a corporation

organized and existing under the laws of the United States of America, any

State thereof or the District of Columbia and the Successor Company (if not the

Company) shall expressly assume, by a supplemental indenture hereto, executed

and delivered to the Trustee, in form satisfactory to the Trustee, all the

Obligations of the Company under the Notes and this Indenture;

 

(b)           immediately after giving effect to

such transaction (and treating any Indebtedness which becomes an obligation of

the Successor Company or any Restricted Subsidiary as a result of such

transaction as having been Incurred by the Successor Company or such Restricted

Subsidiary at the time of such transaction), no Default shall have occurred and

be continuing under this Indenture;

 

(c)           immediately after giving effect to such

transaction, the Successor Company would be able to Incur an additional $1.00

of Indebtedness pursuant to Section 5.04(a) if it were deemed to be the

Company thereunder; and

 

(d)           the Company shall have delivered to

the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating

that such consolidation, merger or transfer and such supplemental indenture (if

any) are permitted by and comply with this Indenture.

 

(e)           The restrictions contained in this Section

6.01 shall not apply to any disposition of properties or assets of the BCI

Group.

 

SECTION 6.02.              Successor

Company Substituted.  The Successor

Company shall succeed to, and be substituted for, and may exercise every right

and power of, the Company under this Indenture, but the Company in the case of

a conveyance, transfer or lease of all or substantially all its assets shall

not be released from the obligation to pay the principal of and interest on the

Notes.

 

ARTICLE 7.

 

EVENTS

OF DEFAULT; REMEDIES

 

SECTION 7.01.              Events

of Default.  An Event of Default

shall exist upon the occurrence of any of the following specified events (each

an “Event of Default”):

 

(a)           the Company defaults in the payment

when due of interest, if any, on the Notes and such default continues for a

period of (x) ten (10) days, prior to the Distribution Date or (y) thirty (30)

days after the Distribution Date;

 

57

 

(b)           the Company defaults in the payment

when due of the principal amount of or premium, if any, on the Notes when the

same becomes due and payable at its Maturity, upon required redemption or

otherwise;

 

(c)           the Company fails to observe or

perform (i) any provision of Section 4.11, Article 5 or Article

6 of this Indenture and either (x) prior to the Distribution Date, such

failure continues for a period of twenty (20) days after the Holders of at

least 25% in principal amount at Maturity of the outstanding Notes notify the

Company and the Trustee in writing of such Default (which notice must specify

the Default, demand that it be remedied and state that such notice is a “Notice

of Default”) or (y) after the Distribution Date, such failure continues for

a period of thirty (30) days after a Notice of Default, or (ii) any other

covenant or other agreement in this Indenture, the Notes or, prior to the

Distribution Date, the Purchase Agreement and such failure continues for a

period of (x) thirty (30) days prior to the Distribution Date or (y) sixty (60)

days after the Distribution Date, in each case, after a Notice of Default;

 

(d)           prior to the Distribution Date, any

representation, warranty, certification or statement made by the Company in the

Purchase Agreement and the related documents or in any statement or certificate

at any time given by or on behalf of the Company in writing pursuant to the

Purchase Agreement or any other related documents shall be false in any

material respect (provided that

the representations and warranties qualified by materiality or Material Adverse

Effect shall not be false in any respect) on the date as of which made;

 

(e)           (i) prior to the Distribution Date, a

default occurs under any mortgage, indenture, agreement or instrument under

which there may be issued or by which there may be secured or evidenced any

Indebtedness for money borrowed by the Company or any of its Restricted

Subsidiaries (or payment of which is Guaranteed by the Company or any of its

Restricted Subsidiaries), whether such Indebtedness or Guarantee now exists, or

is created after the date of this Indenture, which default in the case (but

only in the case) of Senior Indebtedness (A) constitutes a failure to pay

at final maturity (after giving effect to any applicable grace periods and any

extensions thereof) the principal amount of such Senior Indebtedness or (B) shall

have resulted in such Senior Indebtedness being accelerated or otherwise become

or being declared due and payable prior to its stated maturity and, in each

case, the principal amount of any such Indebtedness, together with the

principal amount of any other such Indebtedness (other than Senior

Indebtedness) under which there has been a default, and together with the

principal amount of any such other Senior Indebtedness under which there has

been a default in payment at final maturity or the maturity of which has been

accelerated or otherwise become or being declared due prior to its stated

maturity, aggregates $20,000,000 (or such lower amount as may be set forth in Section

7.01(e) of the Credit Agreement, as such provision may be amended in the

future, or in a similar provision) or more; or

 

(ii)           after

the Distribution Date, a default occurs under any mortgage, indenture,

agreement or instrument under which there may be issued or by which there may

be secured or evidenced any Indebtedness for money borrowed by the Company or

any of its Restricted Subsidiaries (or payment of which is Guaranteed by the

Company or any of its Restricted Subsidiaries), whether such Indebtedness or

Guarantee now exists, or is created after the date of this Indenture, which

default (A) constitutes a failure to pay at final maturity (after giving

effect to any applicable grace periods and any extensions thereof) the

principal amount of

 

58

 

such Indebtedness or (B) shall have resulted in

such Indebtedness being accelerated or otherwise become or being declared due

and payable prior to its stated maturity and, in each case, the principal

amount of any such Indebtedness, together with the principal amount of any

other such Indebtedness under which there has been a default in payment at

final maturity or the maturity of which has been accelerated or otherwise

become or being declared due prior to its stated maturity, aggregates

$20,000,000 (or such lower amount as may be set forth in Section 7.01(e)

of the Credit Agreement, as such provision may be amended in the future, or in

a similar provision) or more;

 

(f)            a final judgment or final judgments

for the payment of money are entered by a court or courts of competent

jurisdiction against the Company or any of its Restricted Subsidiaries and such

judgment or judgments remain unpaid and undischarged for a period (during which

execution shall not be effectively stayed) of 60 days, and is not

adequately covered by insurance or indemnities which have been cash

collateralized, provided, however, that the aggregate amount of all such

undischarged or uninsured judgments exceeds $30,000,000 (or such lower amount

as may be set forth in Section 7.01(g) of the Credit Agreement, as such

provision may be amended in the future, or in a similar provision);

 

(g)           the Company or any of its Material

Restricted Subsidiaries, within the meaning of Bankruptcy Law:

 

(i)            commences a voluntary case or

proceeding,

 

(ii)           consents to the entry of a decree or

order for relief against it in an involuntary case or proceeding or to the

commencement of any case or proceeding against it,

 

(iii)          consents to the filing of a petition

or to the appointment of or taking possession by a Custodian (as defined below)

of it or for all or any substantial part of its property,

 

(iv)          makes or consents to the making of a

general assignment for the benefit of its creditors, or

 

(v)           generally is not paying, or admits in

writing that it is not able to pay its debts as they become due, or

 

(h)           a court of competent jurisdiction

enters an order or decree under any Bankruptcy Law that:

 

(i)            is for relief against the Company or

any of its Material Restricted Subsidiaries in an involuntary case or

proceeding;

 

(ii)           appoints a Custodian of the Company

or any of its Material Restricted Subsidiaries or for all or any substantial

part of the property of the Company or any of its Subsidiaries or approves as

properly filed a petition seeking reorganization, arrangement, adjustment or

composition of or in respect of any of the foregoing; or

 

59

 

(iii)          orders the winding up or liquidation

of the Company or any of its Material Restricted Subsidiaries or adjudges any

of them as bankrupt or insolvent.

 

The

term “Custodian” means any custodian, receiver, trustee, assignee,

liquidator, sequestrator or similar official under any Bankruptcy Law.

 

SECTION 7.02.              Acceleration.  If an Event of Default (other than an Event

of Default specified in Section 7.01(g) or (h) with respect

to the Company) occurs and is continuing, the Trustee or the Holders of 25% or

more in principal amount at Maturity of the then outstanding Notes, may, by

notice to the Company, declare the principal of and accrued but unpaid interest

and any Special Interest on all the Notes to be due and payable.  Upon such a declaration, such principal and

interest will be due and payable immediately. 

If an Event of Default specified in Section 7.01(g) or (h)

with respect to the Company occurs, the principal of and interest on all the

Notes shall ipso facto become and be immediately due and payable without

any declaration or other act on the part of the Trustee or any Holders.  The Holders of a majority in principal

amount at Maturity of the outstanding Notes by written notice to the Trustee

may rescind an acceleration and its consequences if the rescission would not

conflict with any judgment or decree and if all existing Events of Default have

been cured or waived except nonpayment of principal of or interest on Notes that

has become due solely because of acceleration. 

No such rescission shall affect any subsequent Default or impair any

right consequent thereto.

 

If an Event of Default

has occurred and is continuing, the Notes will accrue an additional interest at

3% per annum, until such time as no Event of Default shall be continuing (to

the extent that the payment of such interest shall be legally enforceable); provided that 2.25% of such additional

interest shall be payable in cash and 0.75% of such additional interest shall

be added to the principal amount of the Notes as set forth in the definition of

Accreted Value.

 

The Company shall give

prompt notice (which in any event shall be within five (5) Business Days of the

event) to the Trustee and the Holders of the occurrence of any Event of Default

and the rescission, cure or waiver of any Event of Default.

 

SECTION 7.03.              Other

Remedies.  Notwithstanding any other

provision of this Indenture, if an Event of Default occurs and is continuing,

the Trustee may pursue any available remedy to collect the payment of principal

of or interest on the Notes or to enforce the performance of any provision of

the Notes or this Indenture.

 

The Trustee may maintain

a proceeding in its own name and as trustee of an express trust even if it does

not possess any of the Notes or does not produce any of them in the

proceeding.  A delay or omission by the

Trustee or any Holder in exercising any right or remedy accruing upon an Event

of Default shall not impair the right or remedy or constitute a waiver of or

acquies­cence in the Event of Default. 

No remedy is exclusive of any other remedy.  All available remedies are cumulative.

 

SECTION 7.04.              Waiver

of Past Defaults.  The Holders of a

majority in principal amount at Maturity of the Notes by written notice to the

Trustee may waive an existing Default and its consequences except (a) a

Default in the payment of principal of or interest on a Note, (b) a

Default arising from the failure to redeem or purchase any Note when required

pursuant to

 

60

 

the

terms of this Indenture or (c) a Default in respect of a provision that

under Section 13.02 cannot be amended without the consent of each Holder

affected.  When a Default is waived, it

is deemed cured, but no such waiver shall extend to any subsequent or other

Default or impair any consequent right.

 

SECTION 7.05.              Control

by Majority.  The Holders of a

majority in principal amount at Maturity of the outstanding Notes may direct

the time, method and place of conducting any proceeding for any remedy

available to the Trustee or of exercising any trust or power conferred on the

Trustee.  However, the Trustee may

refuse to follow any direction that conflicts with law or this Indenture or,

subject to Section 9.01, that the Trustee determines is unduly

prejudicial to the rights of other Holders or would involve the Trustee in per­sonal

liability; provided,

however, that the Trustee may take any other action deemed proper by

the Trustee that is not inconsistent with such direction.  Prior to taking any action hereunder, the

Trustee shall be entitled to indemni­fication satisfactory to it in its sole

discretion against all losses and expenses caused by taking or not taking such

action.

 

SECTION 7.06.              Limitation

on Suits.  (a)

Except to enforce the right to receive payment of principal of or interest on

the Notes when due, no Holder may pursue any remedy with respect to this Inden­ture

or the Notes unless:

 

(i)            the Holder has previously given to

the Trustee written notice stating that an Event of Default has occurred and is

continuing;

 

(ii)           the Holders of at least 25% in

principal amount at Maturity of the outstanding Notes make a written request to

the Trustee to pursue the remedy;

 

(iii)          such Holder or Holders offer to the

Trustee reasonable security or indemnity against any loss, liability or

expense;

 

(iv)          the Trustee does not comply with the

request within 60 days after receipt of the request and the offer of security

or indemnity; and

 

(v)           the Holders of a majority in

principal amount at Maturity of the outstanding Notes do not give the Trustee a

direction inconsistent with the request during such 60 day period.

 

(b)           A Holder may not use this Indenture

to prejudice the rights of another Holder or to obtain a preference or priority

over another Holder.

 

61

 

SECTION 7.07.              Rights

of Holders to Receive Payment. 

Notwithstanding any other provision of this Indenture, the right of any

Holder to receive payment of principal of and any Special Interest and interest

on the Notes held by such Holder, on or after the respective due dates

expressed or provided for in the Notes, or to bring suit for the enforcement of

any such payment on or after such respective dates, shall not be impaired or

affected without the consent of such Holder, it being understood that each

Holder has consented to the subordination provisions set forth in Article 8.

 

SECTION 7.08.              Collection

Suit by Trustee.  If an Event of

Default speci­fied in Section 7.01(a) or (b) occurs and is

continuing, the Trustee may recover judgment in its own name and as trustee of

an express trust against the Company or any other obligor on the Notes for the

whole amount then due and owing (together with interest on overdue portion of

the principal amount and (to the extent lawful) on any unpaid interest at the

rate provided for in the Notes) and the amounts provided for in Section 9.07.

 

SECTION 7.09.              Trustee

May File Proofs of Claim.  The

Trustee may file such proofs of claim and other papers or documents as may be

necessary or advisable in order to have the claims of the Trustee and the

Holders allowed in any judicial proceedings relative to the Company or any

Subsidiary, their creditors or their property and, unless prohibited by law or

applicable regulations, may vote on behalf of the Holders in any election of a

trustee in bankruptcy or other Person performing similar functions, and any

Custodian in any such judicial proceeding is hereby authorized by each Holder

to make payments to the Trustee and, in the event that the Trustee shall

consent to the making of such pay­ments directly to the Holders, to pay to the

Trustee any amount due it for the reasonable compensation, expenses, disburse­ments

and advances of the Trustee, its agents and its counsel, and any other amounts

due the Trustee under Section 9.07.

 

SECTION 7.10.              Priorities.  If the Trustee collects any money or

property pursuant to this Article 7, it shall pay out the money or

property in the following order:

 

FIRST:  to the Trustee for its fees (excluding

expenses and indemnities) due under Section 9.07;

 

SECOND:  to the holders of the Senior Indebtedness

if, when and to the extent required by Articles 8 and 12; 

 

THIRD:  to the Trustee for amounts (other than those

set forth in clause FIRST) due under Section 9.07;

 

FOURTH:  to Holders for amounts due and unpaid on the

Notes for principal and interest, ratably, and any Special Interest without

preference or priority of any kind, according to the amounts due and payable on

the Notes for principal, any Special Interest and interest, respectively; and

 

FIFTH:  to the Company.

 

The

Trustee may fix a record date and payment date for any payment to Holders

pursuant to this Section 7.10. 

At least 15 days before such record date, the Trustee shall mail to

 

62

 

each Holder and the Company a notice that states the

record date, the payment date and amount to be paid.

 

SECTION 7.11.              Undertaking

for Costs.  In any suit for the

enforcement of any right or remedy under this Inden­ture or in any suit against

the Trustee for any action taken or omitted by it as Trustee, a court in its

discretion may require the filing by any party litigant in the suit of an

undertaking to pay the costs of the suit, and the court in its discretion may

assess reasonable costs, including reasonable attorneys’ fees, against any

party litigant in the suit, having due regard to the merits and good faith of

the claims or defenses made by the party litigant.  This Section 7.11 does not apply to a suit by the

Trustee, a suit by a Holder pursuant to Section 7.06 or a suit by

Holders of more than 10% in principal amount at Maturity of the Notes.

 

ARTICLE 8.

 

SUBORDINATION

 

SECTION 8.01.              Agreement

to Subordinate.  The Company agrees,

and each Holder by accepting a Note agrees, that the Note Amounts are

subordinated in right of payment, to the extent and in the manner provided in

this Article 8, to the prior Payment in Full of all Senior Indebtedness

of the Company and that the subordination is for the benefit of and enforceable

by the holders of such Senior Indebtedness. 

The Notes shall in all respects rank pari

passu with all other Senior Subordinated Indebtedness of the Company

and only Indebtedness of the Company that is Senior Indebtedness of the Company

shall rank senior to the Notes in accordance with the provisions set forth

herein.  All provisions of this Article

8 shall be subject to Section 8.12.

 

SECTION 8.02.              Liquidation,

Dissolution, Bankruptcy.  Upon any payment or distribution of the assets of the

Company to creditors upon a liquidation or dissolution of the Company or in a

bankruptcy, reorganization, insolvency, receivership or similar proceeding

relating to the Company or its properties:

 

(a)           holders of Senior Indebtedness of the

Company shall be entitled to receive Payment in Full of such Senior

Indebtedness (including interest accruing after, or that would accrue but for,

the commencement of such proceeding at the rate specified in the applicable

Senior Indebtedness, whether or not such claim for such interest would be

allowed) before the Holders shall be entitled to receive any payment of the

Note Amounts; and

 

(b)           until the Senior Indebtedness of the

Company is Paid in Full, any payment or distribution to which Holders would be

entitled but for this Article 8 shall be made to holders of such Senior

Indebtedness as their interests may appear, except that Holders may receive and

retain payments made from the defeasance trust described under Section 10.01

so long as, on the date or dates the respective amounts were paid into the

defeasance trust, such payments were made with respect to the Notes without

violating the subordination provisions described herein.

 

(c)           Nothing in this Section 8.02

shall prohibit (i) the accretion of the Accreted Value of the Notes or (ii)

payment or distribution of stock or securities of the Company provided for by a

plan of reorganization or readjustment authorized by an order or decree of a

court of competent jurisdiction in a reorganization proceeding under any

applicable bankruptcy law or of

 

63

 

any

other corporation provided for by such plan of reorganization or readjustment

which stock or securities are subordinated in right of payment to all then

outstanding Senior Indebtedness to substantially the same extent as, or to a

greater extent than, the Notes are so subordinated as provided in this Article 8.

 

SECTION 8.03.              Default

on Designated Senior Indebtedness. 

The Company may not pay the Note Amounts or make any deposit pursuant to

Section 10.01, and may not otherwise purchase, repurchase, redeem,

retire, defease or otherwise acquire for value any Notes if:

 

(a)           a default in the payment of the

principal of, premium, if any, or interest on any Designated Senior

Indebtedness of the Company occurs and is continuing or any other amount owing

in respect of any Designated Senior Indebtedness of the Company is not paid

when due, whether at the due date of any such payment or by declaration of

acceleration, prepayment, call for redemption or otherwise; or

 

(b)           any other default (beyond any

applicable period of grace) on Designated Senior Indebtedness of the Company

occurs and the maturity of such Designated Senior Indebtedness is accelerated

in accordance with its terms;

 

until, in either case,

the earliest to occur,

 

(i)            the

default has been cured or waived and any such acceleration has been rescinded;

or

 

(ii)           such

Designated Senior Indebtedness has been Paid in Full;

 

provided,

however, that the Company may pay

the Notes without regard to the foregoing if the Company and the Trustee

receive written notice approving such payment from the Representative of the

Designated Senior Indebtedness with respect to which either of the events set forth

in clause (a) or (b) above has occurred and is continuing.

 

(c)           During the continuance of any default

(other than a default described in clause (a) or (b) of the preceding sentence)

with respect to any Designated Senior Indebtedness of the Company either (x)

which is a default under Section 7.01(f) or 7.01(p)(i)(y) of the

Credit Agreement or (y) pursuant to which the maturity thereof may be

accelerated immediately without further notice (except such notice as may be

required to effect such acceleration) or the expiration of any applicable grace

periods, the Company may not pay any of the Note Amounts or make any deposit

pursuant to Section 10.1 for a period (a “Blockage Period”)

commencing upon the receipt by the Trustee (with a copy to the Company) of

written notice (a “Blockage Notice”) of such default from the

Representative of such Designated Senior Indebtedness specifying an election to

effect a Blockage Period and ending 179 days thereafter (or earlier if such

Blockage Period is terminated (i) by written notice to the Trustee and the

Company from the Person or Persons who gave such Blockage Notice, (ii) by

Payment in Full of such Designated Senior Indebtedness or (iii) because the

default giving rise to such Blockage Notice is no longer continuing).  Notwithstanding the provisions described in

the immediately preceding sentence (but subject to the provisions contained in

the first sentence of this Section 8.03), unless the holders of such Designated

Senior Indebtedness or the Representative of such holders shall have

accelerated the maturity of such Designated Senior Indebtedness, the Company

may resume

 

64

 

payments

on the Notes after the end of such Blockage Period, including any missed

payments.  Not more than one Blockage

Notice may be given in any consecutive 360-day period, irrespective of the

number of defaults with respect to Designated Senior Indebtedness during such

period; provided, however, that if any Blockage Notice

within such 360-day period is given by or on behalf of any holders of

Designated Senior Indebtedness other than the holders of Senior Indebtedness

under the Credit Agreement, the Representative under the Credit Agreement may

give another Blockage Notice within such period; and, provided, further,

that in no event may the total number of days during which any Blockage Period

or Periods is in effect exceed 179 days in the aggregate during any consecutive

360 day period.  For purposes of this Section

8.03, no default or event of default that existed or was continuing on the

date of the commencement of any Blockage Period with respect to the Designated

Senior Indebtedness initiating such Blockage Period shall be, or be made, the

basis of the commencement of a subsequent Blockage Period by the Representative

of such Designated Senior Indebtedness, whether or not within a period of 360

consecutive days.  Notwithstanding the

foregoing, the Company may pay the Notes without regard to the foregoing if the

Company and the Trustee receive written notice approving such payment from the

Representative of the Designated Senior Indebtedness with respect to which

either of the events set forth in this clause (c) has occurred and is

continuing.

 

SECTION 8.04.              Acceleration

of Payment of Notes.  If payment of

the Notes is accelerated because of an Event of Default, the Company or the

Trustee shall promptly notify the holders of the Designated Senior Indebtedness

of the Company (or their Representative) of the acceleration.  If any Designated Senior Indebtedness of the

Company is outstanding, the Company may not pay the Notes until five Business

Days after such holders or the Representative of such Designated Senior

Indebtedness receive notice of such acceleration (which notice, for the

avoidance of doubt, shall not be effective prior to the earlier to occur of (x)

the expiration of such five-day period and (y) the acceleration of such

Designated Senior Indebtedness) and, thereafter, may pay the Notes only if this

Article 8 otherwise permits payment at that time.

 

SECTION 8.05.              When

Distribution Must Be Paid Over.  If

a payment or distribution is made to Holders that because of this Article 8

should not have been made to them, the Holders who receive the distribution

shall hold it in trust for holders of Senior Indebtedness of the Company and

pay it over to them as their interests may appear.

 

SECTION 8.06.              Subrogation.  After all Senior Indebtedness of the Company

is Paid in Full and until the Notes are paid in full in cash, Holders shall be

subrogated to the rights of holders of such Senior Indebtedness to receive

distributions applicable to Senior Indebtedness.  A distribution made under this Article 8 to holders of

such Senior Indebtedness which otherwise would have been made to Holders is

not, as between the Company and Holders, a payment by the Company on such

Senior Indebtedness.

 

SECTION 8.07.              Relative

Rights.  This Article 8

defines the relative rights of Holders and holders of Senior Indebtedness of

the Company.  Nothing in this Indenture

shall:

 

65

 

(a)           impair, as between the Company and

Holders, the obligation of the Company, which is absolute and unconditional, to

pay principal of and interest on the Notes in accordance with their terms; or

 

(b)           prevent the Trustee or any Holder

from exercising its available remedies upon a Default, subject to the rights of

holders of Senior Indebtedness of the Company to receive distributions

otherwise payable to Holders.

 

SECTION 8.08.              Subordination

May Not Be Impaired by the Company. 

No right of any holder of Senior Indebtedness of the Company to enforce

the subordination of the Indebtedness evidenced by the Notes shall be impaired

by any act or failure to act by the Company or by its failure to comply with

this Indenture.

 

SECTION 8.09.              Rights

of Trustee and Paying Agent. 

Notwithstanding Section 8.03, the Trustee or Paying Agent may

continue to make payments on the Notes and shall not be charged with knowledge

of the existence of facts that would prohibit the making of any such payments

unless, not less than two Business Days prior to the date of such payment, a

Trust Officer of the Trustee receives written notice from a Responsible Officer

that payments may not be made under this Article 8.  The Company, the Registrar, the Paying

Agent, a Representative or a holder of Senior Indebtedness of the Company may

give the written notice; provided,

however, that, if an issue of

Senior Indebtedness of the Company has a Representative, only the

Representative may give the written notice.

 

The Trustee in its

individual or any other capacity may hold Senior Indebtedness of the Company

with the same rights it would have if it were not Trustee.  The Registrar and the Paying Agent may do

the same with like rights.  The Trustee

shall be entitled to all the rights set forth in this Article 8 with

respect to any Senior Indebtedness of the Company that may at any time be held

by it, to the same extent as any other holder of such Senior Indebtedness; and

nothing in Article 9 shall deprive the Trustee of any of its rights as

such holder.  Nothing in this Article

8 shall apply to claims of, or payments to, the Trustee under or pursuant

to Section 9.07 or any other Section of this Indenture.

 

SECTION 8.10.              Distribution

or Notice to Representative. 

Whenever a distribution is to be made or a notice given to holders of

Senior Indebtedness of the Company, the distribution may be made and the notice

given to their Representative (if any).

 

SECTION 8.11.              Article

8 Not To Prevent Events Of Default Or Limit Right To Accelerate.  The failure to make a payment pursuant to

the Notes by reason of any provision in this Article 8 shall not be

construed as preventing the occurrence of a Default.  Nothing in this Article 8 shall have any effect on the

right of the Holders or the Trustee to accelerate the maturity of the Notes.

 

SECTION 8.12.              Trust

Monies Not Subordinated. 

Notwithstanding anything contained herein to the contrary, payments from

money or the proceeds of U.S. Government Obligations held in trust under Article

10 by the Trustee for the payment of principal of and interest on the Notes

and Additional Amounts, if any, in respect thereof shall not be subordinated to

the prior payment of any Senior Indebtedness of the Company or subject to the

restrictions set forth in this

 

66

 

Article 8, and none of the Holders

shall be obligated to pay over any such amount to the Company or any holder of

Senior Indebtedness of the Company or any other creditor of the Company.

 

SECTION 8.13.              Trustee

Entitled To Rely.  Upon any payment

or distribution pursuant to this Article 8, the Trustee and the Holders

shall be entitled to rely (a) upon any order or decree of a court of competent

jurisdiction in which any proceedings of the nature referred to in Section

8.02 are pending, (b) upon a certificate of the liquidating trustee or

agent or other Person making such payment or distribution to the Trustee or to

the Holders or (c) upon the Representatives for the holders of Senior

Indebtedness of the Company for the purpose of ascertaining the Persons

entitled to participate in such payment or distribution, the holders of such

Senior Indebtedness and other Indebtedness of the Company, the amount thereof

or payable thereon, the amount or amounts paid or distributed thereon and all

other facts pertinent thereto or to this Article 8.  In the event that the Trustee determines, in

good faith, that evidence is required with respect to the right of any Person

as a holder of Senior Indebtedness of the Company to participate in any payment

or distribution pursuant to this Article 8, the Trustee may request such

Person to furnish evidence to the reasonable satisfaction of the Trustee as to

the amount of such Senior Indebtedness held by such Person, the extent to which

such Person is entitled to participate in such payment or distribution and

other facts pertinent to the rights of such Person under this Article 8,

and, if such evidence is not furnished, the Trustee may defer any payment to such

Person pendent judicial determination as to the right of such Person to receive

such payment.  The provisions of Sections

9.01 and 9.02 shall be applicable to all actions or omissions of

actions by the Trustee pursuant to this Article 8.

 

SECTION 8.14.              Trustee

To Effectuate Subordination.  Each

Holder by accepting a Note authorizes and directs the Trustee on his behalf to

take such action as may be necessary or appropriate to acknowledge or

effectuate the subordination between the Holders and the holders of Senior

Indebtedness of the Company as provided in this Article 8 and appoints

the Trustee as attorney-in-fact for any and all such purposes.

 

SECTION 8.15.              Trustee

Not Fiduciary for Holders of Senior Indebtedness.  Neither the Trustee nor any Holder shall be deemed to owe any

fiduciary duty to the holders of Senior Indebtedness of the Company or shall be

liable to any such holders if it shall mistakenly pay over or distribute to

Holders or the Company or any other Person, money or assets to which any holders

of Senior Indebtedness of the Company shall be entitled by virtue of this Article

8 or otherwise.

 

SECTION 8.16.              Reliance

by Holders of Senior Indebtedness on Subordination Provisions.  Each Holder by accepting a Note acknowledges

and agrees that the foregoing subordination provisions are, and are intended to

be, an inducement and a consideration to each holder of any Senior Indebtedness

of the Company, whether such Senior Indebtedness was created or acquired before

or after the issuance of the Notes, to acquire and continue to hold, or to

continue to hold, such Senior Indebtedness and such holder of such Senior

Indebtedness shall be deemed conclusively to have relied on such subordination

provisions in acquiring and continuing to hold, or in continuing to hold, such

Senior Indebtedness.

 

67

 

SECTION 8.17.              Trustee’s

Compensation Not Prejudiced. 

Nothing in this Article shall apply to amounts due to the Trustee

pursuant to other sections of this Indenture, including, but not limited to, Section

9.07 hereof.

 

ARTICLE 9.

 

TRUSTEE

 

SECTION 9.01.              Duties

of Trustee.  (a)  If an

Event of Default has occurred and is continuing, the Trustee shall exercise the

rights and powers vested in it by this Indenture and use the same degree of

care and skill in their exercise as a prudent person would exercise or use

under the circumstances in the conduct of such person’s own affairs.

 

(b)           Except during the continuance of an

Event of Default:

 

(i)            the Trustee undertakes to perform

such duties and only such duties as are specifically set forth in this

Indenture and no implied covenants or obligations shall be read into this

Indenture against the Trustee; and

 

(ii)           in the absence of bad faith on its

part, the Trustee may conclusively rely, as to the truth of the statements and

the correctness of the opinions expressed therein, upon certificates or

opinions furnished to the Trustee and conforming to the require­ments of this

Indenture.  However, the Trustee shall

examine the certificates and opinions to determine whether or not they conform

to the requirements of this Indenture.

 

 (c)          The

Trustee may not be relieved from liability for its own negligent action, its

own negligent failure to act or its own willful misconduct, except that:

 

(i)            this paragraph does not limit the

effect of Section 9.01(b);

 

(ii)           the Trustee shall not be liable for

any error of judgment made in good faith by a Trust Officer unless it is proved

that the Trustee was negligent in ascertaining the pertinent facts; and

 

(iii)          the Trustee shall not be liable with

respect to any action it takes or omits to take in good faith in accordance

with a direction received by it pursuant to Section 7.05.

 

(iv)          No provision of this Indenture shall

require the Trustee to expend or risk its own funds or otherwise incur

financial liability in the performance of any of its duties hereunder or in the

exercise of any of its rights or powers.

 

 (d)          Every

provision of this Indenture that in any way relates to the Trustee is subject

to Sections 9.01(a), 9.01(b) and 9.01(c).

 

 (e)          The

Trustee shall not be liable for interest on any money received by it except as

the Trustee may agree in writing with the Company.

 

68

 

 (f)           Money

held in trust by the Trustee need not be segregated from other funds except to

the extent required by law.

 

(g)           Every provision of this Indenture

relating to the conduct or affecting the liability of or affording protection

to the Trustee shall extend to the Registrar, Notes Custodian, Paying Agent and

an authenticating agent and be subject to the provisions of this Section 9.01

and to the provisions of the TIA.

 

SECTION 9.02.              Rights

of Trustee.  (a) The Trustee may

rely on any document believed by it to be genu­ine and to have been signed or

presented by the proper per­son.  The

Trustee need not investigate any fact or matter stated in the document.

 

(b)           Before the Trustee acts or refrains

from acting, it may require an Officers’ Certificate or an Opinion of Counsel.  The Trustee shall not be liable for any

action it takes or omits to take in good faith in reliance on the Officers’

Certificate or Opinion of Counsel.

 

(c)           The Trustee may act through agents

and shall not be responsible for the misconduct or negligence of any agent

appointed with due care.

 

(d)           The Trustee shall not be liable for

any action it takes or omits to take in good faith which it believes to be

authorized or within its rights or powers; provided, however, that the Trustee’s

conduct does not constitute willful misconduct or negligence.

 

(e)           The Trustee may consult with counsel,

and the advice or opinion of counsel with respect to legal matters relating to

this Indenture and the Notes shall be full and complete authorization and

protection from liability in respect to any action taken, omitted or suffered

by it here­under in good faith and in accordance with the advice or opinion of

such counsel.

 

(f)            The Trustee shall not be bound to

make any investigation into the facts or matters stated in any resolution,

certificate, statement, instrument, opinion, report, notice, request, consent,

order, approval, bond, debenture, note or other paper or document or as to

whether or not an Event of Default shall have occurred unless requested in

writing to do so by the Holders of not less than a majority in principal amount

at Maturity of the Notes at the time outstanding, but the Trustee, in its

discretion, may make such further inquiry or investigation into such facts or

matters as it may see fit, and, if the Trustee shall determine to make such

further inquiry or investigation, it shall be entitled to examine the books,

records and premises of the Company, personally or by agent or attorney.

 

(g)           The permissive rights of the Trustee

to do things enumerated in this Indenture shall not be construed as a duty

unless so specified herein.

 

(h)           The Trustee shall be under no

obligation to exercise any of the rights or powers vested in it by this

Indenture at the request, order or direction of any of the Holders, pursuant to

the provisions of this Indenture, unless such Holders shall have offered to the

Trustee reasonable security or indemnity against the costs, expenses and

liabilities which might be incurred therein or thereby.

 

69

 

SECTION 9.03.              Individual

Rights of Trustee.  The Trustee in

its individual or any other capacity may become the owner or pledgee of Notes

and may otherwise deal with the Company or its Affiliates with the same rights

it would have if it were not Trustee. 

Any Paying Agent, Registrar or co-paying agent may do the same with like

rights.  However, the Trustee must

comply with Sections 9.10 and 9.11.

 

SECTION 9.04.              Trustee’s

Disclaimer.  The Trustee shall not

be responsible for and makes no representation as to the validity, priority or

adequacy of this Indenture, or the Notes, it shall not be account­able for the

Company’s use of the proceeds from the Notes, and it shall not be responsible

for any statement of the Company in this Indenture or in any document issued in

connection with the sale of the Notes or in the Notes other than the Trustee’s

certificate of authentication.  The

Trustee shall not be responsible for any conduct or omission by the Company or the

occurrence of any Event of Default.

 

SECTION 9.05.              Notice

of Defaults.  If a Default occurs

and is continuing and if it is actually known to the Trustee, the Trustee shall

mail to each Holder notice of the Default (“Notice of Default”) within

30 days after it is known to a Trust Officer or written notice of it is

received by the Trustee.  Except in the

case of a Default in payment of principal of or interest on any Note (including

payments pursuant to the mandatory redemption provisions of such Note, if any),

the Trustee may withhold the notice if and so long as a committee of its Trust

Officers in good faith determines that withholding the notice is in the

interests of Holders.  If a Notice of

Default has been given to the Company by the Holders, a copy of such Notice of

Default shall be delivered by the Company to the Trustee.  Except as expressly provided herein, the

Trustee shall not be bound to ascertain or inquire as to the performance or

observance of any of the terms, conditions, covenants or agreements herein, in

any other Transaction Document or in any of the documents executed in

connection with the Notes, or as to the existence of a Default or Event of

Default hereunder or thereunder, and may assume that no such Default or Event

of Default has occurred unless it has actual knowledge or received written

notice thereof.

 

SECTION 9.06.              Reports

by Trustee to Holders.  As promptly

as practicable after each year beginning with the year 2002 following the date

of this Indenture, and in any event prior to February 1 in each year,

the Trustee shall mail (if required by Section 313(a) of the TIA) to each

Holder a brief report dated as of the preceding year that complies with

Section 313(a) of the TIA.  The

Trustee shall also comply with Section 313(b) of the TIA.

 

Following

a Note Registration, a copy of each report at the time of its mailing to

Holders shall be filed with the Commission and each stock exchange (if any) on

which the Notes are listed.  The Company

agrees to notify promptly the Trustee whenever the Notes become listed on any

stock exchange and of any delisting thereof.

 

SECTION 9.07.              Compensation

and Indemnity.  The Company shall

pay to the Trustee from time to time compensation for its services as may be

agreed to between the Trustee and the Company in writing.  The Trustee’s compensation shall not be

limited by any law on compensation of a trustee of an express trust.  The Company shall reimburse the Trustee upon

request for all reasonable out-of-pocket expenses incurred or made by it,

including costs of collection, in addition to the compensation for its

services.  Such expenses shall include

the reasonable compensation and expenses, disbursements and advances of the

Trustee’s agents,

 

70

 

counsel,

accountants and experts.  The Company

shall indemnify the Trustee against any and all loss, liability or expense

(including reasonable and documented attorneys’ fees) incurred by or in

connection with the administration of this trust and the performance of its

duties hereunder.  The Trustee shall

notify the Company of any claim for which it may seek indemnity promptly upon

obtaining actual knowledge thereof; provided, however, that any failure so to

notify the Company shall not relieve the Company of its indemnity obligations

hereunder.  The Company shall defend the

claim and the indemnified party shall provide reasonable cooperation at the

Company’s expense in the defense.  Such

indemnified parties may have separate counsel and the Company shall pay the

fees and expenses of such counsel; provided, however, that the Company shall

not be required to pay such fees and expenses if it assumes such indemnified

parties’ defense and, in such indemnified parties’ reasonable judgment, there

is no conflict of interest between the Company and such parties in connection

with such defense; provided, further, however,

that the selection of the Company’s counsel shall be reasonably acceptable to

the Trustee.  The Company need not

reimburse any expense or indemnify against any loss, liability or expense

incurred by an indemnified party through such party’s own willful misconduct or

negligence.

 

To

secure the Company’s payment obligations in this Section 9.07, the

Trustee shall have a lien prior to the Notes on all money or property held or

collected by the Trustee other than money or property held in trust to pay

principal of and interest and Special Interest, if any, on particular Notes.

 

The

Company’s obligations pursuant to this Section 9.07 shall survive

the satisfaction or discharge of this Indenture, any rejection or termination

of this Indenture under any bankruptcy law or the resignation or removal of the

Trustee.  Without prejudice to any other

rights available to the Trustee under applicable law, when the Trustee incurs

expenses after the occurrence of a Default specified in Section 7.01(g)

or (h) with respect to the Company or the Company, the expenses are

intended to constitute expenses of administration under the Bankruptcy Law.

 

All

indemnifications and releases from liability granted hereunder to the Trustee

shall extend to its officers, directors, employees, agents, successors and

assigns.

 

SECTION 9.08.              Replacement

of Trustee.  (a) The Trustee

may resign at any time by so notifying the Company in writing in accordance

with the provisions of Section 12.02.  Any resignation of the Trustee shall be effective immediately

upon receipt by the Company of such notice (unless such notice shall specify a

later time as the effective time of such resignation, in which case such later

time shall be the effective time), and the resignation of the Trustee shall not

prejudice any rights of the Trustee to receive any compensation, any

reimbursement of any expenses or any indemnity or right to being defended and

held harmless under this Indenture.  The

Holders of a majority in principal amount at Maturity of the Notes may remove

the Trustee by so notifying the Trustee and may appoint a successor

Trustee.  The Company shall remove the

Trustee if:

 

(i)            the

Trustee fails to comply with Section 9.10;

 

(ii)           the

Trustee is adjudged bankrupt or insolvent;

 

71

 

(iii)          a

receiver or other public officer takes charge of the Trustee or its property;

or

 

(iv)          the

Trustee otherwise becomes incapable of acting.

 

(b)           If the Trustee resigns, is removed by

the Company or by the Holders of a majority in principal amount at Maturity of

the Notes and such Holders do not reasonably promptly appoint a successor

Trustee, or if a vacancy exists in the office of Trustee for any reason (the

Trustee in such event being referred to herein as the retiring Trustee), the

Company shall promptly appoint a successor Trustee.

 

(c)           A successor Trustee shall deliver a

written acceptance of its appointment to the retiring Trustee and to the

Company.  Thereupon the resignation or

removal of the retiring Trustee shall become effective, and the succes­sor

Trustee shall have all the rights, powers and duties of the Trustee under this

Indenture.  The successor Trustee shall

mail a notice of its succession to Holders. 

The retiring Trustee shall promptly transfer all property held by it as

Trustee to the successor Trustee, subject to the lien provided for in Section

9.07.

 

(d)           If a successor Trustee does not take

office within 60 days after the retiring Trustee resigns or is removed, the

retiring Trustee or the Holders of 10% in principal amount at Maturity of the

Notes may petition any court of competent jurisdiction for the appointment of a

successor Trustee.

 

(e)           If the Trustee fails to comply with Section

9.10, unless the Trustee’s duty to resign is stayed as provided in TIA §

310(b), any Holder who has been a bona fide Holder of a Note for at least six

months may petition any court of competent jurisdiction for the removal of the

Trustee and the appoint­ment of a successor Trustee.

 

(f)            Notwithstanding the replacement of

the Trustee pursuant to this Section 9.08, the Company’s

obligations under Section 9.07 shall continue for the benefit of

the retiring Trustee.

 

SECTION 9.09.              Successor

Trustee by Merger.  If the Trustee

consolidates with, merges or converts into, or transfers or sells all or

substantially all its corporate trust business or assets to, another

corporation or banking associa­tion, the resulting, surviving or transferee

corporation without any further act shall be the successor Trustee.

 

In

case at the time such successor or successors by merger, conversion, sale or

consolidation to the Trustee shall succeed to the trusts created by this

Indenture any of the Notes shall have been authenticated but not delivered, any

such successor to the Trustee may adopt the certificate of authentication of

any predecessor trustee, and deliver such Notes so authenticated; and in case

at that time any of the Notes shall not have been authenticated, any successor

to the Trustee may authenticate such Notes either in the name of any

predecessor hereunder or in the name of the successor to the Trustee; and in

all such cases such certificates shall have the full force which it is anywhere

in the Notes or in this Indenture provided that the certificate of the Trustee

shall have.

 

72

 

SECTION 9.10.              Eligibility;

Disqualification.  The Trustee shall

at all times satisfy the require­ments of TIA § 310(a).  The Trustee shall have, or in the case of a

corporation included in a bank holding company system, the related bank holding

company shall have, a combined capital and surplus of at least $100.0 million

as set forth in its most recent published annual report of condition.  The Trustee shall comply with TIA

§ 310(b), subject to its right to apply for a stay of its duty to resign

under the penultimate paragraph of TIA § 310(b); provided, however, that

there shall be excluded from the operation of TIA § 310(b)(1) any

indenture or indentures under which other securities or certificates of

interest or participation in other securities of the Company are out­standing

if the requirements for such exclusion set forth in TIA § 310(b)(1)

are met.

 

SECTION 9.11.              Preferential

Collection of Claims Against the Company.  The Trustee shall comply with TIA § 311(a), excluding any

creditor relationship listed in TIA § 311(b).  A Trustee who has resigned or been removed shall be subject to

TIA § 311(a) to the extent indicated.

 

SECTION 9.12.              Appointment

of Co-Trustee.  It is the purpose of

this Indenture that there shall be no violation of any law of any jurisdiction

(including the law of the State of New York) denying or restricting the right

of banking corporations or associations to transact business as trustee in such

jurisdiction.  It is recognized that, in

case of litigation under this Indenture, and in particular in the case of the

enforcement thereof on default, or in the case the Trustee deems that by reason

of any present or future law of any jurisdiction it may not exercise any of the

powers, rights or remedies herein granted to the Trustee or hold title to the

properties, in trust, as herein granted, or take any action which may be

desirable or necessary in connection therewith, it may be necessary that an

additional individual or institution act as a separate or Co-Trustee.

 

In the

event that the Trustee shall appoint an additional individual or institution as

a separate or Co-Trustee, each and every remedy, power, right, claim, demand,

cause of action, immunity, estate, title, interest and lien expressed or

intended by this Indenture to be exercised by or vested in or conveyed to the

Trustee with respect thereto shall be exercisable by and vest in such separate

or Co-Trustee, but only to the extent necessary to enable any separate or such

separate or Co-Trustee to exercise such powers, rights and remedies, and every

covenant and obligation necessary to the exercise thereof by any separate or

such separate or Co-Trustee shall run to and be enforceable by either of them.

 

Should

any instrument in writing from the Company be required by the separate or

Co-Trustee so appointed by the Trustee for more fully and certainly vesting in

and confirming to it such estates, property, rights, powers, trusts, duties,

and obligations, any and all such instruments in writing shall, on request, be

executed, acknowledged and delivered by the Company.  In case the Co-Trustee or a successor to either shall die or

become incapable of acting, resign, or be removed, all the estates, properties,

rights, powers, trusts, duties and obligations of any separate or such separate

or Co-Trustee, so far as permitted by law, shall vest in and be exercised by

the Trustee until the appointment by the Trustee of a successor to any separate

or such separate or Co-Trustee or a new separate or Co-Trustee.  Any separate or Co-Trustee appointed by the

Trustee pursuant to this section  may be

removed by the Trustee , in

 

73

 

which case all powers, rights and remedies vested in

the separate or Co-Trustee shall again vest in the Trustee as if no such

appointment as a separate or Co-Trustee had been made.

 

ARTICLE 10.

 

DISCHARGE

OF INDENTURE; DEFEASANCE

 

SECTION 10.01.            Discharge

of Liability on Notes; Defeasance. 

(a)  When (i) all outstanding Notes (other than Notes

replaced or paid pursuant to Section 2.07) have been canceled or

delivered to the Trustee for cancellation or (ii) all outstanding Notes

have become due and payable, whether at maturity or as a result of the mailing

of a notice of redemption pursuant to Article 3 hereof, and the

Company irrevocably deposits with the Trustee funds in an amount sufficient, or

U.S. Government Obligations, the principal of and interest on which will be

sufficient, or a combination thereof sufficient, in the written opinion of a

nationally recognized firm of independent public accountants delivered to the

Trustee (which delivery shall only be required if U.S. Government Obligations

have been so deposited), to pay the principal amount of and interest on the

outstanding Notes when due at maturity or upon redemption of all outstanding

Notes, including interest thereon to maturity or such Redemption Date (other

than Notes replaced or paid pursuant to Section 2.07), and Special

Interest, if any, and if in either case the Company pays all other sums payable

hereunder by the Company, then this Indenture shall, subject to Section 10.01(c),

cease to be of further effect.  The

Trustee shall acknowledge satisfaction and dis­charge of this Indenture on

demand of the Company accompanied by an Officers’ Certificate and an Opinion of

Counsel and at the cost and expense of the Company.

 

(b)           Subject to Sections 10.01(c)

and 10.02, the Company at any time may terminate (i) all of its obliga­tions

under the Notes and this Indenture (“legal defeasance option”) or

(ii) its obligations under Article 4, Sections 5.02, 5.03,

5.04, 5.05, 5.06, 5.07, 5.08, 5.09,  5.10,

5.11 and 6.01, and the operation of 7.01(c), 7.01(d),

7.01(e), 7.01(f) , 7.01(g) and 7.01(h) (“covenant

defeasance option”).  The Company

may exercise its legal defeasance option not­with­standing its prior exercise

of its covenant defeasance option.

 

In the

event that the Company terminates all of its obligations under the Notes and

this Indenture by exercising its legal defeasance option, the obligations under

the Guarantees shall each be terminated simultaneously with the termination of

such obligations.

 

If the

Company exercises its legal defeasance option, payment of the Notes may not be

accelerated because of an Event of Default. 

If the Company exer­cises its covenant defeasance option, payment of the

Notes may not be accelerated because of an Event of Default specified in Section 7.01(c),

7.01(d), 7.01(e), 7.01(f), 7.01(g) or 7.01(h).

 

Upon

satisfaction of the conditions set forth herein and upon request of the

Company, the Trustee shall acknowledge in writing the discharge of those obliga­tions

that the Company terminates.

 

(c)           Notwithstanding clauses (a) and

(b) above, the Company’s obligations in Sections 2.03, 2.04, 2.05,

2.06, 2.07, 2.08, 9.07, 9.08 and in this Article 10

shall survive until the

 

74

 

Notes have been paid in full.  Thereafter, the Company’s obligations in Sections

9.07, 10.05 and 10.06 shall survive.

 

SECTION 10.02.            Conditions

to Defeasance.

 

(a)           the Company may exercise its legal

defeasance option or its covenant defeasance option only if:

 

(i)            the Company irrevocably deposits in

trust with the Trustee money in an amount sufficient, or U.S. Government

Obligations the principal of and interest on which will be sufficient, or a

combination thereof sufficient, to pay the principal of and interest on the

Notes when due at maturity or redemption, as the case may be, including

interest thereon to maturity or such Redemption Date and Special Interest, if

any;

 

(ii)           the Company delivers to the Trustee a

cer­tificate from a nationally recognized firm of indepen­dent accountants

expressing their opinion that the payments of principal and interest when due

and without reinvestment on the deposited U.S. Government Obliga­tions

plus any deposited money without investment will provide cash at such times and

in such amounts as will be sufficient to pay principal and interest when due on

all the Notes to maturity or redemption, as the case may be;

 

(iii)          123 days pass after the deposit is

made and during the 123-day period no Default specified in Section 6.01(g) and

(h) with respect to the Company occurs which is continuing at the end of the

period;

 

(iv)          the Company delivers to the Trustee an

Opinion of Counsel to the effect that the trust resulting from the deposit does

not constitute, or is quali­fied as, a regulated investment company under the

Investment the Company Act of 1940;

 

(v)           in the case of the legal defeasance

option, the Company shall have delivered to the Trustee an Opinion of Counsel

stating that (1) the Company has received from, or there has been

published by, the Internal Revenue Service a ruling, or (2) since the date

of this Indenture there has been a change in the applicable Federal income tax

law, in either case to the effect that, and based thereon such Opinion of

Counsel shall confirm that, the Holders will not recognize income, gain or loss

for Federal income tax purposes as a result of such defeasance and will be

subject to Federal income tax on the same amounts, in the same manner and at

the same times as would have been the case if such defeasance had not occurred;

 

(vi)          in the case of the covenant defeasance

option, the Company shall have delivered to the Trustee an Opinion of Counsel

to the effect that the Holders will not recognize income, gain or loss for

Federal income tax purposes as a result of such cove­nant defeasance and will

be subject to Federal income tax on the same amounts, in the same manner and at

the same times as would have been the case if such covenant defeasance had not

occurred; and

 

75

 

(vii)         the Company delivers to the Trustee an

Offi­cers’ Certificate and an Opinion of Counsel, each stating that all

conditions precedent to the defeasance and discharge of the Notes as

contemplated by this Article 10 have been complied with.

 

(b)           Before or after a deposit, the

Company may make arrangements satisfactory to the Trustee for the redemption of

Notes at a future date in accordance with Article 3.

 

SECTION 10.03.            Application

of Trust Money.  The Trustee shall

hold in trust money or U.S. Government Obligations deposited with it

pursuant to this Article 10. 

It shall apply the deposited money and the money from U.S.

Government Obligations through the Paying Agent and in accordance with this

Indenture to the payment of principal of and interest on the Notes.  The Trustee shall be under no liability for

interest on any money and U.S. Government Obligations received by it in respect

of the outstanding Notes except as the Trustee may, at its sole option,

otherwise agree with the Company.

 

SECTION 10.04.            Repayment

to the Company.  The Trustee and the

Paying Agent shall promptly turn over to the Company upon request any money or

U.S. Government Obligations held by it as provided in this Article 10

which, in the written opinion of a nationally recognized firm of independent

public accountants delivered to the Trustee (which delivery shall only be

required if U.S. Government Obligations have been so deposited), are in excess

of the amount thereof which would then be required to be deposited to effect an

equivalent discharge or defeasance in accordance with this Article 10.

 

If

money for the payment of principal of or interest on the Notes has been

deposited with the Trustee or Paying Agent and remains unclaimed for two years

after such amount is due and payable, the Trustee or Paying Agent shall pay the

money back to the Company at its written request unless an abandoned property

law designates another Person.  After

any such payment, the Trustee and the Paying Agent shall have no further

liability for such funds and Holders entitled to the money must look only to

the recipient and not to the Trustee for payment.

 

SECTION 10.05.            Indemnity

for Government Obligations.  The

Company shall pay and shall indemnify the Trustee against any tax, fee or other

charge imposed on or assessed against deposited U.S. Government

Obligations or the princi­pal and interest received on such U.S.

Government Obliga­tions.

 

SECTION 10.06.            Reinstatement.  If the Trustee or Paying Agent is unable to

apply any money or U.S. Government Obligations in accordance with this Article

10 by reason of any legal proceeding or by reason of any order or judgment

of any court or Governmental Authority enjoining, restraining or otherwise

prohibiting such application, the Company’s obligations under this Indenture

and the Notes shall be revived and reinstated as though no deposit had occurred

pursuant to this Article 10 until such time as the Trustee or Paying

Agent is permitted to apply all such money or U.S. Government Obligations

in accordance with this Article 10; provided, however, that, if

the Company has made any payment of interest on principal of any Notes because

of the reinstatement of its Obligations, the Company shall be subrogated to the

 

76

 

rights

of the Holders of such Notes to receive such payment from the money or U.S.

