<PAGE>
Exhibit 10.42
LIMITED WAIVER AND FIRST AMENDMENT
TO TERM LOAN AGREEMENT
THIS LIMITED WAIVER AND FIRST AMENDMENT TO TERM LOAN AGREEMENT
(this
"Amendment"), is made as of March 28, 2005,
by and among NORTHLAND CABLE
PROPERTIES SEVEN LIMITED PARTNERSHIP
("Borrower"), NORTHLAND COMMUNICATIONS
CORPORATION ("Guarantor" and, together with
Borrower, the "Credit Parties") and
CIT LENDING SERVICES CORPORATION, as Agent
and Lender.
WHEREAS, Borrower, Guarantor, the Agent and Lender are party to
that
certain Term Loan Agreement, dated as of
November 6, 2003 (as the same may be
amended, the "Loan Agreement"), whereby
Lenders originally extended to Borrower
a term loan of Twenty-one Million Five
Hundred Thousand and 00/100ths Dollars
($21,500,000) pursuant to the Loan
Agreement and the Loan Documents (as defined
in the Loan Agreement);
WHEREAS, Borrower has failed to maintain (i) the minimum required
Total
Debt Service Coverage Ratio; and (ii) the
maximum Total Leverage Ratio, in each
case for the Fiscal Quarter ended as of
December 31, 2004, as required by
Sections 6.10(b) and 6.10(c) of the Loan
Agreement (the "December 31, 2004
Defaults"); and
WHEREAS, Borrower has entered into (i) a Purchase and Sale
Agreement,
dated as of February 24, 2005, between
Borrower and McDonald Investment Company,
Inc. (the "Bay City APA") with respect to
the sale by Borrower of the System
serving the community of Bay City, Texas
(the "Bay City Asset Sale"); and (ii) a
Purchase and Sale Agreement, dated as of
February 2, 2005, between Borrower and
Cequel III Communications I, LLC (the
"Brenham APA") with respect to the sale by
Borrower of the System serving the
community of Brenham, Texas (the "Brenham
Asset Sale" and together with the Bay City
Asset Sale, sometimes collectively
the "Planned Asset Sales"); and
WHEREAS, Borrower has requested that Agent and Lender (i) waive
any
default resulting from the December 31,
2004 Defaults; and (ii) in light of the
Planned Asset Sales, amend certain
provisions of the Loan Agreement relating to
certain amortization requirements and
financial covenants for fiscal periods
occurring during the 2005 Fiscal Year; and
Agent and Lender have agreed to
provide the waivers and amendments set
forth in this Amendment, all on the terms
and subject to the conditions set forth
herein.
NOW, THEREFORE, in consideration of the foregoing premises, and
other
good and valuable consideration, the
receipt and legal sufficiency of which are
hereby acknowledged, the parties hereto
hereby agree as follows:
1. DEFINITIONS. Unless otherwise defined
herein, capitalized terms used herein
shall have the meanings assigned to them in
the Loan Agreement, as amended
hereby.
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2. WAIVER OF DEFAULTS. Subject to the terms
and conditions of this Amendment,
the Agent and Lender hereby waive any
Default or Event of Default currently
existing which arises solely from the
December 31, 2004 Defaults.
3. AMENDMENTS TO LOAN AGREEMENT. The Loan
Agreement is hereby amended as
follows:
(a) Section 1.1(a)(ii) of the Loan Agreement is hereby deleted in
its
entirety and in lieu thereof replaced by
the following:
(ii) Borrower shall, without setoff, deduction or counterclaim,
repay the principal amount of the Term Loan in twenty-one (21)
consecutive quarterly installments on the last day of March,
June,
September and December of each Fiscal Year, commencing March 31,
2004,
followed by a final installment on the Maturity Date, when all
remaining outstanding principal and accrued interest thereon shall
be
due and payable in full without setoff, deduction or
counterclaim.
Quarterly payments of principal in respect of the Term Loan shall
be in
the amounts set forth below:
<TABLE>
<CAPTION>
AMOUNT OF QUARTERLY
QUARTERLY DUE DATES
PRINCIPAL PAYMENT
<S>
<C>
March 31, 2004 through December 31, 2004
$806,250
March 31, 2005 and June 30, 2005
$0
September 30, 2005 and December 31, 2005
$250,000
March 31, 2006 through December 31, 2006
$1,094,750
March 31, 2007 through December 31, 2007
$1,352,500
March 31, 2008 through December 31, 2008
$1,610,000
Maturity Date
The then remaining outstanding
and unpaid principal balance of
the Term Loan.
