Commitment Letter for Post-Merger Credit Facility Modification between ITC/9;DeltaCom, Inc., BTI Telecom Corp., and Lenders
Summary
This agreement is a commitment letter between ITC/9;DeltaCom, Inc., BTI Telecom Corp., and a group of lenders. The lenders agree, subject to certain conditions, to modify the terms of existing credit agreements for both companies in connection with their proposed merger. The companies must meet specific conditions, including finalizing documentation and completing the merger by December 31, 2003. The letter also includes confidentiality and indemnification provisions, and it supersedes prior related agreements.
EX-10.1 4 dex101.txt COMMITMENT LETTER Exhibit 10.1 ------------ [Exhibit I/Exhibit J to Merger Agreement] ------------------- July 2, 2003 ITC/\DeltaCom, Inc. 1791 OG Skinner Drive West Point, Georgia 81833 BTI Telecom Corp. 4300 Six Forks Road Raleigh, North Carolina 27607 Dear ITC/\DeltaCom, Inc. and BTI Telecom Corp.: In accordance with our recent discussions, the undersigned lenders ("Lenders") are, subject to the terms and conditions of this letter, agree to extend this commitment to ITC/\DeltaCom, Inc. and BTI Telecom Corp. (collectively, the "Companies") to modify the terms of both (i) the Amended and Restated Credit Agreement, dated as of October 29, 2002, among ITC/\DeltaCom, Inc., Interstate FiberNet, Inc., the subsidiary guarantors listed on the signature pages thereof, the banks, financial institutions and other institutional lenders listed on the signature pages thereof (collectively, the "ITC/\DeltaCom Lenders"), Morgan Stanley Senior Funding, Inc., as administrative agent, Morgan Stanley & Co. Incorporated, as collateral agent (the "ITC/\DeltaCom Financing"), and (ii) the Credit Agreement, dated as of March 30, 2003, among Business Telecom, Inc., BTI Telecom Corp., Business Telecom of Virginia, Inc., FS Multimedia, Inc., General Electric Capital Corporation, as Agent and Lender, Banc of America Strategic Solutions, Inc., and Export Development Canada (f/k/a Export Development Corporation (collectively the "BTI Lenders"), as amended (the "BTI Financing," and together with the ITC/\DeltaCom Financing, as modified, amended or created, the "Post-Merger Facility"), in connection with the proposed combination of the Companies (the "Merger"). The Companies hereby accept this commitment and agree to be bound by the terms and conditions as set forth in the term sheet annexed hereto on Exhibit A (the "Term Sheet") and as contained herein. 1. Complete Agreement; No Oral Modifications. ----------------------------------------- This commitment letter embodies the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior proposals, letters of intent, negotiations, or agreements, whether written or oral, relating to the subject matter hereof. This letter may not be modified, amended, supplemented, or otherwise changed, except by a document in writing signed by the parties hereto. 2. Indemnification. --------------- The Companies agree to indemnify, defend, and hold the ITC/\DeltaCom Lenders, the BTI Lenders and their respective affiliates, and the directors, officers, employees, agents, attorneys and representatives of any of them, harmless from and against any and all claims, damages, liabilities, costs, and expenses (including legal fees, expenses, and disbursements) that may be incurred by or asserted against any such parties in connection with or arising out of any investigation, litigation, or proceeding related to the transactions contemplated hereby. The foregoing indemnification obligation of the Companies shall apply irrespective of whether definitive documentation for the subject transaction is executed or whether the financing contemplated by the Post-Merger Facility is consummated. Under no circumstances shall any ITC/\DeltaCom Lender, BTI Lender or any of their respective affiliates be liable to any party under this letter or to any other person for any punitive, exemplary, consequential or indirect damages in connection with this letter, the ITC/\DeltaCom Financing, the BTI Financing, the Post-Merger Facility or any documentation related thereto or any other financing, regardless of whether the commitment herein is terminated or the financing contemplated by this letter closes. 3. Confidentiality. --------------- The contents of this commitment letter are confidential. The Companies agree that they will not show, circulate, or otherwise disclose this letter or its contents to any other Person (other than its officers, employees, attorneys, and advisors, on a need-to-know basis), other than as required by law, regulation or legal process. Without limiting the foregoing, ITC/\DeltaCom and the WCAS Securityholders (as defined in the Term Sheet) each may file a copy of this commitment letter and the Term Sheet with the Securities and Exchange Commission ("SEC") together with the Merger Documents (as defined herein) or in connection with the Merger. Once filed with the SEC, the parties hereto may show, circulate or otherwise disclose this commitment letter or its contents to any other Person. If this commitment letter is not accepted by the Companies, the Companies immediately shall return to the ITC/\DeltaCom Lenders and the BTI Lenders all originals and copies of this commitment letter, and any summaries thereof which the Companies or its officers, employees, attorneys, or advisors may have created. Prior to acceptance of this commitment letter, any disclosure by the Companies in violation hereof shall be deemed to constitute the Companies' acceptance of this commitment letter and agreement to be bound by the terms and conditions contained herein. Notwithstanding anything to the contrary set forth herein or in any other agreement to which the parties hereto are parties or by which they are bound, the obligations of confidentiality contained herein and therein, as they relate to the transactions contemplated hereby or by the Merger Documents, shall not apply to the federal tax structure or federal tax treatment of such transactions, and each party hereto (and any employee, representative, or agent of any party hereto) may disclose to any and all persons, without limitation of any kind, the federal tax structure and federal tax treatment of such transactions. The preceding sentence is intended to cause the transactions to be treated as not having been offered under conditions of confidentiality for purposes of Section 1.6011-4(b)(3) (or any successor provision) of the Treasury Regulations promulgated under Section 6011 of the Internal Revenue Code of 1986, as amended, and shall be construed in a manner consistent with such purpose. In addition, each party hereto acknowledges that it has no 2 proprietary or exclusive rights to the federal tax structure of any transaction contemplated hereby or the Merger Documents or any federal tax matter or federal tax idea related to any transaction contemplated hereby of by the Merger Documents. 