Government Obligations held by the Trustee or Paying Agent.

 

ARTICLE 11.

 

Guarantees

 

SECTION 11.01.            Guarantees.  (a) Each Guarantor hereby jointly and

severally, irrevocably and unconditionally guarantees, as a primary obligor and

not merely as a surety, to each Holder and to the Trustee and its successors

and assigns (i) the full and punctual payment when due, whether at Stated

Maturity, by acceleration, by redemption or otherwise, of all obligations of

the Company under this Indenture (including obligations to the Trustee) and the

Notes, whether for payment of principal of, or interest on the Notes and all

other monetary obligations of the Company under this Indenture and the Notes

and (ii) the full and punctual performance within applicable grace periods of

all other obligations of the Company whether for fees, expenses,

indemnification or otherwise under this Indenture and the Notes (all the

foregoing being hereinafter collectively called the “Guaranteed Obligations”).

 Each Guarantor further agrees that the

Guaranteed Obligations may be extended or renewed, in whole or in part, without

notice or further assent from each such Guarantor, and that each such Guarantor

shall remain bound under this Article 11 notwithstanding any extension

or renewal of any Guaranteed Obligation.

 

(b)           Each Guarantor waives presentation

to, demand of, payment from and protest to the Company of any of the Guaranteed

Obligations and also waives notice of protest for nonpayment.  Each Guarantor waives notice of any default

under the Notes or the Guaranteed Obligations. 

The obligations of each Guarantor hereunder shall not be affected by (i)

the failure of any Holder or the Trustee to assert any claim or demand or to

enforce any right or remedy against the Company or any other Person under this

Indenture, the Notes or any other agreement or otherwise; (ii) any extension or

renewal of any thereof; (iii) any rescission, waiver, amendment or modification

of any of the terms or provisions of this Indenture, the Notes or any other

agreement; (iv) the release of any security held by any Holder or the Trustee

for the Guaranteed Obligations or any of them; (v) the failure of any Holder or

Trustee to exercise any right or remedy against any other guarantor of the

Guaranteed Obligations; or (vi) any change in the ownership of such Guarantor,

except as provided in Section 11.02(b).

 

(c)           Each Guarantor hereby waives any

right to which it may be entitled to have its obligations hereunder divided

among the Guarantors, such that such Guarantor’s obligations would be less than

the full amount claimed.  Each Guarantor

hereby waives any right to which it may be entitled to have the assets of the

Company first be used and depleted as payment of the Company’s or such Guarantor’s

obligations hereunder prior to any amounts being claimed from or paid by such

Guarantor hereunder.  Each Guarantor

hereby waives any right to which it may be entitled to require that the Company

be sued prior to an action being initiated against such Guarantor.

 

(d)           Each Guarantor further agrees that

its Guarantee herein constitutes a guarantee of payment, performance and

compliance when due (and not a guarantee of collection)

 

77

 

and

waives any right to require that any resort be had by any Holder or the Trustee

to any security held for payment of the Guaranteed Obligations.

 

(e)           The Guarantee of each Guarantor and

all amounts payable thereunder is, to the extent and in the manner set forth in

Article 12, subordinated and subject in right of payment to the prior

Payment in Full of all Senior Indebtedness of the relevant Guarantor and is

made subject to such provisions of this Indenture.

 

(f)            Except as expressly set forth in Sections

10.01 and 11.02, the obligations of each Guarantor hereunder shall

not be subject to any reduction, limitation, impairment or termination for any

reason, including any claim of waiver, release, surrender, alteration or

compromise, and shall not be subject to any defense of setoff, counterclaim,

recoupment or termination whatsoever or by reason of the invalidity, illegality

or unenforceability of the Guaranteed Obligations or otherwise.  Without limiting the generality of the

foregoing, the obligations of each Guarantor herein shall not be discharged or

impaired or otherwise affected by the failure of any Holder or the Trustee to

assert any claim or demand or to enforce any remedy under this Indenture, the

Notes or any other agreement, by any waiver or modification of any thereof, by

any default, failure or delay, wilful or otherwise, in the performance of the

obligations, or by any other act or thing or omission or delay to do any other

act or thing which may or might in any manner or to any extent vary the risk of

any Guarantor or would otherwise operate as a discharge of any Guarantor as a

matter of law or equity.

 

(g)           Except as expressly set forth in Sections

10.01 and 11.02, each Guarantor agrees that its Guarantee shall

remain in full force and effect until payment in full of all the Guaranteed

Obligations.  Each Guarantor further

agrees that its Guarantee herein shall continue to be effective or be

reinstated, as the case may be, if at any time payment, or any part thereof, of

principal of or interest on any Guaranteed Obligation is rescinded or must

otherwise be restored by any Holder or the Trustee upon the bankruptcy or

reorganization of the Company or otherwise.

 

(h)           In furtherance of the foregoing and

not in limitation of any other right which any Holder or the Trustee has at law

or in equity against any Guarantor by virtue hereof, upon the failure of the

Company to pay the principal of or interest on any Guaranteed Obligation when

and as the same shall become due, whether at maturity, by acceleration, by

redemption or otherwise, or to perform or comply with any other Guaranteed

Obligation, each Guarantor hereby promises to and shall, upon receipt of

written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to

the Holders or the Trustee an amount equal to the sum of (i) the unpaid

principal amount of such Guaranteed Obligations, (ii) accrued and unpaid

interest on such Guaranteed Obligations (but only to the extent not prohibited

by law) and (iii) all other monetary obligations of the Company to the Holders

and the Trustee.

 

(i)            Each Guarantor agrees that it shall

not be entitled to any right of subrogation in relation to the Holders in

respect of any Guaranteed Obligations guaranteed hereby until payment in full

of all Guaranteed Obligations and all obligations to which the Guaranteed

Obligations are subordinated as provided in Article 12.  Each Guarantor further agrees that, as

between it, on the one hand, and the Holders and the Trustee, on the other

hand, (i) the maturity of the Guaranteed Obligations guaranteed hereby may be

accelerated as provided

 

78

 

in Article

7 for the purposes of any Guarantee herein, notwithstanding any stay,

injunction or other prohibition preventing such acceleration in respect of the

Guaranteed Obligations guaranteed hereby, and (ii) in the event of any

declaration of acceleration of such Guaranteed Obligations as provided in Article

7, such Guaranteed Obligations (whether or not due and payable) shall

forthwith become due and payable by such Guarantor for the purposes of this Section

11.01.

 

(j)            Each Guarantor also agrees to pay

any and all costs and expenses (including reasonable attorneys’ fees and

expenses) incurred by the Trustee or any Holder in enforcing any rights under this

Section 11.01.

 

(k)           Upon request of the Trustee, each

Guarantor shall execute and deliver such further instruments and do such

further acts as may be reasonably necessary or proper to carry out more

effectively the purpose of this Indenture.

 

SECTION 11.02.            Limitation

on Liability.  (a) Any term or

provision of this Indenture to the contrary notwithstanding, the maximum

aggregate amount of the Guaranteed Obligations guaranteed hereunder by any

Guarantor shall not exceed the maximum amount that can be hereby guaranteed

without rendering the Guarantee, as it relates to such Guarantor, voidable

under applicable law relating to fraudulent conveyance or fraudulent transfer

or similar laws affecting the rights of creditors generally.

 

(b)           Any Guarantee of any Subsidiary

Guarantor shall terminate and be of no further force or effect and such

Subsidiary Guarantor shall be deemed to be released from all obligations under

this Article 11 upon (i) the sale or other disposition (including

through merger or consolidation) of the Capital Stock, or all or substantially

all the assets, of the applicable Guarantor if such sale or other disposition

is made in compliance with Section 5.08; (ii) the designation by the

Company of any Restricted Subsidiary as an Unrestricted Subsidiary in

accordance with the provisions of this Indenture; or (iii) the applicable

Guarantor ceasing to be a Subsidiary of the Company as a result of any

foreclosure of any pledge or security interest securing Senior Indebtedness or

other exercise of remedies in respect thereof if such Guarantor is released

from its guarantees of, and all pledges and security interests granted in

connection with, such Senior Indebtedness.

 

In the event that the

conditions specified in this Section 11.02(b) are satisfied and the

Company delivers to the Trustee an Opinion of Counsel and an Officers’

Certificate to that effect, the Trustee shall execute and deliver an

appropriate instrument evidencing such release.

 

SECTION 11.03.             Successors

and Assigns.  This Article 11

shall be binding upon each Guarantor and its successors and assigns and shall

inure to the benefit of the successors and assigns of the Trustee and the

Holders and, in the event of any transfer or assignment of rights by any Holder

or the Trustee, the rights and privileges conferred upon that party in this

Indenture and in the Notes shall automatically extend to and be vested in such

transferee or assignee, all subject to the terms and conditions of this

Indenture.

 

SECTION 11.04.             Execution

of Supplemental Indenture for Future Guarantors.  Each Subsidiary which is required to become a Guarantor pursuant

to Section 4.13 shall promptly

 

79

 

execute

and deliver to the Trustee a supplemental indenture in the form of Exhibit C

hereto pursuant to which such Subsidiary shall become a Guarantor under this Article

11 and shall guarantee the Guaranteed Obligations.  Concurrently with the execution and delivery

of such supplemental indenture to this Indenture, the Company shall deliver to

the Trustee an Opinion of Counsel and an Officers’ Certificate to the effect

that such supplemental indenture has been duly authorized, executed and

delivered by such Subsidiary and that, subject to the application of

bankruptcy, insolvency, moratorium, fraudulent conveyance or transfer and other

similar laws relating to creditors’ rights generally and to the principles of

equity, whether considered in a proceeding at law or in equity, the Guarantee

of such Guarantor is a legal, valid and binding obligation of such Guarantor,

enforceable against such Guarantor in accordance with its terms and or to such

other matters as the Trustee may reasonably request.

 

SECTION 11.05.            Non-Impairment.  The failure to endorse a Guarantee on any

Note shall not affect or impair the validity thereof.

 

SECTION 11.06.            Endorsement

of Guarantees.  To evidence its

Guarantee set forth in this Article 11, each Guarantor hereby

agrees that a notation of such Guarantee substantially in the form of Exhibit

D to this Indenture shall be endorsed by an officer of such Guarantor on

each Definitive Note and each Global Exchange Note authenticated and delivered

by the Company; provided that the

Guarantee set forth in this Article 11 shall remain in full force

and effect notwithstanding any failure of a Guarantor to endorse on each Note a

notation of Guarantee.

 

ARTICLE 12.

SUBORDINATION OF THE GUARANTEES

 

SECTION 12.01.            Agreement

To Subordinate.  Each Guarantor

agrees, and each Holder by accepting a Note agrees, that the obligations of a

Guarantor hereunder are subordinated in right of payment, to the extent and in

the manner provided in this Article 12, to the prior Payment in Full of

all Senior Indebtedness of such Guarantor and that the subordination is for the

benefit of and enforceable by the holders of such Senior Indebtedness of such

Guarantor.  The obligations hereunder

with respect to a Guarantor shall in all respects rank pari passu with all other Senior

Subordinated Indebtedness of such Guarantor and shall rank senior to all

existing and future Subordinated Obligations of such Guarantor; and only

Indebtedness of such Guarantor that is Senior Indebtedness of such Guarantor

shall rank senior to the obligations of such Guarantor in accordance with the

provisions set forth herein.

 

SECTION 12.02.            Liquidation,

Dissolution, Bankruptcy.  Upon any payment or distribution of the assets of a

Guarantor to creditors upon a liquidation or dissolution of such Guarantor or

in a bankruptcy, reorganization, insolvency, receivership or similar proceeding

relating to such Guarantor or its properties:

 

(a)           holders of Senior Indebtedness of

such Guarantor shall be entitled to receive Payment in Full of such Senior

Indebtedness (including interest accruing after, or that would accrue but for,

the commencement of such proceeding at the rate specified in the applicable

Senior Indebtedness, whether or not such claim for such interest would be

allowed)

 

80

 

before

the Holders shall be entitled to receive any payment pursuant to any Guaranteed

Obligations from such Subsidiary Guarantor; and

 

(b)           until the Senior Indebtedness of such

Guarantor is Paid in Full, any payment or distribution to which Holders would

be entitled but for this Article 12 shall be made to holders of such

Senior Indebtedness as their respective interests may appear, except that

Holders may receive and retain payments made from the defeasance trust

described under Section 10.01 so long as, on the date or dates the

respective amounts were paid into the defeasance trust, such payments were made

with respect to the Notes without violating the subordination provisions

described herein.

 

(c)           Nothing in this Section 12.02

shall prohibit (i) the accretion of the Accreted Value of the Notes or (ii)

payment or distribution of stock or securities of the Company provided for by a

plan of reorganization or readjustment authorized by an order or decree of a

court of competent jurisdiction in a reorganization proceeding under any

applicable bankruptcy law or of any other corporation provided for by such plan

of reorganization or readjustment which stock or securities are subordinated in

right of payment to all then outstanding Senior Indebtedness to substantially

the same extent as, or to a greater extent than, the Notes are so subordinated

as provided in this Article 8.

 

SECTION 12.03.            Default

on Designated Senior Indebtedness of a Guarantor.  A Guarantor may not make any payment pursuant to any of the

Guaranteed Obligations or repurchase, redeem or otherwise acquire for value any

Notes if:

 

(a)           a default in the payment of the

principal of, premium, if any, or interest on any Designated Senior

Indebtedness of such Guarantor occurs and is continuing or any other amount

owing in respect of any Designated Senior Indebtedness of such Guarantor is not

paid when due, whether at the due date of any such payment or by declaration of

acceleration, prepayment, call for redemption or otherwise; or

 

(b)           any other default (beyond any

applicable period of grace) on Designated Senior Indebtedness of such Guarantor

occurs and the maturity of such Designated Senior Indebtedness is accelerated

in accordance with its terms;

 

until, in either case,

the earlier to occur

 

(i)            the

default has been cured or waived and any such acceleration has been rescinded;

or

 

(ii)           such

Designated Senior Indebtedness has been Paid in Full;

 

provided,

however, that such Guarantor may

pay its Guarantee without regard to the foregoing if such Guarantor and the

Trustee receive written notice approving such payment from the Representative

of the holders of the Designated Senior Indebtedness of such Guarantor with

respect to which either of the events in clause (a) or (b) above has occurred

and is continuing.

 

(c)           During the continuance of any default

(other than a default described in clause (a) or (b) of the preceding

sentence) with respect to any Designated Senior Indebtedness

 

81

 

of a

Guarantor either (x) which is a default under Section 7.01(f) or 7.01(p)(i)(y)

of the Credit Agreement or (y) pursuant to which the maturity thereof may be

accelerated immediately without further notice (except such notice as may be

required to effect such acceleration) or the expiration of any applicable grace

periods, such Guarantor may not pay its Guarantee for a period (a “Guarantee

Payment Blockage Period”) commencing upon the receipt by the Trustee (with

a copy to such Guarantor and the Company) of written notice (a “Guarantee

Blockage Notice”) of such default from the Representative of the holders of

the Designated Senior Indebtedness of such Guarantor specifying an election to

effect a Guarantee Payment Blockage Period and ending 179 days thereafter

(or earlier if such Guarantee Payment Blockage Period is terminated (i) by

written notice to the Trustee (with a copy to such Guarantor and the Company)

from the Person or Persons who gave such Guarantee Blockage Notice,

(ii) because such Designated Senior Indebtedness has been Paid in Full or

(iii) because the default giving rise to such Guarantee Blockage Notice is

no longer continuing).  Notwithstanding

the provisions described in the immediately preceding sentence (but subject to

the provisions contained in the first sentence of this Section 12.03),

unless the holders of such Designated Senior Indebtedness or the Representative

of such holders shall have accelerated the maturity of such Designated Senior

Indebtedness, such Guarantor may resume to paying its Guarantee after such

Guarantee Payment Blockage Period, including any missed payments.  Not more than one Guarantee Blockage Notice

may be given with respect to a Guarantor in any consecutive 360-day period,

irrespective of the number of defaults with respect to Designated Senior

Indebtedness of such Guarantor during such period; provided, however,

that if any Blockage Notice within such 360-day period is given by or on behalf

of any holders of Designated Senior Indebtedness other than the holders of

Senior Indebtedness under the Credit Agreement, the Representative under the

Credit Agreement may give another Blockage Notice within such period; and, provided, further,

that in no event may the total number of days during which any Guarantee

Payment Blockage Period or Periods is in effect exceed 179 days in the

aggregate during any consecutive 360 day period.  For purposes of this Section 12.03, no default or

event of default that existed or was continuing on the date of the commencement

of any Guarantee Payment Blockage Period with respect to the Designated Senior

Indebtedness initiating such Guarantee Payment Blockage Period shall be, or be

made, the basis of the commencement of a subsequent Guarantee Payment Blockage

Period by the Representative of such Designated Senior Indebtedness, whether or

not within a period of 360 consecutive days. 

Notwithstanding the foregoing, such Guarantor may pay its Guarantee

without regard to the foregoing if such Guarantor and the Trustee receive

written notice approving such payment from the Representative of the holders of

the Designated Senior Indebtedness of such Guarantor with respect to which

either of the events in this clause (c) has occurred and is continuing.

 

SECTION 12.04.            Demand

for Payment.  If payment of the

Notes is accelerated because of an Event of Default and a demand for payment is

made on a Guarantor pursuant to Article 11, the Trustee shall promptly

notify the holders of the Designated Senior Indebtedness of such Guarantor (or

the Representative of such holders) of such demand.  If any Designated Senior Indebtedness of such Guarantor is

outstanding, such Guarantor may not pay its Guarantee until five Business Days

after such holders or the Representative of the holders of the Designated

Senior Indebtedness of such Guarantor receive notice of such demand (which notice,

for the avoidance of doubt, shall not be effective prior to the earlier to

occur of (x) the expiration of such five-day period and (y) the acceleration of

such Designated Senior Indebtedness) and, thereafter, may pay its Guarantee

only if this Article 12 otherwise permits payment at that time.

 

82

 

SECTION 12.05.            When

Distribution Must Be Paid Over.  If

a payment or distribution is made to Holders that because of this Article 12

should not have been made to them, the Holders who receive the payment or

distribution shall hold such payment or distribution in trust for holders of

the Senior Indebtedness of the relevant Guarantor and pay it over to them as

their respective interests may appear.

 

SECTION 12.06.            Subrogation.  After all Senior Indebtedness of a Guarantor

is Paid in Full and until the Notes are paid in full in cash, Holders shall be

subrogated to the rights of holders of Senior Indebtedness of such Guarantor to

receive distributions applicable to Designated Senior Indebtedness of such

Guarantor.  A distribution made under

this Article 12 to holders of Senior Indebtedness of such Guarantor

which otherwise would have been made to Holders is not, as between such

Guarantor and Holders, a payment by such Guarantor on Senior Indebtedness of

such Guarantor.

 

SECTION 12.07.            Relative

Rights.  This Article 12

defines the relative rights of Holders and holders of Senior Indebtedness of a

Guarantor.  Nothing in this Indenture

shall:

 

(a)           impair, as between a Guarantor and

Holders, the obligation of a Guarantor which is absolute and unconditional, to

make payments with respect to the Guaranteed Obligations to the extent set

forth in Article 11; or

 

(b)           prevent the Trustee or any Holder

from exercising its available remedies upon a default by a Guarantor under its

obligations with respect to the Guaranteed Obligations, subject to the rights

of holders of Senior Indebtedness of such Guarantor to receive distributions

otherwise payable to Holders.

 

SECTION 12.08.            Subordination

May Not Be Impaired by a Guarantor. 

No right of any holder of Senior Indebtedness of a Guarantor to enforce

the subordination of the obligations of such Guarantor hereunder shall be

impaired by any act or failure to act by such Guarantor or by its failure to

comply with this Indenture.

 

SECTION 12.09.            Rights

of Trustee and Paying Agent. 

Notwithstanding Section 12.03, the Trustee or the Paying Agent

may continue to make payments on the Notes and shall not be charged with

knowledge of the existence of facts that would prohibit the making of any such

payments unless, not less than two Business Days prior to the date of such

payment, a Trust Officer of the Trustee receives written notice from a

Responsible Officer that payments may not be made under this Article 12.  A Guarantor, the Registrar or co-registrar,

the Paying Agent, a Representative or a holder of Senior Indebtedness of a

Guarantor may give the written notice; provided, however, that if

an issue of Senior Indebtedness of a Guarantor has a Representative, only the

Representative may give the written notice.

 

The Trustee in its

individual or any other capacity may hold Senior Indebtedness of a Guarantor

with the same rights it would have if it were not Trustee.  The Registrar and co-registrar and the

Paying Agent may do the same with like rights. 

The Trustee shall be entitled to all the rights set forth in this Article

12 with respect to any Senior Indebtedness of a Guarantor which may at any

time be held by it, to the same extent as any other holder of Senior

Indebtedness of such Guarantor; and nothing in Article 9 shall deprive

the Trustee of any of its

 

83

 

rights as such

holder.  Nothing in this Article 12

shall apply to claims of, or payments to, the Trustee under or pursuant to Section

9.07 or any other Section of this Indenture.

 

SECTION 12.10.            Distribution

or Notice to Representative. 

Whenever a distribution is to be made or a notice given to holders of

Senior Indebtedness of a Guarantor, the distribution may be made and the notice

given to their Representative (if any).

 

SECTION 12.11.            Article

12 Not To Prevent Events of Default or Limit Right To Demand Payment.  The failure of a Guarantor to make a payment

on any of its obligations by reason of any provision in this Article 12

shall not be construed as preventing the occurrence of a default by such

Guarantor under such obligations. 

Nothing in this Article 12 shall have any effect on the right of

the Holders or the Trustee to make a demand for payment on a Guarantor pursuant

to Article 11.

 

SECTION 12.12.            Trustee

Entitled To Rely.  Upon any payment

or distribution pursuant to this Article 12, the Trustee and the Holders

shall be entitled to rely (a) upon any order or decree of a court of competent

jurisdiction in which any proceedings of the nature referred to in Section

12.02 are pending, (b) upon a certificate of the liquidating trustee or

agent or other Person making such payment or distribution to the Trustee or to

the Holders or (c) upon the Representatives for the holders of Senior

Indebtedness of a Guarantor for the purpose of ascertaining the Persons

entitled to participate in such payment or distribution, the holders of the

Senior Indebtedness of a Guarantor and other Indebtedness of a Guarantor, the

amount thereof or payable thereon, the amount or amounts paid or distributed

thereon and all other facts pertinent thereto or to this Article 12.  In the event that the Trustee determines, in

good faith, that evidence is required with respect to the right of any Person

as a holder of Senior Indebtedness of a Guarantor to participate in any payment

or distribution pursuant to this Article 12, the Trustee may request

such Person to furnish evidence to the reasonable satisfaction of the Trustee

as to the amount of Senior Indebtedness of such Guarantor held by such Person,

the extent to which such Person is entitled to participate in such payment or

distribution and other facts pertinent to the rights of such Person under this Article

12, and, if such evidence is not furnished, the Trustee may defer any

payment to such Person pending judicial determination as to the right of such

Person to receive such payment.  The

provisions of Sections 9.01 and 9.02 shall be applicable to all

actions or omissions of actions by the Trustee pursuant to this Article 12.

 

SECTION 12.13.            Trustee

To Effectuate Subordination.  Each

Holder by accepting a Note authorizes and directs the Trustee on his or her

behalf to take such action as may be necessary or appropriate to acknowledge or

effectuate the subordination between the Holders and the holders of Senior

Indebtedness of each of the Guarantors as provided in this Article 12

and appoints the Trustee as attorney-in-fact for any and all such purposes.

 

SECTION 12.14.            Trustee

Not Fiduciary for Holders of Senior Indebtedness of a Guarantor.  Neither the Trustee nor the Holder shall be

deemed to owe any fiduciary duty to the holders of Senior Indebtedness of a

Guarantor or shall be liable to any such holders if it shall mistakenly pay

over or distribute to Holders or the relevant Guarantor or any other Person,

money or assets to which any holders of Senior Indebtedness of such Guarantor

shall be entitled by virtue of this Article 12 or otherwise.

 

84

 

SECTION 12.15.            Reliance

by Holders of Senior Indebtedness of a Guarantor on Subordination Provisions.  Each Holder by accepting a Note acknowledges

and agrees that the foregoing subordination provisions are, and are intended to

be, an inducement and a consideration to each holder of any Senior Indebtedness

of a Guarantor, whether such Senior Indebtedness was created or acquired before

or after the issuance of the Notes, to acquire and continue to hold, or to

continue to hold, such Senior Indebtedness and such holder of Senior

Indebtedness shall be deemed conclusively to have relied on such subordination

provisions in acquiring and continuing to hold, or in continuing to hold, such

Senior Indebtedness.

 

SECTION 12.16.            Defeasance.

 Notwithstanding anything contained in

this Article 12, payments from money or the proceeds of U.S. Government

Obligations held in trust under Article 10 by the Trustee for the

payment of principal of and interest on the Notes shall not be subordinated to the

prior payment of any Senior Indebtedness of any Guarantor or subject to the

restrictions set forth in this Article 12, and none of the Holders

shall be obligated to pay over any such amount to a Guarantor or any holder of

Senior Indebtedness of the Guarantor or any other creditor of a Guarantor.

 

ARTICLE 13.

AMENDMENTS

 

SECTION 13.01.            Without

Consent of Holders.

 

(a)           The Company, the Guarantors and the

Trustee may amend this Indenture or the Notes without notice to or consent of

any Holder:

 

(i)            to cure any ambiguity, omission,

defect or inconsistency;

 

(ii)           to comply with Article 6;

 

(iii)          to provide for uncertificated Notes in

addition to or in place of certificated Notes; provided, however, that the

uncertificated Notes are issued in registered form for purposes of

Section 163(f) of the Code or in a manner such that the uncertificated

Notes are described in Section 163(f)(2)(B) of the Code;

 

(iv)          to add Guarantees of the Notes;

 

(v)           to secure the Notes;

 

(vi)          to add to the covenants of the Company

for the benefit of the Holders or to surrender any right or power herein

conferred upon the Company;

 

(vii)         to make any change in Article 8

or Article 12 that would limit or terminate the benefits available

to any holder of Senior Indebtedness of the Company or a Guarantor (or

Representative thereof) under Article 8 or Article 12,

respectively;

 

85

 

(viii)        subject to the final sentence of Section

13.02(a),to comply with any requirement of the Commission in connection

with qualifying, or maintaining the qualification of, this Indenture under the

TIA;

 

(ix)           to make any change that does not

adversely affect the rights of any Holder;

 

(x)            to provide for the issuance of the

Exchange Notes, which shall have terms substantially identical in all material

respects to the Initial Notes (except that the transfer restrictions contained

in the Initial Notes shall be modified or eliminated, as appropriate), and

which shall be treated, together with any Initial Notes or the Exchange Notes

that remain outstanding, as a single issue of securities; or

 

(xi)           to change the name or title of the

Notes, and any conforming changes related thereto.

 

(b)           An amendment under this Section 13.01

may not make any change that adversely affects the rights under Article 8

or Article 12 of any holder of Senior Indebtedness of the Company

of a Guarantor then outstanding unless the holders of such Senior Indebtedness

(or any group of Representatives thereof authorized to give a consent) consent

to such change.

 

(c)           After an amendment under this Section 13.01

becomes effective, the Company shall mail to Holders a notice briefly

describing such amendment.  The failure

to give such notice to all Holders, or any defect therein, shall not impair or

affect the validity of an amendment under this Section 13.01.

 

SECTION 13.02.            With

Consent of Holders.  (a) The

Company, the Guarantors and the Trustee may amend this Indenture or the Notes

without notice to any Holder but with the written consent of the Required Holders

(including consents obtained in connection with a tender offer or exchange for

the Notes).  However, without the

consent of each Holder affected, an amendment may not:

 

(i)            reduce the principal amount or

percentage of Notes whose Holders must consent to an amendment, supplement,

waiver or modification;

 

(ii)           reduce the rate of or extend the time

for payment of interest or any Special Interest on any Note;

 

(iii)          reduce the principal amount of or

extend the Stated Maturity of any Note;

 

(iv)          reduce the premium payable upon the

redemption of any Note or change the time at which any Note may be redeemed in

accordance with Article 3;

 

(v)           make any Note payable in money other

than that stated in the Note;

 

86

 

(vi)          impair the right of any holder to

receive payment of principal of and interest or any Special Interest on such

Holder’s Notes on or after the due dates therefor or to institute suit for the

enforcement of any payment on or with respect to such Holder’s Notes; or

 

(vii)         make any change in Section 7.04

or 7.07 or the second sentence of this Section 13.02.

 

It

shall not be necessary for the consent of the Holders under this Section 13.02

to approve the particular form of any proposed amendment, but it shall be

sufficient if such consent approves the substance thereof.

 

An

amendment under this Section 13.02 may not make any change that

adversely affects the rights under Article 8 or Article 12

of any holder of Senior Indebtedness then outstanding unless the holders of

such Senior Indebtedness (or any group or Representative thereof authorized to

give a consent) consent to such change.

 

(b)           After an amendment under this Section 13.02

becomes effective, the Company shall mail to Holders a notice briefly describing

such amendment.  The failure to give

such notice to all Holders, or any defect therein, shall not impair or affect

the validity of an amendment under this Section 13.02.

 

SECTION 13.03.            Compliance

with Trust Indenture Act.  Every

amendment to this Indenture or the Notes shall comply with the TIA as then in

effect.

 

SECTION 13.04.            Revocation

and Effect of Consents and Waivers. 

(a) A consent to an amendment or a waiver by a Holder of a Note shall

bind the Holder and every subsequent Holder of that Note or portion of the Note

that evidences the same debt as the consenting Holder’s Note, even if notation

of the consent or waiver is not made on the Note.  However, any such Holder or subse­quent Holder may revoke the

consent or waiver as to such Holder’s Note or portion of the Note if the

Trustee receives the notice of revocation before the date on which the Trustee

receives an Officers’ Certificate from the Company certifying that the

requisite number of consents have been received.  After an amendment or waiver becomes effective, it shall bind

every Holder.  An amendment or waiver

becomes effective upon the (i) receipt by the Company or the Trustee of

the requisite number of consents, (ii) satisfaction of conditions to

effectiveness as set forth in this Indenture and any indenture supplemental

hereto containing such amendment or waiver and (iii) execution of such

amendment or waiver (or supplemental indenture) by the Company and the Trustee.

 

(b)           the Company may, but shall not be

obligated to, fix a record date for the purpose of determining the Holders

entitled to give their consent or take any other action described above or

required or permitted to be taken pursuant to this Indenture.  If a record date is fixed, then

notwithstanding the immediately preceding paragraph, those Persons who were

Holders at such record date (or their duly designated proxies), and only those

Persons, shall be entitled to give such consent or to revoke any consent

previously given or to take any such action, whether or not such Persons

continue to be Holders after such record date. 

No such consent shall be valid or effective for more than 120 days after

such record date.

 

87

 

SECTION 13.05.            Notation

on or Exchange of Notes.  If an

amendment changes the terms of a Note, the Trustee may require the Holder of

the Note to deliver it to the Trustee. 

The Trustee may place an appropriate notation on the Note regarding the

changed terms and return it to the Holder. 

Alternatively, if the Company or the Trustee so determines, the Company

in exchange for the Note shall issue and the Trustee shall authenticate a new

Note that reflects the changed terms. 

Failure to make the appropriate notation or to issue a new Note shall

not affect the validity of such amendment.

 

SECTION 13.06.            Trustee

to Sign Amendments.  The Trustee

shall sign any amendment authorized pursuant to this Article 13 if the

amendment does not adversely affect the rights, duties, liabilities or

immunities of the Trustee.  If it does,

the Trustee may but need not sign it. 

In sign­ing such amendment the Trustee shall be entitled to receive

indemnity reasonably satisfactory to it and to receive, and (subject to Section 9.01)

shall be fully protected in relying upon, an Officers’ Certificate and an

Opinion of Counsel stating that such amendment is authorized or permitted by

this Indenture and that such amendment is the legal, valid and binding

obligation of the Company and the Guarantors enforceable against them in

accordance with its terms, subject to customary exceptions, and complies with

the provisions hereof (including Section 13.03).

 

ARTICLE 14.

MISCELLANEOUS

 

SECTION 14.01.            Trust

Indenture Act Controls.  If and to

the extent that any provision of this Indenture limits, qualifies or con­flicts

with the duties imposed by, or with another provision (an “incorporated

provision”) included in this Indenture by operation of TIA §§ 310 to 318,

inclusive, such imposed duties or incorporated provi­sion shall control.

 

SECTION 14.02.            Notices.  Any notice or communication shall be in

writing and delivered in person, mailed by first-class mail addressed as

follows or transmitted via telecopy (or other facsimile device) with receipt

confirmed as set forth below:

 

if to the Company:

 

Broadwing Inc.

201 West Fourth Street

Cincinnati, Ohio

Attention:  Mark Peterson

(facsimile no.:  (513) 397-4177)

 

with copies to:

 

Cravath, Swaine &

Moore

825 Eighth Avenue

New York, NY  10019

Attention:  William V. Fogg, Esq.

(facsimile no.:  (212) 474-3700)

 

88

 

if to the Trustee:

 

The Bank of New York

101 Barclay Street – 8W

New York, New York  10286

Attention:  Corporate Trust Administration

(facsimile no.:  (212) 815-5704/5707)

 

The

Company or the Trustee by notice to the other may designate additional or

different addresses for subsequent notices or communications.

 

Any

notice or communication mailed to a Holder shall be mailed first class mail, to

the Holder at the Holder’s address as it appears on the registration books of

the Registrar and shall be sufficiently given if so mailed within the time

prescribed.

 

Failure

to mail a notice or communication to a Holder or any defect in it shall not

affect its sufficiency with respect to other Holders.  If a notice or communication is mailed in the manner provided

above, it is duly given, whether or not the addressee receives it.

 

SECTION 14.03.            Communication

by Holders with Other Holders. 

Holders may communicate pursuant to TIA § 312(b) with other Holders with

respect to their rights under this Indenture or the Notes.  The Company, the Trustee, the Registrar and

anyone else shall have the protection of TIA § 312(c).

 

SECTION 14.04.            Certificate

and Opinion as to Conditions Precedent. 

Upon any request or application by the Company to the Trustee to take or

refrain from taking any action under this Indenture, the Company shall furnish

to the Trustee:

 

(a)           an Officers’ Certificate in form

reasonably satisfactory to the Trustee stating that, in the opinion of the

signers, all conditions precedent, if any, provided for in this Indenture

relating to the proposed action have been complied with; and

 

(b)           an Opinion of Counsel in form

reasonably satisfactory to the Trustee stating that, in the opinion of such

counsel, all such conditions precedent have been complied with.

 

SECTION 14.05.            Statements

Required in Certificate or Opinion. 

Each certificate or opinion with respect to compliance with a covenant

or condition provided for in this Indenture (other than pursuant to Section 4.06)

shall include:

 

(a)           a statement that the individual

making such certificate or opinion has read such covenant or condi­tion;

 

(b)           a brief statement as to the nature

and scope of the examination or investigation upon which the statements or

opinions contained in such certificate or opinion are based;

 

89

 

(c)           a statement that, in the opinion of

such individual, he has made such examination or investigation as is necessary

to enable him to express an informed opin­ion as to whether or not such

covenant or condition has been complied with; and

 

(d)           a statement as to whether or not, in

the opin­ion of such individual, such covenant or condition has been complied

with.

 

SECTION 14.06.             When

Notes Disregarded.  In determining

whether the Holders of the required principal amount at Maturity of Notes have

concurred in any direction, waiver or consent hereunder, under the Notes, the

Purchase Agreement or the Exchange and Registration Rights Agreement, Notes

owned by (x) the Company, any Subsidiary or by any Person directly or

indirectly controlling or controlled by or under direct or indirect common

control with the Company or any Subsidiary or (y) except in the case of any

determination pursuant to Section  13.02(a)(i) through (vii),

the holder of any Subordinated Indebtedness or by any Person directly or

indirectly controlling or controlled by or under direct or indirect common

control with such holder of Subordinated Indebtedness shall in each case be

disregarded and deemed not to be outstanding, except that, for the purpose of

determining whether the Trustee shall be protected in relying on any such

direction, waiver or consent, only Notes which the officer of the Trustee

actually knows are so owned shall be so disregarded.  Subject to the foregoing, only Notes outstanding at the time

shall be considered in any such determination.

 

SECTION 14.07.            Rules

by Trustee, Paying Agent and Registrar. 

The Trustee may make reasonable rules for action by or a meeting of

Holders.  The Registrar and the Paying

Agent may make reasonable rules for their functions.

 

SECTION 14.08.            Legal

Holidays.  If a payment date is a

Legal Holiday, payment shall be made on the next succeeding day that is not a

Legal Holiday, and no interest shall accrue for the intervening period.  If a Regular Record Date is a Legal Holiday,

the record date shall not be affected.

 

SECTION 14.09.            GOVERNING

LAW.  THIS INDENTURE AND THE

NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE

OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF

CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER

JURISDICTION WOULD BE REQUIRED THEREBY.

 

SECTION 14.10.            No

Recourse Against Others.  A

director, officer, employee, stockholder or member, as such, of the Company or

any of the Subsidiaries shall not have any liability for any obligations of the

Company or any of the Subsidiaries under the Notes or this Indenture or for any

claim based on, in respect of or by reason of such obligations or their

creation.  By accepting a Note, each

Holder shall waive and release all such lia­bility.  The waiver and release shall be part of the consi­deration for

the issue of the Notes.

 

SECTION 14.11.            Successors.  All agreements of the Company and each

Subsidiary in this Indenture and the Notes shall bind its successors.  All agreements of the Trustee in this

Indenture shall bind its successors.

 

90

 

SECTION 14.12.            Multiple

Originals; Counterparts.  The

parties may sign any number of counterparts of this Indenture.  Each signed copy shall be an original, but

all of them together represent the same agreement.  One signed copy is enough to prove this Indenture.

 

SECTION 14.13.            Table

of Contents; Headings.  The table of

contents, cross-reference sheet and headings of the Articles and Sections of

this Indenture have been inserted for convenience of reference only, are not

intended to be considered a part hereof and shall not modify or restrict any of

the terms or provisions hereof.

 

SECTION 14.14.            Incorporation.  All Exhibits and Schedules attached hereto

are incorporated as part of this Indenture as if fully set forth herein.

 

SECTION 14.15.            Intent

to Limit Interest to Maximum.  In no

event shall the interest rate payable on the Notes under this Indenture, plus

any other amounts paid by the Company to the Holders in connection therewith,

exceed the highest rate permissible under law that a court of competent

jurisdiction shall, in the final determination, deem applicable.  The Company and the Trustee, in executing

and delivering this Indenture, intend legally to agree upon the rate or rates

of interest and the manner of payment stated within it; provided, however, that,

anything contained herein to the contrary notwithstanding, if said rate or

rates of interest or manner of payment exceed the maximum allowable under

applicable law, then, ipso  facto as of the date of this

Indenture, the Company is and shall be liable only for the payment of such

maximum as allowed by law, and payment received from the Company in excess of

such legal maximum, whenever received, shall be applied to reduce the principal

balance of any Notes then outstanding to the extent of such excess, or, if such

excess exceeds the then outstanding principal, such excess shall be first

set-off against any other amounts then due and owing by the Company and

refunded to the Company.

 

91

 

IN

WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as

of the date first written above.

 

 

	

  COMPANY:

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  BROADWING INC.

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ Mark W. Peterson

  
	

   

  	

   

  	

  Name: Mark W. Peterson

  
	

   

  	

   

  	

  Title: Vice President

  & Treasurer

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  GUARANTORS:

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  CINCINNATI BELL PUBLIC

  COMMUNICATIONS INC.

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ Mark W. Peterson

  
	

   

  	

   

  	

  Name:

  
	

   

  	

   

  	

  Title:

  
	

   

  	

   

  	

   

  
	

   

  	

  ZOOMTOWN.COM INC.

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ Mark W. Peterson

  
	

   

  	

   

  	

  Name:

  
	

   

  	

   

  	

  Title:

  
	

   

  	

   

  	

   

  
	

   

  	

  CINCINNATI BELL ANY

  DISTANCE, INC.

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ Mark W. Peterson

  
	

   

  	

   

  	

  Name:

  
	

   

  	

   

  	

  Title:

  
	

   

  	

   

  	

   

  
	

   

  	

  CINCINNATI BELL

  TELECOMMUNICATIONS SERVICES INC.

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ Mark W. Peterson

  
	

   

  	

   

  	

  Name:

  
	

   

  	

   

  	

  Title:

  

 

92

 

	

   

  	

  BROADWING FINANCIAL LLC

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

   /s/ Mark W. Peterson

  
	

   

  	

   

  	

  Name:

  
	

   

  	

   

  	

  Title:

  
	

   

  	

   

  	

   

  
	

   

  	

  CINCINNATI BELL

  WIRELESS COMPANY

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

   /s/ Mark W. Peterson

  
	

   

  	

   

  	

  Name:

  
	

   

  	

   

  	

  Title:

  
	

   

  	

   

  	

   

  
	

   

  	

  CINCINNATI BELL

  WIRELESS

  
	

   

  	

  HOLDINGS LLC

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

   /s/ Mark W. Peterson

  
	

   

  	

   

  	

  Name:

  
	

   

  	

   

  	

  Title:

  
	

   

  	

   

  	

   

  
	

   

  	

  BROADWING HOLDINGS INC.

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

   /s/ Mark W. Peterson

  
	

   

  	

   

  	

  Name:

  
	

   

  	

   

  	

  Title:

  

 

93

 

	

  TRUSTEE:

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  THE BANK OF NEW YORK

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

   /s/ Paul Schmalzel

  
	

   

  	

   

  	

  Name: Paul Schmalzel

  
	

   

  	

   

  	

  Title: Vice President

  

 

94

 

APPENDIX A

 

PROVISIONS

RELATING TO 

INITIAL NOTES 

AND EXCHANGE NOTES

 

1.             Definitions

 

1.1           Definitions

 

For the purposes of this

Appendix A, except where the context otherwise requires, the following terms

shall have the meanings indicated below:

 

“Exchange and

Registration Rights Agreement” means the Exchange and Registration Rights

Agreement, dated as of the date of this Indenture, by and among the Company and

the Purchasers.

 

“Definitive Note”

means a certificated Initial Note or Exchange Note (bearing the Restricted

Notes Legend if the transfer of such Note is restricted by applicable law) that

does not include the Global Notes Legend.

 

“Depositary” means

The Depository Trust the Company, its nominees and their respective successors.

 

“Global Notes Legend”

means the legend set forth under that caption in Exhibit B to this

Indenture.

 

“Institutional

Accredited Investor” means an institutional “accredited investor” as

described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.

 

“Notes” under the Indenture include the Initial Notes

and any Exchange Notes issued in exchange for Initial Notes.

 

“Notes Custodian,”

who shall initially be the Trustee, means the custodian with respect to a

Global Exchange Note (as appointed by the Depositary) or any successor person

thereto.

 

“Purchase Agreement”

means the Purchase Agreement, dated as of December 9, 2002, by and among the

Company and the Purchasers.

 

“Purchasers” means

GS Mezzanine Partners II, L.P., a Delaware limited partnership (“GS

Mezzanine”), GS Mezzanine Partners II Offshore, L.P. (“GS Offshore”),

an exempted limited partnership organized under the laws of the Cayman Islands,

and any other affiliate of GS Mezzanine who purchases the Offered Securities

(as defined in the Purchase Agreement) being issued under the Purchase

Agreement at the Closing (as defined in the Purchase Agreement) (together with

GS Mezzanine, GS Offshore and one or more partnerships, corporations, trusts or

other organizations specified as a Purchaser in Schedule 1 to the Purchase

 

95

 

Agreement (as defined in

the Purchase Agreement) which controls, is controlled by, or is under common

control with, GS Mezzanine or GS Offshore), and any other person specified as a

Purchaser in Schedule 1 to the Purchase Agreement.

 

“QIB” means a

“qualified institutional buyer” as defined in Rule 144A.

 

“Registered Exchange

Offer” means the offer by the Company, pursuant to the Exchange and

Registration Rights Agreement, to certain Holders of Initial Notes, to issue

and deliver to such Holders, in exchange for their Initial Notes, a like

aggregate principal amount at Maturity of Exchange Notes registered under the

Securities Act.

 

“Regulation S”

means Regulation S under the Securities Act.

 

“Restricted Notes

Legend” means the legend set forth in Paragraph 2.3(d)(i) herein.

 

“Rule 501”

means Rule 501(a)(1), (2), (3) or (7) under the Securities Act.

 

“Rule 144A” means

Rule 144A under the Securities Act.

 

“Securities Act”

means the Securities Act of 1933, as amended.

 

“Shelf Registration

Statement” means a registration statement filed by the Company in

connection with the offer and sale of Initial Notes pursuant to the Exchange

and Registration Rights Agreement.

 

“Transfer Restricted

Notes” means Definitive Notes and any other Notes that bear or are required

to bear the Restricted Notes Legend.

 

1.2           Other Definitions

 

	

  Term:

  	

   

  	

  Defined in

  Section:

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  “Agent

  Members”

  	

   

  	

  2.1(c)

  	

   

  
	

  “Initial

  Definitive Notes”

  	

   

  	

  2.1(b)

  	

   

  
	

  “Global

  Exchange Note”

  	

   

  	

  2.1(b)

  	

   

  

 

2.                                       The

Notes

 

2.1           Form and Dating

 

(a)   The Initial Notes issued on the date hereof

will be sold by the Company pursuant to the Purchase Agreement to the

Purchasers.  All such Initial Notes may

thereafter be transferred to, among others, QIBs, purchasers in reliance on

Regulation S and, except as set forth below, Accredited Investors in accordance

with Rule 501.  A pledge by any

Holder of an Initial Note shall not constitute a transfer unless and until such

pledge shall be realized upon.

 

96

 

(b)           The Initial Notes shall be issued in

the form of Definitive Notes, in fully registered form (the “Initial

Definitive Notes”) bearing the Restricted Notes Legend and shall be issued

to and registered in the name of the applicable Purchaser and duly executed by

the Company and authenticated by the Trustee as provided in this Indenture.

 

Initial Notes will be

exchanged for Exchange Notes in the Registered Exchange Offer pursuant to the

Exchange and Registration Rights Agreement. 

Exchange Notes will also be issued upon the sale of Initial Notes (i) under

a Shelf Registration Statement or (ii) at any time that the Initial Notes

being sold are not Transfer Restricted Notes. 

Exchange Notes shall, except as provided in Sections 2.3 and

2.4, be issued in global form bearing the Global Notes Legend (the “Global

Exchange Notes”).  The aggregate

principal amount at Maturity of the Global Exchange Notes may from time to time

be increased or decreased by adjustments made on the records of the Trustee and

the Depositary or its nominee and on the schedules thereto as hereinafter

provided.

 

(c)           Book-Entry Provisions.  This Paragraph 2.1(c) shall apply

only to a Global Exchange Note deposited with or on behalf of the Depositary.

 

The Company shall execute

and the Trustee shall, in accordance with this Paragraph 2.1(c) and Paragraph

2.2 and pursuant to an order of the Company signed by one officer,

authenticate and deliver one Global Exchange Note that (i) shall be

registered in the name of the Depositary for such Global Exchange Note or the

nominee of such Depositary and (ii) shall be delivered by the Trustee to

such Depositary or pursuant to such Depositary’s instruc­tions or held by the

Trustee as Notes Custodian.

 

Members of, or

participants in, the Depositary (“Agent Members”) shall have no rights

under this Indenture with respect to any Global Exchange Note held on their

behalf by the Depositary or by the Trustee as Notes Custodian or under such

Global Exchange Note, and the Depositary may be treated by the Company, the

Trustee and any agent of the Company or the Trustee as the absolute owner of

such Global Exchange Note for all purposes whatsoever.  Notwithstanding the foregoing, nothing

herein shall prevent the Company, the Trustee or any agent of the Company or

the Trustee from giving effect to any written certification, proxy or other

authorization furnished by the Depositary or impair, as between the Depositary

and its Agent Members, the operation of customary practices of such Depositary

governing the exercise of the rights of a holder of a beneficial interest in

any Global Exchange Note.

 

(d)           Definitive Notes.  Except as provided in Paragraph 2.3

or 2.4, owners of beneficial interests in Global Exchange Notes will not

be entitled to receive physical delivery of certificated Notes.

 

2.2           Authentication.  The Trustee shall authenticate and make

available for delivery upon a written order of the Company signed by one

officer (a) Initial Definitive Notes that are Initial Notes for original

issue on the date hereof in an aggregate principal amount at Maturity of $441,628,051.27,

(b) subject to the terms of this Indenture, Exchange Notes in the form of

Global Exchange Notes for issue in a Registered Exchange Offer pursuant to the

Exchange and Registration Rights Agreement in a like principal amount at

Maturity of the Initial Definitive Notes exchanged pursuant thereto,

(c) subject to the terms of this Indenture, Exchange Notes in 

 

97

 

the form of Global

Exchange Notes in lieu of Initial Definitive Notes upon the sale of such

Initial Definitive Notes (i) under a Shelf Registration Statement or

(ii) at any time that such Initial Notes being sold are not Transfer

Restricted Notes and (d) subject to the terms of this Indenture,

Definitive Notes upon presentation to the Trustee of Initial Notes that are not

required to bear the Restricted Notes Legend. 

Such order shall specify the amount of the Notes to be authenticated,

the date on which the original issue of Notes is to be authenticated and

whether the Notes are to be Initial Notes or Exchange Notes.  The aggregate principal amount at Maturity

of the Initial Notes and the Exchange Notes outstanding at any time may not

exceed $441,628,051.27, except as provided in Sections 2.07 and 2.08

of the Indenture.

 

2.3           Transfer and Exchange.

 

(a)           Transfer and Exchange of

Definitive Notes.  When Definitive

Notes are presented to the Registrar with a request:

 

(i)            to register the transfer of such

Definitive Notes; or

 

(ii)           to exchange such Definitive Notes for

an equal principal amount at Maturity of Definitive Notes of other authorized

denominations,

 

the Registrar shall

register the transfer or make the exchange as requested if its reasonable

require­ments for such transaction are met; provided, however, that the Definitive

Notes surrendered for transfer or exchange:

 

(1)           shall be duly endorsed or accompanied

by a written instrument of transfer in form reason­ably satisfactory to the

Company and the Registrar, duly executed by the Holder thereof or his attorney

duly authorized in writing; and

 

(2)           in the case of Transfer Restricted

Notes are accompanied by the following additional information and documents, as

applicable:

 

(A)          if such Definitive Notes are being

delivered to the Registrar by a Holder for registration in the name of such

Holder, with­out transfer, a certification from such Holder to that effect (in

the form set forth on the reverse side of the Initial Note); or

 

(B)           if such Definitive Notes are being

transferred to the Company, a certification to that effect (in the form set forth

on the reverse side of the Initial Note); or

 

(C)           if such Definitive Notes are being

transferred pursuant to an exemption from registration in accordance with

Rule 144 under the Securities Act or in reliance upon another exemption

from the registration requirements of the Securities Act, (x) a

certification to that effect (in the form set forth on the reverse side of the

Initial Note) and (y) if the Company, the Registrar or the Trustee so

requests, an opinion of

 

98

 

counsel or other evidence

reasonably satisfactory to it as to the compliance with the restrictions set

forth in the legend set forth in Paragraph 2.3(d)(i).

 

(b)           Restrictions on Transfer of a

Definitive Note for a Beneficial Interest in a Global Exchange Note.  A Definitive Note may not be exchanged for a

beneficial interest in a Global Exchange Note except (i) as part of a

Registered Exchange Offer, (ii) upon sale of the Definitive Note under the

Shelf Registration Statement, (iii) upon sale of the Definitive Note at

the time such Definitive Note is not a Transfer Restricted Note or

(iv) upon presentation to the Trustee of Definitive Notes that are not

Transfer Restricted Notes.  Upon receipt

by the Trustee of a Definitive Note, duly endorsed or accom­panied by a written

instrument of transfer in form reasonably satisfactory to the Company and the

Registrar, together with written instructions directing the Trustee to make, or

to direct the Notes Custodian to make, an adjustment on its books and records

with respect to such Global Exchange Note to reflect an increase in the

aggregate principal amount at Maturity of the Notes represented by the Global

Exchange Note, such instructions to contain information regarding the

Depositary account to be credited with such increase, then the Trustee shall

cancel such Definitive Note and cause, or direct the Notes Custodian to cause,

in accordance with the standing instructions and procedures existing between

the Depositary and the Notes Cus­todian, the aggregate principal amount at

Maturity of Notes represented by the Global Exchange Note to be increased by

the aggregate principal amount at Maturity of the Definitive Note to be

exchanged and shall credit or cause to be credited to the account of the Person

specified in such instructions a beneficial interest in the Global Exchange

Note equal to the principal amount at Maturity of the Definitive Note so

canceled.  If no Global Exchange Notes

are then outstanding and the Global Exchange Note has not been previously

exchanged for certificated Notes pursuant to Paragraph 2.4, the Company

shall issue and the Trustee shall authenticate, upon written order of the

Company in the form of an Officers’ Certificate, a new Global Exchange Note in

the appropriate principal amount at Maturity.

