<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 24, 1999
MINDSPRING ENTERPRISES, INC.
----------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 0-27890 58-2113290
- ----------------------------- --------------- -----------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1430 WEST PEACHTREE ST., SUITE 400, ATLANTA, GA 30309
-----------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (404) 815-0770
----------------
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On February 17, 1999, MindSpring Enterprises, Inc., a Delaware corporation
("MindSpring"), acquired some of the tangible and intangible assets and rights
used in connection with the Internet services business operated in the United
States by NETCOM On-Line Communication Services, Inc. ("NETCOM"), a Delaware
corporation and an indirect wholly owned subsidiary of ICG Communications, Inc.
(the "Business"), including (1) approximately 400,000 of NETCOM's individual
Internet access accounts; (2) approximately 3,000 dedicated Internet access
accounts; (3) approximately 18,000 Web hosting accounts; (4) leased operations
facilities in San Jose, California and Dallas, Texas; (5) some of NETCOM's
contracts with original equipment manufacturers; (6) NETCOM's rights to the
"NETCOM" name (except in Brazil, Canada and the United Kingdom); (7) some of
NETCOM's intellectual property held or used in connection with the Business;
(8) all engineering, business and other books, papers, files and records
directly related to the Business; (9) all manufacturer's warranties with
respect to the assets being acquired, if any, to the extent assignable; and
(10) some of the other tangible assets such as computers and furniture held or
used by NETCOM in connection with the Business (collectively, the "Assets").
MindSpring and NETCOM entered into an Asset Purchase Agreement (the "Asset
Purchase Agreement") dated January 5, 1999 and amended February 17, 1999
related to the acquisition. The acquisition will be accounted for under the
purchase method of accounting. The Business is headquartered in San Jose,
California, and has a network operations facility in Dallas, Texas. MindSpring
is currently evaluating the feasibility of consolidating operations and
administration. Otherwise, MindSpring intends to use the Assets in a manner
similar to the manner in which NETCOM used the Assets.
The NETCOM operations outside the United States are not included in this
transaction. In addition, NETCOM will retain all of the assets used in
connection with its network operations. Under a separate network services
agreement, NETCOM (which will change its name in the near future) will sell
MindSpring access to its network. The agreement has a term of one year with an
option for a second year on potentially different terms to be negotiated and
accepted by both parties.
MindSpring purchased the Assets for $245 million, including $215 million in
cash and $30 million in common stock of MindSpring (376,116 shares, at a per
share price of $79.76). The purchase price was determined based upon an
evaluation of the Business and the result of negotiations conducted by
management under the direction and supervision of MindSpring's Board of
Directors. To finance the acquisition, MindSpring used approximately $135
million of cash on hand and borrowed approximately $80 million on February 17,
1999, under its $100 million secured revolving credit facility with First Union
National Bank and other lenders (the "Credit Facility"). MindSpring's Credit
Facility is described more fully under the section entitled "Description
of Secured Credit Facility," which is attached as Exhibit 99.1 to this report.
2
<PAGE> 3
The foregoing description of the acquisition does not purport to be
complete and is qualified in its entirety by reference to the Asset Purchase
Agreement, a copy of which is attached as Exhibit 2.1 to this report. A copy of
the press release, dated February 17, 1999, issued by MindSpring regarding the
closing of the NETCOM acquisition is attached as Exhibit 99.2 to this report.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
The financial statements of NETCOM required by this item are contained
in the financial statements and accompanying footnotes listed in the Index on
page F-1.
(b) Pro Forma Financial Information.
The pro forma financial information required by this item is contained
in the financial statements and accompanying footnotes listed in the Index on
page F-1.
(c) Exhibits.
2.1. Asset Purchase Agreement, dated as of January 5, 1999, by and between
MindSpring Enterprises, Inc. and NETCOM On-Line Communication
Services, Inc.
2.2 Closing Agreement, dated February 17, 1999, by and between
MindSpring Enterprises, Inc. and NETCOM On-Line Communication
Services, Inc.
10.1. Credit Agreement, dated as of February 17, 1999, by and among
MindSpring Enterprises, Inc., certain Lenders identified therein,
First Union Capital Markets Corp. as Arranger and First Union
National Bank as Administrative Agent.
10.2. Guaranty and Collateral Agreement, dated as of February 17, 1999,
made by MindSpring Enterprises, Inc. and certain other Grantors
party thereto, in favor of First Union National Bank as
Administrative Agent.
23.1 Consent of Arthur Andersen LLP.
99.1. Description of Secured Credit Facility.
99.2. Press release issued by MindSpring Enterprises, Inc. dated
February 17, 1999.
3
<PAGE> 4
INDEX TO FINANCIAL STATEMENTS
NETCOM ON-LINE COMMUNICATION SERVICES, INC. DOMESTIC SUBSCRIBER OPERATIONS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants ................................... F-2
Balance Sheets as of December 31, 1998 and 1997............................. F-3
Statement of Operations for the years ended December 31, 1998, 1997
and 1996........................................................ F-4
Statement of Accumulated Deficit for the years ended December 31,
1998, 1997 and 1996............................................. F-5
Statements of Cash Flows for the years ended December 31,
1998, 1997 and 1996............................................. F-6
Notes to Financial Statements............................................... F-7
MINDSPRING ENTERPRISES, INC.
Unaudited Pro Forma Financial Data.......................................... F-20
Unaudited Pro Forma Balance Sheet as of December 31, 1998................... F-21
Unaudited Pro Forma Statement of Operations for the twelve months
ended December 31, 1998.......................................... F-22
</TABLE>
F-1
<PAGE> 5
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To NETCOM On-Line
Communication Services, Inc.:
We have audited the accompanying balance sheets of NETCOM ON-LINE COMMUNICATION
SERVICES, INC. DOMESTIC SUBSCRIBER OPERATIONS (an unincorporated division of
NETCOM On-Line Communication Services, Inc.) as of December 31, 1998 and 1997
and the related statements of operations, accumulated deficit, and cash flows
for the three years in the period ended December 31, 1998. These financial
statements are the responsibility of NETCOM On-Line Communication Services,
Inc.'s management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NETCOM On-Line Communication
Services, Inc. Domestic Subscriber Operations as of December 31, 1998 and 1997
and the results of its operations and its cash flows for the three years in the
period ended December 31, 1998 in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Atlanta, Georgia
January 27, 1999
F-2
<PAGE> 6
NETCOM ON-LINE COMMUNICATION SERVICES, INC.
DOMESTIC SUBSCRIBER OPERATIONS
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
1998 1997
--------------- --------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 0 $ 62,248
Accounts receivable, net of allowance for doubtful accounts of $1,147 and $774
at December 31, 1998 and 1997, respectively 2,913 2,032
Inventory 410 334
Prepaid expenses and other current assets 1,863 1,309
--------------- --------------
Total current assets 5,186 65,923
--------------- --------------
PROPERTY AND EQUIPMENT, NET 55,104 63,824
--------------- --------------
OTHER ASSETS:
Subscriber acquisition costs 4,729 2,637
Other assets 482 674
--------------- --------------
Total other assets 5,211 3,311
--------------- --------------
Total assets $ 65,501 $ 133,058
=============== ==============
LIABILITIES AND ACCUMULATED DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 8,901 $ 6,622
Accrued payroll 5,207 5,483
Accrued liabilities 7,729 7,519
Due to parent 142,508 168,582
Deferred revenues 3,869 4,461
Short-term capital lease obligations 2,731 2,247
--------------- --------------
Total current liabilities 170,945 194,914
LONG-TERM CAPITAL LEASE OBLIGATIONS 2,061 3,287
--------------- --------------
Total liabilities 173,006 198,201
--------------- --------------
COMMITMENTS AND CONTINGENCIES (NOTE 4)
ACCUMULATED DEFICIT (107,505) (65,143)
--------------- --------------
Total liabilities and accumulated deficit $ 65,501 $ 133,058
=============== ==============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE> 7
NETCOM ON-LINE COMMUNICATION SERVICES, INC.
DOMESTIC SUBSCRIBER OPERATIONS
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED
DECEMBER 31, 1998, 1997, AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES $ 143,669 $ 147,517 $ 116,713
--------------- --------------- ---------------
COSTS AND EXPENSES:
Costs of revenues 58,046 51,203 36,722
Selling, general, and administrative 99,570 96,280 97,687
Depreciation and amortization 31,878 23,438 16,108
--------------- --------------- ---------------
Total costs and expenses 189,494 170,921 150,517
--------------- --------------- ---------------
OPERATING LOSS (45,825) (23,404) (33,804)
INTEREST INCOME, NET 3,463 4,703 6,050
OTHER EXPENSE 0 (764) (1,550)
--------------- --------------- ---------------
NET LOSS $ (42,362) $ (19,465) $ (29,304)
=============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 8
NETCOM ON-LINE COMMUNICATION SERVICES, INC.
DOMESTIC SUBSCRIBER OPERATIONS
STATEMENTS OF ACCUMULATED DEFICIT
FOR THE YEARS ENDED
DECEMBER 31, 1998, 1997, AND 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
BALANCE, DECEMBER 31, 1995 $ (16,374)
Net loss (29,304)
---------------
BALANCE, DECEMBER 31, 1996 (45,678)
Net loss (19,465)
---------------
BALANCE, DECEMBER 31, 1997 (65,143)
Net loss (42,362)
---------------
BALANCE, DECEMBER 31, 1998 $ (107,505)
===============
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 9
NETCOM ON-LINE COMMUNICATION SERVICES, INC.
DOMESTIC SUBSCRIBER OPERATIONS
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
DECEMBER 31, 1998, 1997, AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (42,362) $ (19,465) $ (29,304)
------------- ------------- --------------
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization 31,878 23,438 16,108
Changes in operating assets and liabilities:
Accounts receivable, net (881) (767) 116
Other current assets (630) 187 (234)
Accounts payable 2,279 2,184 (4,693)
Deferred revenues (592) 1,643 1,568
Accrued expenses (66) 1,276 6,697
Other assets (1,900) 2,096 (902)
------------- ------------- --------------
Total adjustments 30,088 30,057 18,660
------------- ------------- --------------
Net cash (used in) provided by operating
activities (12,274) 10,592 (10,644)
------------- ------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net of retirements (20,030) (5,866) (44,234)
------------- ------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in due to parent company (26,074) (10,232) (19,672)
------------- ------------- --------------
Payments of capital lease obligations (3,870) (1,843) 0
------------- ------------- --------------
Net cash used in financing activities (29,944) (12,075) (19,672)
------------- ------------- --------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (62,248) (7,349) (74,550)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 62,248 69,597 144,147
------------- ------------- --------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 0 $ 62,248 $ 69,597
============= ============= ==============
SUPPLEMENTAL NONCASH DISCLOSURE:
Assets acquired under capital lease $ 3,128 $ 7,377 $ 0
============= ============= ==============
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 10
NETCOM ON-LINE COMMUNICATION SERVICES, INC.
DOMESTIC SUBSCRIBER OPERATIONS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997, AND 1996
1. ORGANIZATION
NETCOM On-Line Communication Services, Inc. ("NETCOM") was incorporated in
the state of California in August 1992. In October 1994, NETCOM
reincorporated in the state of Delaware. In January 1998, in a transaction
accounted for as a pooling of interests, NETCOM became a wholly owned
subsidiary of ICG Services, Inc., a Delaware corporation, which is a wholly
owned subsidiary of ICG Communications, Inc. ("ICG"), and ceased to exist
as an independent entity. NETCOM provides Internet solutions to subscribers
in the United States, the United Kingdom and Canada.
The financial statements and related footnotes contained herein reflect the
operations of NETCOM's customer base of individual Internet access
subscribers in the United States (the "Domestic Operations"). These amounts
exclude the results of NETCOM's operations in Canada and the United Kingdom
as well as its capital stock. A portion of the Domestic Operations' assets,
including its subscriber base, intellectual property and facilities, is
being acquired in a transaction accounted for as a purchase by MindSpring
Enterprises, Inc. ("MindSpring"). The assets not being acquired will
continue to be owned by NETCOM (which will change its name in the near
future) and are expected to be utilized to provide services to MindSpring
via a Network Services Agreement (Note 8).
The Domestic Operations has experienced operating losses since inception as
a result of efforts to build network infrastructure, develop systems and
expand into new markets. The Domestic Operations expects to continue to
focus on increasing its subscriber base which could potentially have a
negative effect on near term financial and operating results. There can be
no assurance that the Domestic Operations' growth in revenue and subscriber
base will continue or that it will achieve profitability or positive cash
flow. The Domestic Operations has been funded to date by NETCOM and will be
funded by MindSpring subsequent to the acquisition.
F-7
<PAGE> 11
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRESENTATION
The financial statements of the Domestic Operations have been derived from
the consolidated financial statements of NETCOM and have been prepared to
present the financial position, results of operations, and cash flows of
the Domestic Operations on a stand-alone basis. Accordingly, the
accompanying financial statements for 1998 only include certain
administrative costs and expenses, which have been allocated to the
Domestic Operations by NETCOM and its parent, ICG (Note 7). These costs
have been allocated on a pro rata basis based primarily on employee
headcount, and represent management's best estimates of what such expenses
would have been had the Domestic Operations been operated as a separate
entity.
ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
DUE TO PARENT
NETCOM either advances funds to or borrows funds from the Domestic
Operations. Funds advanced to the Domestic Operations are used to cover
fixed asset expansion and working capital requirements. The advances and
borrowings are netted and are reflected in the "Due to Parent" line item
included in the accompanying balance sheets.
REVENUE RECOGNITION
Monthly subscription service revenue is recognized over the period services
are provided. Subscription service and equipment revenues, which require
the use of company-provided installation of equipment at a subscriber's
location, are recognized when the service is commenced.
CASH AND CASH EQUIVALENTS
The Domestic Operations considers all highly liquid investments with an
original maturity (at the date of purchase) of three months or less and
F-8
<PAGE> 12
insignificant interest rate risk to be the equivalent of cash for the
purposes of the balance sheet presentation and statements of cash flows.
The Domestic Operations has classified all investments as
available-for-sale and have included them in cash and cash equivalents.
Available-for-sale securities are carried at fair market value based on
quoted market prices, with unrealized gains and losses reported in "other
income." Interest on securities classified as available-for-sale is
included in "other income." The following is a summary of
available-for-sale securities at December 31, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
1998 1997
-------------- -------------
<S> <C> <C>
Commercial paper $ 0 $ 55,480
Money market instruments, net of overdrafts 0 1,108
-------------- -------------
Included in cash and cash equivalents $ 0 $ 56,588
============== =============
</TABLE>
At December 31, 1997, the estimated fair value of the commercial paper and
money market instruments approximated cost, and the amount of gross
unrealized gains and losses was not significant.
ACCOUNTS RECEIVABLE AND DEFERRED REVENUE
The Domestic Operations generally bills for subscription services,
including network and dial-up connection services and initial one-time
setup fees, on the first day of each month for which service is provided.
Deferred revenue consists primarily of prepaid monthly subscriptions and
also, to a lesser extent, billings to customers for equipment shipped that
has not been installed at customer locations.
INVENTORY
Inventory consists of purchased goods and is stated at the lower of cost or
market on a first-in, first-out basis.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost and are depreciated or amortized
using the straight-line method over the estimated useful life of the
assets, which is generally three to five years. Leasehold improvements are
amortized using the straight-line method over the shorter of their
estimated useful lives or the term of the related lease, whichever is
shorter.
F-9
<PAGE> 13
LONG-LIVED ASSETS
The Domestic Operations periodically reviews the values assigned to
long-lived assets, such as property and equipment, subscriber acquisition
costs, and other long-term assets, to determine whether any impairments are
other than temporary. Management believes that the long-lived assets in the
accompanying balance sheets are appropriately valued.
SUBSCRIBER ACQUISITION COSTS
The Domestic Operations expenses the costs of advertising as incurred,
except direct response advertising, which are included in subscriber
acquisition costs. These costs relate directly to subscriber solicitations
and principally include the printing, production, and shipping of starter
packages and the costs of obtaining qualified prospects by various targeted
direct marketing programs. No indirect costs are included in subscriber
acquisition costs. To date, all subscriber acquisition costs have been
incurred for the solicitation of specifically identified prospects.
Subscriber acquisition costs are deferred and amortized over a period
determined by calculating the ratio of current revenues related to the
direct response advertising versus the total expected revenues or 12
months, whichever is shorter. It is possible that these estimates of total
expected revenues could be reduced in the future. The Domestic Operations'
management is constantly evaluating the estimates used. As a result, the
amortization period of the subscriber acquisition costs related directly to
subscriber solicitations may be reduced.
Subscriber acquisition costs, which relate directly to potential
subscribers, are recorded separately from ordinary operating costs.
Deferred subscriber acquisition costs capitalized during fiscal years 1998
and 1997 were $16,469 and $5,252, respectively. Amortization and write-offs
for fiscal years 1998, 1997, and 1996 were $14,377, $7,189, and $11,410,
respectively.
Advertising expenses included in selling, general, and administrative
expenses were $8,268, $3,786, and $5,567 in 1998, 1997, and 1996,
respectively.
OTHER INCOME
In June 1995, the Domestic Operations acquired common stock in the McKinley
Group, Inc. ("McKinley") in exchange for $1,200 in cash and $300 of common
stock. In 1996, Excite, Inc. ("Excite") acquired all of the outstanding
shares of McKinley and the Domestic Operations received shares of Excite in
exchange for its investment in McKinley. The Domestic Operations recorded a
loss of $1,200 in 1996 to reflect the estimated value of the shares
received. During 1997, the Domestic Operations sold the Excite shares for a
net gain of $1,274.
F-10
<PAGE> 14
SEGMENTAL DISCLOSURES
The Domestic Operations adopted Statement of Financial Accounting Standards
("SFAS") No. 131, "Segmental Disclosures," effective December 31, 1998. The
standard had no effect, because the Domestic Operations operates in one
segment.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Domestic Operations to
concentrations of credit risk consist principally of cash investments and
trade receivables. The Domestic Operations' cash investment policies limit
investments to short-term, low-risk instruments. Concentrations of credit
risk with respect to trade receivables are limited due to the large number
of customers comprising the Domestic Operations' customer base.
SOURCES OF SUPPLIES
The Domestic Operations relies on local telephone companies and other
companies to provide data communications capacity. Although management
feels that alternative telecommunications facilities could be found in a
timely manner, disruption of these services, for more than a brief period,
would have an adverse effect on operating results.
Although the Domestic Operations attempts to maintain multiple vendors for
each required product, its property and equipment, which are important
components of its operations, are each currently acquired from only a few
sources. In addition, some of the Domestic Operations' suppliers have
limited resources and production capacity. If the suppliers are unable to
meet the Domestic Operations' needs as it builds out its network
infrastructure and sells services, then delays and increased costs in the
expansion of the Domestic Operations' network infrastructure or losses of
potential customers could result, which would adversely affect operating
results.
INCOME TAXES
The Domestic Operations is not a separate taxable entity. The income tax
returns of NETCOM include the Domestic Operations. For purposes of these
financial statements, income taxes allocated to the Domestic Operations
have been computed and recorded on a separate return basis based on the
statutory rates in effect (Note 6).
Income taxes are accounted for under SFAS No. 109, "Accounting for Income
Taxes." Under this method, deferred tax assets and liabilities are
determined based on differences between the financial reporting and tax
bases of assets and
F-11
<PAGE> 15
liabilities and are measured using the enacted tax rates and laws that will
be in effect when the differences are expected to reverse.
RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to the
current period presentation.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31, 1998 and
1997 (in thousands):
<TABLE>
<CAPTION>
1998 1997
-------------- -------------
<S> <C> <C>
Equipment $ 107,257 $ 90,830
Leasehold improvements 7,969 7,388
Furniture, fixtures, and other 5,079 4,442
Construction in process 676 5
Assets under capital leases 10,505 7,377
-------------- -------------
131,486 110,042
Less accumulated depreciation and amortization (76,382) (46,218)
-------------- -------------
Net property and equipment $ 55,104 $ 63,824
============== =============
</TABLE>
4. COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS
NETCOM is subject to legal proceedings and claims that have arisen in the
ordinary course of its business related to the Domestic Operations. In the
opinion of management, settlement of these actions when ultimately
concluded will not have a material adverse effect on trends in results of
operations or the financial condition of NETCOM or the Domestic Operations.
This conclusion is based on current facts and circumstances, however, and
it is possible that a change in the facts and circumstances relating to
such legal proceedings and claims could result in a development that would
have a material adverse effect on the results of operations or financial
condition of the Domestic Operations.
F-12
<PAGE> 16
NETCOM has allocated to the Domestic Operations leases on certain equipment
under agreements that are classified as capital leases. These leases have
original terms of three years or less and contain bargain purchase options
at the end of the original lease terms. The Domestic Operations also has
operating leases which relate to the lease of office and equipment space.
Rental expense attributable to these operating leases was approximately
$5,569, $5,291, and $4,237 for the years ended December 31, 1998, 1997, and
1996, respectively. At December 31, 1998, the Domestic Operations' capital
lease obligations and minimum rental commitments under noncancelable
operating leases with initial or remaining terms of more than one year were
as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
---------------- ----------------
<S> <C> <C>
1999 $ 3,066 $ 4,521
2000 1,844 1,337
2001 386 939
2002 0 932
2003 and thereafter 0 308
---------------- ----------------
Total minimum lease payments 5,296 $ 8,037
================
Amounts representing interest (504)
----------------
Present value of net minimum payments 4,792
Current portion (2,731)
----------------
Long-term capitalized lease obligations $ 2,061
================
</TABLE>
5. EMPLOYEE BENEFIT PLANS
The option plans and 401(k) plan of NETCOM, as assumed by ICG, include the
Domestic Operations. For purposes of these financial statements, all option
information related to the Domestic Operations has been computed and
recorded on a separate entity basis.
EMPLOYEE SAVINGS PLAN
NETCOM has a savings plan (the "Savings Plan") that qualifies as a deferred
salary arrangement under Section 401(k) of the Internal Revenue Code. Under
the Savings Plan, participating employees may defer a portion of their
pretax earnings up to the Internal Revenue Service annual contribution
limit. NETCOM matches 50% of each employee's contribution up to a maximum
of 6% of the employee's eligible earnings. NETCOM matches vest over four
years. NETCOM has not made any material matching contributions to the
Savings Plan for the related periods.
F-13
<PAGE> 17
1993 STOCK OPTION PLAN
In 1993, NETCOM approved and adopted its 1993 Non-qualified Stock Option
Plan (the "Plan"). The Plan is administered by the stock option committee
of the Board of Directors. The Plan provides for the granting of options to
purchase common stock to eligible employees, directors, and consultants of
NETCOM. A total of 3,153,571 shares of common stock may be issued pursuant
to options granted under the Plan. The options generally vest over three-
to five-year periods and are exercisable for up to ten years following the
date of grant.
ICG PLAN
NETCOM's 1993 Stock Option Plan was assumed by ICG at the time of the
merger (Note 1), and approved by ICG's Board of Directors as an incentive
and non-qualified stock option plan which provides for the granting of
options to certain directors, officers and employees to purchase 2,720,901
shares of ICG Common Stock. A total of 4,380,099 options were granted under
this plan at exercise prices ranging from $0.65 to $92.14, none of which
were less than 100% of the estimated fair market value of the shares
underlying the options on the date of grant, and accordingly, no
compensation expense was recorded for these options under APB 25. The
options granted under this plan are subject to various vesting
requirements, generally three years and five years, and expire within ten
years from the date of grant.
In order to continue to provide non-cash inventive and retain key
employees, all employee stock options outstanding on September 18, 1998
with exercise prices at or in excess of $22.00 were canceled by the Stock
Option Committee of ICG's Board of Directors and regranted with an exercise
price of $16.88. A total of 757,058 of NETCOM's options, with original
exercise prices ranging from $22.02 to $35.75 where canceled and regranted.
During the 1994 fiscal year, NETCOM's Board of Directors approved and
adopted an Employee Stock Purchase Plan which was dissolved upon the merger
with ICG. Shares purchased under this plan were converted into an estimated
119,000 shares of ICG Common Stock.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123
The Domestic Operations has elected to account for its stock-based
compensation plans under Accounting Principles Board Opinion No. 25 ("APB
25"); however, the Domestic Operations has computed for pro forma
disclosure purposes the value of all options granted during the years ended
December 31, 1998, 1997, and 1996 using the Black-Scholes option pricing
model as prescribed by SFAS No. 123 using the following weighted average
assumptions:
F-14
<PAGE> 18
<TABLE>
<CAPTION>
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Risk-free interest rate 6% 6% 6%
Expected dividend yield 0% 0% 0%
Expected lives 1.6 years 1.6 years 1.6 years
Expected volatility 80% 80% 80%
</TABLE>
The total value of options granted during the years ended December 31,
1998, 1997, and 1996 was computed as approximately $21,527, $39,132, and
$14,199, respectively, which would be amortized on a pro forma basis over
the vesting period of the options. If the Domestic Operations had accounted
for these plans in accordance with SFAS No. 123, the Domestic Operations
net loss and pro forma net loss for the years ended December 31, 1998,
1997, and 1996 would have been as follows (in thousands):
<TABLE>
<CAPTION>
AS PRO
REPORTED FORMA
-------------- -------------
<S> <C> <C>
December 31, 1996 $(29,304) $(41,182)
December 31, 1997 (19,465) (24,335)
December 31, 1998 (42,362) (47,777)
</TABLE>
A summary of the status of the Domestic Operations' stock options at
December 31, 1998, 1997, and 1996 and changes during the years then ended
are presented in the following table (in thousands except per share
information):
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
PRICE PER
SHARES SHARE
-------------- --------------
<S> <C> <C>
December 31, 1995 1,454 $ 28.46
Granted 732 30.08
Exercised (167) 7.05
Forfeited (388) 33.26
-------------- --------------
December 31, 1996 1,631 30.24
Granted 1,831 16.11
Exercised (77) 12.96
Forfeited (1,744) 29.84
-------------- --------------
December 31, 1997 1,641 15.67
Granted 1,661 23.04
Exercised (706) 14.90
Forfeited (1,282) 25.04
-------------- --------------
December 31, 1998 1,314 $ 16.27
==============
</TABLE>
F-15
<PAGE> 19
The following table summarizes the information about the Domestic
Operations' stock options outstanding at December 31, 1998 (in thousands
except per share information):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------------- -----------------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
RANGE OF NUMBER REMAINING EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE PRICE EXERCISABLE PRICE
-------------------- ----------------- -------------------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C>
$ 5.20 - 14.05 152 8.31 $12.20 77 $11.99
$ 14.50 - 15.51 26 8.45 15.20 8 15.31
$15.65 251 8.34 15.65 227 15.65
$ 15.73 - 16.88 804 9.20 16.77 95 16.22
$ 17.63 - 46.65 81 8.93 21.18 35 20.28
-------------------- ----------------- -------------------- ------------ --------------- ------------
1,314 442
================= ===============
</TABLE>
During 1996 and early in 1997, certain outstanding options were exchanged
at the election of the option holder. In September 1996, 67,408 shares were
exchanged and repriced for 39,995 shares, and in January 1997, 457,846
shares were exchanged and repriced for 272,084 shares on the effective date
of the trade-in. Eligible options were issued at a lower price than the
traded-in options and at a price higher than the market value. The trade-in
ratio was set such that the number of old options times their option price
approximates the new number of options times their exercise price. This
program was offered to all NETCOM employees, excluding members of the Board
of Directors and officers. However, option holders participating in the
first exchange were not eligible for the second program.
The following table summarizes the options exercisable as of December 31,
1998, 1997, and 1996 (in thousands except per share information):
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER WEIGHTED REMAINING
OF AVERAGE CONTRACTUAL
SHARES PRICE LIFE
------------ ------------- ---------------
<S> <C> <C> <C>
As of:
December 31, 1996 588 $ 22.74 8.77
December 31, 1997 573 12.83 9.17
December 31, 1998 442 15.89 8.65
</TABLE>
6. INCOME TAXES
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. As
discussed in Note
F-16
<PAGE> 20
2, the Domestic Operations is not a separate legal entity, but is included
in the consolidated return of NETCOM. Therefore, no tax-sharing arrangement
exists between NETCOM and the Domestic Operations. Significant components
of the Domestic Operations' allocated deferred tax assets and liabilities
for federal and state income taxes as of December 31, 1998 and 1997 are as
follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward $ 51,115 $ 33,621
Other, net 5,572 4,809
------------- -------------
Total deferred tax assets 56,687 38,430
Valuation allowance (53,281) (35,203)
------------- -------------
$ 3,406 $ 3,227
============= =============
Deferred tax liabilities:
Deferred subscriber acquisition costs $ 2,022 $ 939
Accelerated depreciation and amortization 1,384 2,288
------------- -------------
$ 3,406 $ 3,227
============= =============
</TABLE>
Realization of deferred tax assets is dependent on future earnings, the
timing and amount of which are uncertain. Accordingly, a valuation
allowance, in an amount equal to the net deferred tax assets as of December
31, 1998 and 1997, has been established to reflect these uncertainties. The
change in the valuation allowance was a net increase of $18,078 and $8,150
in 1998 and 1997, respectively.
As of December 31, 1998 and 1997, the Domestic Operations portion of
NETCOM's federal and state net operating loss carryforwards was
approximately $174,678 and $125,763, respectively, which will expire in the
years 1999 through 2011. In addition, NETCOM's ability to recognize the
Domestic Operations' portion of the benefit from the net operating loss
carryforwards will be limited under Section 382 of the Internal Revenue
Code, because the ownership of NETCOM has changed more than 50%, as
defined.
A reconciliation of the income tax provision computed at statutory tax
rates to the income tax provision for the years ended December 31, 1998,
1997, and 1996 is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ----------- ------------
<S> <C> <C> <C>
Income tax benefit at statutory rate (34)% (34)% (34)%
State and local income taxes (9) (9) (9)
Other, net 1 1 3
Deferred tax asset valuation allowance 42 42 40
---------- ----------- ------------
Total income tax provision 0% 0% 0%
========== =========== ============
</TABLE>
F-17
<PAGE> 21
In addition, the Domestic Operations has realized the benefit of
non-qualified stock compensation expense for tax purposes in excess of
stock compensation expense for book purposes of $8.2 million, $0.3 million,
and $7.6 million for the years ended December 31, 1998, 1997, and 1996,
respectively. These amounts have been credited directly against due to
parent, net of a full valuation allowance.
7. RELATED-PARTY TRANSACTIONS
Prior to the ICG merger, the Domestic Operations' only related-party
transactions were certain cash advances to the international operations of
NETCOM. The amount of these advances at December 31, 1998 and 1997 were
$38,125 and $32,352 and is included in due to parent.
Subsequent to the merger, ICG assumed the treasury function, so that all of
the Domestic Operations' cash at December 31, 1998 is netted in due to
parent. Additionally, ICG provided services in the area of risk management
and benefits. Estimated costs attributable to these support functions are
included in selling, general, and administrative expenses. These costs are
allocated to the Domestic Operations based on various factors that NETCOM
management believes represent relative cost streams and fair market value.
The costs allocated to the Domestic Operations were approximately $957 for
the year ended December 31, 1998.
Following the merger, the Domestic Operations began using certain
telecommunications services of ICG. ICG charged NETCOM $2,170 for such
services for the year ended December 31, 1998 and are included in cost of
revenue. Similarly, the Domestic Operations provided certain technical
services to ICG. ICG charged NETCOM $1,678 for such services for the year
ended December 31, 1998 and are included in revenues. The rates charged for
such services approximate market value, in the opinion of NETCOM's
management.
8. SUBSEQUENT EVENTS (UNAUDITED)
On January 5, 1999, MindSpring Enterprises, Inc. ("MindSpring") and NETCOM
entered into an Asset Purchase Agreement, pursuant to which MindSpring
agreed to acquire for a purchase price of $215 million in cash and $30
million in MindSpring stock certain of the tangible and intangible assets
and rights in connection with the consumer dial-up Internet access business
operated by NETCOM, as well as the Domestic Operations' domestic subscriber
base. As part of this transaction, MindSpring and NETCOM (which will change
its name in the near future) entered into a Network Services Agreement for
one year with an option for a second year on potentially different terms to
be
F-18
<PAGE> 22
negotiated and accepted by both parties. Under the Network Services
Agreement, MindSpring subscribers will be able to access the Internet
through ICG's network points-of-presence. This transaction was completed on
February 17, 1999, and will be accounted for as a purchase.
F-19
<PAGE> 23
UNAUDITED PRO FORMA FINANCIAL DATA
The following pro forma balance sheet reflects the acquisition by
MindSpring of certain assets of NETCOM On-Line Communication Services, Inc.
Domestic Subscriber Operations (the "NETCOM Domestic Operations") as if it had
occurred on December 31, 1998. The following pro forma statement of operations
for the year ended December 31, 1998 reflects the acquisition by MindSpring of
certain assets of the NETCOM Domestic Operations and of Spry, Inc. ("Spry") as
if they had occurred on January 1, 1998. The pro forma financial information
does not purport to represent what MindSpring's consolidated results of
operations would have been if the acquisitions had in fact occurred on these
dates, nor does it purport to indicate MindSpring's future consolidated
financial position or future consolidated results of operations. The pro forma
adjustments are based on currently available information and certain assumptions
that MindSpring's management believes are reasonable.
F-20
<PAGE> 24
UNAUDITED PRO FORMA
BALANCE SHEET
AS OF DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
NETCOM
Domestic
Total Assets: MindSpring Operations Subtotal Adjustments Pro Forma
--------------- ------------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 167,743 $ - $ 167,743 $ (135,000) (a) $ 32,743
Accounts receivable, net 3,278 2,913 6,191 - 6,191
Deferred tax asset--current 3,421 - 3,421 - 3,421
Other 758 2,273 3,031 (1,855) (a) 1,176
--------------- ------------- ------------ --------------- ------------
Total current assets 175,200 5,186 180,386 (136,855) 43,531
--------------- ------------- ------------ --------------- ------------
Property and equipment, net 35,841 55,104 90,945 (37,864) (a) 53,081
--------------- ------------- ------------ --------------- ------------
Intangibles, net 34,742 - 34,742 230,514 (a) 265,256
--------------- ------------- ------------ --------------- ------------
Deferred acquisition costs - 4,729 4,729 (4,729) (a) -
--------------- ------------- ------------ --------------- ------------
Other assets 1,816 482 2,298 (294) (a) 2,004
--------------- ------------- ------------ --------------- ------------
Total assets $ 247,599 $ 65,501 $ 313,100 $ 50,772 $ 363,872
=============== ============= ============ =============== ============
Liabilities and Stockholders' equity:
Accounts payable $ 3,462 8,901 $ 12,363 $ (8,901) (a) $ 3,462
Accrued expenses 21,928 12,936 34,864 (10,460) (a) 24,404
Deferred revenue 7,443 3,869 11,312 (72) (a) 11,240
Due to parent - 142,508 142,508 (142,508) (a) -
Income taxes payable 2,566 - 2,566 - 2,566
Current portion of debt - - - 80,000 (a) 80,000
Current portion of capital leases 2,695 2,731 5,426 (2,731) (a) 2,695
--------------- ------------- ------------ --------------- ------------
Total current liabilities 38,094 170,945 209,039 (84,672) 124,367
--------------- ------------- ------------ --------------- ------------
Capital leases--non-current 2,424 2,061 4,485 (2,061) (a) 2,424
--------------- ------------- ------------ --------------- ------------
Total Liabilities $ 40,518 $ 173,006 $ 213,524 $ (86,733) $ 126,791
--------------- ------------- ------------ --------------- ------------
Stockholders' equity:
Preferred stock - - - - -
Common stock 283 - 283 4 (a) 287
Additional paid-in-capital 209,983 - 209,983 - (a) 239,979
29,996 (b)
Accumulated deficit (3,185) (107,505) (110,690) 107,505 (a) (3,185)
--------------- ------------- ------------ --------------- ------------
Total stockholders' equity $ 207,081 $ (107,505) $ 99,576 $ 137,505 $ 237,081
--------------- ------------- ------------ --------------- ------------
Total Liabilities and Stockholders' equity $ 247,599 $ 65,501 $ 313,100 $ 50,772 $ 363,872
=============== ============= ============ =============== ============
</TABLE>
(a) Reflects the preliminary purchase price allocation based on $245
million, with payment comprised of $30 million in stock, $135 million
in cash, and $80 million in borrowings under a secured revolving
credit facility. In addition to the customer subscriber base,
MindSpring is acquiring $3.3 million of accounts receivable and other
current assets, $0.2 million of other non-current assets, certain
fixed assets ($17.2 million) and assuming certain liabilities ($6.3
million) of the NETCOM Domestic Operations, which have also been
included in this allocation based on MindSpring management's estimate
of their fair market value. All other assets and liabilities of the
NETCOM Domestic Operations are not being acquired and, accordingly,
they have been eliminated in the accompanying pro forma balance sheet.
F-21
<PAGE> 25
UNAUDITED PRO FORMA
STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NETCOM
Domestic
MindSpring Spry Operations Subtotal Adjustments(a) Pro Forma
------------- --------- ------------ ---------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 114,673 $ 36,575 $ 143,669 $ 294,917 $ - $ 294,917
------------- --------- ------------ ---------- -------------- -----------
Costs and expenses:
Selling, general and administrative 57,324 17,314 99,570 174,208 - 174,208
Cost of revenue 34,336 21,889 58,046 114,271 - 114,271
Depreciation and amortization 15,227 3,856 31,878 50,961 82,690 (b) 108,700
(24,951) (c)
------------- --------- ------------ ---------- -------------- -----------
106,887 43,059 189,494 339,440 57,739 397,179
------------- --------- ------------ ---------- -------------- -----------
Operating income (loss) 7,786 (6,484) (45,825) (44,523) (57,739) (102,262)
------------- --------- ------------ ---------- -------------- -----------
Interest income (expense), net 1,214 (70) 3,463 4,607 (5,352) (d) (745)
------------- --------- ------------ ---------- -------------- -----------
Income before income tax expense 9,000 (6,554) (42,362) (39,916) (63,091) (103,007)
Income tax expense 1,544 - - 1,544 - 1,544
------------- --------- ------------ ---------- -------------- -----------
Net income $ 10,544 $(6,554) $ (42,362) $(38,372) $ (63,091) $(101,463)
============= ========= ============ ========== ============== ===========
Shares:
Primary 24,611 3,838 (e) 28,449
Diluted 25,431 3,018 (e) 28,449
EPS:
Primary $ 0.43 $ (3.57)
============= ===========
Diluted $ 0.41 $ (3.57)
============= ===========
</TABLE>
(a) Adjustments have not been made to cost of revenue or to selling,
general and administrative costs. However, cost of revenue and
selling, general and administrative costs incurred by Spry and the
NETCOM Domestic Operations may not be indicative of the cost of
revenue and selling, general and administrative costs that would have
been incurred by MindSpring in relation to the same assets. In
connection with MindSpring's acquisition of the NETCOM Domestic
Operations, MindSpring and NETCOM (which will change its name) have
entered into a network services agreement, for one year with an option
for a second year on potentially different terms to be negotiated and
agreed to by the parties. MindSpring expects to use the network
services purchased under this agreement initially to provide service
to the subscribers acquired from NETCOM. MindSpring expects that the
costs it incurs for such network services will be different than the
corresponding historical costs reported by NETCOM. In this regard,
cost of revenue and selling, general and administrative costs incurred
by MindSpring in future periods may be materially different from the
amounts reflected in the pro forma financial statements.
(b) Represents additional amortization based on preliminary purchase price
allocation (as noted in footnote (a) to the pro forma balance sheet)
for the NETCOM Domestic Operations and a full year of amortization of
the $32.5 million purchase price paid by MindSpring for the
acquisition of certain Spry assets using a three-year amortization
period.
(c) Represents the adjustment to conform the accounting policy of the
acquired companies to those of MindSpring with respect to depreciable
lives as well as adjust the historical depreciation for the assets not
being acquired.
F-22
<PAGE> 26
(d) Reflects additional interest expense on anticipated borrowings under a
secured revolving credit facility (as noted in footnote (a) to the pro
forma balance sheet) at an assumed interest rate of 6.69%, as if such
borrowings were outstanding since January 1, 1998.
(e) Reflects (i) 3 million shares of MindSpring common stock issued in a
public offering completed on May 29, 1998; (ii) 2.3 million shares of
MindSpring common stock issued in a public offering completed on
December 14, 1998; and (iii) approximately 376,000 shares of
MindSpring common stock issued to NETCOM On-Line Communication
Services, Inc. as part of the purchase price for the NETCOM Domestic
Operations assets (representing approximately $30 million, at $79.76
per share) as if such shares were outstanding since January 1, 1998.
Also, excludes the effect of stock options for purposes of the diluted
earnings per share calculation, since the effect for pro forma
purposes is antidilutive.
F-23
<PAGE> 27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MINDSPRING ENTERPRISES, INC.
/s/ Michael S. McQuary
-------------------------------------
Michael S. McQuary
President and Chief Operating Officer
Date: February 24, 1999
<PAGE> 28
EXHIBIT INDEX
EXHIBIT NUMBER EXHIBIT
2.1. Asset Purchase Agreement, dated as of January 5, 1999, by and between
MindSpring Enterprises, Inc. and NETCOM On-Line Communication
Services, Inc.
2.2 Closing Agreement, dated February 17, 1999, by and between
MindSpring Enterprises, Inc. and NETCOM On-Line Communication
Services, Inc.
10.1. Credit Agreement, dated as of February 17, 1999, by and among
MindSpring Enterprises, Inc., certain Lenders identified therein,
First Union Capital Markets Corp. as Arranger and First Union
National Bank as Administrative Agent.
10.2. Guaranty and Collateral Agreement, dated as of February 17, 1999,
made by MindSpring Enterprises, Inc. and certain other Grantors
party thereto, in favor of First Union National Bank as
Administrative Agent.
23.1 Consent of Arthur Andersen LLP.
99.1. Description of Secured Credit Facility.
99.2. Press release issued by MindSpring Enterprises, Inc. dated
February 17, 1999.
<PAGE> 1
Exhibit 2.1
=========================================
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
MINDSPRING ENTERPRISES, INC.
AND
NETCOM ON-LINE COMMUNICATION SERVICES, INC.
DATED AS OF JANUARY 5, 1999
=========================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I DEFINITIONS.............................................................................. 1
ARTICLE II PURCHASE AND SALE........................................................................ 7
SECTION 2.1 Basic Transaction........................................................... 7
SECTION 2.2 Purchase Price.............................................................. 9
SECTION 2.3 Payment of Purchase Price................................................... 9
SECTION 2.4 Assumption of Liabilities................................................... 10
SECTION 2.5 Closing; Closing Date....................................................... 11
SECTION 2.6 Deliveries at the Closing................................................... 11
(a) Deliveries by Seller............................................. 11
(b) Deliveries by Buyer.............................................. 12
SECTION 2.7 Transfer Taxes.............................................................. 13
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER................................................. 14
SECTION 3.1 Organization, Good Standing, Etc............................................ 14
SECTION 3.2 [Intentionally Omitted]..................................................... 14
SECTION 3.3 Authority; No Violation..................................................... 14
SECTION 3.4 Subsidiary.................................................................. 15
SECTION 3.5 Consents and Approvals...................................................... 15
SECTION 3.6 Financial Statements........................................................ 15
SECTION 3.7 Absence of Certain Changes or Events........................................ 15
SECTION 3.8 Tax Matters................................................................. 16
SECTION 3.9 Assets and Properties....................................................... 16
SECTION 3.10 Contracts................................................................... 17
SECTION 3.11 Litigation, Compliance with Applicable Laws and Permits..................... 17
SECTION 3.12 Insurance................................................................... 18
SECTION 3.13 Pension and Employee Benefit Matters........................................ 18
SECTION 3.14 Labor and Employment........................................................ 18
SECTION 3.15 Environmental Matters....................................................... 18
SECTION 3.16 Intellectual Property....................................................... 19
SECTION 3.17 Brokers' Fees and Commissions............................................... 20
SECTION 3.18 Employees................................................................... 20
SECTION 3.19 Books and Records........................................................... 20
SECTION 3.20 Subscribers................................................................. 20
SECTION 3.21 Securities Matters.......................................................... 21
SECTION 3.22 Year 2000 Compliance........................................................ 21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER.................................................. 22
SECTION 4.1 Organization and Qualification, Etc......................................... 22
SECTION 4.2 Authority Relative to Agreement............................................. 22
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 4.3 Non-Contravention........................................................... 23
SECTION 4.4 Consents and Approvals...................................................... 23
SECTION 4.5 Brokers' Fees and Commissions............................................... 23
SECTION 4.6 The Shares.................................................................. 23
ARTICLE V PRE-CLOSING COVENANTS.................................................................... 23
SECTION 5.1 General..................................................................... 23
SECTION 5.2 Operation and Preservation of Business...................................... 24
SECTION 5.3 Full Access................................................................. 24
SECTION 5.4 Notice of Developments...................................................... 25
SECTION 5.5 Announcements............................................................... 25
SECTION 5.6 Confidentiality............................................................. 25
SECTION 5.7 Consents and Approvals...................................................... 26
SECTION 5.8 Values of Assets............................................................ 26
SECTION 5.9 Name........................................................................ 26
SECTION 5.10 Resale Prospectus........................................................... 27
ARTICLE VI POST-CLOSING COVENANTS................................................................... 27
SECTION 6.1 Further Assurances.......................................................... 27
SECTION 6.2 Cooperation................................................................. 27
SECTION 6.3 Confidentiality............................................................. 27
SECTION 6.4 Resale Prospectus and Listing of Shares..................................... 28
SECTION 6.5 Restriction on Distribution................................................. 28
ARTICLE VII CONDITIONS TO CLOSING.................................................................... 28
SECTION 7.1 Conditions to Obligation of Buyer........................................... 28
SECTION 7.2 Conditions to Obligation of Seller.......................................... 29
ARTICLE VIII REMEDIES FOR BREACHES OF THIS AGREEMENT.................................................. 30
SECTION 8.1 Indemnification Provisions for Benefit of Buyer............................. 30
SECTION 8.2 Indemnification Provisions for Benefit of Seller............................ 31
SECTION 8.3 Matters Involving Third Parties............................................. 32
SECTION 8.4 Survival.................................................................... 33
SECTION 8.5 Limitations................................................................. 33
SECTION 8.6 Basket and Ceiling.......................................................... 33
ARTICLE IX TERMINATION.............................................................................. 34
SECTION 9.1 Termination of Agreement.................................................... 34
SECTION 9.2 Effect of Termination....................................................... 35
SECTION 9.3 Confidentiality............................................................. 35
ARTICLE X MISCELLANEOUS............................................................................ 35
SECTION 10.1 No Third-Party Beneficiaries............................................... 35
SECTION 10.2 Entire Agreement........................................................... 35
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 10.3 Succession and Assignment.................................................. 35
SECTION 10.4 Counterparts............................................................... 35
SECTION 10.5 Headings, Terms............................................................ 36
SECTION 10.6 Notices.................................................................... 36
SECTION 10.7 Governing Law.............................................................. 36
SECTION 10.8 Amendments and Waivers..................................................... 37
SECTION 10.9 Severability............................................................... 37
SECTION 10.10 Expenses................................................................... 37
SECTION 10.11 Arbitration................................................................ 37
SECTION 10.12 Construction............................................................... 38
SECTION 10.13 Incorporation of Exhibits and Schedules.................................... 38
SECTION 10.14 Representations as to Knowledge............................................ 38
</TABLE>
-iii-
<PAGE> 5
EXHIBIT
<TABLE>
<CAPTION>
Exhibit A Network Services Agreement
SCHEDULES
- ---------
<S> <C>
Schedule 1.1(i) Other Assets
Schedule 1.1(ii) Latest Balance Sheet
Schedule 1.1(iii) Other Contracts
Schedule 2.4(a) Assumed Liabilities
Schedule 2.4(b) Retained Employees
Schedule 3.1 Organization, Good Standing, Etc.
Schedule 3.3 Violations
Schedule 3.5 Seller Notices and Consents
Schedule 3.6(a) Audited Financial Statements
Schedule 3.6(b) Unaudited Financial Statements
Schedule 3.7 Changes or Events
Schedule 3.8 Taxes
Schedule 3.9(a) Description of Premises and Equipment
Schedule 3.9(b) Encumbrances on Assets
Schedule 3.10 Seller Contracts
Schedule 3.11(a) Outstanding Litigation, Etc.
Schedule 3.11(c) Authorizations and Permits
Schedule 3.14 Labor and Employment
Schedule 3.16 Intellectual Property
Schedule 3.18 Employees
Schedule 3.20 Subscribers
Schedule 4.4 Buyer Notices and Consents
</TABLE>
-iv-
<PAGE> 6
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is entered into as of
January 5, 1999, by and between MINDSPRING ENTERPRISES, INC., a Delaware
corporation ("Buyer"), and NETCOM ON-LINE COMMUNICATION SERVICES, INC., a
Delaware corporation ("Seller").
RECITALS
A. Seller owns or leases and uses certain tangible and intangible
assets and rights in connection with the Internet services business currently
operated by Seller in the United States, which business provides, among other
services, dial-up access services, dedicated access services and Web-hosting
services (collectively, the "Business").
B. Buyer desires to purchase the Assets from Seller and Seller
desires to sell the Assets to Buyer, all in accordance with and subject to the
terms and conditions in this Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the Parties hereto hereby agree
as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement:
Adverse Consequences means all losses, damages, costs, expenses, fees and
Liabilities, but will not include any losses or damages arising from or
attributable to lost profits, or consequential, incidental, speculative or
punitive damages (except to the extent such items are payable to a Person not a
Party to this Agreement).
Affiliate means, with respect to any Person, any Person Controlling,
Controlled by or under common Control with such Person.
Agreement means this Asset Purchase Agreement entered into between Buyer
and Seller.
Assets means, collectively, all right, title, benefit and interest of
Seller in and to the following assets, rights, benefits and privileges, both
tangible and intangible (including without limitation the Business as a "going
concern" and customer relationships and reputation of Seller ("Goodwill")),
wherever situated or located, owned, leased, used, held for use or otherwise
held by Seller in connection with the Business, including all such assets
existing on the date of this
<PAGE> 7
Agreement and all such assets acquired between that date and the Closing Date in
connection with the Business:
(a) all Subscriber Contracts;
(b) the contracts described on SCHEDULE 1.1(III) except (i)
contracts involving bounty payments of $50 or more per Subscriber, (ii)
contracts involving the payment of monthly recurring revenue, and (iii)
contracts involving annual payments, in cash or in kind, in excess of One
Hundred Thousand Dollars ($100,000) per annum, unless Buyer elects prior to the
Closing to treat any of such excepted contracts as Assets;
(c) all of Seller's rights in and to the name "NETCOM" and
related intellectual property in all jurisdictions in the world except Canada,
the United Kingdom and Brazil;
(d) all Intellectual Property, including that described in the
preceding clause (c);
(e) all engineering, business and other books, papers, files
and records directly relating to the Business, including customer lists;
(f) all manufacturer's warranties with respect to the Assets,
if any, to the extent assignable;
(g) customer accounts receivable as of the Closing; and
(h) all other assets, rights, benefits and privileges owned,
leased, used or held for use or otherwise held by Seller in connection with the
Business and any contract or agreement relating thereto, a partial list of which
is set forth on SCHEDULE 1.1(i) and which list will be supplemented by the
inventory pursuant to Section 2.1(c)(i) to create a true, correct and complete
list of such assets, rights, benefits and privileges; provided that in no event
will the Assets be deemed to include (a) any benefits arising under or relating
to any of the above-described Assets attributable to the period prior to the
Closing, (b) any receivables held by Seller from, or other amounts owed to
Seller by, ICG or its Affiliates, (c) the Retained Assets, (d) any cash or cash
equivalents held or beneficially owned by Seller in any Seller account or
otherwise or (e) any interest of Seller in NETCOM Internet Limited or NETCOM
Canada, Inc.
Assumed Liabilities means (a) all Liabilities of Seller arising with
respect to or otherwise associated with the Business that are described on
SCHEDULE 2.4(a) attributable to the period following the Closing, (b) the
employee-related Liabilities described in Section 2.4(b)(i) and (c) the
obligation to pay accrued bonuses and vacation pay under Section 2.4(b)(iii);
provided, that in no event will Buyer assume any of Seller's Liabilities
relating to (a) the payment of Taxes of Seller with respect to any period prior
to the Closing Date, (b) any Plans, which Liabilities are due to any of Seller's
current (active or non-active), former or retired employees, (c) any
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Liability of Seller to ICG or its Affiliates, or (d) any Liabilities under
Seller Contracts with respect to services rendered to Subscribers or events
occurring in either case prior to the Closing.
Basket Amount has the meaning set forth in Section 8.6(a).
Business shall have the meaning specified in Recital A.
Business Day means any day on which commercial banks are open for
business in Denver, Colorado and in Atlanta, Georgia.
Buyer means MindSpring Enterprises, Inc., a Delaware corporation.
Buyer Documents means, collectively, the documents described in Section
2.6(b).
Closing and Closing Date have the meanings given in Section 2.5.
Closing Permitted Encumbrances means all Pre-Closing Permitted
Encumbrances other than those described in clause (ii) of the definition of
Pre-Closing Permitted Encumbrances.
Code means the Internal Revenue Code of 1986, as amended, and all Legal
Requirements promulgated pursuant thereto or in connection therewith.
Confidential Information means, with respect to any Person, any
information concerning such Person or its business, products, financial
condition, prospects and affairs that is not already generally available to the
public.
Control means the power to direct the management or policies of any
Person, through the power to vote shares or other equity interests, by contract
or otherwise.
Employees has the meaning specified in Section 3.18.
Encumbrance means any mortgages, pledges, liens, claims, security
interests, agreements, restrictions, defects in title, easements, restrictions,
encumbrances, or charges.
Environmental Obligations means all Legal Requirements and Permits
concerning land use, public health, safety, welfare or the environment,
including, without limitation the Resource Conservation and Recovery Act (42
U.S.C. Section 6901 et seq.), as amended, and the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. Section 9601 et seq.), as
amended.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended, and any regulations, rules or orders promulgated under the Employee
Retirement Income Security Act of 1974, as amended.
Financial Statements has the meaning set forth in Section 3.6.
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GAAP means generally accepted accounting principles as in effect from
time to time in the United States.
Goodwill has the meaning set forth in the definition of Assets.
Governmental Authority means the United States of America or any foreign
jurisdiction, any state, commonwealth, territory or possession of the United
States of America or any such foreign jurisdiction, any political subdivision of
any of them (including counties, municipalities, home-rule cities and the like),
and any agency, authority or instrumentality of any of the foregoing, including,
without limitation, any court, tribunal, department, bureau, commission or
board.
Hart-Scott-Rodino means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and all Legal Requirements promulgated pursuant thereto or
in connection therewith.
ICG means ICG Services, Inc., a Delaware corporation.
Indemnified Party has the meaning set forth in Section 8.3(a).
Indemnifying Party has the meaning set forth in Section 8.3(a).
Intellectual Property means all intellectual property of Seller held or
used in connection with the Business, including: (i) all inventions (whether
patentable or unpatentable and whether or not reduced to practice) held or used
in connection with the Business, all improvements thereto and all patents,
patent applications and patent disclosures held or used in connection with the
Business, (ii) all trademarks, service marks, trade dress, logos, trade names,
and corporate names held or used in connection with the Business, together with
all translations, adaptations, derivations, and combinations thereof and
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith; provided that the term
Intellectual Property will apply to Seller's rights in and to the name NETCOM
(and related trademarks and other intellectual property) only to the extent of
Seller's rights in and to such name and related items anywhere in the world
except Canada, Brazil and the United Kingdom, (iii) all copyrightable works, all
copyrights and maskworks and all applications, registrations and renewals in
connection therewith held or used in connection with the Business, and the right
to bring suit or make any claim for infringement of rights in any such works,
(iv) all trade secrets and confidential information held or used in connection
with the Business (including all ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, business and marketing plans and proposals and
other information or material within the definition of a "trade secret" as set
forth in Section 1(4) of the Uniform Trade Secrets Act (1995), (v) all computer
programs (including, without limitation, data and related documentation) held or
used in connection with the Business, (vi) all other intellectual property held
or used in connection with the Business, (vii) all rights as a licensee or
authorized user of the intellectual property of any third party, and (ix) all
copies and tangible
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embodiments of the foregoing in whatever form or medium; provided that in no
event will the term Intellectual Property be deemed to include any Retained
Assets.
Latest Balance Sheet means the unaudited balance sheet of Seller and the
related unaudited statement of operations dated as of September 30, 1998 and
attached as SCHEDULE 1.1(II).
Legal Requirement means any constitution, statute, ordinance, code, or
other law (including common law), rule, regulation, Order, notice, standard,
procedure or other requirement enacted, adopted, applied or issued by any
Governmental Authority, including, without limitation, judicial decisions
applying or interpreting any such Legal Requirement.
Liability means any liability or obligation (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due).
Material means, unless the context otherwise requires, material with
respect to the Business or the Assets.
Material Adverse Effect means, with respect to the Business or the
Assets, any event, fact, circumstance or condition that in the aggregate results
in, or is likely to result in, a material adverse impact on the Business or the
Assets.
MindSpring Stock means the common stock of Buyer, par value $.01 per
share.
NASDAQ means the over-the-counter national market of the National
Association of Securities Dealers, Inc.
Network means the Internet network currently operated by Seller,
including all intellectual property (which is not Intellectual Property) used or
held for use in connection therewith.
Orders means all judgments, injunctions, orders, rulings, decrees,
directives, notices of violation or other requirements of any Governmental
Authority or arbitrator having jurisdiction in the matter, including a
bankruptcy court or trustee.
Ordinary Course of Business means, with respect to Seller and the
operation of the Business, with respect to any period, the ordinary course of
business consistent with past practices of Seller.
Party means each of Buyer and Seller.
Permits means all governmental permits, licenses, consents, franchises,
authorizations, approvals, privileges, waivers, exemptions, variances,
exclusionary or inclusionary Orders and
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other concessions, including, without limitation, those relating to
environmental, public health, welfare or safety matters.
Pre-Closing Permitted Encumbrances has the meaning set forth in Section
3.9(b).
Person means an individual, and a partnership, corporation, association,
joint stock company, trust, joint venture, limited liability company,
unincorporated organization, Governmental Authority or other entity.
Plans has the meaning set forth in Section 3.13(a).
Premises means the real property, buildings and improvements on such real
property constituting the Business premises of Seller as described on SCHEDULE
3.9(a).
Purchase Price has the meaning specified in Section 2.2, as such amount
may be adjusted pursuant to Section 2.3(c).
Resale Prospectus has the meaning set forth in Section 5.10.
Retained Assets means all assets, rights, benefits and privileges, both
tangible and intangible, wherever situated or located, owned, leased, used or
held for use or otherwise held by Seller other than the Assets, all of which
items are to be retained by Seller, including the software described in Section
2.1(c)(ii)(A)(1) and (4), as of and after the Closing.
Schedules means the disclosure Schedules attached to this Agreement.
SEC means the United States Securities and Exchange Commission.
Securities Act means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
Seller means NETCOM On-Line Communication Services, Inc., a Delaware
corporation.
Seller Contracts has the meaning set forth in Section 3.10.
Seller Documents means, collectively, the documents described in Section
2.6(a).
Seller Software means the software developed by employees, consultants,
and independent contractors of Seller which (a) is owned by Seller, and (b) is
transferred to Buyer under this Agreement, including software that is licensed
or provided to the Subscribers.
Shares has the meaning set forth in Section 2.3(b).
Subscriber means a subscriber to Seller's dial-up or dedicated Internet
access services or Web-hosting services.
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Subscriber Contracts means all contracts for the provision of dial-up or
dedicated Internet access services or Web-hosting services between Seller and
any Subscriber.
Survival Period means, with respect to a representation or warranty, the
applicable period after the Closing Date during which such representation or
warranty survives pursuant to Section 8.4.
Tax means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, documentary, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated or other tax of any kind whatsoever, or any escheat
obligations, including any interest, penalty or addition, whether disputed or
not.
Tax Return means any return, declaration, report, claim for refund or
information return or statement relating to Taxes of Seller, including any
schedule or attachment to any of them, and including any amendment of any of
them.
Third Party Claim has the meaning set forth in Section 8.3(a).
Third Party Products has the meaning set forth in Section 3.22.
WARN Act means the Worker Adjustment and Retraining Notification Act, 29
U.S.C. Sec. 2101 et. seq.
ARTICLE II
PURCHASE AND SALE
SECTION 2.1. Basic Transaction.
(a) Subject to the terms and conditions set forth in this Agreement,
Buyer agrees to purchase and assume from Seller, and Seller agrees to sell and
transfer to Buyer, or to such Affiliate or Affiliates of Buyer as Buyer may
designate in writing to Seller, all of Seller's right, title and interest in, to
and under the Assets, for the consideration specified in Section 2.2.