4. Conditions to Effectiveness. --------------------------- The Companies, the ITC/\DeltaCom Lenders and the BTI Lenders each acknowledge and agree that the commitments set forth herein are subject to the following conditions: (a) Each of the conditions precedent set forth in the Term Sheet as if fully set forth herein; (b) Negotiation, execution and delivery of final documentation incorporating and otherwise consistent with the terms and conditions set forth in the Term Sheet in a manner acceptable to each of the ITC/\DeltaCom Lenders and the BTI Lenders; (c) Consummation of the transactions contemplated by the documents and forms of agreements submitted to the Lenders on or before the date hereof regarding the Merger (the "Merger Documents") in the manner set forth in the Merger Documents (without modification, amendment or supplementation, or other changes or the waiver of any conditions thereto, in any material respect other than those consented to in writing by the ITC/\DeltaCom Lenders and the BTI Lenders) on or before December 31, 2003; and (d) There having occurred after the date hereof no default or event of default under the ITC/\DeltaCom Facility or the BTI Facility (that had not occurred and identified to lenders in writing and had been continuing or otherwise waived in writing as of the date hereof) or any amendment to the documentation evidencing the ITC/\DeltaCom Facility. 5. Amendments. ---------- Neither this letter nor the Term Sheet may be amended without the prior written agreement of each party hereto. 6. Binding Effect. -------------- This commitment letter shall be binding upon, and inure to the benefit of, and be enforceable by successors and assigns of the parties and their successors and assigns, including transferees of interests in the ITC/\DeltaCom Facility or the BTI Facility on or after the date hereof. 7. Effect on Existing ITC/\DeltaCom Facility or the BTI Facility; ------------------------------------------------------------- Relationship of Parties. - ----------------------- Each of the ITC/\DeltaCom Facility or the BTI Facility shall be and remain in full force and effect as originally written, and shall constitute the legal, valid, binding and enforceable obligations of each of the respective parties thereto. The relationships of (i) the ITC/\DeltaCom Lenders, on the one hand, and each other party to the ITC/\DeltaCom Facility, on the other hand, and (ii) the BTI Lenders, on the one hand, and each other party to the BTI 3 Facility, on the other hand, have been and shall continue to be, at all times, that of creditor and debtor and not as joint venturers or partners. The ITC/\DeltaCom Lenders and the BTI Lenders are not, and no actions hereunder shall be deemed to create of imply any relationship between such parties as, joint venturers or partners. Nothing contained in this letter or the Term Sheet, or any instrument, document or agreement delivered in connection herewith, shall be deemed or construed to create a fiduciary relationship between or among the parties. 8. GOVERNING LAW; JURY WAIVER. -------------------------- THIS LETTER SHALL BE DEEMED TO HAVE BEEN MADE IN THE STATE OF NEW YORK AND THE VALIDITY OF THIS LETTER, AND THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF, AND THE RIGHTS OF THE PARTIES HERETO RELATING TO CLAIMS OR CAUSES OF ACTION ARISING IN CONNECTION HEREWITH SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE COMPANIES AND LENDERS HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO THIS LETTER, OR IN ANY WAY RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO WITH RESPECT TO THIS LETTER, OR THE TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW OR HEREAFTER ARISING, IRRESPECTIVE OF WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE. THE COMPANIES AND LENDERS HEREBY AGREE THAT ANY SUCH CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE OTHER PARTY HERETO TO WAIVE ITS RIGHT TO TRIAL BY JURY. 9. Counterparts, Expiration. ------------------------ This commitment letter may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Letter shall be of no force and effect unless and until six fully executed originals of this Commitment Letter are delivered to each of Wells Fargo Bank Minnesota, National Association (as agent for the ITC/\DeltaCom Lenders) in care of Torys LLP, 237 Park Avenue, New York, New York 10017, Attention: Emanuel C. Grillo and General Electric Capital Corporation (as agent for the BTI Lenders) at 2325 Lakeview Parkway, Suite 700, Alpharetta, GA 30004 on or before 5:00 p.m. EST on July 2, 2003. This commitment letter will terminate on December 31, 2003 if the transactions contemplated by the Merger Documents are not consummated before such date; provided, however, that the parties' respective rights and obligations under Sections 2 and 3 will survive any such termination. 