UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
(Commission File Number 333-51037)
ICG SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 84-1448147
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
161 Inverness Drive West
Englewood, Colorado 80112
(888) 424-1144 or (303) 414-5000
(Address of principal executive offices and registrant's telephone numbers,
including area codes)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
On August 16, 1999, ICG Services, Inc. had 10 shares of common stock
outstanding. ICG Communications, Inc. owns all of the issued and outstanding
shares of common stock of ICG Services, Inc.
<PAGE>
TABLE OF CONTENTS
PART I ....................................................................... 3
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ..................... 3
Consolidated Balance Sheets as of December 31, 1998 and
June 30, 1999 (unaudited).................................... 3
Consolidated Statements of Operations (unaudited) for the
Three Months and Six Months Ended June 30, 1998 and 1999..... 5
Consolidated Statement of Stockholder's Equity (unaudited)
for the Six Months Ended June 30, 1999....................... 6
Consolidated Statements of Cash Flows (unaudited) for the
Six Months Ended June 30, 1998 and 1999 ..................... 7
Notes to Consolidated Financial Statements, December 31, 1998
and June 30, 1999 (unaudited)................................ 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS .......................................18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ......30
PART II ......................................................................32
ITEM 1. LEGAL PROCEEDINGS ...............................................32
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS .......................32
ITEM 3. DEFAULTS UPON SENIOR SECURITIES .................................32
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .............32
ITEM 5. OTHER INFORMATION ...............................................32
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ...............................32
Exhibits ........................................................32
Reports on Form 8-K .............................................32
2
<PAGE>
ICG SERVICES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1998 and June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
December 31, June 30,
1998 1999
------------------ ----------------
Assets (in thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 114,380 96,674
Short-term investments available for sale 41,000 4,943
Receivables:
Network services, including amounts due from ICG
(note 6) - 8,029
Leasing services, due from ICG (note 6) 7,753 35,071
Due from ICG (note 6) 137,762 113,420
----------------- ----------------
145,515 156,520
----------------- ----------------
Inventory - 67
Prepaid expenses and deposits 20 613
----------------- ----------------
Total current assets 300,915 258,817
----------------- ----------------
Property and equipment 301,969 624,993
Less accumulated depreciation (4,064) (29,852)
----------------- ----------------
Net property and equipment 297,905 595,141
----------------- ----------------
Investment in restricted preferred stock (note 4) - 10,000
Investments, accounted for under the equity method (note 4) 10,179 47,906
Deferred financing and lease administration costs, net of
accumulated amortization of $1.5 million and $2.5 million at
December 31, 1998 and June 30, 1999, respectively 16,727 16,699
Deposits and other assets - 1,255
Net non-current assets of discontinued operations (note 3) 54,023 -
----------------- ----------------
Total assets (note 8) $ 679,749 929,818
================= ================
(Continued)
</TABLE>
3
<PAGE>
ICG SERVICES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (unaudited), Continued
<TABLE>
<CAPTION>
December 31, June 30,
1998 1999
------------------- -----------------
Liabilities and Stockholder's Equity (in thousands)
<S> <C> <C>
Current liabilities:
Accounts payable, including amounts due to ICG (note 6) $ 28,840 26,617
Accrued liabilities 1,309 27,013
Deferred gain on sale (note 3) - 15,502
Current portion of capital lease obligations - 3,004
Net current liabilities of discontinued operations (note 3) 22,328 -
------------------- -----------------
Total current liabilities 52,477 72,136
------------------- -----------------
Capital lease obligations, less current portion - 6,548
Long-term debt, net of discount (note 5) 594,617 657,260
Other long-term liabilities (note 6) - 2,500
------------------- -----------------
Total liabilities 647,094 738,444
------------------- -----------------
Stockholder's equity:
Common stock, $.01 par value, 1,000 shares authorized; 10 shares
issued and outstanding at December 31, 1998 and June 30, 1999 - -
Additional paid-in capital 207,798 180,619
Accumulated (deficit) earnings (175,024) 10,755
Accumulated other comprehensive loss (119) -
------------------- -----------------
Total stockholder's equity 32,655 191,374
------------------- -----------------
Commitments and contingencies (notes 5 and 7)
Total liabilities and stockholder's equity $ 679,749 929,818
=================== =================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
ICG SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations (unaudited)
Three Months and Six Months Ended June 30, 1998 and 1999
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------------------- ----------------------------------
1998 1999 1998 1999
------------------- ----------------- ----------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Revenue from network and leasing services provided
to ICG (notes 6 and 8) $ 452 20,041 452 34,644
Cost of services and expenses:
Cost of services - 848 - 1,434
Selling, general and administrative expenses,
including amounts allocated from ICG (note 6) 1,015 447 1,504 836
Depreciation (note 8) 148 13,813 148 20,943
------------------- ----------------- ----------------------------------
Total cost of services and expenses 1,163 15,108 1,652 23,213
------------------- ----------------- ----------------------------------
Operating (loss) income (711) 4,933 (1,200) 11,431
Other (expense) income:
Interest expense (note 8) (12,288) (17,499) (16,236) (33,137)
Interest income, including amounts earned from
ICG (note 6) 6,296 6,967 8,409 15,282
Gain on marketable trading securities, net of
unrealized gains and losses (note 4) - - - 439
------------------- ----------------- ----------------------------------
(5,992) (10,532) (7,827) (17,416)
------------------- ----------------- ----------------------------------
Loss from continuing operations before share of
net losses (6,703) (5,599) (9,027) (5,985)
Share of net losses of equity investees - (3) - (1,265)
------------------- ----------------- ----------------------------------
Loss from continuing operations (6,703) (5,602) (9,027) (7,250)
------------------- ----------------- ----------------------------------
Loss from discontinued operations (note 3) (11,794) - (28,373) -
------------------- ----------------- ----------------------------------
Extraordinary gain on sales of operations of
NETCOM, net of income taxes of $6.4 million
(note 3) - - - 193,029
------------------- ----------------- ----------------------------------
Net (loss) income and comprehensive (loss)
income $ (18,497) (5,602) (37,400) 185,779
=================== ================= ==================================
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
ICG SERVICES, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholder's Equity (unaudited)
Six Months Ended June 30, 1999
<TABLE>
<CAPTION>
Accumulated
Common stock Additional Accumulated other Total
-------------------- paid-in (deficit) comprehensive stockholder's
Shares Amount capital earnings loss equity
-------- ----------- -------------- -------------- ---------------- ---------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balances at January 1, 1999 - $ - 207,798 (175,024) (119) 32,655
Reversal of foreign currency translation
adjustment (note 3) - - - - 119 119
Excess of book value of net assets acquired
over consideration paid - - 3,899 - - 3,899
Excess of fair value of assets acquired over
book value (note 6) - - (31,078) - - (31,078)
Net income - - - 185,779 - 185,779
======== =========== ============== ============== ================ ===============
Balances at June 30, 1999 - $ - 180,619 10,755 - 191,374
======== =========== ============== ============== ================ ===============
</TABLE>
See accompanying notes to consolidated financialstatements.