(b) Seller will retain, and Buyer will not acquire or assume, any of
the Retained Assets.
(c) (i) It is the intent of this Agreement that the Assets will
comprise, and Seller will assign and transfer to Buyer at the Closing, all of
the real, personal and mixed assets and property, both tangible and intangible,
which are being used or held for use by Seller in the conduct of the Business,
as of the date of this Agreement and as of and at the Closing consistent with
Seller's historical and current practices. The Parties acknowledge and agree
that the SCHEDULES attempt to accurately describe the Assets, but certain
SCHEDULES, including SCHEDULES
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1.1(i), 1.1(III), 3.9(a), 3.10 and 3.16, may not describe the Assets with the
specificity desired by Buyer. Seller will undertake an inventory of all personal
property comprising the Assets, including tangible and intangible property, the
names of all Subscribers as of a date no earlier than five days prior to the
Closing, and the Intellectual Property, and will deliver such inventory to Buyer
as promptly as practicable but in any event no earlier than ten days or later
than five days prior to the Closing Date.
(ii) The Parties acknowledge and agree to the following in respect
of Intellectual Property comprised of computer software:
(A) Computer software used or held for use by Seller as of
the date of this Agreement consists of the following five categories:
(1) Software licensed from third parties that is not
assignable to Buyer by its terms if the licensor of such software withholds its
consent to such assignment (where the requirement of such consent is
applicable); provided that Seller will use its commercially reasonable best
efforts to secure such consent;
(2) Software licensed from third parties that is
used exclusively in connection with the Business and that is assignable either
by its terms or pursuant to the consent of the other parties thereto where such
consent is obtained;
(3) Internally-developed software that is used
exclusively in connection with the Business;
(4) Software licensed from third parties and
internally-developed software that is used exclusively in connection with the
Network; and
(5) Software licensed from third parties and
internally-developed software that is used both in connection with the Business
and the Network.
Based on the above clauses (1) through (5), the Parties further agree as
follows: (a) ownership of the software described in the preceding clauses (1)
(subject to the provisions of Section 2.1(d)) and (4) will be retained by Seller
and constitute part of the Retained Assets and will not be considered to be
Assets under this Agreement; (b) ownership of the software described in the
preceding clause (2) will be assigned to Buyer; (c) ownership of the software
described in the preceding clause (3) will be assigned and transferred to Buyer;
(d) software described in the preceding clause (5) will be licensed to Buyer
under a worldwide, perpetual, royalty-free licensing arrangement (including both
source and object code) to be mutually satisfactory to Seller and Buyer and
under which arrangement both Seller and Buyer will have unfettered use of such
software and the right to modify and develop such software consistent with the
operation of each of their respective businesses after the Closing; and (e) if
any software described above the ownership of which is transferred to Buyer
under this paragraph is used in connection with the business conducted by NETCOM
Canada, Inc. or NETCOM Internet, Ltd., such use to be determined in Seller's
reasonable discretion, Buyer will enter into with Seller as of the Closing a
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perpetual, royalty-free license arrangement (including both source and object
code), to be mutually satisfactory to Buyer and Seller, providing for the
unfettered use of such software in Canada and/or the United Kingdom, as the case
may be, and the right to modify and develop such software consistent with the
operation of the business by those two Affiliates of Seller. In furtherance of
the agreements set forth in this Section 2.1(c)(ii), the Parties will cooperate
with each other, and enter into appropriate agreements and licensing
arrangements to be effective as of the Closing, to ensure the continued use of
such software to the maximum extent possible by Buyer and Seller (and to the
extent applicable, by NETCOM Canada, Inc. or NETCOM Internet, Ltd.) after the
Closing in connection with their operation of the Business and the Network (and
the business conducted by NETCOM Canada, Inc. or NETCOM Internet, Ltd., as
applicable), respectively.
(d) Notwithstanding anything else in this Agreement to the contrary,
this Agreement shall not constitute an agreement to assign or transfer any Asset
or part thereof or any rights or benefit arising thereunder or resulting
therefrom if an attempted assignment or transfer thereof, without the consent of
a third party thereto, would constitute a breach thereof, or make Buyer or
Seller liable for damages or other penalties. If such consent is not obtained
prior to Closing, or if an attempted assignment thereof would be ineffective or
would affect the rights of Buyer or Seller so that Buyer would not in fact
receive substantially all such rights, Seller (i) at Seller's cost and expense
shall continue to use its commercially reasonable efforts to obtain such consent
and (ii) if any such consent is unobtainable, shall cooperate with Buyer in a
mutually agreed-upon arrangement under which at Seller's cost and expense Buyer
would obtain the benefits and assume the obligations thereunder, or under which
Seller would enforce for the benefit of Buyer, at Buyer's cost and expense, with
Buyer assuming Seller's obligations, any and all rights of Seller against a
third party thereto. To the extent the benefits therefrom have been provided to
Buyer by alternative arrangements as provided above or a consent is obtained,
the contract, agreement or other asset shall be deemed to be an Asset
transferred to Buyer.
SECTION 2.2. Purchase Price. At the Closing, and in addition to the
assumption of the Assumed Liabilities as set forth in Section 2.4, Buyer agrees
to pay to Seller, and Seller agrees to accept from Buyer, an aggregate purchase
price (the "Purchase Price") equal to Two Hundred Forty-Five Million Dollars
($245,000,000), payable as described in Section 2.3. The Purchase Price will be
allocated among the Assets in accordance with Section 5.8.
SECTION 2.3. Payment of Purchase Price. The Purchase Price shall be
payable to Seller at the Closing as follows:
(a) Buyer will pay to Seller the amount of Two Hundred Fifteen Million
Dollars ($215,000,000) in cash in immediately available funds by wire transfer
to an account or accounts designated in writing by Seller; and
(b) Buyer will deliver to Seller certificates representing that number
of shares (the "Shares") of MindSpring Stock obtained by dividing (i) Thirty
Million Dollars ($30,000,000) by (ii) the average closing price for the
MindSpring Stock, as reported on the NASDAQ, for the five consecutive trading
days ending the last trading day immediately before the Closing. The Shares
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will be delivered to Buyer at the Closing free and clear of all Liabilities,
Taxes and other Encumbrances, other than those allowed to arise solely by
Seller.
(c) Within ten days following the Closing Date, Buyer and Seller will
make a calculation to determine whether there shall be a Purchase Price
adjustment. For the purposes of this calculation, as of the Closing Date each
dial-up Subscriber will be valued at $490.1838, each Web-hosting Subscriber will
be valued at $1,225.4595 and each dedicated access Subscriber will be valued at
$12,254.5950. If Buyer and Seller calculate that the aggregate value of all the
Subscribers who are current customers (as defined in Section 3.20) as of the
Closing Date is less than Two Hundred Forty Million One Hundred Thousand Dollars
($240,100,000), a Purchase Price adjustment will be payable in cash from the
Seller to the Buyer in an amount equal to the difference between such aggregate
value and Two Hundred Forty Million One Hundred Thousand Dollars ($240,100,000),
such payment to be made by Seller within 15 days after the Closing Date.
SECTION 2.4. Assumption of Liabilities.
(a) At the Closing, Buyer, or the Affiliate of Buyer that purchases
the Assets pursuant to Section 2.1(a), as the case may be, will assume the
Assumed Liabilities. Except for the Assumed Liabilities, Buyer (or such
Affiliate) will not assume or have any responsibility for any liabilities or
other obligations of any kind or description of Seller, whether connected with
the Business, the Assets or otherwise.
(b) (i) Except as provided in Section 2.4(b)(ii), as of the Closing,
Buyer will offer to employ all of the employees of the Seller (including for
this purpose all employees of Seller hired in the Ordinary Course of Business in
connection with the Business after the date of this Agreement and before the
Closing) other than the employees that are listed on SCHEDULE 2.4(b) as of the
Closing Date; provided that Buyer will not be prevented from terminating the
employment of any such employee after the Closing in accordance with Buyer's
practices and procedures. A preliminary list of the employees to be employed by
Buyer under this Section 2.4(b)(i) as of the Closing is set forth on SCHEDULE
3.18, which list will be finalized within ten days following the date of this
Agreement and contain a listing of employees reasonably necessary for the
operation of the Business. SCHEDULE 2.4(b) sets forth a preliminary list of
employees to be employed by Seller after the Closing, which list will be
finalized within ten days following the date of this Agreement. Buyer will not
assume, and will have no Liability with respect to, any Plan maintained or
contributed to by Seller, and will not assume, and will have no liability for,
any Liability arising out of or accruing during the period prior to the Closing,
except as expressly set forth in the next sentence or Section 2.4(b)(iii). After
the Closing, Buyer will comply with the requirements, if any, under the WARN Act
with respect to the employees who accept employment offers from Buyer under this
Section 2.4(b)(i) and are subsequently terminated by Buyer. Buyer will assume
all costs of employee compensation and other Liabilities relating to such
employees attributable to the period after the Closing. Seller will remain
responsible for all Legal Requirements relating to group health plan
continuation coverage to which any employee or former employee (or dependent of
either) of Seller is entitled because of a qualifying event (as defined in
Section 4980(f)(3) of the Code) occurring through
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the Closing Date, and any benefit or excise tax liability or penalty or other
costs arising from any failure by Seller to provide such group health plan
continuation coverage.
(ii) By written notification to Seller at least ten days prior to the
Closing, Buyer may identify those executive officers of Seller who Buyer will
not offer to employ as of the Closing, and Buyer will have no responsibility
for, and bear no Liability for, those identified executive officers under
Section 2.4(b)(i). Buyer agrees that for a period of six months following the
Closing, neither Buyer nor any of its Affiliates will employ any of such
identified executive officers, whether as an employee, consultant, independent
contractor, advisor or in any other capacity. The Parties agree that the
restriction set forth in the preceding sentence is a material element of this
Agreement and will be specifically enforceable by Seller against Buyer, and upon
a breach by Buyer of such restriction, Buyer agrees that Seller could not be
adequately compensated at law.
(iii) Buyer will assume the obligation to pay bonuses and vacation pay
accrued on the books and records of Seller as of the Closing, in an amount not
to exceed One Million Seven Hundred Thousand Dollars ($1,700,000), with respect
to the employees who Buyer is required to offer to employ as of the Closing in
accordance with Section 2.4(b)(i). Within ten days after the Closing, Seller
will pay to Buyer in cash Five Hundred Thousand Dollars ($500,000) in respect of
the obligation assumed by Buyer for vacation pay described in the immediately
preceding sentence. In the event that Buyer actually pays any bonuses to any
such employee and such bonuses relate to any period preceding the Closing Date,
Seller will reimburse Buyer for all amounts actually paid with respect to such
bonuses to the extent that such amounts relate to any period preceding the
Closing Date; provided that the aggregate amount to be reimbursed by Seller to
Buyer under this sentence will not exceed One Million Two Hundred Thousand
Dollars ($1,200,000). All bonus reimbursements required by Seller under this
Section 2.4(b)(iii) will be paid to Buyer within ten days of the receipt by
Seller from Buyer of evidence reasonably satisfactory to Seller of the payment
by Buyer of reimbursable bonuses.
SECTION 2.5. Closing; Closing Date. The closing of the transactions
contemplated by this Agreement (the "Closing") will take place within two
Business Days after the satisfaction or waiver of all conditions set forth in
Sections 7.1 and 7.2, at the offices of Sherman & Howard L.L.C. in Denver,
Colorado, and all transactions contemplated by this Agreement will be effective
at 12:01 a.m. local time in Denver, Colorado, on the day of the Closing (such
effective time being the "Closing Date").
SECTION 2.6. Deliveries at the Closing.
(a) Deliveries by Seller. At or before the Closing, Seller will
deliver to Buyer the following documents, dated as of the Closing Date and duly
executed by Seller, ICG or Seller's counsel, as applicable.
(i) the Bill of Sale in a form reasonably acceptable to Buyer
and Seller;
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(ii) the Assignment and Assumption of Contracts and Leases in a
form reasonably acceptable to Buyer and Seller;
(iii) the Assumption Agreement in a form reasonably acceptable to
Buyer and Seller;
(iv) the Network Services Agreement substantially in the form
attached as EXHIBIT A;
(v) the opinion of Sherman & Howard L.L.C. in a form reasonably
acceptable to Buyer;
(vi) copies of the resolutions of the board of directors of
Seller and ICG, certified by the Secretaries of Seller and ICG, respectively, as
being correct and complete and then in full force and effect, authorizing the
execution, delivery and performance of this Agreement and of the Seller
Documents, and the consummation of the transactions contemplated hereby and
thereby;
(vii) certificates of Seller signed by an Executive Vice
President of Seller certifying to the fulfillment of the conditions identified
in Section 7.1(a) through (f);
(viii) certificates of Seller and ICG signed by the Secretaries or
Assistant Secretaries of Seller and ICG as to the incumbency of the officers of
Seller and ICG; and
(ix) all such other general instruments of transfer, assignment
and conveyance, assignments, evidences of consent or waiver, and other
instruments or documents, including appropriate license and other agreements
between Seller and Buyer, and assignments of copyrights and trademarks/service
marks, with respect to the use of intellectual property as contemplated in
Section 2.1(c)(ii), in form and substance reasonably satisfactory to Buyer, as
shall be necessary to evidence or perfect the sale, assignment, transfer and
conveyance of the Assets to Buyer and the assumption by Buyer of the Assumed
Liabilities, and effectively vest in Buyer all right, title and interest in the
Assets free and clear of any and all Encumbrances (other than the Closing
Permitted Encumbrances), together with possession (or constructive possession,
in the case of intangibles) thereof, all in accordance with the terms and
conditions of this Agreement, and such other certificates, instruments, opinions
or documents as Buyer may reasonably request in order to effect and document the
transactions contemplated hereby.
(b) Deliveries by Buyer. At or before the Closing, Buyer shall deliver
to Seller the following:
(i) The Purchase Price payable at the Closing in the amount and
manner set forth in Sections 2.2 and 2.3;
(ii) the Assignment and Assumption of Contracts and Leases in a
form reasonably acceptable to Buyer and Seller;
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(iii) the Assumption Agreement in a form reasonably acceptable to
Buyer and Seller;
(iv) the Network Services Agreement substantially in the form
attached as EXHIBIT A;
(v) the opinion of Hogan & Hartson L.L.P. in a form reasonably
acceptable to Seller;
(vi) copies of the resolutions of the board of directors of
Buyer, certified by the Secretary of Buyer as being correct and complete and
then in full force and effect, authorizing the execution, delivery and
performance of this Agreement and of the Buyer Documents, and the consummation
of the transactions contemplated hereby and thereby;
(vii) a certificate of Buyer signed by the Chairman, the
President or an Executive Vice President of Buyer certifying to the fulfillment
of the conditions identified in Section 7.2(a) and (b);
(viii) a certificate signed by the Secretary or an Assistant
Secretary of Buyer as to the incumbency of the officers of the Buyer executing
this Agreement or any of the Buyer Documents on behalf of Buyer; and
(ix) such other certificates, instruments, opinions or documents
as Seller may reasonably request in order to effect and document the
transactions contemplated by this Agreement, including all appropriate licensing
and other agreements between Seller and Buyer as contemplated by Section
2.1(c)(ii).
SECTION 2.7. Transfer Taxes.
(a) Buyer will be responsible for the payment of any Taxes or fees
imposed by any Governmental Authority with respect to the transfer to Buyer of
any of the Assets or the assumption of the Assumed Liabilities by Buyer pursuant
to this Agreement. Seller will cooperate on a reasonable basis with Buyer to
minimize to the maximum lawful extent Buyer's Liability for such Taxes or fees.
(b) All (i) property taxes, ad valorem taxes and special taxes or
assessments attributable to the Assets (including real estate taxes and special
taxes and assessments required to be paid on the Premises or under leases,
whether required to be paid directly to applicable Taxing authorities or the
lessors under leases) for the fiscal year during which the Closing Date occurs
and (ii) amounts payable under equipment leases and outsourcing contracts to be
transferred to and assumed by Buyer as of the Closing will be prorated and
adjusted as of the Closing Date. If the real property taxes, personal property
or ad valorem taxes for the fiscal year during which the Closing Date occurs are
not finally determined as of the Closing Date, then such Taxes for the
immediately preceding fiscal year will be used for purposes of prorating taxes
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on the Closing Date, with a further adjustment to be made after such taxes or
assessments are finalized.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows, in each case as of
the date of this Agreement:
SECTION 3.1. Organization, Good Standing, Etc. Except as set forth on
SCHEDULE 3.1, Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and is qualified and
authorized to do business as a foreign corporation and is in good standing in
each jurisdiction in which the failure to be so qualified and authorized would
result in a Material Adverse Effect. Seller has all requisite corporate power
and authority to own, lease and operate its properties and assets and to carry
on its business as is now being conducted. ICG is the sole shareholder of
Seller.
SECTION 3.2. [Intentionally Omitted].
SECTION 3.3. Authority; No Violation. Seller has the full and absolute
right, corporate power, authority and legal capacity to execute, deliver,
perform and consummate the transactions contemplated on its part by this
Agreement and all other documents and agreements to be executed and delivered by
Seller pursuant to this Agreement. The execution and delivery by Seller of this
Agreement and all other documents and agreements to be executed and delivered by
Seller pursuant to this Agreement, and the consummation by Seller of the
transactions contemplated on its part hereby and thereby, have been duly
authorized by Seller's board of directors and ICG. No other corporate approvals
on the part of the Seller's board of directors or ICG are necessary to authorize
the execution and delivery of this Agreement and such other documents. Assuming
the due authorization, execution and delivery by other applicable parties, this
Agreement constitutes, and all other documents and agreements to be executed and
delivered by Seller pursuant to this Agreement when executed and delivered will
constitute, the legal, valid, and binding obligation of, and will be enforceable
in accordance with their respective terms against, Seller, except as such
enforcement is subject to the effect of (i) any applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting creditors'
rights generally, and (ii) general principles of equity, including concepts of
reasonableness, good faith and fair dealing, and other similar doctrines
affecting the enforceability of agreements generally (regardless of whether
considered in a proceeding in equity or at law). Except as set forth on SCHEDULE
3.3, the execution, delivery and performance of this Agreement and all other
documents and agreements to be executed and delivered by Seller pursuant to this
Agreement, and the consummation of the transactions contemplated hereby and
thereby, will not (a) violate any provision of the certificate of incorporation
or bylaws of Seller, (b) violate, with or without the giving of notice or the
lapse of time or both, or result in the breach or termination of any provision
of, or a diminution of the rights of Seller under, or constitute a default
under, or give any Person the right to accelerate any obligation under, or
result in the creation of any material Encumbrance upon the Assets or the
Business, pursuant to any indenture, mortgage, deed of
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trust, lien, lease, license, Permit, agreement, instrument or other arrangement
to which Seller is a party or by which Seller, or any of the Assets is bound or
subject, or (c) violate in any material respect any Legal Requirement to which
Seller is subject.
SECTION 3.4. Subsidiary. Seller has no subsidiary, and no equity
investment or other interest in any Person, that owns or holds any interest in
the Assets or the Business.
SECTION 3.5. Consents and Approvals. Except as set forth in SCHEDULE 3.5,
no filing or registration with, no notice to and no permit, authorization,
consent or approval of any Governmental Authority or any Person is necessary for
the consummation by Seller of the transactions contemplated by this Agreement
other than (a) requirements of federal and state securities laws, (b) the
authorization of all applicable regulatory agencies necessary or desirable to
consummate the transactions contemplated by this Agreement and (c) those
consents and approvals already obtained as described on SCHEDULE 3.5.
SECTION 3.6. Financial Statements. Seller has delivered to Buyer complete
and correct copies of (a) the audited consolidated balance sheet and related
audited consolidated statements of operations, stockholders' equity and cash
flows for Seller for and as of the year ended December 31, 1997 and all notes
and schedules to such financial statements and (b) the unaudited consolidated
balance sheet of Seller, and the related unaudited consolidated statement of
operations for the calendar quarters ending March 31, 1998, June 30, 1998 and
September 30, 1998 (collectively, the "Financial Statements"). The Financial
Statements are in accordance with the books and records of Seller, as
applicable, and were prepared in accordance with GAAP on a consistent basis
throughout the periods covered and present fairly in all material respects
Seller's financial position and results of operations as of the dates and for
the periods indicated, subject in the case of the unaudited Financial Statements
to standard year-end adjustments (none of which will be material in amount) and
the omission of footnotes. Copies of the financial statements described in
clause (a) of this Section 3.6 are attached as SCHEDULE 3.6(a), and copies of
the financial statements described in clause (b) of this Section are attached as
SCHEDULE 3.6(b). All balance sheets, statements of operations and other
financial statements prepared by or with respect to Seller that are delivered to
Buyer after the date of this Agreement until the Closing will be prepared on a
basis and in a manner consistent with the Financial Statements, subject to
standard year-end adjustments (none of which will be material in amount) and the
omission of footnotes.
SECTION 3.7. Absence of Certain Changes or Events. Since September 30,
1998, and except as disclosed in SCHEDULE 3.7, the Business has been conducted
in the Ordinary Course of Business and there has not been (i) any material
adverse change or any change except in the Ordinary Course of Business in the
financial condition or operations of the Business, (ii) any damage, destruction
or loss that materially and adversely affects the financial condition or
operations of the Business or (iii) except as permitted or contemplated by this
Agreement or as a result of any action taken with the approval or consent of
Buyer, (a) any action by Seller which, if taken on or after the date of this
Agreement, would be prohibited without the consent of Buyer pursuant to Section
5.2 or (b) any agreement by Seller, whether in writing or otherwise, to take any
action described in this Section 3.7.
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SECTION 3.8. Tax Matters.
(a) Except as described on SCHEDULE 3.8, Seller has paid, and will
continue to pay, all Taxes, including, without limitation, all federal, state
and local excise Taxes, due and payable by it or required to be withheld or
collected and paid by it for or with respect to all periods, whether or not
shown on any Tax Return.
(b) Seller has filed, and will continue to file, on a timely basis all
Tax Returns that it was or will be required to file. All such Tax Returns were
and will be accurate and complete in all material respects. There are no
security interests on any of the assets of Seller that arose in connection with
any failure (or alleged failure) to pay any Tax.
(c) Seller has withheld and paid, and will continue to withhold and
pay, all Taxes required to have been or to be withheld and paid in connection
with amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party.
(d) Seller has no knowledge of any facts or circumstances that could
give rise to a reasonable expectation that any Tax authority may assess any
additional Taxes for any period for which Tax Returns of Seller have been or
will be filed. Seller has made available to Buyer correct and complete copies of
all federal income Tax returns, examination reports and statements of
deficiencies assessed against or agreed to by Seller since December 31, 1995.
SECTION 3.9. Assets and Properties.
(a) SCHEDULE 3.9(a) lists (i) the Premises and (ii) all of the
material equipment leased by Seller in relation to the Business as of the date
of this Agreement.
(b) As of the date of this Agreement, Seller owns or leases (to the
extent described in SCHEDULE 3.9(a)) all of the Assets free and clear of all
Encumbrances and has valid title to (or, in the case of the Assets that are
leased, valid leasehold interests in) all of the Assets that are material to the
financial position or results of operations of the Business subject, in each
case, only to (i) statutory Encumbrances arising or incurred in the Ordinary
Course of Business with respect to which the underlying objections are not
delinquent or the validity of which is being contested in good faith by
appropriate proceedings as disclosed on SCHEDULE 3.9(b), (ii) Encumbrances
disclosed or reflected in the Latest Balance Sheet, (iii) Encumbrances for Taxes
not yet delinquent, (iv) Encumbrances which constitute valid leases or subleases
from Seller to third parties none of which leases are delinquent, (v)
Encumbrances and defects in title disclosed on SCHEDULE 3.9(b), and (vi)
Encumbrances and defects in title that are not, individually or in the
aggregate, material to the financial position or results of operations of the
Business (the types of liens described in the foregoing clauses (i) through (vi)
being referred to in this Agreement as "Pre-Closing Permitted Encumbrances").
(c) On the Closing Date, Buyer shall acquire good and marketable title
to, and all right, title and interest in, the Assets, free and clear of all
Encumbrances, except for Closing
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Permitted Encumbrances. The Assets so acquired at the Closing shall constitute
all of the real, personal and mixed assets and property, both tangible and
intangible, which are being used by Seller in the conduct of the Business,
consistent with historical and current practices.
(d) The tangible Assets are in good operating condition and repair,
free of material defects and are suitable, adequate and fit for the uses for
which they are intended or are being used consistent with historical practice.
SECTION 3.10. Contracts.
(a) All contracts, agreements, licenses, leases, commitments,
arrangements or understandings (both written and oral) described within the
definition of the term Assets constitute "Seller Contracts."
(b) Except as set forth on SCHEDULE 3.10, Seller has not entered into
any binding agreement with respect to any Seller Contract that could adversely
affect Seller's ability to enforce its rights under such Seller Contract. Seller
has delivered, or otherwise made available, true and complete copies of all
written Seller Contracts (and all amendments and modifications thereto) to Buyer
prior to the execution of this Agreement.
(c) Each Seller Contract is in full force and effect, and constitutes
a valid and binding obligation of Seller in accordance with its terms, and, to
Seller's knowledge, is legally enforceable in accordance with its terms. Seller
is not in default under any Seller Contract and, to Seller's knowledge, there
does not exist any event that (whether with or without notice, lapse of time, or
the happening or occurrence of any other event) would result in such a default.
To Seller's knowledge, there exists no default by any other party to any Seller
Contract. Within the last year, Seller has not received any written notice from
any other party to any material Seller Contract (other than any Subscriber
Contract) pursuant to which such other party threatened cancellation or
revocation of such Seller Contract.
(d) SCHEDULE 3.10 sets forth a partial list of all notices, consents,
waivers or approvals contemplated or required by the terms of any Seller
Contract in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated by this Agreement, which list will
be supplemented by the inventory pursuant to Section 2.1(c)(i) and which list,
as supplemented, will contain all such notices, consents, waivers or approvals
except for any such notices, waivers, consents or approvals the failure of which
to receive would not result in a Material Adverse Effect.
SECTION 3.11. Litigation, Compliance with Applicable Laws and Permits.
(a) There is no outstanding Order against, nor, except as set forth on
SCHEDULE 3.11(a), is there any material litigation, proceeding, arbitration or
investigation by any Governmental Authority or other Person pending or, to the
knowledge of Seller, threatened against, Seller, its properties or businesses or
relating to the transactions contemplated in this Agreement, nor to the
knowledge of Seller is there any basis for any such action.
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(b) The Assets and Seller's ownership, lease and use of the Assets are
not in violation of any applicable material Legal Requirement. Seller has not
received notice from any Governmental Authority or other Person of any violation
or alleged violation of any material Legal Requirement relating to the Business
or the Assets, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand or notice has been filed or commenced or is pending or,
to the knowledge of Seller, threatened against Seller with respect to any such
violation.
(c) Except as disclosed on SCHEDULE 3.11(c), Seller possesses all
material authorizations, Permits, licenses and Orders required or necessary to
conduct the Business in the manner in which such Business is being and
historically has been conducted. Each authorization and Permit of Seller is
valid and effective and Seller is in compliance with all material terms,
conditions and requirements of such authorizations and Permits.
SECTION 3.12. Insurance. The properties and the conduct of the Business
are, in the reasonable judgment of Seller, adequately insured by financially
sound and reputable insurers.
SECTION 3.13. Pension and Employee Benefit Matters.
(a) Neither Seller nor any employee benefit plan (as defined in
Section 3(3) of ERISA) maintained by Seller or in which employees of Seller
participate (the "Plans"), is in material violation of any provision of ERISA or
the Code. No reportable event (within the meaning of Title IV of ERISA) has
occurred and is continuing with respect to any Plan and no prohibited
transaction (as defined in Section 406 of ERISA) has occurred with respect to
any Plan which would result in material liability to Seller.
(b) No material accumulated funding deficiency (as defined in Section
302 of ERISA) exists with respect to any Plan.
(c) Seller has not ever been required to contribute to any
multiemployer plan (as defined in Section 3(37) of ERISA).
SECTION 3.14. Labor and Employment. Except as described on SCHEDULE 3.14,
there are no material labor or employment controversies pending or, to the
knowledge of Seller, threatened against Seller which could reasonably be
expected to have a Material Adverse Effect. Except as disclosed on SCHEDULE
3.14, there are no collective bargaining agreements, employment agreements
between Seller and any of its Employees, or professional service agreements not
terminable at will relating to the Business or any of the Assets. Except as set
forth in Section 2.4(b)(i), the sale of the Assets and the Business to Buyer
pursuant to the terms of this Agreement will not cause Buyer to incur or suffer
any liability relating to, or obligation to pay, severance, termination or other
similar payments to any current or former employee or independent contractor of
Seller, except as disclosed on SCHEDULE 3.14.
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SECTION 3.15. Environmental Matters. Seller is conducting and at all
times has conducted the Business, and has occupied, used and operated the
Premises and all other real property and facilities presently or previously
occupied, used or operated by Seller in material compliance with all
Environmental Obligations and so as not to give rise to any material Liability
under any Environmental Obligations or to any Material Adverse Effect.
SECTION 3.16. Intellectual Property.
(a) Within ten days of the date of this Agreement, Seller will provide
to Buyer a partial list of all Intellectual Property, which list will be
supplemented by the inventory pursuant to Section 2.1(c)(i) and which list, as
supplemented, will constitute a true, correct and complete list of all
Intellectual Property. Such list will identify Seller as either the owner, joint
owner or licensee of each item of Intellectual Property and in the cases where
Seller is a licensee, will identify the related licensors and license agreements
for such Intellectual Property. Seller either owns, owns jointly or has the
right to use as a licensee all of the Intellectual Property, free and clear of
Encumbrances, including any exclusive rights, however described, granted to
Persons other than Seller with respect to the Intellectual Property, other than
such rights that are described on SCHEDULE 3.16. All federal and foreign
trademark and service mark registrations owned by Seller and all applications
owned by Seller to register any trademarks or service marks on any trademark
register maintained by the United States government or any state or foreign
government are based on truthful affidavits or declarations of use or a bona
fide intention to use.
(b) Except as set forth on SCHEDULE 3.16, with respect to each item of
Intellectual Property required to be identified herein:
(i) such Intellectual Property is not subject to any
outstanding injunction, judgment, order, decree, ruling or charge;
(ii) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand is pending or, to the knowledge of Seller, is
threatened which challenges the legality, validity, enforceability, use or
ownership of such piece of Intellectual Property; and
(iii) Seller has not licensed or permitted any third party to use
such piece of Intellectual Property other than in the Ordinary Course of
Business.
(c) Seller has not received notice, orally or in writing, that any
other Person claims any interest in any Intellectual Property, and to the
knowledge of Seller no such other Person has, or has made, such a claim. Seller
has the right to bring action for the infringement of all Intellectual Property.
Seller has not received any notice, charge, claim or assertion nor otherwise has
any knowledge that the Intellectual Property infringes the proprietary rights of
any third party.
(d) Seller has taken all commercially reasonable measures to protect
and maintain the rights of Seller in the Intellectual Property. All Intellectual
Property used by Seller is used with
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the authorization of every other claimant thereto and the execution, delivery
and performance of this Agreement by Seller will not impair such use.
(e) Seller has not sent or otherwise communicated to any other Person
any notice, charge, claim or assertion of, nor brought any action for, and
Seller does not have any knowledge of, any present, impending or threatened
infringement by such other Person of any Intellectual Property, and to the
knowledge of Seller, no third party has interfered with, infringed upon,
misappropriated, disclosed or otherwise come into conflict with any Intellectual
Property.
SECTION 3.17. Brokers' Fees and Commissions. Except for Salomon Smith
Barney, none of Seller or any of Seller's directors, officers, employees or
agents, has employed any investment banker, broker or finder in connection with
the transactions contemplated by this Agreement, and none of Seller or Buyer
will have any liability to any such Persons (other than Salomon Smith Barney) on
account of any brokerage, finder's or similar fee payable with respect to
services rendered to Seller or any of Seller's directors, officers, employees or
agents in connection with the transactions contemplated by this Agreement.
Seller will pay and discharge any amounts owing to Salomon Smith Barney as a
result of the transactions contemplated by this Agreement.
SECTION 3.18. Employees. Seller has no written employment contract with
any person with respect to the Business except any employment contracts as are
set forth on SCHEDULE 3.14. SCHEDULE 3.18 sets forth a preliminary list of all
current employees of Seller employed with respect to the Business (collectively,
the "Employees"), showing each such Person's name, position, initial employment
date, and annual remuneration (without exclusions for deduction pursuant to Code
Sections 125 or 401(k)), plus actual bonus or incentive compensation paid in
calendar year 1998, if any, which list will be finalized within ten days
following the date of this Agreement. Except as set forth on SCHEDULE 3.18 or
otherwise entered into in the Ordinary Course of Business, other than general
understandings which may exist for employment at will, no oral understandings
currently exist between any executive officer or other representative of Seller
authorized to enter into such understandings on behalf of Seller and any
Employee regarding changes in compensation, promotion or any other change in
status. Except as disclosed on SCHEDULE 3.18, as of the date of this Agreement,
other than in the Ordinary Course of Business no Employee has advised any
executive officer of Seller, and to the knowledge of Seller's executive officers
without any investigation or due diligence on their part, no Employee has
advised any manager or supervisor of Seller, orally or in writing, that he or
she intends to terminate such employment or to refuse employment by Buyer after
the Closing.
SECTION 3.19. Books and Records. Seller has maintained business records
reasonably adequate for the operation of the Business, and Seller has no
knowledge of any material deficiencies in such business records.
SECTION 3.20. Subscribers. As of January 1, 1999, the number of the
dial-up, Web-hosting and dedicated access, respectively, Subscribers that are
current customers (that is, Subscribers who paid for service the last time their
credit card was charged (with respect to those who pay by credit card) or
non-credit card Subscribers who paid for service within 31 days of
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receipt of their most recent invoice), and the average revenue per Subscriber
with respect thereto, are not less than as shown on SCHEDULE 3.20. As of the
Closing, Seller will certify whether or not the aggregate value of the
Subscribers who are current customers (as provided in the prior sentence, and as
determined as of the Closing) is at least One Hundred Ninety Six Million Dollars
($196,000,000), using for purposes of calculation the values for such
Subscribers set forth in Section 2.3(c).
SECTION 3.21. Securities Matters.
(a) Seller is experienced in evaluating and investing in
high-technology companies such as Buyer. Seller has substantial experience in
investing in and evaluating private placement transactions of securities in
companies similar to Buyer and is capable of evaluating the risks and merits of
its investment in Buyer and has the capacity to protect its own interests.
(b) Seller is acquiring the Shares for investment for its own account
and not with a view to, or for resale in connection with, any distribution
thereof, except in compliance with applicable securities laws, and Seller has no
present intention of selling or distributing the Shares except in compliance
with applicable securities laws. Seller understands that as of the date of this
Agreement the Shares have not been registered under the Securities Act.
(c) Seller acknowledges that, because the Shares have not been
registered under the Securities Act, the Shares that Seller receives at the
Closing must be held indefinitely unless subsequently registered under the
Securities Act or an exemption from such registration is available. Seller is
aware of the provisions of Rule 144 promulgated under the Securities Act which
permits limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, the resale
occurring not less than one year after a party has purchased and paid for the
security to be sold.
(d) Without in any way limiting the effect of the representations and
warranties of Buyer set forth in this Agreement, Seller has had an opportunity
to discuss in detail Buyer's business, management and financial affairs with
Buyer's officers and management employees and has reviewed all documents and
records of Buyer which Buyer has provided in response to Seller's request.
(e) Seller is an "accredited investor" as that term is defined in Rule
501(a) under the Securities Act. Seller has not been organized for the specific
purpose of acquiring Shares.
(f) Seller has its principal office in the State of California.
SECTION 3.22 Year 2000 Compliance. To the knowledge of Seller, without
any investigation or due diligence on its part or on the part of any of Seller's
employees or any other Person, the Seller Software accurately processes
date/time data (including calculating, comparing, and sequencing) from, into,
and between the twentieth and twenty-first centuries, and the years 1999 and
2000 and leap year calculations when either (A) used as a standalone
application, or (B) integrated into or otherwise used in conjunction with the
third party hardware,
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software, firmware and data ("Third Party Products") with
which such Seller Software was designed or intended to operate at the time such
Seller Software was (i) developed or (ii) first provided to Seller's customers
or tested by Seller for such customers, whichever is later. Notwithstanding the
foregoing, the Seller shall not be considered to be in breach of the
representation and warranty in the immediately preceding sentence if the failure
of such Seller Software to comply with such representation and warranty is
attributable solely to (x) a failure by any Third Party Product to accurately
process date/time data (including but not limited to, calculating, comparing,
and sequencing) from, into, and between the twentieth and twenty-first
centuries, and the years 1999 and 2000 and leap year calculations; or (y) any
modification of the Seller Software by any party other than Seller (unless such
modification was made at the direction of Seller). As Buyer's sole and exclusive
remedy for breach of the representation and warranty in this Section 3.22,
Seller will (i) exercise commercially reasonable best efforts to correct any
material breach of the warranty reported to Seller on or before June 30, 2000
and (ii) provide any resulting fix to Buyer without charge.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows, in each case as of
the date of this Agreement:
SECTION 4.1. Organization and Qualification, Etc. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has requisite corporate power and authority to own, lease
and operate its properties and assets and to carry on its business as it is now
being conducted. Buyer is qualified to do business and is in good standing in
each jurisdiction in which the failure to be so qualified would result in a
material adverse effect on Buyer's business.
SECTION 4.2. Authority Relative to Agreement. Buyer has the full and
absolute right, corporate power, authority and legal capacity to execute,
deliver, perform and consummate the transactions contemplated on its part by
this Agreement and all other documents and agreements to be executed and
delivered by Buyer pursuant to this Agreement. The execution and delivery by
Buyer of this Agreement and all other documents and agreements to be executed
and delivered by Buyer pursuant to this Agreement, and the consummation by Buyer
of the transactions contemplated on its part hereby and thereby, have been duly
authorized by Buyer's board of directors. No other corporate approvals on the
part of Buyer's board of directors or shareholders are necessary to authorize
the execution and delivery of this Agreement and such other documents. Assuming
the due authorization, execution and delivery by other applicable parties, this
Agreement constitutes, and all other documents and agreements to be executed and
delivered by Buyer pursuant to this Agreement when executed and delivered will
constitute, the legal, valid, and binding obligation of, and will be enforceable
in accordance with their respective terms against, Buyer, except as such
enforcement is subject to the effect of (i) any applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting creditors'
rights generally, and (ii) general principles of equity, including concepts of
reasonableness, good faith and fair dealing, and other similar doctrines
affecting the
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enforceability of agreements generally (regardless of whether
considered in a proceeding in equity or law).
SECTION 4.3. Non-Contravention. The execution, delivery and performance
of this Agreement and all other documents and agreements to be executed and
delivered by Buyer pursuant to this Agreement, and the consummation of the
transactions contemplated hereby and thereby, will not (a) violate any provision
of the certificate of incorporation or bylaws of Buyer, (b) violate, with or
without the giving of notice or the lapse of time or both, or conflict with or
result in the breach or termination of any provision of, or a diminution of the
rights of Buyer under, or constitute a default under, or give any Person the
right to accelerate any obligation under, or result in the creation of any
material Encumbrance upon any properties, assets or business of Buyer, pursuant
to any indenture, mortgage, deed of trust, lien, lease, license, Permit,
agreement, instrument or other arrangement to which Buyer is a party or by which
Buyer, or any of its assets and properties, is bound or subject, or (c) violate
in any material respect any Legal Requirement to which Buyer is subject.
SECTION 4.4. Consents and Approvals. Except as described in SCHEDULE 4.4,
no filing or registration with, no notice to and no permit, authorization,
consent or approval of any Governmental Authority or any Person is necessary for
the consummation by Buyer of the transactions contemplated by this Agreement
other than (a) requirements of federal and state securities laws, (b) the
authorization of all applicable regulatory agencies necessary or desirable to
consummate the transactions contemplated by this Agreement and (c) those
consents and approvals already obtained as described on SCHEDULE 4.4.
SECTION 4.5. Brokers' Fees and Commissions. Except for ING Baring Furman
Selz LLC, neither Buyer nor any of Buyer's directors, officers, partners,
employees or agents, has employed any investment banker, broker or finder in
connection with the transactions contemplated by this Agreement, and none of
Buyer, Seller or ICG, or their Affiliates, will have any liability to any such
Persons (other than ING Baring Furman Selz LLC) on account of any brokerage,
finder's or similar fee payable with respect to services rendered to Buyer or
any of Buyer's directors, officers, partners, employees or agents in connection
with the transactions contemplated by this Agreement. Buyer will pay and
discharge any amounts owing to ING Baring Furman Selz LLC as a result of the
transactions contemplated by this Agreement.
SECTION 4.6. The Shares. Upon delivery to Seller at the Closing, the
Shares will be (a) duly authorized, (b) validly issued and fully paid and
nonassessable and (c) free of any Liability, Tax or other Encumbrance, except as
may be created or allowed to arise solely by Seller.
ARTICLE V
PRE-CLOSING COVENANTS
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
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SECTION 5.1. General. Each of the Parties will use its commercially
reasonable efforts to take all actions necessary, proper or advisable, in order
to consummate and make effective the transactions contemplated by this Agreement
(including the satisfaction, but not the waiver, of the closing conditions set
forth in Article VII) and the other agreements contemplated by this Agreement.
SECTION 5.2. Operation and Preservation of Business. Seller will through
the Closing Date: (a) use its commercially reasonable efforts to preserve the
Business and in connection therewith maintain its existing franchises and
licenses and to preserve Seller's present relationships with customers,
suppliers, consultants, employees and any other Persons having business
relations therewith; and (b) maintain the Assets in the same working order and
condition as the Assets are in on the date of this Agreement, consistent with
how the Assets historically have been maintained in the Ordinary Course of
Business, reasonable wear and tear excepted. Except as contemplated by this
Agreement or as reasonably required to carry out its obligations hereunder,
Seller will, through the Closing Date, conduct the Business in the Ordinary
Course of Business and, in addition, will not (except to the extent that Buyer
has consented in writing thereto or that such action or inaction would not
reasonably be expected to materially affect or be binding upon any part of the
Business or the Assets): (i) grant any increase in the compensation payable or
to become payable by Seller to officers or employees of the Business other than
in the Ordinary Course of Business, or enter into any bonus, insurance, pension,
profit sharing, incentive, deferred compensation, severance pay, retirement,
hospitalization, employee benefit or other similar plan, payment or arrangement
for or with any of such officers or employees other than in the Ordinary Course
of Business; (ii) enter into any agreement in connection with the Business that
involves more than $25,000 individually or $500,000 in the aggregate that may
not be terminated on less than 31 days' notice or that may reasonably be
expected to have a Material Adverse Effect on the Business or the Assets or
enter into the Marketing and Distribution Agreement with American Automobile
Association, a draft copy of which has been furnished to Buyer; (iii) make any
capital purchases or commitments relating to the Business that exceed $50,000
individually or $200,000 in the aggregate; (iv) other than in the Ordinary
Course of Business, place, or allow to be placed, an Encumbrance on any of the
Assets; (v) sell, assign, lease or otherwise transfer or dispose of any interest
in any Asset (other than in the Ordinary Course of Business); (vi) commit any
act or omit to do any act, or engage in any activity or transaction or incur any
obligation (by conduct or otherwise), that (individually or in the aggregate)
reasonably could be expected to have a Material Adverse Effect; (vii) except for
actions taken or not taken in compliance with this Section 5.2, do or omit to do
any act (or permit such action or omission) which reasonably could be expected
to cause a material breach of any Seller Contract; or (viii) take any action or
fail to take any action that would reasonably be expected to cause any of the
representations, warranties or covenants of Seller contained herein to be untrue
or incorrect in any material respect or incapable of being performed or
satisfied on the Closing Date. Prior to the Closing Date, Seller will maintain
in full force and effect all of its existing casualty, liability, and other
insurance relating to the Business or the Assets through the Closing Date in
amounts not less than those in effect on the date hereof, except for changes in
such insurance that are made in the Ordinary Course of Business.
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SECTION 5.3. Full Access. Seller will permit Buyer and its agents to have
full access at all reasonable times, and in a manner so as not to interfere with
the normal business operations of Seller, to all Premises, properties,
personnel, accounting books and records, contracts and documents of or
pertaining to Seller. Buyer's investigation of the financial and operating data,
Assets and other information with respect to the Business and Assets shall in no
way affect the obligations of Seller, or ICG as applicable, with respect to the
agreements, representations, warranties, covenants and indemnification
provisions set forth in this Agreement.
SECTION 5.4. Notice of Developments.
(a) Seller will give prompt written notice to Buyer of any development
which occurs after the date of this Agreement and materially affects the
Business, the Assets, or the liabilities, financial condition, operations,
results of operations, representations, warranties, covenants or disclosure
SCHEDULES of Seller, and will provide Buyer with all information (including,
without limitation, copies of all documents relating thereto) reasonably
requested by Buyer concerning any claims instituted, threatened or asserted
after the date of this Agreement against or affecting the Business or Assets at
law or in equity before or by any Governmental Authority.
(b) Promptly after Seller has knowledge thereof, Seller will, through
the Closing Date, notify Buyer in writing of the occurrence of any event, or the
failure of any event to occur, prior to the Closing that results in a breach of
any of the covenants, representations or warranties made by or on behalf of
Seller in this Agreement, but, in the event the Closing occurs and subject to
the second sentence of Section 8.5(a), such notification will not excuse
breaches of representations, warranties, covenants or agreements disclosed in
such notification.
(c) Promptly after Buyer has knowledge thereof, Buyer will, through
the Closing Date, notify Seller in writing of the occurrence of any event, or
the failure of any event to occur, prior to the Closing that results in a breach
of any of the covenants, representations or warranties made by or on behalf of
Buyer in this Agreement or any other document or agreement furnished by Buyer in
connection with or pursuant to this Agreement, but in the event the Closing
occurs and subject to the second sentence of Section 8.5(a), such notification
will not excuse breaches of representations, warranties, covenants or agreements
disclosed in such notification.
SECTION 5.5. Announcements. Except as may be required by law, no Party
will issue any press release or make any public announcement relating to the
subject matter of this Agreement without the prior written approval of the other
Party.
SECTION 5.6. Confidentiality. Each of the Parties shall keep, and shall
cause its employees, agents, attorneys, accountants and other advisors to keep,
confidential the existence, terms and conditions of this Agreement and all
communications and discussions between or among the Parties. Subject to Section
5.5, without the consent of Buyer and Seller, except as may be required by law
(including disclosure requirements under applicable securities laws), neither
Buyer, nor Seller will make any disclosure of the information described in this
Section 5.6. Nothing contained in this Agreement shall be construed to prohibit
any Party from disclosing the information described in this Section 5.6 or any
Confidential Information in
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connection with the institution or defense of any claim pursuant to this
Agreement or other claims which may be the subject of judicial proceedings.
SECTION 5.7. Consents and Approvals.
(a) The Parties, at each of their own expense except as otherwise
provided in this Agreement, shall take all commercially reasonable measures
reasonably necessary or advisable to secure such consents, authorizations and
approvals of Governmental Authorities and of other Persons or entities with
respect to the transactions contemplated by this Agreement, and to the
performance of all other obligations of such Parties under this Agreement, as
may be required by any applicable statute or regulation of the United States or
any country, state or other jurisdiction or by any agreement of any kind
whatsoever to which Buyer or Seller is a party or by which Buyer or Seller is
bound.
(b) Buyer and Seller will (i) cooperate in the filing of all forms,
notifications, reports and information, if any, required or reasonably deemed
advisable pursuant to applicable statutes, rules, regulations or orders of any
Governmental Authority in connection with the transactions contemplated by this
Agreement and (ii) use their respective commercially reasonable efforts to cause
any applicable waiting periods thereunder to expire and any objections to the
transactions contemplated hereby to be withdrawn before the Closing.
(c) In addition to the obligations set forth in Section 5.7(b), as
promptly as practicable, and in any event no later than 15 days following the
execution of this Agreement, Seller and Buyer will complete any filing that may
be required pursuant to Hart-Scott-Rodino, or shall mutually agree that no such
filing is required. Seller and Buyer will diligently take (or fully cooperate in
the taking of) all actions, and provide any additional information, required or
reasonably requested in order to comply with the requirements of
Hart-Scott-Rodino. Buyer and Seller will each pay one-half of the
Hart-Scott-Rodino filing fee.
SECTION 5.8. Values of Assets. As soon as practicable after the Closing
(but not later than 75 days after the Closing Date, Buyer will prepare and
submit to Seller for its approval, which approval will not be unreasonably
withheld, a schedule allocating the Purchase Price among the Assets. For
purposes of this allocation, the Purchase Price will be deemed to include the
amount of the Assumed Liabilities. Seller will be required to approve such
allocation so long as it is reasonable. Seller will be deemed to have approved
such allocation unless it gives written notice of objection to Buyer within ten
days after receipt of the schedule setting forth such allocation. If such notice
of objection is given, within five days after such notice is given, the dispute
will be submitted to Arthur Andersen LLP, whose determination will be
conclusive. The fees and expenses payable to such firm will be borne equally by
Seller and Buyer. When the allocation of the Purchase Price is finally
determined, the Parties will report the allocation of the Purchase Price
according to that determination for all applicable income, sales, use and
transaction Tax purposes, and Seller and Buyer will file all required Tax forms
with the applicable Taxing authorities consistent with such determination.
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SECTION 5.9. Name. As of the Closing, Seller will change its corporate
name to a name dissimilar to its current name, which name will not include the
word "NETCOM," and thereafter will not use the word "NETCOM" in its corporate
name. As of and after the Closing, neither Seller nor its Affiliates will use
the tradename "NETCOM" nor use such name in any service mark, and any pending
applications for the use of such name will be abandoned.
SECTION 5.10. Resale Prospectus. Provided that Seller has provided or
made available to Buyer all information relating to Seller and reasonably
required by Buyer for inclusion therein, Buyer will prepare and file with the
SEC as promptly as practicable after the date of this Agreement a resale
registration statement on Form S-3 or other eligible Form (the "Resale
Prospectus"), in form and substance reasonably satisfactory to Seller, that
provides for the sale by Seller of the Shares after the Closing. Buyer will
provide to Seller for its review a draft copy of the Resale Prospectus prior to
its filing with the SEC. Buyer will use its commercially reasonable best efforts
to cause the Resale Prospectus to become effective with the SEC as of the
Closing or, if such effectiveness does not occur or is not permitted under
applicable federal securities laws, as soon as possible after the Closing.
ARTICLE VI
POST-CLOSING COVENANTS
The parties agree as follows with respect to the period following the
Closing.
SECTION 6.1. Further Assurances. In case at any time after the Closing
any further action is necessary or desirable to carry out the purposes of this
Agreement, Seller, on the one hand, and Buyer, on the other hand, will take such
further action (including the execution and delivery of such further instruments
and documents) as the other party reasonably may request, all at the sole cost
and expense of the requesting Party (unless the requesting Party is entitled to
indemnification therefor under Article VIII).
SECTION 6.2. Cooperation. In the event and for so long as Seller, on the
one hand, or Buyer, on the other hand, actively is contesting or defending
against any action, suit, proceeding, hearing, investigation, charge, complaint,
claim or demand in connection with (a) any transactions contemplated by this
Agreement or (b) any fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure to act or
transaction on or prior to the Closing Date involving any of the Assets or the
Business, the other Party will cooperate with such party and its counsel in the
contest or defense, make available their personnel (except to the extent that
making their personnel available unreasonably affects the ability of such
personnel to perform their normal duties), and provide such testimony and access
to their books and records as shall be reasonably necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under Article VIII). The Parties also will cooperate
with each other in all reasonable respects to provide for the transition of the
operation of the Business to Buyer and the retention and operation of the
Network by Seller after the Closing, including reasonable cooperation regarding
access to accounting systems and other items.
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SECTION 6.3. Confidentiality. Buyer will treat and hold as confidential
all Confidential Information (except to the extent that the same relates to the
Assets or the Business) concerning Seller and its Affiliates, refrain from using
any such Confidential Information (except to the extent that the same relates to
the Assets or the Business) and deliver promptly to Seller or destroy, at the
request of Seller, all such Confidential Information (except to the extent that
the same relates to the Assets or the Business) in its possession. Seller will
treat and hold as confidential all Confidential Information concerning Buyer and
the Business or Assets, refrain from using any such Confidential Information and
deliver promptly to Buyer or destroy, at the request and option of Buyer, all of
such Confidential Information in its possession.
SECTION 6.4. Resale Prospectus and Listing of Shares. In the event the
Resale Prospectus is not effective with the SEC as of the Closing, Buyer will
use its commercially reasonable best efforts to cause the Resale Prospectus to
become effective with the SEC as soon as possible after the Closing and to
maintain the effectiveness of the Resale Prospectus in accordance with the terms
thereof. Prior to or as of the effectiveness of the Resale Prospectus, the
Shares will be listed for trading on the NASDAQ.
SECTION 6.5. Restriction on Distribution. During the period beginning on
the Closing Date and ending 18 months after the Closing Date, ICG will not
distribute to its shareholder, ICG Communications, Inc., or any Affiliate of ICG
Communications, Inc. that is not a subsidiary of or otherwise controlled by ICG,
any amounts attributable to the Purchase Price that it has received from Seller
after the Closing; provided that if at the end of such 18 month period Buyer has
pending claims for indemnification against Seller and ICG under Article VIII,
the restriction set forth in this Section 6.5 will continue to apply to the
extent of the amount of such pending claims until such claims are finally
resolved. ICG will not sell, assign or transfer any of its assets or properties
in any transaction in which ICG does not receive consideration of a reasonably
equivalent value for such assets or properties. ICG will not incur any liability
for borrowed money without receiving funds corresponding to such borrowing.
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.1. Conditions to Obligation of Buyer. The obligation of Buyer
to consummate the transactions contemplated by this Agreement is subject to
satisfaction of the following conditions:
(a) Seller's representations and warranties (other than the
representations and warranties set forth in Section 3.20), to the extent
qualified by a reference to materiality, shall be correct and complete, and to
the extent not so qualified, shall be correct and complete in all material
respects at and as of the Closing Date and the Closing, and there shall have
occurred no uncured breach of Seller's representations and warranties which,
individually or in the aggregate, taking into account all such breaches, has
resulted in any or may reasonably be expected to result in any Material Adverse
Effect;
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(b) Seller shall have performed and complied in all material respects
with all of its covenants hereunder required to be performed or complied with
through the Closing;
(c) Seller shall have given all notices and procured all of the
material third-party consents, authorizations and approvals (including all
consents, authorizations and approvals by Governmental Authorities and the
expiration of the Hart-Scott-Rodino waiting period) required to consummate the
transactions contemplated by this Agreement, all in form and substance
reasonably satisfactory to Buyer;
(d) no action, suit or proceeding shall be pending or threatened,
other than an action, suit or proceeding instituted by the Buyer, that involves
any Governmental Authority as a party and wherein an unfavorable Order would,
and no injunction shall be in effect that would, (i) prevent consummation of any
of the transactions contemplated by this Agreement, (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation or (iii) materially affect adversely the right of Buyer to use or
operate the Assets in connection with the Business, and no such Order shall be
in effect;
(e) there shall have occurred no event, fact or circumstance,
including any failure of Buyer to obtain any required consent with respect to
the transfer of any Asset to Seller under this Agreement, that has had or could
reasonably be expected to have a material adverse effect on Buyer's right to
conduct the Business substantially as such Business was being conducted on
September 30, 1998;
(f) there shall have occurred after September 30, 1998, no Material
Adverse Effect; provided that if the number of Subscribers as of the Closing is
less than that set forth in SCHEDULE 3.20, that difference in the number of
Subscribers will not be considered to be a Material Adverse Effect;
(g) Seller shall have delivered to Buyer (i) a certificate to the
effect that each of the conditions specified above in Sections 7.1(a) through
(f) is satisfied in all respects and (ii) good standing certificates for Seller
and ICG, dated within ten days of the Closing, from the Secretary of State of
Seller's and ICG's jurisdiction of incorporation and each other jurisdiction in
which Seller is qualified or authorized to do business as a foreign corporation;
(h) Seller shall have made the certification set forth in the last
sentence of Section 3.20; and
(i) Seller shall have delivered to Buyer the Seller Documents and such
other instruments, certificates and documents as are reasonably requested by
Buyer in order to consummate the transactions contemplated by this Agreement,
all in form and substance reasonably satisfactory to Buyer.
Buyer in its sole discretion may waive any condition specified in this
Section 7.1 at or prior to the Closing.
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SECTION 7.2. Conditions to Obligation of Seller. The obligation of Seller
to consummate the transactions contemplated by this Agreement is subject to
satisfaction of the following conditions:
(a) Buyer's representations and warranties, to the extent qualified by
a reference to materiality, shall be correct and complete, and to the extent not
so qualified, shall be correct and complete in all material respects at and as
of the Closing Date and the Closing;
(b) Buyer shall have performed and complied in all material respects
with all of its covenants hereunder required to be performed or complied with
through the Closing;
(c) Buyer shall have delivered to Seller a certificate to the effect
that each of the conditions specified above in Sections 7.2(a) and (b) is
satisfied in all respects;
(d) no action, suit or proceeding shall be pending or threatened,
other than an action, suit or proceeding instituted by Seller, that involves any
Governmental Authority as a party and wherein an unfavorable Order would, and no
injunction shall be in effect that would, (i) prevent consummation of any of the
transactions contemplated by this Agreement or (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, and no such Order shall be in effect;
(e) Buyer shall have paid the cash portion of the Purchase Price
pursuant to Sections 2.2 and 2.3, assumed the Assumed Liabilities and delivered
certificates evidencing the Shares, and the Shares shall be delivered to Seller
free and clear of any Liability, Tax or other Encumbrance, other than those
created or allowed to arise solely by Seller; and
(f) Buyer shall have delivered to Seller the Buyer Documents and such
other documents as are reasonably requested by Seller in order to consummate the
transactions contemplated by this Agreement, all in form and substance
reasonably satisfactory to Seller.
Seller in its sole discretion may waive any condition specified in this
Section 7.2 at or prior to the Closing.
ARTICLE VIII
REMEDIES FOR BREACHES OF THIS AGREEMENT
SECTION 8.1. Indemnification Provisions for Benefit of Buyer. If this
Agreement is not terminated prior to the Closing in accordance with Article IX,
and Seller breaches (a) any of the representations or warranties of Seller
contained herein or in the closing certificate delivered by Seller pursuant to
Section 7.1(g), and Buyer gives notice of a claim for indemnification against
Seller within the applicable Survival Period, or (b) any covenants or agreements
of Seller contained herein or in any Seller Document and Buyer gives notice
thereof to Seller, then, subject to Section 8.6, Seller and ICG, jointly and
severally, will indemnify, defend and hold harmless Buyer from and against any
Adverse Consequences Buyer may suffer arising out of or resulting from any of
the foregoing regardless of whether the Adverse Consequences are suffered
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during or after any applicable Survival Period. Subject to Section 8.6, Seller
and ICG, jointly and severally, also will indemnify, defend and hold harmless
Buyer from and against any Adverse Consequences Buyer may suffer, whether
suffered during or after the Survival Period, arising out of or resulting from
(c) any Liability against Buyer or any of the Assets by virtue of the
application of any bulk sales or other similar laws to the sale and transfer of
the Assets to Buyer, or failure of Seller to comply with any applicable bulk
sales laws or (d) any Liability of Seller other than an Assumed Liability, (e)
any Liability of Seller arising from or relating to the matters described in
Schedule 3.11(a) or (f) except as expressly set forth in this Agreement, any
Liability relating to the operation of the Business by Seller prior to the
Closing. In determining the amount of Adverse Consequences suffered by Buyer for
purposes of this Section 8.1 as a result of a breach by Seller described in
Section 8.1(a) or Section 8.1(b) above of any representation, warranty, covenant
or agreement of Seller qualified by the words "material," "materiality," "in all
material respects," "knowledge," "to the knowledge of," or words of similar
import, or by any phrase using any such terms or words, such Adverse
Consequences will be deemed to include only amounts that are material or arising
out of matters of which Seller or ICG had knowledge, as the case may be. If any
dispute arises concerning whether any indemnification is owing which cannot be
resolved by negotiation among the Parties within 30 days of notice of claim for
indemnification from the party claiming indemnification to the Party against
whom such claim is asserted, the dispute will be resolved by arbitration
pursuant to this Agreement.