4 Very truly yours, THE ITC/\DELTACOM REQUIRED LENDERS: WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Successor Agent By: ------------------------------------ Name: Title: 5 PW WILLOW FUND, L.L.C. By Bond Street Capital LLC By: /s/ Sam S. Kim ------------------------------------ Name: Sam S. Kim Title: Managing Member 6 ELC (CAYMAN) LTD. 2000-1 By David L. Babson & Company Inc., as Collateral Manager By: /s/ Adrienne Musgnug ------------------------------------ Name: Adrienne Musgnug Title: Managing Director MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: /s/ Adrienne Musgnug ------------------------------------ Name: Adrienne Musgnug Title: Managing Director SUFFIELD CLO, LIMITED By David L. Babson & Company Inc., as Collateral Manager By: /s/ Adrienne Musgnug ------------------------------------ Name: Adrienne Musgnug Title: Managing Director TRYON CLO LTD. 2000-1 By David L. Babson & Company Inc., as Collateral Manager By: /s/ Adrienne Musgnug ------------------------------------ Name: Adrienne Musgnug Title: Managing Director 7 GOLDENTREE HIGH YIELD MASTER FUND, LTD. By Goldentree Asset Management, L.P. By: /s/ Steven Shapiro ------------------------------------ Name: Steven Shapiro Title: Portfolio Manager GOLDENTREE HIGH YIELD OPPORTUNITIES I, L.P. By Goldentree Asset Management, L.P. By: /s/ Steven Shapiro ------------------------------------ Name: Steven Shapiro Title: Portfolio Manager GOLDENTREE HIGH YIELD OPPORTUNITIES II, L.P. By Goldentree Asset Management, L.P. By: /s/ Steven Shapiro ------------------------------------ Name: Steven Shapiro Title: Portfolio Manager DB STRUCTURED PRODUCTS INC. By Goldentree Asset Management, L.P. By: /s/ Steven Shapiro ------------------------------------ Name: Steven Shapiro Title: Portfolio Manager GOLDENTREE LOAN OPPORTUNITIES I, LIMITED By Goldentree Asset Management, L.P. By: /s/ Steven Shapiro ------------------------------------ Name: Steven Shapiro Title: Portfolio Manager 8 SAFETY NATIONAL CASUALTY CORPORATION By Goldentree Asset Management, L.P. By: /s/ Steven Shapiro ------------------------------------ Name: Steven Shapiro Title: Portfolio Manager ALPHA U.S. SUBFUND II, LLC By Goldentree Asset Management, L.P. By: /s/ Steven Shapiro ------------------------------------ Name: Steven Shapiro Title: Portfolio Manager 9 SANKATY ADVISORS, LLC, as Collateral Manager for Brant Point II CBO 2000-1 LTD., as Term Lender By: /s/ Timothy M. Barns ------------------------------------ Name: Timothy M. Barns Title: SVP SANKATY ADVISORS, LLC, as Collateral Manager for Great Point CLO 1999-1 LTD., as Term Lender By: /s/ Timothy M. Barns ------------------------------------ Name: Timothy M. Barns Title: SVP SANKATY HIGH YIELD PARTNERS III, L.P. By: /s/ Timothy M. Barns ------------------------------------ Name: Timothy M. Barns Title: SVP SANKATY HIGH YIELD PARTNERS II, L.P. By: /s/ Timothy M. Barns ------------------------------------ Name: Timothy M. Barns Title: SVP SANKATY HIGH YIELD ASSET PARTNERS, L.P. By: /s/ Timothy M. Barns ------------------------------------ Name: Timothy M. Barns Title: SVP 10 SANKATY CREDIT OPPORTUNITIES, L.P. By: /s/ Timothy M. Barns ------------------------------------ Name: Timothy M. Barns Title: SVP 11 PACIFICA PARTNERS I, LP By: /s/ Sean R. Walker ------------------------------------ Name: Sean R. Walker Title: SVR 12 THE BTI LENDERS: GENERAL ELECTRIC CAPITAL CORPORATION, as Agent and Lender By: /s/ Todd B. Faust ------------------------------------ Name: Todd B. Faust Title: Authorized Signatory 13 BANC OF AMERICA STRATEGIC SOLUTIONS,INC. By: /s/ John W. Woodiel III ------------------------------------ Name: John W. Woodiel III Title: Managing Director 14 EXPORT DEVELOPMENT CANADA (f/k/a Export Development Corporation) By: /s/ Kevin Skilliter ------------------------------------ Name: Kevin Skilliter Title: Loan Asset Manager By: /s/ Lynda Bernst ------------------------------------ Name: Lynda Bernst Title: Portfolio Manager 15 Acknowledged and Agreed as of the date first written above ITC/\DELTACOM, INC. By: /s/ Doug Shumate ------------------------------------ Name: Doug Shumate Title: Snr. V.P.CFO INTERSTATE FIBERNET, INC. By: /s/ Doug Shumate ------------------------------------ Name: Doug Shumate Title: Snr. V.P.CFO ITC/\DELTACOM COMMUNICATIONS , INC. By: /s/ Doug Shumate ------------------------------------ Name: Doug Shumate Title: Snr. V.P.CFO DELTACOM INFORMATION SYSTEMS, INC. By: /s/ Doug Shumate ------------------------------------ Name: Doug Shumate Title: Snr. V.P.CFO BUSINESS TELECOM, INC. By: /s/ J.W. Braukman, III ------------------------------------ Name: John W. Braukman, III Title: CFO/COO 16 BTI TELECOM CORP. By: /s/ J.W. Braukman, III ------------------------------------ Name: John W. Braukman, III Title: CFO/COO BUSINESS TELECOM OF VIRGINIA, INC. By: /s/ J.W. Braukman, III ------------------------------------ Name: John W. Braukman, III Title: CFO/COO FS MULTIMEDIA, INC. By: /s/ J.W. Braukman, III ------------------------------------ Name: John W. Braukman, III Title: CFO/COO 17 Exhibit A --------- Execution Version ITC/\DELTACOM, INC. ("ITC") Proposed Amendment and Restatement to Senior Secured Credit Facilities Term Sheet Dated July 2, 2003 The terms set out in this Term Sheet, in the absence of a fully executed and delivered commitment agreement, do not constitute a commitment to amend the ITC Amended and Restated Credit Agreement, dated as of October 29, 2002 (the "Existing Credit Agreement"), nor does this Term Sheet constitute consent for the Borrower to enter into an additional facility to be financed by the lenders to BTI Telecom Corp. and its affiliates (collectively, "BTI") in connection with the acquisition of BTI by ITC. Any amendment of the Existing Credit Agreement is subject to, inter alia, the approval of the Lenders thereunder (the "ITC Lenders") and execution and delivery of satisfactory documentation. In addition, any amendment or refinancing of the BTI Credit Agreement, dated as of March 30, 2001, as amended (the "BTI Facility"), is subject to, inter alia, the approval of the lenders under the BTI Facility (the "BTI Lenders") and execution and delivery of satisfactory documentation. Unless otherwise stated in this Term Sheet or as may be required by (or consistent with) this Term Sheet, it is intended that the provisions of the Existing Credit Agreement will not be amended. Any capitalized terms used herein and not defined herein shall have the meanings set forth in the Existing Credit Agreement. Borrower: Interstate FiberNet, Inc. Guarantors: The Post-Merger First Lien Facilities (as defined below) and the Post-Merger Second Lien Facility (as defined below) shall be guaranteed by ITC and each of its direct and indirect subsidiaries (excluding the Borrower), including, without limitation, BTI Telecom Corp. and BTI Telecom Corp.'s subsidiaries (collectively, the "Guarantors" and when taken together with the Borrower, the "Loan Parties"). Each Loan Party shall secure its obligations in respect of such Facilities with a