6
<PAGE>
ICG SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)
Six Months Ended June 30, 1998 and 1999
<TABLE>
<CAPTION>
Six months ended June 30,
------------------------------------
1998 1999
--------------- ----------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (37,400) 185,779
Loss from discontinued operations 28,373 -
Extraordinary gain on sales of discontinued operations - (193,029)
Adjustments to reconcile net (loss) income to net cash provided by
operating activities:
Recognition of deferred gain - (10,498)
Share of net losses of equity investees - 1,265
Depreciation 148 20,943
Interest expense deferred and included in long-term debt 15,814 29,566
Amortization of deferred financing costs included in interest expense 422 879
Amortization of deferred lease administration costs included in selling,
general and administrative expenses - 146
Gain on marketable trading securities - (439)
Change in operating assets and liabilities:
Receivables (27,889) (18,492)
Inventory - 139
Prepaid expenses and deposits - (93)
Accounts payable and accrued liabilities 26,941 (9,831)
--------------- ----------------
Net cash provided by operating activities 6,409 6,335
--------------- ----------------
Cash flows from investing activities:
Acquisition of property, equipment and other assets (52,236) (290,799)
Investment in equity investee - (35,093)
Investment in restricted preferred stock - (10,000)
Proceeds from sales of operations of NETCOM, net of cash included in sale - 252,881
(Purchase) sale of short-term investments available for sale (16,000) 36,057
Proceeds from sale of marketable securities - 30,439
--------------- ----------------
Net cash used by investing activities (68,236) (16,515)
--------------- ----------------
Cash flows from financing activities:
Proceeds from issuance of common stock:
Exercise of stock options 341 -
Employee stock purchase plan 132 -
Proceeds from issuance of long-term debt 550,574 -
Deferred financing and lease administration costs (17,205) (997)
Principal payments on capital lease obligations - (1,422)
--------------- ----------------
Net cash provided (used) by financing activities 533,842 (2,419)
--------------- ----------------
Net increase (decrease) in cash and cash equivalents 472,015 (12,599)
Net cash used by discontinued operations (473) (5,107)
Cash and cash equivalents, beginning of period - 114,380
=============== ================
Cash and cash equivalents, end of period $ 471,542 96,674
=============== ================
(Continued)
</TABLE>
7
<PAGE>
ICG SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)
Six Months Ended June 30, 1998 and 1999
<TABLE>
<CAPTION>
Six months ended June 30,
------------------------------------
1998 1999
--------------- ----------------
(in thousands)
<S> <C> <C>
Supplemental disclosure of cash flows information of continuing operations:
Cash paid for interest $ - 2,692
=============== ================
Cash paid for taxes $ - 931
=============== ================
Supplemental disclosure of non-cash investing and financing activities of
continuing operations:
Acquisition of corporate headquarters assets through the issuance of
long-term debt (note 5) $ - 33,077
=============== ================
Assets acquired under capital leases $ - 6,190
=============== ================
</TABLE>
See accompanying notes to consolidated financial statements.
8
<PAGE>
ICG SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and June 30, 1999 (unaudited)
(1) Organization and Nature of Business
ICG Services, Inc., a Delaware corporation ("ICG Services" or "the
Company"), was incorporated on January 23, 1998 and is a wholly owned
subsidiary of ICG Communications, Inc., a Delaware corporation
("ICG"). On January 21, 1998, ICG completed a merger with NETCOM
On-Line Communication Services, Inc., a Delaware corporation and
Internet service provider ("ISP") located in San Jose, California
("NETCOM"), accounted for as a pooling of interests. Upon the
formation of ICG Services on January 23, 1998, ICG contributed its
investment in NETCOM to ICG Services and NETCOM became a wholly owned
subsidiary of, and predecessor entity to, ICG Services. Accordingly,
the financial statements of the Company prior to January 23, 1998
consist solely of the accounts of NETCOM and its subsidiaries. On
February 17 and March 16, 1999, the Company completed the sales of the
operations of NETCOM. In conjunction with the sales, the legal name of
the NETCOM subsidiary was changed to ICG NetAhead, Inc. ("NetAhead").
NetAhead has retained the domestic Internet backbone assets formerly
owned by NETCOM which it is utilizing for the provision of newly
developed wholesale network services to ISPs and other
telecommunications providers. The Company's consolidated financial
statements reflect the operations of NETCOM as discontinued for all
periods presented.
On January 23, 1998, ICG Equipment, Inc., a Colorado corporation and
wholly owned subsidiary of the Company ("ICG Equipment"), was formed
for the principal purpose of providing financing of telecommunications
equipment and services to ICG Telecom Group, Inc., an indirectly
wholly owned subsidiary of ICG and provider of competitive local
exchange services, and its subsidiaries ("ICG Telecom"). Such
financing is provided through ICG Equipment's purchase of
telecommunications equipment, software, network capacity and related
services from original equipment manufacturers, providers of intercity
network facilities and ICG Telecom, and subsequent lease of such
assets to ICG Telecom.
The Company's objective is to acquire and invest in telecommunications
equipment, software, network capacity and businesses that complement
ICG's business strategy. By leveraging its relationship with ICG, the
Company intends to capitalize on the growth in demand for
telecommunications equipment and services provided by the Company. In
addition to providing Leasing Services and Network Services, the
Company intends to grow through acquisition or investment in
telecommunications related businesses, potentially including
investment in companies currently owned by ICG.
(2) Significant Accounting Policies
(a) Basis of Presentation
These financial statements should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended December
31, 1998, as certain information and note disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted pursuant to the rules and regulations of the United
States Securities and Exchange Commission. The interim financial
statements reflect all adjustments which are, in the opinion of
management, necessary for a fair presentation of financial
position, results of operations and cash flows as of and for the
interim periods presented. Such adjustments are of a normal
recurring nature. Operating results for the six months ended June
30, 1999 are not necessarily indicative of the results that may
be expected for the year ending December 31, 1999.
All significant intercompany accounts and transactions have been
eliminated in consolidation.
9
<PAGE>
ICG SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Significant Accounting Policies (continued)
(b) (Loss) Income Per Share
The Company has 10 shares of common stock issued and outstanding,
which are owned entirely by ICG. Accordingly, the Company does
not present (loss) income per share in its consolidated financial
statements as such disclosure is not considered to be meaningful.
(c) Reclassifications
Certain 1998 amounts have been reclassified to conform with the
1999 presentation.
(3) Discontinued Operations
On February 17, 1999, the Company sold certain of the operating assets
and liabilities of NETCOM to MindSpring Enterprises, Inc., an ISP
located in Atlanta, Georgia ("MindSpring"). Total proceeds from the
sale were $245.0 million, consisting of $215.0 million in cash and
376,116 shares of common stock of MindSpring, valued at approximately
$79.76 per share at the time of the transaction. Assets and
liabilities sold to MindSpring include those directly related to the
domestic operations of NETCOM's Internet dial-up, dedicated access and
Web site hosting services. In conjunction with the sale to MindSpring,
the Company entered into an agreement to lease to MindSpring for a
one-year period the capacity of certain network operating assets
formerly owned by NETCOM and retained by the Company. MindSpring is
utilizing the Company's network capacity to provide Internet access to
the dial-up services customers formerly owned by NETCOM. Over the term
of the one-year agreement, MindSpring is required to pay the Company a
minimum of $27.0 million for the Company's network capacity, although
such minimum is subject to increase dependent upon network usage. In
addition, the Company is receiving for a one-year period 50% of the
gross revenue earned by MindSpring from the dedicated access customers
formerly owned by NETCOM, estimated to be approximately $10.0 million
for the term of the agreement. The Company, through NetAhead, is
currently utilizing the retained network operating assets to provide
wholesale capacity and other enhanced network services to MindSpring
and intends to provide similar services to other ISPs and
telecommunications providers in the future. The carrying value of the
assets retained by the Company was approximately $21.7 million,
including approximately $17.5 million of network equipment, on
February 17, 1999. The Company also retained approximately $11.3
million of accrued liabilities and capital lease obligations.
On March 16, 1999, the Company sold all of the capital stock of
NETCOM's international operations for total proceeds of approximately
$41.1 million. MetroNET Communications Corp., a Canadian entity, and
Providence Equity Partners, located in Providence, Rhode Island
("Providence"), together purchased the 80% interest in NETCOM Canada
Inc. owned by NETCOM for approximately $28.9 million in cash.