SECTION 8.2. Indemnification Provisions for Benefit of Seller. If this
Agreement is not terminated prior to the Closing in accordance with Article IX,
and Buyer breaches (a) any of its representations or warranties contained herein
or in the closing certificate delivered by Buyer pursuant to Section 7.2(c), and
Seller gives notice of a claim for indemnification against Buyer within the
applicable Survival Period, or (b) any covenants or agreements of Buyer
contained herein or in any Buyer Document and Seller gives notice thereof to
Buyer, then, subject to Section 8.6(d), Buyer will indemnify, defend and hold
harmless Seller from and against any Adverse Consequences Seller may suffer
arising out of or resulting from any of the foregoing regardless of whether the
Adverse Consequences are suffered during or after the applicable Survival
Period. In determining the amount of Adverse Consequences suffered by Seller for
purposes of this Section 8.2 as a result of a breach by Buyer described in
Sections 8.2(a) and 8.2(b) above of any representation, warranty, covenant or
agreement of Buyer qualified by the words "material," "materiality," "in all
material respects," "knowledge," "to the knowledge of," or words of similar
import, or by any phrase using any such terms or words, such Adverse
Consequences will be deemed to include only amounts that are material or arising
out of matters of which Buyer had knowledge, as the case may be. Subject to
Section 8.6(d), Buyer also will indemnify, defend and hold harmless Seller from
all Adverse Consequences Seller may suffer, whether suffered during or after the
Survival Period, (c) as a result of Buyer's failure to comply with any
applicable requirement under the WARN Act as required under Section 2.4(b)(i) or
(d) attributable to or arising out of the Assumed Liabilities, or from the
operation of the Business after the Closing. If any dispute arises concerning
whether any indemnification is owing which cannot be resolved by negotiation
among the Parties within 30 days of notice of claim for indemnification from the
Party claiming indemnification to the party against whom such claim is asserted,
the dispute will be resolved by arbitration pursuant to this Agreement.
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SECTION 8.3. Matters Involving Third Parties.
(a) If any Person not a party to this Agreement (including, without
limitation, any Governmental Authority) notifies Seller, on the one hand, or
Buyer, on the other hand, (the "Indemnified Party") with respect to any matter
(a "Third Party Claim") which may give rise to a claim for indemnification
against the Party (or in the case of Seller, Seller and ICG) (the "Indemnifying
Party"), then the Indemnified Party will notify the Indemnifying Party thereof
in writing within 15 days after receiving such notice. No delay on the part of
the Indemnified Party in notifying the Indemnifying Party will relieve the
Indemnifying Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced by such delay.
(b) The Indemnifying Party will have the right, at its sole cost and
expense, to defend the Indemnified Party against the Third Party Claim with
counsel of its choice satisfactory to the Indemnified Party so long as (i) the
Indemnifying Party notifies the Indemnified Party in writing within ten days
after the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences for which the Indemnified Party is entitled
to indemnification, (ii) the Indemnifying Party provides the Indemnified Party
with evidence reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend against the Third
Party Claim and fulfill its indemnification obligations hereunder, (iii) the
Third Party Claim involves only money damages and does not seek an injunction or
other equitable relief, (iv) settlement of, or an adverse judgment with respect
to, the Third Party Claim is not, in the good faith judgment of the Indemnified
Party, likely to establish a precedential custom or practice materially adverse
to the continuing business interests of the Indemnified Party, and (v) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently. At any time that the Indemnifying Party is entitled to conduct the
defense of the Third Party Claim in accordance with this Section 8.3(b), the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim. In the event any of the
conditions in this Section 8.3(b) is or becomes unsatisfied, the Indemnified
Party may defend against the Third Party Claim so long as the Indemnified Party
conducts the defense of the Third Party Claim actively and diligently.
(c) At any time that a party is defending a Third Party Claim, neither
party will consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without obtaining (A) an entry of
dismissal, with prejudice, or an entry of dismissal, without prejudice, and a
covenant not to sue (if legal action is instituted), (B) the full and
unconditional release of the other party from all liability in respect of such
Third Party Claim and (C) the prior written consent of the other party (not to
be withheld unreasonably).
(d) If the Indemnified Party has the right to and is in fact defending
the Third Party Claim, the Indemnifying Party will reimburse the Indemnified
Party promptly and periodically for the costs of defending against the Third
Party Claim (including reasonable attorneys' fees and
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expenses), and the Indemnifying Party will remain responsible for any Adverse
Consequences for which the Indemnified Party is entitled to indemnification.
SECTION 8.4. Survival. The representations and warranties made in this
Agreement or in any other agreement referred to in this Agreement, or in any
certificate or other document delivered pursuant to this Agreement or in
connection with this Agreement will survive the Closing Date for a period of 18
months from the Closing Date, except that the representations and warranties of
Seller in Sections 3.8 and 3.13 will survive until the expiration of all
applicable statutes of limitations with respect to any such claims that could be
brought regarding such matters and the representations and warranties set forth
in Section 3.15 will survive the Closing Date for a period of five years from
the Closing Date. Neither Buyer, Seller nor ICG will have any obligation to
indemnify any Person pursuant to this Agreement with respect to any breach of a
representation or warranty after the applicable period set forth above. The
covenants and agreements of Seller and Buyer made in Article VI, and the
provisions of Articles VIII and X will survive the Closing Date indefinitely,
except as otherwise specifically provided herein.
SECTION 8.5. Limitations.
(a) Subject solely to Section 9.2, the indemnification and other
provisions of this Article VIII will constitute the exclusive remedy by Seller,
on the one hand, and Buyer, on the other hand, against the other arising by
virtue of a breach of any agreement, representation, warranty, or covenant under
this Agreement. Notwithstanding anything to the contrary in this Agreement,
other than liability for specific performance under Section 9.2, Seller and ICG
will have no liability to Buyer, and Buyer will have no liability to Seller or
ICG, for any Adverse Consequences or other amounts in the event this Agreement
is terminated prior to the Closing in accordance with Article IX.
(b) Notwithstanding any provision in this Agreement to the contrary,
in no event will Seller or ICG, on the one hand, or Buyer, on the other hand, be
liable to the other for amounts attributable to lost profits, or consequential,
incidental, speculative or punitive damages (except to the extent such items are
payable to a Person not a Party to this Agreement).
SECTION 8.6. Basket and Ceiling.
(a) Buyer will not be entitled to indemnification from Seller and ICG
under Section 8.1 or Section 8.3 unless and until the aggregate amount of
Adverse Consequences that Buyer would otherwise be entitled to assert under
either Section 8.1 or Section 8.3 exceeds One Million Dollars ($1,000,000) (the
"Basket Amount"). When the aggregate amount of such Adverse Consequences exceeds
the Basket Amount, Buyer will be entitled to indemnification under Section 8.1
or Section 8.3, as applicable, for all such Adverse Consequences and not just
those in excess of the Basket Amount.
(b) Subject to Section 8.6(a), Seller and ICG will be required to
indemnify Buyer under this Article VIII for all Adverse Consequences suffered as
a result of the breach of any of the representations, warranties or covenants
set forth in Article III or elsewhere in this
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Agreement, other than the representations, warranties or covenants set forth in
any of Sections 3.8, 3.13 and 3.15 and the indemnification obligation set forth
in Section 8.1(e), only in an amount, in the aggregate for all or any of such
breaches, not in excess of 75 percent of the Purchase Price.
(c) Subject to Section 8.6(a), Seller and ICG will be required to
indemnify Buyer under this Article VIII for all Adverse Consequences suffered as
a result of one or more breaches of the representations and warranties set forth
in Sections 3.8, 3.13 and 3.15 and the indemnification obligation set forth in
Section 8.1(e), only in an amount, in the aggregate for all or any of such
breaches, not in excess of the Purchase Price.
(d) Buyer will be required to indemnify Seller under this Article VIII
for all Adverse Consequences suffered as a result of one or more breaches of the
representations, warranties or covenants set forth in Article IV or elsewhere in
00000this Agreement in an amount not in excess of the Purchase Price.
ARTICLE IX
TERMINATION
SECTION 9.1. Termination of Agreement. The parties may terminate this
Agreement as provided in this Section 9.1:
(a) Buyer and Seller may terminate this Agreement by mutual written
consent at any time prior to the Closing;
(b) Buyer may terminate this Agreement by giving written notice to
Seller at any time prior to the Closing (i) in the event Seller has breached any
agreement, representation, warranty or covenant contained in this Agreement and
such breach, individually or in the aggregate taking into account all such
breaches, has remained uncured and has resulted in, or reasonably may be
expected to result in, a Material Adverse Effect, Buyer has notified Seller of
the breach, and the breach has not been cured within 30 days after the notice of
breach (unless the representation, warranty or covenant failure results
primarily from Buyer breaching any agreement contained in this Agreement in any
material way); or (ii) if the Closing has not occurred on or before 180 days
following the date of this Agreement becase of the failure of any condition
precedent to Buyer's obligations to consummate the Closing; or
(c) Seller may terminate this Agreement by giving written notice to
Buyer at any time prior to the Closing (i) if Buyer has materially breached any
agreement, representation, warranty or covenant contained in this Agreement,
Seller has notified Buyer of the breach, and the breach has not been cured
within 30 days after the notice of breach (unless the failure results primarily
from Seller or ICG breaching any agreement, representation, warranty or covenant
contained in this Agreement in any material way) or (ii) if the Closing has not
occurred on or before 180 days following the date of this Agreement because of
the failure of any condition precedent to Seller's or ICG's obligations to
consummate the Closing.
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<PAGE> 40
(d) Either Buyer or Seller may terminate this Agreement if as of the
Closing the aggregate value of the Subscribers who are current customers (as
determined under Section 3.20 and using the values for such Subscribers set
forth in Section 2.3(c)), is less than One Hundred Ninety-Six Million Dollars
($196,000,000).
SECTION 9.2. Effect of Termination. Upon the termination of this
Agreement by a Party pursuant to Section 9.1(b)(i) or (c)(i), notwithstanding
such termination, the terminating party will have as its sole additional remedy
the equitable remedy of specific performance, and in that regard each Party
agrees that the other Party could not be adequately compensated by its remedies
at law.
SECTION 9.3. Confidentiality. If this Agreement is terminated, each Party
will treat and hold as confidential all Confidential Information concerning the
other Party which it acquired from such other Party in connection with this
Agreement and the transactions contemplated by this Agreement, and upon the
request of Seller, on the one hand, or Buyer, on the other hand, as applicable,
Seller and Buyer will return to the other all such Confidential Information
within its possession.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. No Third-Party Beneficiaries. This Agreement will not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
SECTION 10.2. Entire Agreement. This Agreement (including the Schedules
and documents referred to herein) constitutes the entire agreement among the
parties and supersedes any prior understandings, agreements or representations
by or among the parties, written or oral, to the extent they relate in any way
to the subject matter hereof; provided that the Confidentiality Agreement dated
September 9, 1998 between ICG Communications, Inc. and Buyer will survive the
execution of this Agreement in accordance with its terms.
SECTION 10.3. Succession and Assignment. This Agreement will be binding
upon and inure to the benefit of the parties and their respective successors and
permitted assigns. No Party may assign this Agreement or any of its rights,
interests or obligations hereunder without the prior written approval of the
other Party; provided, however, that Buyer may assign to an Affiliate, by prior
written notice to Seller as permitted by law, its rights and obligations under
this Agreement, but not its obligation to pay the Purchase Price.
SECTION 10.4. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument. The execution of a
counterpart of the signature page to this Agreement will be deemed the execution
of a counterpart of this Agreement. The delivery of this Agreement may be made
by facsimile, and facsimile signatures shall be treated as original signatures
for all applicable purposes.
-35-
<PAGE> 41
SECTION 10.5. Headings, Terms. The section headings contained in this
Agreement are inserted for convenience only and will not affect in any way the
meaning or interpretation of this Agreement. Terms used with initial capital
letters will have the meanings specified, applicable to both singular and plural
forms, for all purposes of this Agreement. All pronouns (and any variation) will
be deemed to refer to the masculine, feminine or neuter, as the identity of the
Person may require. The singular or plural includes the other, as the context
requires or permits. The word include (and any variation) is used in an
illustrative sense rather than a limiting sense. The word day means a calendar
day.
SECTION 10.6. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if it is sent by
registered or certified mail, return receipt requested, postage prepaid, or by
courier, telecopy or facsimile, and addressed to the intended recipient as set
forth below:
If to Seller or ICG:
c/o ICG Services, Inc.
161 Inverness Drive West
Englewood, Colorado 80112
Attention: H. Don Teague, Esq.
Executive Vice President, Secretary
and General Counsel
Telecopy: (303) 414-8839
If to Buyer:
MindSpring Enterprises, Inc.
1430 W. Peachtree, Suite 400
Atlanta, Georgia 30309
Attention: Mr. Charles Brewer
Chairman and Chief Executive Officer
Telecopy: (404) 892-7616
Notices will be deemed given seven days after mailing if sent by certified mail,
when delivered if sent by courier, and upon receipt of confirmation by person or
machine if sent by telecopy or facsimile transmission. Any party may change the
address to which notices, requests, demands, claims and other communications
hereunder are to be delivered by giving the other parties notice in the manner
herein set forth.
SECTION 10.7. Governing Law. This Agreement will be governed by and
construed in accordance with the domestic laws of the State of Colorado without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Colorado or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Colorado.
-36-
<PAGE> 42
SECTION 10.8. Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same is in writing and signed by Buyer,
Seller and ICG. No waiver by any party of any default, misrepresentation or
breach of warranty or covenant hereunder, whether intentional or not, will be
deemed to extend to any prior or subsequent default, misrepresentation or breach
of warranty or covenant hereunder or affect in any way any rights arising by
virtue of any prior or subsequent such occurrence, and no waiver will be
effective unless set forth in writing and signed by the party against whom such
waiver is asserted.
SECTION 10.9. Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction will not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
SECTION 10.10. Expenses. Except as otherwise provided in this Agreement,
(a) Buyer will bear its own costs and expenses incurred either before or after
the date of this Agreement in connection with this Agreement or the transactions
contemplated by this Agreement, and (b) Seller will bear its own costs and
expenses incurred by Seller either before or after the date of this Agreement in
connection with this Agreement or the transactions contemplated by this
Agreement.
SECTION 10.11. Arbitration. Any disputes arising under or in connection
with this Agreement, including, without limitation, those involving claims for
specific performance or other equitable relief, will be submitted to binding
arbitration under the Commercial Arbitration Rules of the American Arbitration
Association under the authority of federal and state arbitration statutes, and
will not be the subject of litigation in any forum. EACH PARTY, BY SIGNING THIS
AGREEMENT, VOLUNTARILY, KNOWINGLY AND INTELLIGENTLY WAIVES ANY RIGHTS SUCH PARTY
MAY OTHERWISE HAVE TO SEEK REMEDIES IN COURT OR OTHER FORUMS, INCLUDING THE
RIGHT TO JURY TRIAL. The arbitration will be conducted only in Denver, Colorado,
before three arbitrators, one selected by Buyer, one selected by Seller and the
third selected by the two aforementioned arbitrators, or if they cannot agree
within 30 days of their selection, by the American Arbitration Association. The
arbitrators will have full authority to order specific performance and award
damages and other relief available under this Agreement or applicable law, but
shall have no authority to add to, detract from, change or amend the terms of
this Agreement or existing law. All arbitration proceedings, including
settlements and awards, will be confidential. The decision of the arbitrators
will be final and binding, and judgment on the award by the arbitrators may be
entered in any court of competent jurisdiction. THIS SUBMISSION AND AGREEMENT TO
ARBITRATE WILL BE SPECIFICALLY ENFORCEABLE. The arbitrators will have no power
to award punitive or exemplary damages, to ignore or vary the terms of this
Agreement, and will be bound to apply controlling law. The Party who prevails on
entry of the award of judgment will be entitled to his or its costs and
expenses, including reasonable attorney's fees incurred in connection with the
arbitration. A judgment upon the award may be entered in any court having
jurisdiction.
-37-
<PAGE> 43
SECTION 10.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement will be construed as
if drafted jointly by the parties and no presumption or burden of proof will
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The parties intend that each representation,
warranty and covenant contained herein will have independent significance. If
any party breaches any representation, warranty or covenant contained herein in
any respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached will not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
SECTION 10.13. Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
SECTION 10.14. Representations as to Knowledge. Except as otherwise
provided in this Agreement, the representations and warranties contained in
Article III and Article IV will, in each and every case where a statement to the
"knowledge" is required on behalf of any Party to this Agreement, be deemed to
require that such statement be in good faith after reasonable investigation.
[SIGNATURE PAGE FOLLOWS]
-38-
<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
BUYER:
MINDSPRING ENTERPRISES, INC.
By: /s/ Charles M. Brewer
-------------------------------
Name: Charles M. Brewer
-----------------------------
Title: CEO
----------------------------
SELLER:
NETCOM ON-LINE COMMUNICATION
SERVICES, INC.
By: /s/ Don Teague
-------------------------------
Name: Don Teague
-----------------------------
Title: Executive Vice President
----------------------------
ACKNOWLEDGMENT OF ICG SERVICES, INC. FOR THE ASSET PURCHASE AGREEMENT BY AND
BETWEEN MINDSPRING ENTERPRISES, INC. AND NETCOM ON-LINE COMMUNICATION
SERVICES, INC. DATED AS OF JANUARY 5, 1999.
ICG Services, Inc. ("ICG") acknowledges and agrees that it will honor the
Agreement as it applies to ICG and perform the obligations set forth thereunder
as they apply to ICG.
ICG SERVICES, INC.
By: /s/ Don Teague
-------------------------------
Name: Don Teague
-----------------------------
Title: Executive Vice President
----------------------------
- 39 -
<PAGE> 1
EXHIBIT 2.2
CLOSING AGREEMENT
Reference is made to the Asset Purchase Agreement dated as of January 5,
1999 by and between MindSpring Enterprises, Inc., a Delaware corporation
("MindSpring"), and NETCOM On-Line Communication Services, Inc. ("NETCOM"), a
Delaware corporation (the "Purchase Agreement"). Capitalized terms used herein
that have been defined in the Purchase Agreement shall have the same meanings
as in the Purchase Agreement.
In consideration of the mutual promises set forth in this Closing
Agreement and in the Purchase Agreement, the parties agree as follows with
respect to the following matters:
1. NETCOM and MindSpring agree to prorate and allocate, for periods
before and after the Closing, all property taxes, special taxes and assessments
attributable to the calendar year in which the Closing occurs and amounts
payable under equipment leases, outsourcing contracts and other contracts to be
transferred and assumed by MindSpring as of the Closing. Thus, in furtherance
thereof, for purposes of prorating and allocating, as between NETCOM and
MindSpring, all property taxes, ad valorem taxes and special taxes or
assessments attributable to the Assets for periods prior to and after the
Closing that are identified on SCHEDULE A, and other amounts identified on
SCHEDULE A that are payable in connection with obligations to be assumed by
MindSpring as of the Closing (together, the "Expenses") MindSpring will remit
to NETCOM in cash the amount of the net Expenses as set forth on the attached
SCHEDULE A within ten days after the Closing. If the amounts actually paid
with respect to the amounts identified as estimates on SCHEDULE A differ from
the amounts of such estimates, MindSpring or NETCOM, as the case may be, as
appropriate, will promptly pay the difference to the other.
2. For purposes of allocating the monthly subscriber payments actually
received by NETCOM during the month of February 1999 on account of dial-up,
dedicated and Web-hosting services billed by NETCOM in February 1999 prior to
the Closing and to be provided to Subscribers by NETCOM during February 1999
prior to the Closing and by MindSpring during February 1999 after the Closing,
other than amounts received from Subscribers for prepaid services (the
"Subscriber Payments"), NETCOM will remit to MindSpring in cash the amount of
the Subscriber Payments set forth on SCHEDULE A within ten days after the
Closing. Such amount will be determined in accordance with the methodology
described in SCHEDULE B and shall represent that portion of the Subscriber
Payments that is applicable to the period in February following the Closing
Date as determined on a ratable daily basis, but shall not include any amounts
paid to or previously received by NETCOM pursuant to any prepaid contracts.
NETCOM represents and warrants to MindSpring that the amount set forth on
SCHEDULE A as the total Subscriber Payments received during the month of
February 1999 was calculated based on the methodology set forth in SCHEDULE B
and is a reasonable estimate of the Subscriber Payments collected by NETCOM as
of February 15. Within 10 days after the Closing, NETCOM will confirm to
MindSpring, based on the methodology set forth in SCHEDULE B, the amount of
Subscriber Payments received prior to the Closing. If the amount of such
confirmed Subscriber Payments differs from the total amount of Subscriber
Payments set forth on SCHEDULE A, the amount payable by NETCOM to MindSpring
will be adjusted appropriately. The amount payable by NETCOM to MindSpring
under this paragraph 2 shall be reduced by the amount of the Severance Estimate
as set forth in paragraph 6.
<PAGE> 2
3. Attached hereto as SCHEDULE C are the final schedules to the Purchase
Agreement as contemplated by Section 2.1(c) of the Purchase Agreement. These
schedules include the master list of all NETCOM contracts previously provided
to MindSpring and the list of contracts the status of which is to be determined
after the Closing, the final schedule of intellectual property, the final
master employee list (the "Employee Schedule") and the final schedule of the
inventory of tangible personal property.
4. SCHEDULE D sets forth two lists of contracts. The contracts
identified in the "Accept" column of the attached SCHEDULE D as "No" are the
contracts described on Schedule 1.1(iii) to the Purchase Agreement that are (i)
contracts involving bounty payments of $50 or more per Subscriber, (ii)
contracts involving the payment of monthly recurring revenue, or (iii)
contracts involving annual payments, in cash or in kind, in excess of One
Hundred Thousand Dollars ($100,000) per annum, that Buyer elects pursuant to
the Purchase Agreement to exclude from the definition of "Assets." The contracts
identified in the "Accept" column of the attached Schedule D as "TBD" or
otherwise designated in Schedule D as "to be determined" are contracts the
status of which are not yet agreed by MindSpring and NETCOM. MindSpring and
NETCOM will cooperate on a reasonable basis after the Closing to determine,
such determination to be made within 30 days after the Closing, whether such
"to be determined" contracts are to be included in the definition of Assets
under the Asset Purchase Agreement and transferred to MindSpring as of the
Closing.
5. Attached hereto as SCHEDULE E pursuant to Section 2.4(b)(ii) of the
Purchase Agreement is a list of executive officers of NETCOM that will not be
employed by MindSpring after the Closing.
6. NETCOM agrees to pay in connection with the Closing, accrued and
previously unpaid bonuses and vacation pay (including a one-day floating
holiday for non-California employees, in the approximate amount of $31,625 plus
applicable payroll taxes) to the NETCOM employees listed on the Employee
Schedule as employees to be laid off (the "Laid Off Employees") or employed by
MindSpring, provided that MindSpring will reimburse NETCOM, in cash within 10
days after the Closing, all amounts attributable to the one-day floating
holiday for non-California employees included as part of such employees. As an
accommodation to MindSpring, in lieu of MindSpring offering employment in
accordance with Section 2.4(b)(i) of the Purchase Agreement, NETCOM, at
MindSpring's expense, will terminate the employment of the Laid Off Employees
and pay to or on behalf of such Persons wages and salaries for the period after
the Closing and severance pay (including, without duplication, payroll taxes
required to be withheld and/or paid on behalf of the employee and the employer
and other required amounts with respect to such wages and salaries). After the
Closing, NETCOM will have no obligation to or with respect to the Laid Off
Employees (including with respect to or furtherance of such termination) except
as required in writing by MindSpring and at MindSpring's sole expense. If the
total amount payable by NETCOM to MindSpring pursuant to paragraph 2 (as such
amount is determined without regard to the last sentence of such paragraph 2)
is less than One Million Six Hundred Seventy-Four Thousand Dollars ($1,674,000)
(the "Severance Estimate"), MindSpring will pay to NETCOM in cash within 10
days of the Closing the amount of the difference. If the amount actually
payable by NETCOM to the Laid Off Employees pursuant to this Section 6 differs
from the Severance Estimate, NETCOM or MindSpring, as the case may be, as
appropriate, promptly will pay to the other in cash an amount equal to such
difference. MindSpring will indemnify, defend and hold harmless NETCOM from and
against any Adverse Consequences NETCOM may suffer, including those arising
under the WARN Act, arising out of or resulting from the termination of the
employment of the Laid Off Employees regardless of whether
2
<PAGE> 3
such Adverse Consequences are suffered during or after the Survival Period. As
a further accommodation to MindSpring, NETCOM agrees that for a reasonable
period after the Closing as agreed by the parties it will maintain on its
payroll the employees that are employed under H-1 Visas as of the Closing that
are listed on SCHEDULE F (the "Visa Employees"). MindSpring agrees to promptly
reimburse NETCOM for all salary and benefits (including payroll taxes) and
reasonable out-of-pocket costs incurred by NETCOM following the Closing with
respect to the Visa Employees. Upon the payment by NETCOM of the vacation pay
and bonuses as required under this paragraph 6, NETCOM shall have no obligation
to pay to MindSpring the Five Hundred Thousand Dollar ($500,000) payment for
vacation pay under Section 2.4(b)(iii) of the Purchase Agreement or to make any
other reimbursement or payment to MindSpring under Section 2.4(b)(iii) on
account of any vacation pay or bonuses, including the One Million Two Hundred
Thousand Dollar ($1,200,000) reimbursement for bonuses.
7. MindSpring agrees that it will compensate NETCOM under the Network
Services Agreement to be entered into by the Parties as of the Closing in
accordance with the terms thereof for the period in February 1999 following the
Closing, and thus MindSpring will pay to NETCOM the fees payable under Section 3
of the Network Services Agreement in an amount equal to 12/28ths of the fees
that would have been payable under such Section 3 if the Closing had occurred
at 12:01 a.m. Pacific Standard Time on February 1, 1999 and the Network
Services Agreement had come into effect as of such time.
8. This Closing Agreement shall constitute an amendment to the Purchase
Agreement to the extent of the foregoing matters addressed herein. The Purchase
Agreement as so amended by this Closing Agreement shall remain in full force
and effect.
9. This Closing Agreement may be executed in couterparts. Each of such
counterparts shall be deemed to be an original, but all of such counterparts
together shall constitute one and the same agreement. This Closing Agreement
may be delivered by facsimile.
10. MindSpring will cooperate with NETCOM on a reasonable basis to
minimize NETCOM's liability to third parties with respect to the contracts
described on SCHEDULE D that are not included within the definition of
"Assets." In furtherance thereof, in addition to other actions that may be
reasonably requested by NETCOM, upon the receipt by MindSpring from NETCOM of
applicable registration codes and the names of the applicable third party
contracts, MindSpring will turn off or disconnect such registration codes.
MindSpring will assist NETCOM on a reasonable basis in identifying the
applicable registration codes for such contracts.
11. The Assets will not include, and MindSpring will obtain no benefit or
assume any liability thereunder, for the following contracts: (i) Systems Union
Maintenance; (2) ASAP: Support for Lotus Notes; and (3) Qualcomm Eudora License
(in retail boxes). These contracts will constitute part of the Retained Assets.
12. MindSpring and NETCOM acknowledge that as of the date of this Closing
Agreement, consent from the landlord to the assignment of NETCOM's office lease
(the "Lease") with Horizon Center LLC (the "Consent") has not been received.
Pursuant to Section 2.1(d) of the Asset Purchase Agreement, until such time as
the Consent is received NETCOM shall make the benefits of the Lease available
to MindSpring, and MindSpring shall perform all obligations of the tenant under
the Lease (but not including any obligations arising as a result of the failure
to obtain the Consent). All costs incurred by NETCOM in
3
<PAGE> 4
performing its obligations under this Section 12 shall be borne by NETCOM to
the extent that those costs exceed the costs which would have been incurred by
tenant under the Lease had the Consent been received. As of and from the
Closing and until the time the Consent is received, MindSpring will reimburse
NETCOM for the costs it incurs in connection with the Lease to the extent that
such costs do not exceed the costs which would have been incurred by tenant
under the Lease had the Consent been received. NETCOM's obligations under this
Section 12 shall not be deemed to limit NETCOM's other obligations with
respect to the Consent under Section 2.1(d) of the Asset Purchase Agreement.
[Signature Page Follows]
4
<PAGE> 5
We acknowledge our agreement to the above by signing where indicated below.
MINDSPRING ENTERPRISES, INC.
/s/ SAMUEL R. DeSIMONE, JR.
------------------------------------------------------
February 17, 1999 By: Samuel R. DeSimone, Jr.
Title: Executive Vice President and General Counsel
NETCOM ON-LINE COMMUNICATION SERVICES,
INC.
/s/ H. DON TEAGUE
------------------------------------------------------
February 17, 1999 By: H. Don Teague
Title: Executive Vice President
<PAGE> 1
Exhibit 10.1
================================================================================
CREDIT AGREEMENT
dated as of February 17, 1999
by and among
MINDSPRING ENTERPRISES, INC.,
as Borrower,
the Lenders referred to herein,
FIRST UNION CAPITAL MARKETS CORP.,
as Arranger
and
FIRST UNION NATIONAL BANK,
as Administrative Agent
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-----------
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-----------
SECTION 1.2 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
-------
SECTION 1.3 Other Definitions and Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
--------------------------------
ARTICLE II REVOLVING CREDIT FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
-------------------------
SECTION 2.1 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
-----
SECTION 2.2 Procedure for Advances of Revolving Credit and Swingline Loans . . . . . . . . . . . . 13
--------------------------------------------------------------
SECTION 2.3 Repayment of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
------------------
SECTION 2.4 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
-----
SECTION 2.5 Permanent Reduction of the Aggregate Commitment . . . . . . . . . . . . . . . . . . . 15
-----------------------------------------------
SECTION 2.6 Termination of Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
------------------------------
SECTION 2.7 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
---------------
SECTION 2.8 Increase in Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
-----------------------
ARTICLE III LETTER OF CREDIT FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
-------------------------
SECTION 3.1 L/C Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
--------------
SECTION 3.2 Procedure for Issuance of Letters of Credit . . . . . . . . . . . . . . . . . . . . . 17
-------------------------------------------
SECTION 3.3 Commissions and Other Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
-----------------------------
SECTION 3.4 L/C Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
------------------
SECTION 3.5 Reimbursement Obligation of the Borrower . . . . . . . . . . . . . . . . . . . . . . . 19
----------------------------------------
SECTION 3.6 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
--------------------
SECTION 3.7 Effect of Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
---------------------
ARTICLE IV GENERAL LOAN PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
-----------------------
SECTION 4.1 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
--------
SECTION 4.2 Notice and Manner of Conversion or Continuation of Loans . . . . . . . . . . . . . . . 22
--------------------------------------------------------
SECTION 4.3 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
----
SECTION 4.4 Manner of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
-----------------
SECTION 4.5 Crediting of Payments and Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 24
----------------------------------
SECTION 4.6 Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
-----------
SECTION 4.7 Nature of Obligations of Lenders Regarding Extensions of Credit; Assumption
--------------------------------------------------------------------------
by the Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
-----------------------------
SECTION 4.8 Changed Circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
---------------------
SECTION 4.9 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
---------
SECTION 4.10 Capital Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
--------------------
SECTION 4.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
-----
SECTION 4.12 Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
--------
SECTION 4.13 Change in Lending Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
------------------------
ARTICLE V CLOSING; CONDITIONS OF CLOSING AND BORROWING . . . . . . . . . . . . . . . . . . . . . . . . . . 29
--------------------------------------------
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 5.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
-------
SECTION 5.2 Conditions to Closing and Initial Extensions of Credit . . . . . . . . . . . . . . . . 30
------------------------------------------------------
SECTION 5.3 Conditions to All Extensions of Credit . . . . . . . . . . . . . . . . . . . . . . . . 34
--------------------------------------
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE BORROWER . . . . . . . . . . . . . . . . . . . . . . . . 35
----------------------------------------------
SECTION 6.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
------------------------------
SECTION 6.2 Survival of Representations and Warranties, Etc . . . . . . . . . . . . . . . . . . . 42
-----------------------------------------------
ARTICLE VII FINANCIAL INFORMATION AND NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
---------------------------------
SECTION 7.1 Financial Statements and Projections . . . . . . . . . . . . . . . . . . . . . . . . . 42
------------------------------------
SECTION 7.2 Officer's Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
--------------------------------
SECTION 7.3 Accountants' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
------------------------
SECTION 7.4 Other Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
-------------
SECTION 7.5 Notice of Litigation and Other Matters . . . . . . . . . . . . . . . . . . . . . . . . 44
--------------------------------------
SECTION 7.6 Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
-----------------------
ARTICLE VIII AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
---------------------
SECTION 8.1 Preservation of Corporate Existence and Related Matters . . . . . . . . . . . . . . . 45
-------------------------------------------------------
SECTION 8.2 Maintenance of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
-----------------------
SECTION 8.3 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
---------
SECTION 8.4 Accounting Methods and Financial Records . . . . . . . . . . . . . . . . . . . . . . . 45
----------------------------------------
SECTION 8.5 Payment and Performance of Obligations . . . . . . . . . . . . . . . . . . . . . . . . 46
--------------------------------------
SECTION 8.6 Compliance With Laws and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . 46
----------------------------------
SECTION 8.7 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
------------------
SECTION 8.8 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
---------------------
SECTION 8.9 Compliance With Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 47
----------------------------------
SECTION 8.10 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
-------------------
SECTION 8.11 Visits and Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
----------------------
SECTION 8.12 Guarantors and Additional Collateral . . . . . . . . . . . . . . . . . . . . . . . . . 47
------------------------------------
SECTION 8.13 Year 2000 Compatibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
-----------------------
SECTION 8.14 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
------------------
ARTICLE IX FINANCIAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
-------------------
SECTION 9.1 Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
--------------
SECTION 9.2 Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
-----------------------
SECTION 9.3 Minimum Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
-----------------
ARTICLE X NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
------------------
SECTION 10.1 Limitations on Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
-------------------
SECTION 10.2 Limitations on Guaranty Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 50
-----------------------------------
SECTION 10.3 Limitations on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
--------------------
SECTION 10.4 Limitations on Loans, Advances, Investments and Acquisitions . . . . . . . . . . . . . 51
------------------------------------------------------------
SECTION 10.5 Limitations on Mergers and Liquidation . . . . . . . . . . . . . . . . . . . . . . . . 53
--------------------------------------
SECTION 10.6 Limitations on Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
-----------------------------
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 10.7 Limitations on Dividends and Distributions . . . . . . . . . . . . . . . . . . . . . . 54
------------------------------------------
SECTION 10.8 Limitations on Exchange and Issuance of Capital Stock . . . . . . . . . . . . . . . . . 54
-----------------------------------------------------
SECTION 10.9 Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
----------------------------
SECTION 10.10 Certain Accounting Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
--------------------------
SECTION 10.11 Amendments; Payments and Prepayments of Subordinated Debt . . . . . . . . . . . . . . . 54
---------------------------------------------------------
SECTION 10.12 Restrictive Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
----------------------
ARTICLE XI DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
--------------------
SECTION 11.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
-----------------
SECTION 11.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
--------
SECTION 11.3 Rights and Remedies Cumulative; Non-Waiver; etc . . . . . . . . . . . . . . . . . . . . 58
-----------------------------------------------
ARTICLE XII THE ADMINISTRATIVE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
------------------------
SECTION 12.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
-----------
SECTION 12.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
--------------------
SECTION 12.3 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
----------------------
SECTION 12.4 Reliance by the Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . 59
------------------------------------
SECTION 12.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
-----------------
SECTION 12.6 Non-Reliance on the Administrative Agent and Other Lenders . . . . . . . . . . . . . . 60
----------------------------------------------------------
SECTION 12.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
---------------
SECTION 12.8 The Administrative Agent in Its Individual Capacity . . . . . . . . . . . . . . . . . . 61
---------------------------------------------------
SECTION 12.9 Resignation of the Administrative Agent; Successor Administrative Agent . . . . . . . . 61
-----------------------------------------------------------------------
SECTION 12.10 The Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
------------------------
ARTICLE XIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
-------------
SECTION 13.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
-------
SECTION 13.2 Expenses; Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
-------------------
SECTION 13.3 Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
-------
SECTION 13.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
-------------
SECTION 13.5 Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
-----------------------
SECTION 13.6 Binding Arbitration; Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . 64
-----------------------------------------
SECTION 13.7 Reversal of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
--------------------
SECTION 13.8 Injunctive Relief; Punitive Damages . . . . . . . . . . . . . . . . . . . . . . . . . . 66
-----------------------------------
SECTION 13.9 Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
------------------
SECTION 13.10 Successors and Assigns; Participations . . . . . . . . . . . . . . . . . . . . . . . . 67
--------------------------------------
SECTION 13.11 Amendments, Waivers and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
--------------------------------
SECTION 13.12 Performance of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
---------------------
SECTION 13.13 All Powers Coupled with Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
--------------------------------
SECTION 13.14 Survival of Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
-----------------------
SECTION 13.15 Titles and Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
-------------------
SECTION 13.16 Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
--------------------------
SECTION 13.17 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
------------
SECTION 13.18 Term of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
-----------------
SECTION 13.19 Inconsistencies with Other Documents; Independent Effect of Covenants . . . . . . . . . 71
---------------------------------------------------------------------
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
EXHIBITS
- --------
<S> <C> <C>
Exhibit A - Form of Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Notice of Account Designation
Exhibit D - Form of Notice of Prepayment
Exhibit E - Form of Notice of Conversion/Continuation
Exhibit F - Form of Officer's Compliance Certificate
Exhibit G - Form of Assignment and Acceptance
Exhibit H - Form of Guaranty and Collateral Agreement
Exhibit I-1 - Form of Commitment Increase Supplement
Exhibit I-2 - Form of New Lender Supplement
</TABLE>
<TABLE>
<CAPTION>
SCHEDULES
- ---------
<S> <C> <C>
Schedule 1.1 - Lenders and Commitments
Schedule 6.1(a) - Jurisdictions of Organization and Qualification
Schedule 6.1(b) - Subsidiaries and Capitalization
Schedule 6.1(i) - ERISA Plans
Schedule 6.1(l) - Material Contracts
Schedule 6.1(m) - Labor and Collective Bargaining Agreements
Schedule 6.1(t) - Debt and Guaranty Obligations
Schedule 6.1(u) - Litigation
Schedule 6.1(w) - Communications Licenses
Schedule 8.12(c) - Leased Sites
Schedule 10.3 - Existing Liens
Schedule 10.4 - Existing Loans, Advances and Investments
</TABLE>
iv
<PAGE> 6
CREDIT AGREEMENT, dated as of the 17th day of February, 1999, by and among
MINDSPRING ENTERPRISES, INC., a Delaware corporation (the "Borrower"), the
Lenders who are or may become a party to this Agreement, FIRST UNION CAPITAL
MARKETS CORP., as Arranger, and FIRST UNION NATIONAL BANK, as Administrative
Agent for the Lenders.
STATEMENT OF PURPOSE
The Borrower has requested, and the Lenders have agreed, to extend
certain credit facilities to the Borrower on the terms and conditions of this
Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, such
parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. The following terms when used
in this Agreement shall have the meanings assigned to them below:
"Administrative Agent" means First Union in its capacity as
Administrative Agent hereunder, and any successor thereto appointed pursuant to
Section 12.9.
"Administrative Agent's Office" means the office of the Administrative
Agent specified in or determined in accordance with the provisions of Section
13.1(c).
"Affiliate" means, with respect to any Person, any other Person (other
than a Subsidiary) which directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such first Person or any of its Subsidiaries. The term "control" means (a) the
power to vote five percent (5%) or more of the securities or other equity
interests of a Person having ordinary voting power, or (b) the possession,
directly or indirectly, of any other power to direct or cause the direction of
the management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise.
"Aggregate Commitment" means the aggregate amount of the Lenders'
Commitments hereunder, as such amount may be reduced or modified at any time or
from time to time pursuant to Section 8.12(d) or the other applicable terms
hereof. On the Closing Date, the Aggregate Commitment shall be One Hundred
Million Dollars ($100,000,000).
"Agreement" means this Credit Agreement, as amended, restated or
otherwise modified.
"Applicable Law" means all applicable provisions of constitutions,
laws, statutes, ordinances, rules, treaties, regulations, permits, licenses,
approvals, interpretations and orders of
<PAGE> 7
courts or Governmental Authorities and all orders and decrees of all courts and
arbitrators including Communications Law.
"Applicable Margin" shall have the meaning assigned thereto in Section
4.1(c).
"Application" means an application, in the form specified by the Issuing
Lender from time to time, requesting the Issuing Lender to issue a Letter of
Credit.
"Arranger" means First Union Capital Markets Corp., as arranger
hereunder.
"Asset Purchase Agreement" means the Asset Purchase Agreement between
the Borrower, as buyer, and Netcom, as seller dated January 5, 1999, and as in
effect on the Closing Date and any subsequent material modifications thereto
which have been approved by the Administrative Agent in its reasonable
discretion.
"Assignment and Acceptance" shall have the meaning assigned thereto in
Section 13.10.
"Available Commitment" shall equal the lesser of (a) $85,000,000 or
(b) the Aggregate Commitment, until the earlier to occur of (i) the date on
which the Borrower complies with the requirements of Section 8.12(c) or (ii)
the date which is the ninety-first (91st) day after the Closing Date, at which
time the Available Commitment shall equal the Aggregate Commitment.
"Base Rate" means, at any time, the higher of (a) the Prime Rate and
(b) the sum of (i) the Federal Funds Rate plus (ii) 1/2 of 1%; each change in
the Base Rate shall take effect simultaneously with the corresponding change or
changes in the Prime Rate or the Federal Funds Rate.
"Base Rate Loan" means any Loan bearing interest at a rate based upon
the Base Rate as provided in Section 4.1(a).
"Borrower" means MindSpring Enterprises, Inc., a Delaware corporation,
in its capacity as borrower hereunder.
"Business Day" means (a) for all purposes other than as set forth in
clause (b) below, any day other than a Saturday, Sunday or legal holiday on
which banks in Charlotte, North Carolina and New York, New York, are open for
the conduct of their commercial banking business, and (b) with respect to all
notices and determinations in connection with, and payments of principal and
interest on, any LIBOR Rate Loan, any day that is a Business Day described in
clause (a) and that is also a day for trading by and between banks in Dollar
deposits in the London interbank market.
"Capital Asset" means, with respect to the Borrower and its Subsidiaries,
any asset that should, in accordance with GAAP, be classified and accounted for
as a capital asset on a Consolidated balance sheet of the Borrower and its
Subsidiaries.
2
<PAGE> 8
"Capital Lease" means, with respect to the Borrower and its Subsidiaries,
any lease of any property that should, in accordance with GAAP, be classified
and accounted for as a capital lease on a Consolidated balance sheet of the
Borrower and its Subsidiaries.
"Change in Control" shall have the meaning assigned thereto in Section
11.1(i).
"Closing Date" means the date of this Agreement or such later Business
Day upon which each condition described in Section 5.2 shall be satisfied or
waived in all respects in a manner acceptable to the Administrative Agent, in
its sole discretion or as provided therein.
"Code" means the Internal Revenue Code of 1986, and the rules and
regulations thereunder, each as amended, supplemented or otherwise modified.
"Collateral" shall have the meaning assigned thereto in the Guaranty and
Collateral Agreement.
"Commitment" means, as to any Lender, the obligation of such Lender to
make Loans to and issue or participate in Letters of Credit issued for the
account of the Borrower hereunder in an aggregate principal or face amount at
any time outstanding not to exceed the amount set forth opposite such Lender's
name on Schedule 1.1 hereto, as the same may be reduced or modified at any time
or from time to time pursuant to the terms hereof.
"Commitment Percentage" means, as to any Lender at any time, the ratio
of (a) the amount of the Commitment of such Lender to (b) the Aggregate
Commitment of all of the Lenders.
"Communications Law" means the Communications Act of 1934, as amended,
and all rules and regulations thereunder, or any successor statute or statutes
thereto (including, without limitation, the Telecommunications Act of 1996) and
all rules and regulations issued by the FCC thereunder, as amended or
supplemented from time to time.
"Communications License" means any local telecommunications, long
distance telecommunications, or other license, permit, consent, certificate of
compliance, franchise, approval, waiver or authorization granted or issued by
the FCC or other applicable federal Governmental Authority or any state,
provincial or other regulatory agency pertaining to the provision of internet
service, including, without limitation, any of the foregoing authorizing or
permitting the acquisition, construction or operation of any network
facilities.
"Consolidated" means, when used with reference to financial statements
or financial statement items of the Borrower and its Subsidiaries, such
statements or items on a consolidated basis in accordance with applicable
principles of consolidation under GAAP.
"Credit Facility" means the collective reference to the Revolving
Credit Facility and the L/C Facility.
3
<PAGE> 9
"Debt" means, with respect to the Borrower and its Subsidiaries at any
date and without duplication, the sum of the following calculated in accordance
with GAAP: (a) all liabilities, obligations and indebtedness for borrowed
money including but not limited to obligations evidenced by bonds including any
accrued interest arising as a result of interest deferrals, debentures, notes
or other similar instruments of any such Person, (b) all obligations to pay the
deferred purchase price of property or services of any such Person, except
trade payables arising in the ordinary course of business not more than ninety
(90) days past due (excluding such trade payables which are being contested in
good faith and for which adequate reserves are maintained to the extent
required by GAAP), (c) all obligations of any such Person as lessee under
Capital Leases, (d) all Debt of any other Person secured by a Lien on any asset
of any such Person, (e) all Guaranty Obligations of any such Person, (f) all
obligations, contingent or otherwise, of any such Person relative to the face
amount of letters of credit, whether or not drawn, including without limitation
any Reimbursement Obligation, and banker's acceptances issued for the account
of any such Person, (g) all obligations of any such Person to redeem,
repurchase, exchange, defease or otherwise make payments in respect of capital
stock or other securities of such Person and (h) all obligations incurred by
any such Person pursuant to Hedging Agreements.
"Default" means any of the events specified in Section 11.1 which with
the passage of time, the giving of notice or any other condition, would
constitute an Event of Default.
"Dollars" or "$" means, unless otherwise qualified, dollars in lawful
currency of the United States.
"EBITDA" means, for any period, the sum of the following determined on
a consolidated basis, without duplication, for the Borrower and its
Subsidiaries in accordance with GAAP: (a) net income for such period plus (b)
the sum of the following to the extent deducted in determining net income: (i)
income and franchise taxes, (ii) interest expense, (iii) amortization,
depreciation and other non-cash charges less (c) interest income and any
extraordinary gains. EBITDA shall be adjusted in a manner reasonably
satisfactory to the Administrative Agent to include on a pro forma basis as of
the first day of any calculation period any acquisition consummated during such
period in accordance with this Agreement and exclude on a pro forma basis as of
the first day of any calculation any Subsidiary or assets sold during such
period in accordance with this Agreement.
"Eligible Assignee" means, with respect to any assignment of the rights,
interest and obligations of a Lender hereunder, a Person that is at the time of
such assignment (a) a commercial bank organized under the laws of the United
States or any state thereof, having combined capital and surplus in excess of
$500,000,000, (b) a commercial bank organized under the laws of any other
country that is a member of the Organization of Economic Cooperation and
Development, or a political subdivision of any such country, having combined
capital and surplus in excess of $500,000,000, (c) a finance company, insurance
company or other financial institution which in the ordinary course of business
extends credit of the type extended hereunder and that has total assets in
excess of $1,000,000,000, (d) already a Lender hereunder (whether as an
original party to this Agreement or as the assignee of another Lender), (e) the
successor (whether by transfer of assets, merger or otherwise) to all or
substantially all of the commercial
4
<PAGE> 10
lending business of the assigning Lender, or (f) any other Person that has been
approved in writing as an Eligible Assignee by the Borrower and the
Administrative Agent.
"Employee Benefit Plan" means any employee benefit plan within the
meaning of Section 3(3) of ERISA which (a) is maintained for employees of the
Borrower or any ERISA Affiliate or (b) has at any time within the preceding six
years been maintained for the employees of the Borrower or any current or
former ERISA Affiliate.
"Environmental Laws" means any and all federal, state and local laws,
statutes, ordinances, rules, regulations, permits, licenses, approvals,
interpretations and orders of courts or Governmental Authorities, relating to
the protection of human health or the environment, including, but not limited
to, requirements pertaining to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, handling, reporting, licensing,
permitting, investigation or remediation of Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
the rules and regulations thereunder, each as amended, supplemented or
otherwise modified.
"ERISA Affiliate" means any Person who together with the Borrower is
treated as a single employer within the meaning of Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b) of ERISA.
"Eurodollar Reserve Percentage" means, for any day, the percentage
(expressed as a decimal and rounded upwards, if necessary, to the next higher
1/100th of 1%) which is in effect for such day as prescribed by the Federal
Reserve Board (or any successor) for determining the maximum reserve
requirement (including without limitation any basic, supplemental or emergency
reserves) in respect of eurocurrency liabilities or any similar category of
liabilities for a member bank of the Federal Reserve System in New York City.
"Event of Default" means any of the events specified in Section 11.1,
provided that any requirement for passage of time, giving of notice, or any
other condition, has been satisfied.
"Extensions of Credit" means, as to any Lender at any time, an amount
equal to the sum of (a) the aggregate principal amount of all Loans made by
such Lender then outstanding and (b) such Lender's Commitment Percentage of the
L/C Obligations then outstanding.
"FCC" means the Federal Communications Commission or any successor
Governmental Authority.
"FDIC" means the Federal Deposit Insurance Corporation, or any
successor thereto.
"Federal Funds Rate" means, the rate per annum (rounded upwards, if
necessary, to the next higher 1/100th of 1%) representing the daily effective
federal funds rate as quoted by the Administrative Agent and confirmed in
Federal Reserve Board Statistical Release H.15 (519) or any successor or
substitute publication selected by the Administrative Agent. If, for any
reason, such rate is not available, then "Federal Funds Rate" shall mean a daily
rate which is determined,
5
<PAGE> 11
in the opinion of the Administrative Agent, to be the rate at which federal
funds are being offered for sale in the national federal funds market at 9:00
a.m. (Charlotte time). Rates for weekends or holidays shall be the same as the
rate for the most immediate preceding Business Day.
"First Union" means First Union National Bank, a national banking
association, and its successors.
"Fiscal Year" means the fiscal year of the Borrower and its Subsidiaries
ending on December 31.
"GAAP" means generally accepted accounting principles, as recognized
by the American Institute of Certified Public Accountants and the Financial
Accounting Standards Board, consistently applied and maintained on a consistent
basis for the Borrower and its Subsidiaries throughout the period indicated and
consistent with the prior financial practice of the Borrower and its
Subsidiaries.
"Governmental Approvals" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities.
"Governmental Authority" means any nation, province, state or political
subdivision thereof, and any government or any Person exercising executive,
legislative, regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Guarantors" means the Subsidiaries of the Borrower who have executed
or joined the Guaranty and Collateral Agreement; "Guarantor" means any of such
Guarantors.
"Guaranty and Collateral Agreement" means that certain Guaranty and
Collateral Agreement of even date executed by the Borrower substantially in the
form of Exhibit H hereto, as amended, restated or otherwise modified, including
all joinders thereto executed by any Guarantors after the Closing Date.
"Guaranty Obligation" means, with respect to the Borrower and its
Subsidiaries, without duplication, any obligation, contingent or otherwise, of
any such Person pursuant to which such Person has directly or indirectly
guaranteed any Debt or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of any such Person (a) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Debt or other obligation
(whether arising by virtue of partnership arrangements, by agreement to keep
well, to purchase assets, goods, securities or services, to take-or-pay, or to
maintain financial statement condition or otherwise) or (b) entered into for
the purpose of assuring in any other manner the obligee of such Debt or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided, that the term Guaranty
Obligation shall not include endorsements for collection or deposit in the
ordinary course of business.
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"Hazardous Materials" means any substances or materials (a) which are
or become defined as hazardous wastes, hazardous substances, pollutants,
contaminants, chemical substances or mixtures or toxic substances under any
Applicable Law, (b) which are toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise harmful to human
health or the environment and are or become regulated by any Governmental
Authority, (c) the presence of which require investigation or remediation under
any Applicable Law, (d) the discharge or emission or release of which requires
a permit or license under any Applicable Law or other Governmental Approval,
(e) which are deemed to constitute a nuisance, a trespass or pose a health or
safety hazard to persons or neighboring properties, (f) which consist of
underground or aboveground storage tanks, whether empty, filled or partially
filled with any substance, or (g) which contain, without limitation, asbestos,
polychlorinated biphenyls, urea formaldehyde foam insulation, petroleum
hydrocarbons, petroleum derived substances or waste, crude oil, nuclear fuel,
natural gas or synthetic gas.
"Hedging Agreement" means any agreement with respect to an interest
rate swap, collar, cap, floor or a forward rate agreement or other agreement
regarding the hedging of interest rate risk exposure executed in connection
with hedging the interest rate exposure of the Borrower, and any confirming
letter executed pursuant to such hedging agreement, all as amended, restated or
otherwise modified.
"Intercompany Debt" means any Debt among (a) the Borrower and its
Subsidiaries or (b) any Subsidiaries of the Borrower.
"Interest Expense" means, for any period, total interest expense
(including, without limitation, interest expense attributable to Capital
Leases) determined on a consolidated basis, without duplication, for the
Borrower and its Subsidiaries in accordance with GAAP.
"Interest Period" shall have the meaning assigned thereto in Section
4.1(b).
"Issuing Lender" means any Lender hereunder, in its capacity as issuer
of any Letter of Credit, or any successor thereto.
"L/C Commitment" means the lesser of (a) Ten Million Dollars
($10,000,000) and (b) the Aggregate Commitment.
"L/C Facility" means the letter of credit facility established pursuant
to Article III hereof.
"L/C Obligations" means at any time, an amount equal to the sum of (a)
the aggregate undrawn and unexpired amount of the then outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit which
have not then been reimbursed pursuant to Section 3.5.
"L/C Participants" means the collective reference to all the Lenders
other than the Issuing Lender.
"Leased Sites" shall have the meaning assigned thereto in Section
8.12(c).
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"Lender" means each Person executing this Agreement as a Lender set
forth on the signature pages hereto and each Person that hereafter becomes a
party to this Agreement as a Lender pursuant to Section 13.10(b).
"Lending Office" means, with respect to any Lender, the office of such
Lender maintaining such Lender's Commitment Percentage of the Loans.
"Letters of Credit" shall have the meaning assigned thereto in Section
3.1.
"Leverage Ratio" shall have the meaning assigned thereto in Section
9.1.
"LIBOR" means the rate of interest per annum determined on the basis
of the rate for deposits in Dollars in minimum amounts of at least $5,000,000
for a period equal to the applicable Interest Period which appears on the
Telerate Page 3750 at approximately 11:00 a.m. (London time) two (2) Business
Days prior to the first day of the applicable Interest Period. If, for any
reason, such rate does not appear on Telerate Page 3750, then "LIBOR" shall be
determined by the Administrative Agent to be the arithmetic average of the rate
per annum at which deposits in Dollars would be offered by first class banks in
the London interbank market to the Administrative Agent approximately 11:00
a.m. (London time) two (2) Business Days prior to the first day of the
applicable Interest Period for a period equal to such Interest Period and in an
amount substantially equal to the amount of the applicable Loan.
"LIBOR Rate" means a rate per annum (rounded upwards, if necessary, to
the next higher 1/100th of 1%) determined by the Administrative Agent pursuant
to the following formula:
LIBOR Rate = LIBOR
------------------------------
1.00-Eurodollar Reserve Percentage
"LIBOR Rate Loan" means any Loan bearing interest at a rate based upon
the LIBOR Rate as provided in Section 4.1(a).
"Lien" means, with respect to any asset, any mortgage, lien pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, a Person shall be deemed to own subject to
a Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, Capital Lease or other
title retention agreement relating to such asset.
"Loan Documents" means, collectively, this Agreement, the Notes, the
Applications, any Hedging Agreement with any Lender (which such Hedging
Agreement is permitted or required hereunder), the Guaranty and Collateral
Agreement and each other document, instrument, certificate and agreement
executed and delivered by the Borrower or its Subsidiaries in connection with
this Agreement or otherwise referred to herein or contemplated hereby, all as
may be amended, restated or otherwise modified.
"Loan Parties" means the collective reference to the Borrower and the
Guarantors.
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<PAGE> 14
"Loans" means any revolving loan made to the Borrower pursuant to Section
2.1, and all such revolving loans collectively as the context requires.
"Material Adverse Effect" means, with respect to the Borrower and its
Subsidiaries, taken as a whole, a material adverse effect on the properties,
business, prospects, operations or condition (financial or otherwise) of such
Persons or the ability of such Persons to perform their respective obligations
under the Loan Documents or Material Contracts, in each case to which they are
a party.
"Material Contract" means (a) any contract or other agreement, written
or oral, of the Borrower or any of its Subsidiaries involving monetary
liability of or to any such Person in an amount in excess of $1,000,000 per
annum, or (b) any other contract or agreement, written or oral, of the Borrower
or any of its Subsidiaries the failure to comply with which could reasonably be
expected to have a Material Adverse Effect.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making, or
is accruing an obligation to make, contributions within the preceding six
years.
"Net Cash Proceeds" means, as applicable, (a) with respect to any sale
or other disposition of assets, the gross cash proceeds received by the
Borrower or any of its Subsidiaries from such sale less the sum of (i) all
income taxes and other taxes assessed by a Governmental Authority as a result
of such sale and any other fees and expenses incurred in connection therewith
and (ii) the principal amount of, premium, if any, and interest on any Debt
secured by a Lien on the asset (or a portion thereof) sold, which Debt is
required to be repaid in connection with such sale, (b) with respect to any
offering of capital stock or issuance of Debt, the gross cash proceeds received
by the Borrower or any of its Subsidiaries therefrom less all legal,
underwriting and other fees and expenses incurred in connection therewith and
(c) with respect to any payment under an insurance policy or in connection with
a condemnation proceeding, the amount of cash proceeds received by the Borrower
or its Subsidiaries from an insurance company or Governmental Authority, as
applicable, net of all expenses of collection.
"Netcom" means NETCOM On-Line Communications Services, Inc., a
Delaware corporation.
"Netcom Acquisition" means the acquisition by the Borrower of certain
assets of Netcom in accordance with the Asset Purchase Agreement.
"Net Worth" means, at any date of determination, the total shareholders'
equity (including capital stock, additional paid-in capital and retained
earnings after deducting the treasury stock) of the Borrower and its
Subsidiaries as set forth on the Consolidated balance sheet thereof, in each
case, as determined and prepared in accordance with GAAP.
"Notes" means the collective reference to the Notes made by the Borrower
payable to the order of each Lender, substantially in the form of Exhibit A
hereto, evidencing the Revolving
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<PAGE> 15
Credit Facility, and any amendments and modifications thereto, any substitutes
therefor, and any replacements, restatements, renewals or extension thereof, in
whole or in part; "Note" means any of such Notes.
"Notice of Account Designation" shall have the meaning assigned thereto
in Section 2.2(b).
"Notice of Borrowing" shall have the meaning assigned thereto in Section
2.2(a).
"Notice of Conversion/Continuation" shall have the meaning assigned
thereto in Section 4.2.
"Notice of Prepayment" shall have the meaning assigned thereto in Section
2.3(c).
"Obligations" means, in each case, whether now in existence or hereafter
arising: (a) the principal of and interest on (including interest accruing
after the filing of any bankruptcy or similar petition) the Loans, (b) the L/C
Obligations, (c) all payment and other obligations owing by the Borrower to any
Lender or the Administrative Agent under any Hedging Agreement with any Lender
(which Hedging Agreement is permitted or required hereunder), and (d) all other
fees and commissions (including attorney's fees), charges, indebtedness, loans,
liabilities, financial accommodations, obligations, covenants and duties owing
by the Borrower to the Lenders or the Administrative Agent, of every kind,
nature and description, direct or indirect, absolute or contingent, due or to
become due, contractual or tortious, liquidated or unliquidated, and whether or
not evidenced by any note, in each case under or in respect of this Agreement,
any Note, any Letter of Credit or any of the other Loan Documents.
"Officer's Compliance Certificate" shall have the meaning assigned
thereto in Section 7.2.
"Other Taxes" shall have the meaning assigned thereto in Section 4.11(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
agency.
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or
Section 412 of the Code and which (a) is maintained for employees of the
Borrower or any ERISA Affiliates or (b) has at any time within the preceding
six years been maintained for the employees of the Borrower or any of its
current or former ERISA Affiliates.
"Permitted Acquisition" shall have the meaning assigned thereto in
Section 10.4(c).
"Person" means an individual, corporation, limited liability company,
partnership, association, trust, business trust, joint venture, joint stock
company, pool, syndicate, sole proprietorship, unincorporated organization,
Governmental Authority or any other form of entity or group thereof.
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"Prime Rate" means, at any time, the rate of interest per annum publicly
announced from time to time by First Union as its prime rate. Each change in
the Prime Rate shall be effective as of the opening of business on the day such
change in the Prime Rate occurs. The parties hereto acknowledge that the rate
announced publicly by First Union as its Prime Rate is an index or base rate
and shall not necessarily be its lowest or best rate charged to its customers
or other banks.