pledge of all of its assets. ITC/\DELTACOM, INC. Term Sheet Dated July 2, 2003 Lenders: The ITC Lenders and the BTI Lenders, in respect of the Post-Merger First Lien Facilities and, to the extent provided herein, the Post-Merger Second Lien Facility. Administrative Agent and Collateral Agent under the Post-Merger First Lien Facilities (the "First Lien Agent"): Wells Fargo Bank Minnesota, N.A. Administrative Agent and Collateral Agent under the Post-Merger Second Lien Facility (the "Second Lien Agent"): General Electric Capital Corporation Amount (the "Loans"): Term Loans in the amount of all principal outstanding under the Existing Facilities (as defined below) and the BTI Facility. All outstanding current interest under the Existing Credit Agreement and the BTI Facility shall be paid on the Closing Date (as defined below). Outstanding current interest shall not include past-due or PIK interest payable to the BTI Lenders and any such amounts shall be added to the outstanding principal amount of the Second Lien Facility. Any outstanding and unfunded commitments under the BTI Facility shall be terminated. Closing Date: The closing date under the Post-Merger First Lien Facilities and the Post-Merger Second Lien Facility (the "Closing Date") shall be the closing date under the Agreement and Plan of Merger (the "Merger Agreement") among ITC, BTI and the other parties identified therein pursuant to which ITC will acquire BTI and Welsh, Carson, Anderson & Stowe VIII, L.P. and its Affiliates and related Persons (collectively, the "WCAS 2 ITC/\DELTACOM, INC. Term Sheet Dated July 2, 2003 Securityholders") will make a new investment in ITC, as described below. Maturity Date: As set forth under the Existing Credit Agreement (June 30, 2006) for (i) funds advanced under Tranche 1 Term B Advances and Tranche 2 Term B Advances of the Existing Credit Agreement (the "Existing Facilities") and (ii) $30,000,000 in principal amount of the BTI Facility, all equally secured by the First Lien (as defined below) (together, the "Post-Merger First Lien Facilities"); and, with respect to the remaining $55,715,294 in principal amount of the BTI Facility secured by the Second Lien (as defined below) (the "Post-Merger Second Lien Facility"), June 30, 2008 Scheduled Amortization: The Post-Merger First Lien Facilities shall amortize on the same schedule as the Existing Facilities (with the amount of each such scheduled payment to be increased based upon the additional amounts outstanding under the Post-Merger First Lien Facilities on the Closing Date), on a pro rata basis. There shall be no amortization of the Post-Merger Second Lien Facility before the Post-Merger First Lien Facilities have been indefeasibly repaid in full in cash. Upon repayment of all amounts outstanding under the Post-Merger First Lien Facilities, the amortization of the aggregate unpaid principal amount of the Post-Merger Second Lien Facility shall occur as follows: (i) there shall be mandatory prepayment event provisions identical in all material respects to such provisions under the Post-Merger First Lien Facilities and which shall become operative at that time and shall apply to any such mandatory prepayment events which occur thereafter, but not before; and (ii) such 3 ITC/\DELTACOM, INC. Term Sheet Dated July 2, 2003 aggregate unpaid principal amount shall be amortized as follows: 3Q, 4Q/2006; 1Q/2007 $3,979,644 2Q/2007 $13,979,644 3Q/4Q/2007; 1Q/2008 $646,331 June 30, 2008 $27,857,647 Interest Rate: As set forth in the Existing Credit Agreement (including as to timing and manner of payment) with respect to the Post-Merger First Lien Facilities and the Post-Merger Second Lien Facility; provided that (i) the Lenders under the Post-Merger Second Lien Facility shall not be entitled to any increase of 50 basis points pursuant to Section 5.02(f)(vii) of the Existing Credit Agreement whether or not the Lenders under the Post-Merger First Lien Facilities are entitled to such an increase, and (ii) subject to clause (i) of this proviso, all amounts outstanding under the Post-Merger Second Lien Facility shall, absent default, bear interest at a rate that is 25 basis points higher than the non-default rate applicable to amounts outstanding under the Post-Merger First Lien Facilities, any Permitted Refinancing (as defined below) or any Receivables Financing (as defined below) as applicable, but in no event less than the rates set forth in the Second Lien Credit Agreement (as defined below) on the Closing Date. Security: The obligations of the Borrower and the Guarantors relating to the Post-Merger First Lien Facilities shall be secured by first priority liens on, and security interests in (the "First Lien"), all of the assets of the 4 ITC/\DELTACOM, INC. Term Sheet Dated July 2, 2003 Borrower and the Guarantors (the "Collateral"), subject to Permitted Liens. The obligations of the Borrower and the Guarantors relating to the Post-Merger Second Lien Facility shall be secured by second priority liens on, and security interests in (the "Second Lien"), the Collateral, subject to Permitted Liens. Intercreditor Rights and Agreement: The First Lien holders and the Second Lien holders shall enter into, in addition to the other documents described below, an intercreditor agreement (the "Intercreditor Agreement"), acknowledging that the liens and security interests granted to the First Lien holders in the Collateral shall be senior in priority and in right of payment in all respects to the liens and security interests to the Second Lien holders, in form and substance satisfactory to the parties to evidence the agreed-upon relationship between the First Lien holders and the Second Lien holders and, subject to the provisions of this Term Sheet and not inconsistent herewith, otherwise to document (i) the agreement of all Lenders not to contest the validity of Liens in favor of the First Lien holders and the Second Lien holders, (ii) certain limited approval rights of the Lenders under the Post-Merger Second Lien Facility only with respect to waivers, consents and amendments of or under the Post-Merger First Lien Facilities and/or any Permitted Refinancings in respect of any changes in the principal amount, or material changes in interest rates or in the 5 ITC/\DELTACOM, INC. Term Sheet