 

(c)           Transfer and Exchange of Global

Exchange Notes.  (i)  The

transfer of the Global Exchange Note or beneficial interests therein shall be

effected through the Depositary, in accordance with this Indenture (including

applicable restrictions on transfer set forth herein, if any) and the

procedures of the Depositary therefor. 

A transferor of a beneficial interest in a Global Exchange Note shall

deliver a written order given in accordance with the Depositary’s procedures

containing information regarding the participant account of the Depositary to

be credited with a beneficial interest in such Global Exchange Note and such

account shall be credited in accordance with such order with a beneficial

interest in the applicable Global Exchange Note and the account of the Person

making the transfer shall be debited by an amount equal to the beneficial

interest in the Global Exchange Note being transferred.

 

(ii)           Notwithstanding any other provisions

of this Appendix (other than the provisions set forth in Paragraph 2.4),

a Global Exchange Note may not be transferred as a whole except by the

Depositary to a nominee of the Depositary or by a nominee of the Depositary to

the Depositary or another nominee of the Depositary or by the Depositary or any

such nominee to a successor Depositary or a nominee of such successor

Depositary.

 

99

 

(d)           Legend.

 

(i)            Except as permitted by the following

clauses (ii), (iii) or (iv), each Definitive Note (and all Notes issued in

exchange therefor or in substitution thereof) shall bear a legend in

substantially the following form (each defined term in the legend being defined

as such for purposes of the legend only):

 

“THIS NOTE HAS NOT BEEN

REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),

OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION.  NEITHER THIS NOTE NOR ANY INTEREST OR

PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,

ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR

UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.

 

THE

HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE

TRANSFER SUCH NOTE, PRIOR TO THE DATE (THE “RESALE RESTRICTION TERMINATION

DATE”) WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF

AND THE LAST DATE ON WHICH COMPANY OR ANY AFFILIATE OF COMPANY WAS THE OWNER OF

THIS NOTE (OR ANY PREDECESSOR OF SUCH NOTE), ONLY (A) TO COMPANY, (B) PURSUANT

TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE

SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT

TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”), TO A PERSON IT

REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN

RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED

INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN

RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE

UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E)

TO AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF RULE 501(a)(1), (2),

(3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED

INVESTOR ACQUIRING THE NOTE FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN

INSTITUTIONAL ACCREDITED INVESTOR OR TO AN “ACCREDITED INVESTOR” WITHIN

THE MEANING OF RULE 501(a)(5) OR (6) ACQUIRING THE NOTE FOR ITS OWN ACCOUNT, IN

EACH CASE IN A MINIMUM PRINCIPAL AMOUNT AT MATURITY OF THE NOTES OF $250,000,

FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN

CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F)

PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF

THE SECURITIES ACT, SUBJECT TO COMPANY’S

 

100

 

AND THE TRUSTEE’S RIGHT

PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO

REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER

INFORMATION SATISFACTORY TO EACH OF THEM. 

THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE

RESALE RESTRICTION TERMINATION DATE.”

 

Each Definitive Note

shall bear the following additional legend:

 

“IN CONNECTION WITH ANY

TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH

CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY

REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.”

 

(ii)           Upon any sale or transfer of a

Transfer Restricted Note that is a Definitive Note, the Registrar shall permit

the Holder thereof to exchange such Transfer Restricted Note for a Definitive

Note that does not bear the legends set forth above and rescind any restriction

on the transfer of such Transfer Restricted Note if the Holder certifies in

writing to the Registrar that its request for such exchange was made in

reliance on Rule 144 (such certification to be in the form set forth on

the reverse of the Initial Note).

 

(iii)          After a transfer of any Initial Notes

during the period of the effectiveness and pursuant to a Shelf Registration

Statement with respect to such Initial Notes, all requirements pertaining to

the Restricted Notes Legend on such Initial Notes shall cease to apply and the

requirements that any such Initial Notes be issued in global form shall become

applicable.

 

(iv)          Upon the consummation of a Registered

Exchange Offer with respect to the Initial Notes pursuant to which Holders of

such Initial Notes are offered Exchange Notes in exchange for their Initial

Notes, Exchange Notes in global form without the Restricted Notes Legend shall

be available to Holders that exchange such Initial Notes in such Registered

Exchange Offer.

 

(e)           Cancellation or Adjustment of Global

Exchange Note.  At such time as all

beneficial interests in a Global Exchange Note have either been exchanged for

Definitive Notes, transferred, redeemed, repurchased or canceled, such Global

Exchange Note shall be returned by the Depositary to the Trustee for

cancellation or retained and canceled by the Trustee.  At any time prior to such cancellation, if any beneficial

interest in a Global Exchange Note is exchanged for Definitive Notes,

transferred in exchange for an interest in another Global Exchange Note,

redeemed, repurchased or canceled, the principal amount at Maturity of Notes

represented by such Global Exchange Note shall be reduced and an adjustment

shall be made on the books and records of the Trustee (if it is then the Notes

Custodian for such Global Exchange Note) with respect to such Global Exchange

Note, by the Trustee or the Notes Custodian, to reflect such reduction.

 

101

 

(f)            Obligations with Respect to

Transfers and Exchanges of Notes.

 

(i)            To permit registrations of transfers

and exchanges, the Company shall execute and the Trustee shall authenticate,

Definitive Notes and Global Exchange Notes at the Registrar’s request.

 

(ii)           No service charge shall be made for

any registration of transfer or exchange, but the Company or the Trustee may

require payment of a sum sufficient to cover any transfer tax, assessments, or

similar governmental charge payable in connection therewith (other than any

such transfer taxes, assessments or similar governmental charge payable upon

exchanges pursuant to Sections 2.06, 3.06, 4.09,

4.10 and 10.05 of the Indenture).

 

(iii)          Prior to the due presentation for

registration of transfer of any Note, the Company, the Trustee, the Paying

Agent or the Registrar may deem and treat the person in whose name a Note is

registered as the absolute owner of such Note for the purpose of receiving

payment of principal of and interest on and Special Interest, if any, with

respect to such Note and for all other purposes whatsoever, whether or not such

Note is overdue, and none of the Company, the Trustee, the Paying Agent or the

Registrar shall be affected by notice to the con­trary.

 

(iv)          All Notes issued upon any transfer or

exchange pursuant to the terms of this Indenture shall evidence the same debt

and shall be entitled to the same benefits under this Indenture as the Notes

surrendered upon such transfer or exchange.

 

(g)           No Obligation of the Trustee.

 

(i)            The Trustee shall have no

responsibility or obligation to any beneficial owner of a Global Exchange Note,

a member of, or a participant in the Depositary or any other Person with

respect to the accuracy of the records of the Depositary or its nominee or of

any participant or member thereof, with respect to any ownership interest in

the Notes or with respect to the delivery to any participant, member,

beneficial owner or other Person (other than the Depositary) of any notice

(including any notice of redemption or repurchase) or the payment of any

amount, under or with respect to such Notes. 

All notices and communica­tions to be given to the Holders and all

payments to be made to Holders under the Notes shall be given or made only to

the registered Holders (which shall be the Depositary or its nominee in the

case of a Global Exchange Note).  The

rights of beneficial owners in any Global Exchange Note shall be exercised only

through the Depositary subject to the applicable rules and pro­cedures of the

Depositary.  The Trustee may rely and

shall be fully protected in relying upon information furnished by the

Depositary with respect to its mem­bers, participants and any beneficial

owners.

 

(ii)           The Trustee shall have no obligation

or duty to monitor, determine or inquire as to compliance with any restrictions

on transfer imposed under this Inden­ture or under applicable law with respect

to any trans­fer of any interest in any Note (including any trans­fers between

or among Depositary participants, members or beneficial owners in any Global

Exchange Note) other than to require delivery of such certificates and other

documentation or evidence as are expressly required by, and to do so if and

when

 

102

 

expressly required by, the terms of this Indenture,

and to examine the same to determine substantial compliance as to form with the

express requirements hereof.

 

2.4  Definitive

Notes

 

(a)           A Global Exchange Note deposited with

the Depositary or with the Trustee as Notes Custodian pursuant to Paragraph 2.1

or issued in connection with a Registered Exchange Offer shall be transferred

to the beneficial owners thereof in the form of Definitive Notes in an

aggregate principal amount at Maturity equal to the principal amount at

Maturity of such Global Exchange Note, in exchange for such Global Exchange

Note, only if such transfer complies with Paragraph 2.3 and

(i) the Depositary notifies the Company that it is unwilling or unable to

continue as a Depositary for such Global Exchange Note or if at any time the

Depositary ceases to be a “clearing agency” registered under the Exchange Act,

and a successor depositary is not appointed by the Company within 90 days

of such notice or after the Company becomes aware of such cessation, or

(ii) an Event of Default has occurred and is continuing or (iii) the Company,

in its sole discretion, notifies the Trustee in writing that it elects to cause

the issuance of certificated Notes under this Indenture.

 

(b)           Any Global Exchange Note that is

transferable to the beneficial owners thereof pursuant to this Paragraph 2.4

shall be surrendered by the Depositary to the Trustee, to be so transferred, in

whole or from time to time in part, without charge, and the Trustee shall

authenticate and deliver, upon such transfer of each portion of such Global

Exchange Note, an equal aggregate principal amount at Maturity of Definitive

Notes of authorized denominations.  Any

portion of a Global Exchange Note transferred pursuant to this paragraph shall

be executed, authenticated and delivered only in denominations of $1,000 (in

principal amount at Maturity) and any multiple thereof and registered in such

names as the Depositary shall direct. 

Any certificated Initial Note in the form of a Definitive Note delivered

in exchange for an interest in the Global Exchange Note shall, except as

otherwise provided by Paragraph 2.3(d), bear the Restricted Notes

Legend.

 

(c)           Subject to the provisions of Paragraph 2.4(b),

the registered Holder of a Global Exchange Note may grant proxies and otherwise

authorize any Person, including Agent Members and Persons that may hold

interests through Agent Members, to take any action which a Holder is entitled

to take under this Indenture or the Notes.

 

(d)           In the event of the occurrence of any

of the events specified in Paragraph 2.4(a)(i), (ii) or

(iii), the Company will promptly make available to the Trustee a

reasonable supply of Definitive Notes in fully registered form without interest

coupons.

 

103

 

EXHIBIT A

 

FORM OF FACE OF INITIAL NOTE

 

THIS NOTE HAS NOT BEEN

REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),

OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION.  NEITHER THIS NOTE NOR ANY INTEREST OR

PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,

ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR

UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.

 

THE HOLDER OF THIS NOTE

BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH NOTE,

PRIOR TO THE DATE (THE “RESALE RESTRICTION TERMINATION DATE”) WHICH IS

TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE

ON WHICH COMPANY OR ANY AFFILIATE OF COMPANY WAS THE OWNER OF THIS NOTE (OR ANY

PREDECESSOR OF SUCH NOTE), ONLY (A) TO COMPANY, (B) PURSUANT TO A REGISTRATION

STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO

LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE

SECURITIES ACT (“RULE 144A”), TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED

INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN

ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS

GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO

OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF

REGULATION S UNDER THE SECURITIES ACT, (E) TO AN “ACCREDITED INVESTOR”

WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT

THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE NOTE FOR ITS OWN

ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR OR TO

AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF RULE 501(a)(5) OR (6)

ACQUIRING THE NOTE FOR ITS OWN ACCOUNT, IN EACH CASE IN A MINIMUM PRINCIPAL

AMOUNT AT MATURITY OF THE NOTES OF $250,000, FOR INVESTMENT PURPOSES AND NOT

WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN

VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION

FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO COMPANY’S

AND THE TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO

CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,

CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM.  THIS LEGEND WILL BE REMOVED UPON THE REQUEST

OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.

 

IN CONNECTION WITH ANY

TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES

AND OTHER

 

 

1

 

 

INFORMATION AS SUCH

TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES

WITH THE FOREGOING RESTRICTIONS.

 

The following information is provided pursuant to Treas. Reg. Section

1.1275-3:

 

This debt instrument is issued with original issue discount.

 

Treasurer (513-397-9900),

as a representative of the issuer, will make available on request to holder(s)

of this debt instrument the following information:  issue price, amount of original issue discount, issue date and

yield to maturity.

 

2

 

	

  No.

  [                 ]

  	

   

  	

  $

  

 

Senior Subordinated Discount Note due 2009

 

BROADWING INC., an Ohio

corporation, promises to pay

to                  

or registered assigns, the principal amount at Maturity of

[                 ]

Dollars on January 20, 2009 (the “Stated Maturity Date”).

 

	

  Interest Payment Date

  	

   

  	

  Record Date

  	

   

  
	

  June 30, 2003

  	

   

  	

  June 15, 2003

  	

   

  
	

  December 31, 2003

  	

   

  	

  December 15, 2003

  	

   

  
	

  June 30, 2004

  	

   

  	

  June 15, 2004

  	

   

  
	

  December 31, 2004

  	

   

  	

  December 15, 2004

  	

   

  
	

  June 30, 2005

  	

   

  	

  June 15, 2005

  	

   

  
	

  December 31, 2005

  	

   

  	

  December 15, 2005

  	

   

  
	

  June 30, 2006

  	

   

  	

  June 15, 2006

  	

   

  
	

  December 31, 2006

  	

   

  	

  December 15, 2006

  	

   

  
	

  June 30, 2007

  	

   

  	

  June 15, 2007

  	

   

  
	

  January 20, 2008

  	

   

  	

  January 5, 2008

  	

   

  
	

  January 20, 2009

  	

   

  	

  January 5, 2009

  	

   

  

 

3

 

Additional provisions of

this Note are set forth on the other side of this Note.

 

 

IN WITNESS WHEREOF, the

parties have caused this instrument to be duly executed.

 

	

   

  	

  BROADWING INC.

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

   

  	

  Name:

  
	

   

  	

   

  	

  Title:

  

 

 

TRUSTEE’S

CERTIFICATE OF AUTHENTICATION

 

The Bank of New York,

Trustee, certifies that this is one of the Notes referred to in the Indenture.

 

 

	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

   

  	

  Authorized Signatory

  
	

   

  	

   

  
	

  Dated:

  	

   

  

 

4

 

FORM OF REVERSE

SIDE OF INITIAL NOTE

Senior

Subordinated Discount Note due 2009

 

1.                                       Interest

 

(a)           BROADWING INC., an Ohio corporation

(such corporation, and its successors and assigns under the Indenture

hereinafter referred to, being herein called the “Company”), promises to

pay cash interest on the Accreted Value at such date, in arrears, on each of

June 30 and December 31 of 2003 through 2006, commencing on June 30, 2003, and

then on each of June 30, 2007, January 20, 2008 and on the Stated Maturity Date

(each, an “Interest Payment Date”), at the rate of 12% per annum,

compounded semi-annually, until the principal hereof is paid.  Such interest on the Notes shall accrue from

the most recent date to which interest has been paid or duly provided for or,

if no such interest has been paid or duly provided for, from March 26, 2003

until the principal hereof is due. 

Principal of the Notes will accrete as set forth in the Indenture.  Interest shall be paid in cash.  Any principal of, or premium or installment

of interest or Special Interest (as hereinafter defined) on this Note which is

overdue shall bear interest at the rate equal to 2.25% per annum above the cash

interest rate from the date such amounts are due until they are paid (to the

extent that the payment of such interest shall be legally enforceable), and

such excess interest shall be payable in cash on demand.  In addition, the accretion of principal on

the Notes will increase as set forth in the Indenture.  Interest shall be computed on the basis of a

360-day year of twelve 30-day months.

 

(b)           Special Interest.  The holder of this Note is entitled to the

benefits of the Exchange and Registration Rights Agreement, dated as of the

date hereof, by and among the Company and the Purchasers named therein.  Capitalized terms used in this

paragraph (b) but not defined herein have the meanings assigned to them in

the Exchange and Registration Rights Agreement.  If (i) the Exchange Offer Registration Statement is not filed

with the Commission within 90 days following the Trigger Date, (ii) the Shelf

Registration Statement is not filed within 30 days after, or is not declared

effective within 150 days after, filing is required or requested pursuant to

the Exchange and Registration Rights Agreement, (iii) the Exchange Offer

Registration Statement is not declared effective on or prior to 150 days after

the Trigger Date, (iv) the Registered Exchange Offer is not consummated on or

prior to 180 days after the Trigger Date, or (v) the Shelf Registration

Statement is filed and declared effective but shall thereafter cease to be

effective prior to the end of the Shelf Registration Period (other than during

a Suspension Period permitted under the Exchange and Registration Rights

Agreement) (at any time that the Company and the Guarantors are obligated to

maintain the effectiveness thereof) (each such event referred to in clauses (i)

through (v), a “Registration Default”), the Company and the Guarantors

will be jointly and severally obligated to pay Special Interest to each holder

of Transfer Restricted Notes, during the period of one or more such

Registration Defaults, at the rate equal to $0.05 per week per $1,000 of

principal amount at Maturity for the first 90 days during the period of one or

more such Registration Defaults, which amount shall increase by $0.05 per week

per $1,000 of principal amount at Maturity for each subsequent 90-day period

during the continuance of one or more Registration Default, until such time as

no Registration Default is in effect (such amount equal to the “Special

Interest”), up to a maximum amount of Special Interest for all Registration

Defaults of $0.192 per week per $1,000 of principal amount at Maturity.  All accrued Special Interest shall be paid

to Holders in the same manner as interest

 

5

 

payments on the Notes on semi-annual payment dates

which correspond to interest payments for the Notes.  Following the cure of all Registration Defaults, the accrual of

Special Interest shall cease.  The

Trustee shall have no responsibility with respect to the determination of the

amount of any such Special Interest.

 

(c)           Record

Dates, etc.  Upon the

issuance of an Exchange Note in exchange for this Note, any accrued and unpaid

interest (including Special Interest) on this Note shall cease to be payable to

the Holder hereof but such accrued and unpaid interest (including Special

Interest) shall be payable on the next Interest Payment Date for such Exchange

Note to the Holder thereof on the related Regular Record Date. The interest so

payable, and punctually paid or duly provided for, on any Interest Payment Date

will, as provided in the Agreement, be paid to the Person in whose name this

Note is registered at the close of business on the Regular Record Date (the “Regular

Record Date”) for such interest which shall be the fifteenth (or, in the

case of a Regular Record Date for the Stated Maturity Date and the Interest

Payment Date immediately preceding the Stated Maturity Date, the fifth)

calendar day (whether or not a Business Day) of the calendar month in which

such Interest Payment Date occurs.

 

2.                                       Method

of Payment

 

The

Company shall pay interest on the Notes (except defaulted interest) to the

Persons who are registered holders of Notes at the close of business on the

June 15 or December 15 next preceding the Interest Payment Date (or, in the

case of the Stated Maturity Date and the Interest Payment Date immediately

preceding the Stated Maturity Date, January 5) even if Notes are canceled

after the record date and on or before the Interest Payment Date.  Holders must surrender Notes to a Paying

Agent to collect principal payments. 

The Company shall pay principal, Special Interest, if any, and interest

in money of the United States of America that at the time of payment is

legal tender for payment of public and private debts.  The Company will make all money payments in respect of a certificated

Note (including principal and interest), at the office of the Paying Agent or,

at the option of the Company, by mailing a check to the registered address of

each Holder thereof; provided, however, that money payments on

the Notes shall be made, in the case of a Holder of at least $1,000,000 aggregate

principal amount at Maturity of Notes, by wire transfer to a U.S. dollar

account maintained by the payee with a bank in the United States if such

Holder elects payment by wire transfer by giving written notice to the Trustee

or the Paying Agent to such effect designating such account no later than

30 days immediately preceding the relevant due date for payment (or such

other date as the Trustee may accept in its discretion).

 

3.                                       Paying

Agent and Registrar

 

Initially,

The Bank of New York, a banking corporation organized under the laws of the

State of New York (the “Trustee”), will act as Paying Agent and

Registrar.  The Company may appoint and

change any Paying Agent, Registrar or co-registrar without notice.  The Company or any of its domestically incorporated

Wholly Owned Subsidiaries (other than any member of the BCI Group) may act as

Paying Agent, Registrar or co-registrar.

 

6

 

4.                                       Indenture

 

The

Company issued the Notes under an Indenture, dated as of  March 26, 2003 (the “Indenture”), by

and between the Company and the Trustee. 

The terms of the Notes include those stated in the Indenture and those

made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.

§§ 77aaa-77bbbb) as in effect on the date of the Indenture (the “TIA”).  Terms defined in the Indenture and used but

not defined herein have the meanings ascribed thereto in the Indenture.  The Notes are subject to all terms and

provisions of the Indenture, and Holders (as defined in the Indenture) are

referred to the Indenture and the TIA for a statement of such terms and

provisions.

 

The

Notes are senior subordinated unsecured discount obligations of the Company

limited to $441,628,051.27 aggregate principal amount at Maturity at any one

time outstanding (subject to Section 2.07 of the Indenture).  This Note is one of the series of the

Initial Notes that are referred to in the Indenture issued in an aggregate

original principal amount at Maturity of $441,628,051.27.  The Notes include the Initial Notes and any

Exchange Notes issued in exchange for Initial Notes.  The Initial Notes and the Exchange Notes are treated as a single

class of Notes under the Indenture.  The

Initial Notes of each series and the Exchange Notes of the corresponding series

are treated as a single series of Notes under the Indenture.  The Indenture imposes certain limitations on

the ability of the Company and its Restricted Subsidiaries to, among other

things, make certain Investments and other Restricted Payments, pay dividends

and other distributions, incur Indebtedness, enter into consensual restrictions

upon the payment of certain dividends and distributions by such Restricted

Subsidiaries, issue or sell shares of Capital Stock of such Restricted Subsidiaries,

enter into or permit certain transactions with Affiliates and make asset

sales.  The Indenture also imposes

limitations on the ability of the Company to consolidate or merge with or into

any other Person or convey, transfer or lease all or substantially all of the

property of the Company.

 

The

Notes are guaranteed, on a senior subordinated basis, by all existing and

future Restricted Subsidiaries that are or shall become Guarantors in

accordance with the terms of the Indenture.

 

5.                                       Optional

Redemption

 

Except

as set forth in the last paragraph of this Section 5, the Notes shall not be

redeemable at the option of the Company prior to March 26, 2006.   Thereafter, the Notes are subject to redemption, at the election

of the Company, in whole or in part (in the principal amount at Maturity of not

less than $5,000,000 and integral multiples thereof), upon not less than thirty

(30) nor more than sixty (60) days’ notice by mail at the prices listed

below (expressed as a percentage of the Accreted Value of the Notes being

prepaid as of the Redemption Date) plus accrued interest to the Redemption Date

(each prepayment to be in an aggregate Accreted Value of Notes of not less than

$5 million):

 

7

 

	

  Redemption Date

  	

   

  	

  Redemption

  Price

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  March

  26, 2006 - March 25, 2007

  	

   

  	

  108

  	

  %

  
	

   

  	

   

  	

   

  	

   

  
	

  March

  26, 2007 - March 25, 2008

  	

   

  	

  106

  	

  %

  
	

   

  	

   

  	

   

  	

   

  
	

  March

  26, 2008 - January 19, 2009

  	

   

  	

  104

  	

  %

  

 

On any Interest Payment

Date occurring on or prior to March 26, 2006, the Company may redeem all or any

part (in the principal amount at Maturity of not less than $5,000,000 and

integral multiples thereof) of the then outstanding Accreted Value of Notes

upon not less than thirty (30) nor more than sixty (60) days’ notice by mail at

a price equal to the sum of (x) 100% of the Accreted Value of such Notes being

redeemed as of the applicable Interest Payment Date plus (y) a Make Whole

Premium.  As used herein, the “Make

Whole Premium” means, as at any date, (a) an amount equal to the

present value of the remaining payments of interest on the Notes and the

Redemption Price of the Notes, assuming that on March 26, 2006 the entire

Accreted Value of the Notes then outstanding will be redeemed at 108% of the

Accreted Value thereof, together with accrued interest, and using an annual

discount factor (applied semi-annually) equal to the Treasury Rate plus 0.50%, less

(b) the Accreted Value of the Notes outstanding as at the day of

determination; provided, however, that in no case shall the Make

Whole Premium be less than zero.  For

purposes of this definition, the “Treasury Rate” shall mean a rate equal

to the then current yield to maturity on the most actively traded U.S. Treasury

security having a maturity on March 26, 2006. 

In the event there are not actively traded U.S. Treasury securities with

a maturity on March 26, 2006, then the yield to maturity shall be determined by

linear interpolation using the closest, but shorter, maturity for actively

traded U.S. Treasury securities and the closest, but longer, maturity for

actively traded U.S. Treasury maturities.

 

6.                                       Sinking

Fund

 

The

Notes are not subject to any sinking fund.

 

7.                                       Notice

of Redemption

 

Notice

of redemption will be mailed by first-class mail at least 30 days but not

more than 60 days before the Redemption Date to each Holder of Notes to be

redeemed at such Holder’s registered address. 

Notes in denominations larger than $1,000 (in principal amount at

Maturity) may be redeemed in part but only in multiples of $1,000 (in principal

amount at Maturity).  If money

sufficient to pay the redemption price of and accrued and unpaid interest and

Special Interest, if any, on all Notes (or portions thereof) to be redeemed on

the Redemption Date is deposited with the Paying Agent on or before the

Redemption Date and certain other conditions are satisfied, on and after such

date, cash interest and Special Interest, if any, ceases to accrue on such

Notes (or such portions thereof) called for redemption.

 

8

 

8.                                       Repurchase

of Notes at the Option of Holders upon Change of Control and Sale of Assets

 

Upon

the occurrence of a Change of Control, each Holder of Notes shall have the

right, subject to certain conditions specified in the Indenture, to require the

Company to repurchase all or any part of the Notes of such Holder at a purchase

price in cash equal to 101% of the Accreted Value of the Notes to be

repurchased, plus accrued and unpaid interest thereon and Special Interest, if

any, in respect thereof to the date of repurchase (subject to the right of

Holders of record on the relevant record date to receive interest due and

Special Interest, if any, on the relevant Interest Payment Date) as provided

in, and subject to the terms of, the Indenture.

 

In

accordance with Section 4.10 of the Indenture, the Company will be

required to offer to purchase Notes upon the occurrence of certain sales of

assets.

 

9.                                       Subordination.

 

The

Notes are subordinated to Senior Indebtedness, as defined in the

Indenture.  To the limited extent provided

in the Indenture, Senior Indebtedness must be paid before the Notes may be

paid.  Each of the Company and the

Guarantors agrees, and each Holder by accepting a Note agrees, to the

subordination provisions contained in the Indenture and authorizes the Trustee

to give them effect and appoints the Trustee as attorney-in-fact for such

purpose.

 

10.                                 Denominations;

Transfer; Exchange

 

The

Notes are in registered form without coupons in denominations of $1,000 (in

principal amount at Maturity) and multiples thereof.  A Holder may transfer or exchange Initial Notes in accordance

with the Indenture.  Upon any transfer

or exchange, the Registrar and the Trustee may require a Holder, among other

things, to furnish appropriate endorse­ments or transfer documents and to pay

any taxes required by law or permitted by the Indenture.  The Company shall not be required to make

and the Regis­trar need not register transfers or exchanges of Notes selected

for redemption (except, in the case of a Note to be redeemed in part, the

portion of the Note not to be redeemed) or any Notes for a period of

15 days prior to a selection of Notes to be redeemed.

 

11.                                 Persons

Deemed Owners

 

Except

as provided in paragraph 2 hereof, the registered Holder of this Note

shall be treated as the owner of it for all purposes.

 

12.                                 Unclaimed

Money

 

If

money for the payment of principal of or interest on the Notes has been

deposited with the Trustee or Paying Agent and remains unclaimed for two years

after such amount is due and payable, the Trustee or Paying Agent shall pay the

money back to the Company at its written request unless an abandoned property

law designates another Person.  After

any such payment, the Trustee and the Paying Agent shall have no further

liability for such funds and Holders entitled to the money must look only to

the recipient and not to the Trustee for payment.

 

9

 

13.           Discharge and

Defeasance

 

Subject

to certain conditions, the Company at any time may terminate some of or all its

obligations under the Notes and the Indenture if the Company deposits with the

Trustee money or U.S. Government Obligations for the payment of principal of

and interest on the Notes to redemption or maturity, as the case may be.

 

14.                                 Amendment,

Waiver

 

Subject

to certain exceptions set forth in the Indenture, (a) the Indenture or the

Notes may be amended without prior notice to any Holder but with the written

consent of the Holders of at least a majority in aggregate principal amount at

Maturity of the Notes then outstanding (including consents obtained in

connection with a tender offer or exchange for the Notes) and (b) any

default may be waived with the written consent of the Holders of at least a

majority in principal amount at Maturity of the outstanding Notes.  Subject to certain exceptions set forth in

the Indenture, without the consent of any Holder of Notes, the Company and the

Trustee may amend the Indenture or the Notes (a) to cure any ambiguity, omission,

defect or inconsistency; (b) to comply with Article 6 of the Indenture;

(c) to provide for uncertificated Notes in addition to or in place of

certificated Notes (provided, however, that the uncertificated

Notes are issued in registered form for purposes of Section 163(f) of the Code,

or in a manner such that the uncertificated Notes are described in Section

163(f)(2)(B) of the Code); (d) to add Guarantees of the Notes or to secure

Notes; (e) to add to the covenants of the Company for the benefit of the

Holders or to surrender any right or power conferred on the Company in the

Indenture; (f) to comply with any requirement of the Commission in

connection with qualifying, or maintaining the qualification of, the Indenture

under the TIA;  (g) to make any

change that does not adversely affect the rights of any Holder; (h) to

provide for the issuance of the Exchange Notes which shall have terms

substantially identical in all material respects to the Initial Notes (except

that the transfer restrictions contained in the Initial Notes shall be modified

or eliminated, as appropriate), and which shall be treated, together with any

outstanding Initial Notes or the Exchange Notes, as a single issue of

securities; or (i) to change the name or title of the Notes.

 

15.                                 Defaults,

Remedies and Acceleration

 

If an Event

of Default (other than an Event of Default relating to certain events of

bankruptcy, insolvency or reorganization of the Company) occurs and is

continuing, the Trustee or the Holders of 25% or more in principal amount at

Maturity of the outstanding Notes may declare the principal of and accrued but

unpaid interest on all the Notes to be due and payable.  Upon such a declaration, such principal and

interest shall be due and payable immediately. 

If an Event of Default relating to certain events of bankruptcy,

insolvency or reorganization of the Company occurs, the principal of and

interest on all the Notes shall become and be immediately due and payable

without any declaration or other act on the part of the Trustee or any Holders.  Under certain circumstances, the Holders of

a majority in principal amount at Maturity of the Notes may rescind any such

acceleration with respect to the Notes and its consequences.  If an Event of Default has occurred and is

continuing, the Notes will accrue an additional interest at 3% per annum, until

such time as no Event of Default shall be continuing (to the extent that the

payment of such interest shall be legally enforceable); provided that 2.25% of such additional

 

10

 

interest shall be payable in cash and 0.75% of such

additional interest shall be added to the principal amount of the Notes as set

forth in the definition of Accreted Value.

 

Subject

to the provisions of the Indenture relating to the duties of the Trustee, in

case an Event of Default occurs and is continuing, the Trustee will be under no

obligation to exercise any rights or powers under the Indenture at the request

or direction of any of the Holders, unless such Holders have offered to the

Trustee reasonable indemnity or security against any loss, liability or

expense.  Except to enforce the right to

receive payment of principal or interest when due, no Holder may pursue any

remedy with respect to the Indenture or the Notes unless (i) such Holder

has previously given to the Trustee written notice stating that an Event of

Default is continuing, (ii) Holders of at least 25% in principal amount at

Maturity of the outstanding Notes have requested the Trustee in writing to

pursue the remedy, (iii) such Holder or Holders have offered to the

Trustee reasonable security or indemnity against any loss, liability or

expense, (iv) the Trustee has not complied with such request within

60 days after receipt of the request and the offer of security or

indemnity and (v) the Holders of a majority in principal amount at

Maturity of the outstanding Notes have not given the Trustee a direction

inconsistent with such request during such 60-day period.  Subject to certain restrictions, the Holders

of a majority in principal amount at Maturity of the out­standing Notes are

given the right to direct the time, method and place of conducting any proceed­ing

for any remedy available to the Trustee or of exercising any trust or power

conferred on the Trustee.  The Trustee,

how­ever, may refuse to follow any direction that conflicts with law or the

Indenture or, subject to certain exceptions in the Indenture, that the Trustee

determines is unduly prejudicial to the rights of other Holders or would

involve the Trustee in personal liability. 

Prior to taking any action under the Indenture, the Trustee shall be

entitled to indemnification satisfactory to it in its sole discretion against

all losses and expenses caused by taking or not taking such action.

 

16.                                 Trustee

Dealings with the Company

 

Subject

to certain limitations imposed by the TIA, the Trustee under the Indenture, in

its individual or any other capacity, may become the owner or pledgee of Notes

and may otherwise deal with and collect obliga­tions owed to it by the Company

or its Affiliates and may other­wise deal with the Company or its Affiliates

with the same rights it would have if it were not Trustee.

 

17.                                 No

Recourse Against Others

 

A

director, officer, employee or stockholder, as such, of the Company or any of

the Subsidiaries shall not have any liability for any obligations of the

Company or any of the Subsidiaries under the Notes or the Indenture or for any

claim based on, in respect of or by reason of such obligations or their crea­tion.  By accepting a Note, each Holder waives and

releases all such liability.  The waiver

and release are part of the considera­tion for the issue of the Notes.

 

11

 

18.                                 Authentication

 

This

Note shall not be valid until an author­ized signatory of the Trustee (or an

authenticating agent) manually signs the certificate of authentication on the

other side of this Note.

 

19.                                 Abbreviations

 

Customary

abbreviations may be used in the name of a Holder or an assignee, such as TEN

COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint

tenants with rights of survivorship and not as tenants in common), CUST

(=custodian), and U/G/M/A (=Uniform Gift to Minors Act).

 

20.                                 Governing

Law

 

THIS NOTE SHALL BE GOVERNED BY, AND

CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT

WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE

EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE

REQUIRED THEREBY.

 

21.                                 Registration

Rights

 

Pursuant

to the Exchange and Registration Rights Agreement, the Company will be

obligated upon the occurrence of certain events to consummate an exchange offer

pursuant to which the Holder of this Note shall have the right to exchange this

Note for an Exchange Note, which has been registered under the Securities Act,

in like original principal amount at Maturity and having terms identical in all

material respects to this Note, other than that there shall be no provision for

Special Interest.

 

The Company will furnish to any

Holder of Notes upon written request and without charge to the Holder a copy of

the Indenture which has in it the text of this Note.

 

12

 

ASSIGNMENT FORM

 

To assign this

Note, fill in the form below:

 

I or we assign and

transfer this Note to

 

(Print or type assignee’s name, address and zip code)

 

(Insert assignee’s soc. sec. or tax I.D. No.)

 

 

and irrevocably

appoint                           agent

to transfer this Note on the books of the Company.  The agent may substitute another to act for him.

 

 

	

   

  	

   

  
	

  Date: 

  	

   

  	

  Your Signature:

  	

   

  	

   

  
	

   

  
	

   

  
	

   

  	

   

  
	

  Sign exactly as your

  name appears on the other side of this Note.

  
						

 

13

 

CERTIFICATE TO BE

DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER RESTRICTED NOTES

 

This certificate relates

to

$               principal

amount at Maturity of Notes held in definitive form by the undersigned.

 

The undersigned has

requested the Trustee by written order to exchange or register the transfer of

a Note or Notes.

 

In connection with any

transfer of any of the Notes evidenced by this certificate occurring prior to

the expiration of the period referred to in Rule 144(k) under the

Securities Act, the undersigned confirms that such Notes are being transferred

in accordance with its terms:

 

CHECK ONE BOX BELOW

 

	

   

  	

  o

  	

  (1)

  	

   

  	

  to the Company; or

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

  o

  	

  (2)

  	

   

  	

  to the Registrar for

  registration in the name of the Holder, without transfer; or

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

  o

  	

  (3)

  	

   

  	

  pursuant to an

  effective registration statement under the Securities Act of 1933; or

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

  o

  	

  (4)

  	

   

  	

  inside the

  United States to a “qualified institutional buyer” (as defined in

  Rule 144A under the Securities Act of 1933) that purchases for its own

  account or for the account of a qualified institutional buyer to whom notice

  is given that such transfer is being made in reliance on Rule 144A, in each

  case pursuant to and in compliance with Rule 144A under the Securities

  Act of 1933; or

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

  o

  	

  (5)

  	

   

  	

  outside the

  United States in an offshore transaction within the meaning of

  Regulation S under the Securities Act in compliance with Rule 904 under

  the Securities Act of 1933; or

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

  o

  	

  (6)

  	

   

  	

  to an institutional

  “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under

  the Securities Act of 1933) that has furnished to the Trustee a signed letter

  containing certain representations and agreements; or

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

  o

  	

  (7)

  	

   

  	

  pursuant to another

  available exemption from registration provided by Rule 144 under the

  Securities Act of 1933.

  

 

14

 

Unless one of the boxes

is checked, the Trustee will refuse to register any of the Notes evidenced by

this certificate in the name of any Person other than the registered holder

thereof; provided,

however, that if box (5), (6) or (7) is checked, the Trustee

may require, prior to registering any such transfer of the Notes, such legal

opinions, certifications and other information as the Company has reasonably

requested to confirm that such transfer is being made pursuant to an exemption

from, or in a transaction not subject to, the registration requirements of the

Securities Act of 1933.

 

	

   

  	

   

  	

   

  
	

   

  	

  Your Signature

  	

   

  
	

   

  	

   

  	

   

  
	

  Signature Guarantee:

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  Date: 

  	

   

  	

   

  	

   

  	

   

  
	

  Signature must be

  guaranteed

  	

  Signature of Signature

  	

   

  
	

  by a participant in a

  	

  Guarantee

  	

   

  
	

  recognized signature

  guaranty

  	

   

  	

   

  
	

  medallion program or

  other

  	

   

  	

   

  
	

  signature guarantor

  acceptable

  	

   

  	

   

  
	

  to the Trustee

  	

   

  	

   

  
					

 

 

TO BE COMPLETED BY

PURCHASER IF (4) ABOVE IS CHECKED.

 

The undersigned

represents and warrants that it is purchasing this Note for its own account or

an account with respect to which it exercises sole investment discretion and

that it and any such account is a “qualified institutional buyer” within the

meaning of Rule 144A under the Securities Act of 1933, and is aware that

the sale to it is being made in reliance on Rule 144A and acknowledges

that it has received such information regarding the Company as the undersigned

has requested pursuant to Rule 144A or has determined not to request such

information and that it is aware that the transferor is relying upon the

undersigned’s foregoing representations in order to claim the exemption from

registration provided by Rule 144A.

 

	

  Dated: 

  	

   

  	

   

  
	

   

  
	

   

  	

  NOTICE:  To be executed by

  
	

   

  	

  an

  executive officer

  
				

 

15

 

OPTION OF HOLDER TO ELECT PURCHASE

 

If you want to elect to have this

Note purchased by the Company pursuant to Section  4.09 (Change of

Control) or Section 4.10 (Application of Excess Proceeds from Sale of

Assets) of the Indenture, check the box:

 

	

  o

  	

   

  	

  o

  
	

   

  	

   

  	

   

  
	

  Limitation on Sales of Assets and

  Subsidiary Stock

  	

   

  	

  Change of Control

  

 

If you want to elect to have only

part of this Note purchased by the Company pursuant to Section 4.09

or 4.10 of the Indenture, state the principal amount at Maturity ($1,000

or a multiple thereof):

 

	

  $

  
	

   

  
	

   

  
	

  Date: 

  	

   

  	

  Your Signature: 

  	

   

  	

   

  
	

  (Sign exactly as your name appears on the other side of the

  Note)

  
	

   

  
	

   

  
	

  Signature Guarantee:

  	

   

  	

   

  
	

   

  	

  Signature must be guaranteed by a participant in a

  recognized signature guaranty medallion program or other signature guarantor

  acceptable to the Trustee

  
								

 

16

 

EXHIBIT B

 

FORM OF FACE OF

EXCHANGE NOTE

[Global Notes

Legend]

 

 

UNLESS THIS CERTIFICATE

IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A

NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO HOLDINGS OR ITS AGENT FOR

REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS

REGISTERED IN THE NAME OF CEDE & CO., OR SUCH OTHER NAME AS IS REQUESTED BY

AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.,

OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF

DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO

ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,

HAS AN INTEREST HEREIN.

 

TRANSFERS OF THIS GLOBAL EXCHANGE NOTE SHALL BE LIMITED TO

TRANSFERS IN WHOLE, BUT NOT IN PART, TO DTC, TO NOMINEES OF DTC OR TO A

SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS

GLOBAL EXCHANGE NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE

RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

 

The following

information is provided pursuant to Treas. Reg. Section 1.1275-3:

 

This debt

instrument is issued with original issue discount.

 

Treasurer (513-397-9900),

as a representative of the issuer, will make available on request to holder(s)

of this debt instrument the following information:  issue price, amount of original issue discount, issue date and

yield to maturity.

 

17

 

	

  No.

  [                   ]

  	

   

  	

  $

  

 

Senior

Subordinated Discount Note due 2009

 

[CUSIP No.

            ]

 

BROADWING INC., an Ohio

corporation, promises to pay

to                                    ,

or registered assigns, the principal amount at Maturity of

[                 ]

Dollars on January 20, 2009 (the “Stated Maturity Date”).

 

	

  Interest Payment Date

  	

   

  	

  Record

  Date

  
	

  June 30, 2003

  	

   

  	

  June 15, 2003

  
	

  December 31, 2003

  	

   

  	

  December 15, 2003

  
	

  June 30, 2004

  	

   

  	

  June 15, 2004

  
	

  December 31, 2004

  	

   

  	

  December 15, 2004

  
	

  June 30, 2005

  	

   

  	

  June 15, 2005

  
	

  December 31, 2005

  	

   

  	

  December 15, 2005

  
	

  June 30, 2006

  	

   

  	

  June 15, 2006

  
	

  December 31, 2006

  	

   

  	

  December 15, 2006

  
	

  June 30, 2007

  	

   

  	

  June 15, 2007

  
	

  January 20, 2008

  	

   

  	

  January 5, 2008

  
	

  January 20, 2009

  	

   

  	

  January 5, 2009

  

 

18

 

Additional provisions of

this Note are set forth on the other side of this Note.

 

IN WITNESS WHEREOF, the

parties have caused this instrument to be duly executed.

 

 

	

   

  	

  BROADWING INC.

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

   

  	

  Name:

  
	

   

  	

   

  	

  Title:

  

 

 

TRUSTEE’S

CERTIFICATE OF AUTHENTICATION

 

The Bank of New York,

Trustee, certifies that this is one of the Notes referred to in the Indenture.

 

 

	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

   

  	

  Authorized Signatory

  
	

  Dated:

  	

   

  
					

 

 

*/

If the Note is to be issued in global form, add the Global Notes Legend and the

attachment from Exhibit A captioned “TO BE ATTACHED TO GLOBAL EXCHANGE

NOTES - SCHEDULE OF INCREASES OR DECREASES IN GLOBAL EXCHANGE NOTE”.

 

19

 

FORM OF REVERSE

SIDE OF EXCHANGE NOTE

Senior

Subordinated Discount Note due 2009

 

1.                                       Interest

 

BROADWING

INC., an Ohio corporation (such corporation, and its successors and assigns

under the Indenture hereinafter referred to, being herein called the “Company”),

promises to pay cash interest at the Accreted Value at such date, in arrears,

on each of June 30 and December 31 of 2003 through 2006, commencing on June 30,

2003, and then on each of June 30, 2007, January 20, 2008 and on the Stated

Maturity Date (each, an “Interest Payment Date”), at the rate of 12% per

annum, compounded semi-annually, until the principal hereof is paid.  Such interest on the Notes shall accrue from

the most recent date to which interest has been paid or duly provided for or,

if no such interest has been paid or duly provided for, from March 26, 2003

until the principal hereof is due. 

Principal of the Notes will accrete as set forth in the Indenture.  Interest shall be paid in cash.  Any principal of, or premium or installment

of interest on this Note which is overdue shall bear interest at the rate equal

to 2.25% per annum above the cash interest rate from the date such amounts are

due until they are paid (to the extent that the payment of such interest shall

be legally enforceable), and such excess interest shall be payable on

demand.  In addition, the accretion of

principal on the Notes will increase as set forth in the Indenture.  Interest shall be computed on the basis of a

360-day year of twelve 30-day months. The interest so payable, and punctually

paid or duly provided for, on any Interest Payment Date will, as provided in

the Agreement, be paid to the Person in whose name this Note is registered at

the close of business on the Regular Record Date.  “Regular Record Date” for such interest shall be the

fifteenth (or, in the case of a Regular Record Date for the Stated Maturity

Date and the Interest Payment Date immediately preceding the Stated Maturity

Date, the fifth) calendar day (whether or not a Business Day) immediately

preceding such Interest Payment Date.

 

2.                                       Method

of Payment

 

The

Company shall pay interest on the Notes (except defaulted interest) to the

Persons who are registered holders of Notes at the close of business on the

June 15 or December 15 next preceding the Interest Payment Date (or, in the

case of the Stated Maturity Date and the Interest Payment Date immediately

preceding the Stated Maturity Date, January 5) even if Notes are canceled

after the record date and on or before the Interest Payment Date.  Holders must surrender Notes to a Paying

Agent to collect principal payments. 

The Company shall pay principal and interest in money of the

United States of America that at the time of payment is legal tender for

payment of public and private debts. 

The Company will make all money payments in respect of a certificated

Note (including principal and interest), of the Paying Agent or, at the option

of the Company, by mailing a check to the registered address of each Holder

thereof; provided,

however, that money payments on the Notes shall be made, in the case

of a Holder of at least $1,000,000 aggregate principal amount at Maturity of

Notes, by wire transfer to a U.S. dollar account maintained by the payee with a

bank in the United States if such Holder elects pay­ment by wire transfer

by giving written notice to the Trustee or the Paying Agent to such effect

designating such account no later than 30 days immediately preceding the

relevant due date for payment (or such other date as the Trustee may accept in

its discretion).

 

20

 

3.                                       Paying

Agent and Registrar

 

Initially,

The Bank of New York, a banking corporation organized under the laws of the

State of New York (the “Trustee”), will act as Paying Agent and

Registrar.  The Company may appoint and

change any Paying Agent, Registrar or co-registrar without notice.  The Company or any of its domestically

incorporated Wholly Owned Subsidiaries (other than any member of the BCI Group)

may act as Paying Agent, Registrar or co-registrar.

 

4.                                       Indenture

 

The

Company issued the Notes under an Indenture, dated as of March 26, 2003 (the “Indenture”),

by and between the Company and the Trustee. 

The terms of the Notes include those stated in the Indenture and those

made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.

§§ 77aaa-77bbbb) as in effect on the date of the Indenture (the “TIA”).  Terms defined in the Indenture and used but

not defined herein have the meanings ascribed thereto in the Indenture.  The Notes are subject to all terms and

provisions of the Indenture, and Holders (as defined in the Indenture) are

referred to the Indenture and the TIA for a statement of such terms and

provisions.

 

The

Notes are senior subordinated unsecured discount obligations of the Company

limited to $441,628,051.27 aggregate principal amount at Maturity at any one

time outstanding (subject to Section 2.07 of the Indenture).  This Note is one of the Exchange Notes

referred to in the Indenture issued in an aggregate principal amount at

Maturity of $441,628,051.27.  The Notes

include the Exchange Notes issued in exchange for Initial Notes.  The Initial Notes and the Exchange Notes are

treated as a single class of Notes under the Indenture.  The Initial Notes of each series and the

Exchange Notes of the corresponding series are treated as a single series of

Notes under the Indenture.  The Indenture

imposes certain limitations on the ability of the Company and its Restricted Subsidiaries

to, among other things, make certain Investments and other Restricted Payments,

pay dividends and other distributions, incur Indebtedness, enter into

consensual restrictions upon the payment of certain dividends and distributions

by such Restricted Subsidiaries, issue or sell shares of Capital Stock of such

Restricted Subsidiaries, enter into or permit certain transactions with

Affiliates and make asset sales.  The

Indenture also imposes limitations on the ability of the Company to consolidate

or merge with or into any other Person or convey, transfer or lease all or

substantially all of the property of the Company.

 

The

Notes are guaranteed, on a senior subordinated basis, by all existing and

future Restricted Subsidiaries that are or shall become Guarantors in

accordance with the terms of the Indenture.

 

5.                                       Optional

Redemption

 

Except

as set forth in the last paragraph of this Section 5, the Notes shall not be

redeemable at the option of the Company prior to March 26, 2006.  Thereafter, the Notes are subject to

redemption, at the election of the Company, in whole or in part (in the

principal amount at Maturity of not less than $5,000,000 and integral multiples

thereof), upon not less than ten (30) nor more than sixty (60) days’

notice by mail at the prices listed below (expressed as a

 

21

 

percentage of the Accreted Value of the Notes being

prepaid as of the Redemption Date) plus accrued interest to the Redemption Date

(each prepayment to be in an aggregate Accreted Value of Notes of not less than

$5 million):

 

	

  Redemption Date

  	

   

  	

  Redemption Price

  	

   

  
	

  March

  26, 2006 - March 25, 2007

  	

   

  	

  108

  	

  %

  
	

  March

  26, 2007 - March 25, 2008

  	

   

  	

  106

  	

  %

  
	

  March

  26, 2008 - January 19, 2009

  	

   

  	

  104

  	

  %

  

 

On any Interest Payment

Date occurring on or prior to March 26, 2006, the Company may redeem all or any

part (in the principal amount at Maturity of not less than $5,000,000 and

integral multiples thereof) of the then outstanding Accreted Value of Notes

upon not less than thirty (30) nor more than sixty (60) days’ notice by mail at

a price equal to the sum of (x) 100% of the Accreted Value of such Notes being

redeemed as of the applicable Interest Payment Date plus (y) a Make Whole

Premium.  As used herein, the “Make

Whole Premium” means, as at any date, (a) an amount equal to the

present value of the remaining payments of interest on the Notes and the

Redemption Price of the Notes, assuming that on March 26, 2006 the entire

Accreted Value of the Notes then outstanding will be redeemed at 108% of the

Accreted Value thereof, together with accrued interest, and using an annual

discount factor (applied semi-annually) equal to the Treasury Rate plus 0.50%, less

(b) the Accreted Value of the Notes outstanding as at the day of

determination; provided, however, that in no case shall the Make

Whole Premium be less than zero.  For

purposes of this definition, the “Treasury Rate” shall mean a rate equal

to the then current yield to maturity on the most actively traded U.S. Treasury

security having a maturity on March 26, 2006. 

In the event there are not actively traded U.S. Treasury securities with

a maturity on March 26, 2006, then the yield to maturity shall be determined by

linear interpolation using the closest, but shorter, maturity for actively traded

U.S. Treasury securities and the closest, but longer, maturity for actively

traded U.S. Treasury maturities.

 

6.                                       Sinking

Fund

 

The

Notes are not subject to any sinking fund.

 

7.                                       Notice

of Redemption

 

Notice

of redemption will be mailed by first-class mail at least 30 days but not

more than 60 days before the Redemption Date to each Holder of Notes to be

redeemed at such Holder’s registered address. 

Notes in denominations larger than $1,000 (in principal amount at

Maturity) may be redeemed in part but only in multiples of $1,000 (in principal

amount at Maturity).  If money

sufficient to pay the redemption price of and accrued and unpaid interest on

all Notes (or portions thereof) to be redeemed on the Redemption Date is

deposited with the Paying Agent on or before the Redemption Date and certain

other conditions are satisfied, on and

 

22

 

after

such date, cash interest ceases to accrue on such Notes (or such portions

thereof) called for redemption.

 

8.                                       Repurchase

of Notes at the Option of Holders upon Change of Control and Sale of Assets

 

Upon

the occurrence of a Change of Control, each Holder of Notes shall have the

right, subject to certain conditions specified in the Indenture, to require the

Company to repurchase all or any part of the Notes of such Holder at a purchase

price in cash equal to 101% of the Accreted Value of the Notes to be

repurchased, plus accrued and unpaid interest thereon and Special Interest, if

any, in respect thereof to the date of repurchase (subject to the right of

Holders of record on the relevant record date to receive interest due and

Special Interest, if any, on the relevant Interest Payment Date) as provided

in, and subject to the terms of, the Indenture.