"Register" shall have the meaning assigned thereto in Section 13.10(d).
"Reimbursement Obligation" means the obligation of the Borrower to
reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn under
Letters of Credit.
"Required Lenders" means, at any date, any combination of holders of at
least fifty-one percent (51%) of the aggregate unpaid principal amount of the
Notes, or if no amounts are outstanding under the Notes, any combination of
Lenders whose Commitment Percentages aggregate at least fifty-one percent
(51%).
"Responsible Officer" means any of the following: the chief executive
officer or chief financial officer of the Borrower or any other officer of the
Borrower reasonably acceptable to the Administrative Agent.
"Revolving Credit Facility" means the revolving credit facility
established pursuant to Article II hereof.
"Security Documents" means the collective reference to the Guaranty and
Collateral Agreement and each other agreement or writing pursuant to which the
Borrower or any Subsidiary thereof purports to pledge or grant a security
interest in any property or assets securing the Obligations or any such Person
purports to guaranty the payment and/or performance of the Obligations.
"Solvent" means, as to the Borrower and its Subsidiaries, taken as a
whole, on a particular date, that such Persons (a) have capital sufficient to
carry on their business and transactions and all business and transactions in
which they are about to engage and are able to pay their debts as they mature,
(b) own property having a value, both at fair valuation and at present fair
saleable value, greater than the amount required to pay their probable
liabilities (including contingencies), and (c) do not believe that they will
incur debts or liabilities beyond their ability to pay such debts or
liabilities as they mature.
"Subordinated Debt" means the collective reference to Debt on Schedule
6.1(t) hereof designated as Subordinated Debt and any other Debt of the
Borrower or any Subsidiary contractually subordinated in right and time of
payment to the Obligations on terms and conditions (including, without
limitation, amount, interest rate, amortization and maturity) satisfactory to
the Required Lenders.
"Subsidiary" means as to any Person, any corporation, partnership,
limited liability company or other entity of which more than fifty percent
(50%) of the outstanding capital stock
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<PAGE> 17
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other managers of such corporation, partnership,
limited liability company or other entity is at the time, directly or
indirectly, owned by or the management is otherwise controlled by such Person
(irrespective of whether, at the time, capital stock or other ownership
interests of any other class or classes of such corporation, partnership,
limited liability company or other entity shall have or might have voting power
by reason of the happening of any contingency). Unless otherwise qualified
references to "Subsidiary" or "Subsidiaries" herein shall refer to those of the
Borrower.
"Taxes" shall have the meaning assigned thereto in Section 4.11(a).
"Termination Date" means the earliest of the dates referred to in Section
2.6.
"Termination Event" means: (a) a "Reportable Event" described in Section
4043 of ERISA, or (b) the withdrawal of the Borrower or any ERISA Affiliate
from a Pension Plan during a plan year in which it was a "substantial employer"
as defined in Section 4001(a)(2) of ERISA, or (c) the termination of a Pension
Plan, the filing of a notice of intent to terminate a Pension Plan or the
treatment of a Pension Plan amendment as a termination under Section 4041 of
ERISA, or (d) the institution of proceedings to terminate, or the appointment
of a trustee with respect to, any Pension Plan by the PBGC, or (e) any other
event or condition which would constitute grounds under Section 4042(a) of
ERISA for the termination of, or the appointment of a trustee to administer,
any Pension Plan, or (f) the partial or complete withdrawal of the Borrower or
any ERISA Affiliate from a Multiemployer Plan, or (g) the imposition of a Lien
pursuant to Section 412 of the Code or Section 302 of ERISA, or (h) any event
or condition which results in the reorganization or insolvency of a
Multiemployer Plan under Sections 4241 or 4245 of ERISA, or (i) any event or
condition which results in the termination of a Multiemployer Plan under
Section 4041A of ERISA or the institution by PBGC of proceedings to terminate a
Multiemployer Plan under Section 4042 of ERISA.
"Total Debt" means, as of any date of determination with respect to the
Borrower and its Subsidiaries on a Consolidated basis without duplication, the
sum of all Debt of the Borrower and its Subsidiaries.
"Uniform Customs" the Uniform Customs and Practice for Documentary
Credits (1994 Revision), International Chamber of Commerce Publication No. 500.
"UCC" means the Uniform Commercial Code as in effect in the State of
North Carolina, as amended, restated or otherwise modified.
"United States" means the United States of America.
"Wholly-Owned" means, with respect to a Subsidiary, that all of the
shares of capital stock or other ownership interests of such Subsidiary are,
directly or indirectly, owned or controlled by the Borrower and/or one or more
of its Wholly-Owned Subsidiaries.
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SECTION 1.2 General. Unless otherwise specified, a reference in
this Agreement to a particular section, subsection, Schedule or Exhibit is a
reference to that section, subsection, Schedule or Exhibit of this Agreement.
Wherever from the context it appears appropriate, each term stated in either
the singular or plural shall include the singular and plural, and pronouns
stated in the masculine, feminine or neuter gender shall include the masculine,
the feminine and the neuter. Any reference herein to "Charlotte time" shall
refer to the applicable time of day in Charlotte, North Carolina.
SECTION 1.3 Other Definitions and Provisions.
(a) Use of Capitalized Terms. Unless otherwise defined therein, all
capitalized terms defined in this Agreement shall have the defined meanings
when used in this Agreement, the Notes and the other Loan Documents or any
certificate, report or other document made or delivered pursuant to this
Agreement.
(b) Miscellaneous. The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
ARTICLE II
REVOLVING CREDIT FACILITY
SECTION 2.1 Loans. Subject to the terms and conditions of this
Agreement, each Lender severally agrees to make Loans to the Borrower from time
to time from the Closing Date through the Termination Date as requested by the
Borrower in accordance with the terms of Section 2.2; provided, that (a) the
aggregate principal amount of all outstanding Loans (after giving effect to any
amount requested) shall not exceed the lesser of (i) the Available Commitment
or (ii) the Aggregate Commitment, in each case, less the sum of all outstanding
L/C Obligations and (b) the principal amount of outstanding Loans from any
Lender to the Borrower shall not at any time exceed such Lender's Commitment
less such Lender's Commitment Percentage of outstanding L/C Obligations. Each
Loan by a Lender shall be in a principal amount equal to such Lender's
Commitment Percentage of the aggregate principal amount of Loans requested on
such occasion. Subject to the terms and conditions hereof, the Borrower may
borrow, repay and reborrow Loans hereunder until the Termination Date.
SECTION 2.2 Procedure for Advances of Revolving Credit and
Swingline Loans.
(a) Requests for Borrowing. The Borrower shall give the
Administrative Agent irrevocable prior written notice in the form attached
hereto as Exhibit B (a "Notice of Borrowing") not later than 11:00 a.m.
(Charlotte time) (i) on the same Business Day as each Base Rate Loan and (ii)
at least three (3) Business Days before each LIBOR Rate Loan, of its intention
to borrow, specifying (A) the date of such borrowing, which shall be a Business
Day, (B) the amount of such borrowing, which shall be in an amount equal to the
maximum amount then available to the Borrower pursuant to Section 2.1, or if
less, (x) with respect to Base Rate
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Loans in an aggregate principal amount of $1,000,000 or a whole multiple of
$500,000 in excess thereof and (y) with respect to LIBOR Rate Loans in an
aggregate principal amount of $3,000,000 or a whole multiple of $1,000,000 in
excess thereof, (C) whether the Loans are to be LIBOR Rate Loans or Base Rate
Loans, and (E) in the case of a LIBOR Rate Loan, the duration of the Interest
Period applicable thereto. Notices received after 11:00 a.m. (Charlotte time)
shall be deemed received on the next Business Day. The Administrative Agent
shall promptly notify the Lenders of each Notice of Borrowing.
(b) Disbursement of Loans. Not later than 2:00 p.m. (Charlotte time)
on the proposed borrowing date, each Lender will make available to the
Administrative Agent, for the account of the Borrower, at the office of the
Administrative Agent in funds immediately available to the Administrative
Agent, such Lender's Commitment Percentage of the Loans to be made on such
borrowing date. The Borrower hereby irrevocably authorizes the Administrative
Agent to disburse the proceeds of each borrowing requested pursuant to this
Section 2.2 in immediately available funds by crediting or wiring such proceeds
to the deposit account of the Borrower identified in the most recent notice
substantially in the form of Exhibit C hereto (a "Notice of Account
Designation") delivered by the Borrower to the Administrative Agent or may be
otherwise agreed upon by the Borrower and the Administrative Agent from time to
time. Subject to Section 4.7 hereof, the Administrative Agent shall not be
obligated to disburse the portion of the proceeds of any Loan requested
pursuant to this Section 2.2 to the extent that any Lender has not made
available to the Administrative Agent its Commitment Percentage of such Loan.
SECTION 2.3 Repayment of Loans.
(a) Repayment on Termination Date. The Borrower shall repay the
outstanding principal amount of all Loans in full on the Termination Date, with
all accrued but unpaid interest thereon.
(b) Mandatory Repayment of Excess Loans. If at any time the
outstanding principal amount of all Loans exceeds the lesser of (i) the
Available Commitment or (ii) the Aggregate Commitment, less, in each case, the
sum of all outstanding L/C Obligations, the Borrower shall (i) repay the Loans
immediately upon notice from the Administrative Agent, by payment to the
Administrative Agent for the account of the Lenders or (ii) furnish cash
collateral reasonably satisfactory to the Administrative Agent and/or repay the
L/C Obligations in an amount equal to such excess. Such cash collateral shall
be applied in accordance with Section 11.2(b). Each such repayment shall be
accompanied by any amount required to be paid pursuant to Section 4.9 hereof.
(c) Optional Repayments. The Borrower may at any time and from time
to time repay the Loans, in whole or in part, upon at least three (3) Business
Days' irrevocable notice to the Administrative Agent with respect to LIBOR Rate
Loans and one (1) Business Day irrevocable notice with respect to Base Rate
Loans in the form attached hereto as Exhibit D (a "Notice of Prepayment")
specifying the date and amount of repayment and whether the repayment is of
LIBOR Rate Loans or Base Rate Loans or a combination thereof, and, if of a
combination thereof, the amount allocable to each. Upon receipt of such
notice, the Administrative Agent shall promptly notify each Lender. If any
such notice is given, the amount
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<PAGE> 20
specified in such notice shall be due and payable on the date set forth in such
notice. Partial repayments shall be in an aggregate amount of $1,000,000 or a
whole multiple of $500,000 in excess thereof with respect to Base Rate Loans and
$3,000,000 or a whole multiple of $1,000,000 in excess thereof with respect to
LIBOR Rate Loans. Each such repayment shall be accompanied by any amount
required to be paid pursuant to Section 4.9 hereof.
(d) Limitation on Repayment of LIBOR Rate Loans. The Borrower may
not repay any LIBOR Rate Loan on any day other than on the last day of the
Interest Period applicable thereto unless such repayment is accompanied by any
amount required to be paid pursuant to Section 4.9 hereof.
SECTION 2.4 Notes. Each Lender's Loans and the obligation of the
Borrower to repay such Loans shall be evidenced by a separate Note executed by
the Borrower payable to the order of such Lender representing the Borrower's
obligation to pay such Lender's Commitment or, if less, the aggregate unpaid
principal amount of all Loans made and to be made by such Lender to the
Borrower hereunder, plus interest and all other fees, charges and other amounts
due thereon. Each Note shall be dated the date hereof and shall bear interest
on the unpaid principal amount thereof at the applicable interest rate per
annum specified in Section 4.1.
SECTION 2.5 Permanent Reduction of the Aggregate Commitment.
(a) Voluntary Permanent Reduction. The Borrower shall have the right
at any time and from time to time, upon at least five (5) Business Days prior
written notice to the Administrative Agent, to permanently reduce, without
premium or penalty, (i) the entire Aggregate Commitment at any time or (ii)
portions of the Aggregate Commitment, from time to time, in an aggregate
principal amount not less than $3,000,000 or any whole multiple of $1,000,000
in excess thereof.
(b) Mandatory Permanent Reductions. The Aggregate Commitment and the
Available Commitment shall be permanently reduced by the following amounts on
the corresponding dates as follows:
(i) Insurance Proceeds. One hundred percent (100%) of Net
Cash Proceeds received by the Borrower or any Subsidiary thereof in excess of
$1,000,000 in the aggregate during any twelve (12) month period or $5,000,000 in
the aggregate during the term of this Agreement under any policy of insurance;
provided, that so long as no Default or Event of Default then exists, such Net
Cash Proceeds may be used to finance the repair or replacement of damaged assets
or to purchase like assets within one hundred and twenty days (120) after
receipt thereof;
(ii) Sale of Assets. One hundred percent (100%) of Net Cash
Proceeds received by the Borrower or any Subsidiary thereof in connection with
the sale of assets (other than a sale of assets permitted pursuant to Sections
10.6(a)-(d)); provided, that so long as no Default or Event of Default then
exists, such Net Cash Proceeds may be used to purchase like assets within one
hundred and twenty (120) days after receipt thereof; and
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<PAGE> 21
(iii) Proceeds from Debt Offerings. One hundred percent
(100%) of Net Cash Proceeds from any Debt issued by the Borrower or any
Subsidiary thereof within three (3) Business Days of receipt thereof by the
Borrower or such Subsidiary.
(c) Additional Payments. Each permanent reduction permitted or
required pursuant to this Section 2.5 shall be accompanied by a payment of
principal sufficient to reduce the aggregate outstanding Extensions of Credit
of the Lenders after such reduction to the Aggregate Commitment as so reduced
and if the Aggregate Commitment as so reduced is less than the aggregate amount
of all outstanding Letters of Credit, the Borrower shall be required to deposit
in a cash collateral account opened by the Administrative Agent an amount equal
to the aggregate then undrawn and unexpired amount of such Letters of Credit.
Any reduction of the Aggregate Commitment to zero shall be accompanied by
payment of all outstanding Obligations (and furnishing of cash collateral
satisfactory to the Administrative Agent for all L/C Obligations) and shall
result in the termination of the Commitments and Credit Facility. Such cash
collateral shall be applied in accordance with Section 11.2(b). If the
reduction of the Aggregate Commitment requires the repayment of any LIBOR Rate
Loan, such repayment shall be accompanied by any amount required to be paid
pursuant to Section 4.9 hereof.
SECTION 2.6 Termination of Credit Facility. The Credit Facility
shall terminate on the earliest of (a) February 17, 2002, (b) the date of
termination by the Borrower pursuant to Section 2.5, and (c) the date of
termination by the Administrative Agent on behalf of the Lenders pursuant to
Section 11.2(a).
SECTION 2.7 Use of Proceeds. The Borrower shall use the proceeds
of the Extensions of Credit (a) to finance Permitted Acquisitions pursuant to
Section 10.4(c), (b) to finance the Netcom Acquisition, and (c) for working
capital and general corporate requirements of the Borrower and its
Subsidiaries, including the payment of certain fees and expenses incurred in
connection with the transactions contemplated herein.
SECTION 2.8 Increase in Commitments. Subject to Section 8.12(d),
the Borrower shall have the right, on thirty (30) calendar days' prior written
notice to the Administrative Agent, so long as no Default or Event of Default
shall have occurred and be continuing (or would result therefrom), with the
consent of the Required Lenders to increase the total amount of the Aggregate
Commitments hereunder by (a) first, accepting the offer of any existing Lender
or Lenders to increase its (or their) Commitment (or Commitments) up to the
amount of any such increase (which increase shall be offered first to the
Administrative Agent, then (to the extent any such increase is not fully
underwritten by the Administrative Agent) to the existing other Lenders); and/or
(b) second, accepting the offer or offers of any Person or Persons (not then a
Lender) constituting an Eligible Assignee to become a new Lender hereto with a
Commitment or Commitments up to the amount (or aggregate amount) of any such
increase to the extent any such increase is not fully underwritten by the
Administrative Agent or existing Lenders; provided, that (i) in no event shall
any Lender's Commitment be increased without the consent of such Lender, (ii) if
any Loans are outstanding hereunder on the date that any such increase is to
become effective, the Administrative Agent shall make such transfers of funds as
are necessary in order that the outstanding balance of such Loans reflect the
Commitment Percentages of the Lenders after giving effect to any increase
pursuant to this Section 2.8, (iii)
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<PAGE> 22
each such increase shall be in minimum amounts of at least Five Million Dollars
($5,000,000) and (iv) in no event shall any such increase result in the amount
of the Aggregate Commitment exceeding $200,000,000. Any increase to the
Aggregate Commitment pursuant to clause (a) of the first sentence of this
Section 2.8 shall become effective upon the execution of a Commitment Increase
Supplement in the form of Exhibit I-1 hereto, executed by the Borrower, the
Administrative Agent and the increasing Lender or Lenders and any increase to
the Aggregate Commitment pursuant to clause (b) of the first sentence of this
Section 2.8 shall become effective upon the execution of a New Lender Supplement
in the form of Exhibit I-2 hereto by the Borrower, the Administrative Agent and
relevant new Lender or Lenders. The Administrative Agent shall forward copies
of any such supplement to the Lenders promptly upon receipt thereof.
ARTICLE III
LETTER OF CREDIT FACILITY
SECTION 3.1 L/C Commitment. Subject to the terms and conditions
hereof, the Issuing Lender, in reliance on the agreements of the other Lenders
set forth in Section 3.4(a), agrees to issue standby letters of credit
("Letters of Credit") for the account of the Borrower on any Business Day from
the Closing Date through but not including the Termination Date in such form as
may be approved from time to time by the Issuing Lender; provided, that the
Issuing Lender shall have no obligation to issue any Letter of Credit if, after
giving effect to such issuance, (a) the L/C Obligations would exceed the L/C
Commitment or (b) the principal amount of outstanding Loans from any Lender to
the Borrower would exceed such Lender's Commitment less such Lender's
Commitment Percentage of outstanding Letter of Credit obligations. Each Letter
of Credit shall (i) be denominated in Dollars in a minimum amount of $500,000,
(ii) be a standby letter of credit issued to support obligations of the
Borrower or any of its Subsidiaries, contingent or otherwise, incurred in the
ordinary course of business, (iii) expire on a date reasonably satisfactory to
the Issuing Lender, which date shall be no later than the Termination Date and
(iv) be subject to the Uniform Customs and, to the extent not inconsistent
therewith, the laws of the State of North Carolina. The Issuing Lender shall
not at any time be obligated to issue any Letter of Credit hereunder if such
issuance would conflict with, or cause the Issuing Lender or any L/C Participant
to exceed any limits imposed by any Applicable Law. References herein to
"issue" and derivations thereof with respect to Letters of Credit shall also
include extensions or modifications of any existing Letters of Credit, unless
the context otherwise requires.
SECTION 3.2 Procedure for Issuance of Letters of Credit. The
Borrower may from time to time request that the Issuing Lender issue a Letter
of Credit by delivering to the Issuing Lender at the Administrative Agent's
Office an Application therefor, completed to the satisfaction of the Issuing
Lender, and such other certificates, documents and other papers and information
as the Issuing Lender may request. Upon receipt of any Application, the
Issuing Lender shall process such Application and the certificates, documents
and other papers and information delivered to it in connection therewith in
accordance with its customary procedures and shall, subject to Section 3.1 and
Article V hereof, promptly issue the Letter of Credit
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<PAGE> 23
requested thereby (but in no event shall the Issuing Lender be required to issue
any Letter of Credit earlier than three (3) Business Days after its receipt of
the Application therefor and all such other certificates, documents and other
papers and information relating thereto) by issuing the original of such Letter
of Credit to the beneficiary thereof or as otherwise may be agreed by the
Issuing Lender and the Borrower. The Issuing Lender shall promptly furnish to
the Borrower a copy of such Letter of Credit and promptly notify each Lender of
the issuance and upon request by any Lender, furnish to such Lender a copy of
such Letter of Credit and the amount of such Lender's participation therein.
SECTION 3.3 Commissions and Other Charges.
(a) The Borrower shall pay to the Administrative Agent, for the
account of the Issuing Lender and the L/C Participants, a letter of credit
commission with respect to each Letter of Credit in an amount equal to the face
amount of such Letter of Credit multiplied by the Applicable Margin for LIBOR
Rate Loans (determined on a per annum basis). Such commission shall be payable
quarterly in arrears on the last Business Day of each calendar quarter and on
the Termination Date.
(b) In addition to the foregoing commission, the Borrower shall pay
the Issuing Lender and the Letter of Credit Participants an issuance fee of
0.125% percent per annum on the face amount of each Letter of Credit, payable
quarterly in arrears on the last Business Day of each calendar quarter and on
the Termination Date.
(c) The Administrative Agent shall, promptly following its receipt
thereof, distribute to the Issuing Lender and the L/C Participants all
commissions received by the Administrative Agent in accordance with their
respective Commitment Percentages.
SECTION 3.4 L/C Participations.
(a) The Issuing Lender irrevocably agrees to grant and hereby grants
to each L/C Participant, and, to induce the Issuing Lender to issue Letters of
Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase
and hereby accepts and purchases from the Issuing Lender, on the terms and
conditions hereinafter stated, for such L/C Participant's own account and risk
an undivided interest equal to such L/C Participant's Commitment Percentage in
the Issuing Lender's obligations and rights under each Letter of Credit issued
hereunder and the amount of each draft paid by the Issuing Lender thereunder.
Each L/C Participant unconditionally and irrevocably agrees with the Issuing
Lender that, if a draft is paid under any Letter of Credit for which the Issuing
Lender is not reimbursed in full by the Borrower in accordance with the terms of
this Agreement, such L/C Participant shall pay to the Issuing Lender upon demand
at the Issuing Lender's address for notices specified herein an amount equal to
such L/C Participant's Commitment Percentage of the amount of such draft, or any
part thereof, which is not so reimbursed.
(b) Upon becoming aware of any amount required to be paid by any L/C
Participant to the Issuing Lender pursuant to Section 3.4(a) in respect of any
unreimbursed portion of any payment made by the Issuing Lender under any Letter
of Credit, the Issuing Lender shall notify
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<PAGE> 24
each L/C Participant of the amount and due date of such required payment and
such L/C Participant shall pay to the Issuing Lender the amount specified on the
applicable due date. If any such amount is paid to the Issuing Lender after the
date such payment is due, such L/C Participant shall pay to the Issuing Lender
on demand, in addition to such amount, the product of (i) such amount, times
(ii) the daily average Federal Funds Rate as determined by the Administrative
Agent during the period from and including the date such payment is due to the
date on which such payment is immediately available to the Issuing Lender, times
(iii) a fraction the numerator of which is the number of days that elapse during
such period and the denominator of which is 360. A certificate of the Issuing
Lender with respect to any amounts owing under this Section 3.4(b) shall be
conclusive in the absence of manifest error. With respect to payment to the
Issuing Lender of the unreimbursed amounts described in this Section 3.4(b), if
the L/C Participants receive notice that any such payment is due (A) prior to
1:00 p.m. (Charlotte time) on any Business Day, such payment shall be due that
Business Day, and (B) after 1:00 p.m. (Charlotte time) on any Business Day, such
payment shall be due on the following Business Day.
(c) Whenever, at any time after the Issuing Lender has made payment
under any Letter of Credit and has received from any L/C Participant its
Commitment Percentage of such payment in accordance with this Section 3.4, the
Issuing Lender receives any payment related to such Letter of Credit (whether
directly from the Borrower or otherwise) or any payment of interest on account
thereof, the Issuing Lender will distribute to such L/C Participant its pro
rata share thereof; provided, that in the event that any such payment received
by the Issuing Lender shall be required to be returned by the Issuing Lender,
such L/C Participant shall return to the Issuing Lender the portion thereof
previously distributed by the Issuing Lender to it.
SECTION 3.5 Reimbursement Obligation of the Borrower. The Borrower
agrees to reimburse the Issuing Lender on each date on which the Issuing Lender
notifies the Borrower of the date and amount of a draft paid under any Letter
of Credit for the amount of (a) such draft so paid and (b) any taxes, fees,
charges or other costs or expenses incurred by the Issuing Lender in connection
with such payment. Each such payment shall be made to the Issuing Lender at
its address for notices specified herein in lawful money of the United States
and in immediately available funds. Interest shall be payable on any and all
amounts remaining unpaid by the Borrower under this Article III from the date
such amounts become payable (whether at stated maturity, by acceleration or
otherwise) until payment in full at the rate which would be payable on any
outstanding Base Rate Loans which were then overdue. If the Borrower fails to
timely reimburse the Issuing Lender on the date the Borrower receives the notice
referred to in this Section 3.5, the Borrower shall be deemed to have timely
given a Notice of Borrowing hereunder to the Administrative Agent requesting the
Lenders to make a Base Rate Loan on such date in an amount equal to the amount
of such drawing and, regardless of whether or not the conditions precedent
specified in Article V have been satisfied, the Lenders shall make Base Rate
Loans in such amount, the proceeds of which shall be applied to reimburse the
Issuing Lender for the amount of the related drawing and costs and expenses.
SECTION 3.6 Obligations Absolute. The Borrower's obligations under
this Article III (including without limitation the Reimbursement Obligation)
shall be absolute and unconditional under any and all circumstances and
irrespective of any set-off, counterclaim or defense to payment which the
Borrower may have or have had against the Issuing Lender or any
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<PAGE> 25
beneficiary of a Letter of Credit. The Borrower also agrees with the Issuing
Lender that the Issuing Lender shall not be responsible for, and the Borrower's
Reimbursement Obligation under Section 3.5 shall not be affected by, among other
things, the validity or genuineness of documents or of any endorsements thereon,
even though such documents shall in fact prove to be invalid, fraudulent or
forged, or any dispute between or among the Borrower and any beneficiary of any
Letter of Credit or any other party to which such Letter of Credit may be
transferred or any claims whatsoever of the Borrower against any beneficiary of
such Letter of Credit or any such transferee. The Issuing Lender shall not be
liable for any error, omission, interruption or delay in transmission, dispatch
or delivery of any message or advice, however transmitted, in connection with
any Letter of Credit, except for errors or omissions caused by the Issuing
Lender's gross negligence or willful misconduct. The Borrower agrees that any
action taken or omitted by the Issuing Lender under or in connection with any
Letter of Credit or the related drafts or documents, if done in the absence of
gross negligence or willful misconduct and in accordance with the standards of
care specified in the Uniform Customs and, to the extent not inconsistent
therewith, the UCC shall be binding on the Borrower and shall not result in any
liability of the Issuing Lender to the Borrower. The responsibility of the
Issuing Lender to the Borrower in connection with any draft presented for
payment under any Letter of Credit shall, in addition to any payment obligation
expressly provided for in such Letter of Credit, be limited to determining that
the documents (including each draft) delivered under such Letter of Credit in
connection with such presentment are in conformity with such Letter of Credit.
SECTION 3.7 Effect of Application. To the extent that
any provision of any Application related to any Letter of Credit is
inconsistent with the provisions of this Article III, the provisions of this
Article III shall apply.
ARTICLE IV
GENERAL LOAN PROVISIONS
SECTION 4.1 Interest.
(a) Interest Rate Options. Subject to the provisions of this Section
4.1, at the election of the Borrower, the aggregate principal balance of the
Notes or any portion thereof shall bear interest at (A) the Base Rate plus the
Applicable Margin as set forth in Section 4.1(c) or (B) the LIBOR Rate plus the
Applicable Margin as set forth in Section 4.1(c); provided that the LIBOR Rate
shall not be available until three (3) Business Days after the Closing Date.
The Borrower shall select the rate of interest and Interest Period, if any,
applicable to any Loan at the time a Notice of Borrowing is given pursuant to
Section 2.2 or at the time a Notice of Conversion/Continuation is given
pursuant to Section 4.2. Each Loan or portion thereof bearing interest based
on the Base Rate shall be a "Base Rate Loan", each Loan or portion thereof
bearing interest based on the LIBOR Rate shall be a "LIBOR Rate Loan." Any
Loan or any portion thereof as to which the Borrower has not duly specified an
interest rate as provided herein shall be deemed a Base Rate Loan.
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<PAGE> 26
(b) Interest Periods. In connection with each LIBOR Rate Loan, the
Borrower, by giving notice at the times described in Section 4.1(a), shall
elect an interest period (each, an "Interest Period") to be applicable to such
Loan, which Interest Period shall be a period of one (1), two (2), three (3),
or six (6) months with respect to each LIBOR Rate Loan; provided that:
(i) the Interest Period shall commence on the date of
advance of or conversion to any LIBOR Rate Loan and, in the case of immediately
successive Interest Periods, each successive Interest Period shall commence on
the date on which the next preceding Interest Period expires;
(ii) if any Interest Period would otherwise expire on a
day that is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided, that if any Interest Period with respect to
a LIBOR Rate Loan would otherwise expire on a day that is not a Business Day
but is a day of the month after which no further Business Day occurs in such
month, such Interest Period shall expire on the next preceding Business Day;
(iii) any Interest Period with respect to a LIBOR Rate
Loan that begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month at the
end of such Interest Period) shall end on the last Business Day of the relevant
calendar month at the end of such Interest Period;
(iv) no Interest Period shall extend beyond the
Termination Date; and
(v) there shall be no more than five (5) Interest
Periods outstanding at any time.
(c) Applicable Margin. The Applicable Margin provided for in Section
4.1(a) with respect to the Loans (the "Applicable Margin") shall (i) from the
Closing Date until the delivery of the Officer's Compliance Certificate and
related financial statements for the fiscal quarter ending on March 31, 1999,
equal Level I pricing and (ii) for each fiscal quarter thereafter be determined
by reference to the Leverage Ratio as of the end of the fiscal quarter
immediately preceding the delivery of the applicable Officer's Compliance
Certificate as follows:
<TABLE>
<CAPTION>
Total Debt/ Applicable Applicable Base
Level EBITDA LIBOR Margin Rate Margin
----- ------ ------------ -----------
<S> <C> <C> <C>
Level I >2.50 2.00% 1.00%
-
Level II >2.00 1.75% 0.75%
-
Level III >1.50 1.50% 0.50%
-
Level IV <1.50 1.25% 0.25%
</TABLE>
Adjustments, if any, in the Applicable Margin shall be made by the
Administrative Agent on the fifth (5th) Business Day after receipt by the
Administrative Agent of quarterly financial statements for the Borrower and its
Subsidiaries and the accompanying Officer's Compliance Certificate setting
forth the Leverage Ratio of the Borrower and its Subsidiaries as of the most
recent fiscal quarter end. Subject to Section 4.1(d), in the event the
Borrower fails to deliver such financial statements and certificate within the
time required by Sections 7.1 and 7.2, the Applicable Margin shall be the
highest Applicable Margin set forth above until the delivery of such financial
statements and certificate.
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(d) Default Rate. Subject to Section 11.3, at the discretion of the
Administrative Agent and the Required Lenders, upon the occurrence and during
the continuance of an Event of Default, (i) the Borrower shall no longer have
the option to request LIBOR Rate Loans, (ii) all outstanding LIBOR Rate Loans
shall bear interest at a rate per annum two percent (2%) in excess of the rate
then applicable to LIBOR Rate Loans, as applicable, until the end of the
applicable Interest Period and thereafter at a rate equal to two percent (2%)
in excess of the rate then applicable to Base Rate Loans, and (iii) all
outstanding Base Rate Loans shall bear interest at a rate per annum equal to
two percent (2%) in excess of the rate then applicable to Base Rate Loans.
Interest shall continue to accrue on the Notes after the filing by or against
the Borrower of any petition seeking any relief in bankruptcy or under any act
or law pertaining to insolvency or debtor relief, whether state, federal or
foreign.
(e) Interest Payment and Computation. Interest on each Base Rate
Loan shall be payable in arrears on the last Business Day of each calendar
quarter commencing March 31, 1999; and interest on each LIBOR Rate Loan shall
be payable on the last day of each Interest Period applicable thereto, and if
such Interest Period extends over three (3) months, at the end of each three
(3) month interval during such Interest Period. Interest on LIBOR Rate Loans
and all fees payable hereunder shall be computed on the basis of a 360-day year
and assessed for the actual number of days elapsed and interest on Base Rate
Loans shall be computed on the basis of a 365/66-day year and assessed for the
actual number of days elapsed.
(f) Maximum Rate. In no contingency or event whatsoever shall the
aggregate of all amounts deemed interest hereunder or under any of the Notes
charged or collected pursuant to the terms of this Agreement or pursuant to any
of the Notes exceed the highest rate permissible under any Applicable Law which
a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that such a court determines that the Lenders
have charged or received interest hereunder in excess of the highest applicable
rate, the rate in effect hereunder shall automatically be reduced to the maximum
rate permitted by Applicable Law and the Lenders shall at the Administrative
Agent's option (i) promptly refund to the Borrower any interest received by
Lenders in excess of the maximum lawful rate or (ii) shall apply such excess to
the principal balance of the Obligations. It is the intent hereof that the
Borrower not pay or contract to pay, and that neither the Administrative Agent
nor any Lender receive or contract to receive, directly or indirectly in any
manner whatsoever, interest in excess of that which may be paid by the Borrower
under Applicable Law.
SECTION 4.2 Notice and Manner of Conversion or Continuation
of Loans. Provided that no Event of Default has occurred and is then
continuing, the Borrower shall have the option to (a) convert at any time
following the third Business Day after the Closing Date all or any portion of
its outstanding Base Rate Loans in a principal amount equal to $3,000,000 or
any whole multiple of $1,000,000 in excess thereof into one or more LIBOR Rate
Loans and (b) upon the expiration of any Interest Period, (i) convert all or
any part of its outstanding LIBOR Rate Loans in a principal amount equal to
$1,000,000 or a whole multiple of $500,000 in excess thereof into Base Rate
Loans or (ii) continue such LIBOR Rate Loans as LIBOR Rate Loans. Whenever the
Borrower desires to convert or continue Loans as provided above, the Borrower
shall give the Administrative Agent irrevocable prior written notice in the
form attached as
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Exhibit E (a "Notice of Conversion/ Continuation") not later than 11:00 a.m.
(Charlotte time) three (3) Business Days before the day on which a proposed
conversion or continuation of such Loan is to be effective specifying (A) the
Loans to be converted or continued, and, in the case of any LIBOR Rate Loan to
be converted or continued, the last day of the Interest Period therefor, (B) the
effective date of such conversion or continuation (which shall be a Business
Day), (C) the principal amount of such Loans to be converted or continued, and
(D) the Interest Period to be applicable to such converted or continued LIBOR
Rate Loan. The Administrative Agent shall promptly notify the Lenders of such
Notice of Conversion/Continuation.
SECTION 4.3 Fees.
(a) Commitment Fee. The Borrower shall pay to the Administrative
Agent, for the account of the Lenders, a non-refundable commitment fee on the
average monthly un-utilized portion of the Aggregate Commitment, such
commitment fee equal to (i) 0.50% per annum if the average monthly utilized
portion of the Aggregate Commitment equals or exceeds fifty percent (50%) of
the Credit Facility or (ii) 0.75% per annum if the average monthly utilized
portion of the Aggregate Commitment is less than fifty percent (50%) of the
Credit Facility. The commitment fee shall be payable in arrears on the last
Business Day of each calendar quarter during the term of this Agreement
commencing March 31, 1999, and on the Termination Date. Such commitment fee
shall be distributed by the Administrative Agent to the Lenders pro rata in
accordance with the Lenders' respective Commitment Percentages.
(b) Administrative Agent's and Other Fees. In order to compensate
the Administrative Agent for structuring and syndicating the Loans and for its
obligations hereunder, the Borrower agrees to pay to the Administrative Agent,
for its account, the fees set forth in the separate fee letter agreement
executed by the Borrower, the Arranger and the Administrative Agent and dated
January 9, 1999.
SECTION 4.4 Manner of Payment. Each payment by the Borrower on
account of the principal of or interest on the Loans or of any fee, commission
or other amounts (including the Reimbursement Obligation) payable to the
Lenders under this Agreement or any Note shall be made not later than 1:00 p.m.
(Charlotte time) on the date specified for payment under this Agreement to the
Administrative Agent at the Administrative Agent's Office for the account of
the Lenders (other than as set forth below) pro rata in accordance with their
respective Commitment Percentages (except as specified below), in Dollars, in
immediately available funds and shall be made without any set-off, counterclaim
or deduction whatsoever. Any payment received after such time but before 2:00
p.m. (Charlotte time) on such day shall be deemed a payment on such date for
the purposes of Section 11.1, but for all other purposes shall be deemed to
have been made on the next succeeding Business Day. Any payment received after
2:00 p.m. (Charlotte time) shall be deemed to have been made on the next
succeeding Business Day for all purposes. Upon receipt by the Administrative
Agent of each such payment, the Administrative Agent shall distribute to each
Lender at its address for notices set forth herein its pro rata share of such
payment in accordance with such Lender's Commitment Percentage (except as
specified below) and shall wire advice of the amount of such credit to each
Lender. Each payment to the Administrative Agent of the Issuing Lender's fees
or L/C Participants' commissions shall be
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<PAGE> 29
made in like manner, but for the account of the Issuing Lender or the L/C
Participants, as the case may be. Each payment to the Administrative Agent of
Administrative Agent's fees or expenses shall be made for the account of the
Administrative Agent and any amount payable to any Lender under Sections 4.8,
4.9, 4.10, 4.11 or 13.2 shall be paid to the Administrative Agent for the
account of the applicable Lender. Subject to Section 4.1(b)(ii) if any payment
under this Agreement or any Note shall be specified to be made upon a day which
is not a Business Day, it shall be made on the next succeeding day which is a
Business Day and such extension of time shall in such case be included in
computing any interest if payable along with such payment.
SECTION 4.5 Crediting of Payments and Proceeds. In the event that
the Borrower shall fail to pay any of the Obligations when due and the
Obligations have been accelerated pursuant to Section 11.2, all payments
received by the Lenders upon the Notes and the other Obligations and all net
proceeds from the enforcement of the Obligations shall be applied first to all
expenses then due and payable by the Borrower hereunder, then to all indemnity
obligations then due and payable by the Borrower hereunder, then to all
Administrative Agent's and Issuing Lender's fees then due and payable, then to
all commitment and other fees and commissions then due and payable, then to
accrued and unpaid interest on the Notes, the Reimbursement Obligations and any
termination payments due in respect of a Hedging Agreement with any Lender
(which Hedging Agreement is permitted or required hereunder) (pro rata in
accordance with all such amounts due), then to the principal amount of the
Notes and Reimbursement Obligations (pro rata in accordance with all such
amounts due) and then to the cash collateral account described in Section
11.2(b) hereof to the extent of any L/C Obligations then outstanding, in that
order.
SECTION 4.6 Adjustments. If any Lender (a "Benefitted Lender")
shall at any time receive any payment of all or part of the Obligations owing
to it, or interest thereon, or if any Lender shall at any time receive any
collateral in respect to the Obligations owing to it (whether voluntarily or
involuntarily, by set-off or otherwise) in a greater proportion than any such
payment to and collateral received by any other Lender, if any, in respect of
the Obligations owing to such other Lender, or interest thereon, such Benefitted
Lender shall purchase for cash from the other Lenders such portion of each such
other Lender's Extensions of Credit, or shall provide such other Lenders with
the benefits of any such collateral, or the proceeds thereof, as shall be
necessary to cause such Benefitted Lender to share the excess payment or
benefits of such collateral or proceeds ratably with each of the Lenders;
provided, that if all or any portion of such excess payment or benefits is
thereafter recovered from such Benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned to the extent of such
recovery, but without interest. The Borrower agrees that each Lender so
purchasing a portion of another Lender's Extensions of Credit may exercise all
rights of payment (including, without limitation, rights of set-off) with
respect to such portion as fully as if such Lender were the direct holder of
such portion.
SECTION 4.7 Nature of Obligations of Lenders Regarding Extensions
of Credit; Assumption by the Administrative Agent. The obligations of the
Lenders under this Agreement to make the Loans and issue or participate in
Letters of Credit are several and are not joint or joint and several. Unless
the Administrative Agent shall have received notice from a Lender prior to a
proposed borrowing date that such Lender will not make available to the
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<PAGE> 30
Administrative Agent such Lender's ratable portion of the amount to be borrowed
on such date (which notice shall not release such Lender of its obligations
hereunder), the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the proposed borrowing date in
accordance with Section 2.2(b) and the Administrative Agent may, in reliance
upon such assumption, make available to the Borrower on such date a
corresponding amount. If such amount is made available to the Administrative
Agent on a date after such borrowing date, such Lender shall pay to the
Administrative Agent on demand an amount, until paid, equal to the product of
(a) the amount not made available by such Lender in accordance with the terms
hereof, times (b) the daily average Federal Funds Rate during such period as
determined by the Administrative Agent, times (c) a fraction the numerator of
which is the number of days that elapse from and including such borrowing date
to the date on which such amount not made available by such Lender in
accordance with the terms hereof shall have become immediately available to the
Administrative Agent and the denominator of which is 360. A certificate of the
Administrative Agent with respect to any amounts owing under this Section shall
be conclusive, absent manifest error. If such Lender's Commitment Percentage
of such borrowing is not made available to the Administrative Agent by such
Lender within three (3) Business Days of such borrowing date, the
Administrative Agent shall be entitled to recover such amount made available by
the Administrative Agent with interest thereon at the rate per annum applicable
to Base Rate Loans hereunder, on demand, from the Borrower. The failure of any
Lender to make available its Commitment Percentage of any Loan requested by the
Borrower shall not relieve it or any other Lender of its obligation, if any,
hereunder to make its Commitment Percentage of such Loan available on the
borrowing date, but no Lender shall be responsible for the failure of any other
Lender to make its Commitment Percentage of such Loan available on the
borrowing date.
SECTION 4.8 Changed Circumstances.
(a) Circumstances Affecting LIBOR Rate Availability. If with respect
to any Interest Period the Administrative Agent or any Lender (after
consultation with Administrative Agent) shall determine that, by reason of
circumstances affecting the foreign exchange and interbank markets generally,
deposits in eurodollars, in the applicable amounts are not being quoted via
Telerate Page 3750 or offered to the Administrative Agent or such Lender for
such Interest Period, then the Administrative Agent shall forthwith give notice
thereof to the Borrower. Thereafter, until the Administrative Agent notifies
the Borrower that such circumstances no longer exist (which notification shall
be given promptly, but in any event within thirty (30) days after the
Administrative Agent obtains actual knowledge that such circumstances no longer
exist), the obligation of the Lenders to make LIBOR Rate Loans and the right of
the Borrower to convert any Loan to or continue any Loan as a LIBOR Rate Loan
shall be suspended, and the Borrower shall repay in full (or cause to be repaid
in full) the then outstanding principal amount of each such LIBOR Rate Loan
together with accrued interest thereon, on the last day of the then current
Interest Period applicable to such LIBOR Rate Loan or convert the then
outstanding principal amount of each such LIBOR Rate Loan to a Base Rate Loan
as of the last day of such Interest Period.
(b) Laws Affecting LIBOR Rate Availability. If, after the date
hereof, the introduction of, or any change in, any Applicable Law or any change
in the interpretation or
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administration thereof by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or any of their respective Lending Offices) with any request or
directive (whether or not having the force of law) of any such Authority,
central bank or comparable agency, shall make it unlawful or impossible for any
of the Lenders (or any of their respective Lending Offices) to honor its
obligations hereunder to make or maintain any LIBOR Rate Loan, such Lender shall
promptly give notice thereof to the Administrative Agent and the Administrative
Agent shall promptly give notice to the Borrower and the other Lenders.
Thereafter, until the Administrative Agent notifies the Borrower that such
circumstances no longer exist (which notification shall be given promptly, but
in any event within thirty (30) days after the Administrative Agent obtains
actual knowledge that such circumstances no longer exist), (i) the obligations
of the Lenders to make LIBOR Rate Loans and the right of the Borrower to convert
any Loan or continue any Loan as a LIBOR Rate Loan shall be suspended and
thereafter the Borrower may select only Base Rate Loans hereunder, and (ii) if
any of the Lenders may not lawfully continue to maintain a LIBOR Rate Loan to
the end of the then current Interest Period applicable thereto as a LIBOR Rate
Loan, the applicable LIBOR Rate Loan shall immediately be converted to a Base
Rate Loan for the remainder of such Interest Period.
(c) Increased Costs. If, after the date hereof, the introduction of,
or any change in, any Applicable Law, or in the interpretation or
administration thereof by any Governmental Authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by any of the Lenders (or any of their respective Lending Offices)
with any request or directive (whether or not having the force of law) of such
Authority, central bank or comparable agency:
(i) shall subject any of the Lenders (or any of their
respective Lending Offices) to any tax, duty or other charge with respect to
any Note, Letter of Credit or Application or shall change the basis of taxation
of payments to any of the Lenders (or any of their respective Lending Offices)
of the principal of or interest on any Note, Letter of Credit or Application or
any other amounts due under this Agreement in respect thereof (except for
changes in the rate of tax on the overall net income of any of the Lenders or
any of their respective Lending Offices imposed by the jurisdiction in which
such Lender is organized or is or should be qualified to do business or such
Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors of the
Federal Reserve System), special deposit, insurance or capital or similar
requirement against assets of, deposits with or for the account of, or credit
extended by any of the Lenders (or any of their respective Lending Offices) or
shall impose on any of the Lenders (or any of their respective Lending Offices)
or the foreign exchange and interbank markets any other condition affecting any
Note;
and the result of any of the foregoing is to increase the costs to any of the
Lenders of maintaining any LIBOR Rate Loan or issuing or participating in
Letters of Credit or to reduce the yield or amount of any sum received or
receivable by any of the Lenders under this Agreement or under the Notes in
respect of a LIBOR Rate Loan or Letter of Credit or Application, then such
Lender shall promptly notify the Administrative Agent, and the Administrative
Agent shall promptly
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notify the Borrower of such fact and demand compensation therefor and, within
fifteen (15) days after such notice by the Administrative Agent, the Borrower
shall pay to such Lender such additional amount or amounts as will compensate
such Lender or Lenders for such increased cost or reduction. The Administrative
Agent will promptly notify the Borrower of any event of which it has knowledge
which will entitle such Lender to compensation pursuant to this Section 4.8(c);
provided, that the Administrative Agent shall incur no liability whatsoever to
the Lenders or the Borrower in the event it fails to do so. The amount of such
compensation shall be determined, in the applicable Lender's sole discretion,
based upon the assumption that such Lender funded its Commitment Percentage of
the LIBOR Rate Loans in the London interbank market and using any reasonable
attribution or averaging methods which such Lender deems appropriate and
practical. A certificate of such Lender setting forth the basis for determining
such amount or amounts necessary to compensate such Lender shall be forwarded to
the Borrower through the Administrative Agent and shall be conclusively presumed
to be correct save for manifest error.
SECTION 4.9 Indemnity. The Borrower hereby indemnifies
each of the Lenders against any loss or expense which may arise or be
attributable to each Lender's obtaining, liquidating or employing deposits or
other funds acquired to effect, fund or maintain any Loan (a) as a consequence
of any failure by the Borrower to make any payment when due of any amount due
hereunder in connection with a LIBOR Rate Loan, (b) due to any failure of the
Borrower to borrow on a date specified therefor in a Notice of Borrowing or
Notice of Continuation/Conversion or (c) due to any payment, prepayment or
conversion of any LIBOR Rate Loan on a date other than the last day of the
Interest Period therefor. The amount of such loss or expense shall be
determined, in the applicable Lender's sole discretion, based upon the
assumption that such Lender funded its Commitment Percentage of the LIBOR Rate
Loans in the London interbank market and using any reasonable attribution or
averaging methods which such Lender deems appropriate and practical. A
certificate of such Lender setting forth the basis for determining such amount
or amounts necessary to compensate such Lender shall be forwarded to the
Borrower through the Administrative Agent and shall be conclusively presumed to
be correct save for manifest error.
SECTION 4.10 Capital Requirements. If either (a) the introduction
of, or any change in, or in the interpretation of, any Applicable Law or (b)
compliance with any guideline or request from any central bank or comparable
agency or other Governmental Authority (whether or not having the force of
law), has or would have the effect of reducing the rate of return on the
capital of, or has affected or would affect the amount of capital required to
be maintained by, any Lender or any corporation controlling such Lender as a
consequence of, or with reference to the Commitments and other commitments of
this type, below the rate which the Lender or such other corporation could have
achieved but for such introduction, change or compliance, then within five (5)
Business Days after written demand by any such Lender, the Borrower shall pay
to such Lender from time to time as specified by such Lender additional amounts
sufficient to compensate such Lender or other corporation for such reduction.
A certificate as to such amounts submitted to the Borrower and the
Administrative Agent by such Lender, shall, in the absence of manifest error,
be presumed to be correct and binding for all purposes.
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SECTION 4.11 Taxes.
(a) Payments Free and Clear. Any and all payments by the Borrower
hereunder or under the Notes or the Letters of Credit shall be made free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholding, and all liabilities with respect
thereto excluding, (i) in the case of each Lender and the Administrative Agent,
income and franchise taxes imposed by the jurisdiction under the laws of which
such Lender or the Administrative Agent (as the case may be) is organized or is
or should be qualified to do business or any political subdivision thereof and
(ii) in the case of each Lender, income and franchise taxes imposed by the
jurisdiction of such Lender's Lending Office or any political subdivision
thereof (all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Taxes"). If the
Borrower shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder or under any Note or Letter of Credit to any Lender or
the Administrative Agent, (A) the sum payable shall be increased as may be
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 4.11) such Lender or
the Administrative Agent (as the case may be) receives an amount equal to the
amount such party would have received had no such deductions been made, (B) the
Borrower shall make such deductions, (C) the Borrower shall pay the full amount
deducted to the relevant taxing authority or other authority in accordance with
Applicable Law, and (D) the Borrower shall deliver to the Administrative Agent
evidence of such payment to the relevant taxing authority or other authority in
the manner provided in Section 4.11(d).
(b) Stamp and Other Taxes. In addition, the Borrower shall pay any
present or future stamp, registration, recordation or documentary taxes or any
other similar fees or charges or excise or property taxes, levies of the United
States or any state or political subdivision thereof or any applicable foreign
jurisdiction which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement, the
Loans, the Letters of Credit, the other Loan Documents, or the perfection of
any rights or security interest in respect thereto (hereinafter referred to as
"Other Taxes").
(c) Indemnity. The Borrower shall indemnify each Lender and the
Administrative Agent for the full amount of Taxes and Other Taxes (including,
without limitation, any Taxes and Other Taxes imposed by any jurisdiction on
amounts payable under this Section 4.11) paid by such Lender or the
Administrative Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted.
Such indemnification shall be made within thirty (30) days from the date such
Lender or the Administrative Agent (as the case may be) makes written demand
therefor. The Administrative Agent and the Lenders hereby agree to use
reasonable efforts, at the expense of the Borrower, to obtain a refund of any
such Taxes or Other Taxes which are not correctly or legally asserted.
(d) Evidence of Payment. Within thirty (30) days after the date of
any payment of Taxes or Other Taxes, the Borrower shall furnish to the
Administrative Agent, at its address referred to in Section 13.1, the original
or a certified copy of a receipt evidencing payment thereof or other evidence
of payment satisfactory to the Administrative Agent.
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(e) Delivery of Tax Forms. Each Lender organized under the laws of a
jurisdiction other than the United States or any state thereof shall deliver to
the Borrower, with a copy to the Administrative Agent, on the Closing Date or
concurrently with the delivery of the relevant Assignment and Acceptance, as
applicable, (i) two United States Internal Revenue Service Forms 4224 or Forms
1001, as applicable (or successor forms) properly completed and certifying in
each case that such Lender is entitled to a complete exemption from withholding
or deduction for or on account of any United States federal income taxes, and
(ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable form,
as the case may be, to establish an exemption from United States backup
withholding taxes. Each such Lender further agrees to deliver to the Borrower,
with a copy to the Administrative Agent, a Form 1001 or 4224 and Form W-8 or
W-9, or successor applicable forms or manner of certification, as the case may
be, on or before the date that any such form expires or becomes obsolete or
after the occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrower, certifying in the case of a Form
1001 or 4224 that such Lender is entitled to receive payments under this
Agreement without deduction or withholding of any United States federal income
taxes (unless in any such case an event (including without limitation any change
in treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders such forms inapplicable or
the exemption to which such forms relate unavailable and such Lender notifies
the Borrower and the Administrative Agent that it is not entitled to receive
payments without deduction or withholding of United States federal income taxes)
and, in the case of a Form W-8 or W-9, establishing an exemption from United
States backup withholding tax.
(f) Survival. Without prejudice to the survival of any other
agreement of the Borrower hereunder, the agreements and obligations of the
Borrower contained in this Section 4.11 shall survive the payment in full of
the Obligations and the termination of the Commitments.
SECTION 4.12 Security. The Obligations of the Borrower shall be
secured as provided in the Security Documents.
SECTION 4.13 Change in Lending Office. Each Lender agrees that,
upon the occurrence of any event giving rise to the operation of Section 4.8,
4.9, 4.10 or 4.11 with respect to such Lender, it will use its best efforts to
designate another lending office as its Lending Office for any Loans affected
by such event with the intent of avoiding the consequence of the event giving
rise to the operation of any such Section; provided, that such designation is
made on such terms that such Lender and its Lending Office suffer no economic,
legal or regulatory disadvantage as a consequence thereof.
ARTICLE V
CLOSING; CONDITIONS OF CLOSING AND BORROWING
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SECTION 5.1 Closing. The closing shall take place at the offices of
Kennedy, Covington, Lobdell & Hickman, L.L.P. at 10:00 a.m. on February 17,
1999 or on such other date as the parties hereto shall mutually agree.
SECTION 5.2 Conditions to Closing and Initial Extensions of Credit.
The obligation of the Lenders to close this Agreement and to make the initial
Loan or issue the initial Letter of Credit is subject to the satisfaction of
each of the following conditions:
(a) Executed Loan Documents. This Agreement, the Notes, and the
Guaranty and Collateral Agreement shall have been duly authorized, executed and
delivered to the Administrative Agent by the parties thereto, shall be in full
force and effect and no default shall exist thereunder, and the Borrower shall
have delivered original counterparts thereof to the Administrative Agent.
(b) Closing Certificates; etc.
(i) Officer's Certificate of the Borrower. The
Administrative Agent shall have received a certificate from a Responsible
Officer, in form and substance satisfactory to the Administrative Agent, to the
effect that all representations and warranties of the Borrower contained in
this Agreement and the other Loan Documents are true, correct and complete;
that the Borrower is not in violation of any of the covenants contained in this
Agreement and the other Loan Documents; that, after giving effect to the
transactions contemplated by this Agreement, no Default or Event of Default has
occurred and is continuing; and that the Borrower has satisfied each of the
closing conditions.
(ii) Certificate of Secretary of the Borrower. The
Administrative Agent shall have received a certificate of the secretary or
assistant secretary of the Borrower certifying as to the incumbency and
genuineness of the signature of each officer of the Borrower executing Loan
Documents to which it is a party and certifying that attached thereto is a
true, correct and complete copy of (A) the certificate of incorporation of the
Borrower and all amendments thereto, certified as of a recent date by the
appropriate Governmental Authority in its jurisdiction of incorporation, (B)
the bylaws of the Borrower as in effect on the date of such certification, (C)
resolutions duly adopted by the Board of Directors of the Borrower authorizing
the borrowings contemplated hereunder and the execution, delivery and
performance of this Agreement and the other Loan Documents to which it is a
party, and (D) each certificate required to be delivered pursuant to Section
5.2(b)(iii).
(iii) Certificates of Good Standing. To the extent
requested by the Administrative Agent, the Administrative Agent shall have
received long-form certificates as of a recent date of the good standing of the
Borrower under the laws of its jurisdiction of organization and each other
jurisdiction where the Borrower is qualified to do business and a certificate
of the relevant taxing authorities of such jurisdictions certifying that the
Borrower has filed required tax returns and owes no delinquent taxes.
(iv) Opinions of Counsel. The Administrative Agent shall
have received favorable opinions of counsel to the Borrower addressed to the
Administrative Agent
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and the Lenders with respect to the Borrower, the Loan Documents and such other
matters as the Lenders shall reasonably request.
(v) Tax Forms. The Administrative Agent shall have
received copies of the United States Internal Revenue Service forms required by
Section 4.11(e) hereof.
(c) Collateral.
(i) Filings and Recordings. All filings and
recordations that are necessary to perfect the security interests of the
Lenders in the collateral described in the Security Documents (other than the
documents, instruments and filings to be delivered after the Closing Date
pursuant to Section 8.12, leased sites not listed on Schedule 8.12(c), or as
set forth in the Security Documents) shall have been received by the
Administrative Agent and the Administrative Agent shall have received evidence
satisfactory to the Administrative Agent that upon such filings and recordations
such security interests constitute valid and perfected first priority Liens
therein subject to Liens permitted pursuant to Section 10.3.
(ii) Lien Search. The Administrative Agent shall have
received the results of a Lien search (including a search as to judgments,
pending litigation and tax matters) made against the Borrower under the Uniform
Commercial Code (or applicable judicial docket) as in effect in any state in
which any of Borrower's assets are located, indicating among other things that
its assets are free and clear of any Lien except for Liens permitted hereunder.
(iii) Hazard and Liability Insurance. The Administrative
Agent shall have received certificates of insurance, evidence of payment of all
insurance premiums for the current policy year, and, if requested by the
Administrative Agent, copies (certified by a Responsible Officer) of insurance
policies in the form required under the Security Documents and including
business interruption coverage as reasonably satisfactory to the Administrative
Agent.
(d) Consents; Defaults.
(i) Governmental and Third Party Approvals. The
Borrower shall have obtained all necessary approvals, authorizations and
consents (other than (i) the approvals, authorizations and consents to be
delivered after the Closing Date pursuant to Section 8.12, (ii) any approval,
authorization, or consent relating to leased sites not listed on Schedule
8.12(c), (iii) any approval, authorization, or consent not required to be
delivered pursuant to the Security Documents, and (iv) consents under the PSI
Net and GTE Network Services Agreements) of any Person and of all Governmental
Authorities and courts having jurisdiction with respect to the transactions
contemplated by this Agreement and the other Loan Documents.
(ii) Permits and Licenses. All material permits and
licenses required under Applicable Laws, necessary to the conduct of the
Borrower's business, including, without limitation, if applicable, all
Communications Licenses shall have been obtained.
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(iii) No Injunction, Etc. No action, proceeding,
investigation, regulation or legislation shall have been instituted, threatened
or proposed before any Governmental Authority to enjoin, restrain, or prohibit,
or to obtain substantial damages in respect of, or which is related to or
arises out of this Agreement or the other Loan Documents or the consummation of
the transactions contemplated hereby or thereby.
(iv) No Event of Default. No Default or Event of
Default shall have occurred and be continuing.
(e) Financial Matters.
(i) Financial Statements. The Administrative Agent
shall have received (A) audited Consolidated financial statements (including
balance sheets, related statements of income and retained earnings and cash
flows) of the Borrower and its Subsidiaries (excluding the Netcom Acquisition)
for Fiscal Year 1997 and 1998, (B) audited Consolidated financial statements
(including balance sheets, related statements of income and retained earnings
and cash flows) for Netcom, as prepared by Arthur Andersen, L.L.P., for Fiscal
Year 1997 and 1998 and (C) unaudited pro forma Consolidated financial statements
(including balance sheets, related statements of income and retained earnings
and cash flows) of the Borrower and its Subsidiaries (after giving effect to the
Netcom Acquisition) as of December 31, 1998, all of the foregoing in form and
substance reasonably satisfactory to the Administrative Agent.
(ii) Financial Condition Certificate. The Borrower shall
have delivered to the Administrative Agent a certificate, in form and substance
reasonably satisfactory to the Administrative Agent, and certified as accurate
by a Responsible Officer, that (A) the Borrower and its Subsidiaries are
Solvent, (B) the Borrower's material payables are current and not past due, (C)
attached thereto is a pro forma balance sheet of the Borrower and its
Subsidiaries setting forth on a pro forma basis the financial condition of the
Borrower and its Subsidiaries on a Consolidated basis as of that date,
reflecting a pro forma basis the effect of the transactions contemplated herein
including the Netcom Acquisition as well as all fees and expenses in connection
therewith, and evidencing compliance on a pro forma basis with the covenants
contained in Articles IX and X hereof, and (D) attached thereto are the
financial projections previously delivered to the Administrative Agent
representing the good faith opinions of the Borrower and senior management
thereof as to the projected results contained therein.
(iii) Payment at Closing; Fee Letters. The Borrower shall
have paid the fees set forth or referenced in Section 4.3 and any other accrued
and unpaid fees or commissions due hereunder (including, without limitation,
reasonable legal fees and expenses) to the Administrative Agent and Lenders,
and to any other Person such amount as may be due thereto in connection with
the transactions contemplated hereby, including all taxes, fees and other
charges in connection with the execution, delivery, recording, filing and
registration of any of the Loan Documents. The Administrative Agent shall have
received duly authorized and executed copies of the fee letter agreement
referred to in Section 4.3(b).