Additionally, Providence purchased all of the capital stock of NETCOM
Internet Access Services Limited, NETCOM's operations in the United
Kingdom, for approximately $12.2 million in cash.
During the six months ended June 30, 1999, the Company recorded a
combined gain on the sales of the operations of NETCOM of
approximately $193.0 million, net of income taxes of approximately
$6.4 million. Offsetting the gain on the sales is approximately $16.6
million of net losses from operations of NETCOM from November 3, 1998
(the date on which the Company's board of directors adopted the formal
plan to dispose of the operations of NETCOM) through the dates of the
sales. Additionally, since the Company expects to generate operating
costs in excess of revenue under its network capacity agreement with
MindSpring and the terms of the sale agreement were dependent upon and
negotiated in conjunction with the terms of the network capacity
10
<PAGE>
ICG SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(3) Discontinued Operations (continued)
agreement, the Company deferred approximately $26.0 million of the
proceeds from the sale agreement to be applied on a periodic basis to
the network capacity agreement. The deferred proceeds are recognized
in the Company's statement of operations as the Company incurs cash
operating losses under the network capacity agreement. Accordingly,
the Company does not expect to recognize any revenue, operating costs
or selling, general and administrative expenses from services provided
to MindSpring for the term of the agreement. Any incremental revenue
or costs generated by other customers, or by other services provided
to MindSpring, are recognized in the Company's consolidated statement
of operations as incurred. During the three months and six months
ended June 30, 1999, the Company applied $3.8 million and $10.5
million, respectively, of deferred proceeds from the sale of the
operating assets and liabilities of NETCOM to offset the costs of the
network capacity agreement with MindSpring, which entirely offset the
cost of the Company's operations under the agreement. Since the
operations sold were acquired by ICG in a transaction accounted for as
a pooling of interests, the gain on the sales of the operations of
NETCOM is classified as an extraordinary item in the Company's
consolidated statement of operations.
(4) Investments
As discussed in note 3, the Company received 376,116 shares of common
stock of MindSpring, valued at $79.76 per share, or $30.0 million, at
the time of the transaction, as partial consideration for the sale of
the domestic operations of NETCOM. In April 1999, the Company sold its
investment in MindSpring for net proceeds of approximately $30.4
million. The Company recorded a gain of approximately $0.4 million in
its statement of operations for the six months ended June 30, 1999.
On March 30, 1999, the Company purchased, for approximately $10.0
million in cash, 454,545 shares of restricted Series D-1 Preferred
Stock (the "NorthPoint Preferred Stock") of NorthPoint Communications
Holdings, Inc., a Delaware corporation and competitive local exchange
carrier ("CLEC") based in San Francisco, California ("NorthPoint").
The NorthPoint Preferred Stock has no voting rights and is ultimately
convertible into a voting class of common stock of NorthPoint, at an
exchange price which represents a discount, as provided in the
relevant documentation, to the initial public offering price of
NorthPoint's common stock. The Company is restricted from selling the
NorthPoint Preferred Stock or securities obtained upon conversion of
the NorthPoint Preferred Stock until March 23, 2000. On May 5, 1999,
NorthPoint completed the initial public offering of its common stock,
at which time the NorthPoint Preferred Stock, and additional shares of
NorthPoint Preferred Stock obtained as a result of stock splits, were
automatically converted into shares of Class B common stock, a
nonvoting class of common stock of NorthPoint (the "NorthPoint Class B
Shares"), which are convertible on or after March 23, 2000 on a
one-for-one basis into a voting class of common stock of NorthPoint.
The Company will account for its investment in NorthPoint under the
cost method of accounting until the NorthPoint Class B Shares are
converted into voting and tradable common stock of NorthPoint, after
which the investment will be classified as a trading security.
Investments, accounted for under the equity method include the
Company's 20% and 49% investments in ICG Ohio LINX, Inc. and ICG
ChoiceCom, L.P., respectively.
11
<PAGE>
ICG SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5) Long-term Debt
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
December 31, June 30,
1998 1999
--------------------- ---------------------
(in thousands)
<S> <C> <C>
9 7/8% Senior discount notes, net of discount $ 266,918 280,096
10% Senior discount notes, net of discount 327,699 344,087
Mortgage loan payable with adjustable rate of interest
(14.77% at June 30, 1999) due in full on January
31, 2013, secured by corporate headquarters (a) - 33,077
--------------------- ---------------------
$ 594,617 657,260
===================== =====================
</TABLE>
(a) Mortgage Loan Payable
Effective January 1, 1999, the Company purchased ICG's corporate
headquarters building, land and improvements (collectively, the
"Corporate Headquarters") for approximately $43.4 million, which
amount represents historical cost and approximates fair value.
The Company, through a newly formed subsidiary, financed the
purchase primarily through a loan secured by a mortgage on the
Corporate Headquarters, guaranteed by ICG Services, Inc. The
amended loan agreement, dated May 1, 1999, requires monthly
interest payments at an initial interest rate of 14.77% per annum
which rate increases annually by 0.003%, with the mortgage
balance due in full on January 31, 2013. The seller of the
Corporate Headquarters has retained an option to repurchase the
Corporate Headquarters at the original sales price, which option
is exercisable from January 1, 2004 through January 31, 2012.
(b) Senior Facility
On August 12, 1999, ICG Equipment and NetAhead entered into a
$200.0 million senior secured financing facility (the "Senior
Facility") consisting of a $75.0 million term loan, a $100.0
million term loan and a $25.0 million revolving line of credit.
The Senior Facility is guaranteed by ICG Services and is secured
by the assets of ICG Equipment and NetAhead.
As required under the terms of the loan, the Company borrowed on
August 12, 1999 the available $75.0 million on the $75.0 million
term loan. The loan bears interest at an annual interest rate of
LIBOR plus 3.5% or the base rate, as defined in the credit
agreement, plus 2.5%, at the Company's option (10.5% on August
12, 1999). Quarterly repayments commence September 30, 1999 and
require quarterly loan balance reductions of 0.25% through June
30, 2005 with the remaining outstanding balance to be repaid
during the final three quarters of the loan term. The $75.0
million term loan matures on March 31, 2006.
On August 12, 1999, the Company borrowed $5.0 million on the
$100.0 million term loan which is available through August 10,
2000 at an initial annual interest rate of LIBOR plus 3.125% or
the base rate, as defined in the credit agreement, plus 2.125%,
at the Company's option (10.125% on August 12, 1999). Quarterly
repayments commence September 30, 2002 and require aggregate loan
balance reductions of 25% through June 30, 2003, 35% through June
30, 2004 and 40% through June 30, 2005. The $100.0 million term
loan matures on June 30, 2005.
12
<PAGE>
ICG SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5) Long-term Debt (continued)
The $25.0 million revolving line of credit is available through
the maturity date of June 30, 2005 at an initial annual interest
rate of LIBOR plus 3.125% or the base rate, as defined in the
credit agreement, plus 2.125%, at the Company's option.
The terms of the Senior Facility provide certain limitations on
the use of proceeds, additional indebtedness, dividends,
prepayment of the Senior Facility and other indebtedness and
certain other transactions. Additionally, the Company is subject
to certain financial covenants based on its results and the
results of ICG. The Company is required to pay commitment fees
ranging from 0.625% to 1.375% for the unused portion of available
borrowings under the Senior Facility.