Dated July 2, 2003 extension of the amortization schedule of the Post-Merger First Lien Facilities and/or any Permitted Refinancings or any amendment, waiver or modification to the limitations set forth in Section 502(a) under the First Lien Credit Agreement in respect of proposed Liens of equal or higher priority to the Liens of the Second Lien holders, (iii) the consent of the Required Lenders under the Post-Merger First Lien Facilities required to make any changes to the principal amount, the interest rates or fees, maturity or amortization schedule, covenants, events of default or other material provisions of the Post-Merger Second Lien Facility, or (iv) the consent of the Required Lenders under the Post-Merger First Lien Facilities and under the Post-Merger Second Lien Facility to any changes to the Intercreditor Agreement. Except as provided herein, the Lenders under the Post-Merger Second Lien Facility will agree to waive compliance with, modify or amend any covenant or other term or provision under the Post-Merger Second Lien Facility (other than Sections 2.05(b)(ii), 5.02(a), (e), (g), (k) and (q) in respect of the Total Leverage Ratio Covenant and the Interest Coverage Ratio Covenant applicable to the Post-Merger Second Lien Facility) to the extent the Agent and the Lenders under the Post-Merger First Lien Facilities have agreed to waive compliance with, modify or amend any similar covenant or other term or 6 ITC/\DELTACOM, INC. Term Sheet Dated July 2, 2003 provision under the Post-Merger First Lien Facilities. The Second Lien shall be a "silent lien" as long as the Post-Merger First Lien Facilities or any Permitted Refinancings remain outstanding, so that no action in the nature of remedies may be taken by the Second Lien holders, and any interest in the Collateral must be released upon the request of the First Lien holders to the extent the same is permitted by the Post-Merger First Lien Facilities and all proceeds of the transaction which is the subject of such release are used solely for the purpose of repaying (and permanently reducing) obligations under the Post-Merger First Lien Facilities and/any Permitted Refinancings, until the Post-Merger First Lien Facilities and/any Permitted Refinancings have been indefeasibly repaid in full in cash, except as follows (subject, in each instance, to the payment over to the First Lien holders of any proceeds of such action until such time as the Post-Merger First Lien Facilities and/or any Permitted Refinancings have been indefeasibly repaid in full in cash): (i) Upon (A) any default in the payment of interest or fees under the Post-Merger Second Lien Facility or (B) any default under the Post-Merger Second Lien Facility arising from the breach of the Financial Covenants (as applicable to the Post-Merger Second Lien Facility set forth herein) or the Second Lien Negative Covenants (as defined below), the Second Lien holders may take actions in the nature of remedies following a standstill period of 270 days after written notice of such default to the First Lien Agent; provided, that in 7 ITC/\DELTACOM, INC. Term Sheet Dated July 2, 2003 the case of any breach of the Second Lien Negative Covenants in respect of Sections 5.02(e), (g) and (k), the standstill period shall be 90 days after written notice of such default to the First Lien Agent; (ii) Upon (A) any default in the payment of any scheduled amortization payment under the Post-Merger Second Lien Facility, or (B) any default in the payment in full of all obligations under the Post-Merger Second Lien Facility at maturity, (subject to the 270-day standstill period in clause (i) above), the Second Lien holders may accelerate all obligations under the Post-Merger Second Lien Facility and may commence legal action in the nature of remedies; provided that, the First Lien holders have not commenced any similar action in which case the Second Lien holders and may join any such action pursuant to clause (iii) below; (iii) Upon the commencement of legal action in the nature of remedies by the First Lien holders against the Borrower or the Guarantors, the Second Lien holders may join any foreclosure or enforcement proceeding commenced by the First Lien holders and shall cooperate with the First Lien holders in any such foreclosure or enforcement action; and (iv) Upon the occurrence of an insolvency event, the Second Lien holders may file a proof of claim but may not object to (1) the use of cash collateral or other financings approved by the First Lien holders, (2) the priority and validity of 8 ITC/\DELTACOM, INC. Term Sheet Dated July 2, 2003 the First Lien on the Collateral or (3) the sale of Collateral free and clear of all Liens approved by the First Lien holder; provided that in connection with any sale of the Collateral, the Second Lien holders shall have the right to purchase the rights and claims of the First Lien holders at par and shall retain their right to credit bid their secured claim at any such sale in accordance with Section 363(k) of the United States Bankruptcy Code. Upon indefeasible payment in full in cash of the obligations under the Post-Merger First Lien Facilities and/or any Permitted Refinancings, the obligations relating to the Post-Merger Second Lien Facility shall be secured by first priority liens on, and security interests in, all of the assets of the Collateral subject to Permitted Liens and any standstill periods set forth above shall immediately terminate. Documentation: The Post-Merger First Lien Facilities shall be incorporated into an amendment and restatement of the Existing Credit Agreement (the "First Lien Credit Agreement"), and the Post-Merger Second Lien Facility shall be addressed in a separate Credit Agreement (the "Second Lien Credit Agreement"), unless the ITC Lenders and the BTI Lenders mutually agree that the Post-Merger First Lien Facilities and the Post-Merger Second Lien Facility shall be addressed in a single credit agreement. Subject to the provisions of this Term Sheet, the representations and warranties, affirmative covenants, events of default and other applicable provisions of the First Lien Credit Agreement and the Second Lien Credit Agreement shall in form and scope be 9 ITC/\DELTACOM, INC. Term Sheet Dated July 2, 2003 identical in all material