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(f) Conditions to Funding the Netcom Acquisition.
(i) Asset Purchase Agreement. There shall not have been
any material modification, amendment, supplement or waiver to the Asset
Purchase Agreement without the prior written consent of the Administrative
Agent, including any modification, amendment, supplement or waiver relating to
the amount or type of consideration to be paid in connection with the
transactions contemplated by the Asset Purchase Agreement or the contents of
any disclosure schedules and exhibits; all representations and warranties set
forth therein shall be true and correct in all material respects as of the
Closing Date and all conditions set forth in the Asset Purchase Agreement shall
have been fulfilled to the reasonable satisfaction of the Administrative Agent,
including the receipt by the Borrower of all necessary consents (without any
waiver or amendment, except as consented to by the Administrative Agent); the
transactions contemplated by the Asset Purchase Agreement shall be consummated
simultaneously with or prior to the initial borrowing under this Agreement;
(ii) Network Services Agreement. The Borrower shall have
entered into the Network Services Agreement (as defined in the Asset Purchase
Agreement) on terms reasonably satisfactory to the Administrative Agent; there
shall not have been any material modification, amendment, supplement or waiver
to the Network Services Agreement without the prior written consent of the
Administrative Agent, including any modification, amendment, supplement or
waiver relating to the amount or type of consideration to be paid in connection
with the transactions contemplated therein or the contents of any disclosure
schedules and exhibits; and
(iii) Deliveries to the Administrative Agent. The
Administrative Agent shall have received a certificate. signed by a Responsible
Officer of the Borrower, in form and substance satisfactory to the
Administrative Agent confirming that the Netcom Acquisition has closed
contemporaneously with the closing of this Agreement and attaching copies of
the following final, executed documents (each as defined in the Asset Purchase
Agreement):
(A) the Asset Purchase Agreement and all
exhibits and schedules thereto;
(B) the Bill of Sale;
(C) the Assignment and Assumption of
Contracts and Leases;
(D) the Assumption Agreement;
(E) the Network Services Agreement and all
exhibits and schedules thereto;
(F) the opinions of Sherman & Howard,
L.L.C. and Hogan & Hartson, L.L.P.
(which such opinions shall expressly
provide for reliance thereon by the
Administrative Agent and Lenders);
and
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(G) the resolutions, certificates and
other instruments, as requested by
the Administrative Agent, set forth
in Section 2.6.1 and 2.6.2 of the
Asset Purchase Agreement.
(g) Miscellaneous.
(i) Notice of Borrowing. The Administrative Agent shall
have received a Notice of Borrowing from the Borrower in accordance with
Section 2.2(a), and a Notice of Account Designation specifying the account or
accounts to which the proceeds of any Loans made after the Closing Date are to
be disbursed.
(ii) Proceedings and Documents. All opinions,
certificates and other instruments and all proceedings in connection with the
transactions contemplated by this Agreement shall be reasonably satisfactory in
form and substance to the Lenders. The Lenders shall have received copies of
all other instruments and other evidence as the Lender may reasonably request,
in form and substance reasonably satisfactory to the Lenders, with respect to
the transactions contemplated by this Agreement and the taking of all actions
in connection therewith.
(iii) Due Diligence and Other Documents. The Borrower
shall have delivered to the Administrative Agent such other documents,
certificates and opinions as the Administrative Agent may reasonably request.
SECTION 5.3 Conditions to All Extensions of Credit. The
obligations of the Lenders to make any Extensions of Credit is subject to the
satisfaction of the following conditions precedent on the relevant borrowing or
issue date, as applicable:
(a) Continuation of Representations and Warranties. The
representations and warranties contained in Article VI shall be true and
correct on and as of such borrowing or issuance date with the same effect as if
made on and as of such date; except for any representation and warranty made as
of an earlier date, which representation and warranty shall remain true and
correct as of such earlier date.
(b) No Existing Default. No Default or Event of Default
shall have occurred and be continuing hereunder (i) on the borrowing date with
respect to such Loan or after giving effect to the Loans to be made on such
date or (ii) or the issue date with respect to such Letter of Credit or after
giving affect to such Letters of Credit on such date.
(c) Officer's Compliance Certificate; Additional Documents.
The Administrative Agent shall have received the current Officer's Compliance
Certificate and each additional document, instrument, legal opinion or other
item of information reasonably requested by it.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
SECTION 6.1 Representations and Warranties. To induce the
Administrative Agent and Lenders to enter into this Agreement and to induce the
Lenders to make Extensions of Credit, the Borrower hereby represents and
warrants to the Administrative Agent and Lenders both before and after giving
effect to the transactions contemplated hereunder that:
(a) Organization; Power; Qualification. Each of the Borrower and its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or formation, has the power and
authority to own its properties and to carry on its business as now being
conducted (and as hereafter conducted at the time of any supplement to Schedule
6.1(a) required pursuant to Section 8.12) and is duly qualified and authorized
to do business in each jurisdiction in which the character of its properties or
the nature of its business requires such qualification and authorization,
except where the failure to be so qualified could not reasonably be expected to
have a Material Adverse Effect. The jurisdictions in which the Borrower and
its Subsidiaries are organized and qualified to do business as of the Closing
Date or any date on which Schedule 6.1(a) is supplemented in accordance with
Section 8.12, as applicable, are described on Schedule 6.1(a).
(b) Ownership. Each Subsidiary of the Borrower as of the Closing
Date or any date on which Schedule 6.1(b) is supplemented in accordance with
Section 8.12, as applicable, is listed on Schedule 6.1(b). As of the Closing
Date, the Borrower has no Subsidiaries. As of the Closing Date, or any date on
which Schedule 6.1(b) is supplemented in accordance with Section 8.12, as
applicable, the capitalization of the Borrower and its Subsidiaries consists of
the number of shares, authorized, issued and outstanding, of such classes and
series, with or without par value, described on Schedule 6.1(b). All
outstanding shares have been duly authorized and validly issued and are fully
paid and nonassessable. The shareholders of the Subsidiaries of the Borrower
and the number of shares owned by each as of the Closing Date or any date on
which Schedule 6.1(b) is supplemented in accordance with Section 8.12, as
applicable, are described on Schedule 6.1(b). As of the Closing Date or any
date on which Schedule 6.1(b) is supplemented in accordance with Section 8.12,
there are no outstanding stock purchase warrants, subscriptions, options,
securities, instruments or other rights of any type or nature whatsoever, which
are convertible into, exchangeable for or otherwise provide for or permit the
issuance of capital stock of the Borrower or its Subsidiaries, except as
described on Schedule 6.1(b).
(c) Authorization of Agreement, Loan Documents and Borrowing. Each of
the Borrower and its Subsidiaries has the right, power and authority and has
taken all necessary corporate and other action to authorize the execution,
delivery and performance of this Agreement and each of the other Loan Documents
to which it is a party in accordance with their respective terms. This
Agreement and each of the other Loan Documents have been duly executed and
delivered by the duly authorized officers of the Borrower and each of its
Subsidiaries party thereto, and each such document constitutes the legal, valid
and binding obligation of the Borrower or its Subsidiary party thereto,
enforceable in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization,
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moratorium or similar state or federal debtor relief laws from time to time in
effect which affect the enforcement of creditors' rights in general and the
availability of equitable remedies.
(d) Compliance of Agreement, Loan Documents and Borrowing with Laws,
Etc. The execution, delivery and performance by the Borrower and its
Subsidiaries of the Loan Documents to which each such Person is a party, in
accordance with their respective terms, the borrowings hereunder and the
transactions contemplated hereby do not and will not, by the passage of time,
the giving of notice or otherwise, (i) require any Governmental Approval or
violate any Applicable Law relating to the Borrower or any of its Subsidiaries,
(ii) conflict with, result in a breach of or constitute a default under the
articles of incorporation, bylaws or other organizational documents of the
Borrower or any of its Subsidiaries or any Material Contract to which such
Person is a party or by which any of its properties may be bound or any
Governmental Approval relating to such Person, or (iii) result in or require
the creation or imposition of any Lien upon or with respect to any property now
owned or hereafter acquired by such Person other than Liens arising under the
Loan Documents.
(e) Compliance with Law; Governmental Approvals. Each of the
Borrower and its Subsidiaries (i) has all material Governmental Approvals
including any necessary Communications Licenses required by any Applicable Law
for it to conduct its business, each of which is in full force and effect, is
final and not subject to review on appeal and is not the subject of any pending
or, to the best of its knowledge, threatened attack by direct or collateral
proceeding, and (ii) is in material compliance with each material Governmental
Approval applicable to it and in material compliance with all other material
Applicable Laws relating to it or any of its respective properties.
(f) Tax Returns and Payments. Each of the Borrower and its Subsidies
has duly filed or caused to be filed all federal, state, local and other tax
returns required by Applicable Law to be filed, and has paid, or made adequate
provision for the payment of, all federal, state, local and other taxes,
assessments and governmental charges or levies upon it and its property,
income, profits and assets which are due and payable, except where the payment
of such tax is being disputed in good faith and adequate reserves have been
established in accordance with GAAP. No Governmental Authority has asserted
any Lien or other claim against the Borrower or Subsidiary thereof with respect
to material unpaid taxes which has not been discharged or resolved or is not
being contested in good faith and for which adequate reserves have been
established in accordance with GAAP. The charges, accruals and reserves on the
books of the Borrower and any of its Subsidiaries in respect of federal, state,
local and other taxes for all Fiscal Years and portions thereof since the
organization of the Borrower and any of its Subsidiaries are in the judgment of
the Borrower adequate, and the Borrower does not anticipate any additional
material taxes or assessments for any of such years.
(g) Intellectual Property Matters. Each of the Borrower and its
Subsidiaries owns or possesses rights to use all material franchises, licenses,
copyrights, copyright applications, patents, patent rights or licenses, patent
applications, trademarks, trademark rights, trade names, trade name rights,
copyrights and rights with respect to the foregoing which are required to
conduct its business. No event has occurred which permits, or after notice or
lapse of time or both would permit, the revocation or termination of any such
rights (except where such
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revocation or termination could not reasonably be expected to have a Material
Adverse Effect), and neither the Borrower nor any Subsidiary thereof is liable
to any Person for infringement under Applicable Law with respect to any such
rights as a result of its business operations.
(h) Environmental Matters.
(i) The properties owned, leased or operated by
the Borrower anubsidiaries do not contain, and to the Borrower's knowledge have
not previously contained, any Hazardous Materials in amounts or concentrations
which (A) constitute or constituted a violation of applicable Environmental
Laws or (B) could give rise to liability under applicable Environmental Laws,
except where such violation or liability could not reasonably be expected to
result in a Material Adverse Effect;
(ii) The Borrower, each Subsidiary and such properties
and all operations conducted in connection therewith are in compliance, and
have been in compliance, with all applicable Environmental Laws, and there is
no contamination at, under or about such properties or such operations which
could interfere with the continued operation of such properties or impair the
fair saleable value thereof, except where any such event could not reasonably
be expected to result in a Material Adverse Effect;
(iii) Neither the Borrower nor any Subsidiary
thereof has received any notice of violation, alleged violation,
non-compliance, liability or potential liability regarding environmental
matters, Hazardous Materials, or compliance with Environmental Laws, nor does
the Borrower have knowledge or reason to believe that any such notice will be
received or is being threatened, except where such notice could not reasonably
be expected to result in a Material Adverse Effect;
(iv) To the Borrower's knowledge, Hazardous Materials
have not been transported or disposed of to or from the properties owned,
leased or operated by the Borrower and its Subsidiaries in violation of, or in
a manner or to a location which could give rise to liability under,
Environmental Laws, nor since the date of acquisition of such property by the
Borrower or its Subsidiaries have any Hazardous Materials been generated,
treated, stored or disposed of at, on or under any of such properties in
violation of, or in a manner that could give rise to liability under, any
applicable Environmental Laws, except where the failure to so comply or the
existence of such contamination could not reasonably be expected to result in a
Material Adverse Effect;
(v) No judicial proceedings or governmental or
administrative action is pending, or, to the knowledge of the Borrower,
threatened, under any Environmental Law to which the Borrower or any Subsidiary
thereof is or is expected to be named as a party with respect to such
properties or operations conducted in connection therewith, nor are there any
consent decrees or other decrees, consent orders, administrative orders or
other orders, or other administrative or judicial requirements outstanding
under any Environmental Law with respect to Borrower, any Subsidiary or such
properties or operations, except where any such event could not reasonably be
expected to result in a Material Adverse Effect; and
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(vi) Since the date of the acquisition of any property,
there has been no release or to the Borrower's knowledge, threat of release of
Hazardous Materials at or from properties owned, leased or operated by the
Borrower or any Subsidiary, now or in the past, in violation of or in amounts
or in a manner that could give rise to liability under Environmental Laws,
except where such release could not reasonably be expected to result in a
Material Adverse Effect.
(i) ERISA.
(i) As of the Closing Date, neither the Borrower nor any
ERISA Affiliate maintains or contributes to, or has any obligation under, any
Employee Benefit Plans other than those identified on Schedule 6.1(i);
(ii) The Borrower and each ERISA Affiliate is in material
compliance with all applicable provisions of ERISA and the regulations and
published interpretations thereunder with respect to all Employee Benefit Plans
except for any required amendments for which the remedial amendment period as
defined in Section 401(b) of the Code has not yet expired. Each Employee
Benefit Plan that is intended to be qualified under Section 401(a) of the Code
(A) has been determined by the Internal Revenue Service to be so qualified, and
each trust related to such plan has been determined to be exempt under Section
501(a) of the Code or (B) is within the remedial amendment period as defined in
Section 401(b) of the Code as of the initial adoption of such Employee Benefit
Plan. No liability has been incurred by the Borrower or any ERISA Affiliate
which remains unsatisfied for any taxes or penalties with respect to any
Employee Benefit Plan or any Multiemployer Plan;
(iii) No Pension Plan has been terminated, nor has
any accumulated funding deficiency (as defined in Section 412 of the Code) been
incurred (without regard to any waiver granted under Section 412 of the Code),
nor has any funding waiver from the Internal Revenue Service been received or
requested with respect to any Pension Plan, nor has the Borrower or any ERISA
Affiliate failed to make any contributions or to pay any amounts due and owing
as required by Section 412 of the Code, Section 302 of ERISA or the terms of
any Pension Plan prior to the due dates of such contributions under Section 412
of the Code or Section 302 of ERISA, nor has there been any event requiring any
disclosure under Section 4041(c)(3)(C) or 4063(a) of ERISA with respect to any
Pension Plan;
(iv) Neither the Borrower nor any ERISA Affiliate has:
(A) engaged in a nonexempt prohibited transaction described in Section 406 of
the ERISA or Section 4975 of the Code, (B) incurred any liability to the PBGC
which remains outstanding other than the payment of premiums and there are no
premium payments which are due and unpaid, (C) failed to make a required
contribution or payment to a Multiemployer Plan, or (D) failed to make a
required installment or other required payment under Section 412 of the Code;
(v) No Termination Event has occurred or is reasonably
expected to occur; and
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(vi) No material proceeding, claim, lawsuit and/or
investigation is existing or, to the best knowledge of the Borrower after due
inquiry, threatened concerning or involving any (A) employee welfare benefit
plan (as defined in Section 3(1) of ERISA) currently maintained or contributed
to by the Borrower or any ERISA Affiliate, (B) Pension Plan or (C)
Multiemployer Plan.
(j) Margin Stock. Neither the Borrower nor any Subsidiary thereof is
engaged principally or as one of its activities in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" (as
each such term is defined or used in Regulation U of the Board of Governors of
the Federal Reserve System). No part of the proceeds of any of the Loans or
Letters of Credit will be used for purchasing or carrying margin stock or for
any purpose which violates, or which would be inconsistent with, the provisions
of Regulation T, U or X of such Board of Governors.
(k) Government Regulation. Neither the Borrower nor any Subsidiary
thereof is an "investment company" or a company "controlled" by an "investment
company" (as each such term is defined or used in the Investment Company Act of
1940, as amended) and neither the Borrower nor any Subsidiary thereof is, or
after giving effect to any Extension of Credit will be, subject to regulation
under the Public Utility Holding Company Act of 1935 or the Interstate Commerce
Act, each as amended, or any other Applicable Law which limits its ability to
incur or consummate the transactions contemplated hereby.
(l) Material Contracts. Schedule 6.1(l) sets forth a complete and
accurate list of all Material Contracts of the Borrower and its Subsidiaries
including all network services agreements in effect as of the Closing Date not
listed on any other Schedule hereto; other than as set forth in Schedule
6.1(l), each such Material Contract is, and after giving effect to the
consummation of the transactions contemplated by the Loan Documents will be, in
full force and effect in accordance with the terms thereof. The Borrower has
delivered to the Administrative Agent a true and complete copy of each Material
Contract required to be listed on Schedule 6.1(l) or any other Schedule hereto.
(m) Employee Relations. Each of the Borrower and its Subsidiaries has
a stable work force in place and is not, as of the Closing Date, party to any
collective bargaining agreement nor has any labor union been recognized as the
representative of its employees except as set forth on Schedule 6.1(m). The
Borrower knows of no pending, threatened or contemplated strikes, work stoppage
or other collective labor disputes involving its employees or those of its
Subsidiaries.
(n) Burdensome Provisions. Neither the Borrower nor any Subsidiary
thereof is a party to any indenture, agreement, lease or other instrument, or
subject to any corporate or partnership restriction, Governmental Approval or
Applicable Law which is so unusual or burdensome as in the foreseeable future
could be reasonably expected to have a Material Adverse Effect. The Borrower
does not presently anticipate that future expenditures needed to meet the
provisions of any statutes, orders, rules or regulations of a Governmental
Authority will be so burdensome as to have a Material Adverse Effect.
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(o) Financial Statements. The financial statements required to be
provided to the Administrative Agent pursuant to Section 5.2(e)(i)(A) are
complete and correct and fairly present the assets, liabilities and financial
position of the Borrower and its Subsidiaries as at such dates, and the results
of the operations and changes of financial position for the periods then ended
(except in the case of unaudited statement to changes resulting from normal
year-end adjustments and items that would be disclosed in footnotes to the
audited statements). All such financial statements, including the related
schedules and notes thereto, have been prepared in accordance with GAAP. The
Borrower and its Subsidiaries have no Debt, material obligation or other
unusual material forward or long-term commitment which is not fairly reflected
in the foregoing financial statements or in the notes thereto.
(p) No Material Adverse Change. Since December 31, 1997, there has
been no material adverse change in the properties, business, operations,
prospects, or condition (financial or otherwise) of the Borrower and its
Subsidiaries and no event has occurred or condition arisen that could
reasonably be expected to have a Material Adverse Effect.
(q) Solvency. As of the Closing Date and after giving effect to each
Extension of Credit made hereunder, the Borrower and its Subsidiaries, taken as
a whole, will be Solvent.
(r) Titles to Properties. Each of the Borrower and its Subsidiaries
has such title to the real property owned by it as is necessary or desirable to
the conduct of its business and valid and legal title to all of its personal
property and assets, including, but not limited to, those reflected on the
balance sheets of the Borrower and its Subsidiaries delivered pursuant to
Section 6.1(o), except those which have been disposed of by the Borrower or its
Subsidiaries subsequent to such date which dispositions have been in the
ordinary course of business or as otherwise expressly permitted hereunder.
(s) Liens. None of the properties and assets of the Borrower or any
Subsidiary thereof is subject to any Lien, except Liens permitted pursuant to
Section 10.3. No financing statement under the Uniform Commercial Code of any
state which names the Borrower or any Subsidiary thereof or any of their
respective trade names or divisions as debtor and which has not been
terminated, has been filed in any state or other jurisdiction and neither the
Borrower nor any Subsidiary thereof has signed any such financing statement or
any security agreement authorizing any secured party thereunder to file any
such financing statement, except to perfect those Liens permitted by Section
10.3 hereof.
(t) Debt and Guaranty Obligations. Schedule 6.1(t) is a complete and
correct listing of all Debt and Guaranty Obligations of the Borrower and its
Subsidiaries as of the Closing Date in excess of $500,000. The Borrower and
its Subsidiaries have performed and are in compliance with all of the material
terms of such Debt and Guaranty Obligations and all instruments and agreements
relating thereto, and no default or event of default, or event or condition
which with notice or lapse of time or both would constitute such a default or
event of default on the part of the Borrower or its Subsidiaries exists with
respect to any such Debt or Guaranty Obligation.
(u) Litigation. Except for matters existing on the Closing Date and
set forth on Schedule 6.1(u), there are no actions, suits or proceedings
pending nor, to the knowledge of the
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Borrower, threatened against or in any other way relating adversely to or
affecting the Borrower or any Subsidiary thereof or any of their respective
properties in any court or before any arbitrator of any kind or before or by
any Governmental Authority which is reasonably likely to have a Material
Adverse Effect.
(v) Absence of Defaults. No event has occurred or is continuing (i)
which constitutes a Default or an Event of Default, or (ii) which constitutes,
or which with the passage of time or giving of notice or both would constitute,
a default or event of default by the Borrower or any Subsidiary thereof under
any Material Contract or judgment, decree or order to which the Borrower or its
Subsidiaries is a party or by which the Borrower or its Subsidiaries or any of
their respective properties may be bound or which would require the Borrower or
its Subsidiaries to make any payment thereunder prior to the scheduled maturity
date therefor which, with respect to the matters set forth in clause (ii) could
reasonably be expected to result in a Material Adverse Effect.
(w) Telecommunications Matters
(i) Communications Licenses. Schedule 6.1(w)(i) hereto
sets forth, as of the Closing Date and each subsequent date required pursuant
to Section 8.12, a true and complete list of all Communications Licenses (and
the expiration dates thereof) of the Borrower and its Subsidiaries pertaining
to the provision of internet services, and, if applicable, the jurisdiction
served thereby.
(ii) Condition of Systems. All of the properties,
equipment and systems of the Borrower and its Subsidiaries are in good repair,
working order and condition, ordinary wear and tear excepted.
(iii) Subscribers. As of the Closing Date, (A) the number
of dial-up, Web-hosting and dedicated access subscribers that are being
acquired pursuant to the Netcom Acquisition is not less than 395,000 and the
average revenue per such subscriber for the fiscal quarter ending December 31,
1998 was not less than $28.00; and (B) the number of dial-up, Web-hosting and
dedicated access subscribers on a Consolidated basis, including the acquired
Netcom subscribers, for the Borrower is not less than 1,100,000.
(x) Accuracy and Completeness of Information. All written
information, reports and other papers and data produced by or on behalf of the
Borrower or any Subsidiary thereof and furnished to the Lenders were, at the
time the same were so furnished, complete and correct in all material respects
to the extent necessary to give the recipient a true and accurate knowledge of
the subject matter. No document furnished or written statement made to the
Administrative Agent or the Lenders by the Borrower or any Subsidiary thereof
in connection with the negotiation, preparation or execution of this Agreement
or any of the Loan Documents contains or will contain any untrue statement of a
material fact to the creditworthiness of the Borrower or its Subsidiaries or
omits or will omit to state a material fact necessary in order to make the
statements contained therein not misleading. The Borrower is not aware of any
facts which it has not disclosed in writing to the Administrative Agent having
a Material Adverse Effect, or
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insofar as the Borrower can now foresee, could reasonably be expected to have a
Material Adverse Effect.
SECTION 6.2 Survival of Representations and Warranties, Etc. All
representations and warranties set forth in this Article VI and all
representations and warranties contained in any certificate, or any of the Loan
Documents (including but not limited to any such representation or warranty
made in or in connection with any amendment thereto) shall constitute
representations and warranties made under this Agreement. All representations
and warranties made under this Agreement shall be made or deemed to be made at
and as of the Closing Date, shall survive the Closing Date and shall not be
waived by the execution and delivery of this Agreement, any investigation made
by or on behalf of the Lenders or any borrowing hereunder.
ARTICLE VII
FINANCIAL INFORMATION AND NOTICES
Until all the Obligations have been paid and satisfied in full and the
Commitments terminated, unless consent has been obtained in the manner set
forth in Section 13.11 hereof, the Borrower will furnish or cause to be
furnished to the Administrative Agent and to the Lenders at their respective
addresses as set forth on Schedule 1, or such other office as may be designated
by the Administrative Agent and Lenders from time to time:
SECTION 7.1 Financial Statements and Projections.
(a) Quarterly Financial Statements. As soon as practicable and in
any event within forty-five (45) days after the end of the first three (3)
fiscal quarters on each Fiscal Year, an unaudited Consolidated and
consolidating balance sheet of the Borrower and its Subsidiaries as of the
close of such fiscal quarter and unaudited Consolidated and consolidating
statements of income, retained earnings and cash flows for the fiscal quarter
then ended and that portion of the Fiscal Year then ended, including the notes
thereto, all in reasonable detail setting forth in comparative form the
corresponding figures for the preceding Fiscal Year and prepared by the
Borrower in accordance with GAAP and, if applicable, containing disclosure of
the effect on the financial position or results of operations of any change in
the application of accounting principles and practices during the period, and
certified by the chief financial officer of the Borrower to present fairly in
all material respects the financial condition of the Borrower and its
Subsidiaries as of their respective dates and the results of operations of the
Borrower and its Subsidiaries for the respective periods then ended, subject to
normal year end adjustments.
(b) Annual Financial Statements. As soon as practicable and in any
event within ninety (90) days after the end of each Fiscal Year, an audited
Consolidated balance sheet of the Borrower and its Subsidiaries as of the close
of such Fiscal Year and audited Consolidated statements of income, retained
earnings and cash flows for the Fiscal Year then ended, including the notes
thereto, all in reasonable detail setting forth in comparative form the
corresponding figures for the preceding Fiscal Year and prepared by an
independent certified public accounting
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firm of nationally recognized standing in accordance with GAAP and, if
applicable, containing disclosure of the effect on the financial position or
results of operation of any change in the application of accounting principles
and practices during the year, and accompanied by a report thereon by such
certified public accountants that is not qualified with respect to scope
limitations imposed by the Borrower or any of its Subsidiaries or with respect
to accounting principles followed by the Borrower or any of its Subsidiaries
not in accordance with GAAP.
(c) Annual Business Plan and Financial Projections. As soon as
practicable and in any event within thirty (30) days after the beginning of
each Fiscal Year, commencing with Fiscal Year 2000, a business plan of the
Borrower and its Subsidiaries for the ensuing four (4) fiscal quarters, such
plan to be prepared in accordance with GAAP and to include, on a quarterly
basis, the following: a quarterly operating and capital budget, a projected
income statement, statement of cash flows and balance sheet and a report
containing management's discussion and analysis of such projections,
accompanied by a certificate from the chief financial officer of the Borrower
to the effect that, to the best of such officer's knowledge, such projections
are good faith estimates of the financial condition and operations of the
Borrower and its Subsidiaries for such four (4) quarter period.
SECTION 7.2 Officer's Compliance Certificate. At each time
financial statements are delivered pursuant to Section 7.1 (a) or (b) and at
such other times as the Administrative Agent shall reasonably request, a
certificate of the chief financial officer or the treasurer of the Borrower in
the form of Exhibit F attached hereto (an "Officer's Compliance Certificate").
SECTION 7.3 Accountants' Certificate. At each time financial
statements are delivered pursuant to Section 7.1(b), a certificate of the
independent public accountants certifying such financial statements addressed
to the Administrative Agent for the benefit of the Lenders:
(a) stating that in making the examination necessary for the
certification of such financial statements, they obtained no knowledge of any
Default or Event of Default or, if such is not the case, specifying such
Default or Event of Default and its nature and period of existence; and
(b) including the calculations prepared by such accountants required
to establish whether or not the Borrower and its Subsidiaries are in compliance
with the financial covenants set forth in Article IX hereof as at the end of
each respective period.
SECTION 7.4 Other Reports.
(a) Promptly upon receipt thereof, copies of all reports, if any,
submitted to the Borrower or its Board of Directors by its independent public
accountants in connection with their auditing function, including, without
limitation, any management report and any management responses thereto; and
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(b) Such other information regarding the operations, business
affairs and financial condition of the Borrower or any of its Subsidiaries as
the Administrative Agent or any Lender may reasonably request.
SECTION 7.5 Notice of Litigation and Other Matters. Prompt (but
in no event later than ten (10) days after a senior officer of the Borrower
obtains knowledge thereof) telephonic and written notice of:
(a) the commencement of all material proceedings and investigations
by or before any Governmental Authority and all material actions and
proceedings in any court or before any arbitrator against or involving the
Borrower or any Subsidiary thereof or any of their respective properties,
assets or businesses;
(b) any notice of any material violation received by the Borrower or
any Subsidiary thereof from any Governmental Authority including, without
limitation, any notice of material violation of Environmental Laws which in any
such case could reasonably be expected to have a Material Adverse Effect;
(c) any labor controversy that has resulted in, or threatens to
result in, a strike or other work action against the Borrower or any Subsidiary
thereof;
(d) any attachment, judgment, lien, levy or order exceeding
$1,000,000 that may be assessed against or threatened against the Borrower or
any Subsidiary thereof;
(e) (i) any Default or Event of Default or (ii) any event which
constitutes or which with the passage of time or giving of notice or both would
constitute a default or event of default under any Material Contract to which
the Borrower or any of its Subsidiaries is a party or by which the Borrower or
any Subsidiary thereof or any of their respective properties may be bound or
(iii) any cancellation or material amendment or modification of any network
services agreements that are Material Contracts (other than the PSI Network
Services Agreement and the GTE Network Services Agreement);
(f) (i) any unfavorable determination letter from the Internal
Revenue Service regarding the qualification of an Employee Benefit Plan under
Section 401(a) of the Code (along with a copy thereof), (ii) all notices
received by the Borrower or any ERISA Affiliate of the PBGC's intent to
terminate any Pension Plan or to have a trustee appointed to administer any
Pension Plan, (iii) all notices received by the Borrower or any ERISA Affiliate
from a Multiemployer Plan sponsor concerning the imposition or amount of
withdrawal liability pursuant to Section 4202 of ERISA and (iv) the Borrower
obtaining knowledge or reason to know that the Borrower or any ERISA Affiliate
has filed or intends to file a notice of intent to terminate any Pension Plan
under a distress termination within the meaning of Section 4041(c) of ERISA;
and
(g) any event which makes any of the representations set forth in
Section 6.1 inaccurate in any material respect.
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SECTION 7.6 Accuracy of Information. All written information,
reports, statements and other papers and data furnished by or on behalf of the
Borrower to the Administrative Agent or any Lender (other than financial
forecasts) whether pursuant to this Article VII or any other provision of this
Agreement, or any of the Security Documents, shall be, at the time the same is
so furnished, complete and correct in all material respects to the extent
necessary to give the Administrative Agent or any Lender complete, true and
accurate knowledge of the subject matter based on the Borrower's knowledge
thereof.
ARTICLE VIII
AFFIRMATIVE COVENANTS
Until all of the Obligations have been paid and satisfied in full and
the Commitments terminated, unless consent has been obtained in the manner
provided for in Section 13.11, the Borrower will, and will cause each of its
Subsidiaries to:
SECTION 8.1 Preservation of Corporate Existence and Related
Matters. Except as permitted by Section 10.5, preserve and maintain its
separate corporate existence and all rights, franchises, licenses and
privileges necessary to the conduct of its business, and qualify and remain
qualified as a foreign corporation and authorized to do business in each
jurisdiction where the nature and scope of its activities require it to so
qualify under Applicable Law in which the failure to so qualify would have a
Material Adverse Effect.
SECTION 8.2 Maintenance of Property. In addition to the
requirements of any of the Security Documents, protect and preserve all
properties useful in and material to its business, including material
copyrights, patents, trade names and trademarks; maintain in good working order
and condition (reasonable wear and tear and obsolescence excepted) all
buildings, equipment and other tangible real and personal property; and from
time to time make or cause to be made all renewals, replacements and additions
to such property necessary for the conduct of its business, so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times.
SECTION 8.3 Insurance. Maintain insurance with financially sound
and reputable insurance companies against such risks and in such amounts as are
customarily maintained by similar businesses, including hazard and business
interruption coverage, and as may be required by Applicable Law and as are
required by any Security Documents, and on the Closing Date and from time to
time thereafter deliver to the Administrative Agent upon its request a detailed
list of the insurance then in effect, stating the names of the insurance
companies, the amounts and rates of the insurance, the dates of the expiration
thereof and the properties and risks covered thereby.
SECTION 8.4 Accounting Methods and Financial Records. Maintain a
system of accounting, and keep such books, records and accounts (which shall be
true and complete in all material respects) as may be required or as may be
necessary to permit the preparation of
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financial statements in accordance with GAAP and in compliance with the
regulations of any Governmental Authority having jurisdiction over it or any of
its properties.
SECTION 8.5 Payment and Performance of Obligations. Pay and
perform all Obligations under this Agreement and the other Loan Documents, and
pay or perform (a) all taxes, assessments and other governmental charges that
may be levied or assessed upon it or any of its property, and (b) all other
indebtedness, obligations and liabilities in accordance with customary trade
practices; provided, that the Borrower or any Subsidiary thereof may contest
any item described in clauses (a) or (b) of this Section 8.5 in good faith so
long as adequate reserves are maintained with respect thereto in accordance
with GAAP.
SECTION 8.6 Compliance With Laws and Approvals. Observe and remain
in material compliance with all Applicable Laws and maintain in full force and
effect all material Governmental Approvals, in each case applicable to the
conduct of its business.
SECTION 8.7 Environmental Laws. In addition to and without
limiting the generality of Section 8.6, (a) comply in all material respects
with, and use its best efforts to ensure such compliance by all of its tenants
and subtenants with all applicable Environmental Laws and obtain and comply
with and maintain, and use its best efforts to ensure that all of its tenants
and subtenants obtain and comply with and maintain, any and all material
licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws, (b) conduct and complete all investigations,
studies, sampling and testing, and all remedial, removal and other actions
required under Environmental Laws, and promptly comply with all lawful orders
and directives of any Governmental Authority regarding Environmental Laws, and
(c) defend, indemnify and hold harmless the Administrative Agent and the
Lenders, and their respective parents, Subsidiaries, Affiliates, employees,
agents, officers and directors, from and against any claims, demands,
penalties, fines, liabilities, settlements, damages, costs and expenses of
whatever kind or nature known or unknown, contingent or otherwise, arising out
of, or in any way relating to the presence of Hazardous Materials, or the
violation of, noncompliance with or liability under any Environmental Laws
applicable to the operations of the Borrower or such Subsidiary, or any orders,
requirements or demands of Governmental Authorities related thereto, including,
without limitation, reasonable attorney's and consultant's fees, investigation
and laboratory fees, response costs, court costs and litigation expenses,
except to the extent that any of the foregoing directly result from the gross
negligence or willful misconduct of the party seeking indemnification therefor.
SECTION 8.8 Compliance with ERISA. In addition to and without
limiting the generality of Section 8.6, (a) comply with all applicable
provisions of ERISA and the regulations and published interpretations
thereunder with respect to all Employee Benefit Plans, (b) not take any action
or fail to take action the result of which could be a liability to the PBGC or
to a Multiemployer Plan, (c) not participate in any prohibited transaction that
could result in any civil penalty under ERISA or tax under the Code, (d)
operate each Employee Benefit Plan in such a manner that will not incur any tax
liability under Section 4980B of the Code or any liability (other than for
benefits in accordance with the terms of such Employee Benefit Plan) to any
qualified beneficiary as defined in Section 4980B of the Code and (e) furnish
to the
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Administrative Agent upon the Administrative Agent's request such additional
information about any Employee Benefit Plan as may be reasonably requested by
the Administrative Agent.
SECTION 8.9 Compliance With Material Contracts . Comply in all
material respects with each term, condition and provision of all Material
Contracts; provided, that the Borrower or such Subsidiary may contest any such
Material Contract in good faith through applicable proceedings so long as
adequate reserves are maintained in accordance with GAAP.
SECTION 8.10 Conduct of Business. Engage only in businesses in
substantially the same fields as the businesses conducted on the Closing Date
and in lines of business reasonably related thereto.
SECTION 8.11 Visits and Inspections. Upon reasonable notice and
during normal business hours, permit representatives of the Administrative
Agent or any Lender, from time to time, to visit and inspect its properties;
inspect, audit and make extracts from its books, records and files, including,
but not limited to, management letters prepared by independent accountants; and
discuss with its principal officers, and its independent accountants, its
business, assets, liabilities, financial condition, results of operations and
business prospects.
SECTION 8.12 Guarantors and Additional Collateral.
(a) Simultaneously with any Subsidiary of the Borrower (which is
not then a Guarantor) owning assets in excess of $1,000 or conducting business
or consummating any Permitted Acquisition, cause to be executed and delivered
to the Administrative Agent, (i) a Guaranty and Collateral Agreement Supplement
substantially in the form of Annex I of the Guaranty and Collateral Agreement,
(A) duly executed by such Subsidiary in favor of the Administrative Agent for
the ratable benefit of itself and the Lenders to securing the Guarantor
Obligations (as defined therein) and (B) duly executed by the Borrower pledging
100% of its equity interests in such Subsidiary in favor of the Administrative
Agent for the ratable benefit of the itself and the Lenders with such changes
therein to reflect the pledge by the Borrower of such equity interests as may
be reasonably requested by the Administrative Agent or Required Lenders, (ii)
any stock certificates or other documents evidencing the Borrower's pledged
equity interests in such Subsidiary and (iii) such other Security Documents,
closing items and legal opinions reasonably requested by the Administrative
Agent and consistent with the requirements of Section 5.2(b), Section 5.2(c)
and Section 5.2(d) in order to confirm that such Subsidiary is a Guarantor.
(b) Upon the delivery of any Guaranty and Collateral Agreement
Supplement, additional Security Documents and Collateral pursuant to this
Section 8.12, cause to be delivered to the Administrative Agent (i) favorable
legal opinions addressed to the Administrative Agent and Lenders in form and
substance reasonably satisfactory thereto with respect to such Security
Documents and additional Collateral, (ii) updated versions of Schedule 6.1(a),
Schedule 6.1(b) and Schedule 6.1(w)(i) and (iii) such other documents and
closing certificates as may be reasonably requested by the Administrative Agent
or Required Lenders consistent with the terms of Article V in order to confirm
that such Subsidiary is a Guarantor hereunder and all of the Borrower's equity
interest in such Subsidiary has been pledged as Collateral.
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(c) Subject to Section 8.12(d), within ninety (90) days after the
Closing Date, cause to be delivered to the Administrative Agent, the following
with regard to each leased site location identified in the "Location" column
set forth in Schedule 8.12(c) (the "Leased Sites"): (i) collateral assignments
of leases in a form appropriate for recording in the applicable jurisdiction
and otherwise in form and substance reasonably satisfactory to the
Administrative Agent and including any changes reasonably acceptable to the
Administrative Agent, (ii) landlord subordination and non-disturbance
agreements in form and substance reasonably satisfactory to the Administrative
Agent and including any changes reasonably acceptable to the Administrative
Agent, (iii) favorable legal opinions addressed to the Administrative Agent and
Lenders in form and substance reasonably satisfactory thereto with respect to
such recordable collateral assignments of leases and (iv) such other documents
and certificates reasonably requested by the Administrative Agent and Required
Lenders.
(d) In the event that the Borrower does not comply with each of the
requirements set forth in Section 8.12(c) above for each of the Leased Sites
within ninety (90) days after the Closing Date, then on the ninety-first (91st)
day after the Closing Date, (i) the Borrower's right to request a Commitment
increase pursuant to Section 2.8 shall be terminated, (ii) the Aggregate
Commitment shall be automatically and permanently reduced to Twenty Million
Dollars ($20,000,000) plus the aggregate amount of the incremental commitment
increases set forth on Schedule 8.12(c) (each, an "Incremental Commitment
Increase") corresponding to each Leased Site for which the Borrower has fully
complied with the provisions of Section 8.12(c); provided that, if the Borrower
does not fully comply with the provisions of Section 8.12(c) for the Atlanta,
Georgia Leased Site, no Incremental Commitment Increase shall be allowed, (iii)
the Applicable Margin shall be deemed to equal the pricing calculated pursuant
to Section 4.1(c) for such period plus an additional incremental margin
increase (the "Incremental Margin Increase") corresponding to the Aggregate
Commitment as reduced pursuant to the terms hereof and reflected in the pricing
grid set forth on Schedule 8.12(c) for both LIBOR Rate Loans and Base Rate
Loans, and (iv) the Borrower shall deliver a certificate setting forth (x) the
Leased Sites for which the Borrower has fully complied with Section 8.12(c),
(y) a calculation of the Aggregate Commitment pursuant to Section 8.12(d), and
(z) a calculation of the Incremental Margin Increase pursuant to Section
8.12(d).
SECTION 8.13 Year 2000 Compatibility. Take all actions reasonably
necessary to assure that the Borrower's computer based systems are able to
operate and effectively process data which includes dates on and after January
1, 2000. At the request of the Administrative Agent, the Borrower shall
provide reasonable assurances satisfactory to the Administrative Agent of the
Borrower's Year 2000 compatibility.
SECTION 8.14 Further Assurances. Make, execute and deliver all
such additional and further acts, things, deeds and instruments as the
Administrative Agent or any Lender may reasonably require to document and
consummate the transactions contemplated hereby and to vest completely in and
insure the Administrative Agent and the Lenders their respective rights under
this Agreement, the Notes, the Letters of Credit and the other Loan Documents.
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ARTICLE IX
FINANCIAL COVENANTS
Until all of the Obligations have been paid and satisfied in full and
the Commitments terminated, unless consent has been obtained in the manner set
forth in Section 13.11 hereof, the Borrower and its Subsidiaries on a
Consolidated basis will not:
SECTION 9.1 Leverage Ratio: As of any fiscal quarter end, permit
the ratio (the "Leverage Ratio") of (a) Total Debt as of such date to (b)
EBITDA to be greater than 3.0 to 1.0.
SECTION 9.2 Interest Coverage Ratio: As of any fiscal quarter end,
permit the ratio of (a) EBITDA to (b) Interest Expense for the period of four
(4) consecutive fiscal quarters ending on or immediately prior to such date to
be less than 3.0 to 1.0.
For purposes of calculating the financial covenants set forth in Sections
9.1 and 9.2, (i) as of the Closing Date, EBITDA shall be equal to $8,858,000
times four (4), (ii) as of the fiscal quarter ending on March 31, 1999, EBITDA
shall be equal to the EBITDA for the fiscal quarter ending on such date times
four (4) plus one time transaction costs and cost savings attributable to the
Netcom Acquisition, not to exceed $2,000,000 which such costs and cost savings
are reasonably acceptable to the Administrative Agent, and (iii) for any fiscal
quarter thereafter, EBITDA shall be equal to the EBITDA for the preceding two
(2) consecutive fiscal quarters ending on such date times two (2).
SECTION 9.3 Minimum Net Worth: As of any fiscal quarter end,
permit the Net Worth of the Borrower and its Subsidiaries to be less than
$175,000,000 plus fifty percent (50%) of net income (to the extent positive)
plus seventy-five percent (75%) of the net cash proceeds of any equity
issuances after the Closing Date.
ARTICLE X
NEGATIVE COVENANTS
Until all of the Obligations have been paid and satisfied in full and
the Commitments terminated, unless consent has been obtained in the manner set
forth in Section 13.11 hereof, the Borrower will not and will not permit any of
its Subsidiaries to:
SECTION 10.1 Limitations on Debt. Create, incur, assume or suffer
to exist any Debt except:
(a) the Obligations;
(b) Debt incurred in connection with a Hedging Agreement with a
counterparty reasonably satisfactory to the Administrative Agent (unless such
counterparty is (i) a Lender, (ii)
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an affiliate of a Lender or (iii) any third party who would qualify as an
Eligible Assignee) and upon terms and conditions reasonably satisfactory to the
Administrative Agent;
(c) Subordinated Debt not otherwise permitted under this Section
10.1;
(d) Debt existing on the Closing Date and not otherwise permitted
under this Section 10.1, as set forth on Schedule 6.1(t) (or specifically
permitted to be excluded from Schedule 6.1(t)) and the renewal and refinancing
(but not the increase of the aggregate principal amount thereof) thereof;
(e) Debt of the Borrower and its Subsidiaries incurred in connection
with Capitalized Leases in an aggregate amount not to exceed $10,000,000 on any
date of determination;
(f) purchase money Debt of the Borrower and its Subsidiaries in an
aggregate amount not to exceed $10,000,000 on any date of determination;
(g) Debt consisting of Guaranty Obligations permitted by Section
10.2;
(h) Intercompany Debt not otherwise permitted under this Section
10.1; and
(i) Debt in respect of performance, surety, or appeal bonds provided
in the ordinary course of business or in respect of indemnification or other
obligations incurred in connection with the disposition of any assets pursuant
to Section 10.6.
provided, that no agreement or instrument with respect to Debt permitted to be
incurred by this Section shall restrict, limit or otherwise encumber (by
covenant or otherwise) the ability of any Subsidiary of the Borrower to make
any payment to the Borrower or any other Subsidiaries (in the form of
dividends, intercompany advances or otherwise) for the purpose of enabling the
Borrower to pay the Obligations.
SECTION 10.2 Limitations on Guaranty Obligations. Create, incur,
assume or suffer to exist any Guaranty Obligations except:
(a) Guaranty Obligations in favor of the Administrative Agent for the
benefit of the Administrative Agent and the Lenders;
(b) Guaranty Obligations existing on the Closing Date and not
otherwise permitted under this Section 10.2, as set forth on Schedule 6.1(t)
(or specifically permitted to be excluded from Schedule 6.1(t)) and the renewal
and refinancing (but not the increase of the aggregate principal amount
thereof) thereof; and
(c) Guaranty Obligations of the Borrower or any of its Subsidiaries
of (i) Debt of the Borrower or any of its Subsidiary or (ii) contract
performance obligations of the Borrower or any of its Subsidiaries which do not
constitute Debt.
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SECTION 10.3 Limitations on Liens. Create, incur, assume or suffer
to exist, any Lien on or with respect to any of its assets or properties
(including without limitation shares of capital stock or other ownership
interests), real or personal, whether now owned or hereafter acquired, except:
(a) Liens for taxes, assessments and other governmental charges or
levies (excluding any Lien imposed pursuant to any of the provisions of ERISA
or Environmental Laws) not yet due or as to which the period of grace (not to
exceed thirty (30) days), if any, related thereto has not expired or which are
being contested in good faith and by appropriate proceedings if adequate
reserves are maintained to the extent required by GAAP;
(b) the claims of materialmen, mechanics, carriers, warehousemen,
processors or landlords for labor, materials, supplies or rentals incurred in
the ordinary course of business, (i) which are not overdue for a period of more
than thirty (30) days or (ii) which are being contested in good faith and by
appropriate proceedings;
(c) Liens consisting of deposits or pledges made in the ordinary
course of business in connection with, or to secure payment of, obligations
under workers' compensation, unemployment insurance or similar legislation or
obligations (not to exceed $250,000) under customer service contracts,
statutory or regulatory obligations, bank acceptances, surety and appeal bonds,
government contracts, performance bonds, and other obligations of a similar
nature incurred in the ordinary course of business;
(d) Liens constituting encumbrances in the nature of municipal
ordinances, zoning restrictions, easements and rights or restrictions of record
on the use of real property, title defects or other irregularities, which in
the aggregate are not substantial in amount and which do not, in any case,
materially detract from the value of such property or impair the use thereof in
the ordinary conduct of business;
(e) Liens of the Administrative Agent for the benefit of the
Administrative Agent and the Lenders;
(f) Liens not otherwise permitted by this Section 10.3 and in
existence on the Closing Date and described on Schedule 10.3;
(g) Liens securing Debt permitted under Sections 10.1(e) and 10.1(f);
provided that (i) such Liens shall be created substantially simultaneously with
the acquisition or lease of the related asset, (ii) such Liens do not at any
time encumber any property other than the property financed by such Debt, (iii)
the amount of Debt secured thereby is not increased and (iv) the principal
amount of Debt secured by any such Lien shall at no time exceed the original
purchase price or lease payment amount of such property at the time it was
acquired or leased; and
(h) Liens securing Debt permitted pursuant to Section 10.1(h).
SECTION 10.4 Limitations on Loans, Advances, Investments and
Acquisitions. Purchase, own, invest in or otherwise acquire, directly or
indirectly, any capital stock, interests in
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any partnership or joint venture (including without limitation the creation or
capitalization of any Subsidiary), evidence of Debt or other obligation or
security, substantially all or a material portion of the business or assets of
any other Person or any other investment or interest whatsoever in any other
Person, or make or permit to exist, directly or indirectly, any loans, advances
or extensions of credit to, or any investment in cash or by delivery of
property in, any Person except:
(a) investments not otherwise permitted by this Section 10.4 in
Subsidiaries (including without limitation, the creation or capitalization of
any Subsidiary) and the other existing loans, advances and investments not
otherwise permitted by this Section 10.4 described on Schedule 10.4;
(b) investments in (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency
thereof maturing within 120 days from the date of acquisition thereof, (ii)
commercial paper maturing no more than 120 days from the date of creation
thereof and currently having the highest rating obtainable from either Standard
& Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. or
Moody's Investors Service, Inc., (iii) certificates of deposit maturing no more
than 120 days from the date of creation thereof issued by commercial banks
incorporated under the laws of the United States of America, each having
combined capital, surplus and undivided profits of not less than $500,000,000
and having a rating of "A" or better by a nationally recognized rating agency;
provided, that the aggregate amount invested in such certificates of deposit
shall not at any time exceed $5,000,000 for any one such certificate of deposit
and $10,000,000 for any one such bank, or (iv) time deposits maturing no more
than 30 days from the date of creation thereof with commercial banks or savings
banks or savings and loan associations each having membership either in the
FDIC or the deposits of which are insured by the FDIC and in amounts not
exceeding the maximum amounts of insurance thereunder;
(c) investments by the Borrower or any Subsidiary thereof in the form
of acquisitions of all or substantially all of the business or a line of
business of any other Person (whether by the acquisition of capital stock or
other equity ownership interests, assets or any combination thereof) which are
consummated in accordance with the following requirements of this Section
10.4(c) (any such acquisition, a "Permitted Acquisition"): (i) the acquired
Person shall be and substantially all of the acquired assets shall be utilized
in a substantially similar business as the Borrower or any Subsidiary thereof,
(ii) with regard to any proposed acquisition or series of related acquisitions
having total aggregate consideration in excess of $5,000,000, a description of
the relevant proposed acquisition or series of related acquisitions in
reasonable detail and the corresponding documentation shall be furnished by the
Borrower to the Lenders at least fifteen (15) Business Days prior to the
closing date thereof (to be followed by any changed pages and fully executed
copies promptly after the creation thereof), (iii) after giving effect to the
proposed acquisition, no Default or Event of Default shall have occurred and be
continuing (which, for any proposed acquisition or series of related
acquisitions having total aggregate consideration in excess of $5,000,000,
shall be evidenced by a certificate of the Borrower delivered on the closing
date thereof to the Administrative Agent and the Required Lenders in form and
substance reasonably satisfactory to the Administrative Agent and demonstrating
pro forma compliance with the financial covenants set forth in Article IX and
the other terms of the Loan Documents),
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and (iv) the aggregate cash or any other consideration for any such proposed
acquisition and all prior Permitted Acquisitions consummated during the term
hereof does not exceed Twenty-Five Million Dollars ($25,000,000);
(d) investments in the form of deposits for utilities, security
deposits, deposits for leases, and similar prepaid expenses incurred in the
ordinary course of business;
(e) loans or advances to employees of the Borrower or any Subsidiary
thereof made in the ordinary course of business that do not in the aggregate
exceed $1,000,000 at any time outstanding; and
(f) investments in the form of trade accounts created in the ordinary
course of business.
SECTION 10.5 Limitations on Mergers and Liquidation. Merge,
consolidate or enter into any similar combination with any other Person or
liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution) except:
(a) any Wholly-Owned Subsidiary of the Borrower may merge with the
Borrower or any other Wholly-Owned Subsidiary of the Borrower;
(b) any Wholly-Owned Subsidiary may merge into the Person such
Wholly-Owned Subsidiary was formed to acquire in connection with an acquisition
permitted by Section 10.4(c); and
(c) any Wholly-Owned Subsidiary of the Borrower may wind-up into the
Borrower or any other Wholly-Owned Subsidiary of the Borrower.
SECTION 10.6 Limitations on Sale of Assets. Convey, sell, lease,
assign, transfer or otherwise dispose of any of its property, business or
assets (including, without limitation, the sale of any receivables and
leasehold interests and any sale-leaseback or similar transaction), whether now
owned or hereafter acquired except:
(a) the sale of inventory in the ordinary course of business;
(b) the sale of assets no longer used or usable in the business of
the Borrower or any of its Subsidiaries;
(c) the transfer, sale, lease, assignment or other disposition of
assets to the Borrower or any Wholly-Owned Subsidiary of the Borrower;
(d) the sale or discount without recourse of accounts receivable
arising in the ordinary course of business in connection with the compromise or
collection thereof; and
(e) the transfer, sale, lease, assignment or other disposition of
assets not otherwise permitted pursuant to this Section 10.6; provided that,
(i) the fair market value of all assets
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transferred, sold, leased, assigned or otherwise disposed of, pursuant to this
Section 10.6(e), shall not exceed $5,000,000 during the term hereof and (ii)
the Net Cash Proceeds received from any such disposition shall be applied in
the manner set forth in Section 2.5(b)(ii).
SECTION 10.7 Limitations on Dividends and Distributions. Declare
or pay any dividends upon any of its capital stock; purchase, redeem, retire or
otherwise acquire, directly or indirectly, any shares of its capital stock, or
make any distribution of cash, property or assets among the holders of shares
of its capital stock, or make any change in its capital structure that could
reasonably be expected to have a Material Adverse Effect; provided that:
(a) the Borrower or any Subsidiary may pay dividends in shares of its
own capital stock; and
(b) any Subsidiary may pay cash dividends or make distributions to
the Borrower.
SECTION 10.8 Limitations on Exchange and Issuance of Capital
Stock. Issue, sell or otherwise dispose of any class or series of capital
stock that, by its terms or by the terms of any security into which it is
convertible or exchangeable, is, or upon the happening of an event or passage
of time would be, (a) convertible or exchangeable into Debt or (b) required to
be redeemed or repurchased, including at the option of the holder, in whole or
in part, for cash or other property other than capital stock, or has, or upon
the happening of an event or passage of time would have, a redemption or
similar payment due.
SECTION 10.9 Transactions with Affiliates. Except as otherwise
provided herein, directly or indirectly (a) make any loan or advance to, or
purchase or assume any note or other obligation to or from, any of its
officers, directors, shareholders or other Affiliates, or to or from any member
of the immediate family of any of its officers, directors, shareholders or
other Affiliates, or subcontract any operations to any of its Affiliates or (b)
enter into, or be a party to, any other transaction with any of its Affiliates,
except pursuant to the reasonable requirements of its business which are no
less favorable to it than it would obtain in a comparable arm's length
transaction with a Person not its Affiliate.
SECTION 10.10 Certain Accounting Changes. Change its Fiscal Year
end, or make any material change in its accounting treatment and reporting
practices except as required by GAAP.
SECTION 10.11 Amendments; Payments and Prepayments of Subordinated
Debt. Amend or modify (or permit the modification or amendment of) any of the
terms or provisions of any Subordinated Debt, or cancel or forgive, make any
voluntary or optional payment or prepayment on, or redeem or acquire for value
(including without limitation by way of depositing with any trustee with
respect thereto money or securities before due for the purpose of paying when
due) any Subordinated Debt.
SECTION 10.12 Restrictive Agreements. Enter into any Debt which
contains any negative pledge on assets or any covenants more restrictive than
the provisions of Articles VIII, IX and X hereof, or which restricts, limits or
otherwise encumbers its ability to incur Liens on or
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with respect to any of its assets or properties other than the assets or
properties securing such Debt.
ARTICLE XI
DEFAULT AND REMEDIES
SECTION 11.1 Events of Default. Each of the following shall
constitute an Event of Default, whatever the reason for such event and whether
it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment or order of any court or any order, rule or regulation
of any Governmental Authority or otherwise:
(a) Default in Payment of Principal of Loans and Reimbursement
Obligations. The Borrower shall default in any payment of principal of any
Loan, Note or Reimbursement Obligation when and as due (whether at maturity, by
reason of acceleration or otherwise).
(b) Other Payment Default. The Borrower shall default in the payment
when and as due (whether at maturity, by reason of acceleration or otherwise)
of interest on any Loan, Note or Reimbursement Obligation or the payment of any
other Obligation, and such default shall continue unremedied for three (3)
Business Days.
(c) Misrepresentation. Any representation or warranty made or deemed
to be made by the Borrower or any of its Subsidiaries under this Agreement, any
Loan Document or any amendment hereto or thereto, shall at any time prove to
have been incorrect or misleading in any material respect when made or deemed
made.
(d) Default in Performance of Certain Covenants. The Borrower shall
default in the performance or observance of any covenant or agreement contained
(i) in Section 7.1 or 7.2 of this Agreement and such default shall continue
unremedied for a period of three (3) Business Days after written notice thereof
from the Administrative Agent or any Lender or (ii) in Section 7.5(e)(i) or
Articles IX or X of this Agreement.
(e) Default in Performance of Other Covenants and Conditions. The
Borrower or any Subsidiary thereof shall default in the performance or
observance of any term, covenant, condition or agreement contained in this
Agreement (other than as specifically provided for otherwise in this Section
11.1) or any other Loan Document and such default shall continue for a period
of thirty (30) days after written notice thereof has been given to the Borrower
by the Administrative Agent.
(f) Hedging Agreement. Any termination payment shall be due by the
Borrower under any Hedging Agreement and such amount is not paid within thirty
(30) Business Days of the due date thereof.
(g) Debt Cross-Default. The Borrower or any of its Subsidiaries
shall (i) default in the payment of any Debt (other than the Notes or any
Reimbursement Obligation) the aggregate
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outstanding amount of which Debt is in excess of $1,000,000 beyond the period
of grace if any, provided in the instrument or agreement under which such Debt
was created, or (ii) default in the observance or performance of any other
agreement or condition relating to any Debt (other than the Notes or any
Reimbursement Obligation) the aggregate outstanding amount of which Debt is in
excess of $1,000,000 or contained in any instrument or agreement evidencing,
securing or relating thereto or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the holder or holders of such Debt (or a trustee or agent on behalf of
such holder or holders) to cause, with the giving of notice if required, any
such Debt to become due prior to its stated maturity (any applicable grace
period having expired).
(h) Other Cross-Defaults. The Borrower or any of its Subsidiaries
shall default in the payment when due, or in the performance or observance, of
any material obligation or material condition of any Material Contract unless,
but only as long as, the existence of any such default is being contested by
the Borrower or such Subsidiary in good faith by appropriate proceedings and
adequate reserves in respect thereof have been established on the books of the
Borrower or such Subsidiary to the extent required by GAAP.
(i) Change in Control. Any person or group of persons (within the
meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended)
(other than ITC Holding Company, Inc. and its Affiliates) shall obtain
ownership or control in one or more series of transactions of more than
twenty-five percent (25%) of the common stock or twenty-five percent (25%) of
the voting power of the Borrower entitled to vote in the election of members of
the board of directors of the Borrower or there shall have occurred under any
indenture or other instrument evidencing any Debt in excess of $1,000,000 any
"change in control" (as defined in such indenture or other evidence of Debt)
obligating the Borrower to repurchase, redeem or repay all or any part of the
Debt or capital stock provided for therein (any such event, a "Change in
Control").
(j) Voluntary Bankruptcy Proceeding. The Borrower or any Subsidiary
thereof shall (i) commence a voluntary case under the federal bankruptcy laws
(as now or hereafter in effect), (ii) file a petition seeking to take advantage
of any other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition for adjustment of debts, (iii)
consent to or fail to contest within sixty (60) days after the filing thereof
any petition filed against it in an involuntary case under such bankruptcy laws
or other laws, (iv) apply for or consent to, or fail to contest in a timely and
appropriate manner, the appointment of, or the taking of possession by, a
receiver, custodian, trustee, or liquidator of itself or of a substantial part
of its property, domestic or foreign, (v) admit in writing its inability to pay
its debts as they become due, (vi) make a general assignment for the benefit of
creditors, or (vii) take any corporate action for the purpose of authorizing
any of the foregoing.
(k) Involuntary Bankruptcy Proceeding. A case or other proceeding
shall be commenced against the Borrower or any Subsidiary thereof in any court
of competent jurisdiction seeking (i) relief under the federal bankruptcy laws
(as now or hereafter in effect) or under any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding up or adjustment of
debts, or (ii) the appointment of a trustee, receiver, custodian,
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liquidator or the like for the Borrower or any Subsidiary thereof or for all or
any substantial part of their respective assets, domestic or foreign, and such
case or proceeding shall continue without dismissal or stay for a period of
sixty (60) consecutive days, or an order granting the relief requested in such
case or proceeding (including, but not limited to, an order for relief under
such federal bankruptcy laws) shall be entered.