(6) Related Party Transactions
The Company and its subsidiaries have entered into certain
intercompany and shared services agreements with ICG, whereby ICG
allocates to the Company direct and certain indirect costs incurred by
ICG or its other subsidiaries on behalf of the Company. Allocated
expenses generally include a portion of salaries and related benefits
of legal, accounting and finance, information systems support and
other ICG employees, certain overhead costs and reimbursement for
invoices of the Company paid by ICG. Conversely, any cash collected by
ICG on behalf of the Company or its subsidiaries or invoices paid by
the Company on behalf of ICG or its subsidiaries are in turn
reimbursed to the Company by ICG. As the Company and its subsidiaries
and ICG and its subsidiaries jointly enter into service offerings and
other transactions, joint costs incurred are generally allocated to
each of the Company and ICG according to the relative capital invested
and efforts expended by each party. Management believes that all
transactions between the Company, including its subsidiaries, and ICG,
including its subsidiaries, contain fair and reasonable terms. All
such transactions are approved by the board of directors of the
Company and of ICG and are settled in cash on a quarterly basis.
ICG charged approximately $1.6 million and $3.2 million for the three
months and six months ended June 30, 1998, respectively, and
approximately $32.8 million and $35.6 million for the three months and
six months ended June 30, 1999, respectively, to the Company for
intercompany transfers and direct and indirect costs incurred by ICG
and its Restricted Subsidiaries on behalf of the Company. Of these
amounts, approximately $0.6 million is included in the Company's
selling, general and administrative expenses for the three months and
six months ended June 30, 1998 and approximately $0.2 million and $0.5
million is included in selling, general and administrative expenses
for the three months and six months ended June 30, 1999, respectively.
The Company charged to ICG and its Restricted Subsidiaries for
intercompany transfers and direct and indirect costs incurred by the
Company on behalf of ICG and its Restricted Subsidiaries approximately
$28.6 million and $29.3 million for the three months and six months
ended June 30, 1998, respectively, and approximately $144.4 million
and $269.6 million for the three months and six months ended June 30,
1999, respectively. The net receivable from ICG for all intercompany
charges combined is included in due from ICG in the Company's
consolidated balance sheets. Net interest income accrued by the
Company on outstanding balances from ICG and its Restricted
Subsidiaries is included in interest income in the Company's
consolidated statement of operations and was approximately $4.1
million and $10.0 million for the three months and six months ended
June 30, 1999, respectively. No significant interest income was
accrued by the Company during the six months ended June 30, 1998.
Interest has been accrued on outstanding balances of intercompany
transfers and direct and indirect costs between ICG Services and ICG
and its Restricted Subsidiaries at 10% and 12 1/2% per annum for 1998
and 1999, respectively, which represents the Company's approximate
weighted average cost of capital at the beginning of the respective
fiscal year.
13
<PAGE>
ICG SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(6) Related Party Transactions (continued)
ICG Equipment purchased certain telecommunications equipment both from
and for ICG Telecom for an aggregate purchase price of approximately
$21.9 million during the three months and six months ended June 30,
1998, and approximately $219.9 million and $284.0 million during the
three months and six months ended June 30, 1999, respectively.
Additionally, ICG Equipment entered into separate agreements to lease
$14.8 million during the three months and six months ended June 30,
1998 and $96.5 million and $146.0 million, during the three months and
six months ended June 30, 1999, respectively, of telecommunications
equipment to ICG Telecom under operating leases, with annual lease
payments commencing one year from the date of the lease. ICG Equipment
recognizes revenue from the lease payments ratably over the lease
terms. ICG Equipment recognized approximately $0.5 million for the
three months and six months ended June 30, 1998 and approximately
$15.6 million and $26.7 million for the three months and six months
ended June 30, 1999, respectively, in revenue under its operating
leases with ICG Telecom all of which is included in leasing services
receivables at June 30, 1998 and 1999, respectively. The purchase
prices and lease payments for all leases are subject to adjustment,
based on the results of an independent appraisal which may be
requested at the option of ICG Equipment on or before 90 days from the
purchase date. ICG Equipment submitted a request to ICG Telecom for
independent appraisals of certain of the telecommunications equipment
and fiber optic capacity purchased through June 30, 1999. The Company
received the appraisals for all transactions completed during fiscal
1998 which determined the fair value of the purchased
telecommunications equipment and fiber optic capacity exceeded the
book value, and accordingly, the original purchase price, by $31.1
million. The Company has reflected the payment of the excess of fair
value over the original purchase price as a reduction of equity in the
accompanying consolidated financial statements.
Additionally, under a master lease agreement between ICG Equipment and
ICG Telecom, ICG Telecom is required to pay ICG Equipment a monthly
lease service fee, at an annual rate of prime plus 4% (11.75% at June
30, 1999), based on the average monthly balance of assets purchased by
ICG Equipment and intended for future lease to ICG Telecom, but not
yet placed into service. ICG Equipment recognized approximately $0.5
million for the three months and six months ended June 30, 1998 and
approximately $3.0 million and $5.3 million for the three months and
six months ended June 30, 1999, respectively, of monthly service fee
revenue under this agreement which was included in leasing services
receivables at June 30, 1998 and 1999, respectively. The amount of
assets purchased by ICG Equipment and intended for future lease to ICG
Telecom, but not yet placed into service, was approximately $149.1
million at June 30, 1999. The Company begins depreciation on property
and equipment at the time the assets are placed in service.
In the normal course of business, ICG Telecom provides the use of
certain of its local access lines to NETCOM (prior to the disposition
of the operations of NETCOM) and NetAhead and, accordingly, charges
NETCOM and NetAhead for costs of any installation and recurring access
to its network. For the three months and six months ended June 30,
1998, NETCOM incurred approximately $1.1 million for installation and
recurring local access charges from ICG Telecom, which have been
included in loss from discontinued operations in the accompanying
consolidated financial statements. For the three months and six months
ended June 30, 1999, NETCOM and NetAhead together incurred
approximately $1.4 million and $2.8 million, respectively, for
installation and recurring local access charges from ICG Telecom,
which have been included in the extraordinary gain on the sales of the
operations of NETCOM for those charges relating to NETCOM, and in
operating costs for those charges relating to NetAhead, a portion of
which were applied against the deferred gain on the sale of certain of
NETCOM's domestic operating assets and liabilities, in the Company's
consolidated financial statements for the six months ended June 30,
1999.
14
<PAGE>
ICG SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(6) Related Party Transactions (continued)
Conversely, NetAhead provides the use of its network to ICG Telecom in
NetAhead's and ICG Telecom's joint service offerings. For the three
months and six months ended June 30, 1999, NetAhead recognized
approximately $0.3 million of revenue from ICG Telecom for network
services provided to ICG Telecom in conjunction with NetAhead's and
ICG Telecom's joint service offerings of IP telephony services and
other enhanced data services. Additionally, included in cost of
services of NetAhead is approximately $0.3 million and $0.4 million
for the three months and six months ended June 30, 1999, respectively,
for costs incurred by NetAhead associated with NetAhead's and ICG
Telecom's joint service offerings of IP telephony services and other
enhanced data services.
Effective January 1, 1999, the Company purchased ICG's Corporate
Headquarters and assumed the prior lessor's operating lease of the
Corporate Headquarters assets to a subsidiary of ICG. For the three
months and six months ended June 30, 1999, the Company earned leasing
revenue from the Restricted Subsidiary of ICG of approximately $1.1
million and $2.3 million, respectively, under the operating lease,
which is included in revenue and due from ICG in the Company's
consolidated financial statements. As part of this transaction, the
subsidiary is obligated to pay the Company $2.5 million as a security
deposit on the operating lease, which is included in due from ICG in
the Company's consolidated financial statements.
(7) Commitments and Contingencies
The Company has entered into various equipment purchase agreements
with certain of its vendors. Under these agreements, if the Company
does not meet a minimum purchase level in any given year, the vendor
may discontinue certain discounts, allowances and incentives otherwise
provided to the Company. In addition, the agreements may be terminated
by either the Company or the vendor upon prior written notice.