respects and subject to the terms of the Intercreditor Agreement. In addition to the foregoing and notwithstanding anything to the contrary set forth herein, the Post-Merger Second Lien Facility shall contain (A) negative covenants (other than the financial covenants) substantially similar in all material respects but "stepped-back" as applicable from the negative covenants in the First Lien Credit Agreement (the "Second Lien Negative Covenants") to the applicable provisions of the First Lien Credit Agreement and (B) financial covenants identical in all material respects to the applicable provisions of the First Lien Credit Agreement existing on the Closing Date, except that such covenants shall only reflect the covenant level applicable to the Borrower on the Closing Date, and not be subject to adjustment for future periods. For purposes of illustration, the Total Leverage Ratio Covenant to be included in the Second Lien Credit Agreement shall be set at 5.5x for all periods prior to repayment in full in case of the obligations under the Post-Merger First Lien Facilities and/or any Permitted Refinancings. Mandatory Prepayment Provisions, including Excess Cash Flow, and Optional Prepayment Provisions: As set forth in the Existing Credit Agreement (except as stated below) for the Post-Merger First Lien Facilities, with funds to be applied on a pro rata basis. Representations and Warranties: As set forth in the Existing Credit Agreement and as customary and appropriate for transactions of this type. EBITDA: For purposes of computing EBITDA, all restructuring charges incurred under or in 10 ITC/\DELTACOM, INC. Term Sheet Dated July 2, 2003 connection with the transactions contemplated by the Merger Agreement shall be treated as set forth in clause (h) of the definition of EBITDA in the Existing Credit Agreement, provided that the requirements of such clause (h) are satisfied. Change of Control: The definition of "Existing Stockholders" shall be amended to refer to the "WCAS Securityholders and their Affiliates," (and not the current "Existing Shareholders") as WCAS Securityholders is defined for purposes of this Term Sheet. Affirmative Covenants: As set forth in the Existing Credit Agreement. Financial Covenants: In addition to those set forth in the Existing Credit Agreement, the following: (A) Minimum Cash Covenant, which shall provide that ITC shall have no less than $10,000,000 of unrestricted cash on hand at any time. (B) Total Leverage Ratio Covenant, which shall be defined as the ratio of "total debt" to LTM EBITDA (pursuant to which EBITDA shall not be adjusted as provided in Section 5.02(q)(ii)(B)(1)). Total debt shall be defined to include all amounts outstanding under long-term debt agreements, notes or capital leases of all Loan Parties on a Consolidated basis (including, for avoidance of doubt, all Debt Incurred pursuant to Sections 5.02(b)(i)-(vi) and all Assumed BTI Debt (as defined below). As of the last day of each quarter, the ratio under the Post-Merger First Lien Facilities shall not be greater than: 11 ITC/\DELTACOM, INC. Term Sheet Dated July 2, 2003 4Q/2003 - 2Q/2004 5.5 3Q/2004 - 4Q/2004 5.0 1Q/2005 - Maturity Date 4.5 (C) Interest Coverage Ratio (pursuant to which EBITDA shall not be adjusted as provided in Section 5.02(q)(ii)(B)(1)). On a Consolidated basis, as of the last day of each quarter, based on the trailing two quarters, the ratio under the Post-Merger First Lien Facilities shall not be less than: 4Q/2003 - 2Q/2004 2.5 3Q/2004 - 4Q/2004 3.0 1Q/2005 - 2Q/2005 3.5 3Q/2005 - Maturity Date 4.0 The Borrower shall have a period of 60 days (inclusive of any other cure periods set forth in the Existing Credit Agreement) to cure any violation of any financial covenant before such violation shall become a Default or an Event of Default. If the Closing Date occurs on or before September 30, 2003, any Debt Incurred by the Loan Parties in connection with ITC's acquisition of BTI shall be excluded from the definition of "Senior Debt" for purposes of determining compliance by the Loan Parties with the Senior Debt Ratio with respect to the quarter ending September 30, 2003. Negative Covenants: As set forth in the Existing Credit Agreement, except as follows: 12 ITC/\DELTACOM, INC. Term Sheet Dated July 2, 2003 (A) The negative covenants in the Existing Agreement shall be amended to permit the Incurrence of the Debt and granting of the Liens with respect to the Post-Merger First Lien Facilities and the Post-Merger Second Lien Facility in the manner set forth in this Term Sheet; (B) Section 5.02(a)(v) shall be amended by deleting it in its entirety and replacing it with "Liens securing the Subordinated Debt permitted by Section 5.02(b)(ii) subordinated and junior in priority to the Liens securing the Post-Merger First Lien Facilities and the Post-Merger Second Lien Facility on terms and conditions acceptable to the Agent and the Required Lenders"; (C) The proviso in first sentence of Section 5.02(b) shall be amended to provide that ITC and its Subsidiaries may Incur Debt (including, for avoidance of doubt, all Debt Incurred pursuant to Sections 5.02(b)(i)-(vi)) if, after giving effect to the Incurrence of such Debt and the receipt and application of the proceeds therefrom, the Interest Coverage Ratio (amended as set forth in this Term Sheet), the Total Leverage Ratio and the other financial covenants are satisfied; (D) Section 5.02(b)(ii) permitting the Subordinated Debt of the Parent and the Borrower shall be amended to provide that (i) the aggregate amount of such permitted Subordinated Debt shall be reduced from $50,000,000 to $30,000,000 (excluding Debt under the Post-Merger Second Lien Facility), (ii) the Incurrence of such permitted 13 ITC/\DELTACOM, INC. Term Sheet Dated July 2, 2003 Subordinated Debt shall be made subject to the limitations of clauses (2) and (3) of Section 5.02(b)(v)(where the terms "Loan Documents" and "Facilities" therein shall include the First Lien Credit Agreement, the Second Lien Credit Agreement, the Post-Merger First Lien Facilities and the Post-Merger Second Lien Facility, as applicable) and the financial covenants herein, (iii) the term "Loans" set forth in the definition of Subordinated Debt shall include the obligations outstanding under the Post-Merger