 

In

accordance with Section 4.10 of the Indenture, the Company will be

required to offer to purchase Notes upon the occurrence of certain sales of

assets.

 

9.                                       Subordination

 

The

Notes subordinated to Senior Indebtedness, as defined in the Indenture.  To the limited extent provided in the

Indenture, Senior Indebtedness must be paid before the Notes may be paid.  Each of the Company and the Guarantors

agrees, and each Holder by accepting a Note agrees, to the subordination

provisions contained in the Indenture and authorizes the Trustee to give them

effect and appoints the Trustee as attorney-in-fact for such purpose.

 

10.                                 Denominations;

Transfer; Exchange

 

The

Notes are in registered form without coupons in denominations of $1,000 (in

principal amount at Maturity) and multiples thereof.  A Holder may transfer or exchange Initial Notes in accordance

with the Indenture.  Upon any transfer

or exchange, the Registrar and the Trustee may require a Holder, among other

things, to furnish appropriate endorse­ments or transfer documents and to pay

any taxes required by law or permitted by the Indenture.  The Company shall not be required to make

and the Registrar need not register transfers or exchanges of Notes selected

for redemption (except, in the case of a Note to be redeemed in part, the

portion of the Note not to be redeemed) or any Notes for a period of

15 days prior to a selection of Notes to be redeemed.

 

11.                                 Persons

Deemed Owners

 

Except

as provided in paragraph 2 hereof, the registered Holder of this Note

shall be treated as the owner of it for all purposes.

 

12.                                 Unclaimed

Money

 

If

money for the payment of principal of or interest on the Notes has been

deposited with the Trustee or Paying Agent and remains unclaimed for two years

after such amount is due and payable, the Trustee or Paying Agent shall pay the

money back to the Company at its written request unless an abandoned property

law designates another Person.  After

any such payment, the Trustee and the Paying Agent shall have no further

liability for such

 

23

 

funds

and Holders entitled to the money must look only to the recipient and not to

the Trustee for payment.

 

13.                                 Discharge

and Defeasance

 

Subject

to certain conditions, the Company at any time may terminate some of or all its

obligations under the Notes and the Indenture if the Company deposits with the

Trustee money or U.S. Government Obligations for the payment of principal of

and interest on the Notes to redemption or maturity, as the case may be.

 

14.                                 Amendment,

Waiver

 

Subject

to certain exceptions set forth in the Indenture, (a) the Indenture or the

Notes may be amended without prior notice to any Holder but with the written

consent of the Holders of at least a majority in aggregate principal amount at

Maturity of the Notes then outstanding (including consents obtained in

connection with a tender offer or exchange for the Notes) and (b) any

default may be waived with the written consent of the Holders of at least a

majority in principal amount at Maturity of the outstanding Notes.  Subject to certain exceptions set forth in

the Indenture, without the consent of any Holder of Notes, the Company and the

Trustee may amend the Indenture or the Notes (a) to cure any ambiguity,

omission, defect or inconsistency; (b) to comply with Article 6 of the

Indenture; (c) to provide for uncertificated Notes in addition to or in

place of certificated Notes (provided, however, that the uncertificated

Notes are issued in registered form for purposes of Section 163(f) of the Code,

or in a manner such that the uncertificated Notes are described in Section

163(f)(2)(B) of the Code); (d) to add Guarantees of the Notes or to secure

Notes; (e) to add to the covenants of the Company for the benefit of the

Holders or to surrender any right or power conferred on the Company in the

Indenture; (f) to comply with any requirement of the Commission in

connection with qualifying, or maintaining the qualification of, the Indenture

under the TIA; (g) to make any change that does not adversely affect the rights

of any Holder; (h) to provide for the issuance of the Exchange Notes which

shall have terms substantially identical in all material respects to the

Initial Notes (except that the transfer restrictions contained in the Initial

Notes shall be modified or eliminated, as appropriate), and which shall be

treated, together with any outstanding Initial Notes or the Exchange Notes, as

a single issue of securities; or (i) to change the name or title of the

Notes.

 

15.                                 Defaults,

Remedies and Acceleration

 

If an

Event of Default (other than an Event of Default relating to certain events of

bankruptcy, insolvency or reorganization of the Company) occurs and is

continuing, the Trustee or the Holders of 25% or more in principal amount at

Maturity of the outstanding Notes may declare the principal of and accrued but

unpaid interest on all the Notes to be due and payable.  Upon such a declaration, such principal and

interest shall be due and payable immediately. 

If an Event of Default relating to certain events of bankruptcy,

insolvency or reorganization of the Company occurs, the principal of and

interest on all the Notes shall become and be immediately due and payable

without any declaration or other act on the part of the Trustee or any Holders.  Under certain circumstances, the Holders of

a majority in principal amount at Maturity of the Notes may rescind any such

acceleration with respect to the Notes and its consequences.  If an

 

24

 

Event

of Default has occurred and is continuing, the Notes will accrue an additional

interest at 3% per annum, until such time as no Event of Default shall be

continuing (to the extent that the payment of such interest shall be legally

enforceable); provided that 2.25%

of such additional interest shall be payable in cash and 0.75% of such

additional interest shall be added to the principal amount of the Notes as set

forth in the definition of Accreted Value.

 

Subject

to the provisions of the Indenture relating to the duties of the Trustee, in

case an Event of Default occurs and is continuing, the Trustee will be under no

obligation to exercise any rights or powers under the Indenture at the request

or direction of any of the Holders, unless such Holders have offered to the

Trustee reasonable indemnity or security against any loss, liability or

expense.  Except to enforce the right to

receive payment of principal or interest when due, no Holder may pursue any

remedy with respect to the Indenture or the Notes unless (i) such Holder

has previously given to the Trustee written notice stating that an Event of

Default is continuing, (ii) Holders of at least 25% in principal amount at

Maturity of the out­standing Notes have requested the Trustee in writing to

pursue the remedy, (iii) such Holder or Holders have offered to the

Trustee reasonable security or indemnity against any loss, liability or

expense, (iv) the Trustee has not complied with such request within

60 days after receipt of the request and the offer of security or

indemnity and (v) the Holders of a majority in principal amount at

Maturity of the outstanding Notes have not given the Trustee a direction

inconsistent with such request during such 60-day period.  Subject to certain restrictions, the Holders

of a majority in principal amount at Maturity of the out­standing Notes are

given the right to direct the time, method and place of conducting any proceed­ing

for any remedy available to the Trustee or of exercising any trust or power

conferred on the Trustee.  The Trustee,

how­ever, may refuse to follow any direction that conflicts with law or the

Indenture or, subject to certain exceptions in the Indenture, that the Trustee

determines is unduly prejudicial to the rights of other Holders or would

involve the Trustee in personal liability. 

Prior to taking any action under the Indenture, the Trustee shall be

entitled to indemnification satisfactory to it in its sole discretion against

all losses and expenses caused by taking or not taking such action.

 

16.                                 Trustee

Dealings with the Company

 

Subject

to certain limitations imposed by the TIA, the Trustee under the Indenture, in

its individual or any other capacity, may become the owner or pledgee of Notes

and may otherwise deal with and collect obliga­tions owed to it by the Company

or its Affiliates and may other­wise deal with the Company or its Affiliates

with the same rights it would have if it were not Trustee.

 

17.                                 No

Recourse Against Others

 

A

director, officer, employee or stockholder, as such, of the Company or any of

the Subsidiaries shall not have any liability for any obligations of the

Company or any of the Subsidiaries under the Notes or the Indenture or for any

claim based on, in respect of or by reason of such obligations or their crea­tion.  By accepting a Note, each Holder waives and

releases all such liability.  The waiver

and release are part of the considera­tion for the issue of the Notes.

 

25

 

18.                                 Authentication

 

This

Note shall not be valid until an author­ized signatory of the Trustee (or an

authenticating agent) manually signs the certificate of authentication on the

other side of this Note.

 

19.                                 Abbreviations

 

Customary

abbreviations may be used in the name of a Holder or an assignee, such as TEN

COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint

tenants with rights of survivorship and not as tenants in common), CUST

(=custodian), and U/G/M/A (=Uniform Gift to Minors Act).

 

20.                                 Governing

Law

 

THIS NOTE SHALL BE GOVERNED BY, AND

CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT

WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE

EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE

REQUIRED THEREBY.

 

21.                                 CUSIP

Numbers

 

the

Company has caused CUSIP numbers to be printed on the Notes and has directed

the Trustee to use CUSIP numbers in notices of redemption as a convenience to

Holders.  No representation is made as

to the accuracy of such numbers either as printed on the Notes or as contained in

any notice of redemption and reliance may be placed only on the other

identification numbers placed thereon.

 

The Company will furnish to any

Holder of Notes upon written request and without charge to the Holder a copy of

the Indenture which has in it the text of this Note.

 

26

 

ASSIGNMENT FORM

 

To assign this

Note, fill in the form below:

 

I or we assign and

transfer this Note to

 

(Print or type assignee’s name, address and zip code)

 

(Insert assignee’s soc. sec. or tax I.D. No.)

 

and irrevocably

appoint                           agent

to transfer this Note on the books of the Company.  The agent may substitute another to act for him.

 

 

	

   

  	

   

  
	

   

  	

   

  
	

  Date:

  	

   

  	

  Your Signature:

  	

   

  	

   

  
	

   

  
	

   

  
	

   

  	

   

  
	

  Sign exactly as your

  name appears on the other side of this Note.

  
						

 

27

 

OPTION OF HOLDER TO ELECT PURCHASE

 

If you want to elect to have this

Note purchased by the Company pursuant to Section  4.09 (Change of

Control) or Section 4.10 (Application of Excess Proceeds from Sale of

Assets) of the Indenture, check the box:

 

	

  o

  	

   

  	

   

  	

  o

  
	

   

  	

   

  	

   

  	

   

  
	

  Limitation on Sales of Assets and Subsidiary Stock

  	

   

  	

   

  	

  Change of Control

  

 

If you want to elect to have only

part of this Note purchased by the Company pursuant to Section 4.09  or 4.10 of the Indenture, state

the principal amount at Maturity ($1,000 or a multiple thereof):

 

$

 

 

	

  Date:

  	

   

  	

   

  	

  Your Signature:

  	

   

  	

   

  
	

  (Sign exactly as your name appears on the other side of the

  Note)

  
	

   

  
	

  Signature Guarantee:

  	

   

  	

   

  
	

   

  	

  Signature must be guaranteed by a

  participant in a recognized signature guaranty medallion program or other

  signature guarantor acceptable to the Trustee

  
							

 

28

 

Execution

copy

 

BROADWING INC.

 

Senior

Subordinated Discount Notes due 2009

 

 

INDENTURE

 

 

Dated as of March

26, 2003

 

 

THE BANK OF NEW

YORK,

 

Trustee

 

 

TABLE OF CONTENTS

 

	

  ARTICLE 1. DEFINITIONS AND ACCOUNTING TERMS

  
	

   

  
	

  SECTION

  1.01.DEFINITIONS

  
	

  SECTION 1.02.INCORPORATION BY REFERENCE OF

  TRUST INDENTURE ACT

  
	

  SECTION 1.03.RULES OF CONSTRUCTION

  
	

   

  
	

  ARTICLE 2. THE NOTES

  
	

   

  
	

  SECTION 2.01.FORM AND DATING

  
	

  SECTION 2.02.EXECUTION AND AUTHENTICATION

  
	

  SECTION 2.03.REGISTRAR AND PAYING AGENT

  
	

  SECTION 2.04.PAYING AGENT TO HOLD MONEY IN

  TRUST

  
	

  SECTION 2.05.HOLDER LISTS

  
	

  SECTION 2.06.TRANSFER AND EXCHANGE

  
	

  SECTION

  2.07.REPLACEMENT NOTES

  
	

  SECTION

  2.08.OUTSTANDING NOTES

  
	

  SECTION 2.09.TEMPORARY NOTES

  
	

  SECTION 2.10.CANCELLATION

  
	

  SECTION 2.11.DEFAULTED INTEREST

  
	

  SECTION 2.12.CUSIP NUMBERS

  
	

   

  
	

  ARTICLE 3. REDEMPTION

  
	

   

  
	

  SECTION 3.01.NOTICES TO TRUSTEE

  
	

  SECTION 3.02.SELECTION OF NOTES TO BE

  REDEEMED

  
	

  SECTION 3.03.NOTICE OF REDEMPTION

  
	

  SECTION 3.04.EFFECT OF NOTICE OF REDEMPTION

  
	

  SECTION 3.05.DEPOSIT OF REDEMPTION PRICE

  
	

  SECTION 3.06.NOTES REDEEMED IN PART

  
	

  SECTION 3.07.TENDER OF NOTES IN EXERCISE OF

  WARRANTS

  
	

   

  
	

  ARTICLE 4. AFFIRMATIVE COVENANTS

  
	

   

  
	

  SECTION 4.01.PAYMENT OF NOTES.

  
	

  SECTION 4.02.COMMISSION REPORTS

  
	

  SECTION 4.03.PRESERVATION OF CORPORATE

  EXISTENCE

  
	

  SECTION 4.04.MAINTENANCE OF PROPERTIES

  
	

  SECTION 4.05.TAXES

  
	

  SECTION 4.06.COMPLIANCE CERTIFICATE

  
	

  SECTION 4.07.COMPLIANCE WITH LAW

  
	

  SECTION

  4.08.INSURANCE

  
	

  SECTION

  4.09.OFFER TO REPURCHASE UPON CHANGE OF CONTROL.

  
	

  SECTION 4.10.OFFER TO PURCHASE BY

  APPLICATION OF EXCESS PROCEEDS.

  
	

  SECTION 4.11.OTHER COVENANTS

  
	

  SECTION 4.12.FURTHER ASSURANCES

  
	

  SECTION 4.13.FUTURE GUARANTORS

  
	

  SECTION 4.14.APPROVALS

  

 

i

 

	

  ARTICLE 5. NEGATIVE COVENANTS APPLICABLE TO COMPANY AND ITS

  SUBSIDIARIES

  
	

   

  
	

  SECTION 5.01.STAY, EXTENSION AND USURY LAWS

  
	

  SECTION 5.02.RESTRICTED PAYMENTS

  
	

  SECTION 5.03.DIVIDEND AND OTHER PAYMENT

  RESTRICTIONS AFFECTING SUBSIDIARIES

  
	

  SECTION 5.04.INCURRENCE OF INDEBTEDNESS AND

  ISSUANCE OF PREFERRED STOCK

  
	

  SECTION

  5.05.ASSET DISPOSITIONS.

  
	

  SECTION 5.06.TRANSACTIONS WITH AFFILIATES

  
	

  SECTION

  5.07.LIMITATION ON LIENS

  
	

  SECTION 5.08.LIMITATION ON ISSUANCES AND

  SALES OF CAPITAL STOCK OF SUBSIDIARIES

  
	

  SECTION 5.09.PROHIBITION ON INCURRENCE OF

  SENIOR SUBORDINATED DEBT

  
	

  SECTION 5.10.CONDUCT OF BUSINESS

  
	

  SECTION 5.11.RESTRICTIONS ON DEALINGS WITH

  BCI GROUP

  
	

  SECTION 5.12.SALE OF ASSETS OF THE BCI

  GROUP

  
	

   

  
	

  ARTICLE 6. SUCCESSOR COMPANY

  
	

   

  
	

  SECTION 6.01.MERGER, CONSOLIDATION, OR

  SALES OF ASSETS OF THE COMPANY

  
	

  SECTION 6.02.SUCCESSOR COMPANY SUBSTITUTED

  
	

   

  
	

  ARTICLE 7. EVENTS OF DEFAULT; REMEDIES

  
	

   

  
	

  SECTION 7.01.EVENTS OF DEFAULT

  
	

  SECTION

  7.02.ACCELERATION

  
	

  SECTION

  7.03.OTHER REMEDIES

  
	

  SECTION 7.04.WAIVER OF PAST DEFAULTS

  
	

  SECTION 7.05.CONTROL BY MAJORITY

  
	

  SECTION

  7.06.LIMITATION ON SUITS

  
	

  SECTION 7.07.RIGHTS OF HOLDERS TO RECEIVE

  PAYMENT

  
	

  SECTION 7.08.COLLECTION SUIT BY TRUSTEE

  
	

  SECTION 7.09.TRUSTEE MAY FILE PROOFS OF

  CLAIM

  
	

  SECTION 7.10.PRIORITIES

  
	

  SECTION 7.11.UNDERTAKING FOR COSTS

  
	

   

  
	

  ARTICLE 8. SUBORDINATION

  
	

   

  
	

  SECTION

  8.01.AGREEMENT TO SUBORDINATE

  
	

  SECTION

  8.02.LIQUIDATION, DISSOLUTION, BANKRUPTCY

  
	

  SECTION 8.03.DEFAULT ON DESIGNATED SENIOR

  INDEBTEDNESS

  
	

  SECTION 8.04.ACCELERATION OF PAYMENT OF

  NOTES

  
	

  SECTION 8.05.WHEN DISTRIBUTION MUST BE PAID

  OVER

  
	

  SECTION

  8.06.SUBROGATION

  
	

  SECTION

  8.07.RELATIVE RIGHTS

  
	

  SECTION 8.08.SUBORDINATION MAY NOT BE

  IMPAIRED BY THE COMPANY

  
	

  SECTION 8.09.RIGHTS OF TRUSTEE AND PAYING

  AGENT

  
	

  SECTION 8.10.DISTRIBUTION OR NOTICE TO

  REPRESENTATIVE

  
	

  SECTION 8.11.ARTICLE 8 NOT TO PREVENT

  EVENTS OF DEFAULT OR LIMIT RIGHT TO ACCELERATE

  
	

  SECTION 8.12.TRUST MONIES NOT SUBORDINATED

  

 

ii

 

	

  SECTION 8.13.TRUSTEE ENTITLED TO RELY

  
	

  SECTION 8.14.TRUSTEE TO EFFECTUATE

  SUBORDINATION

  
	

  SECTION 8.15.TRUSTEE NOT FIDUCIARY FOR

  HOLDERS OF SENIOR INDEBTEDNESS

  
	

  SECTION 8.16.RELIANCE BY HOLDERS OF SENIOR

  INDEBTEDNESS ON SUBORDINATION PROVISIONS

  
	

  SECTION 8.17.TRUSTEE’S COMPENSATION NOT

  PREJUDICED

  
	

   

  
	

  ARTICLE 9. TRUSTEE

  
	

   

  
	

  SECTION 9.01.DUTIES OF TRUSTEE

  
	

  SECTION 9.02.RIGHTS OF TRUSTEE

  
	

  SECTION 9.03.INDIVIDUAL RIGHTS OF TRUSTEE

  
	

  SECTION 9.04.TRUSTEE’S DISCLAIMER

  
	

  SECTION 9.05.NOTICE OF DEFAULTS

  
	

  SECTION 9.06.REPORTS BY TRUSTEE TO HOLDERS

  
	

  SECTION 9.07.COMPENSATION AND INDEMNITY

  
	

  SECTION 9.08.REPLACEMENT OF TRUSTEE

  
	

  SECTION 9.09.SUCCESSOR TRUSTEE BY MERGER

  
	

  SECTION 9.10.ELIGIBILITY; DISQUALIFICATION

  
	

  SECTION 9.11.PREFERENTIAL COLLECTION OF

  CLAIMS AGAINST THE COMPANY

  
	

  SECTION 9.12.APPOINTMENT OF CO-TRUSTEE.

  
	

   

  
	

  ARTICLE 10. DISCHARGE OF INDENTURE; DEFEASANCE

  
	

   

  
	

  SECTION

  10.01. DISCHARGE OF LIABILITY ON NOTES; DEFEASANCE

  
	

  SECTION

  10.02. CONDITIONS TO DEFEASANCE.

  
	

  SECTION

  10.03. APPLICATION OF TRUST MONEY

  
	

  SECTION

  10.04. REPAYMENT TO THE COMPANY

  
	

  SECTION

  10.05. INDEMNITY FOR GOVERNMENT OBLIGATIONS

  
	

  SECTION

  10.06. REINSTATEMENT

  
	

   

  
	

  ARTICLE

  11. GUARANTEES

  
	

   

  
	

  SECTION

  11.01. GUARANTEES

  
	

  SECTION

  11.02. LIMITATION ON LIABILITY

  
	

  SECTION

  11.03. SUCCESSORS AND ASSIGNS

  
	

  SECTION

  11.04. EXECUTION OF SUPPLEMENTAL INDENTURE FOR FUTURE GUARANTORS

  
	

  SECTION

  11.05. NON-IMPAIRMENT

  
	

  SECTION

  11.06. ENDORSEMENT OF GUARANTEES

  
	

   

  
	

  ARTICLE 12. SUBORDINATION OF THE GUARANTEES

  
	

   

  
	

  SECTION

  12.01. AGREEMENT TO SUBORDINATE

  
	

  SECTION

  12.02. LIQUIDATION, DISSOLUTION, BANKRUPTCY

  
	

  SECTION

  12.03. DEFAULT ON DESIGNATED SENIOR INDEBTEDNESS OF A GUARANTOR

  
	

  SECTION

  12.04. DEMAND FOR PAYMENT

  
	

  SECTION

  12.05. WHEN DISTRIBUTION MUST BE PAID OVER

  
	

  SECTION

  12.06. SUBROGATION

  
	

  SECTION

  12.07. RELATIVE RIGHTS

  
	

  SECTION

  12.08. SUBORDINATION MAY NOT BE IMPAIRED BY A GUARANTOR

  
	

  SECTION

  12.09. RIGHTS OF TRUSTEE AND PAYING AGENT

  

 

iii

 

	

  SECTION

  12.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE

  
	

  SECTION

  12.11. ARTICLE 12 NOT TO PREVENT EVENTS OF DEFAULT OR LIMIT RIGHT TO DEMAND

  PAYMENT

  
	

  SECTION

  12.12. TRUSTEE ENTITLED TO RELY

  
	

  SECTION

  12.13. TRUSTEE TO EFFECTUATE SUBORDINATION

  
	

  SECTION

  12.14. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR INDEBTEDNESS OF A

  GUARANTOR

  
	

  SECTION

  12.15. RELIANCE BY HOLDERS OF SENIOR INDEBTEDNESS OF A GUARANTOR ON

  SUBORDINATION PROVISIONS 

  
	

  SECTION

  12.16. DEFEASANCE

  
	

   

  
	

  ARTICLE

  13. AMENDMENTS

  
	

   

  
	

  SECTION

  13.01. WITHOUT CONSENT OF HOLDERS.

  
	

  SECTION

  13.02. WITH CONSENT OF HOLDERS

  
	

  SECTION

  13.03. COMPLIANCE WITH TRUST INDENTURE ACT

  
	

  SECTION

  13.04. REVOCATION AND EFFECT OF CONSENTS AND WAIVERS

  
	

  SECTION

  13.05. NOTATION ON OR EXCHANGE OF NOTES

  
	

  SECTION

  13.06. TRUSTEE TO SIGN AMENDMENTS

  
	

   

  
	

  ARTICLE 14. MISCELLANEOUS

  
	

   

  
	

  SECTION

  14.01. TRUST INDENTURE ACT CONTROLS

  
	

  SECTION

  14.02. NOTICES

  
	

  SECTION

  14.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS

  
	

  SECTION

  14.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT

  
	

  SECTION

  14.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION

  
	

  SECTION

  14.06. WHEN NOTES DISREGARDED

  
	

  SECTION

  14.07. RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR

  
	

  SECTION

  14.08. LEGAL HOLIDAYS

  
	

  SECTION

  14.09. GOVERNING LAW

  
	

  SECTION

  14.10. NO RECOURSE AGAINST OTHERS

  
	

  SECTION

  14.11. SUCCESSORS

  
	

  SECTION

  14.12. MULTIPLE ORIGINALS; COUNTERPARTS

  
	

  SECTION

  14.13. TABLE OF CONTENTS; HEADINGS

  
	

  SECTION

  14.14. INCORPORATION

  
	

  SECTION

  14.15. INTENT TO LIMIT INTEREST TO MAXIMUM

  

 

Appendix A   Provisions Relating to the Initial Notes

and the Exchange Notes

EXHIBITS:

 

	

  Exhibit A

  	

  –

  	

  Form of Initial Note

  
	

   

  	

   

  	

   

  
	

  Exhibit B

  	

  –

  	

  Form of Exchange Note

  
	

   

  	

   

  	

   

  
	

  Exhibit C

  	

  –

  	

  Form of Supplemental Guarantee

  
	

   

  	

   

  	

   

  
	

  Exhibit D

  	

  –

  	

  Form of Notation of Guarantee

  
	

   

  	

   

  	

   

  
	

  SCHEDULES:

  	

   

  
	

   

  	

   

  
	

  Schedule 1.1(a)

  	

  Restructuring Charges included in

  Consolidated EBITDA

  
	

  Schedule 5.03

  	

  Agreements containing dividend

  restrictions

  

 

iv

 

	

  Schedule 5.06 –

  	

  Affiliate Transactions

  
	

  Schedule 5.11(b)

  	

  Existing Contractual Arrangements with

  BCI Group

  

 

v

 

EXHIBIT

C

 

 

FORM OF

SUPPLEMENTAL GUARANTEE

 

SUPPLEMENTAL

GUARANTEE (this “Supplemental  Guarantee”), dated as of

                      ,

between

                                     ,

(the “New Guarantor”), a direct or indirect Broadwing Inc. (or its

successor), an Ohio corporation (the “Company”), and The Bank of New

York, as trustee (the “Trustee”).

 

W I T N E S S E T

H

 

WHEREAS, the

Company and the Domestic Subsidiaries listed on the signature pages thereof

have each heretofore executed and delivered to the Trustee an Indenture (the “Indenture”),

dated as of March 26, 2003, providing for the issuance by the Company of its

Senior Subordinated Discount Notes due 2009 (the “Notes”); and

 

WHEREAS, Section 11.05

of the Indenture provides that under certain circumstances the Company is

required to cause the Guarantor to execute and deliver to the Trustee for the

benefit of the Holders a supplemental agreement pursuant to which the Guarantor

shall unconditionally guarantee all of the Company’s obligations under the

Notes pursuant to a Guarantee on the terms and conditions set forth herein;

 

WHEREAS, pursuant

to Section 13.01 of the Indenture, the Trustee, the Company and the

Guarantors are authorized to execute and deliver this Supplemental Indenture;

 

NOW THEREFORE, in

consideration of the foregoing and for other good and valuable consideration,

the receipt of which is hereby acknowledged, the New Guarantor covenants and

agrees for the equal and ratable benefit of the Holders of the Notes as

follows:

 

1.             CAPITALIZED TERMS.  Capitalized terms used herein without definition

shall have the meanings assigned to them in the Indenture.

 

2.             AGREEMENT TO GUARANTEE; EXCHANGE

AND REGISTRATION RIGHTS AGREEMENT.  The

New Guarantor hereby agrees, jointly and severally with all other Guarantors,

to unconditionally guarantee the Company’s obligations under the Notes on the

terms and subject to the conditions set forth in Article 11 and Article

12 of the Indenture and to be bound by all other applicable provisions of

the Indenture.  The Guarantor further

agrees to become a party to the Exchange and Registration Rights Agreement and

to be bound by all provisions thereof.

 

3.             RATIFICATION OF SUPPLEMENTAL

GUARANTEE; SUPPLEMENTAL GUARANTEES PART OF INDENTURE.  Except as expressly amended hereby, the Indenture is in all

respects ratified and confirmed and all the terms, conditions and provisions

thereof shall remain in full force and effect. 

This Supplemental Guarantee shall form a part of the Indenture for all

purposes, and every holder of Notes heretofore or hereafter authenticated and

delivered shall be bound hereby.

 

C-1

 

 

4.             NO RECOURSE AGAINST OTHERS.  No director, officer, employee, incorporator

or stockholder of the New Guarantor, as such, shall have any liability for any

obligations of the Company or any Guarantor under the Notes, any Guarantee, the

Indenture or this Supplemental Guarantee or for any claim based on, in respect

of, or by reason of, such obligations or their creation.  Each Holder of Notes by accepting a Note waives

and releases all such liability.  The

waiver and release are part of the consideration for issuance of the

Notes.  Such waiver may not be effective

to waive liabilities under the federal securities laws and it is the view of

the Securities and Exchange Commission that such a waiver is against public

policy.

 

5.             EFFECTIVENESS.  This Supplemental Guarantee shall be

effective upon execution by the parties hereto.

 

6.             RECITALS.  The recitals contained herein shall be taken as the statements of

the Company and the Guarantors assume no responsibility for their correctness.

 

7.             NEW YORK LAW TO GOVERN.  THE INTERNAL LAWS OF THE STATE OF NEW YORK

SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL GUARANTEE.

 

8.             TRUSTEE MAKES NO

REPRESENTATION.  The Trustee makes no

representation as to the validity or sufficiency of this Supplemental

Guarantee.

 

9.             COUNTERPARTS.  The parties may sign any number of copies of

this Supplemental Guarantee.  Each

signed copy shall be an original, but all of them together represent the same

agreement.

 

10.           EFFECT OF HEADINGS.  The Section headings herein are for

convenience only and shall not affect the construction hereof.

 

	

   

  	

  [New Guarantor]

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

   

  	

  Name:

  	

   

  
	

   

  	

   

  	

  Title:

  	

   

  

 

C-2

 

EXHIBIT

D

 

FORM OF NOTATION

OF GUARANTEE

 

The undersigned

have guaranteed this Note on a subordinated basis as provided in the Indenture.

 

 

	

   

  	

  [GUARANTOR]

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  
	

   

  	

   

  	

  Name:

  	

   

  
	

   

  	

   

  	

  Title:

  	

   

  

 

D-1

 

Schedule

1.1(a)

 

 

Restructuring

Charges Included in

Consolidated

EBITDA

 

	

  December 2001

  	

   

  	

  $

  	

  10,000,000

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  September 2002

  	

   

  	

  $

  	

  4,100,000

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  December 2002

  	

   

  	

  $

  	

  1,800,000

  	

   

  

 

 

Schedule 5.03

 

Restrictions on Transferability and

Dividend Payments as of 12-09-02

 

1.                                       The Operating Agreement dated December 31,

1998 between Cincinnati Bell Wireless Company and AT&T Wireless PCS Inc.,

together with the Related Agreements thereto contain limitations on the

transferability of the member interests and assets of Cincinnati Bell Wireless

LLC, and the payment of dividends.

 

2.                                       The Operating Agreement of Cincinnati Bell

Wireless Holdings LLC (“CBWH”) dated June 2, 2002 contains restrictions on the

ability of CBWH to transfer and obtain assets, and restrictions on affiliate

transactions.

 

 

Schedule 5.06

 

Affiliate

Transactions and Relationships with the BCI Group as of 12-09-02

 

1.                                       PENSION

 

The Company

and its Subsidiaries participate in the defined benefit pension plan (the

“Plan”) of the Company.  Each Subsidiary

is charged an expense related to its portion of the Plan, on a month-to-month

basis, based on the “all participants” allocation method, pursuant to which the

allocation of expenses of the Plan are calculated by independent actuaries.

 

2.                                       MANAGEMENT

FEE ARRANGEMENT

 

Corporate expenses of the

Company incurred on behalf of all of the Company’s Subsidiaries are allocated,

on a month-to-month basis, to the Subsidiaries based on the Massachusetts

Formula, a common method of expense allocation.   Services received by the Subsidiaries from the Company pursuant

to this arrangement include, but are not limited to treasury, tax, accounting,

finance, cash management, communications, legal and information technology.

 

3.             INTERCOMPANY PROMISSORY NOTE

 

BCI is a party to an

Intercompany Promissory Note dated as of June 26, 2001 (the “Note”), payable to

the Company and evidencing funds provided by the Company to BCI for its

operating, investing and financing needs. 

The Note bears interest at the rate applicable to borrowings by the Company

under the Credit Agreement, which rate is adjusted monthly.

 

4.                                       PAYROLL

AND ACCOUNTS PAYABLE PROCESSING

 

Cincinnati Bell Telephone

(“CBT”), a wholly-owned subsidiary of the Company, provides payroll and

accounts-payable processing services, on a month-to-month basis, for the

Company and its Subsidiaries.  The rate

payable for these services is based on a “per check” fee commensurate with

commercially available third party processing rates.

 

5.             PROVISION OF

SERVICES TO CINCINNATI BELL TELEPHONE

 

Broadwing Technology

Services provides subcontracting services to CBT for certain of CBT’s customers

who have contracted for managed internet and hardware services.  The subcontracting services are provided to

CBT on an arms-length basis.

 

 

Schedule 5.11(b)

 

Existing

Contractual Arrangements with BCI Group

 

1.             All

existing arrangements currently between Broadwing Inc. and its subsidiaries on

the one hand and BCI and its Subsidiaries on the other hand that become BRW

Sale Arrangements (as defined in the Credit Agreement on the date hereof) upon

effectiveness of the BCI Sale Agreement.

 

2.             Provision

by Broadwing Technology Solutions Inc. of subcontracting services for CBT

hosting/collocation customers provided on an arm’s length basis.

 

3.             Provision

by Broadwing Technology Solutions Inc. of helpdesk support services to

Broadwing Inc. and its subsidiaries provided on an arm’s length basis.

 

4.             Provision

by CBT of local access equipment and services for BCI subsidiaries provided on

an arm’s length basis.

 

5.             Shared

intercompany resources and supplies such as copiers, telephones, computers,

etc. the cost of which is fairly allocated between the users based on their

respective levels of utilization.

 

6.             Lease

of CBT data center space by Broadwing Technology Solutions Inc. for fair market

rent and separately identified as space of the lessee.Exhibit
10-31

 

EXECUTION COPY

 

 

 

CREDIT AND SECURITY AGREEMENT

 

dated as of

 

February 28, 2003

 

among

 

UFP TECHNOLOGIES,
INC.,

 

MOULDED FIBRE
TECHNOLOGY, INC.,

 

SIMCO INDUSTRIES,
INC.

 

and

 

SIMCO AUTOMOTIVE
TRIM, INC.,

 

as joint and
several borrowers,

 

the GUARANTORS 

from time to time party hereto,

 

and

 

FLEET CAPITAL
CORPORATION,

 

as Lender

 

 

 

TABLE OF CONTENTS

 

	
  ARTICLE 1

  	
   

  	
  DEFINITIONS

  
	
   

  	
   

  
	
  1.1

  	
  Defined Terms

  
	
   

  	
   

  
	
  1.2

  	
  Terms Generally

  
	
   

  	
   

  
	
  1.3

  	
  Accounting
  Terms; GAAP

  
	
   

  	
   

  
	
  1.4

  	
  Joint and Several
  Obligations; Designated Financial Officers

  
	
   

  	
   

  
	
  ARTICLE 2

  	
   

  	
  THE CREDITS

  
	
   

  	
   

  
	
  2.1

  	
  Revolving Loans

  
	
   

  	
   

  
	
  2.2

  	
  Term Loans

  
	
   

  	
   

  
	
  2.3

  	
  Eurodollar
  Borrowings

  
	
   

  	
   

  
	
  2.4

  	
  Letters of
  Credit

  
	
   

  	
   

  
	
  2.5

  	
  Expiration, Termination or Reduction of
  Revolving Credit Commitment

  
	
   

  	
   

  
	
  2.6

  	
  Payments

  
	
   

  	
   

  
	
  2.7

  	
  Prepayment
  of Loans

  
	
   

  	
   

  
	
  2.8

  	
  Fees

  
	
   

  	
   

  
	
  2.9

  	
  Increased Costs

  
	
   

  	
   

  
	
  2.10

  	
  Taxes

  
	
   

  	
   

  
	
  ARTICLE 3

  	
   

  	
  GUARANTEE
  BY GUARANTORS

  
	
   

  	
   

  
	
  3.1

  	
  The Guarantee

  
	
   

  	
   

  
	
  3.2

  	
  Obligations Unconditional

  
	
   

  	
   

  
	
  3.3

  	
  Reinstatement

  
	
   

  	
   

  
	
  3.4

  	
  Subrogation

  
	
   

  	
   

  
	
  3.5

  	
  Remedies

  
	
   

  	
   

  
	
  3.6

  	
  Instrument for the
  Payment of Money

  
	
   

  	
   

  
	
  3.7

  	
  Continuing
  Guarantee

  
	
   

  	
   

  
	
  3.8

  	
  General Limitation on
  Amount of Obligations Guaranteed

  
	
   

  	
   

  
	
  ARTICLE 4

  	
   

  	
  THE COLLATERAL

  
	
   

  	
   

  
	
  4.1

  	
  Grant of Security Interest

  
	
   

  	
   

  
	
  4.2

  	
  Special Warranties and
  Covenants of the Credit Parties

  
	
   

  	
   

  
	
  4.3

  	
  Collection
  of Proceeds of Accounts Receivable

  
	
   

  	
   

  
	
  4.4

  	
  Fixtures, etc.

  

 

i

 

	
  4.5

  	
  Right of
  Lender to Dispose of Collateral, etc.

  
	
   

  	
   

  
	
  4.6

  	
  Right
  of Lender to Use and Operate Collateral, etc.

  
	
   

  	
   

  
	
  4.7

  	
  Proceeds
  of Collateral

  
	
   

  	
   

  
	
  ARTICLE 5

  	
   

  	
  REPRESENTATIONS AND
  WARRANTIES

  
	
   

  	
   

  
	
  5.1

  	
  Organization;
  Powers

  
	
   

  	
   

  
	
  5.2

  	
  Authorization;
  Enforceability

  
	
   

  	
   

  
	
  5.3

  	
  Governmental
  Approvals; No Conflicts

  
	
   

  	
   

  
	
  5.4

  	
  Financial
  Condition; No Material Adverse Change

  
	
   

  	
   

  
	
  5.5

  	
  Properties

  
	
   

  	
   

  
	
  5.6

  	
  Litigation and
  Environmental Matters

  
	
   

  	
   

  
	
  5.7

  	
  Compliance with Laws
  and Agreements

  
	
   

  	
   

  
	
  5.8

  	
  Investment and
  Holding Company Status

  
	
   

  	
   

  
	
  5.9

  	
  Taxes

  
	
   

  	
   

  
	
  5.10

  	
  ERISA

  
	
   

  	
   

  
	
  5.11

  	
  Disclosure

  
	
   

  	
   

  
	
  5.12

  	
  Capitalization

  
	
   

  	
   

  
	
  5.13

  	
  Subsidiaries

  
	
   

  	
   

  
	
  5.14

  	
  Material
  Indebtedness, Liens and Agreements

  
	
   

  	
   

  
	
  5.15

  	
  Federal Reserve Regulations

  
	
   

  	
   

  
	
  5.16

  	
  Solvency

  
	
   

  	
   

  
	
  5.17

  	
  Force Majeure

  
	
   

  	
   

  
	
  5.18

  	
  Accounts
  Receivable

  
	
   

  	
   

  
	
  5.19

  	
  Labor and Employment
  Matters

  
	
   

  	
   

  
	
  5.20

  	
  Bank Accounts

  
	
   

  	
   

  
	
  ARTICLE 6

  	
   

  	
  CONDITIONS

  
	
   

  	
   

  
	
  6.1

  	
  Effective Time

  
	
   

  	
   

  
	
  6.2

  	
  Each
  Extension of Credit

  
	
   

  	
   

  
	
  ARTICLE 7

  	
   

  	
  AFFIRMATIVE
  COVENANTS

  
	
   

  	
   

  
	
  7.1

  	
  Financial
  Statements and Other Information

  
	
   

  	
   

  
	
  7.2

  	
  Notices of Material Events

  

 

ii

 

	
  7.3

  	
  Existence; Conduct of
  Business

  
	
   

  	
   

  
	
  7.4

  	
  Payment
  of Obligations

  
	
   

  	
   

  
	
  7.5

  	
  Maintenance of
  Properties; Insurance

  
	
   

  	
   

  
	
  7.6

  	
  Books and Records;
  Inspection Rights

  
	
   

  	
   

  
	
  7.7

  	
  Fiscal Year

  
	
   

  	
   

  
	
  7.8

  	
  Compliance
  with Laws

  
	
   

  	
   

  
	
  7.9

  	
  Use of Proceeds

  
	
   

  	
   

  
	
  7.10

  	
  Certain
  Obligations Respecting Subsidiaries

  
	
   

  	
   

  
	
  7.11

  	
  ERISA

  
	
   

  	
   

  
	
  7.12

  	
  Environmental Matters;
  Reporting

  
	
   

  	
   

  
	
  7.13

  	
  Matters
  Relating to Additional Real Property Collateral

  
	
   

  	
   

  
	
  7.14

  	
  Cash Deposits/Bank Accounts

  
	
   

  	
   

  
	
  ARTICLE 8

  	
   

  	
  NEGATIVE
  COVENANTS

  
	
   

  	
   

  
	
  8.1

  	
  Indebtedness

  
	
   

  	
   

  
	
  8.2

  	
  Liens

  
	
   

  	
   

  
	
  8.3

  	
  Contingent
  Liabilities

  
	
   

  	
   

  
	
  8.4

  	
  Fundamental Changes;
  Asset Sales

  
	
   

  	
   

  
	
  8.5

  	
  Investments; Hedging
  Agreements

  
	
   

  	
   

  
	
  8.6

  	
  Restricted Junior Payments

  
	
   

  	
   

  
	
  8.7

  	
  Transactions with
  Affiliates

  
	
   

  	
   

  
	
  8.8

  	
  Restrictive
  Agreements

  
	
   

  	
   

  
	
  8.9

  	
  Sale-Leaseback Transactions

  
	
   

  	
   

  
	
  8.10

  	
  Certain Financial Covenants

  
	
   

  	
   

  
	
  8.11

  	
  Lines of
  Business

  
	
   

  	
   

  
	
  8.12

  	
  Other
  Indebtedness

  
	
   

  	
   

  
	
  8.13

  	
  Modifications of
  Certain Documents

  
	
   

  	
   

  
	
  ARTICLE 9

  	
   

  	
  EVENTS OF DEFAULT

  
	
   

  	
   

  
	
  9.1

  	
  Events of
  Default

  
	
   

  	
   

  
	
  9.2

  	
  Receivership

  
	
   

  	
   

  
	
  ARTICLE 10

  	
   

  	
  MISCELLANEOUS

  

 

iii

 

	
  10.1

  	
  Notices

  
	
   

  	
   

  
	
  10.2

  	
  Waivers;
  Amendments

  
	
   

  	
   

  
	
  10.3

  	
  Expenses; Indemnity;
  Damage Waiver

  
	
   

  	
   

  
	
  10.4

  	
  Successors
  and Assigns

  
	
   

  	
   

  
	
  10.5

  	
  Survival

  
	
   

  	
   

  
	
  10.6

  	
  Counterparts;
  Integration; References to Agreement; Effectiveness

  
	
   

  	
   

  
	
  10.7

  	
  Severability

  
	
   

  	
   

  
	
  10.8

  	
  Right of Setoff

  
	
   

  	
   

  
	
  10.9

  	
  Subordination by Credit
  Parties

  
	
   

  	
   

  
	
  10.10

  	
  Governing
  Law; Jurisdiction; Consent to Service of Process

  
	
   

  	
   

  
	
  10.11

  	
  WAIVER
  OF JURY TRIAL

  
	
   

  	
   

  
	
  10.12

  	
  Headings

  
	
   

  	
   

  
	
  10.13

  	
  Confidentiality

  

 

iv

 

CREDIT AND SECURITY AGREEMENT

 

THIS CREDIT AND SECURITY AGREEMENT dated as of
February 28, 2003 (this “Agreement”) is by and among UFP Technologies,
Inc., a Delaware corporation, Moulded Fibre Technology, Inc., a Maine
corporation, Simco Industries, Inc., a Michigan corporation, and Simco
Automotive Trim, Inc., a Michigan corporation, as joint and several borrowers,
the guarantors from time to time party hereto, and FLEET CAPITAL CORPORATION,
as Lender.

 

The parties hereto agree
as follows:

 

ARTICLE 1

 

Definitions

 

1.1                                 Defined Terms.  As used in this Agreement, the following
terms have the meanings specified below:

 

“Accounts
Receivable/Loan Reconciliation Report” means a certificate signed by a
Designated Financial Officer in substantially the form of Exhibit B-3  annexed hereto.

 

“Additional Mortgage”
has the meaning assigned to such term in Section 7.13(a)(i).

 

“Additional Mortgage
Policies” has the meaning assigned to such term in Section 7.13(a)(vii).

 

“Additional Mortgaged
Property” means any Real Property Asset that is now owned or leased, or
hereinafter acquired, by the Credit Parties, which the Lender determines to
acquire a Mortgage on following the Closing Date.

 

“Adjusted Base Rate”
means, for any day, a rate per annum equal to the greater of (a) the Prime Rate
in effect on such day, and (b) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%.  Any
change in the Adjusted Base Rate due to a change in the Prime Rate or the
Federal Funds Effective Rate shall be effective from and including the
effective date of such change in the Prime Rate or the Federal Funds Effective
Rate, respectively.

 

“Advance Request”
means a written request signed by a Designated Financial Officer for a
Borrowing in accordance with subsection 2.1(b), in substantially the form
of Exhibit B-5 annexed hereto.

 

“Affiliate” means,
with respect to a specified Person, another Person that Controls or is
Controlled by or is under common Control with the Person specified.

 

“Applicable Margin”
and “Applicable Unused Fee Rate” means, for any Type of Loans (a) for
the Initial Payment Period (as defined below) the following percentages per
annum:

 

	
  Class of Loans

  	
   

  	
  Applicable
  Margin (% per annum)

  	
   

  	
  Applicable

  Unused Fee Rate

  (% per annum)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Base Rate
  Loans

  	
   

  	
  Eurodollar
  Loans

  	
   

  	
   

  
	
  Revolving
  Loans

  	
   

  	
  0

  	
  %

  	
  2.25

  	
  %

  	
  .25

  	
  %

  
	
  Term
  Loan

  	
   

  	
  .25

  	
  %

  	
  2.50

  	
  %

  	
  Not Applicable

  	
   

  

 

1

 

and (b)   for any Payment Period (as defined below)
other than the Initial Payment Period, the respective rates indicated below for
Loans of such Type opposite the applicable Fixed Charge Coverage Ratio
indicated below (or as provided in the final paragraph of this definition, for
part of a Payment Period):

 

	
  Fixed Charge

  Coverage Ratio

  	
   

  	
  Applicable
  Margin (% per annum)

  	
   

  	
  Applicable

  Unused Fee Rate

  (% per annum)

  	
   

  
	
   

  	
  Revolving
  Loans

  	
   

  	
  Term Loan

  	
   

  	
   

  
	
   

  	
  Base Rate

  Loans

  	
   

  	
  Eurodollar

  Loans

  	
   

  	
  Base Rate

  Loans

  	
   

  	
  Eurodollar

  Loans

  	
   

  	
   

  
	
  Greater
  than or equal to 1.50 to 1.00

  	
   

  	
  0

  	
  %

  	
  1.75

  	
  %

  	
  0

  	
  %

  	
  2.00

  	
  %

  	
  .25

  	
  %

  
	
  Greater
  than 1.25 to 1.0 but less than 1.50 to 1.00

  	
   

  	
  0

  	
  %

  	
  2.00

  	
  %

  	
  0

  	
  %

  	
  2.25

  	
  %

  	
  .25

  	
  %

  
	
  Less
  than or equal to 1.25 to 1.00

  	
   

  	
  0

  	
  %

  	
  2.25

  	
  %

  	
  .25

  	
  %

  	
  2.50

  	
  %

  	
  .25

  	
  %

  

 

For purposes hereof, a “Payment
Period” means (i) initially, the period commencing on the Closing Date to and
including the fifth Business Day after the date of delivery of the financial
statements required by subsection 7.1(b) and the Compliance Certificate
required by subsection 7.1(c) for the fiscal period of the Credit Parties ended
September 30, 2003 (the “Initial Payment Period”), and (ii) thereafter,
the period commencing on the day immediately succeeding the last day of the
prior Payment Period to but not including the fifth Business Day after the
earlier of (x) the due date of the next Compliance Certificate required to be
delivered by the Borrowers to the Lender pursuant to subsection 7.1(c)
concurrently with the delivery by the Borrowers of the financial statements
required by subsection 7.1(b) to be delivered to the Lender for the
periods ended March 31st, June 30th, September 30th and December 31st of each
year, or (y) the date of the actual receipt by the Lender of such Compliance
Certificate.  Subject to and in
accordance with the final paragraph of this definition, the Applicable Margin
and Applicable Unused Fee Rate shall be effective for each Payment Period (or
in the circumstances described in the final paragraph of this definition, such
portion of a Payment Period).

 

The Applicable Margin and
Applicable Unused Fee Rate for any Payment Period except the Initial Payment
Period shall be determined on the basis of the Compliance Certificates required
to be delivered to the Lender pursuant to subsection 7.1(c) concurrently
with the delivery by the Borrowers of the corresponding financial statements required
by subsection 7.1(b) to be delivered to the Lender for the periods ended March
31st, June 30th, September 30th and December 31st of each year, setting forth,
among other things, a calculation of the Fixed Charge Coverage Ratio as at the
last day of the fiscal quarter immediately preceding such Payment Period.

 

Anything in this
Agreement to the contrary notwithstanding, the Applicable Margin and Applicable
Unused Fee Rate shall be the rates effective during the Initial Payment Period
as provided for above if the Compliance Certificate required to be delivered by
subsection 7.1(c) and the financial statements required by subsection 7.1(b),
respectively, shall not be delivered within five Business Days after the same
shall be due (but only with respect to the portion of such Payment Period prior
to the delivery of such certificate).

 

2

 

“Available Funds” means all deposits in the
Controlled Accounts which have been made by 2:00 p.m., Boston, Massachusetts time,
on a Business Day, or such later time as the Lender and the Cash Management
Bank shall have expressly consented to.

 

“Base Rate” when
used in reference to any Loan or Borrowing, refers to whether such Loan, or the
Loans comprising such Borrowing, bear(s) interest at a rate determined by
reference to the Adjusted Base Rate.

 

“Board” means the
Board of Governors of the Federal Reserve System of the United States of
America.

 

“Borrower” means
(a) UFP Technologies, Inc., Moulded Fibre Technology, Inc., Simco Industries,
Inc., and Simco Automotive Trim, Inc., individually, and (b) all of UFP
Technologies, Inc., Moulded Fibre Technology, Inc., Simco Industries, Inc., and
Simco Automotive Trim, Inc., collectively, as joint and several borrowers.

 

“Borrowing” means
Loans of a particular Class of the same Type, made, converted or continued on
the same date and, in the case of Eurodollar Loans, as to which a single
Eurodollar Interest Period is in effect.

 

“Borrowing Base”
means, at the relevant time of reference thereto, an amount determined by the
Lender by reference to the most recent Borrowing Base Certificate/Collateral
Update Certificate delivered to the Lender pursuant to Section 2.1(b)
which is equal to the sum of:

 

(a)          85% of Eligible
Accounts, plus

 

(b)         the lesser of:

 

(i)  the sum of:

 

(A) 50%
of Eligible Raw Material Inventory, plus

 

(B) 50%
of Eligible Finished Goods Inventory, and

 

(ii)  $3,500,000, minus

 

(c)          reserves for foreign
exchange and interest rate derivative exposure and such other reserves as the
Lender in its reasonable credit judgment  shall deem appropriate from time to time;

 

In determining the
Borrowing Base from time to time, the Lender may, but shall not be required to,
rely upon reports or analyses generated by the Credit Parties (including,
without limitation, Borrowing Base Certificates/Collateral Update Certificates)
and reports or analyses generated by or on behalf of the Lender.  Notwithstanding anything to the contrary set
forth herein, the Lender may in its reasonable credit judgment at any time and
from time to time, adjust the percentages of Eligible Accounts, Eligible Raw
Materials Inventory, Eligible Finished Goods Inventory and undrawn amount of
Documentary LCs included within the Borrowing Base.

 

“Borrowing Base
Certificate” means a certificate signed by a Designated Financial Officer
certifying the amount of the Borrowing Base as of the date set forth therein,
in substantially the form of Exhibit B-1 annexed hereto.

 

3

 

“Business Day”
means any day that is not a Saturday, Sunday or other day on which commercial
banks in Boston, Massachusetts are authorized or required by law to remain
closed; provided
that, when used in connection with a Eurodollar Loan, the term “Business Day”
shall also exclude any day on which banks are not open for dealings in U.S.
dollar deposits in the London interbank market.

 

“Capital Expenditures”
means, for any period, the sum for the Credit Parties (determined on a
consolidated basis without duplication in accordance with GAAP) of the
aggregate amount of expenditures made or liabilities incurred during such
period (including the aggregate amount of Capital Lease Obligations incurred
during such period) to acquire or construct fixed assets, plant and equipment
(including renewals, improvements and replacements, but excluding repairs)
computed in accordance with GAAP; provided that such term shall not include
any such expenditures in connection with any replacement or repair of Property
affected by a Casualty Event.