The Company has entered into certain commitments to purchase capital
assets with an aggregate purchase price of approximately $81.1 million
at June 30, 1999.
A putative class action lawsuit was filed on July 15, 1997 in Superior
Court of California, Orange County, alleging unfair business practices
and related causes of action against NETCOM, now NetAhead, in
connection with its offers of free trial periods and cancellation
procedures. This litigation was settled in May 1999 for an amount
which was not significant to the Company's consolidated financial
statements.
NETCOM, now NetAhead, is a party to certain other litigation which has
arisen in the ordinary course of business. In the opinion of
management, the ultimate resolution of these matters will not have a
material adverse effect on the Company's financial condition, results
of operations or cash flows.
(8) Business Units
The Company conducts transactions with external customers through the
operations of its Network Services (NetAhead) and Leasing Services
(primarily ICG Equipment). Direct and certain indirect costs incurred
by ICG Services, Inc., the parent company, on behalf of Network
Services and Leasing Services are allocated among those business units
based on the nature of the underlying costs. As the operations of
Network Services commenced during the three months ended March 31,
1999, such operations are not considered to be significant for
purposes of business segment reporting and, accordingly, are included
with the remaining corporate subsidiaries of the Company which
primarily hold securities.
15
<PAGE>
ICG SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(8) Business Units (continued)
Set forth below are revenue, EBITDA (which represents the measure of
operating performance used by management to evaluate operating
results), depreciation, interest expense, capital expenditures of
continuing operations and total assets for Leasing Services and all
other subsidiaries of the Company combined. As described in note 3,
results of the Company reflect the operations of NETCOM as
discontinued for all periods presented.
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
------------------------------- -------------------------------
1998 1999 1998 1999
--------------- --------------- -------------- ---------------
(in thousands)
<S> <C> <C> <C> <C>
Revenue:
Leasing Services $ 452 19,788 452 34,391
All other - 253 - 253
=============== =============== ============== ===============
Total revenue $ 452 20,041 452 34,644
=============== =============== ============== ===============
EBITDA (a):
Leasing Services $ 349 19,558 179 34,052
All other (912) (812) (1,231) (1,678)
=============== =============== ============== ===============
Total EBITDA $ (563) 18,746 (1,052) 32,374
=============== =============== ============== ===============
Depreciation (b):
Leasing Services $ 65 11,425 65 17,778
All other 83 2,388 83 3,165
=============== =============== ============== ===============
Total depreciation $ 148 13,813 148 20,943
=============== =============== ============== ===============
Interest expense (b):
Leasing Services $ - 413 - 1,034
All other 12,288 17,086 16,236 32,103
=============== =============== ============== ===============
Total interest expense $ 12,288 17,499 16,236 33,137
=============== =============== ============== ===============
Capital expenditures of continuing operations (c):
Leasing Services $ 50,113 224,795 52,236 288,732
All other - 4,380 - 8,257
=============== =============== ============== ===============
Total capital expenditures of continuing
operations $ 50,113 229,175 52,236 296,989
=============== =============== ============== ===============
</TABLE>
<TABLE>
<CAPTION>
December 31, June 30,
1998 1999
-------------------- ------------------
(in thousands)
<S> <C> <C>
Total assets:
Leasing Services $ 292,300 637,446
All other (d) 195,664 178,952
Net current assets of discontinued operations (e) - -
Net non-current assets of discontinued operations 54,023 -
Due from ICG 137,762 113,420
-------------------- ------------------
Total assets $ 679,749 929,818
==================== ==================
</TABLE>
16
<PAGE>
ICG SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(8) Business Units (continued)
(a) EBITDA consists of loss from continuing operations before
interest, income taxes, depreciation, other expense, net, and
share of net losses of equity investees, or simply, revenue less
operating costs and selling, general and administrative expenses.
EBITDA is presented as the Company's measure of operating
performance because it is a measure commonly used in the
telecommunications industry. EBITDA is presented to enhance an
understanding of the Company's operating results and is not
intended to represent cash flows or results of operations in
accordance with generally accepted accounting principles for the
periods indicated. EBITDA is not a measurement under generally
accepted accounting principles and is not necessarily comparable
with similarly titled measures of other companies.
(b) Although not included in EBITDA (which represents the measure of
operating performance used by management to evaluate operating
results) the Company has supplementally provided depreciation and
interest expense for each of the Company's Leasing Services and
all other Company subsidiaries combined. Interest expense
excludes amounts charged by ICG Services, Inc. to ICG Equipment,
Inc. (Leasing Services) for interest on outstanding cash advances
and expense allocations.
(c) Capital expenditures include assets acquired under capital leases
and excludes corporate headquarters assets acquired through the
issuance of long-term debt.
(d) Total assets excludes the investment in ICG Equipment, Inc.
(Leasing Services) which eliminates in consolidation.
(e) At December 31, 1998, the Company had net current liabilities of
discontinued operations of $22.3 million, and accordingly, such
amount was not included within net current assets of discontinued
operations on that date.
17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion includes certain forward-looking statements which
are affected by important factors including, but not limited to, the Company's
lack of operating history, the successful execution of the Company's new
strategy of offering enhanced network services to Internet service providers
("ISPs"), ICG Telecom and other telecommunications providers and lack of credit
support from ICG that could cause actual results to differ materially from the
forward-looking statements. The results of operations for the three months and
six months ended June 30, 1998 and 1999 represent the consolidated operating
results of the Company and its subsidiaries. See the unaudited condensed
consolidated financial statements of the Company for the three months and six
months ended June 30, 1999 included elsewhere herein. The Company's consolidated
financial statements reflect the operations of NETCOM as discontinued for all
periods presented. The terms "fiscal" and "fiscal year" refer to the Company's
fiscal year ending December 31.
Company Overview
ICG Services, Inc. ("ICG Services" or the "Company") was formed on January
23, 1998 and is a wholly owned subsidiary of ICG. The Company's Leasing Services
and Network Services operations are currently conducted through its two
operating subsidiaries, ICG Equipment, Inc. ("ICG Equipment") and ICG NetAhead,
Inc. ("NetAhead") (formerly NETCOM On-Line Communication Services, Inc.
("NETCOM")).
On January 21, 1998, ICG acquired NETCOM, a Delaware corporation and
provider of Internet connectivity and Web site hosting services located in San
Jose, California, in a transaction accounted for as a pooling of interests. As
consideration for the acquisition, ICG issued approximately 10.2 million shares
of common stock of ICG ("ICG Common Stock"), valued at approximately $284.9
million on the date of the merger. Upon the formation of ICG Services, ICG
contributed its investment in NETCOM to ICG Services and NETCOM became a wholly
owned subsidiary of, and predecessor entity to, ICG Services. Accordingly, the
historical consolidated financial statements of the Company prior to January 23,
1998 consist solely of the accounts of NETCOM.