First Lien Facilities and the Post-Merger Second Lien Facility, as applicable, and (iv) the Required Lenders under both the Post-Merger First Lien Facilities and the Post-Merger Second Lien Facility have approved the terms of subordination; (E) Clause (ii) of Section 5.02(d) shall be amended to delete the reference to Section 5.02(a)(v), and clause (v) of Section 5.02(d) shall be amended to expressly require compliance with Sections 5.02(a), (b) and (f); (F) Section 5.02(d) shall be further amended to permit ITC's acquisition of BTI by a merger of a newly formed direct, wholly-owned subsidiary of ITC with and into BTI Telecom Corp., which shall be the surviving corporation of such merger and, immediately after such merger, shall be a direct, wholly-owned subsidiary of ITC; (G) Sections 5.02(d)(v) and (f)(vii) limiting permitted Mergers and Investments in other Persons shall be amended to 14 ITC/\DELTACOM, INC. Term Sheet Dated July 2, 2003 (i) permit ITC to acquire all of the outstanding capital stock of another Person solely in exchange for the stock, shares or other equity securities of the Parent; provided that such Person has positive cash flow measured by (1) LTM EBITDA minus LTM Capital Expenditures; and (2) Current Assets minus unsecured debt assumed minus Capitalized Leases shall have a positive value; provided, further, that if ITC seeks to acquire another Person within 12 months after the closing of its acquisition of BTI, the Chief Financial Officer of ITC shall certify that 60% of the synergies projected in the synergy study with respect to ITC's acquisition of BTI previously delivered to the Agent shall have been achieved; and (ii) provide that all other Investments in other Persons pursuant to Section 5.02(d)(v) or (f)(vii) shall require the consent of the Required Lenders; (H) Section 5.02(e) shall be amended to add as clause (vi) thereof the following: "(vi) assignments, sales or other dispositions at fair market value of accounts receivable representing amounts owed to any Loan Party by any Person that is subject to a proceeding under the Bankruptcy Code"; (I) Clause (v) of Section 5.02(f) limiting Investments in other Persons shall be amended by deleting the reference therein to "$150,000,000" and substituting therefor reference to "$10,000,000" and by deleting the reference therein to "$10,000,000" and substituting therefor reference to "$2,000,000"; and 15 ITC/\DELTACOM, INC. Term Sheet Dated July 2, 2003 (J) Section 5.02(h) shall be amended to provide that amendments of the certificate of incorporation and by laws or other constitutive documents of ITC and the other Loan Parties as contemplated by the Merger Agreement shall not be deemed to reasonably be expected to have a Material Adverse Effect. Refinancing Rights: The Borrower shall have the right to refinance all (but not less than all) of the amounts outstanding under the Post-Merger First Lien Facilities from time to time, and to cause such refinancing to be secured and guaranteed in the same manner as the First Lien Credit Agreement, provided that (i) the principal amount of each such refinancing shall not exceed the then outstanding principal amount of the Post-Merger First Lien Facilities being refinanced, (ii) the maturity date of such facility shall not be earlier than the stated maturity date of the Post-Merger First Lien Facilities and (iii) to the extent the rate of interest and fees under such new financing exceed the rate of interest and fees under the Post-Merger First Lien Facilities, the rate of interest and fees under the Post-Merger Second Lien Facility shall be adjusted to maintain the spread existing between such rates and fees under the Post-Merger First Lien Facilities and the Post-Merger Second Lien Facility immediately prior to such new financing (each such refinancing, a "Permitted Refinancing"). Any right of approval with respect to a Permitted Refinancing shall be subject to approval by Required Lenders under the Post-Merger First Lien Facilities. The Borrower also shall have the right to incur additional Debt in an amount not to 16 ITC/\DELTACOM, INC. Term Sheet Dated July 2, 2003 exceed the amount then outstanding under the Post-Merger First Lien Facilities secured by the combined accounts receivable of the Loan Parties (a "Receivables Financing"), provided that: (i) all of the proceeds of such Receivables Financing are used solely to refinance all (but not less than all) of the amounts outstanding under the Post-Merger First Lien Facilities and all outstanding and unfunded commitments under the Post-Merger First Lien Facilities, if any, are terminated; (ii) the Required Lenders under the Post-Merger First Lien Facilities have approved such additional Debt; (iii) any one or more of the Lenders under the Post-Merger Second Lien Facility have a first right of refusal to match the offer the Borrower has received for such Receivables Financing; and (iv) upon the closing of such Receivables Financing, the Post-Merger Second Lien Facility is secured by a first priority lien on all assets of the Borrower and the Guarantors (other than the accounts receivable required to be pledged under the Receivables Financing), subject to Permitted Liens. Upon the satisfaction of the conditions set forth in the foregoing clauses (i) through (iv), the Lenders under the Post-Merger First Lien Facilities and the Post-Merger Second Lien Facility shall release their Liens on such accounts receivable. No Permitted Refinancing or Receivables Financing shall be permitted without the consent of the Lenders under the Post-Merger Second Lien Facility if such Permitted Refinancing or Receivables Financing shall affect the (i) the maturity date or any provision with respect to amortization of the Post-Merger Second Lien Facility or (ii) the rights and obligations contemplated by the Intercreditor Agreement 17 ITC/\DELTACOM, INC. Term Sheet Dated July 2, 2003 (except that the lenders under each Permitted Refinancing shall become parties to the Intercreditor Agreement). In addition to the foregoing, the Borrower shall have the right at any time to refinance the entire amount outstanding under and thereupon terminate the Post-Merger First Lien Facilities and, in connection therewith, to incur additional Debt in excess of the amount