 

“Capital Lease
Obligations” of any Person means the obligations of such Person to pay rent
or other amounts under any lease of (or other arrangement conveying the right
to use) real or personal property, or a combination thereof, which obligations
are required to be classified and accounted for as capital leases on a balance
sheet of such Person under GAAP, and the amount of such obligations shall be
the capitalized amount thereof determined in accordance with GAAP.

 

“Cash Management Bank”
means Fleet National Bank, in its capacity as the provider of cash management
services to the Credit Parties.

 

“Casualty Event”
means, with respect to any Property of any Person, any loss of or damage to, or
any condemnation or other taking of, such Property for which such Person or any
of its Subsidiaries receives insurance proceeds, or proceeds of a condemnation
award or other compensation.

 

“Change in Law”
means (a) the adoption of any law, rule or regulation after the Closing Date,
(b) any change after the Closing Date in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority or (c)
compliance by the Lender or the Issuing Lender (or, for purposes of subsection
2.9(b), by any lending office of the Lender or by the Lender’s or the Issuing
Lender’s holding company, if any) with any request, guideline or directive
(whether or not having the force of law), other than a request or directive to
comply with any law, rule or regulation in effect on the Closing Date, of any
Governmental Authority made or issued after the Closing Date.

 

“Change of Control”
means (a) any event, transaction or occurrence as a result of which a majority
of the seats (other than vacant seats) on the board of directors of any Credit
Party shall be occupied by Persons who were neither (i) nominated by the board
of directors of UFP nor (ii) appointed by directors so nominated; or (b) the
failure of UFP to own, directly or indirectly through one or more Subsidiaries,
100% of the outstanding capital stock of each of the other Credit Parties; or
(c) the sale of all or substantially all of the business or assets of any
Credit Party; or (d) R. Jeffrey Bailly and/or Ronald J. Lataille shall for any
reason cease to serve in their present capacities as officers of the Borrower
and the Borrower shall fail within six (6) months of the date that R. Jeffrey
Bailly and/or Ronald J. Lataille cease to serve in such capacities, to retain
replacements for R. Jeffrey Bailly and/or Ronald J. Lataille who have comparable
industry experience and are reasonably acceptable to the Lender.

 

“Class” when used
in reference to any Loan or Borrowing, refers to whether such Loan, the Loans
comprising such Borrowing or the Loans that the Lender is obligated to make,
are Revolving Loans, or a Term Loan.

 

“Closing Date”
means the date during which the Effective Time shall occur.

 

4

 

“Code” means the
Internal Revenue Code of 1986, as amended from time to time.

 

“Collateral”
means, collectively, all of the Property in which Liens are purported to be
granted hereunder and under the other Loan Documents as security for the
Obligations of the Credit Parties hereunder.

 

“Collateral Update
Certificate” means a certificate signed by a Designated Financial Officer,
in substantially the form of Exhibit B-2 annexed hereto.

 

“Compliance
Certificate” means a certificate signed by a Designated Financial Officer,
in substantially the form of Exhibit D annexed hereto, (a) certifying as
to whether a Default has occurred and, if a Default has occurred, specifying
the details thereof and any action taken or proposed to be taken with respect
thereto, (b) setting forth reasonably detailed calculations demonstrating
compliance with Section 8.10, and  (c) stating whether any change in GAAP or
in the application thereof has occurred since the date of the audited financial
statements referred to in Section 5.4 and, if any such change has
occurred, specifying the effect of such change on the financial statements accompanying
such certificate.

 

“Control” means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ability to exercise voting power, by contract or otherwise.  “Controlling” and “Controlled”
have meanings correlative thereto.  A
Person who owns or holds capital stock, beneficial interests or other
securities representing five percent (5%) or more of the Total Voting Power of
another Person shall be deemed, for purposes of this Agreement, to “control”
such other Person.

 

“Control Agreement”
means with respect to any Controlled Account, an agreement in accordance with
Section 4.3(b), in form and substance satisfactory to the Lender, executed and
delivered by the Credit Parties, the depository institution at which such
Controlled Account is maintained and the Lender at the Effective Time and
thereafter in accordance with Section 7.14, as such agreement may be
amended, supplemented or otherwise modified from time to time.

 

“Controlled Account “
has the meaning assigned to such term in Section 4.3(a).

 

“Copyrights” means
all copyrights, whether statutory or common law, owned by or assigned to the
Credit Parties, and all exclusive and nonexclusive licenses to the Credit
Parties from third parties or rights to use copyrights owned by such third
parties, including, without limitation, the registrations, applications and
licenses listed on Schedule 5.5 hereto, along with any and all (a)
renewals and extensions thereof, (b) income, royalties, damages, claims and
payments now and hereafter due and/or payable with respect thereto, including,
without limitation, damages and payments for past, present or future
infringements thereof, (c) rights to sue for past, present and future
infringements thereof, and (d) foreign copyrights and any other rights
corresponding thereto throughout the world.

 

“Credit Parties”
(i) until such time as any acquired or newly created Subsidiary of the
Borrowers shall become a Subsidiary Guarantor of the Obligations of the
Borrowers hereunder, the Borrowers; and (ii) from and after such time as any
acquired or newly created Subsidiary of the Borrowers shall become a Subsidiary
Guarantor of the Obligations of the Borrowers hereunder, the Borrowers and all
Subsidiary Guarantors.

 

“Default” means
any event or condition which constitutes an Event of Default or which upon
notice, lapse of time or both would, unless cured or waived, become an Event of
Default.

 

5

 

“Designated Financial
Officer” means an individual holding one or more of the following offices
with each of the Credit Parties or otherwise having executive responsibilities
for financial matters and listed in Schedule 1.4 hereto:  chief financial officer, principal
accounting officer, treasurer, assistant treasurer or controller.

 

“Disclosed Matters”
means the actions, suits and proceedings and the environmental matters
disclosed in Schedule 5.6.

 

“Disposition”
means any sale, assignment, transfer or other disposition of any property
(whether now owned or hereafter acquired) by any Credit Party to any
Person  other than to another Credit
Party excluding (a) the granting of Liens permitted hereunder and (b) any sale,
assignment, transfer or other disposition of (i) any property sold or disposed
of in the ordinary course of business and on ordinary business terms, (ii) any
property no longer used or useful in the business of the Credit Parties and
(iii) any Collateral pursuant to an exercise of remedies by the Lender
hereunder or under any other Loan Document.

 

“EBITDA” means,
for any period, (a) the net income of the Credit Parties (determined on a
consolidated basis without duplication in accordance with GAAP) for such
period, plus (b) to the extent deducted in calculating net income
(i) income taxes accrued during such period, (ii) interest and fees in
respect of Indebtedness (including amounts accrued or paid in respect of
Hedging Agreements) during such period (whether or not actually paid in cash
during such period), and (iii) depreciation and amortization accrued for
such period, minus (c) to the extent such items were added in
calculating net income (i) extraordinary or unusual gains during such period
and (ii) proceeds received during such period in respect of Casualty Events and
Dispositions.

 

“Effective Time”
means the time specified in a written notice from the Lender when the
conditions specified in Section 6.1 are satisfied (or waived in accordance
with Section 10.2).

 

“Eligible Accounts”
means (a) the aggregate face amount of the accounts receivable outstanding and
owed to the Credit Parties as determined in accordance with GAAP consistently
applied and as entered on the books and records of the Credit Parties in the
ordinary course of the  business
operations of the Credit Parties which satisfy each of the requirements set
forth below, minus (b) without duplication, the aggregate amount of any
returns, discounts (which may, at the Lender’s option, be calculated on the
shortest term), claims, credits, chargebacks, contra accounts, aged credit
balances, allowances or excise taxes of any nature (whether issued, owing,
granted or outstanding):

 

(i)                                     the
subject goods have been sold and/or services have been rendered on an absolute
sale basis and on an open account basis to an account debtor which is not (A)
the United States government or any agency thereof or other Person such that
the Assignment of Claims Act would apply to the pledge of receivables of such
account debtor, unless the Assignment of Claims Act has been complied with to
the satisfaction of the Lender or (B) an Affiliate of any Credit Party;

 

(ii)                                  an
invoice (in form and substance acceptable to the Lender) has been sent to the
applicable account debtor and bears an invoice date contemporaneous with or
later than the date of sale of such goods or rendering of such service;

 

(iii)                               the
account receivable does not arise from a sale to the account debtor on a
bill-and-hold, guaranteed sale, progress billing, sale-or-return,
sale-on-assignment, sale-on-appraisal, consignment or any other repurchase or
return basis;

 

6

 

(iv)                              the
account is not evidenced by chattel paper or an instrument of any kind, and has
not been reduced to judgment;

 

(v)                                 the
account debtor is not insolvent or the subject of any bankruptcy or insolvency
proceedings of any kind;

 

(vi)                              the
account debtor is credit worthy and not experiencing financial difficulties
that could affect the collectability of the account;

 

(vii)                           the
account debtor is an entity organized under the laws of one of the United
States, whose main office is also located within the United States (including
Puerto Rico as within the United States), or, if the account debtor is not such
an entity organized and located within the United States, the account is
insured by a letter of credit issued or confirmed by a bank acceptable to the
Lender or by other credit enhancements, in each case in form and substance
satisfactory to the Lender;

 

(viii)                        the
account receivable is a valid and legally enforceable obligation of the account
debtor thereunder, it is not subject to recoupment, offset (other than discount
for prompt payment) or other defense on the part of such account debtor or to
any claim on the part of such account debtor denying liability thereunder;

 

(ix)                                the
account receivable is not subject to any Lien of any kind except for the Lien
of the Lender securing the obligations of the Credit Parties under this
Agreement;

 

(x)                                   the
account receivable has not remained outstanding in whole or in part for more
than (A) ninety (90) days after the invoice date or (B) sixty (60) days after
the due date;

 

(xi)                                the
account receivable does not arise out of a transaction (direct or indirect)
with an employee, officer, agent, director or stockholder of any Credit Party;

 

(xii)                             the
account receivable is not owing from an account debtor from whom twenty-five
percent (25%)  or more of the dollar amount of all accounts receivable are
deemed ineligible under clause (x) above;

 

(xiii)                          the total
unpaid accounts receivable owing from such account debtor do not exceed twenty
percent (20%)  of all Eligible Accounts;

 

(xiv)                         the
account receivable constitutes Collateral in which the Lender has a First
Priority Lien securing the Obligations of the Credit Parties under this
Agreement;

 

(xv)                            the
Credit Parties have not made an agreement with the account debtor to extend the
time of payment of the subject account receivable;

 

(xvi)                         the account debtor is not located in Minnesota
(or any other jurisdiction which adopts a statute or other requirement with
respect to which any Person that obtains business from within such jurisdiction
or is otherwise subject to such jurisdiction’s tax law must file a “Business
Activity Report” (or other applicable report) or make any other required
filings in a timely manner in order to enforce its claims in such
jurisdiction’s courts or arising under such jurisdiction’s laws); provided,
that accounts receivable which would be Eligible Accounts but for the terms of
this clause (xvi) shall nonetheless be deemed to be Eligible Accounts if the
Credit Parties have filed a “Business Activity Report” (or other applicable
report) with the applicable

 

7

 

state
office or are qualified to do business in such jurisdiction and, at the time
the account receivable was created, was qualified to do business in such
jurisdiction or had on file with the applicable state office a current
“Business Activity Report” (or other applicable report); and

 

(xvii)                      the account
receivable is denominated in U.S. Dollars;

 

provided, however, that (A) the Lender may
in its reasonable credit  judgment
exclude particular accounts from the definition of Eligible Accounts and may
impose additional and/or more restrictive eligibility or valuation criteria
than those set forth above as preconditions for any account to be deemed to be
an Eligible Account hereunder, and (B) an account deemed to be an Eligible
Account at any one point in time may be excluded by the Lender in its
reasonable credit judgment at a future point in time.

 

“Eligible Inventory”
means inventory of the Credit Parties recorded on the books and records of the
Credit Parties in the ordinary course of the business operations of the Credit
Parties valued on a first in first out basis at the lower of (a) the fair
market value of such inventory, or (b) the cost charged by suppliers which are
not Affiliates of the Credit Parties, which inventory satisfies each of the
following requirements:

 

(i)                                     is
in good and merchantable condition and is not work in process;

 

(ii)                                  meets
all standards imposed by any government agency having regulatory authority over
such goods and/or their use, manufacture and/or sale;

 

(iii)                               has
been physically received in the continental United States by the Credit Parties
and is located at a facility owned or leased by the Credit Parties; provided
that no inventory located at a leased facility shall be deemed to be “Eligible
Inventory” hereunder unless the landlord of such facility shall have entered
into an agreement satisfactory in form and substance to the Lender
acknowledging the Liens of the Lender and granting the Lender unrestricted
access to such inventory;

 

(iv)                              is
currently useable or currently salable in the normal course of the business
operations, or, as respects raw materials, is incorporated or is being held to
be incorporated in customer products being produced or provided by the Credit
Parties;

 

(v)                                 does
not constitute excess, obsolete, unsaleable, shopworn, seconds, damaged or
unfit inventory;

 

(vi)                              has
not remained in the possession of the Credit Parties for more than 180-days  or
has not otherwise been determined by the Lender in its reasonable credit
judgment to constitute slow-moving inventory;

 

(vii)                           does
not arise from a sale to an account debtor on a bill-and-hold, guaranteed sale,
sale-or-return, sale-on-approval, consignment or any other repurchase or return
basis;

 

(viii)                        is not
subject to any Lien of any kind except for the Lien of the Lender securing
Obligations under this Agreement;

 

(ix)                                has
not been sold to any Person;

 

(x)                                   does
not constitute raw materials specifically printed for a customer with the
Customer’s name or Customer’s trademarks;

 

8

 

(xi)                                does
not constitute customer labels; and

 

(xii)                             constitutes
Collateral in which the Lender has a First Priority Lien securing the
obligations of the Credit Parties under this Agreement;

 

provided, however, that (A) the aggregate
amount of Eligible Inventory shall be computed net of such reserves for slow
moving and other ineligible inventory as the Lender shall deem appropriate, (B)
the Lender may in its reasonable credit judgment exclude particular items of
inventory from the definition of Eligible Inventory and may impose additional
and/or more restrictive eligibility or valuation criteria than those set forth
above as preconditions for any item of inventory to be deemed to be Eligible
Inventory hereunder, and (C) inventory deemed to be Eligible Inventory at any
one point in time may be excluded by the Lender in its reasonable credit
judgment at a future point in time.

 

“Eligible Finished Goods Inventory” means that
portion of Eligible Inventory consisting of finished goods.

 

“Eligible Raw Materials Inventory” means that portion
of Eligible Inventory consisting of raw materials.

 

“Environmental Laws”
means all applicable laws, rules, regulations, codes, ordinances, orders,
decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to the environment, preservation or reclamation of natural resources, the
management, release or threatened release of any Hazardous Material or to
health and safety matters.

 

“Environmental
Liability” means any liability, contingent or otherwise (including any
liability for damages, costs of environmental remediation, fines, penalties or
indemnities), of any Credit Party directly or indirectly resulting from or
based upon (a) violation of any Environmental Law, (b) the generation, use,
handling, transportation, storage, treatment or disposal of any Hazardous
Materials, (c) exposure to any Hazardous Materials, (d) the release or
threatened release of any Hazardous Materials into the environment or (e) any
contract, agreement or other consensual arrangement pursuant to which liability
is assumed or imposed with respect to any of the foregoing.

 

“Equipment Term Loan”
means the $5,000,000  Equipment Term Loan to be made by the
Lender to the Borrowers at the Effective Time.

 

“Equipment Term Loan
Maturity Date” means February 28, 2008, or such earlier date as provided in
Section 2.7 or Section 9.1.

 

“Equipment Term Note”
means the promissory note, substantially in the form of Exhibit A-2
annexed hereto, issued by the Borrowers in favor of the Lender and evidencing
the Equipment Term Loan.

 

“Equity Rights”
means, with respect to any Person, any subscriptions, options, warrants,
commitments, preemptive rights or agreements of any kind (including any
stockholders’ or voting trust agreements) for the issuance or sale of, or
securities convertible into, any additional shares of capital stock of any
class, or partnership or other ownership interests of any type in, such Person.

 

“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended from time to time.

 

9

 

“ERISA Affiliate”
means any trade or business (whether or not incorporated) that, together with
the Credit Parties, is treated as a single employer within the meaning of
Section 414(b), (c), (m) or (o) of the Code.  Notwithstanding the foregoing, for purposes of any liability
related to a Multiemployer Plan under Title IV of ERISA, the term “ERISA
Affiliate” means any trade or business that, together with the Credit Parties,
is treated as a single employer within the meaning of Section 4001(b) of ERISA.

 

“ERISA Event” means (a) a “reportable event”,
as defined in Section 4043 of ERISA or the regulations issued thereunder for
which the notice requirement has not been waived with respect to any Pension
Plan, (b) the existence with respect to any Pension Plan of an “accumulated
funding deficiency” (as defined in Section 412 of the Code or Section 302 of
ERISA), whether or not waived, (c) the filing pursuant to Section 412(d) of the
Code or Section 303(d) of ERISA of an application for a waiver of the minimum
funding standard with respect to any Pension Plan, (d) the incurrence by any
Credit Party or any ERISA Affiliate of any liability under Title IV of ERISA with
respect to the termination of any Pension Plan, (e) the receipt by any Credit
Party or any ERISA Affiliate from the PBGC or 
plan administrator of any notice relating to an intention to terminate
any Pension Plan or Pension Plans or to appoint a trustee to administer any
Pension Plan, or (f) the receipt by any Credit Party or any ERISA Affiliate of
any notice, or the receipt by any Multiemployer Plan from any Credit Party or
any ERISA Affiliate of any notice of Withdrawal Liability or a determination that
a Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.

 

“Eurodollar” when
used in reference to any Loan or Borrowing, refers to whether such Loan, or the
Loans comprising such Borrowing, are bearing interest at a rate determined by
reference to the Eurodollar Rate.

 

“Eurodollar Interest
Period” means with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrowers may elect; provided, that (i) if any Eurodollar
Interest Period would end on a day other than a Business Day, such Eurodollar
Interest Period shall be extended to the next succeeding Business Day unless
such next succeeding Business Day would fall in the next calendar month, in
which case such Eurodollar Interest Period shall end on the next preceding
Business Day and (ii) any Eurodollar Interest Period that commences on the last
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the last calendar month of such Eurodollar Interest
Period) shall end on the last Business Day of the last calendar month of such
Eurodollar Interest Period.  For
purposes hereof, the date of a Borrowing initially shall be the date on which
such Borrowing is made and thereafter shall be the effective date of the most
recent conversion or continuation of such Borrowing.  Notwithstanding the foregoing, if any Eurodollar Interest Period
for any Revolving Credit Borrowing would otherwise end after the Revolving
Credit Maturity Date, such Eurodollar Interest Period shall end on the
Revolving Credit Maturity Date.

 

“Eurodollar Rate”
means, with respect to any Eurodollar Borrowing for any Eurodollar Interest
Period, the rate appearing on Dow Jones Markets Page 3750 (or on any successor
or substitute page of such Service, or any successor to or substitute for such
Service, providing rate quotations comparable to those currently provided on
such page of such Service, as determined by the Lender from time to time for
purposes of providing quotations of interest rates applicable to U.S. dollar
deposits in the London interbank market) at approximately 11:00 a.m., London
time, two Business Days prior to the commencement of such Eurodollar Interest
Period, as the rate for U.S. dollar deposits with a maturity comparable to such
Eurodollar Interest Period.  In the
event that such rate is not available at such time for any reason, then the “Eurodollar
Rate” with respect to such Eurodollar Borrowing for such Eurodollar
Interest Period shall be the average of the rates at which U.S. dollar deposits
of $5,000,000, and for a maturity comparable to such Eurodollar Interest Period,
are offered by four major banks in the London interbank

 

10

 

market as selected by the
Lender in immediately available funds in the London interbank market at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Eurodollar Interest Period.

 

“Eurodollar Request”
means a written request signed by a Designated Financial Officer for the
conversion of Base Rate Loans into Eurodollar Loans or for the continuation of
an existing Eurodollar Loan for an additional Eurodollar Interest Period in
accordance with Section 2.3, in substantially the form of Exhibit B-4
annexed hereto.

 

“Event of Default”
has the meaning assigned to such term in Section 9.1.

 

“Excess Availability”
means, as of any date of determination thereof, the difference between (a) the
lesser of (i) the Revolving Credit Commitment at such time and (ii) the
Borrowing Base at such time, and (b) the Revolving Credit Exposure at such
time.

 

“Excluded Taxes”
means, with respect to the Lender, the Issuing Lender or any other recipient of
any payment to be made by or on account of any Obligation hereunder, (a)
income, net worth or franchise taxes imposed on (or measured by) its net income
or net worth by the United States of America, or by the jurisdiction under the
laws of which such recipient is organized or in which its principal office is
located or, in the case of the Lender, in which its lending office is located
or in which it is taxable solely on account of some connection other than the
execution, delivery or performance of this Agreement or the receipt of income
hereunder, and (b) any branch profits taxes imposed by the United States of
America or any similar tax imposed by any other jurisdiction in which any Borrower
is located.

 

“Existing Debt”
means (i) Indebtedness of the Credit Parties existing as of the Effective Time
which is being repaid in full with the proceeds of the Loans made by the Lender
at the Effective Time and (ii) Indebtedness of the Credit Parties existing as
of the Effective Time which is permitted to remain outstanding after the
Effective Time under Section 8.1 and is listed on Schedule 8.1 hereto.

 

“Federal Funds
Effective Rate” means, for any day, the weighted average (rounded upwards,
if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business Day, the average (rounded upwards, if necessary, to the next
1/100 of 1%) of the quotations for such day for such transactions received by
the Lender from three Federal funds brokers of recognized standing selected by
it.

 

“First Priority”
means, with respect to any Lien purported to be created in any Collateral
pursuant to any Collateral Document, that such Lien is the most senior Lien
(other than Permitted Liens) to which such Collateral is subject.

 

“Fixed
Charge Coverage Ratio” means, for any period, the ratio of (a) (i) EBITDA
of the Credit Parties for such period minus (ii) the aggregate amount of
all Non-Financed Capital Expenditures during such period minus (iii) the
aggregate amount paid, or required to be paid (without duplication), in cash in
respect of the current portion of all income taxes for such period minus
(iv) the aggregate amount of dividends and distributions permitted to be paid
under Section 8.6 and actually paid in cash during such period to (b) the sum
for the Credit Parties (determined on a consolidated basis without duplication
in accordance with GAAP), of (i) the aggregate amount of Interest Expense for
such period and (ii) the aggregate amount of regularly scheduled payments of
principal in respect of Indebtedness for borrowed money (including the
principal component of any payments in respect of Capital Lease Obligations)
paid or required to be paid during such period.  For purposes of calculating Fixed Charge Coverage Ratio, the
Credit Parties shall be permitted to offset (without duplication) the income
taxes described in subsection

 

11

 

(iii)
above with state or federal income tax refunds received by the Credit Parties
during such period, but only in an amount less than or equal to the amount
described in subsection (iii) for such period.

 

“GAAP” means
generally accepted accounting principles in the United States of America.

 

“Governmental
Authority” means the government of the United States of America, any other
nation or 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.

 

“Guarantee” means
a guarantee, an endorsement, a contingent agreement to purchase or to furnish
funds for the payment or maintenance of, or otherwise to be or become
contingently liable under or with respect to, the Indebtedness, other
obligations, net worth, working capital or earnings of any Person, or a
guarantee of the payment of dividends or other distributions upon the stock or
equity interests of any Person, or an agreement to purchase, sell or lease (as
lessee or lessor) property, products, materials, supplies or services primarily
for the purpose of enabling a debtor to make payment of such debtor’s
obligations or an agreement to assure a creditor against loss, and including,
without limitation, causing a bank or other financial institution to issue a
letter of credit or other similar instrument for the benefit of another Person,
but excluding endorsements for collection or deposit in the ordinary course of
business.  The terms “Guarantee”
and “Guaranteed” used as a verb shall have a correlative meaning.  The amount of any Guarantee shall be deemed
to be an amount equal to the stated or determinable amount of the primary
obligations in respect of which such Guarantee is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder).

 

“Guarantor” means
any Person, including, without limitation, the Subsidiary Guarantors, which is
a guarantor hereunder as of the Effective Time or which becomes a guarantor
hereunder after the Effective Time.

 

“Hazardous Materials”
means all explosive or radioactive substances or wastes and all hazardous or
toxic substances, wastes or other pollutants, including petroleum or petroleum
distillates, asbestos or asbestos containing materials, polychlorinated
biphenyls, radon gas, infectious or medical wastes and all other substances or
wastes of any nature, in each case regulated or subject to regulation pursuant
to any Environmental Law.

 

“Hazardous Materials
Indemnity Agreement” means the Hazardous Materials Indemnity Agreement
substantially in the form of Exhibit F annexed hereto, executed and
delivered by the Credit Parties at the Effective Time, as such agreement may be
amended, supplemented or otherwise modified from time to time.

 

“Hedging Agreement”  means any interest rate protection
agreement, foreign currency exchange agreement, commodity price protection
agreement or other interest or currency exchange rate or commodity price
hedging arrangement.

 

“Indebtedness”
means, for any Person, without duplication: (a) obligations created, issued or
incurred by such Person for borrowed money (whether by loan, advance, the
issuance and sale of debt securities or the sale of Property to another Person
subject to an understanding or agreement, contingent or otherwise, to
repurchase such Property from such Person); (b) obligations of such Person to
pay the deferred purchase or acquisition price of Property or services, other
than trade accounts payable (other than for borrowed money) arising, and
accrued expenses and deferred taxes incurred and paid, in the ordinary course
of business; (c) Capital Lease Obligations of such Person; (d) obligations of
such Person

 

12

 

in respect of Hedging
Agreements; and (e) obligations of such Person in respect of letters of credit
or similar instruments issued or accepted by banks and other financial
institutions for the account of such Person. 
The Indebtedness of any Person shall include the Indebtedness of any
other entity (including any partnership in which such Person is a general
partner) to the extent such Person is liable therefor as a result of such Person’s
ownership interest in or other relationship with such entity, except to the
extent the terms of such Indebtedness provide that such Person is not liable
therefor.

 

“Indemnified Taxes”
means all Taxes other than (a) Excluded Taxes and Other Taxes and (b) amounts
constituting penalties or interest imposed with respect to Excluded Taxes or
Other Taxes.

 

“Intercompany Indebtedness” has the meaning
assigned to such term in Section 10.9.

 

“Interest Expense”
means, for any period, the sum, without duplication, for the Credit Parties
(determined on a consolidated basis without duplication in accordance with
GAAP), of the following: (a) all interest in respect of Indebtedness during
such period, but excluding capitalized debt acquisition costs (including fees and
expenses related to this Agreement) plus (b) the net amounts payable (or
minus the net amounts receivable) in respect of Hedging Agreements
accrued during such period (whether or not actually paid or received during
such period) excluding reimbursement of legal fees and other similar
transaction costs and excluding payments required by reason of the early
termination of Hedging Agreements in effect on the date hereof plus (c)
all fees, including letter of credit fees and expenses, (but excluding
reimbursement of legal fees) incurred in respect of Indebtedness during such
period.

 

“Investment”
means, for any Person: (a) the acquisition (whether for cash, Property,
services or securities or otherwise) of capital stock, bonds, notes,
debentures, partnership, limited liability company or other ownership interests
or other securities of any other Person or any agreement to make any such
acquisition (including, without limitation, any “short sale” or any sale of any
securities at a time when such securities are not owned by the Person entering
into such short sale); (b) the making of any deposit with, or advance, loan or
other extension of credit to, any other Person (including the purchase of
Property from another Person subject to an understanding or agreement, contingent
or otherwise, to resell such Property to such Person, but excluding any such
advance, loan or extension of credit representing the purchase price of
inventory or supplies sold by such Person in the ordinary course of business
provided that in no event shall the term of any such inventory or supply
advance, loan or extension of credit exceed 180 days); or (c) the entering into
of any Guarantee of, or other contingent obligation with respect to,
Indebtedness or other liability of any other Person and (without duplication)
any amount committed to be advanced, lent or extended to such Person.  Notwithstanding the foregoing, Capital
Expenditures shall not be deemed “Investments” for purposes hereof.

 

“IP Collateral”
means, collectively, the Collateral relating to intellectual property rights of
the Credit Parties hereunder or under any other Loan Document.

 

“Issuing Lender”
means Fleet National Bank, an Affiliate of the Lender, in its capacity as an
issuer of Letters of Credit hereunder.

 

“Landlord Waiver and
Consent” means, with respect to any Leasehold Property, a letter,
certificate or other instrument in writing from the lessor under the related
lease, in form approved by the Lender in its sole discretion, including the
form of Landlord Waiver and Consent in substantially the form of Exhibit H
annexed hereto.

 

“LC Disbursement”
means a payment made by the Issuing Lender pursuant to a Letter of Credit.

 

13

 

“LC Sublimit”
means a sublimit of the Revolving Credit Commitment available for the issuance
of Letters of Credit for the account of the Borrowers in an aggregate maximum
amount available to be drawn equal to $1, 500,000.

 

“Leasehold Property”
means any leasehold interest of any Credit Party as lessee under any lease of
real property, other than any such leasehold interest designated from time to
time by the Lender in its sole discretion as not being required to be included
in the Collateral and not being of material importance to the business or operations
of the Credit Parties.

 

“Lender” means
Fleet Capital Corporation or any other party which becomes a lender hereunder.

 

“Letter of Credit”
means any letter of credit issued on a standby basis or in support of trade
obligations of the Credit Parties pursuant to this Agreement.

 

“Lien” means, with
respect to any asset, (a) any mortgage, deed of trust, lien, pledge,
hypothecation, encumbrance, charge or security interest in, on or of such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing), other
than an operating lease, relating to such asset and (c) in the case of
securities, any purchase option, call or similar right of a third party with
respect to such securities.

 

“Loan Documents”
means this Agreement, the Revolving Credit Note, the Equipment Term Note, the
Real Estate Term Note, the Control Agreements, the Mortgages, the Stock Pledge
Agreement, the Hazardous Materials Indemnity Agreement, and any other
instruments or documents executed and delivered or to be delivered to the
Lender from time to time pursuant to this Agreement, as the same may be
supplemented and amended from time to time in accordance with their respective
terms.

 

“Loans” means the
Revolving Loans, the Equipment Term Loan and the Real Estate Term Loan.

 

“Lock Box” has the
meaning assigned to such term in Section 4.3(a).

 

“Lockbox Agreement”
means with respect to any Lock Box  of the Credit Parties, an agreement in
accordance with Section 4.3(b), in form and substance satisfactory to the
Lender, executed and delivered by the Credit Parties, the depository
institution at which such Lock Box is maintained and the Lender at the
Effective Time, as such agreement may be amended, supplemented or otherwise
modified from time to time.

 

“Material Adverse
Effect” means, any event, circumstance, happening or condition, which, in
the Lender’s reasonable discretion, has resulted or could result in a material
adverse effect on (a) the business, assets, financial condition or prospects of
the Credit Parties taken as a whole, (b) the ability of any Credit Party to pay
or perform any of its obligations under this Agreement or the other Loan
Documents or (c) any of the rights of or benefits available to the Lender under
this Agreement and the other Loan Documents.

 

“Material Indebtedness”
means Indebtedness (other than the Loans or Letters of Credit), including,
without limitation, obligations in respect of one or more Hedging Agreements,
in an aggregate principal amount exceeding  $50,000. 
For purposes of determining Material Indebtedness, the “principal
amount” of the obligations of any Person in respect of a Hedging Agreement at
any time shall be the maximum aggregate amount (giving effect to any netting
agreements) that such Person would be required to pay if such Hedging Agreement
were terminated at such time.

 

14

 

“Material Leasehold
Property” means a Leasehold Property reasonably determined by the Lender to
be of material value as Collateral or of material importance to the operations
of the Credit Parties.

 

“Material Owned
Property” means any real property owned by any Credit Party that is
reasonably determined by the Lender to be of material value as Collateral or of
material importance to the operations of the Credit Parties following the
Closing Date.

 

“Material Rental
Obligations” means obligations of the Credit Parties to pay rent under any
one or more operating leases with respect to any real or personal property that
is material to the business of the Credit Parties.

 

“Multiemployer Plan”
means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

 

“Mortgage” means a
security instrument (whether designated as a deed of trust or a mortgage,
leasehold mortgage, assignment of leases and rents or by any similar title)
executed and delivered by any Credit Party in such form as may be approved by
the Lender in its sole and reasonable discretion, in each case with such
changes thereto as may be recommended by the Lender’s local counsel based on
local laws or customary local practices, and (b) at the Lender’s option, in the
case of an Additional Mortgaged Property, an amendment to an existing Mortgage,
in form satisfactory to the Lender, adding such Additional Mortgaged Property
to the Real Property Assets encumbered by such existing Mortgage, in either
cases as such security instrument or amendment may be amended, supplemented or
otherwise modified from time to time.

 

“Mortgaged Property”
has the meaning assigned to such term in subsection 6.1(f)(i).

 

“Net Cash Payments”
means,

 

(a)                                  with
respect to any Casualty Event, the aggregate amount of cash proceeds of
insurance, condemnation awards and other compensation received by the Credit
Parties in respect of such Casualty Event net of (i) reasonable expenses
incurred by the Credit Parties in connection therewith and (ii) contractually
required repayments of Indebtedness to the extent secured by a Lien on such
property and (iii) any income and transfer taxes payable by the Credit Parties
in respect of such Casualty Event;

 

(b)                                 with
respect to any Disposition, the aggregate amount of all cash payments received
by the Credit Parties directly or indirectly in connection with such
Disposition, whether at the time of such Disposition or after such Disposition
under deferred payment arrangements or Investments entered into or received in
connection with such Disposition, net of (i) the amount of any legal, title,
transfer and recording tax expenses, commissions and other fees and expenses
payable by the Credit Parties in connection therewith, (ii) any Federal, state
and local income or other Taxes estimated to be payable by the Credit Parties
as a result thereof, (iii) any repayments by the Credit Parties of Indebtedness
to the extent that such Indebtedness is secured by a Lien on the property that
is the subject of such Disposition and the transferee of (or holder of a Lien
on) such property requires that such Indebtedness be repaid as a condition to
the purchase of such property, and (iv) any repayments by the Credit Parties to
minority stockholders if and to the extent permitted hereby; and

 

(c)                                  with
respect to any incurrence of Indebtedness or offering of equity securities, the
aggregate amount of all cash proceeds received by the Credit Parties therefrom
less all legal, underwriting and similar fees and expenses incurred in
connection therewith.

 

15

 

“Non-Financed Capital
Expenditures” means Capital Expenditures paid in cash and not financed with
Indebtedness for borrowed money; provided that Capital Expenditures
financed with the proceeds of Revolving Loans shall be deemed to constitute
“Non-Financed Capital Expenditures” for purposes of this Agreement.

 

“Obligations”
means (a) the aggregate outstanding principal balance of and all interest on
the Loans made by the Lender to the Borrowers (including any interest accruing
after the commencement of any proceeding by or against any Borrower under the
federal bankruptcy laws, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency or other similar law, and
any other interest that would have accrued but for the commencement of such
proceeding, whether or not any such interest is allowed as a claim enforceable
against any Borrower in any such proceeding), and (b) all LC Disbursements,
overdraft obligations, fees, costs, charges, expenses and other obligations
from time to time owing to the Lender, the Issuing Lender, the Cash Management
Bank, or any other Affiliate of the Lender by the Credit Parties hereunder or
under any other Loan Document or in respect of any Hedging Agreement, cash
management agreement, operating or deposit account, or other banking product
from time to time made available to the Credit Parties by the Lender, the
Issuing Lender, the Cash Management Bank or any other Affiliate of the Lender.

 

“Other Taxes”
means any and all present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies arising from any payment
made hereunder or from the execution, delivery or enforcement of, or otherwise
with respect to, this Agreement and the other Loan Documents, provided
that there shall be excluded from “Other Taxes” all Excluded Taxes.

 

“Patents” means
all patents issued or assigned to and all patent applications made by the
Credit Parties and, to the extent that the grant of a security interest does
not cause a breach or termination thereof, all exclusive and nonexclusive
licenses to the Credit Parties from third parties or rights to use patents
owned by such third parties, including, without limitation, the patents, patent
applications and licenses listed on Schedule 5.5 hereto, along with any
and all (a) inventions and improvements described and claimed therein, (b)
reissues, divisions, continuations, extensions and continuations-in-part
thereof, (c) income, royalties, damages, claims and payments now and hereafter due
and/or payable under and with respect thereto, including, without limitation,
damages and payments for past or future infringements thereof, (d) rights to
sue for past, present and future infringements thereof, and (e) any other
rights corresponding thereto throughout the world.

 

“Pension Plan”
means any Plan that is a defined benefit pension plan subject to the provisions
of Title IV of ERISA or Section 412 of the Code or Section 302 of
ERISA, and in respect of which any Credit Party or any ERISA Affiliate is (or,
if such plan were terminated, would under Section 4069 of ERISA be deemed
to be) an “employer” as defined in Section 3(5) of ERISA.

 

“Permitted Investments”
means:

 

(a)                                  direct
obligations of, or obligations the principal of and interest on which are
unconditionally guaranteed by, the United States of America (or by any agency
thereof to the extent such obligations are backed by the full faith and credit
of the United States of America), in each case maturing within one year from
the date of acquisition thereof;

 

(b)                                 investments
in commercial paper maturing within 270 days from the date of acquisition
thereof and having, at such date of acquisition, the highest credit rating
obtainable from Standard and Poor’s Ratings Service or from Moody’s Investors
Service, Inc.;

 

16

 

(c)                                  investments
in certificates of deposit, banker’s acceptances and time deposits maturing
within 180 days from the date of acquisition thereof issued or guaranteed by or
placed with, and money market deposit accounts issued or offered by, any
domestic office of any commercial bank organized under the laws of the United
States of America or any State thereof which has a combined capital and surplus
and undivided profits of not less than $250,000,000;

 

(d)                                 fully
collateralized repurchase agreements with a term of not more than 30 days for
securities described in clause (a) above and entered into with a financial
institution satisfying the criteria described in clause (c) above;

 

(e)                                  advances,
loans and extensions of credit to any director, officer or employee of the
Credit Parties, if the aggregate outstanding amount of all such advances, loans
and extensions of credit (excluding travel advances in the ordinary course of
business) does not at any time exceed $25,000;

 

(f)                                    capital
contributions by any Credit Party to any other Credit Party and Intercompany
Indebtedness; and

 

(g)                                 investments
in money market mutual funds that are rated AAA by Standard & Poor’s Rating
Service.

 

“Permitted Liens”
has the meaning set forth in Section 8.2.

 

“Person” means any
natural person, corporation, limited liability company, trust, joint venture,
association, company, partnership, Governmental Authority or other entity.

 

“Plan” means any
employee benefit plan within the meaning of Section 3(3) of ERISA in which
any Credit Party or any ERISA Affiliate is an “employer” as defined in
Section 3(5) of ERISA, including, but not limited to, any Pension Plan or
Multiemployer Plan.

 

“Post-Default Rate”
means, a rate per annum equal to the Adjusted Base Rate plus the
Applicable Margin plus two percent (2%).

 

“Prime Rate” means
the rate of interest per annum publicly announced from time to time by Fleet
National Bank, as its prime rate for commercial loans in effect at its
principal office in Boston, Massachusetts, which rate is not necessarily the
lowest rate charged by Fleet National Bank to its most preferred customers;
each change in the Prime Rate shall be effective from and including the date
such change is publicly announced as being effective.

 

“Property” means
any interest of any kind in property or assets, whether real, personal or
mixed, and whether tangible or intangible.

 

“Proprietary Rights”
has the meaning assigned to such term in Section 5.5(b).

 

“PTO” means the
United States Patent and Trademark Office or any successor or substitute office
in which filings are necessary or, in the opinion of the Lender, desirable in
order to create or perfect Liens on any IP Collateral.

 

“Real Estate Term Loan”
means the $2,500,000 Real Estate Term Loan to be made by the Lender to the
Borrowers at the Effective Time.

 

17

 

“Real Estate Term Loan
Maturity Date” means February 28, 2008, or such earlier date as provided in
Section 2.7 or Section 9.1.

 

“Real Estate Term Note”
means the promissory note, substantially in the form of Exhibit A-3
annexed hereto, issued by the Borrowers in favor of the Lender and evidencing
the Real Estate Term Loan.

 

“Real Property Asset”
means, at any time of determination, any and all real property owned or leased
by the Credit Parties.

 

“Registered
Proprietary Rights” has the meaning assigned to such term in Section
5.5(c).

 

“Reimbursement
Obligation” has the meaning assigned to such term in Section 2.4(d).

 

“Related Parties”
means, with respect to any specified Person, such Person’s Affiliates and the
respective directors, officers, employees, agents and advisors of such Person
and such Person’s Affiliates.

 

“Restricted Junior
Payment” means (i) any dividend or other distribution, direct or indirect,
on account of any shares of any class of stock of, or other equity interest in,
any Credit Party now or hereafter outstanding, except a dividend payable solely
in shares of stock or other equity interests, (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value,
direct or indirect, of any shares of any class of stock of, or other equity
interest in, any Credit Party now or hereafter outstanding, (iii) any payment
made to retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire shares of any class of stock of, or other
equity interest in, any Credit Party, (iv) any payment or prepayment of
principal of, premium, if any, or interest on, or redemption purchase,
retirement, defeasance (including economic or legal defeasance), sinking fund
or similar payment with respect to, any Subordinated Indebtedness, and (v) any
payment made to any Affiliates of any Credit Party in respect of management,
consulting or other similar services provided to any Credit Party.

 

“Restrictive
Agreements” has the meaning assigned to such term in Section 5.13(b).

 

“Revolving Credit
Availability Period” means the period from and including the Effective Time
to but excluding the earlier of (a) the Revolving Credit Maturity Date and (b)
the date of termination of the Revolving Credit Commitment, as terminated by
the Borrowers pursuant to Section 2.7 or by the Lender pursuant to Section 9.1.

 

“Revolving Credit
Commitment” means the commitment of the Lender to make Revolving Loans as
such commitment may be reduced from time to time pursuant to Section 2.5.  The original maximum amount of the Revolving
Credit Commitment is equal to $12,000,000.

 

“Revolving Credit
Exposure” means at any time the sum of (a) the outstanding principal amount
of Revolving Loans at such time and (b) the Total LC Exposure at such time.

 

“Revolving Credit
Maturity Date” means February 28, 2006.

 

“Revolving Credit Note”
means the promissory note, substantially in the form of Exhibit A-1
annexed hereto, issued by the Borrowers in favor of the Lender.

 

“Revolving Loan”
means a Loan made pursuant to Section 2.1(a) that utilizes the Revolving
Credit Commitment.

 

18

 

“Senior Liabilities”
means, as at any time of determination thereof, (a) the aggregate amount of all
indebtedness, liabilities and other obligations of the Credit Parties
(determined on a consolidated basis in accordance with GAAP) at such time minus
(b) the aggregate principal amount of Subordinated Indebtedness at such time.

 

 “Solvency Certificate” means a
certificate in substantially the form of Exhibit J annexed hereto
executed by the Chief Financial Officer of the Borrowers and delivered to the
Lender on the Closing Date.

 

“Special Counsel”
means Palmer & Dodge LLP, in its capacity as special counsel to Fleet
Capital Corporation, as Lender of the credit facilities contemplated hereby.

 

“Stock Pledge
Agreement” means the Stock Pledge Agreement in substantially the form of Exhibit
E annexed hereto executed by UFP and delivered to the Lender on the Closing
Date with respect to the capital stock of each of the Credit Parties owned by
UFP or its Subsidiaries, as the same may be modified or amended from time to
time with the consent of the Lender.

 

“Subordinated
Indebtedness” means any Indebtedness of the Credit Parties incurred after
the Closing Date with the consent of the Lender that by its terms (or by the
terms of the instrument under which it is outstanding and to which appropriate
reference is made in the instrument evidencing such Subordinated Indebtedness)
is made subordinate and junior in right of payment to the Loans and to the
other Obligations of the Credit Parties by provisions in form and substance
reasonably satisfactory to the Lender and Special Counsel.

 

“Subsidiary”
means, with respect to any Person (the “parent”) at any date, any
corporation, limited liability company, partnership, association or other
entity the accounts of which would be consolidated with those of the parent in
the parent’s consolidated financial statements if such financial statements
were prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing more
than 50% of the ordinary voting power or, in the case of a partnership, more
than 50% of the general partnership interests are, as of such date, owned,
controlled or held, or (b) that is, as of such date, otherwise Controlled, by
the parent and/or one or more subsidiaries of the parent.  References herein to “Subsidiaries”
shall, unless the context requires otherwise, be deemed to be references to
Subsidiaries of the Borrowers.

 

“Subsidiary Guarantor”
means, collectively, any Subsidiary of the Borrowers which becomes a Guarantor
hereunder after the Effective Time.

 

“Tangible Net Worth”
means, at any time, an amount for the Credit Parties (determined on a
consolidated basis without duplication in accordance with GAAP) equal to (a)
the book net worth of the Credit Parties at such time, minus (b) the
aggregate amount at such time of all investments in, and all receivables, fees,
loans and other amounts due from, Affiliates, minus (c) the total
book value at such time of all intangible assets, including without limitation,
such items as goodwill, customer lists, Patents, Copyrights and Trademarks, and
rights (including rights under licenses) with respect to the foregoing, minus
(d) the total book value at such time of all deferred tax assets net of
deferred tax liabilities recorded on the books of the Credit Parties.

 

“Taxes” means any
and all present or future taxes, levies, imposts, duties, deductions, charges
or withholdings imposed by any Governmental Authority.

 

 “Term Loans” means, collectively, the
Equipment Term Loan and the Real Estate Term Loan.

 

19

 

“Term Notes”
means, collectively, the Equipment Term Note and the Real Estate Term Note.

 

“Total Gross
Availability” means, at any time, the lesser of (i) the Borrowing Base at
such time and (ii) the Revolving Credit Commitment at such time.

 

“Total LC Exposure”
means, at any time, the sum of (a) 100% of the aggregate undrawn amount of all
outstanding standby and documentary Letters of Credit at such time plus
(b) the aggregate amount of all LC Disbursements that have not yet been
reimbursed by or on behalf of the Borrowers at such time.

 

“Total Voting Power”
means, with respect to any Person, the total number of votes which holders of
securities having the ordinary power to vote, in the absence of contingencies,
are entitled to cast in the election of directors of such Person.

 

“Trademarks” means
all trademarks (including service marks), federal and state trademark
registrations and applications made by the Credit Parties, common law
trademarks and trade names owned by or assigned to the Credit Parties, all
registrations and applications for the foregoing and all exclusive and
nonexclusive licenses from third parties of the right to use trademarks of such
third parties, including, without limitation, the registrations, applications,
unregistered trademarks, service marks and licenses listed on Schedule 5.5
hereto, along with any and all (a) renewals thereof, (b) income, royalties,
damages and payments now and hereafter due and/or payable with respect thereto,
including, without limitation, damages, claims and payments for past or future
infringements thereof, (c) rights to sue for past, present and future
infringements thereof, and (d) foreign trademarks, trademark registrations, and
trade name applications for any thereof and any other rights corresponding
thereto throughout the world.

 

“Type” when used
in reference to any Loan or Borrowing, refers to whether the rate of interest
on such Loan, or on the Loans comprising such Borrowing, is determined by
reference to the Eurodollar Rate or the Adjusted Base Rate.

 

“UCC” means the
Uniform Commercial Code (or any similar or equivalent legislation) as in effect
in any applicable jurisdiction.

 

“UFP” means UFP
Technologies, Inc., a Delaware corporation.

 

“U.S. Dollars” or
“$” refers to lawful money of the United States of America.

 

“Wholly Owned
Subsidiary” means, with respect to any Person at any date, any corporation,
limited liability company, partnership, association or other entity of which
securities or other ownership interests representing 100% of the equity or
ordinary voting power (other than directors’ qualifying shares) or, in the case
of a partnership, 100% of the general partnership interests are, as of such
date, directly or indirectly owned, controlled or held by such Person or one or
more Wholly Owned Subsidiaries of such Person or by such Person and one or more
Wholly Owned Subsidiaries of such Person.

 

“Withdrawal Liability”
means liability to a Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan, as such terms are defined in Part I of
Subtitle E of Title IV of ERISA.

 

1.2                                 Terms Generally.  The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined.  Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter
forms.  The words “include”, “includes”
and “including” shall be deemed to be followed by the phrase “without
limitation”.  The word “will” shall be
construed to

 

20

 

have the same meaning and
effect as the word “shall”.  Unless the
context requires otherwise (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person’s successors and
assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar
import, shall be construed to refer to this Agreement in its entirety and not
to any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
“asset” and “property” shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.

 

1.3                                 Accounting Terms; GAAP.  Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time; provided that, if the
Borrowers notify the Lender that the Borrowers request an amendment to any
provision hereof to eliminate the effect of any change occurring after the date
hereof in GAAP or in the application thereof on the operation of such provision
(or if the Lender notifies the Borrowers that the Lender requests an amendment
to any provision hereof for such purpose), regardless of whether any such
notice is given before or after such change in GAAP or in the application
thereof, then such provision shall be interpreted on the basis of GAAP as in
effect and applied immediately before such change shall have become effective
until such notice shall have been withdrawn or such provision shall have been
amended in accordance herewith.

 

1.4                                 Joint and Several Obligations; Designated
Financial Officers.

 

(a)                                  All
Obligations of the Credit Parties hereunder shall be joint and several.  Any notice, request, waiver, consent or
other action made, given or taken by any Credit Party shall bind all Credit
Parties.

 

(b)                                 Each
Credit Party hereby authorizes each of the Designated Financial Officers listed
in Schedule 1.4 hereto to act as agent for each Credit Party and to
execute and deliver on behalf of each Credit Party such notices, requests,
waivers, consents, certificates and other documents, and to take any and all
actions required or permitted to be delivered or taken by any Credit Party
hereunder.  The Borrowers may replace
any of the Designated Financial Officers listed in Schedule 1.4 hereto
or add any additional Designated Financial Officers by delivering written
notice to the Lender specifying the names of each new Designated Financial
Officer and the offices held by each such Person.  Each Credit Party hereby agrees that any such notices, requests,
waivers, consents, certificates and other documents executed, delivered or sent
by any Designated Financial Officer and any such actions taken by any
Designated Financial Officer shall bind each Credit Party.

 

ARTICLE 2

 

The Credits

 

2.1                                 Revolving Loans.

 

(a)                                  Revolving
Credit Commitment.  Subject to the terms
and conditions set forth herein, the Lender agrees to make Revolving Loans to
the Borrowers from time to time during the Revolving Credit Availability Period
in an aggregate principal amount that will not result in the Revolving Credit
Exposure exceeding the lesser of (i) the Revolving Credit Commitment at such
time and

 

21

 

(ii) the Borrowing Base
at such time.  Within the foregoing
limits and subject to the terms and conditions set forth herein, the Borrowers
may borrow, prepay and reborrow Revolving Loans.

 

(b)                                 Funding
of Revolving Loans. Not later than 3:30 p.m. Boston, Massachusetts time, on
each Business Day, the Lender shall, subject to the conditions of the Agreement
(but without any further written notice required), make a Revolving Loan to the
Borrower in an amount equal to the amount necessary to pay items to be drawn on
the Controlled Accounts maintained with the Cash Management Bank that day after
giving effect to all Available Funds to be deposited to such Controlled
Accounts on that day, by crediting such amount to one or more accounts of the
Borrower maintained with the Cash Management Bank.  To request the funding of any other Revolving Loan hereunder, the
Borrower shall deliver to the Lender not later than 1:00 p.m., Boston,
Massachusetts time, by facsimile or electronic mail transmission, an Advance
Request in substantially the form of Exhibit B-5 hereto, and setting
forth all of the information required to be set forth therein including,
without limitation, the Total Gross Availability as set forth in the most
recent Collateral Update Certificate/Borrowing Base Certificate delivered to
Lender, and the amount of the Revolving Loan requested.  Upon receipt of such Advance Request and
provided that no Default or Event of Default shall have occurred and be
continuing or shall result therefrom, not later than 3:30 p.m. Boston,
Massachusetts time on the date such Advance Request is delivered to the Lender,
the Lender shall make a Revolving Loan to the Borrower in an amount equal to
the amount set forth in such Advance Request by crediting such amount to one or
more accounts of the Borrower maintained with the Lender; provided that
Revolving Loans made to finance the reimbursement of an LC Disbursement under
any Letter of Credit as provided in Section 2.4(e) shall be remitted by the
Lender to the Issuing Lender.