(l) Failure of Agreements. Any provision of this Agreement or of any
other Loan Document shall for any reason cease to be valid and binding on the
Borrower or Subsidiary party thereto or any such Person shall so state in
writing, or this Agreement or any other Loan Document shall for any reason
cease to create a valid and perfected first priority Lien on, or security
interest in, any of the collateral purported to be covered thereby, in each
case other than in accordance with the express terms hereof or thereof.
(m) Termination Event. The occurrence of any of the following
events: (i) the Borrower or any ERISA Affiliate fails to make full payment
when due of all amounts which, under the provisions of any Pension Plan or
Section 412 of the Code, the Borrower or any ERISA Affiliate is required to pay
as contributions thereto, (ii) an accumulated funding deficiency in excess of
$500,000 occurs or exists, whether or not waived, with respect to any Pension
Plan, (iii) a Termination Event or (iv) the Borrower or any ERISA Affiliate as
employers under one or more Multiemployer Plan makes a complete or partial
withdrawal from any such Multiemployer Plan and the plan sponsor of such
Multiemployer Plans notifies such withdrawing employer that such employer has
incurred a withdrawal liability requiring payments in an amount exceeding
$500,000.
(n) Judgment. A judgment or order for the payment of money which
causes the aggregate amount of all such judgments to exceed $1,000,000 in any
Fiscal Year shall be entered against the Borrower or any of its Subsidiaries by
any court and such judgment or order shall continue without discharge or stay
for a period of thirty (30) days.
SECTION 11.2 Remedies. Upon the occurrence of an Event of
Default, with the consent of the Required Lenders, the Administrative Agent
may, or upon the request of the Required Lenders, the Administrative Agent
shall, by notice to the Borrower:
(a) Acceleration; Termination of Facilities. Declare the principal
of and interest on the Loans, the Notes and the Reimbursement Obligations at
the time outstanding, and all other amounts owed to the Lenders and to the
Administrative Agent under this Agreement or any of the other Loan Documents
(other than any Hedging Agreement) (including, without limitation, all L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters
of Credit shall have presented the documents required thereunder) and all other
Obligations (other than obligations owing under any Hedging Agreement), to be
forthwith due and payable, whereupon the same shall immediately become due and
payable without presentment, demand, protest or other notice of any kind, all
of which are expressly waived, anything in this Agreement or the other Loan
Documents to the contrary notwithstanding, and terminate the Credit Facility
and any right of the Borrower to request borrowings or Letters of Credit
thereunder; provided, that upon the occurrence of an Event of Default specified
in Section 11.1(j) or (k), the Credit Facility shall
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be automatically terminated and all Obligations (other than obligations owing
under any Hedging Agreement) shall automatically become due and payable.
(b) Letters of Credit. With respect to all Letters of Credit with
respect to which presentment for honor shall not have occurred at the time of
an acceleration pursuant to the preceding paragraph, require the Borrower at
such time to deposit in a cash collateral account opened by the Administrative
Agent an amount equal to the aggregate then undrawn and unexpired amount of
such Letters of Credit. Amounts held in such cash collateral account shall be
applied by the Administrative Agent to the payment of drafts drawn under such
Letters of Credit, and the unused portion thereof after all such Letters of
Credit shall have expired or been fully drawn upon, if any, shall be applied to
repay the other Obligations. After all such Letters of Credit shall have
expired or been fully drawn upon, the Reimbursement Obligation shall have been
satisfied and all other Obligations shall have been paid in full, the balance,
if any, in such cash collateral account shall be returned to the Borrower.
(c) Rights of Collection. Exercise on behalf of the Lenders all of
its other rights and remedies under this Agreement, the other Loan Documents
and Applicable Law, in order to satisfy all of the Borrower's Obligations.
SECTION 11.3 Rights and Remedies Cumulative; Non-Waiver; etc. The
enumeration of the rights and remedies of the Administrative Agent and the
Lenders set forth in this Agreement is not intended to be exhaustive and the
exercise by the Administrative Agent and the Lenders of any right or remedy
shall not preclude the exercise of any other rights or remedies, all of which
shall be cumulative, and shall be in addition to any other right or remedy
given hereunder or under the Loan Documents or that may now or hereafter exist
in law or in equity or by suit or otherwise. No delay or failure to take
action on the part of the Administrative Agent or any Lender in exercising any
right, power or privilege shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or privilege preclude other
or further exercise thereof or the exercise of any other right, power or
privilege or shall be construed to be a waiver of any Event of Default. No
course of dealing between the Borrower, the Administrative Agent and the
Lenders or their respective agents or employees shall be effective to change,
modify or discharge any provision of this Agreement or any of the other Loan
Documents or to constitute a waiver of any Event of Default.
ARTICLE XII
THE ADMINISTRATIVE AGENT
SECTION 12.1 Appointment. Each of the Lenders hereby irrevocably
designates and appoints First Union as Administrative Agent of such Lender
under this Agreement and the other Loan Documents for the term hereof and each
such Lender irrevocably authorizes First Union as Administrative Agent for such
Lender, to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the Administrative Agent by the terms
of this Agreement and such other Loan Documents, together with such other
powers as are reasonably
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incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement or such other Loan Documents, the Administrative Agent shall not
have any duties or responsibilities, except those expressly set forth herein
and therein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or the other Loan Documents or otherwise
exist against the Administrative Agent. Any reference to the Administrative
Agent in this Article XII shall be deemed to refer to the Administrative Agent
solely in its capacity as Administrative Agent and not in its capacity as a
Lender.
SECTION 12.2 Delegation of Duties. The Administrative Agent may
execute any of its respective duties under this Agreement and the other Loan
Documents by or through agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such duties. The
Administrative Agent shall not be responsible for the negligence or misconduct
of any agents or attorneys-in-fact selected by the Administrative Agent with
reasonable care.
SECTION 12.3 Exculpatory Provisions. Neither the Administrative
Agent nor any of its officers, directors, employees, agents, attorneys-in-fact,
Subsidiaries or Affiliates shall be (a) liable for any action lawfully taken or
omitted to be taken by it or such Person under or in connection with this
Agreement or the other Loan Documents (except for actions occasioned solely by
its or such Person's own gross negligence or willful misconduct), or (b)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Borrower or any of its Subsidiaries
or any officer thereof contained in this Agreement or the other Loan Documents
or in any certificate, report, statement or other document referred to or
provided for in, or received by the Administrative Agent under or in connection
with, this Agreement or the other Loan Documents or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
the other Loan Documents or for any failure of the Borrower or any of its
Subsidiaries to perform its obligations hereunder or thereunder. The
Administrative Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement, or to inspect the
properties, books or records of the Borrower or any of its Subsidiaries.
SECTION 12.4 Reliance by the Administrative Agent. The
Administrative Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrower), independent accountants and other experts
selected by the Administrative Agent. The Administrative Agent may deem and
treat the payee of any Note as the owner thereof for all purposes unless such
Note shall have been transferred in accordance with Section 13.10 hereof. The
Administrative Agent shall be fully justified in failing or refusing to take
any action under this Agreement and the other Loan Documents unless it shall
first receive such advice or concurrence of the Required Lenders (or, when
expressly required hereby or by the relevant other Loan Document, all the
Lenders) as it deems appropriate or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by
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it by reason of taking or continuing to take any such action except for its own
gross negligence or willful misconduct. The Administrative Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement and the Notes in accordance with a request of the Required Lenders
(or, when expressly required hereby, all the Lenders), and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Lenders and all future holders of the Notes.
SECTION 12.5 Notice of Default. The Administrative Agent shall not
be deemed to have knowledge or notice of the occurrence of any Default or Event
of Default hereunder unless it has received notice from a Lender or the
Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event
that the Administrative Agent receives such a notice, it shall promptly give
notice thereof to the Lenders. The Administrative Agent shall take such action
with respect to such Default or Event of Default as shall be reasonably
directed by the Required Lenders; provided that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it
shall deem advisable in the best interests of the Lenders, except to the extent
that other provisions of this Agreement expressly require that any such action
be taken or not be taken only with the consent and authorization or the request
of the Lenders or Required Lenders, as applicable.
SECTION 12.6 Non-Reliance on the Administrative Agent and Other
Lenders. Each Lender expressly acknowledges that neither the Administrative
Agent nor any of its respective officers, directors, employees, agents,
attorneys-in-fact, Subsidiaries or Affiliates has made any representations or
warranties to it and that no act by the Administrative Agent hereinafter taken,
including any review of the affairs of the Borrower or any of its Subsidiaries,
shall be deemed to constitute any representation or warranty by the
Administrative Agent to any Lender. Each Lender represents to the
Administrative Agent that it has, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrower and its Subsidiaries and made
its own decision to make its Loans and issue or participate in Letter of Credit
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon the Administrative Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and other condition
and creditworthiness of the Borrower and its Subsidiaries. Except for notices,
reports and other documents expressly required to be furnished to the Lenders
by the Administrative Agent hereunder or by the other Loan Documents, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business,
operations, property, financial and other condition or creditworthiness of the
Borrower or any of its Subsidiaries which may come into the possession of the
Administrative Agent or any of its respective officers, directors, employees,
agents, attorneys-in-fact, Subsidiaries or Affiliates.
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SECTION 12.7 Indemnification. The Lenders agree to indemnify the
Administrative Agent in its capacity as such and (to the extent not reimbursed
by the Borrower and without limiting the obligation of the Borrower to do so),
ratably according to the respective amounts of their Commitment Percentages,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the Notes or any Reimbursement Obligation) be
imposed on, incurred by or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement or the other Loan Documents, or
any documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby or any action taken or omitted by
the Administrative Agent under or in connection with any of the foregoing;
provided that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting solely from the
Administrative Agent's bad faith, gross negligence or willful misconduct. The
agreements in this Section 12.7 shall survive the payment of the Notes, any
Reimbursement Obligation and all other amounts payable hereunder and the
termination of this Agreement.
SECTION 12.8 The Administrative Agent in Its Individual Capacity.
The Administrative Agent and its respective Subsidiaries and Affiliates may
make loans to, accept deposits from and generally engage in any kind of
business with the Borrower as though the Administrative Agent were not an
Administrative Agent hereunder. With respect to any Loans made or renewed by it
and any Note issued to it and with respect to any Letter of Credit issued by it
or participated in by it, the Administrative Agent shall have the same rights
and powers under this Agreement and the other Loan Documents as any Lender and
may exercise the same as though it were not an Administrative Agent, and the
terms "Lender" and "Lenders" shall include the Administrative Agent in its
individual capacity.
SECTION 12.9 Resignation of the Administrative Agent; Successor
Administrative Agent. Subject to the appointment and acceptance of a successor
as provided below, the Administrative Agent may resign at any time by giving
notice thereof to the Lenders and the Borrower. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor Administrative
Agent, which successor shall have minimum capital and surplus of at least
$500,000,000 and, so long as no Default or Event of Default has occurred and is
continuing, such appointment shall be consented to by the Borrower (which
consent shall not be unreasonably withheld or delayed). If no successor
Administrative Agent shall have been so appointed by the Required Lenders and
shall have accepted such appointment within thirty (30) days after the
Administrative Agent's giving of notice of resignation, then the Administrative
Agent may, on behalf of the Lenders, appoint a successor Administrative Agent,
which successor shall have minimum capital and surplus of at least $500,000,000
and, so long as no Default or Event of Default has occurred and is continuing,
such appointment shall be consented to by the Borrower (which consent shall not
be unreasonably withheld or delayed). Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested
with all rights, powers, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its
duties and obligations hereunder. After any
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retiring Administrative Agent's resignation hereunder as Administrative Agent,
the provisions of this Section 12.9 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting
as Administrative Agent.
SECTION 12.10 The Administrative Agent. The Administrative Agent
hereby agrees that with respect to any amendment, modification or waiver of
this Agreement and the other Loan Documents, the Administrative Agent shall be
responsible for the preparation, documentation and execution thereof. In
addition, with respect to any action or decision requiring consent or approval
of any Lenders, the Administrative Agent shall be responsible for requesting
such consent or approval from the Lenders.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 Notices.
(a) Method of Communication. Except as otherwise provided in this
Agreement, all notices and communications hereunder shall be in writing, or by
telephone subsequently confirmed in writing. Any notice shall be effective if
delivered by hand delivery or sent via telecopy, recognized overnight courier
service or certified mail, return receipt requested, and shall be presumed to be
received by a party hereto (i) on the date of delivery if delivered by hand or
sent by telecopy, (ii) on the next Business Day if sent by recognized overnight
courier service and (iii) on the third Business Day following the date sent by
certified mail, return receipt requested. A telephonic notice to the
Administrative Agent as understood by the Administrative Agent will be deemed to
be the controlling and proper notice in the event of a discrepancy with or
failure to receive a confirming written notice.
(b) Addresses for Notices. Notices to any party shall be sent to it at the
following addresses, or any other address as to which all the other parties are
notified in writing.
<TABLE>
<S> <C>
If to the Borrower: MindSpring Enterprises, Inc.
1430 West Peachtree St., NW, Suite 400
Atlanta, GA 30309
Attention: Mr. Charles Brewer, Chief Executive Officer
Telephone No.: (404) 287-0770 (ext. 2200)
Telecopy No.: (404) 892-7616
</TABLE>
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<TABLE>
<S> <C>
With copies to: Hogan & Hartson, L.L.P.
(which shall 555 13th Street, N.W.
not constitute notice) Washington, D.C. 20004-1109
Attention: Benton R. Hammond, Esq.
Telephone No.: (202) 637-5600
Telecopy No.: (202) 637-5910
If to First Union as First Union National Bank
Administrative Agent: One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Telephone No.: (704) 374-2698
Telecopy No.: (704) 383-0288
If to any Lender: To the Address set forth on Schedule 1 hereto
</TABLE>
(c) Administrative Agent's Office. The Administrative Agent hereby
designates its office located at the address set forth above, or any subsequent
office which shall have been specified for such purpose by written notice to the
Borrower and Lenders, as the Administrative Agent's Office referred to herein,
to which payments due are to be made and at which Loans will be disbursed and
Letters of Credit issued.
SECTION 13.2 Expenses; Indemnity. The Borrower will (a) pay all
out-of-pocket expenses of the Administrative Agent in connection with (i) the
preparation, execution and delivery of this Agreement and each other Loan
Document, whenever the same shall be executed and delivered, including without
limitation all out-of-pocket syndication and due diligence expenses and
reasonable fees and disbursements of counsel for the Administrative Agent and
(ii) the preparation, execution and delivery of any waiver, amendment or
consent by the Administrative Agent or the Lenders relating to this Agreement
or any other Loan Document, including without limitation reasonable fees and
disbursements of counsel for the Administrative Agent, (b) pay all reasonable
out-of-pocket expenses of the Administrative Agent and each Lender actually
incurred in connection with the enforcement of any rights and remedies of the
Administrative Agent and Lenders under the Credit Facility, including
consulting with appraisers, accountants, engineers, attorneys and other Persons
concerning the nature, scope or value of any right or remedy of the
Administrative Agent or any Lender hereunder or under any other Loan Document
or any factual matters in connection therewith, which expenses shall include
without limitation the reasonable fees and disbursements of such Persons, and
(c) indemnify and hold harmless the Administrative Agent and the Lenders, and
their respective parents, Subsidiaries, Affiliates, employees, agents, officers
and directors (each such Person referred to hereafter in this paragraph as an
"Indemnified Party"), from and against any losses, penalties, fines,
liabilities, damages, costs and expenses, for which any Indemnified Party may
become liable to any third party in connection with any claim, investigation,
litigation or other proceeding (whether or not the Administrative Agent or any
Lender is a party thereto) and the
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prosecution and defense thereof, arising out of or in any way connected with
this Agreement, any other Loan Document or the Loans, including without
limitation reasonable attorney's and consultant's fees, except to the extent
that any of the foregoing result from the gross negligence or willful
misconduct of the party seeking indemnification therefor.
SECTION 13.3 Set-off. In addition to any rights now or hereafter
granted under Applicable Law and not by way of limitation of any such rights,
upon and after the occurrence of any Event of Default and during the
continuance thereof, the Lenders and any assignee or participant of a Lender in
accordance with Section 13.10 are hereby authorized by the Borrower at any time
or from time to time, without notice to the Borrower or to any other Person,
any such notice being hereby expressly waived, to set off and to appropriate
and to apply any and all deposits (general or special, time or demand,
including, but not limited to, indebtedness evidenced by certificates of
deposit, whether matured or unmatured) and any other indebtedness at any time
held or owing by the Lenders, or any such assignee or participant to or for the
credit or the account of the Borrower against and on account of the Obligations
irrespective of whether or not (a) the Lenders shall have made any demand under
this Agreement or any of the other Loan Documents or (b) the Administrative
Agent shall have declared any or all of the Obligations to be due and payable
as permitted by Section 11.2 and although such Obligations shall be contingent
or unmatured.
SECTION 13.4 Governing Law. This Agreement, the Notes and the other
Loan Documents, unless otherwise expressly set forth therein, shall be governed
by, construed and enforced in accordance with the laws of the State of North
Carolina, without reference to the conflicts or choice of law principles
thereof.
SECTION 13.5 Consent to Jurisdiction. The Borrower hereby
irrevocably consents to the personal jurisdiction of the state and federal
courts located in Mecklenburg County, North Carolina, in any action, claim or
other proceeding arising out of any dispute in connection with this Agreement,
the Notes and the other Loan Documents, any rights or obligations hereunder or
thereunder, or the performance of such rights and obligations. The Borrower
hereby irrevocably consents to the service of a summons and complaint and other
process in any action, claim or proceeding brought by the Administrative Agent
or any Lender in connection with this Agreement, the Notes or the other Loan
Documents, any rights or obligations hereunder or thereunder, or the
performance of such rights and obligations, on behalf of itself or its
property, in the manner specified in Section 13.1. Nothing in this Section 13.5
shall affect the right of the Administrative Agent or any Lender to serve legal
process in any other manner permitted by Applicable Law or affect the right of
the Administrative Agent or any Lender to bring any action or proceeding
against the Borrower or its properties in the courts of any other
jurisdictions.
SECTION 13.6 Binding Arbitration; Waiver of Jury Trial.
(a) Binding Arbitration. Upon demand of any party, whether made before or
after institution of any judicial proceeding, any dispute, claim or controversy
arising out of, connected with or relating to the Notes or any other Loan
Documents ("Disputes"), between or among parties to the Notes or any other Loan
Document shall be resolved by binding arbitration as
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provided herein. Institution of a judicial proceeding by a party does not waive
the right of that party to demand arbitration hereunder. Disputes may include,
without limitation, tort claims, counterclaims, claims brought as class
actions, claims arising from Loan Documents executed in the future, disputes as
to whether a matter is subject to arbitration, or claims concerning any aspect
of the past, present or future relationships arising out of or connected with
the Loan Documents. Arbitration shall be conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules") of
the American Arbitration Association and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in Charlotte, North Carolina. The
expedited procedures set forth in Rule 51, et seq. of the Arbitration Rules
shall be applicable to claims of less than $1,000,000. All applicable statutes
of limitation shall apply to any Dispute. A judgment upon the award may be
entered in any court having jurisdiction. Notwithstanding anything foregoing to
the contrary, any arbitration proceeding demanded hereunder shall begin within
ninety (90) days after such demand thereof and shall be concluded within
one-hundred and twenty (120) days after such demand. These time limitations may
not be extended unless a party hereto shows cause for extension and then such
extension shall not exceed a total of sixty (60) days. The panel from which all
arbitrators are selected shall be comprised of licensed attorneys. The single
arbitrator selected for expedited procedure shall be a retired judge from the
highest court of general jurisdiction, state or federal, of the state where the
hearing will be conducted. The parties hereto do not waive any applicable
Federal or state substantive law except as provided herein. Notwithstanding the
foregoing, this paragraph shall not apply to any Hedging Agreement that is a
Loan Document.
(b) Jury Trial. THE ADMINISTRATIVE AGENT, EACH LENDER AND THE BORROWER
HEREBY ACKNOWLEDGE THAT BY AGREEING TO BINDING ARBITRATION THEY HAVE IRREVOCABLY
WAIVED THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM
OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS
AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS
HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
(c) Preservation of Certain Remedies. Notwithstanding the preceding
binding arbitration provisions, the parties hereto and the other Loan Documents
preserve, without diminution, certain remedies that such Persons may employ or
exercise freely, either alone, in conjunction with or during a Dispute. Each
such Person shall have and hereby reserves the right to proceed in any court of
proper jurisdiction or by self help to exercise or prosecute the following
remedies: (i) all rights to foreclose against any real or personal property or
other security by exercising a power of sale granted in the Loan Documents or
under Applicable Law or by judicial foreclosure and sale, (ii) all rights of
self help including peaceful occupation of property and collection of rents, set
off, and peaceful possession of property, (iii) obtaining provisional or
ancillary remedies including injunctive relief, sequestration, garnishment,
attachment, appointment of receiver and in filing an involuntary bankruptcy
proceeding, and (iv) when applicable, a judgment by confession of judgment.
Preservation of these remedies does not limit the power of an arbitrator to
grant similar remedies that may be requested by a party in a Dispute.
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SECTION 13.7 Reversal of Payments. To the extent the Borrower makes
a payment or payments to the Administrative Agent for the ratable benefit of
the Lenders or the Administrative Agent receives any payment or proceeds of the
collateral which payments or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds repaid, the Obligations or part thereof
intended to be satisfied shall be revived and continued in full force and
effect as if such payment or proceeds had not been received by the
Administrative Agent.
SECTION 13.8 Injunctive Relief; Punitive Damages.
(a) The Borrower recognizes that, upon an Event of Default, any remedy of
law may prove to be inadequate relief to the Lenders. Therefore, the Borrower
agrees that the Lenders, at the Lenders' option, shall be entitled to temporary
and permanent injunctive relief in any such case without the necessity of
proving actual damages.
(b) The Administrative Agent, Lenders and the Borrower (on behalf of
itself and its Subsidiaries) hereby agree that no such Person shall have a
remedy of punitive or exemplary damages against any other party to a Loan
Document and each such Person hereby waives any right or claim to punitive or
exemplary damages that they may now have or may arise in the future in
connection with any Dispute, whether such Dispute is resolved through
arbitration or judicially.
(c) The parties agree that they shall not have a remedy of punitive or
exemplary damages against any other party in any Dispute and hereby waive any
right or claim to punitive or exemplary damages they have now or which may arise
in the future in connection with any Dispute whether the Dispute is resolved by
arbitration or judicially.
SECTION 13.9 Accounting Matters. All financial and accounting
calculations, measurements and computations made for any purpose relating to
this Agreement, including, without limitation, all computations utilized by the
Borrower or any Subsidiary thereof to determine compliance with any covenant
contained herein, shall, except as otherwise expressly contemplated hereby or
unless there is an express written direction by the Administrative Agent to the
contrary agreed to by the Borrower, be performed in accordance with GAAP as in
effect on the Closing Date. In the event that changes in GAAP shall be mandated
by the Financial Accounting Standards Board, or any similar accounting body of
comparable standing, or shall be recommended by the Borrower's certified public
accountants, to the extent that such changes would modify such accounting terms
or the interpretation or computation thereof, such changes shall be followed in
defining such accounting terms only from and after the date the Borrower and
the Lenders shall have amended this Agreement to the extent necessary to
reflect any such changes in the financial covenants and other terms and
conditions of this Agreement.
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SECTION 13.10 Successors and Assigns; Participations.
(a) Benefit of Agreement. This Agreement shall be binding upon and inure
to the benefit of the Borrower, the Administrative Agent and the Lenders, all
future holders of the Notes, and their respective successors and assigns, except
that the Borrower shall not assign or transfer any of its rights or obligations
under this Agreement without the prior written consent of each Lender.
(b) Assignment by Lenders. Each Lender may, with the consent of the
Borrower (so long as no Default or Event of Default has occurred and is
continuing) and the consent of the Administrative Agent, which consents shall
not be unreasonably withheld, assign to one or more Eligible Assignees all or a
portion of its interests, rights and obligations under this Agreement
(including, without limitation, all or a portion of the Extensions of Credit at
the time owing to it and the Notes held by it); provided that:
(i) each such assignment shall be of a constant, and not a
varying, percentage of all the assigning Lender's rights and obligations under
this Agreement;
(ii) if less than all of the assigning Lender's Commitment is to
be assigned, the Commitment so assigned shall not be less than $5,000,000;
(iii) the parties to each such assignment shall execute and deliver
to the Administrative Agent, for its acceptance and recording in the Register,
an Assignment and Acceptance in the form of Exhibit G attached hereto (an
"Assignment and Acceptance"), together with any Note or Notes subject to such
assignment;
(iv) such assignment shall not, without the consent of the
Borrower, require the Borrower to file a registration statement with the
Securities and Exchange Commission or apply to or qualify the Loans or the Notes
under the blue sky laws of any state; and
(v) the assigning Lender shall pay to the Administrative Agent an
assignment fee of $3,000 upon the execution by such Lender of the Assignment and
Acceptance; provided that no such fee shall be payable upon any assignment by a
Lender to an Affiliate thereof.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, which effective date
shall be at least five (5) Business Days after the execution thereof, (A) the
assignee thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender hereby
and (B) the Lender thereunder shall, to the extent provided in such assignment,
be released from its obligations under this Agreement.
(c) Rights and Duties Upon Assignment. By executing and delivering an
Assignment and Acceptance, the assigning Lender thereunder and the assignee
thereunder confirm to and
67
<PAGE> 73
agree with each other and the other parties hereto as set forth in such
Assignment and Acceptance.
(d) Register. The Administrative Agent shall maintain a copy of each
Assignment and Acceptance delivered to it and a register for the recordation of
the names and addresses of the Lenders and the amount of the Extensions of
Credit with respect to each Lender from time to time (the "Register"). The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Borrower, the Administrative Agent and the Lenders may treat each person
whose name is recorded in the Register as a Lender hereunder for all purposes of
this Agreement. The Register shall be available for inspection by the Borrower
or any Lender at any reasonable time and from time to time upon reasonable prior
notice.
(e) Issuance of New Notes. Upon its receipt of an Assignment and
Acceptance executed by an assigning Lender and an Eligible Assignee together
with any Note or Notes subject to such assignment and the written consent to
such assignment as provided in Section 13.10(b), the Administrative Agent shall,
if such Assignment and Acceptance has been completed and is substantially in the
form of Exhibit G:
(i) accept such Assignment and Acceptance;
(ii) record the information contained therein in the Register;
(iii) give prompt notice thereof to the Lenders and the Borrower;
and
(iv) promptly deliver a copy of such Assignment and Acceptance to
the Borrower.
Within five (5) Business Days after receipt of a copy of such Assignment and
Acceptance, the Borrower shall execute and deliver to the Administrative Agent,
in exchange for the surrendered Note or Notes, a new Note or Notes to the order
of such Eligible Assignee in amounts equal to the Commitment assumed by it
pursuant to such Assignment and Acceptance and a new Note or Notes to the order
of the assigning Lender in an amount equal to the Commitment retained by it
hereunder. Such new Note or Notes shall be in an aggregate principal amount
equal to the aggregate principal amount of such surrendered Note or Notes,
shall be dated the effective date of such Assignment and Acceptance and shall
otherwise be in substantially the form of the assigned Notes delivered to the
assigning Lender. Each surrendered Note or Notes shall be canceled and returned
to the Borrower.
(f) Participations. Each Lender may sell participations to one or more
banks or other entities in all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its
Extensions of Credit and the Notes held by it); provided that:
(i) each such participation shall be in an amount not less than
$5,000,000;
68
<PAGE> 74
(ii) such Lender's obligations under this Agreement (including,
without limitation, its Commitment) shall remain unchanged;
(iii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations;
(iv) such Lender shall remain the holder of the Notes held by it
for all purposes of this Agreement;
(v) the Borrower, the Administrative Agent and the other Lenders
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement;
(vi) such Lender shall not permit such participant the right to
approve any waivers, amendments or other modifications to this Agreement or any
other Loan Document other than waivers, amendments or modifications which would
reduce the principal of or the interest rate on any Loan or Reimbursement
Obligation, extend the term or increase the amount of the Commitment (except as
expressly permitted pursuant to Section 2.8), reduce the amount of any fees to
which such participant is entitled, extend any scheduled payment date for
principal of any Loan or, except as expressly contemplated hereby or thereby,
release substantially all of the Collateral; and
(vii) any such disposition shall not, without the consent of the
Borrower, require the Borrower to file a registration statement with the
Securities and Exchange Commission to apply to qualify the Loans or the Notes
under the blue sky law of any state.
(g) Disclosure of Information; Confidentiality. The Administrative Agent
and the Lenders shall hold all non-public information with respect to the
Borrower or any Subsidiary thereof obtained pursuant to the Loan Documents in
accordance with their customary procedures for handling confidential
information; provided, that the Administrative Agent may disclose information
relating to this Agreement to Gold Sheets and other similar bank trade
publications, such information to consist of deal terms and other information
customarily found in such publications and provided further, that the
Administrative Agent and Lenders may disclose any such information to the
extent such disclosure is required by law or requested by any regulatory
authority. Any Lender may, in connection with any assignment, proposed
assignment, participation or proposed participation pursuant to this Section
13.10, disclose to the assignee, participant, proposed assignee or proposed
participant, any information relating to the Borrower, or any Subsidiary
thereof, furnished to such Lender by or on behalf of the Borrower or any
Subsidiary thereof; provided, that prior to any such disclosure, each such
assignee, proposed assignee, participant or proposed participant shall agree
with the Borrower or such Lender (which in the case of an agreement with only
such Lender, the Borrower shall be recognized as a third party beneficiary
thereof) to preserve the confidentiality of any confidential information
relating to the Borrower or any Subsidiary thereof received from such Lender.
69
<PAGE> 75
(h) Certain Pledges or Assignments. Nothing herein shall prohibit any
Lender from pledging or assigning any Note to any Federal Reserve Bank in
accordance with Applicable Law.
SECTION 13.11 Amendments, Waivers and Consents. Except as set forth
below, any term, covenant, agreement or condition of this Agreement or any of
the other Loan Documents (other than any Hedging Agreement, the terms and
conditions of which may be amended, modified or waived by the parties thereto)
may be amended or waived by the Lenders, and any consent given by the Lenders,
if, but only if, such amendment, waiver or consent is in writing signed by the
Required Lenders (or by the Administrative Agent with the consent of the
Required Lenders) and delivered to the Administrative Agent and, in the case of
an amendment, signed by the Borrower; provided, that no amendment, waiver or
consent shall (a) increase the amount or extend the time of the obligation of
the Lenders to make Loans or issue or participate in Letters of Credit (except
as expressly permitted pursuant to Section 2.8), including, without limitation,
any waiver or modification of Section 8.12(c) or 8.12(d), (b) extend the
originally scheduled time or times of payment of the principal of any Loan or
Reimbursement Obligation (other than the waiver of prepayments required
pursuant to Section 2.5(b)(iii)) or the time or times of payment of interest on
any Loan or Reimbursement Obligation, (c) reduce the rate of interest or fees
payable on any Loan or Reimbursement Obligation, (d) reduce the principal
amount of any Loan or Reimbursement Obligation, (e) permit any subordination of
the principal or interest on any Loan or Reimbursement Obligation, (f) permit
any assignment (other than as specifically permitted or contemplated in this
Agreement) of any of the Borrower's rights and obligations hereunder, (g)
release any material portion of the Collateral or release any Security Document
(other than as specifically permitted or contemplated in this Agreement or the
applicable Security Document) or (h) amend the provisions of this Section 13.11
or the definition of Required Lenders, without the prior written consent of
each Lender. In addition, no amendment, waiver or consent to the provisions of
(a) Article XII shall be made without the written consent of the Administrative
Agent and (b) Article III without the written consent of the Issuing Lender
affected thereby.
SECTION 13.12 Performance of Duties. The Borrower's obligations under
this Agreement and each of the Loan Documents shall be performed by the
Borrower at its sole cost and expense.
SECTION 13.13 All Powers Coupled with Interest. All powers of
attorney and other authorizations granted to the Lenders, the Administrative
Agent and any Persons designated by the Administrative Agent or any Lender
pursuant to any provisions of this Agreement or any of the other Loan Documents
shall be deemed coupled with an interest and shall be irrevocable so long as
any of the Obligations remain unpaid or unsatisfied or the Credit Facility has
not been terminated.
SECTION 13.14 Survival of Indemnities. Notwithstanding any
termination of this Agreement, the indemnities to which the Administrative
Agent and the Lenders are entitled under the provisions of this Article XIII
and any other provision of this Agreement and the Loan Documents shall continue
in full force and effect and shall protect the Administrative Agent and the
Lenders against events arising after such termination as well as before.
70
<PAGE> 76
SECTION 13.15 Titles and Captions. Titles and captions of Articles,
Sections and subsections in this Agreement are for convenience only, and
neither limit nor amplify the provisions of this Agreement.
SECTION 13.16 Severability of Provisions. Any provision of this
Agreement or any other Loan Document which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective only to the
extent of such prohibition or unenforceability without invalidating the
remainder of such provision or the remaining provisions hereof or thereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 13.17 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and shall be binding upon all parties, their successors and assigns, and all of
which taken together shall constitute one and the same agreement.
SECTION 13.18 Term of Agreement. This Agreement shall remain in
effect from the Closing Date through and including the date upon which all
Obligations shall have been indefeasibly and irrevocably paid and satisfied in
full. The Administrative Agent is hereby permitted to release all Liens on the
Collateral in favor of the Administrative Agent, for the ratable benefit of
itself and the Lenders, upon repayment of the outstanding principal of and all
accrued interest on the Loans, payment of all outstanding fees and expenses
hereunder and the termination of the Lender's Commitments. No termination of
this Agreement shall affect the rights and obligations of the parties hereto
arising prior to such termination.
SECTION 13.19 Inconsistencies with Other Documents; Independent Effect
of Covenants. (a) In the event there is a conflict or inconsistency between
this Agreement and any other Loan Document, the terms of this Agreement shall
control; provided, that any provision of the Security Documents which imposes
additional burdens on the Borrower or its Subsidiaries or further restricts the
rights of the Borrower or its Subsidiaries or gives the Administrative Agent or
Lenders additional rights shall not be deemed to be in conflict or inconsistent
with this Agreement and shall be given full force and effect.
(b) The Borrower expressly acknowledges and agrees that each covenant
contained in Articles VIII, IX, or X hereof shall be given independent effect.
Accordingly, the Borrower shall not engage in any transaction or other act
otherwise permitted under any covenant contained in Articles VIII, IX, or X if,
before or after giving effect to such transaction or act, the Borrower shall or
would be in breach of any other covenant contained in Articles VIII, IX, or X.
[Signature pages to follow]
71
<PAGE> 77
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers, all as of the day and
year first written above.
[CORPORATE SEAL] MINDSPRING ENTERPRISES, INC., as Borrower
By: /s/ MICHAEL MISIKOFF
--------------------------------------
Name: Michael Misikoff
---------------------------------
Title: CFO
---------------------------------
[Signature Pages Continue]
[Credit Agreement]
<PAGE> 78
FIRST UNION NATIONAL BANK,
as Administrative Agent and Lender
By: /s/ C. MARK HEDRICK
--------------------------------------
Name: C. Mark Hedrick
---------------------------------
Title: Vice President
--------------------------------
FIRST UNION CAPITAL MARKETS CORP.,
as Arranger
By: /s/ C. MARK HEDRICK
--------------------------------------
Name: C. Mark Hedrick
---------------------------------
Title: Director
--------------------------------
[Credit Agreement]
<PAGE> 79
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as Lender
By: /s/ ED PORST
--------------------------------------
Name: Ed Porst
---------------------------------
Title: Managing Director
--------------------------------
[Credit Agreement]
<PAGE> 80
ING (US) CAPITAL LLC, as Lender
By: /s/ FRED ASSENHEIMER
--------------------------------------
Name: Fred Assenheimer
---------------------------------
Title: Managing Director
--------------------------------
[Credit Agreement]
<PAGE> 81
NATIONSBANK, N.A., as Lender
By: /s/ ANNE F. APPLEBY
--------------------------------------
Name: Anne F. Appleby
---------------------------------
Title: Senior Vice President
--------------------------------
[Credit Agreement]
<PAGE> 82
Schedule 1.1
(Lenders and Commitments)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
LENDER COMMITMENT COMMITMENT
PERCENTAGE
- --------------------------------------------------------------------------------
<S> <C> <C>
First Union National Bank
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608 25% $25,000,000
Attention: Syndication Agency Services
Telephone No.: (704) 374-2698
Telecopy No.: (704) 383-0288
- --------------------------------------------------------------------------------
Goldman Sachs Credit Partners L.P.
85 Broad Street
14th Floor
New York, NY 10004 25% $25,000,000
Attention: Rich Katz
Telephone No.: (212) 902-5492
Telecopy No.: (212) 357-4451
- --------------------------------------------------------------------------------
ING (US) Capital LLC
55 E. 52nd Street
35th Floor
New York, NY 10055 25% $25,000,000
Attention: Whit Martin
Telephone No.: (212) 309-8989
Telecopy No.: (212) 409-5852
- --------------------------------------------------------------------------------
NationsBank, N.A.
600 Peachtree Street NE
19th Floor
Atlanta, GA 30308 25% $25,000,000
Attention: Anne F. Appleby
Telephone No.: (404) 607-4569
Telecopy No.: (404) 607-6338
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 83
EXHIBIT A
to
Credit Agreement
dated as of February 17, 1999
by and among
MINDSPRING ENTERPRISES, INC.,
as Borrower,
the Lenders party thereto,
First Union Capital Markets Corp.,
as Arranger,
and
First Union National Bank,
as Administrative Agent
FORM OF REVOLVING CREDIT NOTE
<PAGE> 84
NOTE
$ February , 1999
---------- --
FOR VALUE RECEIVED, the undersigned, MINDSPRING ENTERPRISES, INC., a
Delaware corporation, as borrower (the "Borrower"), promises to pay to the order
of _________________________________ (the "Lender"), at the place and times
provided in the Credit Agreement referred to below, the principal sum of
_________________ Dollars ($__________) or, if less, the aggregate unpaid
principal amount of all Loans made by the Lender to the Borrower from time to
time pursuant to that certain Credit Agreement, dated as of even date herewith
(as amended, restated or otherwise modified, the "Credit Agreement") among the
Borrower, the Lenders who are or may become a party thereto (collectively, the
"Lenders"), First Union Capital Markets Corp., as Arranger, and First Union
National Bank, as Administrative Agent. Capitalized terms used herein and not
defined herein shall have the meanings assigned thereto in the Credit Agreement.
The unpaid principal amount of this Note from time to time outstanding is
subject to mandatory repayment from time to time as provided in the Credit
Agreement and shall bear interest as provided in Section 4.1 of the Credit
Agreement. All payments of principal and interest on this Note shall be payable
in lawful currency of the United States of America in immediately available
funds to the account designated in the Credit Agreement.
This Note is entitled to the benefits of, and evidences Obligations
incurred under, the Credit Agreement, to which reference is made for a
description of the security for this Note and for a statement of the terms and
conditions on which the Borrower is permitted and required to make prepayments
and repayments of principal of the Obligations evidenced by this Note and on
which such Obligations may be declared to be immediately due and payable.
THIS NOTE SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF NORTH CAROLINA, WITHOUT REFERENCE TO THE CONFLICTS OR CHOICE OF
LAW PRINCIPLES THEREOF.
The Debt evidenced by this Note is senior in right of payment to all
Subordinated Debt referred to in the Credit Agreement.
The Borrower hereby waives all requirements as to diligence, presentment,
demand of payment, protest and (except as required by the Credit Agreement)
notice of any kind with respect to this Note.
<PAGE> 85
IN WITNESS WHEREOF, the undersigned has executed this Note under seal as
of the day and year first above written.
MINDSPRING ENTERPRISES, INC.
[CORPORATE SEAL]
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
[Revolving Credit Note]
<PAGE> 86
EXHIBIT B
to
Credit Agreement
dated as of February 17, 1999
by and among
MINDSPRING ENTERPRISES, INC.,
as Borrower,
the Lenders party thereto,
First Union Capital Markets Corp.,
as Arranger,
and
First Union National Bank,
as Administrative Agent
FORM OF NOTICE OF BORROWING
<PAGE> 87
NOTICE OF BORROWING
Dated as of:
--------
First Union National Bank,
as Administrative Agent
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Ladies and Gentlemen:
This irrevocable Notice of Borrowing is delivered to you under Section
2.2(a) of the Credit Agreement dated as of February __, 1999 (as amended,
restated, supplemented or otherwise modified, the "Credit Agreement"), by and
among MINDSPRING ENTERPRISES, INC., a Delaware corporation, as borrower (the
"Borrower"), the lenders party thereto (the "Lenders"), First Union Capital
Markets Corp., as Arranger, and First Union National Bank, as Administrative
Agent.
1. The Borrower hereby requests that the Lenders make a Loan to the
Borrower in the aggregate principal amount of $___________. (Complete with an
amount in accordance with Section 2.2(a) of the Credit Agreement.)
2. The Borrower hereby requests that such Loan be made on the following
Business Day: _____________________. (Complete with a Business Day in accordance
with Section 2.2(a) of the Credit Agreement).
3. The Borrower hereby requests that the Loan bear interest at the
following interest rate, plus the Applicable Margin, as set forth below:
Principal Interest Period Termination Date for
Component (LIBOR Interest Period
of Loan Interest Rate Rate only) (if applicable)
[Base Rate or LIBOR
Rate]
4. The principal amount of all Loans and L/C Obligations outstanding as of
the date hereof (including the requested Loan) does not exceed the maximum
amount permitted to be outstanding pursuant to the terms of the Credit
Agreement.
<PAGE> 88
5. All of the conditions applicable to the Loan requested herein as set
forth in the Credit Agreement have been satisfied as of the date hereof and will
remain satisfied to the date of such Loan.
6. Capitalized terms used herein and not defined herein shall have the
meanings assigned thereto in the Credit Agreement.
[Signature Page Follows]
<PAGE> 89
IN WITNESS WHEREOF, the undersigned has executed this Notice of Borrowing
on this ____ day of _______, ____.
MINDSPRING ENTERPRISES, INC.
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
[Notice of Borrowing]
<PAGE> 90
EXHIBIT C
to
Credit Agreement
dated as of February 17, 1999
by and among
MINDSPRING ENTERPRISES, INC.,
as Borrower,
the Lenders party thereto,
First Union Capital Markets Corp.,
as Arranger,
and
First Union National Bank,
as Administrative Agent
FORM OF NOTICE OF ACCOUNT DESIGNATION
<PAGE> 91
NOTICE OF ACCOUNT DESIGNATION
Dated as of:
---------
First Union National Bank, as Administrative Agent
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Ladies and Gentlemen:
This Notice of Account Designation is delivered to you under Section
2.2(b) of the Credit Agreement dated as of February __, 1999 (as amended,
restated, supplemented or otherwise modified, the "Credit Agreement") by and
among MINDSPRING ENTERPRISES, INC., a Delaware corporation, as borrower (the
"Borrower"), the lenders party thereto (the "Lenders"), First Union Capital
Markets Corp., as Arranger, and First Union National Bank, as Administrative
Agent.
1. The Administrative Agent is hereby authorized to disburse all Loan
proceeds into the following account(s):
-----------------------------
ABA Routing Number:
---------
Account Number:
-------------
2. This authorization shall remain in effect until revoked or until a
subsequent Notice of Account Designation is provided to the Administrative
Agent.
3. Capitalized terms used herein and not defined herein shall have the
meanings assigned thereto in the Credit Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Notice of Account
Designation this _____ day of _______, ____.
MINDSPRING ENTERPRISES, INC.
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
<PAGE> 92
EXHIBIT D
to
Credit Agreement
dated as of February 17, 1999
by and among
MINDSPRING ENTERPRISES, INC.,
as Borrower,
the Lenders party thereto,
First Union Capital Markets Corp.,
as Arranger,
and
First Union National Bank,
as Administrative Agent
FORM OF NOTICE OF PREPAYMENT
<PAGE> 93
NOTICE OF PREPAYMENT
Dated as of:
-------------
First Union National Bank,
as Administrative Agent
One First Union Center
301 South College Street, TW-10
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Ladies and Gentlemen:
This irrevocable Notice of Prepayment is delivered to you under Section
2.3(c) of the Credit Agreement dated as of February __, 1999 (as amended,
restated, supplemented or otherwise modified, the "Credit Agreement"), by and
among MINDSPRING ENTERPRISES, INC., a Delaware corporation, as borrower (the
"Borrower"), the lenders party thereto (the "Lenders"), First Union Capital
Markets Corp., as Arranger, and First Union National Bank, as Administrative
Agent.
1. The Borrower hereby provides notice to the Administrative Agent that it
shall repay the following [Base Rate Loans] and/or [LIBOR Rate Loans]:
____________________. (Complete with an amount in accordance with Section 2.3 of
the Credit Agreement.)
2. The Borrower shall repay the above-referenced Loans on the following
Business Day: _______________. (Complete with a Business Day no later than at
least one (1) Business Day subsequent to the date of this Notice of Prepayment
with respect to any Base Rate Loan and three (3) Business Days subsequent to
date of this Notice of Prepayment with respect to any LIBOR Rate Loan.)
3. Capitalized terms used herein and not defined herein shall have the
meanings assigned thereto in the Credit Agreement.
<PAGE> 94
IN WITNESS WHEREOF, the undersigned has executed this Notice of Prepayment
this ____ day of _______, ____.
MINDSPRING ENTERPRISES, INC.
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
[Notice of Prepayment]
<PAGE> 95
EXHIBIT E
to
Credit Agreement
dated as of February 17, 1999
by and among
MINDSPRING ENTERPRISES, INC.,
as Borrower,
the Lenders party thereto,
First Union Capital Markets Corp.,
as Arranger,
and
First Union National Bank,
as Administrative Agent
FORM OF NOTICE OF CONVERSION/CONTINUATION
<PAGE> 96
NOTICE OF CONVERSION/CONTINUATION
Dated as of:
--------------
First Union National Bank, as Administrative Agent
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Ladies and Gentlemen:
This irrevocable Notice of Conversion/Continuation (the "Notice") is
delivered to you under Section 4.2 of the Credit Agreement dated as of February
__, 1999 (as amended, restated, supplemented or otherwise modified, the "Credit
Agreement"), by and among MINDSPRING ENTERPRISES, INC., a Delaware corporation,
as borrower (the "Borrower"), the lenders party thereto (the "Lenders"), First
Union Capital Markets Corp., as Arranger, and First Union National Bank, as
Administrative Agent.
1. This Notice is submitted for the purpose of: (Check one and
complete applicable information in accordance with the Credit Agreement.)
[ ] Converting all or a portion of a Base Rate Loan into a
LIBOR Rate Loan
(a) The aggregate outstanding principal balance of such Loan is
$ .
---------------
(b) The principal amount of such Loan to be converted is
$ .
---------------
(c) The requested effective date of the conversion of such Loan is
.
---------------
(d) The requested Interest Period applicable to the converted Loan
is .
---------------
[ ] Converting a portion of LIBOR Rate Loan into a Base Rate
Loan
(a) The aggregate outstanding principal balance of such Loan is
$ .
---------------
(b) The last day of the current Interest Period for such Loan is
.
---------------
<PAGE> 97
(c) The principal amount of such Loan to be converted is
$ .
---------------
(d) The requested effective date of the conversion of such Loan is
.
---------------
[ ]Continuing all or a portion of a LIBOR Rate Loan as a LIBOR Rate
Loan
(a) The aggregate outstanding principal balance of such Loan is
$ .
---------------
(b) The last day of the current Interest Period for such Loan is
.
---------------
(c) The principal amount of such Loan to be continued is
$ .
---------------
(d) The requested effective date of the continuation of such Loan
is .
---------------
(e) The requested Interest Period applicable to the continued Loan
is .
---------------
2. The principal amount of all Loans and L/C Obligations outstanding as
of the date hereof does not exceed the maximum amount permitted to be
outstanding pursuant to the terms of the Credit Agreement.
3. All of the conditions applicable to the conversion or continuation
of the Loan requested herein as set forth in the Credit Agreement have been
satisfied or waived as of the date hereof and will remain satisfied or waived to
the date of such Loan.
4. Capitalized terms used herein and not defined herein shall have the
meanings assigned thereto in the Credit Agreement.
[Signature Page Follows]
2
<PAGE> 98
IN WITNESS WHEREOF, the undersigned has executed this Notice of
Conversion/Continuation this ____ day of __________, ____.
MINDSPRING ENTERPRISES, INC.
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
[Notice of Conversion/Continuation]
<PAGE> 99
EXHIBIT F
to
Credit Agreement
dated as of February 17, 1999
by and among
MINDSPRING ENTERPRISES, INC.,
as Borrower,
the Lenders party thereto,
First Union Capital Markets Corp.,
as Arranger,
and
First Union National Bank,
as Administrative Agent
FORM OF OFFICER'S COMPLIANCE CERTIFICATE
<PAGE> 100
OFFICER'S COMPLIANCE CERTIFICATE
The undersigned, on behalf of MINDSPRING ENTERPRISES, INC. (the
"Borrower"), hereby certifies to the Administrative Agent and the Lenders (each
as defined in the Credit Agreement referred to below), as follows:
1. This Certificate is delivered to you pursuant to Section 7.2 of the
Credit Agreement dated as of February __, 1999 (as amended, restated,
supplemented or otherwise modified, the "Credit Agreement"), by and among the
Borrower, the lenders party thereto (the "Lenders"), First Union Capital Markets
Corp., as Arranger, and First Union National Bank, as Administrative Agent.
Capitalized terms used herein and not defined herein shall have the meanings
assigned thereto in the Credit Agreement.
2. I have reviewed the financial statements of the Borrower [and its
Subsidiaries] dated as of _______________ and for the _______________ PERIOD[S]
then ended and such statements fairly present in all material respects the
financial condition of the Borrower [and its Subsidiaries] as of the dates
indicated and the results of [their] [its] operations and cash flows for the
period[s] indicated.
3. I have reviewed the terms of the Credit Agreement, and the related Loan
Documents and have made, or caused to be made under my supervision, a review in
reasonable detail of the transactions and the condition of the Borrower [and its
Subsidiaries] during the accounting period covered by the financial statements
referred to in Paragraph 2 above. Such review has not disclosed the existence
during or at the end of such accounting period of any condition or event that
constitutes a Default or an Event of Default, nor do I have any knowledge of the
existence of any such condition or event as at the date of this Certificate
[except, if such condition or event existed or exists, describe the nature and
period of existence thereof and what action the Borrower has taken, is taking
and proposes to take with respect thereto].
4. The Applicable Margin and calculations determining such figure are set
forth on the attached Schedule 1 and the Borrower [and its Subsidiaries]
[is/are] in compliance with the financial covenants contained in Article IX of
the Credit Agreement as shown on such Schedule 1.
[Signature Page Follows]
<PAGE> 101
WITNESS the following signature as of the _____ day of _________, ____.
MINDSPRING ENTERPRISES, INC.
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
[Officer's Compliance Certificate]
<PAGE> 102
Schedule 1
to
Officer's Compliance Certificate
<PAGE> 103
EXHIBIT G
to
Credit Agreement
dated as of February 17, 1999
by and among
MINDSPRING ENTERPRISES, INC.,
as Borrower,
the Lenders party thereto,
First Union Capital Markets Corp.,
as Arranger,
and
First Union National Bank,
as Administrative Agent
FORM OF ASSIGNMENT AND ACCEPTANCE
<PAGE> 104
ASSIGNMENT AND ACCEPTANCE
Dated as of:
---------
Reference is made to the Credit Agreement dated as of February __, 1999
(as amended, restated, supplemented or otherwise modified, the "Credit
Agreement") by and among MINDSPRING ENTERPRISES, INC., a Delaware corporation
(the "Borrower"), the lenders party thereto (the "Lenders"), First Union Capital
Markets Corp., as Arranger, and First Union National Bank, as Administrative
Agent. Capitalized terms used herein which are not defined herein shall have the
meanings assigned thereto in the Credit Agreement.
_____________ (the "Assignor") and _____________ (the "Assignee") agree as
follows:
1. The Assignor hereby sells and assigns to the Assignee, and the Assignee
hereby purchases and assumes from the Assignor, as of the Effective Date (as
defined below), a ____% interest in and to all of the Assignor's interest,
rights and obligations with respect to its Commitment and Loans (including such
percentage of the outstanding L/C Obligations) and the Assignor thereby retains
____% of its interest therein. This Assignment and Acceptance is entered
pursuant to, and authorized by, Section 13.10(b) of the Credit Agreement.
2. The Assignor (i) represents that, as of the date hereof, its Commitment
Percentage (without giving effect to assignments thereof which have not yet
become effective) under the Credit Agreement is ____%, the outstanding balances
of its Loans (including its Commitment Percentage of the outstanding L/C
Obligations) (unreduced by any assignments thereof which have not yet become
effective) under the Credit Agreement is $__________; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or any other Loan Document or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or any other instrument or document furnished pursuant thereto, other
than that the Assignor is the legal and beneficial owner of the interest being
assigned by it hereunder and that such interest is free and clear of any adverse
claim; (iii) makes no representation or warranty and assumes no responsibility
with respect to the financial condition of the Borrower or its Subsidiaries or
the performance or observance by the Borrower or its Subsidiaries of any of
their respective obligations under the Credit Agreement or any other instrument
or document furnished or executed pursuant thereto; and (iv) attaches the Note
delivered to it under the Credit Agreement and requests that the Borrower
exchange such Note for new Notes payable to each of the Assignor and the
Assignee as follows:
[Assignment and Acceptance]
<PAGE> 105
Note Payable to the Order of: Principal Amount of Note:
$
--------- ---------
$
--------- ---------
3. The Assignee (i) represents and warrants that it is legally authorized
to enter into this Assignment and Acceptance; (ii) confirms that it has received
a copy of the Credit Agreement, together with copies of the most recent
financial statements delivered pursuant to Section 7.1 thereof and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (iii) agrees
that it will, independently and without reliance upon the Assignor or any other
Lender or Administrative Agent and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Credit Agreement; (iv) confirms that it is
an Eligible Assignee; (v) appoints and authorizes the Administrative Agent to
take such action as agent on its behalf and to exercise such powers under the
Credit Agreement and the other Loan Documents as are delegated to the
Administrative Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; (vi) agrees that it will perform in accordance
with their terms all the obligations which by the terms of the Credit Agreement
and the other Loan Documents are required to be performed by it as a Lender;
(vii) agrees to hold all confidential information in a manner consistent with
the provisions of Section 13.10(g) of the Credit Agreement; and (viii) includes
herewith for the Administrative Agent the two forms required by Section 4.11(e)
of the Credit Agreement (if not previously delivered).
4. The effective date for this Assignment and Acceptance shall be as set
forth in Section 1 of Schedule 1 hereto (the "Effective Date"). Following the
execution of this Assignment and Acceptance, it will be delivered to the
Administrative Agent for, to the extent required by the Credit Agreement,
consent by the Borrower and the Administrative Agent and acceptance and
recording in the Register.
5. Upon such consents, acceptance and recording, from and after the
Effective Date, (i) the Assignee shall be a party to the Credit Agreement and
the other Loan Documents to which Lenders are parties and, to the extent
provided in this Assignment and Acceptance, have the rights and obligations of a
Lender under each such agreement, and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement and the other Loan
Documents; provided, that to the extent that the Assignor retains any portion
of its Commitment, its rights and obligations under the Credit Agreement and
the other Loan Documents with respect to such retained portion of its
Commitment shall continue to be of full force and effect.
6. Upon such consents, acceptance and recording, from and after the
Effective Date, the Administrative Agent shall make all payments in respect of
the interest assigned hereby (including payments of principal, interest, fees
and other amounts) to the Assignee. The Assignor and
2
[Assignment and Acceptance]
<PAGE> 106
Assignee shall make all appropriate adjustments in payments for periods prior
to the Effective Date or with respect to the making of this assignment directly
between themselves.
7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE DEEMED TO BE A CONTRACT UNDER
SEAL AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NORTH CAROLINA, WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.
WITNESS the following signatures as of the ______ day of _____________,
_____.
ASSIGNOR:
------------------------------------------
By:
--------------------------------------
Title:
-----------------------------------
ASSIGNEE:
------------------------------------------
By:
--------------------------------------
Title:
-----------------------------------
3
[Assignment and Acceptance]
<PAGE> 107
Acknowledged and Consented to:(1)
MINDSPRING ENTERPRISES, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Consented to and Accepted by:
FIRST UNION NATIONAL BANK,
as Administrative Agent
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
- ------------------------------
(1) If applicable pursuant to Section 13.10.
4
[Assignment and Acceptance]
<PAGE> 108
Schedule 1
to
Assignment and Acceptance
<TABLE>
<S> <C>
1. Effective Date ,
------------ ----
2. Assignor's Interest
Prior to Assignment
(a) Commitment Percentage %
(b) Outstanding balance of Commitment Percentage of Loans $
--------------
(c) Outstanding balance of Assignor's Commitment
Percentage of the L/C Obligations $
--------------
3. Assigned Interest (from Section 1) of Loans %
-----
4. Assignee's Extensions of Credit
After Effective Date
(a) Total outstanding balance of
Assignee's Commitment Percentage of Loans
(line 2(b) times line 3) $
--------------
(b) Total outstanding balance of
Assignee's Commitment Percentage
of the L/C Obligations
(line 2(c) times line 3) $
--------------
5. Retained Interest of Assignor after
Effective Date
(a) Retained Interest (from Section 1) of
Commitment Percentage %
-----
(b) Outstanding balance of Assignor's
Commitment Percentage of Loans
(line 2(b) times line 5(a)) $
--------------
(c) Outstanding balance of Assignor's
</TABLE>
<PAGE> 109
<TABLE>
<S> <C>
Commitment Percentage of L/C Obligations
(line 2(c) times line 5(a)) $
--------------
6. Payment Instructions
(a) If payable to Assignor,
to the account of Assignor to:
-----------------------------------
-----------------------------------
ABA No.:
--------------------------
Account Name:
---------------------
Account No.:
----------------------
Attn:
-----------------------------
Ref:
------------------------------
(b) If payable to Assignee, to the account
of Assignee to:
-----------------------------------
-----------------------------------
ABA No.:
--------------------------
Account Name:
---------------------
Account No.:
----------------------
Attn:
-----------------------------
Ref:
------------------------------
</TABLE>
2
<PAGE> 110
EXHIBIT H
to
Credit Agreement
dated as of February 17, 1999
by and among
MINDSPRING ENTERPRISES, INC.,
as Borrower,
the Lenders party thereto,
First Union Capital Markets Corp.,
as Arranger,
and
First Union National Bank,
as Administrative Agent
FORM OF GUARANTY AND COLLATERAL AGREEMENT
<PAGE> 111
[Insert]
G & C Agreement
<PAGE> 112
EXHIBIT I-1
to
Credit Agreement
dated as of February 17, 1999
by and among
MINDSPRING ENTERPRISES, INC.,
as Borrower,
the Lenders party thereto,
First Union Capital Markets Corp.,
as Arranger,
and
First Union National Bank,
as Administrative Agent
FORM OF COMMITMENT INCREASE SUPPLEMENT
<PAGE> 113
COMMITMENT INCREASE SUPPLEMENT
THIS COMMITMENT INCREASE SUPPLEMENT, dated as of ____________, ____ (this
"Commitment Increase Supplement"), to the Credit Agreement referred to below is
entered into by and among MINDSPRING ENTERPRISES, INC., a Delaware corporation,
as borrower (the "Borrower"), FIRST UNION NATIONAL BANK, as Administrative Agent
(the "Administrative Agent"), and ____________________________ (the "Increasing
Lender").
Statement of Purpose
The Borrower is party to a Credit Agreement dated as of February ___, 1999
(as supplemented hereby and as further amended, supplemented or otherwise
modified, the "Credit Agreement"), by and among the Borrower, the Increasing
Lender, the other Lenders who are or may become party thereto and the
Administrative Agent.
Pursuant to Section 2.8 of the Credit Agreement, the Borrower is entitled
to increase the total amount of the Aggregate Commitment thereunder by accepting
the offer of a Lender to increase its Aggregate Commitment thereunder. Pursuant
to Section 2.8 of the Credit Agreement, the Increasing Lender, the Borrower, and
the Administrative Agent hereby agree that the Aggregate Commitment of the
Increasing Lender under the Credit Agreement shall be increased as set forth
herein and in connection therewith shall execute this Commitment Increase
Supplement. All capitalized terms used and not defined herein shall have the
meanings given thereto in the Credit Agreement.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereto hereby agree as follows:
SECTION 1. Aggregate Commitment Increase.