In January 1998, the Company formed ICG Equipment, a Colorado corporation,
for the principal purpose of providing financing of telecommunications equipment
and services to ICG Telecom Group, Inc., an indirectly wholly owned subsidiary
of ICG and provider of competitive local exchange services, and its subsidiaries
("ICG Telecom"). Such financing is provided through ICG Equipment's purchase of
telecommunications equipment, software, network capacity and related services
from original equipment manufacturers, providers of intercity network facilities
and ICG Telecom, and subsequent lease of such assets to ICG Telecom. ICG
Equipment has applied for, and received or has pending, sales tax reseller
certificates in all jurisdictions in which it conducts business. By purchasing
assets through ICG Equipment, ICG Telecom defers sales tax on asset purchases
over the terms of its leases with ICG Equipment, which sales tax would otherwise
be paid in full by ICG Telecom at the time of the purchase. The equipment and
services provided to ICG Telecom are utilized to upgrade and expand ICG's
network infrastructure. Management believes that all leasing and other
arrangements between ICG Equipment and ICG Telecom contain fair and reasonable
terms and are intended to be conducted on the basis of fair market value and on
comparable terms that the Company would be able to obtain from a comparable
third party. ICG Equipment completed its first significant transaction on June
30, 1998 and, accordingly, ICG Equipment's operations prior to that date are not
significant. During the second half of 1998 and the six months ended June 30,
1999, ICG Equipment entered into a series of agreements whereby ICG Equipment
purchased telecommunications equipment and fiber optic capacity from ICG Telecom
and leased back the same telecommunications equipment and fiber optic capacity
to ICG Telecom under operating leases. Additionally, under master lease
agreements between ICG Equipment and ICG Telecom, ICG Telecom is required to pay
ICG Equipment a monthly lease service fee based on the average monthly balance
of assets purchased by ICG Equipment and intended for future lease to ICG
Telecom, but not yet placed into service. At June 30, 1999, ICG Equipment had
approximately $437.5 million of telecommunications equipment, software, network
capacity and related services under lease to ICG Telecom and approximately
$149.1 million of such assets intended for future lease to ICG Telecom, but not
yet placed into service.
On February 17, 1999, the Company sold certain of the operating assets and
liabilities of NETCOM to MindSpring Enterprises, Inc., an ISP located in
18
<PAGE>
Atlanta, Georgia ("MindSpring"), for total proceeds of $245.0 million, and on
March 16, 1999, the Company sold all of the capital stock of NETCOM's
international operations in Canada and the United Kingdom to other unrelated
third parties for total proceeds of approximately $41.1 million. During the six
months ended June 30, 1999, the Company recorded a combined gain on the sales of
the operations of NETCOM of approximately $193.0 million, net of income taxes of
approximately $6.4 million. Offsetting the gain on the sales is approximately
$16.6 million of net losses from operations of NETCOM from November 3, 1998 (the
date on which the Company's board of directors adopted the formal plan to
dispose of the operations of NETCOM) through the dates of the sales. Since the
operations sold were acquired by ICG in a transaction accounted for as a pooling
of interests, the gain on the sales of the operations of NETCOM is classified as
an extraordinary item in the Company's consolidated statement of operations. For
fiscal 1996, 1997 and 1998, NETCOM reported revenue of $120.5 million, $160.7
million and $164.6 million, respectively, and EBITDA losses of $(31.0) million,
$(9.4) million and $(14.7) million, respectively. The Company's consolidated
financial statements reflect the operations of NETCOM as discontinued for all
periods presented.
In conjunction with the sale to MindSpring, the legal name of the NETCOM
subsidiary was changed to ICG NetAhead, Inc. ("NetAhead"). NetAhead has retained
the domestic Internet backbone assets formerly owned by NETCOM which include 236
points of presence ("POPs") serving approximately 700 cities nationwide.
NetAhead is utilizing the retained network operating assets to provide wholesale
Internet access and enhanced network services to MindSpring and other ISPs, ICG
Telecom and other telecommunications providers. On February 17, 1999, NetAhead
entered into an agreement to lease to MindSpring for a one-year period the
capacity of certain network operating assets formerly owned by NETCOM and
retained by the Company. MindSpring is utilizing the Company's network capacity
to provide Internet access to the dial-up services customers formerly owned by
NETCOM. Over the term of the one-year agreement, MindSpring is required to pay
the Company a minimum of $27.0 million, although such minimum is subject to
increase dependent upon network usage. In addition, the Company is receiving for
a one-year period 50% of the gross revenue earned by MindSpring from the
dedicated access customers formerly owned by NETCOM, estimated to be
approximately $10.0 million for the term of the agreement. Although the Company
expects to generate cash operating losses under this agreement, any such losses
are offset by the periodic recognition of approximately $26.0 million of the
proceeds from the sale of certain of NETCOM's domestic operating assets and
liabilities to MindSpring, which the Company deferred on February 17, 1999.
Accordingly, the Company does not expect to recognize any revenue, operating
costs or selling, general and administrative expenses from services provided to
MindSpring for the term of the agreement. Any incremental revenue or costs
generated by other customers, or by other services provided to MindSpring, are
recognized in the Company's consolidated statement of operations as incurred.
During the three months and six months ended June 30, 1999, the Company applied
$3.8 million and $10.5 million, respectively, of deferred proceeds to the
network capacity agreement with MindSpring.
Additionally, NetAhead provides network capacity and enhanced data services
to ISPs, ICG Telecom and other telecommunications providers, as required. In
December 1998, ICG announced plans to offer several new network services to its
business and ISP customers by utilizing ICG's and, consequently, NetAhead's
nationwide data network and service capabilities to carry out-of-region traffic
and enhance data services provided. One of the services currently being offered
is modemless remote access service ("RAS"). RAS, also known as managed modem
service, allows ICG to provide modem access at its own switch location, thereby
eliminating the need for ISPs to deploy modems physically at each of their POPs.
The benefits to ISPs, including reduced capital expenditures and the shift of
network management responsibility from the ISPs to ICG, allows ICG to act as an
aggregator of ISP traffic. Currently, NetAhead participates in offering RAS by
providing radius routing and proxy services at the modem bank connected to ICG
Telecom's or another telecommunications provider's local switch, which services
are the authentication services necessary to validate and accurately route
incoming call traffic to the ISP. NetAhead also provides transport services to
deliver all Internet protocol ("IP") data packets either directly to the ISP, if
the ISP is not collocated at the telecommunications provider's local switch, or
directly to the Internet, bypassing the ISP. Additionally, through its network
operations center, NetAhead monitors the usage of each port and is responsible
for the administration of all network repair and maintenance. The Company is
currently offering Internet RAS services, or expanded originating services, to
MindSpring and expects to extend such services offerings to other ISPs in the
future. In June 1999, ICG entered into a five-year agreement with Qwest
Communications Corporation ("Qwest"), whereby Qwest has agreed to purchase
100,000 RAS circuits from ICG. ICG expects to install a minimum of 80,000 of
Qwest's RAS circuits by September 30, 1999, with the remaining 20,000 RAS
circuits to be installed prior to June 29, 2000. In August 1998, ICG Telecom
19
<PAGE>
began offering enhanced telephony services via IP technology. ICG Telecom
currently offers this service in 230 major cities in the United States, which
cities account for more than 90% of the commercial long distance market. ICG
Telecom carries the IP traffic over NetAhead's nationwide data network and
terminates a large portion of the traffic via NetAhead's POPs. NetAhead charges
ICG Telecom for calls carried and terminated on NetAhead's network. ICG and
NetAhead together plan to begin offering integrated access service ("IAS") which
allows voice and data traffic to be carried on the same circuit. Through
equipment installed by ICG Telecom at the customers' premises and in ICG
Telecom's central offices, IAS will provide expanded bandwidth for small to
medium-sized business customers as an alternative to purchasing additional
circuits. Data traffic, including Internet traffic, from IAS service offerings
will be carried over NetAhead's network. NetAhead's network will also be
utilized by ICG Telecom in offering peering services to its ISP customers, in
which service offerings ICG Telecom will become the general backbone provider
for its customers. Additionally, NetAhead intends to provide other enhanced
network services as demand warrants.