 

(c)                                  Interest
on Revolving Loans.  Subject to Section
2.3 hereof, each Revolving Loan made to the Borrowers by Lender hereunder shall
bear interest at a rate per annum equal to the Adjusted Base Rate plus the
Applicable Margin.  Notwithstanding the
foregoing, (i) all Revolving Loans which are not paid when due shall
automatically bear interest until paid in full at the Post-Default Rate, (ii)
during the period when any Event of Default of the type described in
clauses (g), (h) or (i) of Section 9.1 shall have occurred and be
continuing, the principal of all Revolving Loans hereunder shall automatically
bear interest, after as well as before judgment, at the Post-Default Rate,
(iii) if there shall occur and be continuing any Event of Default (other
than an Event of Default of the type described in clauses (g), (h) or (i)
of Section 9.1), following written notice delivered to the Borrowers from
the Lender, the principal of all Revolving Loans hereunder shall bear interest,
after as well as before judgment, at the Post-Default Rate during the period
beginning on the date such Event of Default first occurred, and ending on the
date such Event of Default is cured or waived. 
Accrued interest on each Revolving Loan shall be payable in arrears on
the first day of each month; provided that interest accrued at the
Post-Default Rate shall be payable on demand, and all accrued interest on
Revolving Loans shall be payable upon expiration of the Revolving Credit
Availability Period.  All interest
hereunder shall be computed on the basis of a year of 360 days, and in each
case shall be payable for the actual number of days elapsed (including the
first day but excluding the last day).

 

(d)                                 Repayment
of Revolving Loans.  The Borrowers
unconditionally promise to pay to the Lender the then unpaid principal amount
of the Revolving Loans on the Revolving Credit Maturity Date.  In addition, if following any reduction in
the Revolving Credit Commitment or at any other time the Revolving Credit
Exposure shall exceed the lesser of (i) the Revolving Credit Commitment at such
time, or (ii) the Borrowing Base at such time, the Borrowers shall first, repay
Revolving Loans in an aggregate amount equal to such excess, and second,
provide cash collateral for Total LC Exposure as specified in
Section 2.4(g) in an aggregate amount equal to such excess.

 

(e)                                  Loan
Account.  The Lender shall maintain in
accordance with its usual practice an account evidencing the indebtedness of
the Borrowers to the Lender resulting from each Revolving

 

22

 

Loan made by the Lender,
including the amounts of principal and interest payable and paid to the Lender
from time to time hereunder.  The
entries made in the account maintained pursuant to this subsection 2.1(e) shall
be prima facie evidence of the existence and amounts of the obligations
recorded therein; provided that the failure of the Lender to maintain such
account or any error therein shall not in any manner affect the obligation of
the Borrowers to repay the Revolving Loans in accordance with the terms of this
Agreement.

 

(f)                                    Revolving
Credit Note.  Prior to the Closing Date,
the Borrowers shall prepare, execute and deliver to the Lender a Revolving
Credit Note in the principal amount of the Revolving Credit Commitment.

 

2.2                                 Term Loans.

 

(a)                                  Funding
of the Term Loans.  Subject to the terms
and conditions set forth herein, the Lender agrees to fund the full amount of
the Term Loans at the Effective Time. 
Principal amounts of the Term Loans that have been repaid or prepaid may
not be reborrowed.

 

(b)                                 Interest
on the Term Loans.  Subject to Section
2.3 hereof, the outstanding principal amount of the Term Loans shall bear
interest at a rate per annum equal to the Adjusted Base Rate plus the
Applicable Margin.  Notwithstanding the
foregoing, (i) any portion of the Term Loans which is not paid when due shall
automatically bear interest until paid in full at the Post-Default Rate, (ii)
during the period when any Event of Default of the type described in
clauses (g), (h) or (i) of Section 9.1 shall have occurred and be
continuing, the outstanding principal balance of the Term Loans shall
automatically bear interest, after as well as before judgment, at the
Post-Default Rate, (iii) if there shall occur and be continuing any Event
of Default (other than an Event of Default of the type described in clauses (g),
(h) or (i) of Section 9.1), following written notice delivered to the
Borrowers from the Lender, the outstanding principal balance of the Term Loans
shall bear interest, after as well as before judgment, at the Post-Default Rate
during the period beginning on the date such Event of Default first occurred,
and ending on the date such Event of Default is cured or waived.  Accrued interest on the outstanding
principal balance of the Term Loans shall be payable in arrears on the first
day of each month; provided that interest accrued at the
Post-Default Rate shall be payable on demand, and all accrued interest on the
(x) Equipment Term Loan shall be payable on each date that any portion of the
principal of the Equipment Term Loan shall be payable hereunder and on the Equipment
Term Loan Maturity Date, and (y) Real Estate Term Loan shall be payable on each
date that any portion of the principal of the Real Estate Term Loan shall be
payable hereunder and on the Real Estate Term Loan Maturity Date.  All interest hereunder shall be computed on
the basis of a year of 360 days, and in each case shall be payable for the
actual number of days elapsed (including the first day but excluding the last
day).

 

(c)                                  Repayment
of Term Loans.

 

(i)                                     Equipment
Term Loan.  The Borrowers hereby
unconditionally promise to pay to the Lender monthly principal installments in
respect of the Equipment Term Loan on the first day of each month commencing
May 1, 2003  equal in amount to 70,000.00 each month.  To the extent not previously paid, the Term
Loan shall be due and payable in full on the Term Loan Maturity Date.

 

(ii)                                  Repayment
of Real Estate Term Loan.  The
Borrowers hereby unconditionally promise to pay to the Lender monthly principal
installments in respect of the Real Estate Term Loan on the first day of each
month commencing May 1, 2003 equal in amount to $14,000.00 each month. To the
extent not previously paid, the Term Loan shall be due and payable in full on
the Term Loan Maturity Date.

 

23

 

(d)                                 Loan
Account.  The Lender shall maintain in
accordance with its usual practice an account evidencing the indebtedness of
the Borrowers to the Lender in respect of the Term Loan, including the amounts
of principal and interest payable and paid to the Lender from time to time
hereunder.  The entries made in the
account maintained pursuant to this subsection  2.2(d) shall be prima
facie evidence of the existence and amounts of the obligations recorded therein;
provided
that the failure of the Lender to maintain such account or any error therein
shall not in any manner affect the obligation of the Borrowers to repay the
Term Loan in accordance with the terms of this Agreement.

 

(e)                                  Term
Note.  Prior to the Closing Date, the
Borrowers shall prepare, execute and deliver to the Lender the Term Notes
evidencing the Borrowers’ obligations in respect of the Term Loans.

 

2.3                                 Eurodollar Borrowings.

 

(a)                                  General.  The entire principal balance of the Term
Loans and each Revolving Loan initially shall be a Base Rate Loan.  Thereafter, the Borrowers may elect to
convert all or any portion of the Term Loans or any portion of the outstanding
Revolving Loans to a Eurodollar Borrowing. 
The Borrowers may elect different options for continuations and
conversions with respect to different portions of the affected Borrowing, in
which case the Loans comprising each such portion shall be considered a
separate Borrowing.  The Borrowers shall
not be permitted to select any Eurodollar Interest Period for any Eurodollar
Borrowing that ends after the Revolving Credit Maturity Date, the Equipment
Term Loan Maturity Date or the Real Estate Term Loan Maturity Date.

 

(b)                                 Interest
on Eurodollar Borrowings.  Each
Eurodollar Borrowing shall bear interest during the applicable Eurodollar Interest
Period at a rate per annum equal to the Eurodollar Rate plus the Applicable
Margin.  Notwithstanding the foregoing,
(i) all Eurodollar Borrowings which are not paid when due shall automatically
be converted into Base Rate Borrowings and shall bear interest until paid in
full at the Post-Default Rate, (ii) during the period when any Event of Default
of the type described in clauses (g), (h) or (i) of Section 9.1 shall
have occurred and be continuing, all Eurodollar Borrowings shall automatically
be converted into Base Rate Borrowings and shall bear interest, after as well
as before judgment, at the Post-Default Rate, (iii) if there shall occur
and be continuing any Event of Default (other than an Event of Default of the
type described in clauses (g), (h) or (i) of Section 9.1), following
written notice delivered to the Borrowers from the Lender, all Eurodollar
Borrowings shall automatically be converted into Base Rate Borrowings and shall
bear interest, after as well as before judgment, at the Post-Default Rate
during the period beginning on the date such Event of Default first occurred,
and ending on the date such Event of Default is cured or waived.  Accrued interest on each Eurodollar
Borrowing shall be payable in arrears on the first day of each month and on the
last Business Day of the Eurodollar Interest Period applicable to such
Eurodollar Borrowing; provided that interest accrued at the
Post-Default Rate shall be payable on demand. 
All interest hereunder shall be computed on the basis of a year of 360
days, and in each case shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).

 

(c)                                  Procedure
for Requesting Eurodollar Borrowings. 
To request that any portion of the Term Loan or the outstanding Revolving
Loans be converted into a Eurodollar Borrowing, or, to request that any
Eurodollar Borrowing continue as a Eurodollar Borrowing for an additional
Eurodollar Interest Period, the Borrowers shall submit to the Lender a
Eurodollar Request, in substantially the form of Exhibit B-4 hereto and
setting forth all of the information required to be set forth therein, by
electronic mail or facsimile transmission, not later than 1:00 p.m., Boston,
Massachusetts time, three Business Days before the date of the proposed
conversion or continuation of such Borrowing. 
Each such Eurodollar Request made by the Borrowers shall be
irrevocable.  Subject to the provisions
of subsection 2.3(f) and provided that no Default or Event of Default shall
have occurred and be continuing, upon receipt of a Eurodollar Request, the
Lender shall on the requested date of conversion or continuation (i) convert
the

 

24

 

Base Rate Loan requested
to be converted into a Eurodollar Loan for the Eurodollar Interest Period set
forth in such Eurodollar Request and/or (ii) continue the Eurodollar Loan
requested to be continued as a Eurodollar Loan for the additional Eurodollar
Interest Period set forth in such Eurodollar Request.

 

(d)                                 Incomplete
Eurodollar Requests.  If any Eurodollar
Request is incomplete in any respect, then such Eurodollar Request shall be
void and the Borrowing which was the subject matter of such Eurodollar Request
shall continue as a Base Rate Borrowing. 
If, with respect to any existing Eurodollar Borrowing, the Borrowers
fail to deliver a Eurodollar Request to continue such Eurodollar Borrowing at
least three Business Days prior to the expiration of the Eurodollar Interest
Period for such existing Eurodollar Borrowing, such Eurodollar Borrowing shall
automatically convert to a Base Rate Borrowing at the expiration of such
Eurodollar Interest Period.

 

(e)                                  Limit
on Eurodollar Borrowings.  At the
commencement of each Eurodollar Interest Period for a Eurodollar Borrowing,
such Borrowing shall be in an aggregate amount at least equal to $250,000 or
any greater multiple of $100,000. 
Borrowings of more than one Type and Class may be outstanding at the
same time; provided
that there shall not at any time be more than a total of five (5) Eurodollar
Borrowings outstanding.

 

(f)                                    Alternate
Rate of Interest.  If prior to the
commencement of any Eurodollar Interest Period for a Eurodollar Borrowing, the
Lender determines that (i) adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate for such Eurodollar Interest Period, (ii) the
Eurodollar Rate for such Eurodollar Interest Period will not adequately and
fairly reflect the cost to the Lender of making or maintaining Eurodollar
Borrowings, or (iii) as a result of any Change in Law it is unlawful or
impossible for the Lender to make or maintain any Eurodollar Borrowing; then in
each case the Lender shall give notice thereof to the Borrowers as promptly as
practicable thereafter and, until the Lender notifies the Borrowers that the
circumstances giving rise to such notice no longer exist, any Eurodollar
Request submitted by the Borrowers shall be ineffective; provided that if as a result
of a Change in Law the Lender is prohibited from maintaining any outstanding
Eurodollar Borrowing, upon notice from the Lender, the Borrowers shall
immediately (A) convert such Eurodollar Borrowing to a Base Rate Loan, or (B)
repay such Eurodollar Borrowing in full, together with all interest accrued
thereon and all fees and other amounts payable to the Lender hereunder (in
either case, subject to the provisions of subsection 2.3(g) of this Agreement
with respect to redeployment costs).

 

(g)                                 Break
Funding Payments.  In the event of (i)
the payment of any principal of any Eurodollar Loan other than on the last day
of the Eurodollar Interest Period applicable thereto (including as a result of
an Event of Default), (ii) the conversion of any Eurodollar Loan other than on
the last day of the Eurodollar Interest Period applicable thereto, or (iii) the
failure to borrow, convert, continue or prepay any Eurodollar Loan on the date
specified in any notice delivered pursuant hereto (regardless of whether such
notice is permitted to be revocable and is revoked in accordance herewith),
then, in any such event, the Borrowers shall compensate the Lender for the
loss, cost and expense attributable to such event, as determined by the Lender
in a manner consistent with its customs and practices.  In the event that the Lender is entitled to
receive compensation pursuant to this subsection 2.3(g), the Lender shall
deliver a certificate to the Borrowers setting forth the amount or amounts that
the Lender is entitled to receive, and the Borrowers shall pay such amount or
amounts within three (3) days after receipt of such certificate.

 

2.4                                 Letters of Credit.

 

(a)                                  General.  Subject to the terms and conditions set
forth herein, in addition to the Revolving Loans provided for in
Section 2.1, any Borrower may request the issuance of Letters of Credit
for its own account by the Issuing Lender, in a form reasonably acceptable to
the Issuing Lender, at any time and from time to time during the Revolving
Credit Availability Period.  Letters of
Credit issued 

 

25

 

hereunder shall constitute utilization of the Revolving Credit
Commitment.  In the event of any
inconsistency between the terms and conditions of this Agreement and the terms
and conditions of any form of letter of credit application or other agreement
submitted by any Borrower to, or entered into by any Borrower with, the Issuing
Lender relating to any Letter of Credit, the terms and conditions of this
Agreement shall control.

 

(b)                                 Notice
of Issuance, Amendment, Renewal, Extension; Certain Conditions.  To request the issuance of a Letter of
Credit (or the amendment, renewal or extension of an outstanding Letter of
Credit), the Borrowers shall deliver to the Issuing Lender and the Lender by
electronic or facsimile transmission (reasonably in advance of the requested
date of issuance, amendment, renewal or extension) a letter of credit
application in the form required by the Issuing Lender.  A Letter of Credit shall be issued, amended,
renewed or extended only if (and upon issuance, amendment, renewal or extension
of each Letter of Credit, the Borrowers shall be deemed to represent and
warrant that), after giving effect to such issuance, amendment, renewal or
extension (i) the Total LC Exposure at such time shall not exceed the LC
Sublimit, and (ii) the Revolving Credit Exposure at such time shall not
exceed the lesser of (A) the Revolving Credit Commitment at such time, and (B)
the Borrowing Base at such time.

 

(c)                                  Expiration
Date.  Each Letter of Credit shall
expire (without giving effect to any extension thereof by reason of an
interruption of business) at or prior to the close of business on the earlier
of (i) the date 365 days, in the case of standby Letters of Credit, or 180
days, in the case of documentary Letters of Credit, after the date of the
issuance of such Letter of Credit (or, in the case of any renewal or extension
thereof, 365 days or 180 days, as applicable, after such renewal or extension) provided
that any such standby Letter of Credit may provide for automatic extensions
thereof to a date not later than 365 days beyond its current expiration date,
and (ii) the date that is thirty Business Days prior to the Revolving Credit
Maturity Date.  No Letter of Credit may
be extended beyond the date that is thirty Business Days prior to the Revolving
Credit Maturity Date.

 

(d)                                 Reimbursement.  If the Issuing Lender shall make any LC
Disbursement in respect of a Letter of Credit, the Borrowers shall reimburse
(each, a “Reimbursement Obligation”) the Issuing Lender in respect of
such LC Disbursement by paying to the Lender for the account of the Issuing
Bank an amount equal to such LC Disbursement not later than 1:00 p.m., Boston,
Massachusetts time, on (i) the Business Day that the Borrowers receive notice
of such LC Disbursement, if such notice is received prior to 11:00 a.m.,
Boston, Massachusetts time, or (ii) the Business Day immediately following the
day that the Borrowers receive such notice, if such notice is not received
prior to such time, provided that, subject to the conditions
to borrowing set forth herein, payment of each such Reimbursement Obligation
shall be made through the automatic funding of a Base Rate Borrowing in an
amount equal to the amount of such Reimbursement Obligation, and the Borrowers
hereby irrevocably authorize and direct the Lender to take such actions as may
necessary to effectuate such automatic funding of such Base Rate
Borrowings.  To the extent that any such
Reimbursement Obligation is paid through the automatic funding of a Base Rate
Borrowing, the Borrowers’ obligation to make such payment shall be discharged
and replaced by the resulting Base Rate Borrowing.  If the Borrowers cannot satisfy the conditions to borrowing set
forth herein such that the payment of any Reimbursement Obligation cannot be
made through the automatic funding of a Base Rate Borrowing and the Borrowers
shall fail to make such payment when due, the Lender shall promptly pay to the
Issuing Lender the unreimbursed portion of the LC Disbursement.  Promptly following receipt by the Lender of
any payment from the Borrowers pursuant to this paragraph, the Lender shall
distribute such payment to the Issuing Lender.

 

(e)                                  Obligations
Absolute.  The Borrowers’ obligation to
reimburse LC Disbursements as provided in subsection 2.4(d) shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all circumstances whatsoever and
irrespective of (i) any lack of validity or enforceability of any Letter of
Credit, or any

 

26

 

term or provision
therein, (ii) any draft or other document presented under a Letter of Credit
proving to be forged, fraudulent or invalid in any respect or any statement
therein being untrue or inaccurate in any respect, (iii) payment by the Issuing
Lender to the beneficiary under a Letter of Credit against presentation of a
draft or other document that does not comply strictly with the terms of such
Letter of Credit and (iv) any other event or circumstance whatsoever (other
than gross negligence or willful misconduct of the Issuing Lender), whether or
not similar to any of the foregoing, that might, but for the provisions of this
Section 2.4, constitute a legal or equitable discharge of the Borrowers’
obligations hereunder.

 

(f)                                    Interim
Interest.  If the Issuing Lender shall
make any LC Disbursement in respect of any Letter of Credit, and if the
Borrowers cannot satisfy the conditions to borrowing set forth herein such that
payment of the Reimbursement Obligation resulting from such LC Disbursement
cannot be made through the automatic funding of a Base Rate Borrowing, then,
unless the Borrowers shall reimburse such LC Disbursement in full on the date
such LC Disbursement is made, the unpaid amount thereof shall bear interest,
for each day from and including the date such LC Disbursement is made to but
excluding the date that the Borrowers reimburse such LC Disbursement, at the
rate per annum then applicable to Base Rate Loans; provided that, if the
Borrowers fail to reimburse such LC Disbursement when due pursuant to
subsection 2.4(d), then interest calculated at the Post-Default Rate shall
accrue on the unpaid amount thereof. 
Interest accrued pursuant to this paragraph shall be for the account of the
Issuing Lender, except that interest accrued on and after the date of payment
by the Lender pursuant to subsection 2.4(d) shall be for the account of the
Lender to the extent of the payment.

 

(g)                                 Cash
Collateralization.  If either (i) an
Event of Default shall occur and be continuing and the Borrowers receive notice
from the Lender demanding the deposit of cash collateral pursuant to this
paragraph, or (ii) the Borrowers shall be required to provide cash collateral
for Total LC Exposure pursuant to subsections  2.1(d) or 2.7(b), the Borrowers
shall immediately deposit with the Lender an amount in cash equal to, in the
case of an Event of Default, the Total LC Exposure as of such date plus any
accrued and unpaid interest thereon and, in the case of any cash collateral
required to be provided pursuant to subsections 2.1(d) or 2.7(b), the
amount required under subsections 2.1(d) or 2.7(b), as the case may be; provided
that the obligation to deposit such cash collateral shall become effective
immediately, and such deposit shall become immediately due and payable, without
demand or other notice of any kind, upon the occurrence of any Event of Default
described in clause (g) or (h) of Section 9.1.  Such deposit shall be held by the Lender as collateral in the
first instance for the Total LC Exposure under this Agreement and thereafter
for the payment of any other obligations of the Credit Parties hereunder.

 

2.5                                 Expiration, Termination or Reduction of Revolving Credit Commitment.

 

(a)                                  Expiration
of Revolving Credit Commitment.  Unless
previously terminated, the Revolving Credit Commitment shall expire at the
close of business on the Revolving Credit Maturity Date.

 

(b)                                 Reduction
of Revolving Credit Commitment.  The
Borrowers may at any time and from time to time reduce the Revolving Credit
Commitment; provided
that (i) each reduction of the Revolving Credit Commitment shall be in an
amount that is at least equal to $500,000 or any greater multiple of $100,000,
and (ii) the Borrowers shall not reduce the Revolving Credit Commitment if,
after giving effect to any concurrent repayment, the total Revolving Credit
Exposure would exceed the total Revolving Credit Commitment.  The Borrowers shall notify the Lender of any
election to reduce the Revolving Credit Commitment at least three Business Days
prior to the effective date of such reduction, specifying the effective date
thereof.  Each notice of reduction of
the Revolving Credit Commitment shall be irrevocable.  Each reduction of the Revolving Credit Commitment shall be
permanent.

 

27

 

(c)                                  Optional
Termination of Revolving Credit Commitment. 
Subject to the provisions of subsection 2.5(d), the Borrowers shall have
the right at any time to terminate the Revolving Credit Commitment.  The Borrowers shall notify the Lender of any
election to terminate the Revolving Credit Commitment under this subsection
2.5(c) in writing at least ninety (90) days prior to the effective date of such
termination, specifying the effective date thereof.  Each notice of termination of the Revolving Credit Commitment
shall be irrevocable.  Any termination
of the Revolving Credit Commitment shall be permanent.

 

(d)                                 Termination
Fee.  In connection with any termination
of the Revolving Credit Commitment, the Borrowers shall (i) repay the entire
principal balance of, and all accrued interest and fees owing with respect to,
the Revolving Loans and the Term Loans, and (ii) pay to the Lender, a
termination fee equal to the applicable amount set forth below:

 

	
  Period during which

  Termination Date Occurs

  	
   

  	
  Applicable
  Termination Fee

  	
   

  
	
  Prior
  to the first anniversary of the Closing Date

  	
   

  	
  $

  	
  180,000

  	
   

  
	
  On
  or after the first anniversary of the Closing Date but prior to the second
  anniversary of the Closing Date

  	
   

  	
  $

  	
  60,000

  	
   

  
	
  From
  and after the second anniversary of the Closing Date

  	
   

  	
  $

  	
  0

  	
   

  

 

Notwithstanding the
foregoing, the Borrowers shall not be obligated to pay the fee described in
Section 2.5(d)(ii) if the credit facilities contemplated hereby are being
transferred to an Affiliate of the Lender for their respective remaining terms
or are refinanced by the Lender in connection with a “going private”
transaction.

 

2.6                                 Payments.

 

(a)                                  Payments
Generally.  The Borrowers shall be
obligated to make each payment required to be made by the Borrowers hereunder
(whether of principal, interest, fees or reimbursement of LC Disbursements, or
otherwise) to Lender at its offices in Boston, Massachusetts, prior to 3:00
p.m., Boston, Massachusetts time, on the date when due (except that if any
payment shall be due on a day that is not a Business Day, the date for payment
shall be extended to the next succeeding Business Day, and, in the case of any
payment accruing interest, interest thereon shall be payable for the period of
such extension).  All payments shall be
made in immediately available funds, in U.S. dollars without set-off or
counterclaim.  Any amounts received
after such time on any date may, in the discretion of the Lender, be deemed to
have been received on the next succeeding Business Day for purposes of
calculating interest thereon. 
Notwithstanding anything to the contrary set forth herein, subject to
the conditions to the funding of Revolving Loans set forth herein, all payments
of interest, fees and any other amounts due to be paid by the Borrowers
hereunder shall be made through the automatic funding of Base Rate Revolving
Loans in amounts equal to the amounts of such interest, fees or other amounts
due to be paid by the Borrowers hereunder, and the Borrowers hereby irrevocably
authorize and direct the Lender to take such actions as may be necessary to
effectuate such automatic funding of Base Rate Revolving Loans, and, upon
funding of any such Base Rate Revolving Loan, the Borrowers’ obligation to make
such payment shall be discharged and replaced by the resulting Base Rate
Revolving Loan.  The Borrowers expressly
acknowledge and agree that (i) the Lender may, in its sole discretion,
effectuate the automatic funding of a Revolving Loan pursuant to this
subsection 2.6(a) even though at the time of, or after giving effect to, the
funding of such Revolving Loans the Revolving Credit Exposure exceeds the
lesser of (x) the

 

28

 

Revolving Credit
Commitment and (y) the Borrowing Base, and (ii) if any one or more of the conditions
to the funding of Revolving Loans cannot be satisfied and the Lender, in its
sole discretion, refuses to fund a Base Rate Revolving Loan in an amount
sufficient to satisfy the amount of any interest, fees or other amounts due
hereunder, the Borrowers shall remain obligated to pay the full amount of such
interest, fees or other amounts as and when the same shall become due.

 

(b)                                 Application
of Payments.  If at any time
insufficient funds are received by and available to the Lender to pay fully all
amounts of principal, unreimbursed LC Disbursements, interest and fees then due
hereunder under any circumstances, including, without limitation during, or as
a result of the exercise by the Lender of remedies hereunder or under any other
Loan Document and applicable law, such funds shall be applied (i) first, to pay
interest, fees, costs and expenses then due hereunder, (ii) second, to pay
principal and unreimbursed LC Disbursements then due hereunder, and (iii)
third, to any other Obligations then due from the Credit Parties to the Lender,
the Issuing Lender, the Cash Management Bank or any other Affiliate of the
Lender.

 

(c)                                  Collection.  Any check, instrument or other item of
payment in favor of any Borrower remitted to the Cash Management Bank for
processing shall be subject to a collection charge equal to two days interest
on the amount thereof at the Adjusted Base Rate plus the Applicable Margin,
which collection charges shall be payable by the Borrowers monthly in arrears
on the first Business Day of each month.

 

2.7                                 Prepayment of Loans.

 

(a)                                  Optional
Prepayments of Loans.  The Borrowers
shall have the right at any time and from time to time to prepay the Revolving
Loans in whole or in part, subject to the payment of any amounts due under
subsection 2.3(g) and, if the Revolving Credit Commitment is terminated,
subsection 2.5(d).  The Borrowers shall
have the right at any time and from time to time to prepay the Term Loan in
whole or in part, subject to prior notice in accordance with
subsection 2.7(d) and subject to the payment of any amounts due under
subsection 2.3(g) and, if the Term Loan is repaid in full, subsection 2.5(d),
and provided that each such prepayment of the Term Loan shall be in an amount
that is at least equal to $250,000 or any greater multiple of $100,000.

 

(b)                                 Mandatory
Prepayments.  The Borrowers shall be
obligated to, and shall, make prepayments of the Loans hereunder (and reduce
the Revolving Credit Commitment hereunder) as follows:

 

(i)                                     Incurrence
of Debt.  Without limiting the obligation
of the Borrowers to obtain the consent of the Lender to any incurrence of
Indebtedness not otherwise permitted hereunder, the Borrowers agree, on the
closing of any incurrence of Indebtedness by any Credit Party (other than
Indebtedness permitted pursuant to Section 8.1) to prepay the Loans
hereunder (and provide cash collateral for Total LC Exposure as specified in
subsection 2.4(g)), and the Revolving Credit Commitment hereunder shall be
subject to automatic reduction, upon the date of such incurrence of
Indebtedness, in an aggregate amount equal to 100% of the amount of the Net
Cash Payments from such incurrence of Indebtedness received by any Credit
Party, such prepayment and reduction to be effected in each case in the manner
and to the extent specified in subsection 2.7(c) below.

 

(ii)                                  Sale
or Offering of Securities.  The
Borrowers agree on the closing of any offering or sale of equity securities by
any Credit Party, to prepay the Loans hereunder (and provide cash collateral
for Total LC Exposure as specified in subsection 2.4(g)), upon the date of such
sale or offering of securities, in an aggregate amount equal to 100% of the
amount of Net

 

29

 

Cash Payments from such
offering of securities received by any such Credit Party such prepayment to be
effected in each case in the manner and to the extent specified in
subsection 2.7(c) below.

 

(iii)                               Sale
of Assets.  Without limiting the
obligation of the Borrowers to obtain the consent of the Lender to any
Disposition not otherwise permitted hereunder, the Borrowers agree, on the date
of any Disposition by any Credit Party, to prepay the Loans hereunder (and
provide cash collateral for Total LC Exposure as specified in
subsection 2.4(g)), and the Revolving Credit Commitment hereunder shall be
subject to automatic reduction, upon the date of such Disposition, in an
aggregate amount equal to 100% of the amount of such Net Cash Payments from
such Disposition received by any Credit Party on the date of such Disposition,
such payment and reduction to be effected in each case and in the manner and to
the extent specified in subsection 2.7(c) below.  Notwithstanding the forgoing, the Borrowers shall not be required
to make any prepayment of the Loans under this subsection 2.7(b)(iii) with
respect to the first $10,000 of aggregate Net Cash Payments received by the
Credit Parties from Dispositions after the Effective Time to the extent 100% of
such Net Cash Payments are utilized to replace the assets disposed of by the
Credit Parties in the Disposition within 90 days of each such Disposition.

 

(iv)                              Proceeds
of Casualty Events.  Upon the
receipt by the Lender or the Credit Parties of the proceeds of insurance,
condemnation award or other compensation in respect of any Casualty Event
affecting any property of the Credit Parties, the Borrowers shall prepay the
Loans (and provide cash collateral for Total LC Exposure as specified in
subsection 2.4(g)), and the Revolving Credit Commitment shall be subject
to automatic reduction, in an aggregate amount equal to 100% of the Net Cash
Payments from such Casualty Event, such prepayment and reduction to be effected
in each case in the manner and to the extent specified in subsection 2.7(c)
below; provided
that if there shall occur a Casualty Event and the aggregate market value of
all property affected by such Casualty Event shall be less than $25,000, and
if, at the time proceeds of insurance in respect of such Casualty Event are
received, no Event of Default shall have occurred and be continuing, the
Borrowers shall be entitled to utilize such insurance proceeds (in an amount
not in excess of $25,000) to repair or replace the property affected by such
Casualty Event within 90 days (it being understood that if proceeds of insurance
intended to be applied to repair or replace property are not in fact applied
within 90 days after receipt thereof, then such proceeds shall be applied to
the prepayment of Loans, cover for Total LC Exposure and reduction of the
Revolving Credit Commitment as provided in this clause (iv) at the expiration
of such 90 day period).

 

(c)                                  Application.  In the event of any mandatory prepayment of
Loans pursuant to subsections (b)(i), (b)(ii), (b)(iii) and (b)(iv) of
this Section 2.7, the proceeds shall be applied as follows:

 

(i)                                     first,
to the extent that Revolving Credit Exposure shall at such time exceed the
lesser of (A) the Revolving Credit Commitment at such time or (B) the Borrowing
Base at such time, such prepayment shall be applied to the repayment of Revolving
Loans;

 

(ii)                                  second,
if such prepayment is made at a time when any part of the Term Loan remains
outstanding, such prepayment shall be applied to the repayment of the unpaid
principal balance of the Term Loan in inverse order of maturity; and

 

(iii)                               third,
after the Term Loan has been repaid in full, the amount of any mandatory
prepayment shall be applied to repay Revolving Loans, and, second, to provide
cash collateral for Total LC Exposure as specified in Section 2.4(g), with
a corresponding permanent

 

30

 

reduction in the
Revolving Credit Commitment (except that no such corresponding permanent
reduction in the total Revolving Credit Commitment shall be required in
connection with any prepayment pursuant to subsection 2.7(b)(ii) above).

 

(d)                                 Notification
of Certain Prepayments.  The Borrowers
shall notify the Lender by telephone (confirmed by telecopy) of any voluntary
prepayment of any Eurodollar Loan not later than 1:00 p.m., Boston,
Massachusetts time, three Business Days before the date of such
prepayment.  The Borrowers shall notify
the Lender of any mandatory prepayment of the Loans pursuant to subsection
2.7(b) hereunder as soon as practicable. 
Each such notice shall be irrevocable and shall specify the prepayment
date and the principal amount of each Borrowing or portion thereof to be
prepaid.

 

(e)                                  Prepayments
Accompanied by Interest.  All
prepayments of the Term Loans shall be accompanied by accrued interest through
the date of prepayment.

 

2.8                                 Fees.

 

(a)                                  Closing
Fee.  The Borrowers shall pay to the
Lender on the Closing Date a closing fee in an amount equal to $48,750.

 

(b)                                 Unused
Fee.  The Borrowers shall pay to the
Lender unused fees in respect of the Revolving Credit Commitment, in an
aggregate amount equal to the product of (x) the Applicable Unused Fee Rate,
multiplied by (y) the daily average unused amounts of the Revolving Credit
Commitment during the period from and including the date on which the Effective
Time shall occur to but excluding the date on which the Revolving Credit
Commitment terminates.  Accrued unused
fees shall be payable monthly in arrears on the first day of each month and on
the date on which the Revolving Credit Commitment terminates.  All unused fees shall be computed on the
basis of a year of 360 days and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).

 

(c)                                  Letter
of Credit Fees.  The Borrowers shall pay
with respect to Letters of Credit issued hereunder the following fees:

 

(i)                                     with
respect to each documentary or standby Letter of Credit issued hereunder, a fee
to the Lender which shall accrue at a rate per annum equal to (x) the
Applicable Margin for Eurodollar Rate Revolving Loans multiplied by (y)
the average daily amount of outstanding Letters of Credit during the period
from and including the Closing Date to but excluding the date on which there
shall no longer be any Letters of Credit outstanding hereunder, and

 

(ii)                                  with
respect to each documentary or standby Letter of Credit issued hereunder, the
Issuing Lender’s standard fees with respect to the issuance, amendment, renewal
or extension of any Letter of Credit or processing of drawings thereunder.

 

Accrued fees for Letters
of Credit shall be computed on the basis of a year of 360 days and shall be
payable for the actual number of days elapsed (including the first day but
excluding the last day), and shall be payable monthly in arrears on the first
day of each month and on the date the Revolving Credit Commitment terminates,
commencing on the first such date to occur after the date hereof, provided
that any such fees accruing after the date on which the Revolving Credit
Commitment terminates shall be payable on demand.

 

31

 

2.9                                 Increased Costs.

 

(a)                                  If
any Change in Law shall:

 

(i)                                     impose,
modify or deem applicable any reserve, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended by,
the Lender or the Issuing Lender; or

 

(ii)                                  impose
on the Lender or the Issuing Lender or the London interbank market any other
condition affecting this Agreement or Eurodollar Loans made by the Lender or
any Letter of Credit;

 

and the result of any of
the foregoing shall be to increase the cost to the Lender of making or
maintaining any Eurodollar Loan (or of maintaining its obligation to make any
such Loan) or to increase the cost to the Issuing Lender of issuing or
maintaining any Letter of Credit or to reduce the amount of any sum received or
receivable by the Lender or the Issuing Lender hereunder (whether of principal,
interest or otherwise), then the Borrowers will pay to the Lender or the
Issuing Lender, as the case may be, such additional amount or amounts as will
compensate the Lender or the Issuing Lender, as the case may be, for such
additional costs incurred or reduction suffered.

 

(b)                                 If
the Lender or the Issuing Lender reasonably determines that any Change in Law
regarding capital requirements has or would have the effect of reducing the
rate of return on the Lender’s or the Issuing Lender’s capital or on the
capital of the Lender’s or the Issuing Lender’s holding company, if any, as a
consequence of this Agreement or the Loans made by the Lender, or the Letters
of Credit issued by the Issuing Lender, to a level below that which the Lender
or the Issuing Lender or the Lender’s or the Issuing Lender’s holding company
could have achieved but for such Change in Law (taking into consideration the
Lender’s or the Issuing Lender’s policies and the policies of the Lender’s or
the Issuing Lender’s holding company with respect to capital adequacy), then
from time to time the Borrowers will pay to the Lender or the Issuing Lender,
as the case may be, such additional amount or amounts as will compensate the
Lender or the Issuing Lender, or the Lender’s or the Issuing Lender’s holding
company, for any such reduction suffered.

 

(c)                                  A
certificate of the Lender or the Issuing Lender setting forth the amount or
amounts necessary to compensate the Lender or the Issuing Lender or its holding
company, as the case may be, as specified in subsections 2.9(a) or 2.9(b) above
shall be delivered to the Borrowers and shall be conclusive so long as it
reflects a reasonable basis for the calculation of the amounts set forth
therein and does not contain any manifest error.  The Borrowers shall pay the Lender or the Issuing Lender the
amount shown as due on any such certificate within 10 days after receipt
thereof.

 

(d)                                 Failure
or delay on the part of the Lender or the Issuing Lender to demand compensation
pursuant to this Section 2.9 shall not constitute a waiver of the Lender’s
or the Issuing Lender’s right to demand such compensation; provided that the Borrowers
shall not be required to compensate the Lender or the Issuing Lender pursuant
to this Section 2.9 for any increased costs or reductions incurred more
than six months prior to the date that Lender or the Issuing Lender, as the
case may be, notifies the Borrowers of the Change in Law giving rise to such
increased costs or reductions and of Lender’s or the Issuing Lender’s intention
to claim compensation therefor; provided  further that, if the Change
in Law giving rise to such increased costs or reductions is (i) retroactive and
(ii) occurred within such six-month period, then the six-month period referred
to above may be extended to include the period of retroactive effect thereof,
but in no event any period prior to the Closing Date.

 

32

 

2.10                           Taxes.

 

(a)                                  Any
and all payments by or on account of any Obligations of the Borrowers hereunder
shall be made free and clear of and without deduction for any Indemnified Taxes
or Other Taxes; provided that if the Borrowers shall be required to deduct any
Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable
shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this
Section 2.10) the Lender or the Issuing Lender (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrowers shall make such deductions and (iii)
the Borrowers shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.

 

(b)                                 In
addition, the Borrowers shall pay all Other Taxes to the relevant Governmental
Authority in accordance with applicable law.

 

(c)                                  The
Borrowers shall indemnify the Lender and the Issuing Lender, within 10 days
after written demand therefor, for the full amount of any Indemnified Taxes or
Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on
or attributable to amounts payable under this Section 2.10) paid by the Lender
or the Issuing Lender, as the case may be (and any penalties, interest and
reasonable expenses arising therefrom or with respect thereto during the period
prior to the Borrowers making the payment demanded under this paragraph (c)),
whether or not such Indemnified Taxes or Other Taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such
payment or liability delivered to the Borrowers by the Lender or the Issuing
Lender, shall be conclusive absent manifest error.

 

(d)                                 As
soon as practicable after any payment of Indemnified Taxes or Other Taxes by
the Borrowers to a Governmental Authority, the Borrowers shall deliver to the
Lender the original or a certified copy of a receipt issued by such
Governmental Authority evidencing such payment, a copy of the return reporting
such payment or other evidence of such payment reasonably satisfactory to the
Lender.

 

ARTICLE 3

 

Guarantee
by Guarantors

 

3.1                                 The Guarantee.  The Guarantors hereby guarantee to the
Lender and the Issuing Lender and their respective successors and assigns the
prompt payment in full when due (whether at stated maturity, by acceleration or
otherwise) of the Obligations.  The
Guarantors hereby further agree that if the Borrowers shall fail to pay in full
when due (whether at stated maturity, by acceleration or otherwise) any of the
Obligations, the Guarantors will promptly pay the same, 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 extended maturity, by acceleration or otherwise) in accordance
with the terms of such extension or renewal.

 

3.2                                 Obligations Unconditional.  The obligations of the Guarantors under
Section 3.1 are absolute and unconditional irrespective of the value,
genuineness, validity, regularity or enforceability of this Agreement, the
other Loan Documents or any other agreement or instrument referred to herein or
therein, or any substitution, release or exchange of any other guarantee of or
security for any of the Obligations, and, to the fullest extent permitted by
applicable law, irrespective of any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor, it being the intent of this Section 3.2 that the obligations of
the Guarantors hereunder shall be absolute and unconditional under any and all
circumstances.  Without limiting the
generality of the

 

33

 

foregoing, it is agreed
that the occurrence of any one or more of the following shall not alter or
impair the liability of the Guarantors hereunder which shall remain absolute
and unconditional as described above:

 

(i)                                     at
any time or from time to time, without notice to such Guarantors, the time for
any performance of or compliance with any of the Obligations shall be extended,
or such performance or compliance shall be waived;

 

(ii)                                  any
of the acts mentioned in any of the provisions hereof or of the other Loan
Documents or any other agreement or instrument referred to herein or therein
shall be done or omitted;

 

(iii)                               the
maturity of any of the Obligations shall be accelerated, or any of the
Obligations shall be modified, supplemented or amended in any respect, or any
right hereunder or under the other Loan Documents or any other agreement or
instrument referred to herein or therein shall be waived or any other guarantee
of any of the Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with; or

 

(iv)                              any
lien or security interest granted to, or in favor of, the Lender or the Issuing
Lender as security for any of the Obligations shall fail to be perfected.

 

The Guarantors hereby
expressly waive diligence, presentment, demand of payment, protest and all
notices whatsoever, and any requirement that the Lender or the Issuing Lender
exhaust any right, power or remedy or proceed against the Borrowers hereunder
or under the other Loan Documents or any other agreement or instrument referred
to herein or therein, or against any other Person under any other guarantee of,
or security for, any of the Obligations.

 

3.3                                 Reinstatement.  The obligations of the Guarantors under this
Article 3 shall be automatically reinstated if and to the extent that for
any reason any payment by or on behalf of the Borrowers in respect of the
Obligations is rescinded or must be otherwise restored by any holder of any of
the Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will indemnify
the Lender and the Issuing Lender on demand for all reasonable costs and
expenses (including fees and expenses of counsel) incurred by the Lender or the
Issuing Lender in connection with such rescission or restoration, including any
such costs and expenses incurred in defending against any claim alleging that
such payment constituted a preference, fraudulent transfer or similar payment
under any bankruptcy, insolvency or similar law.

 

3.4                                 Subrogation.  Until
such time as the Obligations shall have been indefensibly paid in full, each of
the Guarantors hereby waives all rights of subrogation or contribution, whether
arising by contract or operation of law (including, without limitation, any
such right arising under the Federal Bankruptcy Code of 1978, as amended) or
otherwise by reason of any payment by it pursuant to the provisions of this
Article 3 and further agrees with the Borrowers for the benefit of each
creditor of the Borrowers (including, without limitation, the Lender and the
Issuing Lender) that any such payment by it shall constitute a contribution of
capital by such Guarantor to the Borrowers.

 

3.5                                 Remedies.  The
Guarantors agree that, as between the Guarantors and the Lender, the
Obligations of the Borrowers hereunder may be declared to be forthwith due and
payable as provided in Section 9.1 (and shall be deemed to have become
automatically due and payable in the circumstances provided in
Section 9.1) for purposes of Section 3.1 notwithstanding any stay,
injunction or other prohibition preventing such declaration (or such
Obligations from becoming automatically due and payable) as against the
Borrowers and that, in the event of such declaration (or such Obligations being
deemed to have become automatically due and payable), such Obligations (whether
or not due and

 

34

 

payable by the Borrowers)
shall forthwith become due and payable by the Guarantors for purposes of
Section 3.1.

 

3.6                                 Instrument for the Payment of Money.  Each of the Guarantors hereby acknowledges
that the guarantee in this Article 3 constitutes an instrument for the
payment of money, and consents and agrees that the Lender or the Issuing
Lender, at its sole option, in the event of a dispute by such Guarantor in the
payment of any moneys due hereunder, shall have the right to summary judgment
or such other expedited procedure as may be available for a suit on a note or
other instrument for the payment of money.

 

3.7                                 Continuing Guarantee.  The guarantee in this Article 3 is a
continuing guarantee, and shall apply to all Obligations whenever arising.

 

3.8                                 General Limitation on Amount of
Obligations Guaranteed.  In
any action or proceeding involving any state or non-U.S. corporate law, or any
state or Federal or non-U.S. bankruptcy, insolvency, reorganization or other
law affecting the rights of creditors generally, if the obligations of the
Guarantors under Section 3.1 would otherwise be held or determined to be
void, invalid or unenforceable, or subordinated to the claims of any other
creditors, on account of the amount of its liability under Section 3.1,
then, notwithstanding any other provision hereof to the contrary, the amount of
such liability shall, without any further action by the Guarantors, Lender, or
other Person, be automatically limited and reduced to the highest amount that
is valid and enforceable and not subordinated to the claims of other creditors
as determined in such action or proceeding.

 

ARTICLE 4

 

The
Collateral

 

4.1                                 Grant of Security Interest.  As
security for due and punctual payment and performance of the Obligations, each
Credit Party hereby grants to the Lender (for the ratable benefit of the
Lender, the Issuing Lender and the Cash Management Bank) a continuing security
interest in and lien on all tangible and intangible property and assets of such
Credit Party, whether now owned or existing or hereafter acquired or arising,
together with any and all additions thereto and replacements therefor and
proceeds and products thereof (collectively referred to for purposes of this
Article 4 as “Collateral”), including without limitation the
property described below:

 

(a)                                  all
tangible personal property, including without limitation all present and future
goods, inventory (including, without limitation, all merchandise, raw
materials, work in process, finished goods and supplies), machinery, equipment,
motor vehicles, rolling stock, tools, furniture, fixtures, office supplies,
computers, computer software and associated equipment, whether now owned or
hereafter acquired, including, without limitation, all tangible personal
property used in the operation of the business of such Credit Party;

 

(b)                                 all
rights under all present and future authorizations, permits, licenses and
franchises issued, granted or licensed to such Credit Party for the operation
of its business;

 

(c)                                  all
Patents of such Credit Party;

 

(d)                                 all
Trademarks of such Credit Party;

 

(e)                                  all
Copyrights of such Credit Party;

 

35

 

(f)                                    the
entire goodwill of business of such Credit Party and all other general
intangibles (including know-how, trade secrets, customer lists, proprietary
information, inventions, domain names, methods, procedures and formulae)
connected with the use of and symbolized by any Patents, Trademarks or
Copyrights of such Credit Party;

 

(g)                                 all
rights under all present and future vendor or customer contracts and all franchise,
distribution, design, consulting, construction, engineering, management and
advertising and related agreements;

 

(h)                                 all
rights under all present and future leases of real and personal property; and

 

all other personal
property, including, without limitation, all present and future accounts,
accounts receivable, cash, cash equivalents, deposits, deposit accounts, loss
carry back, tax refunds, insurance proceeds, premiums, rebates and refunds,
choses in action, investment property, securities, partnership interests,
limited liability company interests, contracts, contract rights, general
intangibles (including without limitation, all customer and advertiser mailing
lists, intellectual property, patents, copyrights, trademarks, trade secrets,
trade names, domain names, goodwill, customer lists, advertiser lists, catalogs
and other printed materials, publications, indexes, lists, data and other
documents and papers relating thereto, blueprints, designs, charts, and
research and development, whether on paper, recorded electronically or
otherwise), all websites (including without limitation, all content, HTML
documents, audiovisual material, software, data, hardware, access lines,
connections, copyrights, trademarks, patents and trade secrets relating to such
websites) and domain names, any information stored on any medium, including
electronic medium, related to any of the personal property of such Credit
Party, all financial books and records and other books and records relating, in
any manner, to the business of such Credit Party, all proposals and cost
estimates and rights to performance, all instruments and promissory notes,
documents and chattel paper, and all debts, obligations and liabilities in
whatever form owing to such Credit Party from any person, firm or corporation
or any other legal entity, whether now existing or hereafter arising, now or
hereafter received by or belonging or owing to such Credit Party; and all
guaranties and security therefor, and all letters of credit and other
supporting obligations in respect of such debts, obligations and liabilities.

 

Any of the foregoing
terms 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, as supplemented and expanded by the foregoing.

 

4.2                                 Special Warranties and Covenants of the
Credit Parties.  Each Credit
Party hereby warrants and covenants to the Lender that:

 

(a)                                  Such
Credit Party has delivered to the Lender a Perfection Certificate in substantially
the form of Exhibit C hereto. 
All information set forth in such Perfection Certificate is true and
correct in all material respects and the facts contained in such Perfection
Certificate are accurate in all material respects as of the date of this
Agreement.  Each Credit Party agrees to
supplement its Perfection Certificate promptly after obtaining information
which would require a correction or addition to such Perfection Certificate.

 

(b)                                 No
Credit Party will change its jurisdiction of organization, principal or any
other place of business, or the location of any Collateral from the locations
set forth in the Perfection Certificate delivered by such Credit Party, or make
any change in its name or conduct its business operations under any fictitious
business name or trade name, without, in any such case, at least thirty (30)
days’ prior written notice to the Lender; provided that the inventory of such
Credit Party may be in the possession of manufacturers or processors in any
jurisdiction in which all necessary UCC financing statements have

 

36

 

been filed by the Lender
and with respect to which the Lender has received waiver letters from all
landlords, warehousemen and processors in form and substance acceptable to
Lender.

 

(c)                                  Except
for Collateral that is obsolete or no longer used in their business, the Credit
Parties will keep the Collateral in good order and repair (normal wear
excepted) and adequately insured at all times in accordance with the provisions
of Section 7.5.  The Credit Parties will
pay promptly when due all taxes and assessments on the Collateral or for its
use or operation, except for taxes and assessments permitted to be contested as
provided in Section 7.4.  Following the
occurrence and during the continuance of an Event of Default, the Lender may at
its option discharge any taxes or Liens to which any Collateral is at any time
subject (other than Permitted Liens), and may, upon the failure of the Credit
Parties to do so in accordance with this Agreement, purchase insurance on any
Collateral and pay for the repair, maintenance or preservation thereof, and
each Credit Party agrees to reimburse the Lender on demand for any payments or
expenses incurred by the Lender pursuant to the foregoing authorization and any
unreimbursed amounts shall constitute Obligations for all purposes hereof.

 

(d)                                 The
Lender may from time to time request and each Credit Party shall deliver copies
of all customer lists and vendor lists.

 

(e)                                  To
the extent, if any, that such Credit Party’s signature is required therefor,
each Credit Party will promptly execute and deliver to the Lender such
financing statements and amendments thereto, certificates and other documents
or instruments as may be necessary to enable the Lender to perfect or from time
to time renew the security interest granted hereby, including, without
limitation, such financing statements and amendments thereto, certificates and
other documents as may be necessary to perfect a security interest in any
additional Collateral hereafter acquired by such Credit Party or in any
replacements or proceeds thereof.  Each
Credit Party authorizes and appoints the Lender, in case of need, to execute
such financing statements, certificates and other documents pertaining to the
Lender’s security interest in the Collateral in its stead if such Credit
Party’s signature is required therefor and such Credit Party fails to so
execute such documents, with full power of substitution, as such Debtor’s
attorney in fact.

 

(f)                                    Each
Credit Party hereby irrevocably authorizes the Lender, at any time and from
time to time, to file in any jurisdiction financing statements and amendments
thereto that (i) indicate the Collateral (x) as all assets of such Credit Party
or words of similar effect, regardless of whether any particular asset falls
within the scope of Article 9 of the Uniform Commercial Code of the
Commonwealth of Massachusetts or such jurisdiction or (y) as being of an equal
or lesser scope or with greater detail and (ii) which contain any other
information required by Article 9 of the Uniform Commercial Code (including
Part 5 thereof) for the sufficiency or filing office acceptance of any
financing statement or amendment, including whether (A) any Credit Party is an
organization, the type of organization and any organization identification
number issued to such Credit Party and (B) in the case of a financing statement
filed as a fixture filing or indicating Collateral as as-extracted collateral
or timber to be cut, a sufficient description of the real property to which the
Collateral relates.  The Credit Parties
agree to furnish any such information to the Lender promptly upon request.  Each Credit Party also ratifies its
authorization for the Lender to have filed in any Uniform Commercial Code
jurisdiction any like initial financing statements or amendments thereto if
filed prior to the date hereof.

 

(g)                                 Each
Credit Party agrees that it will join with the Lender in executing and, at its
own expense, will file and refile, or permit the Lender to file and refile such
other documents (including, without limitation, this Agreement and licenses to
use software and other property protected by copyright), in such offices
(including, without limitation, the PTO, the United States Copyright Office,
and appropriate state patent, trademark and copyright offices), as the Lender
may reasonably deem necessary or appropriate, wherever required or permitted by
law in order to perfect and preserve the rights

 

37

 

and interests granted to
the Lender in Patents, Trademarks and Copyrights hereunder.  Each Credit Party will give the Lender
notice of each office at which records of such Credit Party pertaining to all
intangible items of Collateral are kept. 
Except as may be provided in such notice, the records concerning all
intangible Collateral are and will be kept at the address shown in the
respective Perfection Certificate for such Credit Party as the principal place
of business of such Credit Party.