</TABLE>
(b) Section 6.10(b) of the Loan Agreement is hereby deleted in
its
entirety and in lieu thereof replaced by
the following:
(b) Minimum Total Debt Service Coverage Ratio. Borrower shall
have, at the end of each Fiscal Quarter set forth below, a
Total Debt Service Coverage Ratio of not less than the
following:
1.00 to 1.00 for the Fiscal
Quarters ending September 30,
2003, December 31, 2003, March 31, 2004, June
30, 2004, September 30, 2004 and December 31,
2004; and
1.10 to 1.00 for the Fiscal Quarter
ending March 31, 2006
and each Fiscal Quarter ending thereafter.
2
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For purposes of greater certainty, the parties acknowledge and
agree that minimum Total Debt Service Coverage Ratio shall not
be measured during the 2005 Fiscal Year.
(c) Section 6.10(c) of the Loan Agreement is hereby deleted in
its
entirety and in lieu thereof replaced by
the following:
(c) Maximum Total Leverage Ratio. Borrower shall have, at the
end of each Fiscal Quarter set forth below, a Total Leverage
Ratio as of the last
day of such Fiscal Quarter of not more
than the following;
4.75 to 1.00 for the
Fiscal Quarters ending September 30,
2003, December 31, 2003 and March 31, 2004;
4.50 to 1.00 for the
Fiscal Quarters ending June 30,
2004, September 30, 2004, and December 31,
2004;
4.75 to 1.00 for the
Fiscal Quarter ending March 31, 2005;
4.50 to 1.00 for the
Fiscal Quarters ending June 30, 2005,
September 30, 2005 and December 31, 2005; and
3.50 to 1.00 for each
Fiscal Quarter ending thereafter.
(d) Section 6.10(d) of the Loan Agreement is hereby deleted in
its
entirety and in lieu thereof replaced by
the following:
(d) Minimum Interest Coverage Ratio. Borrower shall have, at
the end of each Fiscal Quarter set forth below, a Minimum
Interest Coverage Ratio as of the last day of such Fiscal
Quarter of not less than the following;
2.50 to 1.00 for the
Fiscal Quarters ending September 30,
2003, December 31, 2003, March 31, 2004, June
30, 2004, September 30, 2004 and December 31,
2004;
2.50 to 1.00 for the
Fiscal Quarters ending March 31, 2005,
June 30, 2005, September 30, 2005 and December
31, 2005; and
3.50 to 1.00 for each
Fiscal Quarter ending thereafter.
(e) Section 13 of the Loan Agreement is hereby amended as
follows:
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(i) The definition of "Applicable Base Rate
Margin" is hereby deleted in its
entirety and in lieu thereof replaced by
the following:
"Applicable Base Rate Margin" means, at any time of determination,
an
amount equal to the sum of: (i) the per annum interest rate margin
from
time to time in effect and payable in addition to the Base Rate
applicable to the Term Loan, as determined by reference to
Section
1.4(a); plus (ii) at all times prior to the Required Asset
Sales
Events, the Additional June 2005 Margin Amount, if applicable;
plus
(iii) at all times prior to the Required Asset Sales Events,
the
Additional September 2005 Margin Amount, if applicable.
(ii) The definition of "Applicable LIBOR
Margin" is hereby deleted in its
entirety and in lieu thereof replaced by
the following:
"Applicable LIBOR Margin" means, at any time of determination,
an
amount equal to the sum of: (i) the per annum interest rate from
time
to time in effect and payable in addition to the LIBOR Rate
applicable
to the Term Loan, as determined by reference to Section 1.4(a);
plus
(ii) at all
times prior to the Required Asset Sales Events, the
Additional June 2005 Margin Amount, if applicable; plus (iii) at
all
times prior to the Required Asset Sales Events, the Additional
September 2005 Margin Amount, if applicable.
(iii) The following new definition of
"Additional June 2005 Margin Amount" is
hereby added to Section 13 of the Loan
Agreement in the proper alphabetical
order:
"Additional June 2005 Margin Amount" means, in the case of the
determination of
any Applicable Margin on or after July 1, 2005, an
amount equal to (i) 0.00% if the Required Asset S