Section 1.1 Aggregate Commitment Increase. Pursuant to Section 2.8 of the
Credit Agreement, the Increasing Lender hereby agrees that its Aggregate
Commitment under the Credit Agreement shall be increased to $___________.
Section 1.2 Commitment Adjustment. If any Loans are outstanding on the
date hereof, the Administrative Agent shall make such transfer of funds as are
necessary in order that the outstanding balance of such Loans reflects the
Commitment Percentages of the Lenders after giving effect to the increase in the
Aggregate Commitment of the Increasing Lender and the corresponding increase in
the Aggregate Commitments pursuant hereto.
Section 1.3 Updated Schedule. Attached hereto is an updated Schedule 1 to
the Credit Agreement revised to include the increase in the Increasing Lender's
Commitment thereunder and the corresponding increase in the total amount of the
Aggregate Commitments.
<PAGE> 114
SECTION 2. Representations and Warranties of the Borrower.
The Borrower hereby confirms that each of the representations and
warranties under the Loan Documents is true and correct in all material respects
as of the date hereof unless such representation or warranty relates to an
earlier date, in which such case it was true and correct as of such earlier
date, and that no Default or Event of Default has occurred or is continuing
under the Credit Agreement.
SECTION 3. General Provisions.
Section 3.1 Limited Effect. Except as supplemented hereby, the Credit
Agreement and each other Loan Document shall continue to be, and shall remain,
in full force and effect. This Commitment Increase Supplement shall not be
deemed (i) to be a waiver of, or consent to, or a modification or amendment of,
any other term or condition of the Credit Agreement or (ii) to prejudice any
right or rights which the Administrative Agent or the Lenders may now have or
may have in the future under or in connection with the Credit Agreement or the
Loan Documents or any of the instruments or agreements referred to therein, as
the same may be amended or modified from time to time.
Section 3.2 Costs and Expenses. The Borrower hereby agrees to pay or
reimburse the Administrative Agent for all reasonable and customary
out-of-pocket costs and expenses incurred in connection with the preparation,
negotiation and execution of this Commitment Increase Supplement including,
without limitation, the reasonable fees and disbursements of counsel.
Section 3.3 Counterparts. This Commitment Increase Supplement may be
executed by one or more of the parties hereto in any number of separate
counterparts and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
Section 3.4 Governing Law. THIS COMMITMENT INCREASE SUPPLEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NORTH CAROLINA, WITHOUT REFERENCE TO THE CONFLICTS OR CHOICE OF LAW
PRINCIPLES THEREOF.
[SIGNATURE PAGES FOLLOW]
<PAGE> 115
IN WITNESS WHEREOF the undersigned have duly executed this Commitment
Increase Supplement as of the date first above written.
MINDSPRING ENTERPRISES, INC., as Borrower
[CORPORATE SEAL]
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
[SIGNATURE PAGES CONTINUE]
[Commitment Increase Supplement]
<PAGE> 116
FIRST UNION NATIONAL BANK, as
Administrative Agent
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
[SIGNATURE PAGES CONTINUE]
[Commitment Increase Supplement]
<PAGE> 117
[INCREASING LENDER]
[CORPORATE SEAL]
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
[Commitment Increase Supplement]
<PAGE> 118
EXHIBIT I-2
to
Credit Agreement
dated as of February 17, 1999
by and among
MINDSPRING ENTERPRISES, INC.,
as Borrower,
the Lenders party thereto,
First Union Capital Markets Corp.,
as Arranger,
and
First Union National Bank,
as Administrative Agent
FORM OF NEW LENDER SUPPLEMENT
<PAGE> 119
NEW LENDER SUPPLEMENT
THIS NEW LENDER SUPPLEMENT dated as of the ____ day of __________, 19___
(this "New Lender Supplement"), to the Credit Agreement referred to below is
entered into by and among MINDSPRING ENTERPRISES, INC., a Delaware corporation,
as borrower (the "Borrower"), FIRST UNION NATIONAL BANK, as Administrative
Agent (the "Administrative Agent"), and ____________________________ (the "New
Lender").
Statement of Purpose
The Borrower is party to a Credit Agreement dated as of February ____,
1999 (as supplemented hereby and as further amended, restated, supplemented or
otherwise modified, the "Credit Agreement"), by and among the Borrower, the
Lenders who are or may become party thereto and the Administrative Agent.
Pursuant to Section 2.8 of the Credit Agreement, the Borrower is entitled
to increase the total amount of the Aggregate Commitment thereunder by accepting
the offer of any Person (not then a Lender) constituting an Eligible Assignee to
become a new Lender thereunder. Pursuant to Section 2.8 of the Credit Agreement,
the New Lender, the Borrower and the Administrative Agent hereby agree that the
New Lender shall be a Lender under the Credit Agreement and in connection
therewith execute this New Lender Supplement. All capitalized terms used and not
defined herein shall have the meanings given thereto in the Credit Agreement.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereto hereby agree as follows:
SECTION 1. Joinder of New Lender.
Section 1.1 Joinder. Pursuant to Section 2.8 of the Credit Agreement, the
New Lender hereby agrees that it is a Lender under the Credit Agreement as if a
signatory thereto on the Closing Date, and the New Lender shall comply with and
be subject to and have the benefit of all of the terms, conditions, covenants,
agreements and obligations set forth therein. The New Lender hereby agrees that
each reference to a "Lender" or the "Lenders" in the Credit Agreement shall
include the New Lender. The New Lender acknowledges that it has received a copy
of the Credit Agreement and that it has read and understands the terms thereof.
Section 1.2 Commitment Adjustment. If any Loans are outstanding on the
date hereof, the Administrative Agent shall make such transfers of funds as are
necessary in order that the outstanding balance of such Loans reflects the
Commitment Percentages of the Lenders after giving effect to the joinder of the
New Lender pursuant to this New Lender Supplement and any increase in the
Aggregate Commitments pursuant hereto.
Section 1.3 Updated Schedule. Attached hereto is an updated Schedule 1 to
the Credit Agreement revised to include the joinder of the New Lender as a
Lender and its Commitment thereunder and the corresponding increase in the total
amount of the Aggregate Commitments.
<PAGE> 120
SECTION 2. Representations and Warranties.
Section 2.1 Representations and Warranties of the Borrower. The Borrower
hereby confirms that each representation and warranty under the Loan Documents
is true and correct in all material respects as of the date hereof unless such
representation or warranty relates to an earlier date, in which case it was true
and correct as of such earlier date and that no Default or Event of Default has
occurred or is continuing under the Credit Agreement.
Section 2.2 Representations and Warranties of the New Lender. The New
Lender hereby represents and warrants that it is an Eligible Assignee, and it
has complied with the provisions of Section 4.11(e) of the Credit Agreement if
applicable thereto.
SECTION 3 General Provisions.
Section 3.1 Limited Effect. Except as supplemented hereby, the Credit
Agreement and each other Loan Document shall continue to be, and shall remain,
in full force and effect. This New Lender Supplement shall not be deemed (i) to
be a waiver of, or consent to, or a modification or amendment of, any other term
or condition of the Credit Agreement or (ii) to prejudice any right or rights
which the Administrative Agent or the Lenders may now have or may have in the
future under or in connection with the Credit Agreement or the Loan Documents or
any of the instruments or agreements referred to therein, as the same may be
amended or modified from time to time.
Section 3.2 Costs and Expenses. The Borrower hereby agrees to pay or
reimburse the Administrative Agent for all reasonable and customary
out-of-pocket costs and expenses incurred in connection with the preparation,
negotiation and execution of this New Lender Supplement including, without
limitation, the reasonable fees and disbursements of counsel.
Section 3.3 Counterparts. This New Lender Supplement may be executed by
one or more of the parties hereto in any number of separate counterparts and all
of said counterparts taken together shall be deemed to constitute one and the
same instrument.
Section 3.4 Governing Law. THIS NEW LENDER SUPPLEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NORTH CAROLINA, WITHOUT REFERENCE TO THE CONFLICTS OR CHOICE OF LAW PRINCIPLES
THEREOF.
[SIGNATURE PAGES FOLLOW]
<PAGE> 121
IN WITNESS WHEREOF the undersigned have duly executed this New Lender
Supplement as of the date first above written.
MINDSPRING ENTERPRISES, INC., as Borrower
[CORPORATE SEAL]
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
[SIGNATURE PAGES CONTINUE]
[New Lender Supplement]
<PAGE> 122
FIRST UNION NATIONAL BANK, as
Administrative Agent
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
[SIGNATURE PAGES CONTINUE]
[New Lender Supplement]
<PAGE> 123
[NEW LENDER]
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
[New Lender Supplement]
<PAGE> 1
Exhibit 10.2
================================================================================
GUARANTY AND COLLATERAL AGREEMENT
made by
MINDSPRING ENTERPRISES, INC.
and the other Grantors party hereto
in favor of
FIRST UNION NATIONAL BANK,
as Administrative Agent
Dated as of February 17, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Page
----
SECTION 1. DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-----------
1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
-----------------------------
SECTION 2. GUARANTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
--------
2.2 Right of Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
---------------------
2.3 No Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
--------------
2.4 Amendments, etc. with respect to the Borrower Obligations . . . . . . . . . . . . . . . . . 9
----------------------------------------------------------
2.5 Guarantee Absolute and Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
------------------------------------
2.6 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
-------------
2.7 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
--------
SECTION 3. GRANT OF SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.1 Pledge and Grant of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 11
-------------------------------------
3.2 Stock Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
------------
3.3 Control Agreement; Acknowledgement by Issuers . . . . . . . . . . . . . . . . . . . . . . 12
---------------------------------------------
SECTION 4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.1 Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
---------
4.2 Binding Obligation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
------------------
4.3 Title, No Other Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
---------------------
4.4 Perfected First Priority Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
------------------------------
4.6 Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
----------------------
4.7 Inventory and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
-----------------------
4.8 Farm Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
-------------
4.9 Investment Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
-------------------
4.10 Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
--------
4.11 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
----------
4.12 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
--------
4.13 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
-------- ---------
4.14 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
---------------------
SECTION 5. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.1 Delivery of Instruments, Certificated Securities and Chattel Paper . . . . . . . . . . . . 17
------------------------------------------------------------------
5.2 Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
------------------------
5.3 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
----------------------
5.4 Maintenance of Perfected Security Interest, Further Documentation . . . . . . . . . . . . 18
-----------------------------------------------------------------
5.5 Changes in Locations, Name, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
-------------------------------
5.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
-------
5.7 Investment Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
-------------------
</TABLE>
ii
<PAGE> 3
<TABLE>
<S> <C> <C>
5.8 Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
--------
5.10 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
------------------
5.11 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
---------------------
5.12 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
---------
5.13 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
--------------------
SECTION 6. REMEDIAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.1 Certain Matters Relating to Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
------------------------------------
6.2 Communications with Obligors, Grantors Remain Liable . . . . . . . . . . . . . . . . . . . 25
----------------------------------------------------
6.3 Pledged Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
-------------
6.4 Proceeds to be Turned Over To Administrative Agent . . . . . . . . . . . . . . . . . . . . 27
--------------------------------------------------
6.5 Application of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
-----------------------
6.6 Code and Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
-----------------------
6.7 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
-------------------
6.8 Waiver, Deficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
------------------
SECTION 7. THE ADMINISTRATIVE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.1 Administrative Agent's Appointment as Attorney-in-Fact, etc . . . . . . . . . . . . . . . 29
-----------------------------------------------------------
7.2 Duty of Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
----------------------------
7.3 Execution of Financing Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
---------------------------------
7.4 Authority of Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
---------------------------------
SECTION 8. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.1 Amendments in Writing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
---------------------
8.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
-------
8.3 No Waiver by Course of Conduct; Cumulative Remedies . . . . . . . . . . . . . . . . . . . 32
---------------------------------------------------
8.4 Enforcement Expenses, Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 32
-------------------------------------
8.5 Binding Arbitration; Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . 33
-----------------------------------------
8.6 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
----------------------
8.7 Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
-------
8.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
------------
8.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
------------
8.10 Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
----------------
8.11 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
-----------
8.12 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
-------------
8.13 Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
-----------------------
8.14 Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
---------------
8.15 Additional Grantors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
-------------------
8.16 Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
--------
</TABLE>
iii
<PAGE> 4
<TABLE>
<S> <C>
SCHEDULES
- ---------
Schedule 1 Notice Addresses of Guarantors
Schedule 2 Investment Property
Schedule 3 Material Contracts
Schedule 4 Intellectual Property
Schedule 5 Deposit Accounts/Financial Institutions
EXHIBITS
- --------
Exhibit A Form of Perfection Certificate
Exhibit B Form of Depository Account Agreement
ANNEXES
- -------
Annex I Form of Acknowledgment and Consent
Annex II Form of Guaranty and Collateral Agreement Supplement
</TABLE>
iv
<PAGE> 5
GUARANTY AND COLLATERAL AGREEMENT
GUARANTY AND COLLATERAL AGREEMENT (this "Agreement"), dated as
of February 17, 1999, made by each of the signatories hereto, including certain
Subsidiaries of the Borrower (as defined below), as guarantors (the
"Guarantors"), and the Borrower (the Borrower and the Guarantors together with
any other entity that may become a party hereto as provided herein, the
"Grantors"), in favor of FIRST UNION NATIONAL BANK, as Administrative Agent (in
such capacity, the "Administrative Agent") for the banks and other financial
institutions (the "Lenders") from time to time parties to the Credit Agreement,
dated as of February 17, 1999 (as amended, restated, supplemented or otherwise
modified, the "Credit Agreement"), by and among MINDSPRING ENTERPRISES, INC.,
as borrower (the "Borrower"), the Lenders, FIRST UNION CAPITAL MARKETS CORP.,
as Arranger, and the Administrative Agent.
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have
agreed to make Extensions of Credit to the Borrower upon the terms and subject
to the conditions set forth therein;
WHEREAS, on the date hereof, the Borrower is the sole Grantor;
WHEREAS, on such date that additional Grantors are party
hereto, the Borrower will be a member of an affiliated group which group will
include each other Grantor;
WHEREAS, on such date that additional Grantors are party
hereto, the proceeds of the Extensions of Credit under the Credit Agreement
will be used in part to enable the Borrower to make valuable transfers to one
or more of such Grantors in connection with the operation of their respective
businesses;
WHEREAS, on such date that additional Grantors are party
hereto, the Borrower and such other Grantors will be engaged in related
businesses, and each Grantor will derive substantial direct and indirect
benefit from the making of the Extensions of Credit under the Credit Agreement;
and
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective Extensions of Credit to the Borrower under the
Credit Agreement that the Borrower and each of the other Grantors shall have
executed and delivered this Agreement to the Administrative Agent for the
ratable benefit of itself and the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into the Credit Agreement and
to induce the Lenders to make their respective Extensions of Credit to the
Borrower thereunder, the Borrower and each other Grantor hereby agrees with the
Administrative Agent, for the ratable benefit of itself and the Lenders, as
follows:
<PAGE> 6
SECTION 1. DEFINED TERMS
1.1 Definitions. (a) Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings given
to them in the Credit Agreement; the following terms are used herein as defined
in the UCC: Certificated Security, and Farm Products.
(b) The following terms when used in this Agreement shall
have the meanings assigned to them below:
"Accounts" means all "accounts" (as defined in the UCC) of any
Grantor, including withoutlimitation all present or future accounts
receivable, all rights to payment for goods sold or leased or to be
sold or leased or for services rendered or to be rendered, whether or
not earned by performance, all rights in any merchandise or goods
which any of the same may represent, all notes receivable, book debts,
notes, bills, drafts, acceptances, choses in action, contract rights,
instruments and documents and all sums of money due or to become due
thereon and all proceeds thereof and all rights, title, security
interests and guarantees with respect to each of the foregoing.
"Agreement" means this Guaranty and Collateral Agreement, as
amended, restated, supplemented or otherwise modified.
"Applicable Insolvency Laws" means all Applicable Laws
governing bankruptcy, reorganization, arrangement, adjustment of
debts, relief of debtors, dissolution, insolvency, fraudulent
transfers or conveyances or other similar laws (including, without
limitation, 11 U.S.C. Section 547, Section 548, Section 550 and other
"avoidance" provisions of Title 11 of the United States Code)
applicable in any such proceeding to any Guarantor and this Agreement.
"Borrower Obligations" means, in each case, whether now in
existence or hereafter arising: (a) the principal of and interest on
(including interest accruing after the filing of any bankruptcy or
similar petition) the Loans, (b) the L/C Obligations, (c) all payment
and other obligations owing by the Borrower to any Lender or the
Administrative Agent under any Hedging Agreement with any Lender
(which Hedging Agreement is permitted or required under the Credit
Agreement), and (d) all other fees and commissions (including
attorney's fees), charges, indebtedness, loans, liabilities, financial
accommodations, obligations, covenants and duties owing by the
Borrower to the Lenders or the Administrative Agent, of every kind,
nature and description, direct or indirect, absolute or contingent,
due or to become due, contractual or tortious, liquidated or
unliquidated, and whether or not evidenced by any note, in each case
under or in respect of the Credit Agreement, any Note, any Letter of
Credit or any of the other Loan Documents.
"Chattel Paper" means a writing or writings which evidence
both a monetary obligation of a Grantor and a security interest in or
a lease of specific goods relating thereto.
2
<PAGE> 7
"Collateral" shall have the meaning assigned thereto in
Section 3.1.
"Collateral Account" means any cash collateral account
established by the Administrative Agent as provided in Section 6.4.
"Controlled Depository" shall have the meaning assigned thereto in
Section 5.9.
"Copyright Licenses" means any written agreement naming any
Grantor as licensor or licensee (including, without limitation, those
listed in Schedule 4), granting any right under any Copyright,
including, without limitation, the grant of rights to manufacture,
distribute, exploit and sell materials derived from any Copyright.
"Copyrights" means collectively, all of the following of any
Grantor: (a) all copyrights, rights and interests in copyrights,
works protectable by copyright, copyright registrations and copyright
applications anywhere in the world, including, without limitation, any
thereof referred to on Schedule 4 hereto, (b) all reissues,
extensions, continuations (in whole or in part) and renewals of any of
the foregoing, (c) all income, royalties, damages and payments now or
hereafter due and/or payable under any of the foregoing or with
respect to any of the foregoing, including, without limitation,
damages or payments for past or future infringements of any of the
foregoing, (d) the right to sue for past, present and future
infringements of any of the foregoing and (e) all rights corresponding
to any of the foregoing throughout the world.
"Deposit Account" means a deposit account (as defined in the
UCC) of any applicable jurisdiction and, in any event, including,
without limitation, any demand, time, savings, passbook or like
account maintained with a depositary institution.
"Documents" means all "documents" (as defined in the UCC) or
other receipts of any Grantor covering, evidencing or representing
goods.
"Equipment" means all "equipment" (as defined in the UCC) of
any Grantor and all other machinery, furniture, equipment and goods
(other than Inventory) and all other tangible assets of any Grantor
used or bought for use primarily in the business of such Grantor,
including all accessions, additions, attachments, improvements,
alterations, modifications, substitutions, repairs and replacements
thereto and therefor.
"General Intangibles" means all "general intangibles" (as
defined in the UCC) including, without limitation, with respect to any
Grantor, all contracts, agreements, subscriber lists, instruments and
indentures in any form, and portions thereof, to which such Grantor is
a party or under which such Grantor has any right, title or interest
or to which such Grantor or any property of such Grantor is subject, as
the same may be amended, supplemented or otherwise modified, including,
without limitation, (i) all rights of such Grantor to receive monies
due and to become due to it thereunder or in connection therewith, (ii)
all rights of such Grantor to damages arising thereunder and (iii) all
rights of such Grantor to perform and to exercise all remedies
thereunder, in each
3
<PAGE> 8
case only to the extent that the grant by such Grantor of a security
interest pursuant to this Agreement in its right, title and interest in
such contract, agreement, instrument or indenture (a) is not prohibited
by such contract, agreement, instrument or indenture without the
consent of any other party thereto, (b) would not give any other party
to such contract, agreement, instrument or indenture the right to
terminate its obligations thereunder, or (c) is permitted with consent
if all necessary consents to such grant of a security interest have
been obtained from the other parties thereto; provided that the
foregoing limitation shall not affect, limit, restrict or impair the
grant by such Grantor of a security interest pursuant to this Agreement
in any Account or any money or other amounts due or to become due under
any such contract, agreement, instrument or indenture.
"Guarantor Obligations" means with respect to any Guarantor,
all obligations and liabilities of such Guarantor which may arise
under or in connection with this Agreement (including, without
limitation, those arising pursuant to Section 2) or any other Loan
Document to which such Guarantor is a party, in each case whether on
account of Guaranty Obligations, Reimbursement Obligations, fees,
indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to the
Administrative Agent or to the Lenders that are required to be paid by
such Guarantor pursuant to the terms of this Agreement or any other
Loan Document).
"Guarantors" means the collective reference to each Subsidiary
of the Borrower executing this Agreement.
"Instruments" means all "instruments," "chattel paper" or
"letters of credit" (each as defined in the UCC) of any Grantor,
including, without limitation, instruments, chattel paper and letters
of credit evidencing, representing, arising from or existing in
respect of, relating to, securing or otherwise supporting the payment
of, any of the Accounts, including (but not limited to) promissory
notes, drafts, bills of exchange and trade acceptances.
"Intellectual Property" means collectively, all of the
following of any Grantor: (a) all systems software and applications
software, including, without limitation, screen displays and formats,
program structures, sequence and organization, all documentation for
such software, including, without limitation, user manuals,
flowcharts, programmer's notes, functional specifications, and
operations manuals, all formulas, processes, ideas and know-how
embodied in any of the foregoing, and all program materials,
flowcharts, notes and outlines created in connection with any of the
foregoing, whether or not patentable or copyrightable, (b) concepts,
discoveries, improvements and ideas, (c) any useful information
relating to the items described in clause (a) or (b), including
know-how, technology, engineering drawings, reports, design
information, trade secrets, practices, laboratory notebooks,
specifications, test procedures, maintenance manuals, research,
development, manufacturing, marketing, merchandising, selling,
purchasing and accounting, (d) Patents and Patent Licenses, Copyrights
and Copyright Licenses, Trademarks and Trademark Licenses (excluding
any foreign Copyrights, Copyright Licenses, Trademarks, and Trademark
Licenses owned by the Borrower other than in Canada), and (e) other
licenses to
4
<PAGE> 9
use any of the items described in the foregoing clauses (a), (b), (c)
and (d) or any other similar items of such Grantor necessary for the
conduct of its business.
"Intercompany Note" means any promissory note evidencing loans
made by any Grantor to another Grantor.
"Inventory" means all "inventory" (as defined in the UCC) of
any Grantor, including without limitation, all raw materials,
inventory and other materials and supplies, work-in-process, finished
goods, all accessions thereto, documents therefor and any products
made or processed therefrom and all substances, if any, commingled
therewith or added thereto.
"Investment Property" means the collective reference to (i)
all "investment property" (as such term is defined in the UCC) and
(ii) all Pledged Notes, all Pledged Stock and all Partnership/LLC
Interests (whether or not constituting "investment property," as so
defined) of any Grantor.
"Issuers" means the collective reference to the issuers of any
Investment Property.
"Lender Hedge Agreements" means all Hedge Agreements entered
into by the Borrower with any Lender (or any Affiliate of any Lender).
"Material Contracts" shall have the meaning assigned thereto
in the Credit Agreement.
"Obligations" means (i) in the case of the Borrower, the
Borrower Obligations, and (ii) in the case of each Guarantor, its
Guarantor Obligations.
"Partnership/LLC" means the collective reference to the
entities listed on Schedule 2 under the heading "Partnerships/LLCs."
"Partnership/LLC Interests" means the entire partnership or
membership interest of each Grantor in each Partnership/LLC listed on
Schedule 2 hereto, including, without limitation, each Grantor's
capital account, its interest as a partner or member in the net cash
flow, net profit and net loss, and items of income, gain, loss,
deduction and credit of the Partnerships/LLCs, its interest in all
distributions made or to be made by the Partnerships/LLCs to such
Grantor and all of the other economic rights, titles and interests of
each Grantor as a partner or member of the Partnerships/LLCs, whether
set forth in the partnership agreement or membership agreement of the
Partnerships/LLCs, by separate agreement or otherwise.
"Patent License" means all agreements now or hereafter in
existence, whether written or oral, providing for the grant by or to
any Grantor of any right to manufacture, use or sell any invention
covered in whole or in part by a Patent, including, without
limitation, any of the foregoing referred to in Schedule 4.
5
<PAGE> 10
"Patents" means collectively, all of the following of any
Grantor: (a) all patents, rights and interests in patents, patentable
inventions and patent applications anywhere in the world, including,
without limitation, any thereof referred to on Schedule 4 hereto, (b)
all reissues, extensions, continuations (in whole or in part) and
renewals of any of the foregoing, (c) all income, royalties, damages
or payments now or hereafter due and/or payable under any of the
foregoing or with respect to any of the foregoing, including, without
limitation, damages or payments for past or future infringements of
any of the foregoing, (d) the right to sue for past, present and
future infringements of any of the foregoing and (e) all rights
corresponding to any of the foregoing throughout the world.
"Perfection Certificate" means the perfection certificate
dated as of even date herewith, substantially in the form of Exhibit A
attached hereto, in form and substance satisfactory to the
Administrative Agent, and duly certified by a Responsible Officer of
each Grantor.
"Permitted Liens" means all liens and encumbrances respecting
the Collateral permitted pursuant to the terms of the Credit
Agreement.
"Pledged Notes" means all promissory notes listed on Schedule
2, all Intercompany Notes at any time issued to any Grantor and all
other promissory notes issued to or held by any Grantor (other than
promissory notes issued in connection with extensions of trade credit
by any Grantor in the ordinary course of business).
"Pledged Stock" means the shares of capital stock listed on
Schedule 2 together with any other shares, stock certificates, options
or rights of any nature whatsoever in respect of the capital stock of
any Person that may be issued or granted to, or held by, any Grantor
while this Agreement is in effect.
"Proceeds" means all "proceeds" (as defined in the UCC) and,
in any event, shall include, without limitation, all dividends or
other income from the Investment Property, collections thereon or
distributions or payments with respect thereto.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Interests" means the security interests granted
pursuant to Section 3, as well as all other security interests created
or assigned as additional security for the Obligations pursuant to the
provisions of this Agreement.
"Trademark License" means any agreement now or hereafter in
existence, whether written or oral, providing for the grant by or to
any Grantor of any right to use any Trademark, including, without
limitation, any of the foregoing referred to in Schedule 4.
"Trademarks" means collectively, all of the following of any
Grantor: (a) all trademarks, rights and interests in trademarks,
trade names, corporate names, company names, business names,
fictitious business names, trade styles, service marks, logos, other
6
<PAGE> 11
business identifiers, prints and labels on which any of the foregoing
have appeared or appear, all registrations and recordings thereof, and
all applications in connection therewith anywhere in the world,
including without limitation any thereof referred to on Schedule 4
hereto, (b) all reissues, extensions, continuations (in whole or in
part) and renewals of any of the foregoing, (c) all income, royalties,
damages and payments now or hereafter due and/or payable under any of
the foregoing or with respect to any of the foregoing, including,
without limitation, damages or payments for past or future
infringements of any of the foregoing, (d) the right to sue for past,
present and future infringements of any of the foregoing and (e) all
rights corresponding to any of the foregoing throughout the world.
"UCC" means the Uniform Commercial Code as in effect in the
State of North Carolina; provided that, if by reason of mandatory
provisions of law, the perfection or the effect of perfection or
non-perfection of the Security Interests in any Collateral is governed
by the Uniform Commercial Code as in effect in a jurisdiction other
than North Carolina, "UCC" means the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions
hereof relating to such perfection or effect of perfection or
non-perfection.
1.2 Other Definitional Provisions.
(a) The words "hereof," "herein," "hereto" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
Section and Schedule references are to this Agreement unless otherwise
specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the Collateral
or any part thereof, when used in relation to a Grantor, shall refer to such
Grantor's Collateral or the relevant part thereof.
SECTION 2.GUARANTY
2.1 Guaranty. (a) Each of the Guarantors hereby, jointly and
severally, unconditionally and irrevocably, guarantees to the Administrative
Agent, for the ratable benefit of itself and the Lenders and their respective
successors, endorsees, transferees and assigns, the prompt and complete payment
and performance by the Borrower when due (whether at the stated maturity, by
acceleration or otherwise) of the Borrower Obligations, provided, that
notwithstanding anything to the contrary contained herein, it is the intention
of each Guarantor and the Lenders that in any proceeding involving the
bankruptcy, reorganization, arrangement, adjustment of debts, relief of debtors,
dissolution or insolvency or any similar proceeding with respect to any
Guarantor or its assets, the amount of such Guarantor's Guarantor Obligations
shall be in, but not in excess of, the maximum amount thereof not subject to
avoidance or recovery by operation of Applicable Insolvency Laws. To that end,
but only in the event and to the extent that such Guarantor's Guarantor
Obligations or any payment made pursuant to such
7
<PAGE> 12
Guarantor Obligations would, but for the operation of the foregoing proviso, be
subject to avoidance or recovery in any such proceeding under Applicable
Insolvency Laws, the amount of such Guarantor's Guarantor Obligations shall be
limited to the largest amount which, after giving effect thereto, would not,
under Applicable Insolvency Laws, render such Guarantor's Guarantor Obligations
unenforceable or avoidable or otherwise subject to recovery under Applicable
Insolvency Laws. To the extent any payment actually made pursuant to the
Guarantor Obligations exceeds the limitation of the foregoing proviso and is
otherwise subject to avoidance and recovery in any such proceeding under
Applicable Insolvency Laws, the amount subject to avoidance shall in all events
be limited to the amount by which such actual payment exceeds such limitation
and the Guarantor Obligations as limited by the foregoing proviso shall in all
events remain in full force and effect and be fully enforceable against such
Guarantor. The foregoing proviso is intended solely to preserve the rights of
the Administrative Agent hereunder against such Guarantor in such proceeding to
the maximum extent permitted by Applicable Insolvency Laws, and the foregoing
proviso does not constitute nor shall it be construed as an acknowledgment that
such Guarantor, the Borrower, or any other guarantor or any other Person has or
shall have any right or claim under Applicable Insolvency Laws in such
proceeding.
(a) Each Guarantor agrees that the Borrower Obligations may at any
time and from time to time exceed the amount of the liability of such Guarantor
hereunder without impairing the guaranty contained in this Section 2 or
affecting the rights and remedies of the Administrative Agent or any Lender
hereunder.
(b) The guaranty contained in this Section 2 shall remain in full
force and effect until all the Borrower Obligations and all the Guarantor
Obligations shall have been satisfied by indefeasible payment and performance
in full, no Letter of Credit shall be outstanding and the Commitments shall be
terminated, notwithstanding that from time to time during the term of the
Credit Agreement the Borrower may be free from any Borrower Obligations.
(c) No payment made by the Borrower, any of the Guarantors, any
other guarantor or any other Person or received or collected by the
Administrative Agent or any Lender from the Borrower, any of the Guarantors,
any other guarantor or any other Person by virtue of any action or proceeding
or any set-off or appropriation or application at any time or from time to time
in reduction of or in payment of the Borrower Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of any Guarantor
hereunder which shall, notwithstanding any such payment (other than any payment
made by such Guarantor in respect of the Borrower Obligations or any payment
received or collected from such Guarantor in respect of the Borrower
Obligations), remain liable for the Borrower Obligations up to the maximum
liability of such Guarantor hereunder until the Borrower Obligations are paid
in full, no Letter of Credit shall be outstanding and the Commitments are
terminated.
2.2 Right of Contribution. To the extent that the value (whether
determined under a standard of "fair value," "reasonably equivalent value" or
any other valuation standard under applicable law) of the benefit received by
any Guarantor by reason of the matters described in the preamble to this
Agreement is determined to be less than the Obligations incurred by such
Guarantor, then each other Guarantor agrees that such Guarantor shall have a
present right of contribution against such other Guarantor which right shall be
no less enforceable than the
8
<PAGE> 13
Obligations incurred by each Guarantor under this Agreement. To that end, in
the event any Guarantor is required, by reason of this Agreement, to pay an
amount in excess of the value of the benefit such Guarantor is deemed to have
received by reason of matters described in the preamble of this Agreement, the
remaining Guarantors jointly and severally agree to pay such Guarantor, upon
demand, the amount of such excess. Subject only to the provisions of the
following Section 2.3, such Guarantor shall be subrogated to any and all rights
of the Administrative Agent and the Lenders against the remaining Guarantors and
the Borrower to the extent of such excess payment.
2.3 No Subrogation. Notwithstanding any payment made by any
Guarantor hereunder or any set-off or application of funds of any Guarantor by
the Administrative Agent or any Lender, no Guarantor shall be entitled to be
subrogated to any of the rights of the Administrative Agent or any Lender
against the Borrower or any other Guarantor or any collateral security or
guaranty or right of offset held by the Administrative Agent or any Lender for
the payment of the Borrower Obligations, nor shall any Guarantor seek or be
entitled to seek any contribution or reimbursement from the Borrower or any
other Guarantor in respect of payments made by such Guarantor hereunder, until
all amounts owing to the Administrative Agent and the Lenders by the Borrower
on account of the Borrower Obligations are paid in full, no Letter of Credit
shall be outstanding and the Commitments are terminated. If any amount shall
be paid to any Guarantor on account of such subrogation rights at any time when
all of the Borrower Obligations shall not have been paid in full, such amount
shall be held by such Guarantor in trust for the Administrative Agent and the
Lenders, segregated from other funds of such Guarantor, and shall, forthwith
upon receipt by such Guarantor, be turned over to the Administrative Agent in
the exact form received by such Guarantor (duly indorsed by such Guarantor to
the Administrative Agent, if required), to be applied against the Borrower
Obligations, whether matured or unmatured, in such order as the Administrative
Agent may determine.
2.4 Amendments, etc. with respect to the Borrower Obligations.
Each Guarantor shall remain obligated hereunder notwithstanding that, without
any reservation of rights against any Guarantor and without notice to or
further assent by any Guarantor, any demand for payment of any of the Borrower
Obligations made by the Administrative Agent or any Lender may be rescinded by
the Administrative Agent or such Lender and any of the Borrower Obligations
continued, and the Borrower Obligations, or the liability of any other Person
upon or for any part thereof, or any collateral security or guaranty therefor
or right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Administrative Agent or any Lender, and the
Credit Agreement and the other Loan Documents and any other documents executed
and delivered in connection therewith may be amended, modified, supplemented or
terminated, in whole or in part, as the Administrative Agent (or the Required
Lenders or all Lenders, as the case may be) may deem advisable from time to
time, and any collateral security, guarantee or right of offset at any time held
by the Administrative Agent or any Lender for the payment of the Borrower
Obligations may be sold, exchanged, waived, surrendered or released. Neither
the Administrative Agent nor any Lender shall have any obligation to protect,
secure, perfect or insure any Lien at any time held by it as security for the
Borrower Obligations or for the guaranty contained in this Section 2 or any
property subject thereto.
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2.5 Guarantee Absolute and Unconditional. Each Guarantor waives
any and all notice of the creation, renewal, extension or accrual of any of the
Borrower Obligations and notice of or proof of reliance by the Administrative
Agent or any Lender upon the guaranty contained in this Section 2 or acceptance
of the guaranty contained in this Section 2; the Borrower Obligations, and any
of them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon the
guaranty contained in this Section 2; and all dealings between the Borrower and
any of the Guarantors, on the one hand, and the Administrative Agent and the
Lenders, on the other hand, likewise shall be conclusively presumed to have
been had or consummated in reliance upon the guaranty contained in this Section
2. To the extent permitted by law, each Guarantor expressly waives all rights
it may now or in the future have under any statute (including, without
limitation, North Carolina General Statutes Section 26-7, et seq. or similar
law). Each Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the Borrower or any of
the Guarantors with respect to the Borrower Obligations. Each Guarantor
understands and agrees that the guaranty contained in this Section 2 shall be
construed as a continuing, absolute and unconditional guaranty of payment
without regard to (a) the validity or enforceability of the Credit Agreement or
any other Loan Document, any of the Borrower Obligations or any other
collateral security therefor or guaranty or right of offset with respect
thereto at any time or from time to time held by the Administrative Agent or
any Lender, (b) any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or be asserted by
the Borrower or any other Person against the Administrative Agent or any
Lender, or (c) any other circumstance whatsoever (with or without notice to or
knowledge of the Borrower or such Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the Borrower for
the Borrower Obligations, or of such Guarantor under the guaranty contained in
this Section 2, in bankruptcy or in any other instance. When making any demand
hereunder or otherwise pursuing its rights and remedies hereunder against any
Guarantor, the Administrative Agent or any Lender may, but shall be under no
obligation to, make a similar demand on or otherwise pursue such rights and
remedies as it may have against the Borrower, any other Guarantor or any other
Person or against any collateral security or guaranty for the Borrower
Obligations or any right of offset with respect thereto, and any failure by the
Administrative Agent or any Lender to make any such demand, to pursue such
other rights or remedies or to collect any payments from the Borrower, any
other Guarantor or any other Person or to realize upon any such collateral
security or guaranty or to exercise any such right of offset, or any release of
the Borrower, any other Guarantor or any other Person or any such collateral
security, guaranty or right of offset shall not relieve any Guarantor of any
obligation or liability hereunder, and shall not impair or affect the rights and
remedies, whether express, implied or available as a matter of law, of the
Administrative Agent or any Lender against any Guarantor. For the purposes
hereof "demand" shall include the commencement and continuance of any legal
proceedings.
2.6 Reinstatement. The guaranty contained in this Section 2 shall
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Borrower Obligations is rescinded
or must otherwise be restored or returned by the Administrative Agent or any
Lender upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Borrower or any Guarantor, or upon or as a result of the
appointment of a
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receiver, intervenor or conservator of, or trustee or similar officer for, the
Borrower or any Guarantor or any substantial part of its property, or otherwise,
all as though such payments had not been made.
2.7 Payments. Each Guarantor hereby guarantees that payments
hereunder will be paid to the Administrative Agent without set-off or
counterclaim in Dollars at the Administrative Agent's Office.
SECTION 3.GRANT OF SECURITY INTEREST
3.1 Pledge and Grant of Security Interest. Each Grantor hereby
assigns and transfers (to the extent allowable by Applicable Law) to the
Administrative Agent and hereby grants to the Administrative Agent, for the
ratable benefit of the Administrative Agent and the Lenders, a security
interest in, all of the following property now owned or at any time hereafter
acquired by such Grantor or in which such Grantor now has or at any time in the
future may acquire any right, title or interest (collectively, the
"Collateral"), as collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of such Grantor's Obligations:
(a) all Accounts;
(b) all Chattel Paper;
(c) all Material Contracts;
(d) all Deposit Accounts;
(e) all Documents;
(f) all Equipment;
(g) all General Intangibles;
(h) all Instruments;
(i) all Intellectual Property;
(j) all Inventory;
(k) all Investment Property;
(l) all other property not otherwise described above;
(m) all books and records pertaining to the Collateral;
and
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(n) to the extent not otherwise included, all Proceeds
and products of any and all of the foregoing and all collateral
security and guaranties given by any Person with respect to any of the
foregoing.
Notwithstanding the foregoing and anything contained in any one or
more of the Loan Documents to the contrary, it is agreed that the
Grantors shall not be deemed to have granted a security interest in
the following: (i) any Copyright and Copyright Licenses and Trademark
and Trademark Licenses for any foreign country, except Canada, owned
by any Grantor, (ii) any of Leased Sites listed on Schedule 8.12(c) to
the Credit Agreement until such time as the approvals, authorizations,
or consents therefore have been obtained pursuant to Section 8.12(c)
of the Credit Agreement, (iii) any Leased Sites which do not appear on
Schedule 8.12(c), and (iv) any Material Contracts other than the
NETCOM Network Services Agreement and the WorldCom Network Services
Agreement and the Leased Sites (which shall be treated pursuant to
clause (ii) above). In addition, security interest granted hereby is
granted only to the extent that the grant by such Grantor in its
right, title and interest in any contract, agreement, instrument or
indenture (a) is not prohibited by such contract, agreement,
instrument or indenture without the consent of any other party
thereto, (b) would not give any other party to such contract,
agreement, instrument or indenture the right to terminate its
obligations thereunder, or (c) is permitted with consent if all
necessary consents to such grant of a security interest have been
obtained from the other parties thereto; provided that the foregoing
limitation shall not affect, limit, restrict or impair the grant by
such Grantor of a security interest pursuant to this Agreement in any
Account or any money or other amounts due or to become due under any
such contract, agreement, instrument or indenture.
3.2 Stock Powers. Concurrently with the execution of this
Agreement and the delivery to the Administrative Agent of each certificate
representing one or more shares of Pledged Stock, each Grantor shall deliver an
undated stock power covering such certificate, duly executed in blank by such
Grantor with, if the Administrative Agent so requests, signature guaranteed.
3.3 Control Agreement; Acknowledgement by Issuers.
(a) The Grantors hereby authorize and instruct each Issuer and
Partnership/LLC to comply, and each Issuer and Partnership/LLC hereby agrees to
so comply, with any instruction received thereby from the Administrative Agent
in accordance with the terms of this Agreement with respect to the Collateral,
without any consent or further instructions from such Grantor (or other
registered owner), and such Grantor agrees that such Issuer and Partnership/LLC
shall be fully protected in so complying. Each Issuer and Partnership/LLC
agrees that its agreement set forth in the preceding sentence shall be
sufficient to create in favor of the Administrative Agent, for the benefit of
the Lenders, "control" of the Partnership/LLC Interests within the meaning of
such term under Section 8-106(c) of the UCC. (Notwithstanding the foregoing,
nothing in this Agreement is intended or shall be construed to mean or imply
that the Partnership/LLC Interests constitute "securities" within the meaning
of such term under Section 8-102(a)(15) of the UCC or otherwise to limit or
modify the application of Section 8-103(c) of the UCC. Rather, the
Administrative Agent has requested that this provision be included in this
Agreement solely out of an abundance of
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caution in the event the Partnership/LLC Interests are, nevertheless, deemed to
constitute "securities" under the UCC.)
(b) Each Issuer and Partnership/LLC acknowledges receipt of a copy
of this Agreement and agrees to be bound thereby and to comply with the terms
thereof insofar as such terms are applicable to it. Each Issuer and
Partnership/LLC agrees to notify the Administrative Agent promptly in writing
of the occurrence of any of the events described in Section 5.7(d) of this
Agreement. Each Issuer and Partnership/LLC further agrees that the terms of
Section 6.6 of this Agreement shall apply to it with respect to all actions
that may be required of it under or pursuant to or arising out of Section 6.6
of this Agreement.
SECTION 4.REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into the
Credit Agreement and to induce the Lenders to make their respective Extensions
of Credit to the Borrower thereunder, each Grantor hereby represents and
warrants to the Administrative Agent and each Lender that:
4.1 Existence. Each Grantor is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or
formation, has the power and authority to own its properties and to carry on
its business as now being and hereafter proposed to be conducted (and as
hereafter conducted at the time of any supplement to Schedule 6.1(a) to the
Credit Agreement required pursuant to Section 8.12 of the Credit Agreement) and
is duly qualified and authorized to do business in each jurisdiction in which
the character of its properties or the nature of its business requires such
qualification and authorization, except where the failure to be so qualified
could not reasonably be expected to have a Material Adverse Effect.
4.2 Binding Obligation.
(a) Each Grantor has the corporate right, power and authority to
execute, deliver and perform this Agreement and has taken all necessary
corporate action to authorize its execution, delivery and performance of, this
Agreement.
(b) This Agreement constitutes the legal, valid and binding
obligation of the Grantors enforceable in accordance with its terms, except as
such enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar state or federal debtor relief laws from time to time in
effect which affect the enforcement of creditors' rights in general and the
availability of equitable remedies.
(c) The execution, delivery and performance by the Grantors of
this Agreement will not violate any material provision of any Applicable Law or
Material Contract of any Grantor and will not result in the creation or
imposition of any Lien upon or with respect to any property of any Grantor
other than Liens arising under the Loan Documents.
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4.3 Title, No Other Liens. Except for the security interest
granted to the Administrative Agent for the ratable benefit of itself and the
Lenders pursuant to this Agreement and the other Liens permitted to exist on
the Collateral by the Credit Agreement, such Grantor owns each item of the
Collateral free and clear of any and all Liens or claims of others. No
financing statement under the UCC of any state which names a Grantor as debtor
and which has not been terminated is on file or of record in any public office,
except such as have been filed in favor of the Administrative Agent, for the
ratable benefit of itself and the Lenders, pursuant to this Agreement or as are
permitted by the Credit Agreement.
4.4 Perfected First Priority Liens. The security interests
granted pursuant to this Agreement (a) constitute valid perfected security
interests in all of the Collateral in favor of the Administrative Agent, for
the ratable benefit of itself and the Lenders, as collateral security for such
Grantor's Obligations, enforceable in accordance with the terms hereof against
all creditors of such Grantor and any Persons purporting to purchase any
Collateral from such Grantor and (b) are prior to all other Liens on the
Collateral in existence on the date hereof except for unrecorded Liens
permitted by the Credit Agreement.
4.5 Perfection Certificate. All the information set forth in the
Perfection Certificate is true and correct as of the date hereof.
4.6 Chief Executive Office. On the date hereof, such Grantor's
jurisdiction of organization and the location of such Grantor's chief executive
office or sole place of business are specified in the Perfection Certificate.
4.7 Inventory and Equipment. On the date hereof, the Inventory
and the Equipment (other than mobile goods) are kept at the locations listed in
the Perfection Certificate.
4.8 Farm Products. None of the Collateral constitutes, or is the
Proceeds of, Farm Products.
4.9 Investment Property.
(a) The shares of Pledged Stock pledged by such Grantor hereunder
constitute all the issued and outstanding shares of all classes of the capital
stock of each Issuer owned by such Grantor; and the Partnership/LLC Interests
pledged by such Grantor hereunder constitute all of the outstanding ownership
interests in which the Grantor has any right, title or interest in each
Partnership/LLC in which it is a partner or member.
(b) Each of the Pledged Notes constitutes the legal, valid and
binding obligation of the applicable Grantor, enforceable in accordance with
its terms, except as such enforcement may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or similar state or federal
debtor relief laws from time to time in effect which affect creditors' rights
generally and the availability of equitable remedies.
(c) All the shares of the Pledged Stock have been duly and validly
issued and are fully paid and nonassessable and all of the Partnership/LLC
Interests have been duly and validly issued;
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(d) Such Grantor is the record and beneficial owner of, and has
good and marketable title to, the Investment Property pledged by it hereunder,
free of any and all Liens or options in favor of, or claims of, any other
Person, except the security interest created by this Agreement and Permitted
Liens.
(e) Except as contemplated by Section 6.7, and provided in
Section 4.13, no consent or authorization of, filing with, or other act by or
in respect of, any arbitrator or Governmental Authority and no consent of any
other Person (including, without limitation, any stockholder or creditor of any
Grantor or any Issuer or any general or limited partner or member of any
Partnership/LLC), is required in connection with the execution, delivery,
performance, validity or enforceability against such Grantor of this Agreement,
except (i) as may be required in connection with the disposition of the Pledged
Stock and the Partnership/LLC Interests by laws affecting the offering and sale
of securities generally, (ii) filings with the United States Copyright Office,
the United States Patent and Trademark Office, the Canadian Trademarks Office,
or the Canadian Copyright Office and (iii) filings under the Uniform Commercial
Code;
(f) The Grantors have delivered to the Administrative Agent true
and complete copies of the partnership agreements and operating agreements, as
applicable, for each of the Partnerships/LLCs, which partnership agreements and
operating agreements are currently in full force and effect and have not been
amended or modified except as disclosed to the Administrative Agent in writing.
4.10 Accounts.
(a) No amount payable to such Grantor in excess of $50,000 under
or in connection with any Account is evidenced by any Instrument or Chattel
Paper which has not been delivered to the Administrative Agent.
(b) The amounts represented by such Grantor to the Lenders from
time to time as owing to such Grantor in respect of the Accounts will at such
times be accurate in all material respects.
4.11 Litigation. Except as set forth on Schedule 6.1(u) to the
Credit Agreement, no actions, suits or proceedings before any arbitrator or
Governmental Authority are pending or, to the knowledge of the Grantors,
threatened by or against any Grantor or against any of their properties with
respect to this Agreement or any of the transactions contemplated hereby.
4.12 Solvency. As of the Closing Date, the Grantors, taken as a
whole, (i) have capital sufficient to carry on their business and transactions
and all business and transactions in which they are about to engage and are
able to pay their debts as they mature, and (ii) own property having a value,
both at fair valuation and at present fair saleable value, greater than the
amount required to pay their probable liabilities (including contingencies).
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4.13 Material Contracts.
(a) No consent of any party (other than such Grantor) to any
Material Contract is required, or purports to be required, in connection with
the execution, delivery and performance of this Agreement, except for those
excluded in Section 3.1.
(b) Each Material Contract is in full force and effect and
constitutes a valid and binding obligation of the applicable Grantor
enforceable in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar state or federal debtor relief laws from time to time in
effect which affect the enforcement of creditors' rights in general and the
availability of equitable remedies.
(c) No consent or authorization of, filing with or other act by or
in respect of any Governmental Authority is required in connection with the
execution, delivery, performance, validity or enforceability of any of the
Material Contracts by any party thereto other than those which have been duly
obtained, made or performed, are in full force and effect and do not subject
the scope of any such Material Contract to any material adverse limitation,
either specific or general in nature.
(d) Neither such Grantor nor (to the best of such Grantor's
knowledge) any of the other parties to the Material Contracts is in default in
the performance or observance of any material terms thereof.
(e) The right, title and interest of such Grantor in, to and under
the Material Contracts are not subject to any defenses, offsets, counterclaims
or claims which such defenses, offsets, counterclaims or claims could
reasonably be expected to have a Material Adverse Effect.
(f) Such Grantor has delivered to the Administrative Agent a
complete and correct copy of each Material Contract requested by the
Administrative Agent, including all amendments, supplements and other
modifications thereto.
(g) No amount payable to such Grantor in excess of $50,000 under
or in connection with any Material Contract is evidenced by any Instrument or
Chattel Paper which has not been delivered to the Administrative Agent.
(h) None of the parties to any Material Contract is a Governmental
Authority.
4.14 Intellectual Property.
(a) Schedule 4 lists all material Intellectual Property owned by
such Grantor in its own name on the date hereof.
(b) On the date hereof, all material Intellectual Property is
valid, subsisting, unexpired and enforceable, has not been abandoned and does
not infringe the intellectual property rights of any other Person.
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(c) Except as set forth in Schedule 4 on the date hereof, none of
the Intellectual Property is the subject of any licensing or franchise
agreement pursuant to which such Grantor is the licensor or franchisor.
(d) No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity of,
or such Grantor's rights in, any Intellectual Property in any respect that
could reasonably be expected to have a Material Adverse Effect.
(e) No action or proceeding is pending, or, to the knowledge of
such Grantor, threatened, on the date hereof (i) seeking to limit, cancel or
question the validity of any Intellectual Property or such Grantor's ownership
interest therein, or (ii) which, if adversely determined, would have a Material
Adverse Effect on the value of any Intellectual Property.
4.15 Financing Statements. The Financing Statements naming each
Grantor as a debtor are in appropriate form and when filed in the offices
specified in the Perfection Certificate, the Security Interests will constitute
valid and perfected Security Interests in the Collateral of such Grantor, prior
to all other Liens and rights of others therein except for Permitted Liens (to
the extent that a security interest therein may be perfected by filing pursuant
to the UCC) and all filings and other actions necessary or desirable to perfect
and protect such Security Interests have been duly taken.
SECTION 5.COVENANTS
Each Grantor covenants and agrees with the Administrative Agent and
the Lenders that, from and after the date of this Agreement until the
Obligations shall have been paid in full, no Letter of Credit shall be
outstanding and the Commitments shall have terminated:
5.1 Delivery of Instruments, Certificated Securities and Chattel
Paper. If any amount in excess of $50,000 payable under or in connection with
any of the Collateral shall be or become evidenced by any Instrument,
Certificated Security or Chattel Paper, such Instrument, Certificated Security
or Chattel Paper shall be promptly delivered to the Administrative Agent, duly
indorsed in a manner satisfactory to the Administrative Agent, to be held as
Collateral pursuant to this Agreement.
5.2 Maintenance of Insurance.
(a) Such Grantor will maintain, with financially sound and
reputable companies, insurance policies (i) insuring the Inventory and
Equipment against loss by fire, explosion, theft, fraud and such other
casualties, including business interruption, as may be reasonably satisfactory
to the Administrative Agent in amounts and with deductibles at least as
favorable as those generally maintained by businesses of similar size engaged
in similar activities and (ii) insuring such Grantor, the Administrative Agent
and the Lenders against liability for hazards, risks and liability to persons
and property relating to such Inventory and Equipment, in amounts
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and with deductibles at least as favorable as those generally maintained by
businesses of similar size engaged in similar activities, such policies to be in
such form and having such coverage as may be reasonably satisfactory to the
Administrative Agent and the Lenders.
(b) All such insurance shall (i) name the Administrative Agent as
loss payee (to the extent covering risk of loss or damage to tangible property)
and as an additional insured as its interests may appear (to the extent
covering any other risk), (ii) provide that no cancellation, material reduction
in amount or material change in coverage thereof shall be effective until at
least 30 days after receipt by the Administrative Agent of written notice
thereof, and (iii) be reasonably satisfactory in all other respects to the
Administrative Agent.
(c) The Borrower shall deliver to the Administrative Agent and the
Lenders a report of a reputable insurance broker with respect to such insurance
substantially concurrently with each delivery of the Borrower's audited annual
financial statements and such supplemental reports with respect thereto as the
Administrative Agent may from time to time reasonably request.
5.3 Payment of Obligations. Such Grantor will pay and discharge
or otherwise satisfy at or before maturity or before they become delinquent, as
the case may be, all taxes, assessments and governmental charges or levies
imposed upon the Collateral or in respect of income or profits therefrom, as
well as all claims of any kind (including, without limitation, claims for
labor, materials and supplies) against or with respect to the Collateral, except
that no such charge need be paid if the amount or validity thereof is currently
being contested in good faith by appropriate proceedings, reserves in conformity
with GAAP with respect thereto have been provided on the books of such Grantor
and such proceedings could not reasonably be expected to result in the sale,
forfeiture or loss of any material portion of the Collateral or any interest
therein.
5.4 Maintenance of Perfected Security Interest, Further
Documentation.
(a) Such Grantor shall maintain the Security Interest created by
this Agreement as a perfected Security Interest having at least the priority
described in Section 4.4 and shall defend, in a manner consistent with
customary business practices, such Security Interest against the claims and
demands of all Persons whomsoever.
(b) Such Grantor will furnish to the Administrative Agent and the
Lenders from time to time statements and schedules further identifying and
describing the assets and property of such Grantor and such other reports in
connection therewith as the Administrative Agent may reasonably request, all in
reasonable detail.
(c) At any time and from time to time, upon the written request of
the Administrative Agent and at the sole expense of such Grantor, such Grantor
will promptly and duly execute and deliver, and have recorded, such further
instruments and documents and take such further actions as the Administrative
Agent may reasonably request for the purpose of obtaining or preserving the
full benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, (i) filing any financing or continuation
statements under the UCC (or other
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similar laws) in effect in any jurisdiction with respect to the security
interests created hereby and (ii) in the case of Investment Property, Deposit
Accounts and any other relevant Collateral, taking any actions necessary to
enable the Administrative Agent to obtain "control" (within the meaning of the
applicable UCC ) with respect thereto.
(d) No Grantor shall (1) sell, assign (by operation of law or
otherwise) or otherwise dispose of any of the Collateral, except as permitted
by the Credit Agreement, or (2) create or suffer to exist any Lien or other
charge or encumbrance upon or with respect to any of the Collateral to secure
indebtedness of any Person or entity, except as permitted by the Credit
Agreement.
(e) Each Grantor will comply in all material respects with all
Applicable Laws applicable to the Collateral or any part thereof or to the
operation of such Grantor's business.
5.5 Changes in Locations, Name, etc. Such Grantor will not,
except upon 15 days' prior written notice to the Administrative Agent and
delivery to the Administrative Agent of (a) all additional executed financing
statements and other documents reasonably requested by the Administrative Agent
to maintain the validity, perfection and priority of the security interests
provided for herein and (b) if applicable, a written supplement to the
Perfection Certificate showing any additional location at which Inventory or
Equipment shall be kept:
(i) permit any of the material Inventory or Equipment to
be kept at a location other than those listed in the Perfection
Certificate;
(ii) change its jurisdiction of organization or the
location of its chief executive office from that referred to in the
Perfection Certificate or
(iii) change its name, identity or corporate structure to
such an extent that any financing statement filed by the
Administrative Agent in connection with this Agreement would become
misleading.
5.6 Notices. Such Grantor will advise the Administrative Agent a
promptly, in reasonable detail, of
(a) any Lien (other than security interests created hereby or
Liens permitted under the Credit Agreement) on any of the Collateral which
would adversely affect the ability of the Administrative Agent to exercise any
of its remedies hereunder; and
(b) of the occurrence of any other event which could reasonably be
expected to have a Material Adverse Effect on the Collateral or on the Security
Interests.
5.7 Investment Property.
(a) On or before the date of execution of this Agreement, the
Grantors shall use its best efforts to cause each of the partners and members
of each of the Partnerships/LLCs to acknowledge
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and consent to the pledge of the Partnership/LLC Interests pursuant to this
Agreement by signing the appropriate signature blocks attached hereto.
(b) The Grantors agree that as a partner or member in the
Partnerships/LLCs such Grantor will abide by, perform and discharge each and
every material obligation, covenant and agreement to be abided by, performed or
discharged by such Grantor under the terms of the partnership agreements and
operating agreements, as applicable, of the Partnerships/LLCs, at no cost or
expense to the Administrative Agent and the Lenders.
(c) Without the prior written consent of the Administrative Agent,
the Grantors will not (i) vote to enable, or take any other action to permit,
any Issuer or Partnership/LLC to issue any stock, partnership interests,
limited liability company interests or other equity securities of any nature or
to issue any other securities convertible into or granting the right to
purchase or exchange for any stock, partnership interests, limited liability
company interests or other equity securities of any nature of such Issuer or
Partnership/LLC, (ii) except as expressly provided to the contrary herein,
consent to any modification, extension or alteration of the terms of any
partnership agreement or operating agreement of the Partnerships/LLCs, (iii)
accept a surrender of any partnership agreement or operating agreement of any
of the Partnerships/LLCs or waive any breach of or default under any
partnership agreement or operating agreement of any of the Partnerships/LLCs by
any other party thereto, (iv) sell, assign, transfer, exchange, or otherwise
dispose of, or grant any option with respect to, the Collateral, or (v) create,
incur or permit to exist any Lien or option in favor of, or any claim of any
Person with respect to, any of the Collateral, or any interest therein, except
for the Lien provided for by this Agreement and by Permitted Liens. The
Grantors will defend the right, title and interest of the Administrative Agent
in and to the Collateral against the claims and demands of all Persons
whomsoever.
(d) If such Grantor shall become entitled to receive or shall
receive any stock certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate issued in
connection with any reorganization), option or rights in respect of the capital
stock of any Issuer, whether in addition to, in substitution of, as a
conversion of, or in exchange for, any shares of the Pledged Stock, or
otherwise in respect thereof, such Grantor shall accept the same as the agent
of the Administrative Agent and the Lenders, hold the same in trust for the
Administrative Agent and the Lenders and deliver the same forthwith to the
Administrative Agent in the exact form received, duly indorsed by such Grantor
to the Administrative Agent, if required, together with an undated stock power
covering such certificate duly executed in blank by such Grantor and with, if
the Administrative Agent so requests, signature guaranteed, to be held by the
Administrative Agent, subject to the terms hereof, as additional collateral
security for the Obligations. Any sums paid upon or in respect of the
Investment Property upon the liquidation or dissolution of any Issuer shall be
paid over to the Administrative Agent to be held by it hereunder as additional
collateral security for the Obligations, and in case any distribution of
capital shall be made on or in respect of the Investment Property or any
property shall be distributed upon or with respect to the Investment Property
pursuant to the recapitalization or reclassification of the capital of any
Issuer or pursuant to the reorganization thereof, the property so distributed
shall, unless otherwise subject to a perfected security interest in favor of
the Administrative Agent, be delivered to the Administrative Agent to be held
by it hereunder as
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additional collateral security for the Obligations. If any sums of money or
property so paid or distributed in respect of the Investment Property shall be
received by such Grantor, such Grantor shall, until such money or property is
paid or delivered to the Administrative Agent, hold such money or property in
trust for the Lenders, segregated from other funds of such Grantor, as
additional collateral security for the Obligations.