 

(h)                                 The
Credit Parties are the sole and exclusive owners of the websites and domain
names listed on Schedule 4.2 hereto and have registered such domain
names with the applicable authority for registration of the same which provides
for the exclusive use by the Credit Parties of such domain names.  The websites do not contain any material,
the publication of which may result in (a) the violation of rights of any
person or (b) a right of any person against the publisher or distributor of
such material.

 

(i)                                     The
Credit Parties shall, annually by the end of the first calendar quarter
following the previous calendar year, provide written notice to the Lender of
all applications for registration of Patents, Trademarks or Copyrights, to the
extent such applications exist, made during the preceding calendar year.  The Credit Parties shall file and prosecute
diligently all applications for registration of Patents, Trademarks or
Copyrights now or hereafter pending that would be necessary to the business of
the Credit Parties to which any such applications pertain, and to do all acts,
in any such instance, necessary to preserve and maintain all rights in such
registered Patents, Trademarks or Copyrights unless such Patents, Trademarks or
Copyrights are not material to the business of the Credit Parties, as
reasonably determined by the Credit Parties consistent with prudent and
commercially reasonable business practices. 
Any and all costs and expenses incurred in connection with any such
actions shall be borne by the Credit Parties. 
Except in accordance with prudent and commercially reasonable business
practices, the Credit Parties shall not abandon any right to file a Patent,
Trademark or Copyright application or any pending Patent, Trademark or
Copyright application or any registered Patent, Trademark or Copyright, in each
case material to its business, without the consent of the Lender.

 

(j)                                     The
domain name servers used in connection with the domain names of the Credit
Parties and all other relevant information pertaining to such domain names, and
the administrative contacts used in connection with the registration of such
domain names are identified on Schedule 4.2 hereof.  No Credit Party will change such domain name
servers without 10 days’ prior notice to the Lender.  No Credit Party will cause a change in the identity of any domain
name administrative contact without 10 days’ prior notice to the Lender.

 

(k)                                  If
any Credit Party is, now or at any time hereafter, a beneficiary under a letter
of credit now or hereafter, such Credit Party will promptly notify the Lender
thereof and, at the request and option of the Lender, such Credit Party shall,
pursuant to an agreement in form and substance satisfactory to the Lender,
either (i) arrange for the issuer and any confirmer or other nominated person
of such letter of credit to consent to an assignment to the Lender of the
proceeds of the letter of credit or (ii) arrange for the Lender to become the
transferee beneficiary of the letter of credit, with the Lender agreeing, in
each case, that the proceeds of the letter of credit are to be applied by the
Lender against the Obligations as provided in this Agreement.

 

(l)                                     To
the extent any Credit Party shall, now or at any time hereafter, hold or
acquire any promissory note or other instrument or tangible chattel paper, such
Credit Party will promptly notify the Lender thereof and, at the request and
option of the Lender, such Debtor will deliver such promissory note or other
instrument or tangible chattel paper to the Lender to be held as Collateral
hereunder, together with an endorsement thereof reasonably satisfactory in form
and substance to the Lender.

 

38

 

(m)                               If, now or at any time hereafter, any Credit
Party shall obtain or hold any investment property or electronic chattel paper,
such Credit Party will promptly notify the Lender thereof and, at the request
and option of the Lender, such Credit Party will take or cause to be taken such
steps as the Lender may reasonably request for the Lender to obtain “control”
(as provided in Sections 9-105 and 9-106 of the Uniform Commercial Code of the
Commonwealth of Massachusetts, as amended and in effect from time to time) of
such Collateral.

 

(n)                                 No Credit Party holds any commercial tort claims,
as defined in Article 9 of the Uniform Commercial Code, except as indicated in
the Perfection Certificate attached hereto as Exhibit C.  If any of the Credit Parties shall at any
time acquire a commercial tort claim, such Credit Party shall immediately
notify the Lender in a writing signed by such Credit Party of the brief details
thereof and grant to the Lender in such writing a security interest therein and
in the proceeds thereof, all upon the terms of this Agreement, with such
writing to be in form and substance reasonably satisfactory to the Lender.

 

(o)                                 If any Credit Party has accounts receivable in
respect of which the account debtor is located in Minnesota, the Credit Parties
represent and warrant that the applicable Credit Party has filed and shall file
all legally-required Notice of Business Activities Reports and comparable
reports with the appropriate government authorities.

 

4.3                                 Collection of Proceeds of Accounts
Receivable.

 

(a)                                  On
or before the Closing Date, the Credit Parties shall (i) direct all of their
account debtors to make all payments on accounts receivable of the Credit
Parties directly to post office boxes (each a “Lock Box” and
collectively the “Lock Boxes”) under the control of the Cash Management
Bank, (ii) establish accounts (each a “Controlled Account” and
collectively the “Controlled Accounts”) in the Lender’s name for the
benefit of the Borrowers with the Cash Management Bank, into which all payments
received in the Lock Boxes shall be deposited, and into which the Credit
Parties will immediately deposit all payments made for inventory or services
sold or rendered by the Credit Parties and received by the Credit Parties in
the identical form in which such payments were made, whether by cash or check,
and (iii) cause each Subsidiary and Affiliate, and any other Person acting for
or in concert with the Credit Parties that receives any monies, checks, notes,
drafts or other payments relating to or as proceeds of accounts receivable or
other Collateral, to receive and hold such items in trust for, and as the sole
and exclusive property of, the Lender and, immediately upon receipt thereof,
shall remit the same (or cause the same to be remitted) in hand to the
Controlled Accounts; provided that, for purposes of
administrative convenience, the Lender may in its reasonable discretion, permit
the Credit Parties from time to time to maintain one or more accounts with one
or more financial institutions other than the Cash Management Bank and with
such maximum cash balances as the Lender deems appropriate, and for which the
Credit Parties may, at the discretion of the Lender, be permitted to have
direct access.

 

(b)                                 Each
Credit Party acknowledges that the Cash Management Bank is an Affiliate of the
Lender and that the Cash Management Bank and the Lender are parties to cash
management agreements that confirm that the Lender has dominion and control
over all accounts of the Credit Parties or the Lender maintained by the Cash
Management Bank, and all funds from time to time held in such accounts.  The Borrowers, the Lender and the Cash
Management Bank hereby agree that the Cash Management Bank shall comply with
any instructions originated by the Lender directing disposition of funds in
such accounts without further consent of the Borrowers.  Each Credit Party agrees to enter into such
Lockbox Agreements and Control Agreements with the Cash Management Bank and the
Lender as the Lender may reasonably request. 
Each Credit Party also agrees to cause each financial institution other
than the Cash Management Bank with which a Lock Box and/or Controlled Account
has been established to, enter into a Lockbox Agreement and/or Control
Agreement, as applicable, confirming that the

 

39

 

amounts on deposit in
such Lock Box and/or Controlled Account, as applicable, are the property of and
are under the control of the Lender, that such financial institution has no
right to setoff against such Lock Box or Controlled Account or against any
other account maintained by such financial institution into which the contents
of such Controlled Account are transferred, and that upon written notice from
the Lender, such financial institution shall wire, or otherwise transfer in
immediately available funds in a manner satisfactory to the Lender, funds
deposited in the Controlled Account on a daily basis as such funds are
collected.

 

(c)                                  The
Credit Parties agree to pay all reasonable fees, costs and expenses which the
Credit Parties incur in connection with opening and maintaining a Lock Box and
Controlled Account.  All of such fees,
costs and expenses which remain unpaid pursuant to any Lock Box or Control
Agreement with the Credit Parties, to the extent same shall have been paid by
the Lender hereunder, shall constitute Loans hereunder, shall be payable to the
Lender by the Credit Parties upon demand, and, until paid, shall bear interest
at the highest rate then applicable to Loans hereunder.  All checks, drafts, instruments and other
items of payment or proceeds of Collateral delivered to the Lender or the Cash
Management Bank in kind shall be endorsed by the Credit Parties, to the Lender,
and, if that endorsement of any such item shall not be made for any reason, the
Lender and the Cash Management Bank are each hereby irrevocably authorized to
endorse the same on behalf of the Credit Parties.  For the purpose of this subsection 4.3(c), each Credit Party
irrevocably hereby makes, constitutes and appoints the Lender (and all Persons designated
by the Lender for that purpose, including, without limitation, the Cash
Management Bank) as such Credit Party’s true and lawful attorney and
agent-in-fact (i) to endorse the name of the such Credit Party upon said items
of payment and/or proceeds of Collateral of the Credit Parties and upon any
chattel paper, document, instrument, invoice or similar document or agreement
relating to any account receivable of the Credit Parties or goods pertaining
thereto; (ii) to take control in any manner of any item of payment or proceeds
thereof; (iii) to have access to any Lock Box or postal box into which any mail
of the Credit Parties is deposited; and (iv) open and process all mail
addressed to the Credit Parties and deposited therein.

 

(d)                                 The
Lender (and all Persons designated by the Lender for such purpose, including,
without limitation, the Cash Management Bank) may, at any time and from time to
time after the occurrence and during the continuance of an Event of Default,
whether before or after notification to any account debtor and whether before
or after the maturity of any of the Obligations, (i) enforce collection of any
accounts receivable or contract rights of the Credit Parties by suit or
otherwise; (ii) exercise all of the rights and remedies of the Credit Parties
with respect to proceedings brought to collect any accounts receivable; (iii)
surrender, release or exchange all or any part of any accounts receivable of
the Credit Parties, or compromise or extend or renew for any period (whether or
not longer than the original period) any indebtedness thereunder; (iv) sell or
assign any account receivable of the Credit Parties upon such terms, for such
amount and at such time or times as the Lender deems advisable; (v) prepare,
file and sign the names of the Credit Parties on any proof of claim in
bankruptcy or other similar document against any account debtor indebted on an
account receivable of the Credit Parties; and (vi) do all other acts and things
which are necessary, in the Lender’s sole discretion, to fulfill the
Obligations of the Credit Parties under this Agreement and to allow the Lender
to collect the accounts receivable.  In
addition to any other provision hereof or in any of the other Loan Documents,
the Lender may at any time on or after the occurrence of an Event of Default,
at the sole expense of the Credit Parties, notify any parties obligated on any
of the accounts receivable of the Credit Parties to make payment directly to
the Lender of any amounts due or to become due thereunder.

 

4.4                                 Fixtures, etc. 
It is the intention of the parties hereto that (except for Collateral
located on any Mortgaged Property) none of the Collateral shall become fixtures
and each Credit Party will take all such reasonable action or actions as may be
necessary to prevent any of the Collateral from becoming fixtures.  Without limiting the generality of the
foregoing, each Credit Party will, if requested by the

 

40

 

Lender, use commercially reasonable efforts to obtain waivers of Liens,
in form satisfactory to the Lender, from each lessor of real property on which
any of the Collateral is or is to be located to the extent requested by the
Lender.

 

4.5                                 Right of Lender to Dispose of Collateral, etc.   Upon the occurrence of any Event of Default,
such Event of Default not having previously been waived, remedied or cured, but
subject to the provisions of the Uniform Commercial Code or other applicable
law, in addition to all other rights under applicable law and under the Loan
Documents, the Lender shall have the right to take possession of the Collateral
and, in addition thereto, the right to enter upon any premises on which the
Collateral or any part thereof may be situated and remove the same
therefrom.  The Lender may require the
Credit Parties to make the Collateral (to the extent the same is moveable)
available to the Lender at a place to be designated by the Lender or transfer
any information related to the Collateral to the Lender by electronic
medium.  Unless the Collateral is
perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market, the Lender will give the Credit
Parties at least seven (7) days’ prior written notice of the time and place of
any public sale thereof or of the time after which any private sale or any
other intended disposition thereof is to be made.  Any such notice shall be deemed to meet any requirement hereunder
or under any applicable law (including the Uniform Commercial Code) that
reasonable notification be given of the time and place of such sale or other
disposition.

 

4.6                                 Right of Lender to Use and Operate Collateral, etc.  Upon the occurrence and during the
continuance of any Event of Default, subject to the provisions of the Uniform
Commercial Code or other applicable law, the Lender shall have the right and
power (a) to take possession of all or any part of the Collateral, and to
exclude the Credit Parties and all persons claiming under the Credit Parties
wholly or partly therefrom, and thereafter to hold, store, and/or use, operate,
manage and control the same, and (b) to grant a license to use, or cause to be
granted a license to use, any or all of the Patents, Trademarks and Copyrights
(in the case of Trademarks, along with the goodwill associated therewith), but
subject to the terms of any licenses. 
Upon any such taking of possession, the Lender may, from time to time,
at the expense of the Credit Parties, make all such repairs, replacements,
alterations, additions and improvements to and of the Collateral as the Lender
may deem proper.  In any such case the
Lender shall have the right to manage and control the Collateral and to carry
on the business and to exercise all rights and powers of the Credit Parties in
respect thereto as the Lender shall deem best, including the right to enter
into any and all such agreements with respect to the operation of the
Collateral or any part thereof as the Lender may see fit; and the Lender shall
be entitled to collect and receive all rents, issues, profits, fees, revenues
and other income of the same and every part thereof.  Such rents, issues, profits, fees, revenues and other income
shall be applied to pay the expenses of holding and operating the Collateral
and of conducting the business thereof, and of all maintenance, repairs,
replacements, alterations, additions and improvements, and to make all payments
which the Lender may be required or may elect to make, if any, for taxes,
assessments, insurance and other charges upon the Collateral or any part
thereof, and all other payments which the Lender may be required or authorized
to make under any provision of this Agreement (including legal costs and
reasonable attorneys’ fees).  The Lender
shall apply the remainder of such rents, issues, profits, fees, revenues and
other income as provided in  Section 4.7.

 

4.7                                 Proceeds of Collateral. 
After deducting all reasonable costs and expenses of collection,
storage, custody, sale or other disposition and delivery (including reasonable
legal costs and attorneys’ fees) and all other charges against the Collateral,
the Lender shall apply the residue of the proceeds of any such sale or
disposition to the Obligations in accordance with the terms hereof  and
any surplus shall be returned to the Credit Parties or to any Person or party
lawfully entitled thereto.  In the event
the proceeds of any sale, lease or other disposition of the Collateral are
insufficient to pay all of the Obligations in full, the Credit Parties will be
liable for the deficiency, together with interest thereon at the Post-Default
Rate, and the cost and expenses of collection of such deficiency, including (to
the extent permitted by law), without limitation, reasonable attorneys’ fees,
expenses and disbursements.

 

41

 

ARTICLE 5

Representations
and Warranties

 

Each Credit Party
represents and warrants to the Lender and the Issuing Lender as to itself and
each other Credit Party, that:

 

5.1                                 Organization; Powers.  Each
Credit Party has been duly formed or organized and is validly existing and in
good standing under the laws of its jurisdiction of organization.  Each Credit Party has all requisite power
and authority to carry on its business as now conducted and is qualified to do
business in, and is in good standing in, every jurisdiction where such
qualification is required, except where the failure to have such power or
authority or to be so qualified or in good standing, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.

 

5.2                                 Authorization; Enforceability.  The
borrowing of the Loans and the grant of security interests pursuant to the Loan
Documents are within the power and authority of the Credit Parties and have
been duly authorized by all necessary action on the part of the Credit Parties.  This Agreement and the other Loan Documents
have been duly authorized, executed and delivered by the Credit Parties and
constitute legal, valid and binding obligations of the Credit Parties,
enforceable in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors’ rights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law.

 

5.3                                 Governmental Approvals; No
Conflicts.  The borrowing of
the Loans and the grant of the security interests pursuant to the Loan
Documents (a) do not require any consent or approval of, registration or filing
with, or any other action by, any Governmental Authority which has not been
obtained, except as disclosed on Schedule 5.3, (b) will not violate any
applicable law, policy or regulation or the organizational documents of the
Credit Parties or any order of any Governmental Authority, (c) will not violate
or result in a default under any indenture, agreement or other instrument
binding upon the Credit Parties, or any assets, or give rise to a right
thereunder to require any payment to be made by the Credit Parties, and such
violation or default or right to payment would have a Material Adverse Effect,
and (d) except for the Liens created by the Loan Documents, will not result in
the creation or imposition of any Lien on any asset of the Credit Parties.

 

5.4                                 Financial Condition; No Material Adverse Change.

 

(a)                                  The
Credit Parties have heretofore delivered to the Lender the following financial
statements:

 

(i)                                     the
consolidated balance sheets and statements of operations, shareholders’ equity
and cash flows of the Credit Parties, as of and for the fiscal years ended
December 31, 1999, and December 31, 2000, and December 31, 2001, audited and
accompanied by an opinion of the Credit Parties’ independent public
accountants;

 

(ii)                                  the
draft audited consolidated balance sheet and statements of operations,
shareholder’s equity and cash flows of the Credit Parties, as of and for the
fiscal year ended December 31, 2002, certified by a Designated Financial
Officer that such financial statements fairly present the financial condition
of the Credit Parties as at such date and the results of the operations of the
Credit Parties for the period ended on such date and that all such financial
statements, including the related schedules and notes thereto have been
prepared in all material

 

42

 

respects in accordance
with GAAP applied consistently throughout the periods involved, except as
disclosed on Schedule 5.4; and

 

(iii)                               the
management summary of operations of the Credit Parties for the 12 month period
ended on December 31, 2002, set forth on a monthly basis, certified by a
Designated Financial Officer that such summary of operations fairly presents
the financial condition of the Credit Parties as at such date and for the
periods specified therein;

 

(iv)                              the
projected consolidated balance sheets, statements of operations and cash flows,
and projected Excess Availability for the Credit Parties on a monthly basis for
fiscal year 2003 .

 

Except as disclosed on Schedule 5.4,
such financial statements (except for the projections) present fairly, in all
material respects, the respective consolidated financial position and results
of operations and cash flows of the respective entities as of such respective
dates and for such periods in accordance with GAAP, subject to year-end audit
adjustments and the absence of footnotes in the case of such unaudited or pro forma
statements.  The projections were
prepared by the Credit Parties in good faith and were based on assumptions that
were reasonable when made.

 

(b)                                 Except
as disclosed on Schedule 5.4, since December 31, 2001, there has
been no material adverse change in the business, assets, operations or
condition, financial or otherwise, of the Credit Parties from that set forth in
the December 31, 2001 financial statements referred to in clause (i) of paragraph
(a) above.

 

(c)                                  None
of the Credit Parties has on the date hereof any contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or unrealized
or anticipated losses from any unfavorable commitments in each case that are
material, except as referred to or reflected or provided for in the balance
sheets as at the end of their respective fiscal years ended December 31, 2001,
referred to above, as provided for in Schedule 5.4 annexed hereto,
or as otherwise permitted pursuant to this Agreement, or as referred to or
reflected or provided for in the financial statements described in this
Section 5.4.

 

5.5                                 Properties.

 

(a)                                  Each
Credit Party has good and marketable title to, or valid, subsisting and
enforceable leasehold interests in, all its Property material to its
business.  All machinery and equipment
of the Credit Parties is in good operating condition and repair (ordinary wear
and tear excepted), and all necessary replacements of and repairs thereto have
be made so as to preserve and maintain the value and operating efficiency of
such machinery and equipment.  As of the
date hereof, Schedule 5.5 annexed hereto contains a true, accurate
and complete list of (i) all owned equipment and all leased equipment, and (ii)
all equipment leases (together with all amendments, modifications, supplements,
renewals or extensions of any thereof). 
Except as specified in Schedule 5.5, each agreement listed
in clause (ii) of the immediately preceding sentence is in full force and
effect and the Borrowers have no knowledge of any default that has occurred and
is continuing thereunder, and each such agreement constitutes the legal, valid
and binding obligation of each applicable Credit Party, enforceable against
such Credit Party in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors’ rights generally or by equitable principles.

 

(b)                                 Set
forth on Schedule 5.5 hereto is a complete list of all Patents,
Trademarks and Copyrights.  Each Credit
Party owns, or is licensed to use, all Patents, Trademarks and Copyrights and

 

43

 

other intellectual property material to its business (“Proprietary
Rights”), and to the knowledge of the Borrowers, the use thereof by the
Credit Parties does not infringe upon the rights of any other Person, except
for any such infringements that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.

 

(c)                                  Schedule
5.5 clearly identifies all Patents, Trademarks and Copyrights that have
been duly registered in, filed in or issued by the PTO or the United States
Register of Copyrights (collectively, the “Registered Proprietary Rights”).  The Registered Proprietary Rights have been
properly maintained and renewed in accordance with all applicable provisions of
law and administrative regulations in the United States, as applicable.  The Credit Parties have taken commercially
reasonable steps to protect their Registered Proprietary Rights and to maintain
the confidentiality of all Proprietary Rights that are not generally in the
public domain.

 

(d)                                 As
of the date hereof, Schedule 5.5 annexed hereto contains a true,
accurate and complete list of (i) all Real Property Assets, whether owned or
leased, and (ii) all leases, subleases or assignments of leases (together with
all amendments, modifications, supplements, renewals or extensions of any
thereof) affecting each Leasehold Property, regardless of whether such Credit
Party is the landlord or tenant (whether directly or as an assignee or
successor in interest) under such lease, sublease or assignment.  Except as specified in Schedule 5.5,
each agreement listed in clause (ii) of the immediately preceding sentence is
in full force and effect and the Borrowers have no knowledge of any default
that has occurred and is continuing thereunder, and each such agreement
constitutes the legal, valid and binding obligation of each applicable Credit
Party, enforceable against such Credit Party in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors’ rights generally
or by equitable principles.

 

5.6                                 Litigation and Environmental Matters.

 

(a)                                  There
are no actions, suits or proceedings by or before any arbitrator or
Governmental Authority pending against or, to the knowledge of the Credit
Parties, threatened against or affecting any Credit Party as to which there is
a reasonable possibility of an adverse determination and that, if adversely
determined, could reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect (other than the Disclosed Matters set forth
in part (a) of Schedule 5.6).

 

(b)                                 Except
for the Disclosed Matters set forth in Schedule 5.6 and except with
respect to any other matters that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, the Credit
Parties (i) have not failed to comply with any Environmental Law or to obtain,
maintain or comply with any permit, license or other approval required in
connection with the operation of the Credit Parties’ business to be in
compliance with all applicable Environmental Laws, (ii) have not become subject
to any Environmental Liability; (iii) have not received notice of any claim
with respect to any Environmental Liability or any inquiry, allegation, notice
or other communication from any Governmental Authority which is currently
outstanding or pending concerning its compliance with any Environmental Law or
(iv) do not know of any basis for any Environmental Liability.

 

(c)                                  Since
the date of this Agreement, there has been no change in the status of the
Disclosed Matters that, individually or in the aggregate, has resulted in, or
materially increased the likelihood of, a Material Adverse Effect.

 

5.7                                 Compliance with Laws and Agreements.  Except as set forth on Schedule 5.7,
each Credit Party is in compliance with all laws, regulations, policies and
orders of any Governmental Authority applicable to it or its property and all
indentures, agreements and other instruments binding

 

44

 

upon it or its property, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.

 

5.8                                 Investment and Holding Company Status.  No Credit Party is (a) an “investment
company” as defined in, or subject to regulation under, the Investment Company
Act of 1940, as amended, (b) a “holding company” as defined in, or subject to
regulation under, the Public Utility Holding Company Act of 1935, as amended or
(c) a “bank holding company” as defined in, or subject to regulation under, the
Bank Holding Company Act of 1956, as amended.

 

5.9                                 Taxes.  Except as
set forth on Schedule 5.9, each Credit Party has timely filed or
caused to be filed all Tax returns and reports required to have been filed and
has paid or caused to be paid all Taxes required to have been paid by it,
except (a) Taxes that are being contested in good faith by appropriate
proceedings and for which such Credit Party has set aside on its books adequate
reserves with respect thereto in accordance with GAAP, which reserves shall be
acceptable to Lender, or (b) to the extent that the failure to do so could not
reasonably be expected to result in a Material Adverse Effect.

 

5.10                           ERISA.  Except as
set forth on Schedule 5.10, no Credit Party has any Pension Plans.  No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events
for which liability is reasonably expected to occur, could reasonably be expected
to result in a Material Adverse Effect. 
No Credit Party has a present intention to terminate any Pension Plan
with respect to which any Credit Party would incur a cost of more than $100,000
to terminate such Plan, including amounts required to be contributed to fund
such Plan on Plan termination and all costs and expenses associated therewith,
including without limitation attorneys’ and actuaries’ fees and expenses in
connection with such termination and a reasonable estimate of expenses and
settlement or judgment costs and attorneys’ fees and expenses in connection
with litigation related to such termination.

 

5.11                           Disclosure.  As of
the Effective Time, the Credit Parties have disclosed to the Lender all
material agreements, instruments and corporate or other restrictions to which
any Credit Party is subject after the Effective Time, and all other matters
known to the Credit Parties, that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect.  The organizational structure of the Credit
Parties is as set forth on Schedule 5.12 annexed hereto.  The information, reports, financial
statements, exhibits and schedules furnished at or prior to the Effective Time
in writing by or on behalf of the Credit Parties to the Lender in connection
with the negotiation, preparation or delivery of this Agreement and the other
Loan Documents or included herein or therein or delivered pursuant hereto or
thereto, at the Effective Time, when taken as a whole do not contain any untrue
statement of material fact or omit to state any material fact necessary to make
the statements herein or therein, in light of the circumstances under which
they were made, not materially misleading. 
All written information furnished after the Effective Time by the Credit
Parties to the Lender in connection with this Agreement and the other Loan
Documents and the transactions contemplated hereby and thereby will be true,
complete and accurate in every material respect, or (in the case of pro-forma
information and projections) prepared in good faith based on reasonable
assumptions, on the date as of which such information is stated or
certified.  There is no fact known to
the Credit Parties that could reasonably be expected to have a Material Adverse
Effect that has not been disclosed herein, in the other Loan Documents or in a
report, financial statement, exhibit, schedule, disclosure letter or other
writing furnished to the Lender for use in connection with the transactions
contemplated hereby or thereby.

 

5.12                           Capitalization.  As of the Effective Time, the capital
structure and ownership of the Credit Parties are correctly described on Schedule 5.12.  As of the Effective Time, the authorized,
issued and outstanding capital stock of the Credit Parties consists of the
capital stock described on Schedule 5.12, all of which is duly and
validly issued and outstanding, fully paid and nonassessable.  Except as set forth on Schedule 5.12,
as of the date hereof, (x) there are no outstanding Equity Rights with

 

45

 

respect to any Credit Party and, (y) there are no outstanding
obligations of any Credit Party to repurchase, redeem, or otherwise acquire any
shares of capital stock of or other interest in any Credit Party, nor are there
any outstanding obligations of any Credit Party to make payments to any Person,
such as “phantom stock” payments, where the amount thereof is calculated with
reference to the fair market value or equity value of any Credit Party.

 

5.13                           Subsidiaries.

 

(a)                                  Set
forth on Schedule 5.13 is a complete and correct list of all
Subsidiaries of the Credit Parties as of the date hereof, together with, for
each such Subsidiary, (i) the jurisdiction of organization of such Subsidiary,
(ii) each Person holding ownership interests in such Subsidiary and (iii) the
nature of the ownership interests held by each such Person and the percentage
of ownership of such Subsidiary represented by such ownership interests.  Except as disclosed in Schedule 5.13,
(x) each Credit Party and its respective Subsidiaries owns, free and clear of
Liens (other than Liens permitted hereunder), and has the unencumbered right to
vote, all outstanding ownership interests in each Person shown to be held by it
in Schedule 5.13, (y) all of the issued and outstanding capital
stock of each such Person organized as a corporation is validly issued, fully
paid and nonassessable and (z) there are no outstanding Equity Rights with
respect to such Person.

 

(b)                                 Except
as set forth on Schedule 8.8, as of the date of this Agreement none
of the Credit Parties is subject to any indenture, agreement, instrument or
other arrangement containing any provision of the type described in
Section 8.8 (“Restrictive Agreements”), other than any such
provision the effect of which has been unconditionally, irrevocably and
permanently waived.

 

5.14                           Material Indebtedness, Liens and
Agreements.

 

(a)                                  Schedule 5.14
hereto contains a complete and correct list, as of the date of this Agreement,
of all Material Indebtedness or any extension of credit (or commitment for any
extension of credit) to, or guarantee by, any Credit Party the aggregate
principal or face amount of which equals or exceeds (or may equal or exceed)
$50,000 and the aggregate principal or face amount outstanding or that may
become outstanding with respect thereto is correctly described on Schedule 5.14.

 

(b)                                 Schedule 5.14
hereto is a complete and correct list, as of the date of this Agreement, of
each Lien (other than the Liens in favor of the Lender) securing Indebtedness
of any Person and covering any property of the Credit Parties, and the
aggregate Indebtedness secured (or which may be secured) by each such Lien and
the Property covered by each such Lien is correctly described in the
appropriate part of Schedule 5.14.

 

(c)                                  Schedule 5.14
hereto is a complete and correct list, as of the date of this Agreement, of
each contract and arrangement to which any Credit Party is a party for which
breach, nonperformance, cancellation or failure to renew would have a Material
Adverse Effect other than purchase orders made in the ordinary course of
business and subject to customary terms.

 

(d)                                 To
the extent requested by Lender, true and complete copies of each agreement
listed on the appropriate part of Schedule 5.14 have been delivered
to the Lender, together with all amendments, waivers and other modifications
thereto.  All such agreements are valid,
subsisting, in full force and effect, are currently binding and will continue
to be binding upon each Credit Party that is a party thereto and, to the best
knowledge of the Credit Parties, binding upon the other parties thereto in
accordance with their terms.  The Credit
Parties are not in default under any such agreements, which default could have
a Material Adverse Effect.

 

46

 

5.15                           Federal Reserve Regulations.  No Credit Party is engaged principally or as
one of its important activities in the business of extending credit for the
purpose of purchasing or carrying margin stock (as defined in Regulation U
of the Board).  The making of the Loans
hereunder, the use of the proceeds thereof as contemplated hereby, and the
security arrangements contemplated by the Loan Documents, will not violate or
be inconsistent with any of the provisions of Regulations T, U, or X of the
Board of Governors of the Federal Reserve System.

 

5.16                           Solvency.  As of
the Effective Time and after giving effect to the initial Loans hereunder and
the other transactions contemplated hereby:

 

(a)                                  the
aggregate value of all properties of the Credit Parties at their present fair
saleable value on a going concern basis (i.e., the amount that may be realized
within a reasonable time, considered to be six months to one year, either
through collection or sale at the regular market value, conceiving the latter
as the amount that could be obtained for such properties within such period by
a capable and diligent businessperson from an interested buyer who is willing
to purchase under ordinary selling conditions), exceed the amount of all the
debts and liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities) of the Credit Parties;

 

(b)                                 the
Credit Parties will not, on a consolidated basis, have an unreasonably small
capital with which to conduct their business operations as heretofore
conducted; and

 

(c)                                  the
Credit Parties will have, on a consolidated basis, sufficient cash flow to
enable them to pay their debts as they mature.

 

5.17                           Force Majeure.  Since December 31, 2001, the business,
properties and other assets of the Credit Parties have not been materially and
adversely affected in any way as the result of any fire or other casualty,
strike, lockout or other labor trouble, embargo, sabotage, confiscation,
contamination, riot, civil disturbance, activity of armed forces or act of God.

 

5.18                           Accounts Receivable.  The Lender may rely, in determining which
accounts receivable are Eligible Accounts, on all statements and
representations made by the Credit Parties with respect to such accounts
receivable.  Unless otherwise indicated
to the Lender in writing:

 

(a)                                  Each
account receivable is genuine and in all respects what it purports to be, and
it is not evidenced by a judgment;

 

(b)                                 Each
account receivable arises out of a completed, bona fide sale and delivery of
goods or rendition of services by a Credit Party in the ordinary course of its
business and in accordance with the terms and conditions of all purchase
orders, contracts or other documents relating thereto and forming a part of the
contract between such Credit Party and the account debtor, and, in the case of
goods, title to the goods has passed from the Credit Party to the account
debtor;

 

(c)                                  Each
account receivable is for a liquidated amount maturing as stated in the
duplicate invoice covering such sale or rendition of services, a copy of which
has been furnished or is available to the Lender;

 

(d)                                 Each
account receivable, and the Lender’s security interest therein, is not, and
will not (by voluntary act or omission of the Credit Parties) be in the future,
subject to any offset, Lien, deduction, defense, dispute, counterclaim or any
other adverse condition except for disputes resulting in returned goods where
the amount in controversy is deemed by the Lender to be immaterial, and each
such

 

47

 

account receivable is absolutely owing to one of the Credit Parties and
is not contingent in any respect or for any reason;

 

(e)                                  No
Credit Party has made any agreement with any account debtor for any extension,
compromise, settlement or modification of any account receivable or any
deduction therefrom, except discounts or allowances which are granted by the
Credit Parties in the ordinary course of their businesses for prompt payment
and which are reflected in the calculation of the net amount of each respective
invoice related thereto and are reflected in the Borrowing Base Certificates
and Collateral Update Certificates furnished to the Lender hereunder;

 

(f)                                    To
the best knowledge of the Credit Parties, the account debtor under each account
receivable had the capacity to contract at the time any contract or other
document giving rise to an account receivable was executed and such account
debtor is not insolvent; and

 

(g)                                 To
the best knowledge of the Credit Parties, there are no proceedings or actions
which are threatened or pending against any account debtor which might result
in any material adverse change in such account debtor’s financial condition or
the collectability of any account receivable.

 

5.19                           Labor and Employment Matters.

 

(a)                                  Except
as set forth on Schedule 5.19 as of the Effective Time, and
thereafter with respect to which such would have a Material Adverse Effect, (A)
no employee of the Credit Parties is represented by a labor union, no labor
union has been certified or recognized as a representative of any such
employee, and the Credit Parties do not have any obligation under any
collective bargaining agreement or other agreement with any labor union or any
obligation to recognize or deal with any labor union, and there are no such
contracts or other agreements pertaining to or which determine the terms or
conditions of employment of any employee of the Credit Parties; (B) there are
no pending or threatened representation campaigns, elections or proceedings;
(C) the Credit Parties do not have knowledge of any strikes, slowdowns or work
stoppages of any kind, or threats thereof, and no such activities occurred
during the 24-month period preceding the date hereof; (D) no Credit Party has
engaged in, admitted committing or been held to have committed any unfair labor
practice; and (E) there are no controversies or grievances between any Credit
Party and any of its employees or representatives thereof.

 

(b)                                 Except
as set forth on Schedule 5.19, the Credit Parties have at all times
complied in all material respects, and are in material compliance with, all
applicable laws, rules and regulations respecting employment, wages, hours,
compensation, benefits, and payment and withholding of taxes in connection with
employment.

 

(c)                                  Except
as set forth on Schedule 5.19, except as could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect,
the Credit Parties have at all times complied with, and are in compliance with,
all applicable laws, rules and regulations respecting occupational health and
safety, whether now existing or subsequently amended or enacted, including,
without limitation, the Occupational Safety & Health Act of 1970, 29 U.S.C.
Section 651 et seq. and the state analogies thereto, all as amended or
superseded from time to time, and any common law doctrine relating to worker
health and safety.

 

5.20                           Bank Accounts.  Schedule 5.20 lists all banks and
other financial institutions at which any Credit Party maintains deposits
and/or other accounts as of the Closing Date, and such Schedule correctly
identifies the name and address of each depository, the name in which the
account is held, a description of the purpose of the account, and the complete
account number.

 

48

 

ARTICLE 6

Conditions

 

6.1                                 Effective Time.  The obligations of the Lender to make
Revolving Loans and Term Loans, and of the Issuing Lender to issue Letters
of Credit hereunder shall not become effective until the date on which each of
the following conditions is satisfied (or waived in accordance with
Section 10.2):

 

(a)                                  Counterparts
of Agreement.  The Lender shall have
received from each party hereto either (i) a counterpart of this Agreement
signed on behalf of such party or (ii) written evidence satisfactory to the
Lender (which may include telecopy transmission of a signed signature page of
this Agreement) that such party has signed a counterpart of this Agreement.

 

(b)                                 Notes.  The Lender shall have received a duly
completed and executed Revolving Credit Note, a duly completed and executed
Equipment Term Note, and a duly completed and executed Real Estate Term Note.

 

(c)                                  Organizational
Structure.  The corporate organizational
structure, capitalization and ownership of the Credit Parties, shall be as set
forth on Schedules 5.12 and 5.13 annexed hereto.  The Lender shall have had the opportunity to
review, and shall be satisfied with, the Credit Parties’ state and federal tax
assumptions, and the ownership, capital, organization and structure of the
Credit Parties.

 

(d)                                 Existence
and Good Standing.  The Lender shall
have received such documents and certificates as the Lender or Special Counsel
may reasonably request relating to the organization, existence and good
standing of each Credit Party, the authorization of the transactions
contemplated hereby and any other legal matters relating to the Credit Parties,
this Agreement or the other Loan Documents, all in form and substance
reasonably satisfactory to the Lender and Special Counsel.

 

(e)                                  Security
Interests in Personal and Mixed Property. 
The Lender shall have received evidence satisfactory to it that the
Credit Parties shall have taken or caused to be taken all such actions,
executed and delivered or caused to be executed and delivered all such
agreements, documents and instruments and made or caused to be made all such
filings and recordings (other than filings or recordings to be made by the
Lender on or after the Closing Date) that may be necessary or, in the opinion
of the Lender, desirable in order to create in favor of the Lender, valid and
(upon such filing and recording) perfected First Priority security interests in
the entire personal and mixed property Collateral.

 

(f)                                    Mortgage;
Etc.  The Lender shall have received
from the Credit Parties fully executed and notarized Mortgages, in the form of Exhibit
G, in proper form for recording in all appropriate places in all applicable
jurisdictions, encumbering each parcel of Material Owned Property existing as
of the Closing Date that is designated as a “Mortgaged Property” on Schedule
1.1 hereto (each such parcel, a “Mortgaged Property”), together with
mortgagee title insurance policies or commitments therefor, and copies of all
surveys, deeds, title exception documents, flood hazard certificates and other
documents as the Lender may reasonably require.

 

(g)                                 Leases;
Landlord’s Waivers and Consents.  In the
case of each Material Leasehold Property existing as of the Closing Date,
copies of the lease, and all amendments thereto, between the Credit Party and
the landlord or tenant party thereto, together with a Landlord’s Waiver and
Consent with respect thereto and where required by the terms of any lease, the
consent of the mortgagee, ground lessor or other party.

 

49

 

(h)                                 Hazardous
Materials Environmental Indemnity.  A
Hazardous Materials Indemnity Agreement from the Credit Parties with respect to
the indemnification of the Lender for any liabilities that may be imposed on or
incurred by any of them as a result of any Hazardous Materials that may be
located on any Real Property Asset.

 

(i)                                     Environmental
Reports.  The Lender shall have received
reports and other information, in form, scope and substance satisfactory to the
Lender, regarding environmental matters relating to such Real Property Assets
as the Lender shall require, which reports shall include Phase I and/or
Phase II environmental assessments as specified by the Lender for each such
Real Property Asset, which conform to the ASTM Standard Practice for
Environmental Site Assessments, and the Lender shall be satisfied with the
results of such reports and other information. 
Such reports shall be conducted by one or more environmental consulting
firms reasonably satisfactory to the Lender. 
The Credit Parties shall deliver a similar satisfactory environmental
assessment prior to the acquisition of any future Real Property Asset.

 

(j)                                     Evidence
of Insurance.  The Lender shall have
received certificates from the Credit Parties’ insurance brokers that all
insurance required to be maintained pursuant to Section 7.5 is in full
force and effect and that the Lender has been named as additional insured or
loss payee thereunder to the extent required under Section 7.5.

 

(k)                                  Necessary
Governmental Permits, Licenses and Authorizations and Consents; Etc.  The Credit Parties shall have obtained all
other permits, licenses, authorizations and consents from all other
Governmental Authorities and all consents of other Persons with respect to
Material Indebtedness, Liens and material agreements listed on Schedule 5.14
(and so identified thereon) annexed hereto, in each case that are necessary or
advisable in connection with the transactions contemplated by the Loan
Documents, and each of the foregoing shall be in full force and effect, in each
case other than those the failure to obtain or maintain which, either
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.  No action,
request for stay, petition for review or rehearing, reconsideration or appeal
with respect to any of the foregoing shall be pending, and the time for any
applicable Governmental Authority to take action to set aside its consent on
its own motion shall have expired.

 

(l)                                     Existing
Debt; Liens.  The Lender shall have
received evidence that all principal, interest, and other amounts owing in
respect of all Existing Debt of the Credit Parties (other than Indebtedness
permitted to remain outstanding in accordance with Section 8.1 hereof)
will be repaid in full as of the Effective Time, and that with respect to all
Indebtedness permitted to remain outstanding in accordance with Section 8.1
hereof, any defaults or events of default existing as of the Closing Date with
respect to such Indebtedness will be cured or waived immediately following the
funding of the initial Loans.  The
Lender shall have received evidence that as of the Effective Time, the Property
of the Credit Parties is not subject to any Liens (other than Liens permitted
to remain outstanding in accordance with Section 8.2 hereof).

 

(m)                               Financial
Statements; Projections.  The Lender
shall have received the certified financial statements and projections referred
to in Section 5.4 hereof and the same shall not be inconsistent with the information
previously provided to the Lender.

 

(n)                                 Financial
Officer Certificate.  The Lender shall
have received a certificate, dated the Closing Date and signed by a Designated
Financial Officer, confirming compliance with the conditions set forth in paragraphs
(a) and (b) of Section 6.2 at the Effective Time.

 

50

 

(o)                                 Solvency
Certificate.  The Lender shall have
received the Solvency Certificate, dated the Closing Date and signed by the
Chief Financial Officer of the Borrowers, confirming the truth and accuracy of
the representations and warranties made by the Borrowers in Section 5.16.

 

(p)                                 No
Material Adverse Change.  There shall
have occurred no material adverse change (in the reasonable opinion of the Lender)
in the businesses, operations, properties (including tangible properties), or
conditions (financial or otherwise), assets, liabilities or income of the
Credit Parties.

 

(q)                                 Opinion
of Counsel to Credit Parties.  The
Lender shall have received favorable written opinions (addressed to the Lender
and dated the Closing Date) of Lynch, Brewer, Hoffman & Fink, LLP, special
counsel to the Credit Parties, substantially in the form of Exhibit I
annexed hereto and covering such matters relating to the Credit Parties, this
Agreement, the other Loan Documents or the transactions contemplated hereby as
the Lender shall reasonably request.

 

(r)                                    Borrowing
Base and Collateral Update Certificates. 
A Designated Financial Officer shall have executed and delivered to the
Lender a Borrowing Base Certificate substantially in the form of Exhibit B-1
annexed hereto, which Borrowing Base Certificate shall show Excess Availability
under the Revolving Credit Commitment of not less than $1,000,000 (after giving
effect to the payment of all sums and expenses, the issuance of all Letters of
Credit and the funding of all Loans to be paid, issued or funded at the
Effective Time), and a Collateral Update Certificate substantially in the form
of Exhibit B-2 annexed hereto.

 

(s)                                  Lockbox
Accounts/Controlled Accounts.  The
Credit Parties shall have established such Lock Box Accounts and Controlled
Accounts with the Cash Management Bank as required in accordance with Section
4.3 hereof, and shall have entered into all Lockbox Agreements and/or Control
Agreements as shall be required by the Lender.

 

(t)                                    Inspection,
Audit and Appraisal.  The Lender shall
have (i) discussed the business and operations of the Credit Parties with the
senior management of the Credit Parties, (ii) inspected the facilities of the
Credit Parties, (iii) conducted an audit of the books and records of the Credit
Parties and (iv) received appraisal reports and other information regarding the
assets of the Credit Parties as the Lender may require conducted by auditors satisfactory
to the Lender, and the results of such meeting, inspection, audit and
appraisals shall be in form, scope and substance satisfactory to the Lender in
its sole discretion.

 

(u)                                 Fees
and Expenses.  The Lender and the
Issuing Lender shall have received all fees and other amounts due and payable
to such Person and Special Counsel at or prior to the Effective Time,
including, to the extent invoiced, reimbursement or payment of all
out-of-pocket expenses required to be reimbursed or paid by the Borrowers hereunder.

 

(v)                                 Other
Documents.  The Lender shall have
received all material contracts, instruments, opinions, certificates,
assurances and other documents as the Lender or Special Counsel shall have
reasonably requested and the same shall be reasonably satisfactory to each of
them.

 

6.2                                 Each Extension of Credit.  The obligation of the Lender to make a Loan
on the occasion of any Borrowing, and of the Issuing Lender to issue, amend,
renew or extend any Letter of Credit, is subject to the satisfaction of the
following conditions:

 

51

 

(a)                                  Representations
and Warranties.  The representations and
warranties of each Credit Party set forth in this Agreement and the other Loan
Documents shall be true and correct in all material respects on and as of the
date of such Borrowing, or (as applicable) the date of issuance, amendment,
renewal or extension of such Letter of Credit, both before and after giving
effect thereto and to the use of the proceeds thereof (or, if any such
representation or warranty is expressly stated to have been made as of a
specific date, such representation or warranty shall be or have been true and
correct as of such specific date and provided that, to the extent any change in
circumstances expressly permitted by this Agreement causes any representation
and warranty set forth herein to no longer be true, such representation and
warranty shall be deemed modified to reflect such change in circumstances).

 

(b)                                 No
Defaults.  At the time of, and immediately
after giving effect to, such Borrowing, or (as applicable) the date of
issuance, amendment, renewal or extension of such Letter of Credit, no Default
shall have occurred and be continuing.

 

(c)                                  Excess
Availability.  The Borrowers’ shall
have Excess Availability of not less than $1 after giving effect to the funding
of such requested Loan or the issuance of such requested Letter of Credit.

 

ARTICLE 7

Affirmative
Covenants

 

Until the Revolving
Credit Commitment has expired or been terminated and the principal of and
interest on each Loan and all fees payable hereunder shall have been paid in
full and all Letters of Credit shall have expired or terminated and all LC
Disbursements shall have been reimbursed, each Credit Party covenants and
agrees with the Lender that:

 

7.1                                 Financial Statements and Other Information.  The Credit Parties will furnish to the
Lender:

 

(a)                                  as
soon as available and in any event within 90 days after the end of each fiscal
year of the Credit Parties:

 

(i)                                     consolidated
statements of operations, shareholders’ equity and cash flows of the Credit
Parties for such fiscal year and the related consolidated balance sheets of the
Credit Parties as at the end of such fiscal year, setting forth in each case in
comparative form the corresponding consolidated figures for the preceding
fiscal year, and

 

(ii)                                  an
opinion of independent certified public accountants of recognized national
standing (without a “going concern” or like qualification or exception and
without any qualification or exception as to the scope of such audit) stating
that the financial statements referred to in the preceding clause (i) fairly
present in all material respects the consolidated financial condition and
results of operations of the Credit Parties as at the end of, and for, such
fiscal year in accordance with GAAP.

 

(b)                                 as
soon as available and in any event within (x) 45 days after each December 31st,
March 31st, June 30th and September 30th, and (y) 30 days after the end of each
other month:

 

(i)                                     consolidated
statements of operations, shareholders’ equity and cash flows of the Credit
Parties for such month and for the period from the beginning of the respective
fiscal year to the end of such month, and the related consolidated balance
sheets of the Credit

 

52

 

 Parties as at the end of such period, setting
forth in each case in comparative form the corresponding consolidated figures
for the corresponding period in the preceding fiscal year, and the
corresponding figures for the forecasts most recently delivered to the Lender
for such period, and

 

(ii)                                  a
certificate of a Designated Financial Officer, which certificate shall state
that said financial statements referred to in the preceding clause (i) fairly
present in all material respects the consolidated financial condition and
results of operations of the Credit Parties, in each case in accordance with
GAAP, consistently applied, as at the end of, and for, such period (subject to
normal year-end audit adjustments and the omission of footnotes);

 

(c)                                  as
soon as available and in any event (i) simultaneously with the delivery of the
monthly financial statements delivered pursuant to subsection 7.1(b) above, a
Compliance Certificate duly executed by a Designated Financial Officer with
respect to such monthly financial statements, and (ii) within 90 days after the
end of each fiscal year, a Compliance Certificate duly executed by a Designated
Financial Officer with respect to the annual financial statements delivered
pursuant to subsection 7.1(a) above;

 

(d)                                 as
soon as available and in any event simultaneously with the delivery of the
monthly financial statements delivered pursuant to subsection 7.1(b) above a
management summary of operations of the Credit Parties for such month, certified
by a Designated Financial Officer that such summary of operations fairly
presents the financial condition of the Credit Parties for such month;

 

(e)                                  within
five days after the same are sent or filed, copies of all financial statements
and reports which the Credit Parties send to the holders of any public equity
securities and all periodic financial statements, final registration statements
(excluding exhibits) and reports which the Company or the Borrower may make to,
or file with, the Securities and Exchange Commission;

 

(f)                                    as
soon as available and in any event within three (3) days after the end of each
week with respect to such week (or more frequently if requested by the Lender),
(i) a Collateral Update Certificate in the form attached hereto as Exhibit
B-2,

 

(g)                                 as
soon as available and in any event within twenty (20) days after the end of
each month with respect to such month (or more frequently if requested by the
Lender), (i) a Borrowing Base Certificate in the form attached hereto as Exhibit
B-1, (ii) an Accounts Receivable/Loan Reconciliation Report in the form
attached hereto as Exhibit B-3, (iii) a summary of inventory by type and
location, (iv) an accounts receivable aging report, and (v) such other
information relating to the Collateral as the Lender shall reasonably request,
in each case, accompanied by such supporting detail and documentation as the
Lender shall reasonably request;

 

(h)

 

(i)                                     as
soon as available and in any event prior to the end of each fiscal year of the
Credit Parties, statements of forecasted consolidated income and cash flows for
the Credit Parties for each fiscal quarter in the immediately succeeding fiscal
year and a forecasted consolidated balance sheet of the Credit Parties as of
the last day of each fiscal quarter in such succeeding fiscal year, and a
comparison of the projected Excess Availability as of the last day of each
fiscal quarter in such succeeding fiscal year with the Excess Availability as
of the last day of each fiscal quarter in the current fiscal year, together
with supporting assumptions which were reasonable when made, all prepared in
good faith in reasonable detail and consistent with the Credit Parties’ past
practices in preparing projections and otherwise reasonably satisfactory in
scope to the Lender;

 

53

 

(j)                                     as
soon as available and in any event prior to March 1 of each year, statements of
forecasted consolidated income and cash flows for the Credit Parties for each
fiscal month in the current fiscal year and a forecasted consolidated balance
sheet of the Credit Parties as of the last day of each fiscal month in such
fiscal year, and a comparison of the projected Excess Availability as of the
last day of each fiscal month in such fiscal year with the Excess Availability
as of the last day of each fiscal month in the immediately prior fiscal year,
together with supporting assumptions which were reasonable when made, all
prepared in good faith in reasonable detail and consistent with the Credit Parties’
past practices in preparing projections and otherwise reasonably satisfactory
in scope to the Lender;

 

(k)                                  as
soon as available and in any event no later than 1:00 p.m. (Boston time) on
each day that the Borrowers make any request for any Borrowing hereunder, an
Advance Request in the form attached hereto as Exhibit B-5.

 

(l)                                     promptly
upon receipt thereof, copies of all management letters and accountants’ letters
received by the Credit Parties; and

 

(m)                               promptly
following any request therefor, such other information regarding the
operations, business affairs and financial condition of the Credit Parties, or
compliance with the terms of this Agreement, as the Lender may reasonably
request.

 

7.2                                 Notices of Material Events.  The Credit Parties will furnish to the
Lender prompt written notice of the following:

 

(a)                                  the
occurrence of any Default;

 

(b)                                 the
filing or commencement of any action, suit or proceeding by or before any
arbitrator or Governmental Authority against or affecting any Credit Party or Affiliate
that could reasonably be expected to result in a Material Adverse Effect;

 

(c)                                  the
occurrence of any ERISA Event related to the Plan of any Credit Party or
knowledge after due inquiry of any ERISA Event related to a Plan of any other
ERISA Affiliate that, alone or together with any other ERISA Events that have
occurred, could reasonably be expected to result in liability of the Credit
Parties; and

 

(d)                                 any
other development that results in, or could reasonably be expected to result
in, a Material Adverse Effect.

 

Each notice delivered
under this Section 7.2 shall be accompanied by a statement of a Designated
Financial Officer setting forth the details of the event or development
requiring such notice and any action taken or proposed to be taken with respect
thereto.

 

7.3                                 Existence; Conduct of Business.  Each Credit Party shall do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
its legal existence and the rights, licenses, permits, privileges and franchises
material to the conduct of its business; provided that the foregoing shall not
prohibit any merger, consolidation, liquidation, dissolution or any
discontinuance or sale of such business permitted under Section 8.4.