In March 1999, ICG entered into an agreement with NorthPoint
Communications, Inc., a data competitive local exchange carrier based in San
Francisco, California ("NorthPoint"), which designates NorthPoint as ICG's
preferred digital subscriber line ("DSL") provider through June 1, 2001. A
significant portion of ICG's DSL traffic will be routed by NorthPoint to
NetAhead's asynchronous transfer mode ("ATM") switches and transported by
NetAhead either to the ISP, via a point to point connection or via IP
technology, or directly to the Internet, as required. ICG expects to purchase a
minimum of 75,000 digital subscriber lines from NorthPoint during the term of
the agreement. NetAhead has not finalized its arrangements with ICG Telecom
regarding pricing and volume of services required by NetAhead in order for ICG
Telecom to perform under its agreement with NorthPoint and meet the needs of its
customers, although the Company believes this agreement will expand the current
operations of NetAhead.
The Company has and will continue to enter into agreements with ICG Telecom
to provide network services at negotiated rates. Management believes that all
such arrangements contain fair and reasonable terms and are intended to be
conducted on the basis of fair market value and on comparable terms that the
Company would be able to obtain from a comparable third party. The Company is
not presently able to determine the impact that the offerings of its newly
developed network services will have on revenue or EBITDA in 1999, 2000 or
future years. The nature, volume and consideration received for network services
from ISPs and other telecommunications providers as well as that received under
its agreements with ICG Telecom are ultimately dependent upon demand from ISPs
and other telecommunications providers, and while ICG Telecom and NetAhead
believe the Internet services market sector will benefit from these new
services, there is no assurance that ICG Telecom and NetAhead will be able to
successfully deploy and market its new services efficiently, or at all, or
obtain and retain new customers in a competitive marketplace. In the event that
ICG Telecom fails to successfully deploy its new services utilizing NetAhead's
network, demands a lower volume of network capacity services than originally
anticipated or is unable to adequately compensate NetAhead for services provided
or to be provided, NetAhead will market its services solely to unrelated third
parties.
The Company may acquire telecommunications and related businesses that
complement ICG's business strategy to offer a wide array of telecommunications
and related services primarily to communications-intensive business customers.
Additionally, the Company may acquire businesses from ICG which ICG currently
owns and operates. Any further acquisitions would be primarily through the use
of cash on hand and the proceeds from securities offerings and ICG Common Stock.
However, there is no assurance that acquisitions at favorable prices to the
Company will occur or that the Company will have sufficient sources of funding
to make such acquisitions. The Company's results of operations and financial
condition will change as the operations of ICG Equipment and NetAhead become
more significant and as it consummates acquisitions, if any.
Results of Operations
The following table provides certain statement of operations data and
certain other financial data for the Company for the periods indicated. The
table also presents revenue, cost of services and expenses, operating (loss)
income and EBITDA as a percentage of the Company's revenue.
20
<PAGE>
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
--------------------------------------- -------------------------------------
1998 1999 1998 1999
------------------ ------------------- ----------------- ------------------
$ % $ % $ % $ %
---------- ------- ---------- ------- ----------- ----- ----------- -------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue 452 100 20,041 100 452 100 34,644 100
Cost of services and expenses:
Cost of services - - 848 4 - 1,434 4
Selling, general and administrative expenses 1,015 224 447 2 1,504 333 836 3
Depreciation 148 33 13,813 69 148 33 20,943 60
---------- ------- ---------- ------- ----------- ----- ----------- -------
Total cost of services and expenses 1,163 257 15,108 75 1,652 366 23,213 67
Operating (loss) income (711) (157) 4,933 25 (1,200) (266) 11,431 33
Other Data:
Net cash provided by operating activities 4,647 2,715 6,409 6,335
Net cash used by investing activities (54,113) (147,136) (68,236) (16,515)
Net cash provided (used) by financing activities 242,373 153 533,842 (2,419)
EBITDA (1) (563) (124) 18,746 94 (1,052) (233) 32,374 93
Capital expenditures of continuing operations (2) 50,113 229,175 52,236 296,989
Capital expenditures of discontinued operations (2) 8,439 - 14,948 -
</TABLE>
(1) EBITDA consists of earnings (loss) from continuing operations
before interest, income taxes, depreciation, other expense, net
and share of net losses of equity investees, or simply, operating
(loss) income plus depreciation. EBITDA is provided because it is
a measure commonly used in the telecommunications industry.
EBITDA is presented to enhance an understanding of the Company's
operating results and is not intended to represent cash flows or
results of operations in accordance with generally accepted
accounting principles ("GAAP") for the periods indicated. EBITDA
is not a measurement under GAAP and is not necessarily comparable
with similarly titled measures of other companies. Net cash flows
from operating, investing and financing activities as determined
using GAAP are also presented in Other Data.
(2) Capital expenditures includes assets acquired under capital
leases and excludes corporate headquarters assets acquired
through the issuance of long-term debt. Capital expenditures of
discontinued operations includes the capital expenditures of
NETCOM.
Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998
Revenue. The Company recorded revenue of approximately $0.5 million and
$20.0 million for the three months ended June 30, 1998 and 1999, respectively.
Revenue recorded on operating leases of property and equipment to ICG Telecom
was $15.6 million for the three months ended June 30, 1999. Additionally, the
Company charges lease service fees to ICG Telecom for the cost of carrying
assets not yet placed into service. For the three months ended June 30, 1998 and
1999, revenue earned on lease service fees was $0.5 million and $3.0 million,
respectively. The Company also received rental income from ICG under the
operating lease for ICG's corporate headquarters, which the Company purchased
and simultaneously leased to ICG, effective January 1, 1999. For the three
months ended June 30, 1999, the Company recorded revenue on the operating lease
for the corporate headquarters of $1.1 million. For the three months ended June
30, 1999, NetAhead generated revenue of approximately $0.3 million for RAS
custom programming and IP network services provided to ICG. Revenue earned of
$11.7 million for the three months ended June 30, 1999 under the Company's
network capacity agreement with MindSpring has been offset by cost of services
and selling, general and administrative expenses of $18.4 million incurred under
the same agreement. This $6.7 million operating deficit has been equally offset
by the recognition of $6.7 million of the deferred proceeds from the sale of
certain of the domestic operating assets and liabilities of NETCOM. The Company
anticipates that revenue will increase substantially in future periods as the
volume of ICG Equipment's operations increases and as NetAhead provides a
greater volume of services to ICG, provides new services to MindSpring and
obtains and generates revenue from new customers.
21
<PAGE>
Cost of services. Cost of services of $0.8 million for the three months
ended June 30, 1999 consists of line costs and other direct costs of NetAhead
associated with NetAhead's and ICG Telecom's joint service offering of IP
telephony services.
Selling, general and administrative expenses. Selling, general and
administrative ("SG&A") expenses were approximately $1.0 million and $0.4
million for the three months ended June 30, 1998 and 1999, respectively. SG&A
expenses include allocations of a portion of ICG's general and administrative
expenses for certain direct and indirect costs incurred by ICG on behalf of the
Company. Such allocations were $0.6 million and $0.2 million, representing 44%
and 45% of total SG&A expenses for the three months ended June 30, 1998 and
1999, respectively. Remaining SG&A expenses include general corporate
administrative expenses, including professional and cash management fees. SG&A
expenses for the three months ended June 30, 1998 include increased professional
fees due to the start-up and organization of the Company in early 1998. SG&A
expenses are expected to increase in absolute dollars as the volume of ICG
Equipment's operations increases and as NetAhead commences new service offerings
to ICG and MindSpring and obtains new customers.