necessary to refinance the entire amount of the Post-Merger First Lien Facilities (a "Replacement Financing") if the following conditions are satisfied: (i) the obligations outstanding under the Post-Merger Second Lien Facility and the Replacement Financing are secured, from and after the date of closing of the Replacement Facility, by the First Lien, on a pro rata basis; (ii) the maximum aggregate principal amount permitted under the Replacement Financing (together with (a) the maximum aggregate principal amount permitted under any Receivables Financing and (b) the principal amount then outstanding under the Post-Merger Second Lien Facility) does not exceed $250,000,000; (iii) (A) the maturity date and amortization schedule under the Post-Merger Second Lien Facility shall not be affected, and (B) the rate of interest and fees under the Post-Merger Second Lien Facility shall be increased to equal any higher rate of interest or fees provided under any such Replacement Facility; 18 ITC/\DELTACOM, INC. Term Sheet Dated July 2, 2003 (iv) the Borrower can demonstrate pro forma compliance with the financial covenants in the Post-Merger First Lien Facilities; and (v) the term and provisions of the documents governing the Replacement Financing (including, without limitation, financial covenants and events of default) are substantially similar in all material respects to those contained in the First Lien Credit Agreement (subject to proportionate adjustment to reflect the increase, if any, in the amounts available under the Replacement Financing) or otherwise reasonably acceptable to the Lenders under the Second Lien Credit Agreement. If a Replacement Financing is closed and documented as a single facility, the Intercreditor Agreement will be terminated on the date of such closing. Other Provisions: (A) The definition of "Cash Equivalents" shall be amended to add as clause (d) thereof the following: "(d) investments in marketable direct obligations issued by any state of the United States of America or any municipality or other political subdivision of any such state or any public instrumentality thereof having, at the time of acquisition, the highest rating obtainable from any of Standard & Poor's, a division of The McGraw-Hill Companies, Inc., Moody's Investors Service, Inc. or Fitch Ratings, Inc., including, without limitation, auction rate certificates"; (B) The definition of "Contingent Payments" shall be amended by deleting 19 ITC/\DELTACOM, INC. Term Sheet Dated July 2, 2003 the reference therein to $19,600,000 and substituting therefor reference to $21,400,000; (C) The definition of "Lien" shall be amended by deleting the references therein to $2,000,000 and $5,000,000 and substituting therefor references to $4,000,000 and $6,000,000 plus an amount reasonably acceptable to the Agent and the Lenders in respect of the BTI business not to exceed $4,000,000, respectively; and (D) Covenants and agreements in Sections 2.05(b)(iii) and 5.02(h) of the Existing Credit Agreement in respect of "Reorganization Securities" shall be made applicable to the Common Stock, Series B Convertible Redeemable Preferred Stock and Common Stock Purchase Warrants of ITC issuable by ITC pursuant to the Merger Agreement and the securities of ITC issuable upon conversion or exercise of, or as payment-in-kind dividends on, the foregoing securities in accordance with their terms in the First Lien Credit Agreement and the Second Lien Credit Agreement. Conditions Precedent: Customary and appropriate for transactions of this type, including, without limitation, (i) execution and delivery of satisfactory definitive documentation customary for such transactions, (ii) obtaining necessary third party approvals (if any), (iii) evidence of the existence of control and cash management agreements in form and substance satisfactory to the Lenders, (iv) completion of due diligence satisfactory to the Agent and the Lenders and (v) execution and delivery of 20 ITC/\DELTACOM, INC. Term Sheet Dated July 2, 2003 the Successor Agent Agreement (pursuant to which the First Lien Agent shall be appointed). ITC shall have acquired BTI pursuant to the Merger Agreement on terms and conditions acceptable in form and substance to the Agent and the Lenders including, without limitation, (i) the initial investment by the WCAS Securityholders of $35,000,000 in ITC in the form of a new issue of Series B Convertible Redeemable Preferred Stock for cash and cancellation of the Post-July 31 Notes and the Transaction Expenses Notes (as such terms are defined in the Merger Agreement) as set forth in the Merger Agreement; (ii) a commitment by the WCAS Securityholders to invest an additional $10,000,000 in such Series B Convertible Redeemable Preferred Stock for cash as set forth in the Merger Agreement; (iii) assumption of Debt consisting of the obligations under the BTI Facility (on the terms and conditions set forth herein), certain vendor notes in the aggregate principal amount of $7,100,000, certain outstanding 101/2% Senior Notes due 2007 in the aggregate principal amount of $18,525,000 (but not Debt held by the WCAS Securityholders, which shall be treated only as set forth in Section 8.09(a) of the Merger Agreement) in an aggregate principal amount of not more than $112,500,000, plus any 21 ITC/\DELTACOM, INC. Term Sheet Dated July 2, 2003 fully cash-collateralized letters of credit and ordinary course of business obligations in an aggregate amount reasonably acceptable to all of the Lenders (all such Debt to be assumed, the "Assumed BTI Debt"); and (iv) satisfaction of the condition relating to Working Capital (as defined in the Merger Agreement) of BTI as of the Closing Date as set forth in Section 9.02(e) of the Merger Agreement. Default Rate: As set forth in the Existing Credit Agreement. Costs and Expenses: On the Closing Date, the Borrower shall reimburse the ITC Lenders and the BTI Lenders for the costs and expenses (including reasonable fees and expenses of attorneys, including one law firm for the BTI Lenders, and financial advisors) incurred in connection with the transaction and the documentation of the First Lien Credit Agreement and the Second Lien Credit Agreement. Events of Default: As set forth in the Existing Credit Agreement. Governing Law: New York 22