 

7.4                                 Payment of Obligations.  Each Credit Party shall pay its obligations,
including Tax liabilities, that, if not paid, could result in a Material
Adverse Effect before the same shall become delinquent or in default, except
where (a) the validity or amount thereof is being contested in good faith

 

54

 

by appropriate proceedings, (b) such Credit Party has set aside on its
books adequate reserves with respect thereto in accordance with GAAP, which
reserves shall be acceptable to Lender, and (c) the failure to make payment
pending such contest could not reasonably be expected to result in a Material
Adverse Effect.

 

7.5                                 Maintenance of Properties; Insurance.  Each Credit Party shall (a) keep and
maintain all property material to the conduct of its business in good working
order and condition, ordinary wear and tear excepted, and (b) maintain
insurance, with financially sound and reputable insurance companies, as may be
required by law and such other insurance in such amounts and against such risks
as are customarily maintained by companies engaged in the same or similar
businesses operating in the same or similar locations, including, without
limitation, business interruption and product liability insurance.  Without limiting the generality of the foregoing,
the Credit Parties will maintain or cause to be maintained replacement value
casualty insurance on the Collateral under such policies of insurance, in each
case with such insurance companies, in such amounts, with such deductibles, and
covering such terms and risks as are at all times satisfactory to the Lender in
its commercially reasonable judgment. 
All general liability and other liability policies with respect to the
Credit Parties shall name the Lender as an additional insured thereunder as its
interests may appear, and all business interruption and casualty insurance
policy shall contain a loss payable clause or endorsement, satisfactory in form
and substance to the Lender that names the Lender as the loss payee thereunder.  All policies of insurance shall provide for
at least 30 days prior written notice to the Lender of any modifications or
cancellation of such policy.

 

7.6                                 Books and Records; Inspection Rights.  Each Credit Party shall keep proper books of
record and account in which entries are made of all dealings and transactions
in relation to its business and activities which fairly record such
transactions and activities.  Each
Credit Party shall permit any representatives designated by the Lender to visit
and inspect its properties, to examine and make extracts from its books and
records, and to discuss its affairs, finances and condition with its officers
and independent accountants as frequently as the Lender deems appropriate provided
that, so long as no Default has occurred and is continuing, all such visits
shall be on reasonable prior notice, at reasonable times during regular
business hours of such Credit Party, and provided further that after the occurrence
and during the continuance of any Default, the Lender may visit at any reasonable
times.  The Borrowers shall reimburse
the Lender for all examination and inspections costs, internal costs at the
rate of $850  per man-day, plus all out-of-pocket expenses incurred in
connection with such inspections.  The
Credit Parties will permit independent appraisers and environmental consultants
selected by the Lender to visit the properties of the Credit Parties and
perform appraisals and examinations of the inventory, equipment and Real
Property Assets of the Credit Parties at such times and with such frequencies
as the Lender shall reasonably request. The Borrowers shall reimburse the
Lender for all fees, costs and expenses charged by such independent appraisers
and environmental consultants for each such appraisal and examination.

 

7.7                                 Fiscal Year.  To
enable the ready and consistent determination of compliance with the covenants
set forth in Section 8.10 hereof, the Credit Parties shall not change
their current fiscal year or current method of determining the last day of the
first three fiscal quarters in each fiscal year without the prior written
consent of the Lender.

 

7.8                                 Compliance with Laws.  Each Credit Party shall comply with (i) all
permits, licenses and authorizations, including, without limitation,
environmental permits, licenses and authorizations, issued by a Governmental
Authority, (ii) all laws, rules, regulations and orders including, without
limitation, Environmental Laws, of any Governmental Authority and (iii) all
contractual obligations, in each case applicable to it or its property, except
where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.

 

55

 

7.9                                 Use of Proceeds.  The proceeds of the Loans will be used only
for (i) the refinancing of existing indebtedness, (ii) fees and expenses
incurred in connection with the transactions contemplated by this Agreement,
and (iii) for general corporate and working capital purposes (including Capital
Expenditures) of the Credit Parties.  No
part of the proceeds of any Loan will be used, whether directly or indirectly,
for any purpose that entails a violation of any of the Regulations of the
Board, including Regulations T, U and X.

 

7.10                           Certain Obligations Respecting Subsidiaries.  Each Credit Party will, and will cause each
of its Subsidiaries to, take such action from time to time as shall be
necessary to ensure that the percentage of the issued and outstanding shares of
capital stock of any class or character owned by it in any Subsidiary on the
date hereof is not at any time decreased, other than by reason of transfers to
another Credit Party.

 

7.11                           ERISA.  Except where a failure to comply with any of
the following, individually or in the aggregate, would not or could not
reasonably be expected to result in a Material Adverse Effect, (i) the Credit
Parties will maintain, and cause each ERISA Affiliate to maintain, each Plan in
compliance with all applicable requirements of ERISA and of the Code and with
all applicable rulings and regulations issued under the provisions of ERISA and
of the Code and (ii) the Credit Parties will not and, to the extent authorized,
will not permit any of the ERISA Affiliates to (a) engage in any transaction
with respect to any Plan which would subject any Credit Party to either a civil
penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by
Section 4975 of the Code, (b) fail to make full payment when due of all
amounts which, under the provisions of any Plan, any Credit Party or any ERISA
Affiliate is required to pay as contributions thereto, or permit to exist any
accumulated funding deficiency (as such term is defined in Section 302 of
ERISA and Section 412 of the Code), whether or not waived, with respect to
any Pension Plan or (c) fail to make any payments to any Multiemployer Plan
that any Credit Party or any of the ERISA Affiliates may be required to make
under any agreement relating to such Multiemployer Plan or any law pertaining
thereto.

 

7.12                           Environmental Matters; Reporting.  The Credit Parties will observe and comply
with, and cause each Subsidiary to observe and comply with all Environmental
Laws to the extent non-compliance could reasonably be expected to have a
Material Adverse Effect.  The Credit
Parties will give the Lender prompt written notice of any violation as to any
Environmental Law by any Credit Party and of the commencement of any judicial
or administrative proceeding relating to Environmental Laws (a) in which an
adverse result would have a material adverse effect on any operating permits,
air emission permits, water discharge permits, hazardous waste permits or other
environmental permits held by any Credit Party, or (b) which will, or is likely
to, have a Material Adverse Effect on such Credit Party or which will require a
material expenditure by such Credit Party to cure any alleged problem or
violation.

 

7.13                           Matters Relating to Additional Real Property
Collateral.

 

(a)                                  From
and after the Effective Time, in the event that any Credit Party acquires any
Material Owned Property that the Lender determines is an Additional Mortgaged
Property or in the event that the Lender determines that any Real Property
Asset has become an Additional Mortgaged Property, the Borrowers shall deliver,
to the Lender, as soon as practicable after the Lender has notified the
Borrowers that a Real Property Asset is an Additional Mortgaged Property, fully
executed and notarized Mortgages (“Additional Mortgages”), in proper
form for recording in all appropriate places in all applicable jurisdictions,
encumbering the interest of the applicable Credit Party in such Additional
Mortgaged Property, together with mortgagee title insurance policies or
commitments therefor, and copies of all surveys, deeds, title exception documents,
flood hazard certificates and other documents as the Lender may reasonably
require copies of all deeds with respect to such Additional Mortgaged Property.

 

56

 

(b)                                 From
and after the Effective Time, in the event that any Credit Party enters into
any lease with respect to any Material Leasehold Property, the Borrowers shall
deliver to the Lender copies of the lease, and all amendments thereto, between
the Credit Party and the landlord or tenant, together with a Landlord’s Waiver
and Consent with respect thereto and where required by the terms of any lease,
the consent of the mortgagee, ground lessor or other party.

 

(c)                                  If
requested by the Lender, the Credit Parties shall permit an independent real
estate appraiser satisfactory to the Lender, upon reasonable notice, to visit
and inspect any Additional Mortgaged Property for the purpose of preparing an
appraisal of such Additional Mortgaged Property satisfying the requirements of
all applicable laws and regulations (in each case to the extent required under
such laws and regulations as determined by the Lender in its sole discretion).

 

7.14                           Cash Deposits/Bank Accounts.  The Credit Parties shall take all actions
necessary to maintain, preserve and protect the rights and interests of the
Lender with respect to all cash deposits of the Credit Parties and all other
proceeds of Collateral and shall not, without the Lender’s prior written
consent, open any deposit or other bank account, or instruct any account debtor
to make payment to any account other than to an established dominion account,
Lock Box Account or other Controlled Account 
under the Lender’s control; provided that so long as no Default or
Event of Default shall have occurred and be continuing, the Credit Parties
shall be permitted to maintain payroll and accounts not subject to the Lender’s
control so long as the aggregate amount of funds on deposit in all such payroll
accounts does not materially exceed estimated payroll for the next payroll
period.

 

ARTICLE 8

Negative
Covenants

 

Until the Revolving
Credit Commitment has expired or terminated and the principal of and interest
on each Loan and all fees payable hereunder have been paid in full and all
Letters of Credit shall have expired or terminated and all LC Disbursements
shall have been reimbursed, each Credit Party covenants and agrees with the
Lender that:

 

8.1                                 Indebtedness.  The Credit Parties will not, and will not permit any Subsidiary
to, create, incur, assume or permit to exist any Indebtedness, except:

 

(a)                                  Indebtedness
created hereunder;

 

(b)                                 Existing
Debt on the Closing Date which is set forth in Schedule 8.1 and has
been designated on such schedule as Indebtedness that will remain outstanding
following the funding of the initial Loans, and any extension, renewal,
refunding or replacement of any such Indebtedness that does not increase the
principal amount thereof;

 

(c)                                  Intercompany
loans among the Credit Parties;

 

(d)                                 other
Indebtedness incurred after the Closing Date (determined on a consolidated
basis without duplication in accordance with GAAP) consisting of Capital Lease
Obligations and/or secured by Liens permitted under Section 8.2(h), in an
aggregate principal amount at any time outstanding not in excess of $5,000,000;
and

 

(e)                                  Guarantees
permitted under Section 8.3.

 

57

 

8.2                                 Liens.  The Credit
Parties will not, and will not permit any Subsidiary to, create, incur, assume
or permit to exist any Lien on any Property or asset now owned or hereafter
acquired by it, or assign or sell any income or revenues (including accounts
receivable) or rights in respect of any thereof, except (the following being
called “Permitted Liens”):

 

(a)                                  Liens
created hereunder or under the other Loan Documents;

 

(b)                                 any
Lien on any property or asset of any Credit Party existing on the date hereof
and set forth in Schedule 8.1 (excluding, however, following the
making of the initial Loans hereunder, the Liens in favor of any Person other
than the Lender securing Indebtedness not designated on said schedule as
Indebtedness to remain outstanding following the funding of the initial Loans),
provided
that (i) such Lien shall not apply to any other property or asset of any Credit
Party and (ii) such Lien shall secure only those obligations which it secures
on the date hereof and extensions, renewals and replacements thereof that do
not increase the outstanding principal amount thereof;

 

(c)                                  Liens
imposed by any Governmental Authority for taxes, assessments or charges not yet
delinquent or (in the case of property taxes and assessments not exceeding
$250,000 in the aggregate more than 90 days overdue) which are being contested
in good faith and by appropriate proceedings if adequate reserves with respect
thereto are maintained on the books of the applicable Credit Party in
accordance with GAAP and which reserves shall be acceptable to the Lender;

 

(d)                                 landlords’,
carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like
Liens, and vendors’ Liens imposed by statute or common law not securing the
repayment of Indebtedness, arising in the ordinary course of business which are
not overdue for a period of more than 60 days or which are being contested in
good faith and by appropriate proceedings and Liens securing judgments
(including, without limitation, pre-judgment attachments) but only to the
extent for an amount and for a period not resulting in an Event of Default
under Section 9.1(j) hereof;

 

(e)                                  pledges
or deposits under worker’s compensation, unemployment insurance and other
social security legislation and pledges or deposits to secure the performance
of bids, tenders, trade contracts (other than for borrowed money), leases
(other than capital leases), utility purchase obligations, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business;

 

(f)                                    easements,
rights-of-way, restrictions and other similar encumbrances incurred in the
ordinary course of business and encumbrances consisting of zoning restrictions,
easements, licenses, restrictions on the use of Property or minor imperfections
in title thereto which, in the aggregate, are not material in amount, and which
do not, in the aggregate, materially detract from the value of the Property of
any Credit Party or materially interfere with the ordinary conduct of the
business of any Credit Party;

 

(g)                                 Liens
consisting of bankers’ liens and rights of setoff, in each case, arising by
operation of law, and Liens on documents presented in letter of credit
drawings; and

 

(h)                                 Liens
on fixed or capital assets, including real or personal property, acquired,
constructed or improved by any Credit Party, provided that (A) such Liens
secure Indebtedness (including Capital Lease Obligations) permitted by
Section 8.1(d), (B) such Liens and the Indebtedness secured thereby
are incurred prior to or within 90 days after such acquisition or the
completion of such construction or improvement or were in effect at the time
the Credit Parties acquired the assets or stock, (C) the Indebtedness secured
thereby does not exceed the cost of acquiring, constructing or improving

 

58

 

such fixed or capital assets, and (D) such security interests shall not
apply to any other property or assets of the Credit Parties.

 

8.3                                 Contingent Liabilities.  The Credit Parties will not Guarantee the
Indebtedness or other obligations of any Person, or Guarantee the payment of
dividends or other distributions upon the stock of, or the earnings of, any
Person, except:

 

(a)                                  endorsements
of negotiable instruments for deposit or collection or similar transactions in
the ordinary course of business;

 

(b)                                 Guarantees
and letters of credit in effect on the date hereof which are disclosed in Schedule 8.1,
and any replacements thereof in amounts not exceeding such Guarantees;

 

(c)                                  obligations
in respect of Letters of Credit.

 

8.4                                 Fundamental Changes; Asset Sales.

 

(a)                                  The
Credit Parties will not enter into any transaction of merger or consolidation
or amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution) without the prior written consent of the
Lender.  The Credit Parties will not
acquire any business or property from, or capital stock of, or other equity
interests in, or be a party to any acquisition of, any Person without the prior
written consent of the Lender, except for purchases of property to be used in
the ordinary course of business, Investments permitted under Section 8.5
and Capital Expenditures.  The Credit
Parties will not form or acquire any Subsidiary without the prior written
consent of the Lender.  The Credit
Parties will not issue or sell any of their capital stock or other equity
interests without the prior consent of the Lender (other than in connection
with Equity Rights issued or granted to members of the Credit Parties’ boards
of directors or employees consistent with the Credit Parties’ past business
practices).

 

(b)                                 The
Credit Parties will not convey, sell, lease, transfer or otherwise dispose
(including any Disposition) of, in one transaction or a series of transactions,
any part of their business or property, whether now owned or hereafter acquired
(including, without limitation, receivables and leasehold interests, but
excluding (x) obsolete or worn-out property (including leasehold interests), or
tools, equipment or other property no longer used or useful in their business
and (y) any inventory or other property sold or disposed of in the ordinary
course of business and on ordinary business terms) without the prior written
consent of the Lender, provided that the Credit Parties may
sublease real property to the extent such sublease would not interfere with the
operation of the business of the Credit Parties.

 

(c)                                  Notwithstanding
the foregoing provisions of this Section 8.4:

 

(i)                                     any
Credit Party may be merged or combined with or into any other Credit Party
(provided that if such merger involves any Borrower, (x) such Borrower shall be
the surviving entity and (y) no Change of Control shall occur); and

 

(ii)                                  any
Credit Party may sell, lease, transfer or otherwise dispose of any or all of
its property (upon voluntary liquidation or otherwise) to any other Credit
Party.

 

59

 

8.5                                 Investments; Hedging Agreements.

 

(a)                                  The
Credit Parties will not make or permit to remain outstanding any Investment,
except:

 

(i)                                     Investments
consisting of Guarantees permitted by Section 8.3(c) and Indebtedness
permitted by Section 8.1; Intercompany Indebtedness; and capital contributions
by any Credit Party to any other Credit Party;

 

(ii)                                  Permitted
Investments; and

 

(iii)                               Checking
and deposit accounts with banks used in the ordinary course of business.

 

(b)                                 The
Credit Parties will not enter into any Hedging Agreement without the prior
written consent of the Lender.

 

8.6                                 Restricted Junior Payments.  The Credit Parties will not declare or make
any Restricted Junior Payment at any time; provided, however, that any Credit
Party that is a Subsidiary of another Credit Party may pay dividends to such
Credit Party.

 

8.7                                 Transactions with Affiliates.  Except as expressly permitted by this
Agreement, the Credit Parties will not directly or indirectly (a) make any
Investment in an Affiliate; (b) transfer, sell, lease, assign or otherwise
dispose of any property to an Affiliate; (c) merge into or consolidate with an
Affiliate, or purchase or acquire property from an Affiliate; or (d) enter into
any other transaction directly or indirectly with or for the benefit of an
Affiliate (including, without limitation, guarantees and assumptions of
obligations of an Affiliate); provided that:

 

(i)                                     any
Affiliate who is an individual may serve as a director, officer, employee or
consultant of any Credit Party, receive reasonable compensation for his or her
services in such capacity and benefit from Permitted Investments to the extent
specified in clause (e) of the definition thereof;

 

(ii)                                  the
Credit Parties may engage in and continue the transactions with or for the
benefit of Affiliates which are described in Schedule 8.7 or are
referred to in Section 8.6 (but only to the extent specified in such
section); and

 

(iii)                               the
Credit Parties may engage in transactions with Affiliates in the ordinary
course of business on terms which are no less favorable to the Credit Parties
than those likely to be obtained in an arms’ length transaction between a
Credit Party and a non-affiliated third party.

 

8.8                                 Restrictive Agreements.  The Credit Parties will not directly or
indirectly, enter into, incur or permit to exist any agreement or other
arrangement (other than this Agreement) that prohibits, restricts or imposes
any condition upon (a) the ability of any Credit Party to create, incur or
permit to exist any Lien upon any of its property or assets, or (b) the ability
of any Credit Party that is a Subsidiary of another Credit Party to pay
dividends or other distributions with respect to any shares of its capital
stock or other equity interests or to make or repay loans or advances to any other
Credit Party or to Guarantee Indebtedness of any other Credit Party; provided
that (i) the foregoing shall not apply to restrictions and conditions imposed
by law or by this Agreement, (ii) the foregoing shall not apply to restrictions
and conditions existing on the date hereof identified on Schedule 8.8
(but shall apply to any extension or renewal of, or any amendment or
modification expanding the scope of, any such restriction

 

60

 

or condition), (iii) the foregoing shall not apply to customary
restrictions and conditions contained in agreements relating to the sale of
stock or assets of a Subsidiary of a Credit Party pending such sale, provided
such restrictions and conditions apply only to the Subsidiary that is to be
sold and such sale is permitted hereunder, (iv) clause (a) of the foregoing
shall not apply to restrictions or conditions imposed by any agreement relating
to secured Indebtedness permitted by this Agreement if such restrictions or
conditions apply only to the property or assets securing such Indebtedness, and
(v) clause (a) of the foregoing shall not apply to customary provisions in
leases and other contracts (excluding license agreements) restricting the
assignment thereof.

 

8.9                                 Sale-Leaseback Transactions.   No Credit Party will directly or indirectly,
enter into any arrangements with any Person whereby such Credit Party shall
sell or transfer (or request another Person to purchase) any property, real,
personal or mixed, used or useful in its business, whether now owned or
hereafter acquired, and thereafter rent or lease such property from any Person.

 

8.10                           Certain Financial Covenants.

 

(a)                                  Fixed
Charge Coverage Ratio.  Beginning on
December 31, 2003, the Credit Parties shall not permit the Fixed Charge
Coverage Ratio as of the end of each fiscal quarter for the period of four
fiscal quarters most recently ended to be less than 1:00 to 1.00.

 

(b)                                 Tangible
Net Worth.  The Credit Parties shall not
permit the Tangible Net Worth (determined on a consolidated basis without
duplication in accordance with GAAP) at any time during the periods set forth
below to be less than the required Tangible Net Worth set forth below opposite
such periods:

 

	
  Period

  	
   

  	
  Required Tangible Net Worth

  
	
  Effective Date
  through March 31, 2003

  	
   

  	
  $

  	
  3,500,000

  
	
   

  	
   

  	
   

  
	
  for each
  succeeding fiscal quarter of the Credit Parties

  	
   

  	
  The required Tangible
  Net Worth of the Credit Parties for the immediately preceding fiscal quarter plus
  33% of the quarterly net income of the Credit Parties for the current fiscal
  quarter; provided that the required Tangible Net Worth shall not be reduced
  by net losses of the Credit Parties

  

 

(c)                                  EBITDA.  The Credit Parties shall not permit EBITDA
for the periods set forth below to be less than the amount set forth opposite
such period below:

 

	
  Period

  	
   

  	
  Minimum EBITDA

  
	
  January
  1, 2003 through 

  March 31, 2003

  	
   

  	
  $

  	
  250,000

  
	
   

  	
   

  	
   

  
	
  January
  1, 2003 through 

  June 30, 2003

  	
   

  	
  $

  	
  1,000,000

  
	
   

  	
   

  	
   

  
	
  January
  1, 2003 through 

  September 30, 2003

  	
   

  	
  $

  	
  1,900,000

  

 

61

 

(d)                                 Capital
Expenditures.  The Credit Parties shall
not, and shall not permit any Subsidiary to, make any Capital Expenditures
(including, without limitation, incurring any Capital Lease Obligations) which,
in the aggregate for the Credit Parties and all Subsidiaries, exceed $3,750,000
at any time during any fiscal year.

 

8.11                           Lines of Business.  The Credit Parties will not engage to any
substantial extent in any line or lines of business activity other than (i) the
types of businesses engaged in by the Credit Parties as of the Effective Time
and businesses substantially related thereto, and (ii) such other lines of
business as may be consented to by the Lender.

 

8.12                           Other Indebtedness.  The Credit Parties will not purchase,
redeem, retire or otherwise acquire for value, or set apart any money for a
sinking, defeasance or other analogous fund for the purchase, redemption,
retirement or other acquisition of, or make any voluntary payment or prepayment
of the principal of or interest on, or any other amount owing in respect of any
Subordinated Indebtedness, except as may be consented to by the Lender.

 

8.13                           Modifications of Certain Documents.  The Credit Parties will not consent to any
modification, supplement or waiver of any of the provisions of any documents or
agreements evidencing or governing any Existing Debt.

 

ARTICLE 9

Events of Default

 

9.1                                 Events of Default.  The occurrence of any of the following
events shall be deemed to constitute an “Event of Default” hereunder:

 

(a)                                  the
Credit Parties shall fail to pay to the Lender, the Issuing Lender, the Cash
Management Bank or any other Affiliate of the Lender, any principal of or
interest on any Loan or any Reimbursement Obligation in respect of any LC
Disbursement or any other Obligation of the Credit Parties to the Lender, the
Issuing Lender, the Cash Management Bank or any other Affiliate of the Lender
when the same shall become due and payable, whether at the due date thereof or
at a date fixed for prepayment thereof, by acceleration of such due or
prepayment date, or otherwise;

 

(b)                                 any
representation or warranty made or deemed made by or on behalf of any Credit
Party or any Subsidiary in or in connection with this Agreement, any of the
other Loan Documents or any amendment or modification hereof or thereof, or in
any report, certificate, financial statement or other document furnished
pursuant to or in connection with this Agreement, any of the other Loan
Documents or any amendment or modification hereof or thereof, shall prove to
have been incorrect in any material respect when made or deemed made;

 

(c)                                  the
Credit Parties (i) shall fail to observe or perform any covenant, condition or
agreement contained in Sections 7.1, 7.2, 7.5, 7.6, 7.9, 7.10, 7.12, 7.14
or in Article 8 (it being expressly acknowledged and agreed that any Event
of Default resulting from the failure of the Credit Parties at any measurement
date to satisfy any financial covenant set forth in Section 8.10 shall not be
deemed to be “cured” or remedied by the Credit Parties’ satisfaction of such
financial covenant at any subsequent measurement date) or (ii) shall fail to
observe or perform any other covenant, condition or agreement contained in
Sections 7.3, 7.4, 7.7, 7.8, 7.11, or 7.13 and such failure described in this
clause (ii) shall continue unremedied for a period of 30 days after the earlier
of (x) actual knowledge by an officer of any Credit Party or (y) notice thereof
from the Lender to the Credit Parties;

 

62

 

(d)                                 the
Credit Parties shall fail to observe or perform any covenant, condition or
agreement contained in this Agreement (other than those specified in clauses
(a), (b) or (c) of this Section 9.1) or any other Loan Document, and such
failure shall continue unremedied for a period of 30 days after notice thereof
from the Lender to the Credit Parties;

 

(e)                                  the
Credit Parties shall fail to make any payment (whether of principal, interest
or otherwise and regardless of amount) in respect of (x) any Material Indebtedness
when and as the same shall become due and payable, after giving effect to any
grace period with respect thereto, or (y) any Material Rental Obligation when
and as the same shall become due and payable, after giving effect to any grace
period with respect thereto, except with respect to Material Rental Obligations
where (i) the payment thereof is being contested in good faith by appropriate
proceedings, (ii) such Credit Party has set aside on its books adequate
reserves with respect thereto in accordance with GAAP, which reserves shall be
acceptable to Lender, and (iii) the failure to make payment pending such
contest could not reasonably be expected to result in a Material Adverse
Effect;

 

(f)                                    any
event or condition occurs that results in (i) any Material Indebtedness of any
Credit Party becoming due prior to its scheduled maturity or that enables or
permits (with or without the giving of notice, the lapse of time or both) the
holder or holders of any Material Indebtedness or any trustee or agent on its
or their behalf to cause such Material Indebtedness to become due, or to
require the prepayment, repurchase, redemption or defeasance thereof, prior to
its scheduled maturity, or (ii) the lease with respect to any Material Rental
Obligation of any Credit Party being terminated prior to its scheduled
expiration date or that enables or permits (with or without the giving of
notice, the lapse of time or both) the counterparty to such lease to cause such
lease to be terminated prior to its scheduled expiration date;

 

(g)                                 an
involuntary proceeding shall be commenced or an involuntary petition shall be
filed seeking (i) liquidation, reorganization or other relief in respect of any
Credit Party or its debts, or of a substantial part of its assets, under any Federal,
state or foreign bankruptcy, insolvency, receivership or similar law now or
hereafter in effect or (ii) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for any Credit Party or for a
substantial part of its assets, and, in any such case, such proceeding or
petition shall continue undismissed for 60 days or an order or decree approving
or ordering any of the foregoing shall be entered;

 

(h)                                 any
Credit Party shall (i) voluntarily commence any proceeding or file any petition
seeking liquidation, reorganization or other relief under any Federal, state or
foreign bankruptcy, insolvency, receivership or similar law now or hereafter in
effect, (ii) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or petition described in clause (g) of this
Article, (iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for any Credit Party
or for a substantial part of its assets, (iv) file an answer admitting the
material allegations of a petition filed against it in any such proceeding, (v)
make a general assignment for the benefit of creditors or (vi) take any action
for the purpose of effecting any of the foregoing;

 

(i)                                     any
Credit Party shall become unable, admit in writing or fail generally to pay its
debts as they become due;

 

(j)                                     a
final judgment or judgments for the payment of money (x) in excess of $100,000
in the aggregate (exclusive of judgment amounts fully covered by insurance
where the insurer has admitted liability in respect of such judgment) or (y) in
excess of $250,000 in the aggregate (regardless of insurance coverage), shall
be rendered by one or more courts, administrative tribunals or other bodies
having jurisdiction against any Credit Party and the same shall not be
discharged (or provision shall not be made for such discharge), bonded, or a
stay of execution thereof shall not be

 

63

 

procured, within 60 days from the date of entry thereof and the
relevant Credit Party shall not, within said period of 60 days, or such longer
period during which execution of the same shall have been stayed, appeal
therefrom and cause the execution thereof to be stayed during such appeal;

 

(k)                                  an
ERISA Event shall have occurred that, in the reasonable opinion of the Lender,
when taken together with all other ERISA Events that have occurred, could
reasonably be expected to result in a Material Adverse Effect;

 

(l)                                     there
shall occur any Change of Control;

 

(m)                               any
of the following shall occur: (i) the Liens created hereunder or under the
other Loan Documents shall at any time (other than by reason of the Lender
relinquishing such Lien) cease in any material respect to constitute valid and
perfected Liens on the Collateral intended to be covered thereby; (ii) except
for expiration in accordance with its respective terms, any Loan Document shall
for whatever reason be terminated, or shall cease to be in full force and
effect; or (iii) the enforceability of any Loan Document shall be contested by
any Credit Party;

 

(n)                                 there
shall occur any material loss theft, damage or destruction of any Collateral
not fully covered (subject to such reasonable deductibles as the Lender shall
have approved) by insurance;

 

(o)                                 any
Guarantor shall assert that its obligations under any Loan Document shall be
invalid or unenforceable; or

 

(p)                                 there
shall occur any material adverse change (in the opinion of the Lender) on the
businesses, operations, properties, conditions (financial or otherwise),
assets, liabilities, income or prospects of the Credit Parties;

 

then, and in every such
event (other than an event described in clause (g) or (h) of this
Section 9.1), and at any time thereafter during the continuance of such
event, the Lender may, by notice to the Borrowers, take any or all of the
following actions, at the same or different times: (i) terminate the Revolving
Credit Commitment, and thereupon the Revolving Credit Commitment shall terminate
immediately, (ii) notify the Borrowers that the outstanding principal of the
Loans shall bear interest at the Post-Default Rate, and thereupon the
outstanding principal of the Loans shall bear interest at the Post-Default
Rate, (iii) declare the Loans then outstanding to be due and payable in whole
(or in part, in which case any principal not so declared to be due and payable
may thereafter be declared to be due and payable), and thereupon the principal
of the Loans so declared to be due and payable, together with accrued interest
thereon and all fees and other Obligations, shall become due and payable
immediately, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Credit Parties, and (iv) the Lender, the
Issuing Lender, the Cash Management Bank and any other Affiliate of the Lender
may exercise all of the rights as secured party and mortgagee hereunder or
under the other Loan Documents; and in case of any event with respect to the
Credit Parties or any Subsidiary described in clause (g) or (h) of this
Section 9.1, the Revolving Credit Commitment shall automatically
terminate, the principal of the Loans then outstanding shall automatically bear
interest at the Post-Default Rate, the principal of the Loans then outstanding,
together with accrued interest thereon and all fees and other Obligations shall
automatically become due and payable, and the Borrowers shall provide cash
collateral in accordance with Section 2.4(g) without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Credit Parties, and the Lender, the Issuing Lender, the Cash Management Bank
and all other Affiliates of the Lender shall be permitted to exercise such
rights as secured party and mortgagee hereunder or under the other Loan
Documents to the extent permitted by applicable law.

 

64

 

9.2                                 Receivership.  Without limiting the generality of the foregoing or limiting in
any way the rights of the Lender hereunder or under the other Loan Documents or
otherwise under applicable law, at any time after (i) the entire principal
balance of any Loan shall have become due and payable (whether at maturity, by
acceleration or otherwise) and (ii) the Lender shall have provided to the
Borrowers not less than ten (10) days’ prior written notice of its intention to
apply for a receiver, the Lender shall be entitled to apply for and have a
receiver appointed under state or federal law by a court of competent jurisdiction
in any action taken by the Lender to enforce its rights and remedies hereunder
and under the other Loan Documents in order to manage, protect, preserve, sell
and otherwise dispose of all or any portion of the Collateral and continue the
operation of the business of the Credit Parties, and to collect all revenues
and profits thereof and apply the same to the payment of all expenses and other
charges of such receivership, including the compensation of the receiver, and
to the payment of the Loans and other fees and expenses due hereunder and under
the Loan Documents as aforesaid until a sale or other disposition of such
Collateral shall be finally made and consummated.  TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH CREDIT PARTY
HEREBY IRREVOCABLY CONSENTS TO AND WAIVES ANY RIGHT TO OBJECT TO OR OTHERWISE
CONTEST THE APPOINTMENT OF A RECEIVER AS PROVIDED ABOVE.  EACH CREDIT PARTY (I) GRANTS SUCH WAIVER AND
CONSENT KNOWINGLY AFTER HAVING DISCUSSED THE IMPLICATIONS THEREOF WITH COUNSEL,
(II) ACKNOWLEDGES THAT (A) THE UNCONTESTED RIGHT TO HAVE A RECEIVER APPOINTED
FOR THE FOREGOING PURPOSES IS CONSIDERED ESSENTIAL BY THE LENDER IN CONNECTION
WITH THE ENFORCEMENT OF ITS RIGHTS AND REMEDIES HEREUNDER AND UNDER THE OTHER
LOAN DOCUMENTS, AND (B) THE AVAILABILITY OF SUCH APPOINTMENT AS A REMEDY UNDER
THE FOREGOING CIRCUMSTANCES WAS A MATERIAL FACTOR IN INDUCING THE LENDER TO
MAKE THE LOANS TO THE BORROWERS; AND (III) AGREES TO ENTER INTO ANY AND ALL
STIPULATIONS IN ANY LEGAL ACTIONS, OR AGREEMENTS OR OTHER INSTRUMENTS IN
CONNECTION WITH THE FOREGOING AND TO COOPERATE FULLY WITH THE LENDER IN
CONNECTION WITH THE ASSUMPTION AND EXERCISE OF CONTROL BY THE RECEIVER OVER ALL
OR ANY PORTION OF THE COLLATERAL.  THE
LENDER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS SECTION 9.2 SHALL BE
DEEMED TO CONSTITUTE A WAIVER OF THE RIGHT OF CREDIT PARTIES TO FILE FOR
PROTECTION UNDER TITLE 11 OF THE UNITED STATES CODE AT ANY TIME.

 

ARTICLE 10

Miscellaneous

 

10.1                           Notices.  Except in
the case of notices and other communications expressly permitted to be given by
telephone, all notices and other communications provided for herein shall be in
writing and shall be delivered by hand or overnight courier service, mailed by
certified or registered mail or sent by telephonic facsimile (fax), as follows:

 

(a)                                  if
to any Credit Party, to UFP Technologies, Inc., 172 East Main Street,
Georgetown, MA  01833, Attention: Ronald
J. Lataille, Chief Financial Officer (Fax no. (978-352-5616) with a copy to
Lynch, Brewer, Hoffman & Fink, LLP, 101 Federal Street, Boston, MA  02110, Attention Patrick J. Kinney, Jr. (Fax
no. (617-951-0811); and

 

(b)                                 if
to the Lender, to Fleet Capital Corporation, One Federal Street, Mail Stop MA
DE 10307X, Boston, Massachusetts 02110, Attention: Daniel Corcoran, Senior Vice
President (Fax no.:  (617-654-1167),
with a copy to Palmer & Dodge LLP, 111 Huntington Avenue, Boston, MA
02199-7613, Attention:  David L.
Ruediger (Fax no. (617-227-4420).

 

65

 

Any party hereto may
change its address or fax number for notices and other communications hereunder
by notice to the other parties hereto. 
All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt.

 

10.2                           Waivers; Amendments.

 

(a)                                  No
failure or delay by the Lender, the Issuing Lender, the Cash Management Bank or
any Affiliate of the Lender in exercising any right or power hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. 
The rights and remedies of the Lender, the Issuing Lender, the Cash
Management Bank and all Affiliates of the Lender hereunder and under the other
Loan Documents are cumulative and are not exclusive of any rights or remedies
that they would otherwise have.  No
waiver of any provision of this Agreement or consent to any departure by any
Credit Party or Subsidiary therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) of this Section 10.2, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given.  Without
limiting the generality of the foregoing, the making of a Loan or issuance of a
Letter of Credit shall not be construed as a waiver of any Default, regardless
of whether the Lender or the Issuing Lender may have had notice or knowledge of
such Default at the time.

 

(b)                                 Neither
this Agreement nor any other Loan Document nor any provision hereof or thereof
may be waived, amended or modified except pursuant to an agreement or agreements
in writing entered into by the Borrowers and the Lender.

 

10.3                           Expenses; Indemnity; Damage Waiver.

 

(a)                                  The
Credit Parties jointly and severally agree to pay, or reimburse the Lender for
paying, (i) all reasonable out-of-pocket expenses incurred by the Lender and
its Affiliates, including the reasonable fees, charges and disbursements of
Special Counsel, in connection with the preparation of this Agreement and the
other Loan Documents or any amendments, modifications or waivers of the
provisions hereof or thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket
expenses incurred by the Issuing Lender in connection with the issuance,
amendment, renewal or extension of any Letter of Credit or any demand for
payment thereunder, (iii) all out-of-pocket expenses incurred by the Lender,
the Issuing Lender, the Cash Management Bank or any Affiliate of the Lender,
including the fees, charges and disbursements of any counsel for the Lender, the
Issuing Lender, the Cash Management Bank or any Affiliate of the Lender, in
connection with the enforcement or protection of their rights in connection
with this Agreement and the other Loan Documents, including their rights under
this Section 10.3, or in connection with the Loans made or Letters of
Credit issued hereunder, including in connection with any workout,
restructuring or negotiations in respect thereof, and (iv) all Other Taxes
levied by any Governmental Authority in respect of this Agreement or any of the
other Loan Documents or any other document referred to herein or therein and
all costs, expenses, taxes, assessments and other charges incurred in
connection with any filing, registration, recording or perfection of any
security interest contemplated by any Loan Document or any other document
referred to therein.

 

(b)                                 The
Credit Parties jointly and severally agree to indemnify the Lender, the Issuing
Lender, the Cash Management Bank, each Affiliate of the Lender and each Related
Party of any of the foregoing Persons (each such Person being called an “Indemnitee”)
against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses, including the fees, charges and
disbursements of any counsel for any Indemnitee and settlement costs, incurred
by

 

66

 

or asserted against any Indemnitee arising out of, in connection with,
or as a result of (i) the execution or delivery of this Agreement, the other
Loan Documents or any agreement or instrument contemplated hereby, the
performance by the parties hereto and thereto of their respective obligations
hereunder or thereunder or the consummation of the transactions contemplated
hereby or any other transactions contemplated hereby or thereby, (ii) any Loan
or Letter of Credit or the use of the proceeds therefrom (including any refusal
by the Issuing Lender to honor a demand for payment under a Letter of Credit if
the documents presented in connection with such demand do not strictly comply
with the terms of such Letter of Credit), (iii) any actual or alleged presence
or release of Hazardous Materials on or from any property owned, leased or
operated by any Credit Party or any Subsidiary, or any Environmental Liability
related in any way to any Credit Party or any Subsidiary, or (iv) any actual or
prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory and
regardless of whether any Indemnitee is a party thereto; provided that such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted
from the gross negligence or willful misconduct of such Indemnitee.

 

(c)                                  To
the extent permitted by applicable law, none of the Credit Parties shall
assert, and each Credit Party hereby waives, any claim against any Indemnitee,
on any theory of liability, for special, indirect, consequential or punitive
damages (as opposed to direct or actual damages) arising out of, in connection
with, or as a result of, this Agreement, the other Loan Documents or any
agreement or instrument contemplated hereby or thereby, the transactions
contemplated hereby, any Loan or Letter of Credit or the use of the proceeds
thereof.

 

(d)                                 All
amounts due under this Section 10.3 shall be payable promptly after
written demand therefor.

 

10.4                           Successors and Assigns.

 

(a)                                  The
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns permitted
hereby, except that no Credit Party may assign or otherwise transfer any of its
rights or obligations hereunder without the prior written consent of the Lender
(and any attempted assignment or transfer without such consent shall be null
and void).  Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than
the parties hereto, their respective successors and assigns permitted hereby
and, to the extent expressly contemplated hereby, the Related Parties of the
Lender, the Issuing Lender and the Cash Management Bank) any legal or equitable
right, remedy or claim under or by reason of this Agreement.

 

(b)                                 The
Lender may at any time and from time to time assign to one or more assignees
all or a portion of its rights and obligations under this Agreement (including
all or a portion of the Revolving Credit Commitment and the Loans at the time
owing to it).

 

(c)                                  The
Lender may at any time and from time to time, sell participations to one or
more banks or other entities (a “Participant”) in all or a portion of
the Lender’s rights and obligations under this Agreement (including all or a
portion of the Revolving Credit Commitment and the Loans owing to it); provided
that (i) the Lender’s obligations under this Agreement shall remain unchanged,
(ii) the Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations and (iii) the Borrowers shall continue to
deal solely and directly with the Lender in connection with the Lender’s rights
and obligations under this Agreement. 
The Borrowers agree that each Participant shall be entitled to the
benefits of this Agreement to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to paragraph (b) of this
Section 10.4; provided that a

 

67

 

Participant shall not be entitled to receive any greater payment under
this Agreement than the Lender would have been entitled to receive with respect
to the participation sold to such Participant, unless the sale of the
participation to such Participant is made with the Borrowers’ prior written
consent.

 

(d)                                 The
Lender may at any time pledge or assign a security interest in all or any
portion of its rights under this Agreement to secure obligations of the Lender,
including any such pledge or assignment to a Federal Reserve Bank, and this
Section shall not apply to any such pledge or assignment of a security
interest; provided
that no such pledge or assignment of a security interest shall release the
Lender from any of its obligations hereunder or substitute any such assignee
for the Lender as a party hereto.

 

(e)                                  The
Lender may furnish any information concerning any Credit Party, any Subsidiary
in the possession of the Lender from time to time to assignees and participants
(including prospective assignees and participants) subject, however, to and so
long as the recipient agrees in writing to be bound by, the provisions of
Section 10.13.  In addition, the
Lender may furnish any information concerning any Credit Party, any Subsidiary,
any Affiliate in the Lender’s possession to any Affiliate of the Lender,
subject, however, to the provisions of Section 10.13.  The Credit Parties shall assist the Lender
in effectuating any assignment or participation pursuant to this
Section 10.4 in whatever manner the Lender reasonably deems necessary,
including participation in meetings with prospective transferees.

 

10.5                           Survival.  All
covenants, agreements, representations and warranties made by the Credit
Parties and Subsidiaries herein and in the other Loan Documents, and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement and the other Loan Documents, shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of this Agreement and the other Loan Documents and the making of any
Loans and issuance of any Letters of Credit, regardless of any investigation
made by any such other party or on its behalf and notwithstanding that the
Lender or the Issuing Lender may have had notice or knowledge of any Default or
incorrect representation or warranty at the time any credit is extended
hereunder, and shall continue in full force and effect so long as the principal
of or any accrued interest on any Loan or any fee or any other Obligation
payable under this Agreement or the other Loan Documents is outstanding and
unpaid or any Letter of Credit is outstanding and so long as the Revolving
Credit Commitment has not expired or terminated.  The provisions of Sections 2.9, 2.10 and 10.3 shall survive and
remain in full force and effect regardless of the consummation of the
transactions contemplated hereby, the repayment of the Loans, the expiration or
termination of the Letters of Credit and the Revolving Credit Commitment or the
termination of this Agreement or any other Loan Document or any provision
hereof or thereof.

 

10.6                           Counterparts; Integration; References to Agreement;
Effectiveness.  This
Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract.  This Agreement and any separate letter
agreements with respect to fees payable to the Lender or its counsel constitute
the entire contract among the parties relating to the subject matter hereof and
supersede any and all previous agreements and understandings, oral or written,
relating to the subject matter hereof. 
Whenever there is a reference in any Loan Document or UCC Financing
Statement to the “Credit Agreement” to which the Lender and the Credit Parties
are parties, such reference shall be deemed to be made to this Agreement among
the parties hereto.  Except as provided
in Section 6.1, this Agreement shall become effective when it shall have
been executed by the Lender and when the Lender shall have received
counterparts hereof which, when taken together, bear the signatures of each of
the other parties hereto, and thereafter shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.  Delivery of an executed counterpart of a
signature page of this Agreement by telecopy shall be effective as delivery of
a manually executed counterpart of this Agreement.

 

68

 

10.7                           Severability.  Any provision of this Agreement held to be invalid, illegal or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.

 

10.8                           Right of Setoff.  Each Credit Party hereby grants to the
Lender, the Cash Management Bank and each Affiliate of the Lender that from
time to time maintains any deposit accounts, holds any funds or otherwise
becomes indebted to the Credit Parties a security interest in all deposits
(general or special, time or demand, provisional or final) and funds at any
time held and other indebtedness at any time owing by the Lender, the Cash
Management Bank or any such Affiliate of the Lender to or for the credit or the
account of any Credit Party as security for the Obligations, and the Credit
Parties hereby agree that if an Event of Default shall have occurred and be
continuing, the Lender, the Cash Management Bank and each Affiliate of the
Lender are hereby authorized at any time and from time to time, to the fullest
extent permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) or other funds at any time held
and other indebtedness at any time owing by the Lender, the Cash Management
Bank or any Affiliate of the Lender to or for the credit or the account of any
Credit Party against any and all of the Obligations, irrespective of whether or
not the Lender shall have made any demand under this Agreement and although any
of the Obligations may be unmatured. 
The rights of the Lender, the Cash Management Bank and each Affiliate of
the Lender under this Section 10.8 are in addition to any other rights and
remedies (including other rights of setoff) which the Lender, the Cash
Management Bank or any Affiliate of the Lender may have.

 

10.9                           Subordination by Credit Parties.  The Credit Parties hereby agree that all
present and future Indebtedness of any Credit Party to another Credit Party (“Intercompany
Indebtedness”) shall be subordinate and junior in right of payment and
priority to the Obligations, and each Credit Party agrees not to make, demand,
accept or receive any payment in respect of any present or future Intercompany
Indebtedness, including, without limitation, any payment received through the
exercise of any right of setoff, counterclaim or cross claim, or any collateral
therefor, unless and until such time as the Obligations shall have been
indefeasibly paid in full; provided that, so long as no Default shall
have occurred and be continuing and no Default shall be caused thereby, the
Credit Parties may make and receive such payments as shall be customary in the
ordinary course of the Credit Parties’ business.  Without in any way limiting the foregoing, in the event of any
insolvency or bankruptcy proceedings, or any receivership, liquidation,
reorganization, dissolution or other similar proceedings relative to any Credit
Party or to its businesses, properties or assets, the Lender shall be entitled
to receive payment in full of all of the Obligations before any Credit Party
shall be entitled to receive any payment in respect of any present or future
Intercompany Indebtedness.

 

10.10                     Governing Law; Jurisdiction; Consent to Service of
Process.

 

(a)                                  This
Agreement shall be construed in accordance with and governed by the law of The
Commonwealth of Massachusetts.

 

(b)                                 Each
party hereto hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of the courts of The Commonwealth of
Massachusetts and of the United States District Court for the District of
Massachusetts, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement or the other Loan
Documents, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such
Massachusetts court (or, to the extent permitted by law, in such Federal
court).  Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be

 

69

 

conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.  Nothing in this Agreement shall affect any right that the Lender,
the Issuing Lender or the Cash Management Bank may otherwise have to bring any
action or proceeding relating to this Agreement against any Credit Party, any
Subsidiary or its properties in the courts of any jurisdiction.

 

(c)                                  Each
party hereto hereby irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement or the other Loan Documents in any court
referred to in paragraph (b) of this Section 10.10.  Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.

 

(d)                                 Each
party to this Agreement irrevocably consents to service of process in the
manner provided for notices in Section 10.1.  Nothing in this Agreement will affect the right of any party to
this Agreement to serve process in any other manner permitted by law.

 

10.11                     WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). 
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.11.

 

10.12                     Headings.  Article
and Section headings and the Table of Contents used herein are for
convenience of reference only, are not part of this Agreement and shall not
affect the construction of, or be taken into consideration in interpreting,
this Agreement.

 

10.13                     Confidentiality.  The Lender agrees to keep confidential
information obtained by it pursuant hereto and the other Loan Documents
confidential in accordance with the Lender’s customary practices and agrees
that it will only use such information in connection with the transactions
contemplated by this Agreement and not disclose any of such information other
than (a) to the Lender’s employees, representatives, directors, attorneys,
auditors, agents, professional advisors, trustees or Affiliates who are advised
of the confidential nature of such information or to any direct or indirect
contractual counterparty in swap agreements or such contractual counterparty’s
professional advisor (so long as such contractual counterparty or professional
advisor to such contractual counterparty agrees to be bound by the provisions
of this Section 10.13), (b) to the extent such information presently is or
hereafter becomes available to the Lender on a non-confidential basis from any
source of such information that is in the public domain at the time of
disclosure, (c) to the extent disclosure is required by law (including
applicable securities law), regulation, subpoena or judicial order or process (provided
that notice of such requirement or order shall be promptly furnished to the
Borrowers unless such notice is legally prohibited) or requested or required by
bank, securities, insurance or investment company regulators or auditors or any
administrative body or commission to whose jurisdiction the Lender may be
subject, (d) to any rating agency to the extent required in connection with any
rating to be assigned to the Lender, (e) to assignees or participants or
prospective assignees or participants who agree to be bound by the provisions
of this Section 10.13, (f) to the extent required in connection with any
litigation between any Credit Party

 

70

 

and the Lender with respect to the Loans or this Agreement and the
other Loan Documents or (g) with the Borrowers’ prior written consent.

 

71

 

IN WITNESS WHEREOF, the parties hereto have caused
this Credit Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.

 

	
   

  	
  BORROWERS

  
	
   

  	
   

  
	
   

  	
  UFP TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MOULDED FIBRE
  TECHNOLOGY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SIMCO INDUSTRIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SIMCO AUTOMOTIVE TRIM,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

72

 

	 
	
   

  	
  LENDER

  	 

	 
	
   

  	
   

  	 

	 
	
   

  	
   

  	 

	
   

  	
  FLEET CAPITAL
  CORPORATION,

  
	
   

  	
   as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ISSUING LENDER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FLEET NATIONAL BANK,

  
	
   

  	
   as Issuing Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CASH MANAGEMENT BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FLEET NATIONAL BANK,

  
	
   

  	
   as Cash Management Bank

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
					

 

73

 

SCHEDULES &
EXHIBITS

 

	
  Schedule 1.1

  	
   

  	
  Material Owned
  Properties

  
	
  Schedule 1.4

  	
   

  	
  Designated Financial
  Officers

  
	
  Schedule 4.2

  	
   

  	
  Websites and Domain
  Names

  
	
  Schedule 5.3

  	
   

  	
  Governmental Approvals;
  No Conflicts

  
	
  Schedule 5.4

  	
   

  	
  Financial Condition; No
  Material Adverse Changes

  
	
  Schedule 5.5

  	
   

  	
  Properties; Proprietary
  Rights; Real Property Assets

  
	
  Schedule 5.6

  	
   

  	
  Litigation and
  Environmental Matters

  
	
  Schedule 5.7

  	
   

  	
  Compliance with Laws
  and Agreements

  
	
  Schedule 5.9

  	
   

  	
  Taxes

  
	
  Schedule 5.10

  	
   

  	
  Pension Plans

  
	
  Schedule 5.12

  	
   

  	
  Organizational
  Structure; Capitalization

  
	
  Schedule 5.13

  	
   

  	
  Subsidiaries

  
	
  Schedule 5.14

  	
   

  	
  Material Indebtedness,
  Liens and Agreements

  
	
  Schedule 5.19

  	
   

  	
  Labor and Employment
  Matters

  
	
  Schedule 5.20

  	
   

  	
  Bank Accounts

  
	
  Schedule 8.1

  	
   

  	
  Existing Indebtedness

  
	
  Schedule 8.7

  	
   

  	
  Transactions with
  Affiliates

  
	
  Schedule 8.8

  	
   

  	
  Restrictive Agreements

  
	
   

  	
   

  	
   

  
	
  Exhibit A-1

  	
   

  	
  Form of Revolving
  Credit Note

  
	
  Exhibit A-2

  	
   

  	
  Form of Equipment Term
  Note

  
	
  Exhibit A-3

  	
   

  	
  Form of Real Estate
  Term Note

  
	
  Exhibit B-1

  	
   

  	
  Form of Borrowing Base
  Certificate

  
	
  Exhibit B-2

  	
   

  	
  Form of Collateral
  Update Certificate

  
	
  Exhibit B-3

  	
   

  	
  Form of Accounts
  Receivable/Loan Reconciliation Report

  
	
  Exhibit B-4

  	
   

  	
  Form of Eurodollar
  Request

  
	
  Exhibit B-5

  	
   

  	
  Form of Advance Request

  
	
  Exhibit C

  	
   

  	
  Form of Perfection
  Certificate

  
	
  Exhibit D

  	
   

  	
  Form of Compliance
  Certificate

  
	
  Exhibit E

  	
   

  	
  Form of Stock Pledge
  Agreement

  
	
  Exhibit F

  	
   

  	
  Form of Hazardous
  Materials Indemnity Agreement

  
	
  Exhibit G

  	
   

  	
  Form of Mortgage

  
	
  Exhibit H

  	
   

  	
  Form of Landlord Waiver
  & Consent

  
	
  Exhibit I

  	
   

  	
  Form of Opinion of
  Counsel to the Borrower

  
	
  Exhibit J

  	
   

  	
  Form of Solvency
  Certificate

  

 

74

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