(e) In the case of each Grantor which is an Issuer, such Issuer
agrees that (i) it will be bound by the terms of this Agreement relating to the
Investment Property issued by it and will comply with such terms insofar as
such terms are applicable to it, (ii) it will notify the Administrative Agent
promptly in writing of the occurrence of any of the events described in Section
5.7(d) with respect to the Investment Property issued by it and (iii) the terms
of Section 6.3(c) and Section 6.7 shall apply to it, mutatis mutandis with
respect to all actions that may be required of it pursuant to Section 6.3(c) or
Section 6.7 with respect to the Investment Property issued by it.
5.8 Accounts.
(a) Other than in the ordinary course of business consistent with
its past practice, such Grantor will not (i) grant any extension of the time of
payment of any Account with a face amount in excess of $50,000, (ii) compromise
or settle any Account with a face amount in excess of $50,000 for less than the
full amount thereof, (iii) release, wholly or partially, any Person liable for
the payment of any Account with a face amount in excess of $50,000, (iv) allow
any credit or discount whatsoever on any Account with a face amount in excess of
$50,000 or (v) amend, supplement or modify any Account with a face amount in
excess of $50,000 in any manner that could materially adversely affect the value
thereof.
(b) Such Grantor will deliver to the Administrative Agent a copy
of each material demand, notice or document received by it that questions or
calls into doubt the validity or enforceability of any material Account.
5.9 Deposit Accounts.
(a) Each Grantor shall maintain on and after the Closing Date its
Deposit Accounts with a financial institution listed on Schedule 5 or at such
other financial institution reasonably acceptable to the Administrative Agent
and the Required Lenders, each of which financial institutions (other than
First Union) shall have executed a Depository Account Agreement in
substantially the form of Exhibit B hereto (any such institution a "Controlled
Depository"). Upon the occurrence or during the continuance of a Default or
Event of Default, whenever any Grantor shall receive any monies, checks or any
other items of payment relating to, or proceeds of, Accounts, such Grantor
agrees with the Administrative Agent and Lenders that it will, consistent with
Grantor's business practice, deposit all such items of payment into a Deposit
Account at First Union or at a Controlled Depository. Upon receipt, such
Grantor shall hold such items of payment in trust for the Administrative Agent
and Lenders and as property of the Administrative Agent and Lenders, separate
from the other funds of such Grantor, until such Grantor shall deposit the same
in a Depository Account as provided above.
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(b) Upon the occurrence or during the continuance of a Default or
Event of Default, each Grantor shall forward to the Administrative Agent, on
the last Business Day of each week, deposit slips related to all such items of
payment received by the Grantor during such week, and, if requested by the
Administrative Agent, copies of such checks and other items, together with a
statement showing the application of all payments on the Accounts during such
week and a collection report with regard thereto in form and substance
satisfactory to the Administrative Agent.
(c) The Administrative Agent shall have the right (but not the
obligation) to apply any funds held in any Deposit Account to the repayment of
any Obligations then due and payable in the order set forth in Section 4.5 of
the Credit Agreement.
(d) Upon the occurrence and during the continuance of an Event of
Default, the Administrative Agent shall have the right in accordance with
Section 6 to transfer or direct the transfer of the balance of each Deposit
Account to the Collateral Account.
5.10 Material Contracts.
(a) Such Grantor will perform and comply in all material respects
with all its material obligations under the Material Contracts.
(b) Such Grantor will not amend, modify, terminate or waive any
material provision of any Material Contract in any manner which could
reasonably be expected to materially adversely affect the value of such
Material Contract as Collateral.
(c) Such Grantor will exercise promptly and diligently each and
every material right which it may have under each Material Contract (other than
any right of termination).
(d) Such Grantor will deliver to the Administrative Agent a copy
of each material demand, notice or document received by it relating in any way
to any Material Contract that questions the validity or enforceability of such
Material Contract.
5.11 Intellectual Property.
(a) Such Grantor (either itself or through licensees) will (i)
continue to use each material Trademark on each and every trademark class of
goods applicable to its current line as reflected in its current catalogs,
brochures and price lists in order to maintain such Trademark in full force
free from any claim of abandonment for non-use, (ii) maintain as in the past
the quality of products and services offered under such material Trademark,
(iii) use such material Trademark with the appropriate notice of registration
and all other notices and legends required by Applicable Laws, (iv) not adopt
or use any mark which is confusingly similar or a colorable imitation of such
material Trademark unless the Administrative Agent, for the ratable benefit of
itself and the Lenders, shall obtain a perfected security interest in such mark
pursuant to this Agreement; and (v) not (and not permit any licensee or
sublicensee thereof to) do any act or knowingly omit to do any act whereby such
material Trademark may become invalidated or impaired in any way.
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(b) Such Grantor (either itself or through licensees) will not do
any act; or omit to do any act, whereby any material Patent may become
forfeited, abandoned or dedicated to the public.
(c) Such Grantor (either itself or through licensees) (i) will
employ each material Copyright and (ii) will not (and will not permit any
licensee or sublicensee thereof to) do any act or knowingly omit to do any act
whereby any material portion of the Copyrights may become invalidated or
otherwise impaired. Such Grantor will not (either itself or through licensees)
do any act whereby any material portion of the Copyrights may fall into the
public domain.
(d) Such Grantor (either itself or through licensees) will not do
any act that knowingly uses any material Intellectual Property to infringe the
intellectual property rights of any other Person.
(e) Such Grantor will notify the Administrative Agent and the
Lenders immediately if it knows, or has reason to know, that any application or
registration relating to any material Intellectual Property may become
forfeited, abandoned or dedicated to the public, or of any adverse
determination or development (including, without limitation, the institution
of, or any such determination or development in, any proceeding in the United
States Patent and Trademark Office, the United States Copyright Office or any
court or tribunal in any country) regarding such Grantor's ownership of, or the
validity of, any material Intellectual Property or such Grantor's right to
register the same or to own and maintain the same.
(f) Whenever such Grantor, either by itself or through any agent,
employee, licensee or designee, shall file an application for the registration
of any Intellectual Property with the United States Patent and Trademark
Office, the United States Copyright Office or any similar office or agency in
any other country or any political subdivision thereof, such Grantor shall
report such filing to the Administrative Agent within five Business Days after
the last day of the fiscal quarter in which such filing occurs. Upon request
of the Administrative Agent, such Grantor shall execute and deliver, and have
recorded, any and all agreements, instruments, documents, and papers as the
Administrative Agent may reasonably request to evidence the Administrative
Agent's and the Lenders' security interest in any Copyright, Patent or
Trademark and the goodwill and general intangibles of such Grantor relating
thereto or represented thereby.
(g) With respect to the material Intellectual Property, such
Grantor will take all reasonable and necessary steps, including, without
limitation, in any proceeding before the United States Patent and Trademark
Office, the United States Copyright Office or any similar office or agency in
any other country or any political subdivision thereof, to maintain and pursue
each application (and to obtain the relevant registration) and to maintain each
registration of the material Intellectual Property, including, without
limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.
(h) In the event that any material Intellectual Property is
infringed, misappropriated or diluted by a third party, such Grantor shall (i)
take such actions as such Grantor shall reasonably deem appropriate under the
circumstances to protect such Intellectual Property and (ii) if such
Intellectual Property is of material economic value, promptly notify the
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Administrative Agent after it learns thereof and sue for infringement,
misappropriation or dilution, to seek injunctive relief where appropriate and
to recover any and all damages for such infringement, misappropriation or
dilution.
5.12 Inventory. Each Grantor will maintain each item of Equipment
in good working order and condition (reasonable wear and tear and obsolescence
excepted), and within a reasonable time will make or cause to be made all
maintenance, service and repairs necessary for such purpose and will promptly
furnish to the Administrative Agent a statement respecting any material loss or
damage to any of the Equipment.
5.13 Regulatory Approvals. Each Grantor will, at its expense,
promptly execute and deliver, or cause the execution and delivery of, all
applications, certificates, instruments, registration statements, and all other
documents and papers the Administrative Agent may reasonably request and as may
be required by law in connection with the obtaining of any consent, approval,
registration, qualification, or authorization of any Person deemed necessary or
appropriate for the effective exercise of any rights under this Agreement.
Without limiting the generality of the foregoing, if an Event of Default shall
have occurred and be continuing, each Grantor shall take any action which the
Administrative Agent may reasonably request in order to transfer and assign to
the Administrative Agent, or to such one or more third parties as the
Administrative Agent may designate, or to a combination of the foregoing, each
Communications License or other Governmental Approval. To enforce the
provisions of this Section, upon the occurrence and during the continuance of an
Event of Default, the Administrative Agent is empowered to request the
appointment of a receiver from any court of competent jurisdiction. Such
receiver shall be instructed to seek from the Governmental Authority an
involuntary transfer of control of each such Communications License or other
Governmental Approval for the purpose of seeking a bona fide purchaser to whom
control will ultimately be transferred. Each Grantor hereby agrees to authorize
such an involuntary assignment or transfer of control upon the request of the
receiver so appointed and, if such Grantor shall refuse to authorize the
transfer, its approval may be required by the court. Upon the occurrence and
continuance of an Event of Default, such Grantor shall further use its
commercially reasonable to assist in obtaining approval of any Governmental
Authority, if required, for any action or transactions contemplated by this
Agreement, including, without limitation, the preparation, execution and filing
with any Governmental Authority of the assignor's or transferor's portion of any
application or applications for consent to the assignment of any Communications
License or other Governmental Approval or transfer of control necessary or
appropriate under the rules and regulations of any Governmental Authority for
the approval of the transfer or assignment of any portion of the assets of such
Grantor, together with any Communications Licenses or other Governmental
Approval. Because such Grantor agrees that the Administrative Agent's remedy at
law for failure of such Grantor to comply with the provisions of this Section
would be inadequate and that such failure would not be adequately compensable in
damages, such Grantor agrees that the covenants contained in this Section may be
specifically enforced, and such Grantor hereby waives and agrees not to assert
any defenses against an action for specific performance of such covenants.
Notwithstanding the foregoing, the Lenders and the Administrative Agent
understand and agree that the assignment or transfer of control of some of the
Communications Licenses requires advance approval by the FCC.
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SECTION 6.REMEDIAL PROVISIONS
6.1 Certain Matters Relating to Accounts.
(a) The Administrative Agent shall have the right to make test
verifications of the Accounts in any manner and through any medium that it
reasonably considers advisable, and each Grantor shall furnish all such
assistance and information as the Administrative Agent may reasonably require
in connection with such test verifications. At any time and from time to time,
upon the Administrative Agent's request and at the expense of the relevant
Grantor, such Grantor shall cause independent public accountants or others
reasonably satisfactory to the Administrative Agent to furnish to the
Administrative Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, the Accounts.
(b) The Administrative Agent hereby authorizes each Grantor to
collect such Grantor's Accounts, under the Administrative Agent's direction and
control, and the Administrative Agent may curtail or terminate said authority at
any time after the occurrence and during the continuance of an Event of Default.
(c) At the Administrative Agent's reasonable request, each Grantor
shall deliver to the Administrative Agent all original and other documents
evidencing, and relating to, the agreements and transactions which gave rise to
the material Accounts, including, without limitation, all original orders,
invoices and shipping receipts.
6.2 Communications with Obligors, Grantors Remain Liable.
(a) The Administrative Agent in its own name or in the name of
others may at any time after the occurrence and during the continuance of an
Event of Default communicate with obligors under the Accounts and parties to
the Material Contracts to verify with them to the Administrative Agent's
satisfaction the existence, amount and terms of any Accounts or Material
Contracts.
(b) Upon the request of the Administrative Agent at any time after
the occurrence and during the continuance of an Event of Default, each Grantor
shall notify obligors on the Accounts and parties to the Material Contracts
that the Accounts and the Material Contracts have been assigned to the
Administrative Agent for the ratable benefit of itself and the Lenders and that
payments in respect thereof shall be made directly to the Administrative Agent.
(c) Anything herein to the contrary notwithstanding, each Grantor
shall remain liable under each of the Accounts and Material Contracts to
observe and perform all the conditions and obligations to be observed and
performed by it thereunder, all in accordance with the terms of any agreement
giving rise thereto. Neither the Administrative Agent nor any Lender shall
have any obligation or liability under any Account (or any agreement giving
rise thereto) or Material Contract by reason of or arising out of this
Agreement or the receipt by the Administrative Agent or any Lender of any
payment relating thereto, nor shall the Administrative Agent or any Lender be
obligated in any manner to perform any of the obligations of any Grantor under
or pursuant to any Account (or any agreement giving rise thereto) or Material
Contract to make any payment, to
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make any inquiry as to the nature or the sufficiency of any payment received by
it or as to the sufficiency of any performance by any party thereunder, to
present or file any claim, to take any action to enforce any performance or to
collect the payment of any amounts which may have been assigned to it or to
which it may be entitled at any time or times.
(d) Anything herein to the contrary notwithstanding, (a) each
Grantor shall remain liable to perform all of its duties and obligations as a
partner or member of the Partnerships/LLCs to the same extent as if this
Agreement had not been executed, (b) the exercise by the Administrative Agent
or any Lender of any of its rights hereunder shall not release such Grantor
from any of its duties or obligations as a partner or member of the
Partnerships/LLCs, and (c) neither the Administrative Agent nor any Lender
shall have any obligation or liability as a partner or member of the
Partnerships/LLCs by reason of this Agreement.
6.3 Pledged Stock.
(a) Unless an Event of Default shall have occurred and be
continuing and the Administrative Agent shall have given notice to the relevant
Grantor of the Administrative Agent's intent to exercise its corresponding
rights pursuant to Section 6.3(b), each Grantor shall be permitted to receive
all cash dividends paid in respect of the Pledged Stock, Partnership/LLC
Interests and all payments made in respect of the Pledged Notes, in each case
paid in the normal course of business of the relevant Issuer and consistent
with past practice, to the extent permitted in the Credit Agreement, and to
exercise all voting and corporate, company and partnership rights with respect
to the Investment Property; provided, however, that no vote shall be cast or
corporate, company and partnership right exercised or other action taken which,
in the Administrative Agent's reasonable judgment, would impair the Collateral
or which would be inconsistent with or result in any violation of any provision
of the Credit Agreement, this Agreement or any other Loan Document.
(b) If an Event of Default shall occur and be continuing and the
Administrative Agent shall give notice of its intent to exercise such rights to
the relevant Grantor or Grantors, (i) the Administrative Agent shall have the
right to receive any and all cash dividends paid in respect of the Pledged
Stock, partnership and membership distributions in respect of the
Partnership/LLC Interests or other Proceeds paid in respect of the Investment
Property and make application thereof to the Obligations in the order set forth
in Section 4.5 of the Credit Agreement, and (ii) any or all of the Investment
Property shall be registered in the name of the Administrative Agent or its
nominee, and the Administrative Agent or its nominee may thereafter exercise
(A) all voting, corporate and other rights pertaining to such Investment
Property at any meeting of shareholders of the relevant Issuer or Issuers or
otherwise and (B) any and all rights of conversion, exchange and subscription
and any other fights, privileges or options pertaining to such Investment
Property as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the
Investment Property upon the merger, consolidation, reorganization,
recapitalization or other fundamental change in the corporate structure of any
Issuer, or upon the exercise by any Grantor or the Administrative Agent of any
right, privilege or option pertaining to such Investment Property, and in
connection therewith, the right to deposit and deliver any and all of the
Investment Property with any committee, depositary, transfer agent, registrar
or other designated agency upon such terms and conditions as
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the Administrative Agent may determine), all without liability except to account
for property actually received by it; but the Administrative Agent shall have no
duty to any Grantor to exercise any such right, privilege or option and shall
not be responsible for any failure to do so or delay in so doing.
(c) Each Grantor hereby authorizes and instructs each Issuer of
any Investment Property pledged by such Grantor hereunder to (i) comply with
any instruction received by it from the Administrative Agent in writing that
(x) states that an Event of Default has occurred and is continuing and (y) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Grantor, and each Grantor agrees that each
Issuer shall be fully protected in so complying, and (ii) unless otherwise
expressly permitted hereby, pay any dividends or other payments with respect to
the Investment Property directly to the Administrative Agent.
6.4 Proceeds to be Turned Over To Administrative Agent. In
addition to the rights of the Administrative Agent and the Lenders specified in
Section 6.1 with respect to payments of Accounts, if an Event of Default shall
occur and be continuing, all Proceeds received by any Grantor consisting of
cash, checks and other near-cash items shall be held by such Grantor in trust
for the Administrative Agent and the Lenders, segregated from other funds of
such Grantor, and shall, forthwith upon receipt by such Grantor, be turned over
to the Administrative Agent in the exact form received by such Grantor (duly
indorsed by such Grantor to the Administrative Agent, if required). All
Proceeds received by the Administrative Agent hereunder shall be held by the
Administrative Agent in a Collateral Account maintained under its sole dominion
and control. All Proceeds while held by the Administrative Agent in a
Collateral Account (or by such Grantor in trust for the Administrative Agent
and the Lenders) shall continue to be held as collateral security for all the
Obligations and shall not constitute payment thereof until applied as provided
in Section 6.5.
6.5 Application of Proceeds. In accordance with Section 4.5 of
the Credit Agreement, at such intervals as may be agreed upon by the Borrower
and the Administrative Agent, or, if an Event of Default shall have occurred
and be continuing, at any time at the Administrative Agent's election, the
Administrative Agent may apply all or any part of Proceeds held in any
Collateral Account in payment of the Obligations in such order as the
Administrative Agent may elect, and any part of such funds which the
Administrative Agent elects not so to apply and deems not required as
collateral security for the Obligations shall be paid over from time to time by
the Administrative Agent to the Borrower or to whomsoever may be lawfully
entitled to receive the same. Any balance of such Proceeds remaining after the
Obligations shall have been paid in full, no Letters of Credit shall be
outstanding and the Commitments shall have terminated shall be paid over to the
Borrower or to whomsoever may be lawfully entitled to receive the same.
6.6 Code and Other Remedies. If an Event of Default shall occur
and be continuing, the Administrative Agent, on behalf of the Lenders, may
exercise, in addition to all other rights and remedies granted to them in this
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured party under
the UCC or any other applicable law. Without limiting the generality of the
foregoing, the
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Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon any Grantor or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of the Administrative Agent or any Lender or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Administrative Agent or any Lender shall
have the right upon any such public sale or sales, and, to the extent permitted
by law, upon any such private sale or sales, to purchase the whole or any
part of the Collateral so sold, free of any right or equity of redemption in
any Grantor, which right or equity is hereby waived and released. Each Grantor
further agrees, at the Administrative Agent's request, to assemble the
Collateral and make it available to the Administrative Agent at places which
the Administrative Agent shall reasonably select, whether at such Grantor's
premises or elsewhere. The Administrative Agent shall apply the net proceeds
of any action taken by it pursuant to this Section 6.6, after deducting all
reasonable costs and expenses of every kind incurred in connection therewith or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Administrative Agent and the
Lenders hereunder, including, without limitation, reasonable attorneys' fees
and disbursements, to the payment in whole or in part of the Obligations, in
the order set forth in Section 4.5 of the Credit Agreement, and only after such
application and after the payment by the Administrative Agent of any other
amount required by any provision of law, including, without limitation, Section
9-504(l)(c) of the UCC, need the Administrative Agent account for the surplus,
if any, to any Grantor. To the extent permitted by applicable law, each
Grantor waives all claims, damages and demands it may acquire against the
Administrative Agent or any Lender arising out of the exercise by them of any
rights hereunder. If any notice of a proposed sale or other disposition of
Collateral shall be required by law, such notice shall be deemed reasonable and
proper if given at least 10 days before such sale or other disposition.
6.7 Registration Rights.
(a) If the Administrative Agent shall determine to exercise its
right to sell any or all of the Pledged Stock pursuant to Section 6.6, and if
in the opinion of the Administrative Agent it is necessary or advisable to have
the Pledged Stock, or that portion thereof to be sold, registered under the
provisions of the Securities Act, the relevant Grantor will use its best
efforts to cause the Issuer thereof to (i) execute and deliver, and cause the
directors and officers of such Issuer to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts as
may be, in the opinion of the Administrative Agent, necessary or advisable to
register the Pledged Stock, or that portion thereof to be sold, under the
provisions of the Securities Act, (ii) use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering
of the Pledged Stock, or that portion thereof to be sold, and (iii) make all
amendments thereto and/or to the related prospectus which, in the opinion of
the Administrative Agent, are necessary or advisable, all in conformity with
the requirements of the Securities Act and the rules
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and regulations of the Securities and Exchange Commission applicable thereto.
Each Grantor agrees to cause such Issuer to comply with the provisions of the
securities or "Blue Sky" laws of any and all jurisdictions which the
Administrative Agent shall designate and to make available to its security
holders, as soon as practicable, an earnings statement (which need not be
audited) which will satisfy the provisions of Section 11 (a) of the Securities
Act.
(b) Each Grantor recognizes that the Administrative Agent may be
unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. Each
Grantor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The
Administrative Agent shall be under no obligation to delay a sale of any of the
Pledged Stock for the period of time necessary to permit the Issuer thereof to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if such Issuer would agree to do so.
(c) Each Grantor agrees to use its best efforts to do or cause to
be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Pledged Stock pursuant to this Section 6.7 valid and
binding and in compliance with any and all other Applicable Laws. Each Grantor
further agrees that a breach of any of the covenants contained in this Section
6.7 will cause irreparable injury to the Administrative Agent and the Lenders,
that the Administrative Agent and the Lenders have no adequate remedy at law in
respect of such breach and, as a consequence, that each and every covenant
contained in this Section 6.7 shall be specifically enforceable against such
Grantor, and such Grantor hereby waives and agrees not to assert any defenses
against an action for specific performance of such covenants except for a
defense that no Event of Default has occurred under the Credit Agreement.
6.8 Waiver, Deficiency. Each Grantor waives and agrees not to
assert any rights or privileges which it may acquire under Section 9-112 of the
UCC. Each Grantor shall remain liable for any deficiency if the proceeds of
any sale or other disposition of the Collateral are insufficient to pay its
Obligations and the fees and disbursements of any attorneys employed by the
Administrative Agent or any Lender to collect such deficiency.
SECTION 7. THE ADMINISTRATIVE AGENT
7.1 Administrative Agent's Appointment as Attorney-in-Fact, etc.
(a) Each Grantor hereby irrevocably constitutes and appoints the
Administrative Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of such Grantor and in the name of
such Grantor or in its own name, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action and to execute any and
all documents and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement,
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and, without limiting the generality of the foregoing, each Grantor hereby gives
the Administrative Agent the power and right, on behalf of such Grantor, without
notice to or assent by such Grantor, to do any or all of the following:
(i) in the name of such Grantor or its own name, or
otherwise, take possession of and indorse and collect any checks,
drafts, notes, acceptances or other instruments for the payment of
moneys due under any Account or Material Contract or with respect to
any other Collateral and file any claim or take any other action or
proceeding in any court of law or equity or otherwise deemed
appropriate by the Administrative Agent for the purpose of collecting
any and all such moneys due under any Account or Material Contract or
with respect to any other Collateral whenever payable;
(ii) in the case of any Intellectual Property, execute and
deliver, and have recorded, any and all agreements, instruments,
documents and papers as the Administrative Agent may request to
evidence the Administrative Agent's and the Lenders' security interest
in such Intellectual Property and the goodwill and general intangibles
of such Grantor relating thereto or represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on
or threatened against the Collateral, effect any repairs or any
insurance called for by the terms of this Agreement and pay all or any
part of the premiums therefor and the costs thereof,
(iv) execute, in connection with any sale provided for in
Section 6.6 or Section 6.7, any endorsements, assignments or other
instruments of conveyance or transfer with respect to the Collateral;
and
(v) (1) direct any party liable for any payment under any
of the Collateral to make payment of any and all moneys due or to
become due thereunder directly to the Administrative Agent or as the
Administrative Agent shall direct; (2) ask or demand for, collect, and
receive payment of and receipt for, any and all moneys, claims and
other amounts due or to become due at any time in respect of or
arising out of any Collateral; (3) sign and indorse any invoices,
freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications, notices
and other documents in connection with any of the Collateral; (4)
commence and prosecute any suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect the
Collateral or any portion thereof and to enforce any other right in
respect of any Collateral; (5) defend any suit, action or proceeding
brought against such Grantor with respect to any Collateral; (6)
settle, compromise or adjust any such suit, action or proceeding and,
in connection therewith, give such discharges or releases as the
Administrative Agent may deem appropriate; (7) assign any Copyright,
Patent or Trademark (along with the goodwill of the business to which
any such Copyright, Patent or Trademark pertains), for such term or
terms, on such conditions, and in such manner, as the Administrative
Agent shall in its sole discretion determine; and (8) generally, sell,
transfer, pledge and make any agreement with respect to or otherwise
deal with any of the Collateral as fully and completely as though the
Administrative Agent were the absolute
30
<PAGE> 35
owner thereof for all purposes, and do, at the Administrative Agent's
option and such Grantor's expense, at any time, or from time to time,
all acts and things which the Administrative Agent deems necessary to
protect, preserve or realize upon the Collateral and the Administrative
Agent's and the Lenders' security interests therein and to effect the
intent of this Agreement, all as fully and effectively as such Grantor
might do.
Anything in this Section 7.1(a) to the contrary notwithstanding, the
Administrative Agent agrees that it will not exercise any rights under the
power of attorney provided for in this Section 7.1(a) unless an Event of
Default shall have occurred and be continuing and the Administrative
Agent shall give such Grantor not less than ten (10) days notice of such sale
or disposition, except for the sale or disposition of perishable goods.
(b) If any Grantor fails to materially perform or comply with any
of its agreements contained herein, the Administrative Agent, at its option,
but without any obligation so to do, may perform or comply, or otherwise cause
performance or compliance, with such agreement.
(c) The expenses of the Administrative Agent incurred in
connection with actions undertaken as provided in this Section 7.1, together
with interest thereon at a rate per annum equal to the highest rate per annum
at which interest would then be payable on any category of past due Base Rate
Loans under the Credit Agreement, from the date of payment by the
Administrative Agent to the date reimbursed by the relevant Grantor, shall be
payable by such Grantor to the Administrative Agent on demand.
(d) Each Grantor hereby ratifies all that said attorneys shall
lawfully do or cause done by virtue hereof. All powers, authorizations and
agencies contained in this Agreement are coupled with an interest and are
irrevocable until this Agreement is terminated and the security interests
created hereby are released.
7.2 Duty of Administrative Agent. The Administrative Agent's sole
duty with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the UCC or otherwise,
shall be to deal with it in the same manner as the Administrative Agent deals
with similar property for its own account. Neither the Administrative Agent,
any Lender nor any of their respective officers, directors, employees or agents
shall be liable for failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so or shall be under any obligation to
sell or otherwise dispose of any Collateral upon the request of any Grantor or
any other Person or to take any other action whatsoever with regard to the
Collateral or any part thereof. The powers conferred on the Administrative
Agent and the Lenders hereunder are solely to protect the Administrative
Agent's and the Lenders' interests in the Collateral and shall not impose any
duty upon the Administrative Agent or any Lender to exercise any such powers.
The Administrative Agent and the Lenders shall be accountable only for amounts
that they actually receive as a result of the exercise of such powers, and
neither they nor any of their officers, directors, employees or agents shall be
responsible to any Grantor for any act or failure to act hereunder, except for
their own gross negligence or willful misconduct.
31
<PAGE> 36
7.3 Execution of Financing Statements. Pursuant to Section 9-402
of the UCC and any other applicable law, each Grantor authorizes the
Administrative Agent to file or record financing statements and other filing or
recording documents or instruments with respect to the Collateral without the
signature of such Grantor in such form and in such offices as the
Administrative Agent determines appropriate to perfect the security interests
of the Administrative Agent under this Agreement. A photographic or other
reproduction of this Agreement shall be sufficient as a financing statement or
other filing or recording document or instrument for filing or recording in any
jurisdiction.
7.4 Authority of Administrative Agent. Each Grantor acknowledges
that the rights and responsibilities of the Administrative Agent under this
Agreement with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, voting
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the Administrative
Agent and the Lenders, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Administrative Agent and the Grantors, the Administrative Agent
shall be conclusively presumed to be acting as agent for the Lenders with full
and valid authority so to act or refrain from acting, and no Grantor shall be
under any obligation, or entitlement to make any inquiry respecting such
authority.
SECTION 8.MISCELLANEOUS
8.1 Amendments in Writing. None of the terms or provisions of
this Agreement may be waived, amended, supplemented or otherwise modified
except in accordance with Section 13.11 of the Credit Agreement.
8.2 Notices. All notices, requests and demands to or upon the
Administrative Agent or any Grantor hereunder shall be effected in the manner
provided for in Section 13.1 of the Credit Agreement; provided that any such
notice, request or demand to or upon any Guarantor shall be addressed to such
Guarantor at its notice address set forth on Schedule 1.
8.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither
the Administrative Agent nor any Lender shall by any act (except by a written
instrument pursuant to Section 8.1), delay, indulgence, omission or otherwise
be deemed to have waived any right or remedy hereunder or to have acquiesced in
any Default or Event of Default. No failure to exercise, nor any delay in
exercising on the part of the Administrative Agent or any Lender, any right,
power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Administrative Agent or any Lender of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Administrative Agent or such Lender would otherwise
have on any future occasion. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
8.4 Enforcement Expenses, Indemnification.
32
<PAGE> 37
(a) Each Guarantor agrees to pay or reimburse each Lender and the
Administrative Agent for all its costs and expenses incurred in collecting
against such Guarantor under the guaranty contained in Section 2 or otherwise
enforcing or preserving any rights under this Agreement and the other Loan
Documents to which such Guarantor is a party, including, without limitation,
the reasonable fees and disbursements of counsel (including the allocated fees
and expenses of in-house counsel) to each Lender and of counsel to the
Administrative Agent.
(b) Each Guarantor agrees to pay, and to save the Administrative
Agent and the Lenders harmless from, any and all liabilities with respect to,
or resulting from any delay in paying, any and all stamp, excise, sales or
other taxes which may be payable or determined to be payable with respect to
any of the Collateral or in connection with any of the transactions
contemplated by this Agreement.
(c) Each Guarantor agrees to pay, and to save the Administrative
Agent and the Lenders harmless from any and all liabilities, losses, damages,
penalties, costs and expenses in connection with this Agreement to the extent
the Borrower would be required to do so pursuant to Section 13.2 of the Credit
Agreement.
(d) The agreements in this Section 8.4 shall survive repayment of
the Obligations and all other amounts payable under the Credit Agreement and
the other Loan Documents.
8.5 Binding Arbitration; Waiver of Jury Trial.
(a) Binding Arbitration. Upon demand of any party, whether made
before or after institution of any judicial proceeding, any dispute, claim or
controversy arising out of, connected with or relating to this Agreement
("Disputes"), between or among parties to this Agreement shall be resolved by
binding arbitration as provided herein. Institution of a judicial proceeding
by a party does not waive the right of that party to demand arbitration
hereunder. Disputes may include, without limitation, tort claims,
counterclaims, claims brought as class actions, claims arising from Loan
Documents executed in the future, or claims concerning any aspect of the past,
present or future relationships arising out of or connected with this
Agreement. Arbitration shall be conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association and Title 9 of the U.S. Code. All arbitration hearings
shall be conducted in Charlotte, North Carolina. The expedited procedures set
forth in Rule 51, et seq. of the Arbitration Rules shall be applicable to
claims of less than $1,000,000. All applicable statutes of limitation shall
apply to any Dispute. A judgment upon the award may be entered in any court
having jurisdiction. Notwithstanding anything foregoing to the contrary, any
arbitration proceeding demanded hereunder shall begin within ninety (90) days
after such demand thereof and shall be concluded within one-hundred and twenty
(120) days after such demand. These time limitations may not be extended
unless a party hereto shows cause for extension and then such extension shall
not exceed a total of sixty (60) days. The panel from which all arbitrators
are selected shall be comprised of licensed attorneys. The single arbitrator
selected for expedited procedure shall be a retired judge from the highest
court of general jurisdiction, state or federal, of the state where the hearing
will be conducted.
33
<PAGE> 38
(b) Jury Trial. TO THE EXTENT PERMITTED BY LAW, THE
ADMINISTRATIVE AGENT, EACH LENDER AND EACH GRANTOR HEREBY ACKNOWLEDGE THAT BY
AGREEING TO BINDING ARBITRATION THEY HAVE IRREVOCABLY WAIVED THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING
ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR
OBLIGATIONS HEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
8.6 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of each Grantor, the Administrative Agent and the
Lenders, all future holders of the Notes, and their respective successors and
assigns; provided that no Grantor may assign, transfer or delegate any of its
rights or obligations under this Agreement without the prior written consent of
each Lender.
8.7 Set-Off. Each Grantor hereby irrevocably authorizes the
Administrative Agent and each Lender at any time and from time to time pursuant
to Section 13.3 of the Credit Agreement, without notice to such Grantor or any
other Grantor, any such notice being expressly waived by each Grantor, to
set-off and appropriate and apply any and all deposits (general or special,
time or demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by the Administrative Agent or such Lender to or for the credit or the
account of such Grantor, or any part thereof in such amounts as the
Administrative Agent or such Lender may elect, against and on account of the
obligations and liabilities of such Grantor to the Administrative Agent or such
Lender hereunder and claims of every nature and description of the
Administrative Agent or such Lender against such Grantor, in any currency,
whether arising hereunder, under the Credit Agreement, any other Loan Document
or otherwise, as the Administrative Agent or such Lender may elect, whether or
not the Administrative Agent or any Lender has made any demand for payment and
although such obligations, liabilities and claims may be contingent or
unmatured. The Administrative Agent and each Lender shall notify such Grantor
promptly of any such set-off and the application made by the Administrative
Agent or such Lender of the proceeds thereof, provided that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of the Administrative Agent and each Lender under this Section 8.7 are
in addition to other rights and remedies (including, without limitation, other
rights of set-off) which the Administrative Agent or such Lender may have.
8.8 Counterparts. This Agreement may be executed by one or more
of the parties to this Agreement on any number of separate counterparts
(including by telecopy), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
8.9 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
34
<PAGE> 39
8.10 Section Headings. The Section headings used in this Agreement
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
8.11 Integration. This Agreement and the other Loan Documents
represent the agreement of the Grantors, the Administrative Agent and the
Lenders with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to subject matter hereof and thereof not expressly
set forth or referred to herein or in the other Loan Documents.
8.12 GOVERNING LAW. THIS AGREEMENT UNLESS OTHERWISE SET FORTH
THEREIN, SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NORTH CAROLINA, WITHOUT REFERENCE TO THE CONFLICTS OR
CHOICE OF LAW PRINCIPLES THEREOF.
8.13 Consent to Jurisdiction. Each Grantor hereby irrevocably
consents to the personal jurisdiction of the state and federal courts located
in Mecklenburg County, North Carolina, in any action, claim or other proceeding
arising out of any dispute in connection with this Agreement, any rights or
obligations hereunder, or the performance of such rights and obligations. Each
Grantor hereby irrevocably consents to the service of a summons and complaint
and other process in any action, claim or proceeding brought by the
Administrative Agent or any Lender in connection with this Agreement, any
rights or obligations hereunder, or the performance of such rights and
obligations, on behalf of itself or its property, in the manner specified in
Section 8.2. Nothing in this Section 8.13 shall affect the right of the
Administrative Agent or any Lender to serve legal process in any other manner
permitted by Applicable Law or affect the right of the Administrative Agent or
any Lender to bring any action or proceeding against each Grantor or its
properties in the courts of any other jurisdictions.
8.14 Acknowledgments. Each Grantor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement;
(b) neither the Administrative Agent nor any Lender has
any fiduciary relationship with or duty to any Grantor arising out of
or in connection with this Agreement, and the relationship between the
Grantors, on the one hand, and the Administrative Agent and Lenders,
on the other hand, in connection herewith is solely that of debtor and
creditor; and
(c) no joint venture is created hereby or otherwise
exists by virtue of the transactions contemplated hereby among the
Lenders or among the Grantors and the Lenders.
35
<PAGE> 40
8.15 Additional Grantors. Each Subsidiary of the Borrower that is
required to become a party to this Agreement pursuant to Section 8.12 of the
Credit Agreement shall become a Grantor and a Guarantor for all purposes of
this Agreement upon execution and delivery by such Subsidiary of a Guaranty and
Collateral Agreement Supplement in the form of Annex I hereto.
8.16 Releases.
(a) At such time as the Loans, the Reimbursement Obligations and
the other Obligations shall have been paid in full, the Commitments have been
terminated and no Letters of Credit shall be outstanding, the Collateral shall
be released from the Liens created hereby, and this Agreement and all
obligations (other than those expressly stated to survive such termination) of
the Administrative Agent and each Grantor hereunder shall terminate, all
without delivery of any instrument or performance of any act by any party, and
all rights to the Collateral shall revert to the Grantors. At the request and
sole expense of any Grantor following any such termination, the Administrative
Agent shall deliver to such Grantor any Collateral held by the Administrative
Agent hereunder, and execute and deliver to such Grantor such documents as such
Grantor shall reasonably request to evidence such termination.
(b) If any of the Collateral shall be sold, transferred or
otherwise disposed of by any Grantor in a transaction permitted by the Credit
Agreement, then the Administrative Agent, at the request and sole expense of
such Grantor, shall execute and deliver to such Grantor all releases or other
documents reasonably necessary or desirable for the release of the Liens
created hereby on such Collateral. At the request and sole expense of the
Borrower, a Guarantor shall be released from its obligations hereunder in the
event that all the capital stock of such Guarantor shall be sold, transferred
or otherwise disposed of in a transaction permitted by the Credit Agreement;
provided that the Borrower shall have delivered to the Administrative Agent, at
least ten Business Days prior to the date of the proposed release, a written
request for release identifying the relevant Guarantor and the terms of the
sale or other disposition in reasonable detail, including the price thereof and
any expenses in connection therewith, together with a certification by the
Borrower stating that such transaction is in compliance with the Credit
Agreement and the other Loan Documents.
[Signature Pages to Follow]
36
<PAGE> 41
IN WITNESS WHEREOF, each of the undersigned has caused this Guaranty
and Collateral Agreement to be duly executed and delivered as of the date first
above written.
GRANTOR:
MINDSPRING ENTERPRISES, INC.
By: /s/ MICHAEL MISIKOFF
-------------------------
Name: Michael Misikoff
-----------------------
Title: CFO
----------------------
State of Georgia )
:
County of Fulton )
This ____ day of February, 1999, personally came before me, K. Anne
Peavler, Notary Public for said County and State, Michael Misikoff, who, being
by me duly sworn, says that he is CFO of MindSpring Enterprises, Inc., a
corporation, and that the seal affixed to the foregoing instrument in writing is
the corporate seal of said company, and that said writing was signed and sealed
by him in behalf of said corporation by its authority duly given, and the said
CFO acknowledged the said writing to be the act and deed of said corporation.
[NOTARIAL SEAL]
/s/ K. ANNE PEAVLER
- ------------------------------------
Notary Public
My commission expires 5/20, 2001
[Guaranty and Collateral Agreement]
<PAGE> 42
SECURED PARTY
FIRST UNION NATIONAL BANK,
as Administrative Agent
By: /s/ C. MARK HEDRICK
------------------------
Name: C. Mark Hedrick
----------------------
Title: Vice President
---------------------
State of North Carolina )
:
County of Mecklenburg )
This 16th day of February, 1999, personally came before me, Loree
Frances Charles, Notary Public for said County and State, C. Mark Hedrick, who,
being by me duly sworn, says that he is Vice President of First Union National
Bank, a National Banking Association, and that the seal affixed to the foregoing
instrument in writing is the corporate seal of said company, and that said
writing was signed and sealed by him in behalf of said corporation by its
authority duly given, and the said Vice President acknowledged the said writing
to be the act and deed of said corporation.
[NOTARIAL SEAL]
/s/ Loree Frances Charles
- ---------------------------
Notary Public
My commission expires 1/31, 2003
[Guaranty and Collateral Agreement]
<PAGE> 43
Schedule 1
to Guaranty and
Collateral Agreement
NOTICE ADDRESSES OF GUARANTORS
<PAGE> 44
Schedule 2
to Guaranty and
Collateral Agreement
DESCRIPTION OF INVESTMENT PROPERTY
PLEDGED STOCK:
Issuer Class of Stock Stock Certificate No. No. of Shares
PLEDGED NOTES:
Issuer Payee Principal Amount
PARTNERSHIPS/LLC:
Name of Entity Type of Entity Type of Ownership % Ownership
<PAGE> 45
Schedule 3
to Guaranty and
Collateral Agreement
MATERIAL CONTRACTS
<PAGE> 46
Schedule 4
to Guaranty and
Collateral Agreement
COPYRIGHTS AND COPYRIGHT LICENSES
PATENTS AND PATENT LICENSES
TRADEMARKS AND TRADEMARK LICENSES
<PAGE> 47
Schedule 5
to Guaranty and
Collateral Agreement
DEPOSIT ACCOUNTS AND FINANCIAL INSTITUTIONS
Financial Address of Account
Grantor Institution Account No. Financial Institution Purpose
<PAGE> 48
Annex I to
the Guaranty and Collateral Agreement
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the Guaranty
and Collateral Agreement dated as of February 17, 1999 (the "Agreement"), made
by the Grantors party thereto for the benefit of First Union National Bank, as
Administrative Agent. The undersigned agrees for the benefit of the
Administrative Agent and the Lenders as follows:
1. The undersigned will be bound by the terms of the Agreement
and will comply with such terms insofar as such terms are applicable to the
undersigned.
2. The undersigned will notify the Administrative Agent promptly
in writing of the occurrence of any of the events described in Section 5.7(d)
of the Agreement.
3. The terms of Sections 6.3(c) and Section 6.7 of the Agreement
shall apply to it, mutatis mutandis, with respect to all actions that may be
required of it pursuant to Section 6.3(c) or Section 6.7 of the Agreement.
[NAME OF ISSUER]
By:
----------------------------------
Name:
Title:
Address for Notices:
-------------------------------------
-------------------------------------
-------------------------------------
Fax:
<PAGE> 49
Annex II to the
Guaranty and Collateral Agreement
GUARANTY AND COLLATERAL AGREEMENT SUPPLEMENT (this
"Supplement"), dated as of ____________, ______, made by
________________, a ________________ corporation (the "Additional Grantor"), in
favor of FIRST UNION NATIONAL BANK, as administrative agent (in such capacity,
the "Administrative Agent") for the banks and other financial institutions (the
"Lenders") parties to the Credit Agreement referred to below. All capitalized
terms not defined herein shall have the meaning ascribed to them in such Credit
Agreement.
W I T N E S S E T H:
WHEREAS, MINDSPRING ENTERPRISES, INC. (the "Borrower"), the
Lenders, FIRST UNION CAPITAL MARKETS CORP., as Arranger, and the Administrative
Agent have entered into a Credit Agreement, dated as of February 17, 1999 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement");
WHEREAS, in connection with the Credit Agreement, the Borrower
has entered into the Guaranty and Collateral Agreement, dated as of February
17, 1999 (as amended, supplemented or otherwise modified, the "Guaranty and
Collateral Agreement") in favor of the Administrative Agent for the benefit of
the Lenders;
WHEREAS, the Additional Grantor as an indirect or direct
Subsidiary of the Borrower will derive indirect or direct benefit from the
Extension of Credit provided in the Credit Agreement and the Credit Agreement
requires the Additional Grantor to become a party to the Guaranty and
Collateral Agreement; and
WHEREAS, the Additional Grantor has agreed to execute and
deliver this Supplement in order to become a party to the Guaranty and
Collateral Agreement;
NOW, THEREFORE, IT IS AGREED:
1. Guaranty and Collateral Agreement. By executing and
delivering this Supplement, the Additional Grantor, as provided in Section 8.15
of the Guaranty and Collateral Agreement, hereby becomes a party to the
Guaranty and Collateral Agreement as a Grantor and Guarantor thereunder with
the same force and effect as if originally named therein as a Grantor and
Guarantor and, without limiting the generality of the foregoing, hereby
expressly assumes all obligations and liabilities of a Grantor and Guarantor
thereunder. The information set forth in Annex 1-A hereto is hereby added to
the information set forth in the Schedules to the Guaranty and Collateral
Agreement. The Additional Grantor hereby represents and warrants that each of
the representations and warranties contained in Section 4 of the Guaranty and
Collateral Agreement is true and correct on and as the date hereof (after
giving effect to this Supplement) as if made on and as of such date.
<PAGE> 50
2. GOVERNING LAW. THIS SUPPLEMENT SHALL BE GOVERNED BY,
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH
CAROLINA, WITHOUT REFERENCE TO THE CONFLICTS OR CHOICE OF LAW PRINCIPLES
THEREOF.
IN WITNESS WHEREOF, the undersigned has caused this Supplement
to be duly executed and delivered as of the date first above written.
[ADDITIONAL GRANTOR]
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE> 51
Annex 1-A to
Guaranty and Agreement Supplement
Supplement to Schedule 1
Supplement to Schedule 2
Supplement to Schedule 3
Supplement to Schedule 4
Supplement to Schedule 5
<PAGE> 52
EXHIBIT A
to
Guaranty and Collateral Agreement
Form of Perfection Certificate
Reference is made to that certain Guaranty and Collateral Agreement
dated as of _________ ___, 1999, executed by the entities set forth on the
signature pages thereto (collectively, the "Grantors" and each, a "Grantor"),
in favor of FIRST UNION NATIONAL BANK, as Administrative Agent (the "Agent"),
for the ratable benefit of the Administrative Agent and the lenders who are or
may become a party to the Credit Agreement referred to below (collectively, the
"Lenders"). Capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to them in the Credit Agreement dated as of ____________
____, 1999, by and among MINDSPRING ENTERPRISES, INC., as Borrower, the Lenders
and the Administrative Agent (as amended, restated, or otherwise modified, the
"Credit Agreement").
The Grantors hereby certify to the Administrative Agent and each
Lender as follows:
1. Names, etc.
(a) The exact name of each Grantor as it appears in its
Articles or Certificate of Incorporation is as follows:
(b) Except as set forth in the Perfection Certificate, no
Grantor has changed its identity structure in any way within the past five
years.
(c) The following is a list of all other names (including
trade names or similar appellations) used by any Grantor or any of their
respective divisions or other business units at any time during the past five
years:
(d) The taxpayer identification numbers of the Grantors
are as follows:
2. Current Locations.
(a) The chief executive offices of each of the Grantors are
located at the following addresses:
Mailing Address County State
(b) The following are the only locations at which the
Grantors maintain any books or records relating to any Accounts:
Mailing Address County State
<PAGE> 53
(c) The following are all the locations not identified above
where the Grantors maintain any Inventory or Equipment:
3. Unusual Transactions. Other than as set forth below, all
Accounts have been originated by the Grantors and all Inventory and Equipment
have been acquired by the Grantors in the ordinary course of business.
4. Reliance. The undersigned acknowledges that the
Administrative Agent and the Lenders are entitled to rely and have, in fact,
relied on the information contained herein, and any successor or assign of the
Agent or the Lenders is entitled to rely on the information contained therein.
IN WITNESS WHEREOF, the undersigned have executed this Perfection
Certificate, this ____ day of ________________, 1999.
<PAGE> 54
EXHIBIT B
to
Guaranty and Collateral Agreement
Form of Depository Account Agreement
[Name and Address of Bank]
_____________, 19__
First Union National Bank,
as Administrative Agent
One First Union Center, DC-5
301 South College Street
Charlotte, North Carolina 28222-0737
Attention: C. Mark Hedrick
Re: Credit Agreement dated as of February 17, 1999 (as amended,
restated, supplemented or otherwise modified, the "Credit
Agreement"), by and among MINDSPRING ENTERPRISES, INC., a
corporation organized under the laws of Delaware, as borrower
(the "Borrower"), the Lenders party thereto, FIRST UNION
CAPITAL MARKETS CORP., as Arranger, and FIRST UNION NATIONAL
BANK, as Administrative Agent (the "Administrative Agent") for
such Lenders
Ladies and Gentlemen:
The company or companies set forth on the signature page hereto
(collectively, the "Company") maintains with us (hereinafter referred to as the
"Bank") the accounts and lockboxes set forth on Schedule I hereto
(collectively, the "Deposit Accounts"), which are all the accounts and
lockboxes of the Company maintained with the Bank. By its execution hereof,
the Company has confirmed to the Bank that all amounts and other items in the
Deposit Accounts are and shall be deemed proceeds of the Accounts subject to
the lien of the Administrative Agent granted pursuant to the Guaranty and
Collateral Agreement referred to in the Credit Agreement.
Unless and until an Account Notice (as defined below) is received by
the Bank in accordance with the provisions of this letter, the Company shall
have the right to withdraw and deposit funds, instruments and other items in
the Deposit Accounts by duly authorized signatories in such amounts and with
such frequency as it chooses, and free of any direction by the Administrative
Agent. The Administrative Agent may, at its sole discretion, terminate the
Company's signing authority and rights to withdraw or transfer funds and other
items from the Deposit Accounts by delivery to the Company and the Bank of a
written notice thereof (an "Account Notice"). Such Account Notice shall be
effective upon receipt by the Bank.
From and after the date an Account Notice is received by the Bank and
until such Account Notice is withdrawn by the Administrative Agent or the
termination of this letter (i) withdrawals
<PAGE> 55
from the Deposit Accounts by the Company shall be prohibited and may be made
only by direction of the Administrative Agent by way of wire transfer or
electronic funds transfer to such account or accounts ("Administrative Agent's
Account") as the Administrative Agent shall notify to the Bank, (ii) the Bank
shall use its reasonable efforts to transfer to Administrative Agent's Account
all collected funds in the Deposit Accounts before noon each business day and
(iii) the Company shall have no right to direct any such transfers.
The Bank agrees that it will not exercise or claim any right of
setoff against, or any security interest or any banker's lien in, the Deposit
Accounts or in monies or items deposited or to be deposited in the Deposit
Accounts. The parties hereto agree that the Deposit Accounts will be subject
to the exercise of such rights by the Administrative Agent. The Bank waives
and releases to the Administrative Agent any right or claim which it may have
in any of the funds or other items at any time deposited or to be deposited in
the Deposit Accounts.
At the end of each statement period, the Bank's regular statement
covering the deposits to and withdrawals from the Deposit Accounts will be sent
to the Company, with a copy to the Administrative Agent. The Administrative
Agent will have no liability to the Bank or the Company for any costs, fees or
charges under the Bank's usual and customary procedures or under this letter.
All fees and other charges incurred in connection with the Deposit Accounts
will be payable by the Company.
The Company may not terminate this letter as long as any of the
Company's Obligations (as defined in the Credit Agreement) to the
Administrative Agent or any Lender under the Credit Agreement are outstanding
and unpaid and any Lender has any obligation to make Loans or has other
obligations to the Company, but the Company may thereafter terminate this
letter by notice to the Bank, provided any such termination notice is also
signed by the Administrative Agent. The Administrative Agent will exercise its
good faith efforts to sign any such termination notice prepared by the Company
within three business days after receipt by the Administrative Agent. Any
attempt to terminate this letter by the Company without the prior written
consent of the Administrative Agent shall be void.
By its execution hereof, the Company agrees to be bound by the
provisions of this letter and represents and warrants that it has no other
accounts or lockboxes with the Bank other than the Deposit Accounts, and
covenants and agrees that any lockboxes or accounts opened by the Company with
the Bank after the date hereof will be added to Schedule 1 of this letter and
be subject upon the establishment thereof to the provisions hereof.
<PAGE> 56
All notices, demands, requests, and other communications required or
permitted hereunder shall be in writing and shall be effective and deemed to
have been received (i) on the date of delivery if delivered by hand or sent by
telecopy, (ii) on the next business day if sent by recognized overnight courier
service and (iii) on the third business day following the date sent by
certified mail, return receipt requested. Notices to any party shall be sent
to it at the addresses set forth on the first and signature pages hereto, as
applicable, or any other address as any party may from time to time designate
by written notice to the others as herein required.
Very truly yours,
[THE BANK]
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
FIRST UNION NATIONAL BANK,
as Administrative Agent
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
Agreed to and Accepted:
MINDSPRING ENTERPRISES, INC.
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
- ---------------------------------------
- ---------------------------------------
- ---------------------------------------
Attention:
-----------------------------
<PAGE> 57
Schedule 1
[Insert Account and Lockboxes Descriptions]
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference of our report dated January 27, 1999 on the financial
statements of NETCOM On-Line Communication Services, Inc. Domestic Subscriber
Operations, included in this Form 8-K, into MindSpring Enterprises, Inc.'s
previously filed Registration Statements No. 333-17807 and No. 333-44411.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 23, 1999
<PAGE> 1
EXHIBIT 99.1
DESCRIPTION OF SECURED CREDIT FACILITY
SECURED CREDIT FACILITY
We have a credit agreement, dated as of February 17, 1999, with First
Union National Bank as lender and as administrative agent for the other lenders,
which agreement provides for a $100,000,000 secured revolving credit facility.
The credit facility will mature on February 17, 2002. The credit facility may be
increased at our option to $200,000,000 with the approval of lenders holding at
least 51% of the aggregate unpaid principal amount of the notes thereunder or,
if no such amounts are outstanding, lenders holding at least 51% of the
aggregate commitment of the lenders. We are obligated under the credit agreement
to deliver to the lenders specific consents and related documents in connection
with eleven of our leased properties within 90 days after February 17, 1999. If
we fail to do so, then on the 91st day after February 17, 1999, (1) our option
to increase the commitment to $200,000,000 will terminate, (2) the commitment
will be automatically and permanently reduced to $20,000,000 plus an incremental
amount based upon the extent of our compliance with the requirement concerning
consents and related documents (with the exception that if we do not deliver the
consents and related documents for our Atlanta, Georgia leased property, no
incremental amount will be added to the $20,000,000 amount); and (3) the
applicable margin will be increased between .375% and 1.00% for both Base Rate
borrowings and LIBOR rate borrowings. While at present we do not anticipate
difficulties in obtaining the described consents and related documents by the
specified deadline, there can be no assurance that we will be able to do so.
The credit facility is to be used to finance the acquisition of some of
the assets of NETCOM, to finance permitted acquisitions and for working capital
and general corporate requirements. The following summary of the material
provisions of the credit agreement does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the credit
agreement. Some of the capitalized terms used in this description of the credit
facility are defined at the end of this section.
Amounts drawn under the credit facility will bear interest, at our
option, at either the Base Rate or the reserve adjusted LIBOR rate, plus an
applicable margin. The applicable margin will be an annual rate which will
fluctuate based on
1
<PAGE> 2
our ratio of total debt to EBITDA and which will be between 0.25% and 1.00% for
Base Rate borrowings and between 1.25% and 2.00% for LIBOR rate borrowings.
The credit agreement requires us to repay indebtedness outstanding under
the credit facility with the net cash proceeds from all debt issuances, from
some types of sales of our assets and from some types of insurance proceeds. In
addition, the total loan commitment will be reduced by the amount of net cash
proceeds from debt issuances and, to the extent not reinvested in similar
assets or used to finance the repair or replacement of damaged assets, as the
case may be, by the amount of net cash proceeds from some types of asset sales
and from some types of insurance proceeds.
Our obligations under the credit facility will be guaranteed by all of
our future subsidiaries. Our obligations are secured by a first priority lien on
all of our current and future assets and properties and will be secured by a
first priority pledge of the capital stock of any subsidiary that we organize or
acquire.
The credit agreement contains negative covenants limiting our ability and
that of our future subsidiaries to:
- incur debt;
- guaranty obligations;
- create liens;
- make loans, advances, investments and acquisitions;
- engage in mergers and liquidations;
- sell assets;
- pay dividends and make distributions;
- exchange and issue some types of convertible or redeemable
capital stock;
- engage in transactions with affiliates;
- amend subordinated debt; and
- enter into restrictive agreements and change our fiscal year or
accounting method.
In addition, the credit agreement contains affirmative covenants, including
covenants requiring:
- compliance with laws and material contracts;
- maintenance of corporate existence, properties and insurance;
- payment of taxes and all other obligations;
- year 2000 compatibility; and
- the delivery of financial and other information.
The credit agreement also requires us to comply with specific financial
tests and to maintain specific financial ratios. We must maintain (1) as of
the end of any fiscal quarter, a ratio of EBITDA to interest expense for the
immediately preceding four consecutive fiscal quarters of no less than 3.0:1.0;
(2) a maximum total debt to EBITDA ratio no greater than 3.0:1.0; and (3) a net
worth not less than $175,000,000 plus 50% of net income (to the extent
positive) plus 75% of the net cash proceeds of equity issuances.
Failure to satisfy any of the financial covenants constitutes an event of
default under the credit facility, notwithstanding our ability to meet our debt
service obligations. The credit agreement also includes other customary events
of default, including, without limitation, cross default to other debt and
2
<PAGE> 3
material contracts; insolvency or bankruptcy; occurrence of certain ERISA
events; material undischarged judgments and change in control.
"Base Rate" means the greater of First Union National Bank's prime
lending rate or the overnight federal funds rate plus 0.50%.
"EBITDA" means, for any period, the sum of the following on a
consolidated basis, without duplication, for MindSpring and our Subsidiaries (as
defined in the credit agreement) in accordance with generally accepted
accounting principles: (A) net income for such period plus (B) the sum of the
following to the extent deducted in determining net income: (1) income and
franchise taxes, (2) interest expense, (3) amortization, depreciation and
other non-cash charges less (C) interest income and any extraordinary gains.
EBITDA will be adjusted in a manner reasonably satisfactory to First Union
National Bank to include on a pro forma basis as of the first day of any
calculation period any acquisition consummated during that period as permitted
by the credit agreement and exclude on a pro forma basis as of the first day
of any calculation any Subsidiary or assets sold during that period as
permitted by the credit agreement.
"LIBOR" means the rate of interest per annum determined on the basis of
the rate for deposits in dollars in minimum amounts of at least $5,000,000 for a
period equal to the applicable Interest Period (as defined in the credit
agreement) which appears on the Telerate Page 3750 at approximately 11:00 a.m.
(London time) two business days prior to the first day of the applicable
Interest Period. If, for any reason, the rate does not appear on Telerate Page
3750, then "LIBOR" will be determined by First Union National Bank to be the
arithmetic average of the rate per annum at which deposits in dollars would be
offered by first class banks in the London interbank market to First Union
National Bank at approximately 11:00 a.m. (London time) two business days prior
to the first day of the applicable Interest Period for a period equal to that
Interest Period and in an amount substantially equal to the amount of the
applicable loan.
3
<PAGE> 1
Exhibit 99.2
NEWS RELEASE
Release Dates: Immediate
Ed Hansen, MindSpring Enterprises, Inc.
MINDSPRING COMPLETES NETCOM ACQUISITION
ATLANTA, GA (February 17, 1999) MindSpring Enterprises, Inc. today announced it
has completed the acquisition of the U.S. subscribers and other assets of Netcom
On-Line Communication Services, Inc. from ICG Communications, Inc. The sale
price is approximately $245 million, including $215 million in cash and $30
million in MindSpring stock. The sale was first announced on January 5 1999.
About MindSpring MindSpring Enterprises, Inc. (Nasdaq:MSPG) is a leading
Internet service provider focused on delivering outstanding service and support
to its customers. By following its Core Values And Beliefs, MindSpring is
committed to doing an exceptional job of serving its customers, its employees,
its owners and its community. MindSpring's dial-up subscribers can browse the
World Wide Web, send electronic mail, participate in informative online chats
and access over 20,000 newsgroups. MindSpring offers local Internet service in
748 locations throughout the United States. MindSpring is also a leading
provider of Web Hosting services and domain registrations. MindSpring has
received the following Awards & Recommendations:
- 1998 MVP Award for Best National ISP, "It's a no-brainer for Internet
access and small-biz Web hosting." - PC Computing, January 1999.
- 1998 HOC 100 Editor's Gold Award for Internet Service Provider,
"Neither consumer-cute nor no-frills/no-fun, MindSpring is both the
easiest and most efficient ISP for home-based workers." - Home Office
- Computing, December 1998.
- World Class Award for Best ISP, "It's hard to improve on what readers
tell us is the best support in the business," - PC World, July 1998.
- Best ISP Start Page, "Organized, comprehensive, and friendly - in
other words, a great place to start," FamilyPC, July 1998. - Buy It
recommendation of MindSpring as the national ISP providing the best
value, "...its software selection beats the pants off the competition,
and MindSpring's technical support gets our nod as the best overall,"
- CNET: The Computer Network, November 1997 (Reiterated July 1998).
- Best Buy, "This company prides itself on being 'patient,'" Smart Money
Interactive, June 1998.
- "Best Buy" for Web Hosting, Home Office Computing, April 1998.