Depreciation. Depreciation increased $13.7 million, from $0.1 million for
the three months ended June 30, 1998 to $13.8 million for the three months ended
June 30, 1999. Depreciation consists primarily of depreciation of ICG
Equipment's property and equipment purchased from and for ICG Telecom and leased
to ICG Telecom under long-term operating leases, in addition to depreciation of
property and equipment of NetAhead. The increase in depreciation is primarily
due to the expansion of ICG Equipment's operations during the second half of
1998 and the six months ended June 30, 1999. The Company's depreciation expense
will continue to increase as NetAhead purchases additional property and
equipment, ICG Equipment places in service equipment that has already been
purchased and purchases additional property and equipment for lease to ICG's
other operating subsidiaries.
Interest expense. Interest expense increased $5.2 million, from $12.3
million for the three months ended June 30, 1998 to $17.5 million for the three
months ended June 30, 1999, which includes $15.4 million of non-cash interest.
Interest expense is primarily attributable to the 10% Senior Discount Notes due
2008 (the "10% Notes") issued in February 1998 and the 9 7/8% Senior Discount
Notes due 2008 (the "9 7/8% Notes") issued in April 1998. The Company's interest
expense will continue to increase as the principal amounts of the 10% Notes and
the 9 7/8% Notes increase until the 10% Notes and the 9 7/8% Notes begin to pay
interest in cash in 2003.
Interest income. Interest income increased $0.7 million, from $6.3 million
for the three months ended June 30, 1998 to $7.0 million for the three months
ended June 30, 1999 and primarily represents net interest income from ICG of
approximately $4.1 million during the three months ended June 30, 1999 for
invoices paid by the Company on behalf of ICG and its other operating
subsidiaries and repaid on a quarterly basis. The Company also earned interest
on invested cash balances from the proceeds from the issuance of the 10% Notes
and the 9 7/8% Notes and the proceeds from the sales of the operations of
NETCOM. The Company expects interest income to decline in future periods as the
Company continues to invest its available cash balances in telecommunications
equipment and other assets.
Share of net losses of equity investees. The Company's share of net losses
of equity investees for the three months ended June 30, 1999 consists of the
Company's share of net income of ICG Ohio LINX, Inc. ("ICG Ohio LINX") of $2.8
million, offset by the Company's share of net losses of ICG ChoiceCom L.P.
("ChoiceCom") of $2.8 million. The Company purchased a 20% equity interest in
ICG Ohio LINX in August 1998 and a 49% equity interest in ChoiceCom in March
1999.
Loss from continuing operations. Loss from continuing operations improved
$1.1 million, or 16%, from $6.7 million for the three months ended June 30, 1998
to $5.6 million for the three months ended June 30, 1999 due to the increase in
revenue, offset by increases in depreciation and interest expense, as noted
above. As the operations of ICG Equipment become more significant, the Company's
loss from continuing operations will be increasingly impacted by the operating
income of ICG Equipment.
Loss from discontinued operations and net loss. For the three months ended
June 30, 1998, loss from discontinued operations was $11.8 million, or 64% of
the Company's net loss, and consists of the net loss of NETCOM. The Company sold
the operations of NETCOM in February and March 1999.
22
<PAGE>
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
Revenue. The Company recorded revenue of approximately $0.5 million and
$34.6 million for the six months ended June 30, 1998 and 1999, respectively.
Revenue recorded on operating leases of property and equipment to ICG Telecom
was $26.7 million for the six months ended June 30, 1999. Additionally, the
Company charges lease service fees to ICG Telecom for the cost of carrying
assets not yet placed into service. For the six months ended June 30, 1998 and
1999, revenue earned on lease service fees was $0.5 million and $5.3 million,
respectively. The Company also received rental income from ICG under the
operating lease for ICG's corporate headquarters, which the Company purchased
and simultaneously leased to ICG, effective January 1, 1999. For the six months
ended June 30, 1999, the Company recorded revenue on the operating lease for the
corporate headquarters of $2.3 million. For the six months ended June 30, 1999,
NetAhead generated revenue of approximately $0.3 million for RAS custom
programming and IP network services provided to ICG. Revenue earned of $17.4
million for the six months ended June 30, 1999 under the Company's network
capacity agreement with MindSpring has been offset by operating costs and
selling, general and administrative expenses of $27.9 million incurred under the
same agreement. This $10.5 million operating deficit has been equally offset by
the recognition of $10.5 million of the deferred proceeds from the sale of
certain of the domestic operating assets and liabilities of NETCOM.
Cost of services. Cost of services of $1.4 million for the six months ended
June 30, 1999 consists of line costs and other direct costs of NetAhead
associated with NetAhead's and ICG Telecom's joint service offering of IP
telephony services.
Selling, general and administrative expenses. SG&A expenses were
approximately $1.5 million and $0.8 million for the six months ended June 30,
1998 and 1999, respectively. SG&A expenses include allocations of a portion of
ICG's general and administrative expenses for certain direct and indirect costs
incurred by ICG on behalf of the Company. Such allocations were $0.6 million and
$0.5 million, representing 42% and 58% of total SG&A expenses for the six months
ended June 30, 1998 and 1999, respectively. Remaining SG&A expenses include
general corporate administrative expenses, including professional and cash
management fees. SG&A expenses for the six months ended June 30, 1998 include
increased professional fees due to the start-up and organization of the Company
in early 1998.
Depreciation. Depreciation increased $20.8 million, from $0.1 million for
the six months ended June 30, 1998 to $20.9 million for the six months ended
June 30, 1999. Depreciation consists primarily of depreciation of ICG
Equipment's property and equipment purchased from and for ICG Telecom and leased
to ICG Telecom under long-term operating leases, in addition to depreciation of
property and equipment of NetAhead.
Interest expense. Interest expense increased $16.9 million, from $16.2
million for the six months ended June 30, 1998 to $33.1 million for the six
months ended June 30, 1999, which includes $30.4 million of non-cash interest.
Interest expense is primarily attributable to the 10% Notes issued in February
1998 and the 9 7/8% Notes issued in April 1998.
Interest income. Interest income increased $6.9 million, from $8.4 million
for the six months ended June 30, 1998 to $15.3 million for the six months ended
June 30, 1999 and primarily represents net interest income from ICG of
approximately $10.0 million during the six months ended June 30, 1999 for
invoices paid by the Company on behalf of ICG and its other operating
subsidiaries and repaid on a quarterly basis. The Company also earned interest
on invested cash balances from the proceeds from the issuance of the 10% Notes
and the 9 7/8% Notes and the proceeds from the sales of the operations of
NETCOM.
Gain on marketable trading securities, net of unrealized gains and losses.
Gain on marketable trading securities, net of unrealized gains and losses of
$0.4 million for the six months ended June 30, 1999 represents the net gain on
the common stock of MindSpring which the Company received as partial
consideration for the sale of the domestic operations of NETCOM. The Company
sold its investment in MindSpring in April 1999.
Share of net losses of equity investees. The Company's share of net losses
of equity investees of $1.3 million for the six months ended June 30, 1999
consists of the Company's share of net income of ICG Ohio LINX of $2.3 million,
offset by the Company's share of net losses of ChoiceCom of $3.6 million.
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<PAGE>
Loss from continuing operations. Loss from continuing operations improved
$1.7 million, or 20%, from $9.0 million for the six months ended June 30, 1998
to $7.3 million for the six months ended June 30, 1999 due to increases in
revenue and interest income, offset by increases in depreciation and interest
expense, as noted above.
Loss from discontinued operations and net loss. For the six months ended
June 30, 1998, loss from discontinued operations was $28.4 million, or 76% of
the Company's net loss, and consists of the net loss of NETCOM. Since the
Company expected to report a gain on the disposition of NETCOM, the Company
deferred the net losses from operations of NETCOM from November 3, 1998 (the
date on which the Company's board of directors adopted the formal plan to
dispose of the operations of NETCOM) through the dates of the sales and,
accordingly, the Company reported no loss from discontinued operations of NETCOM
for the six months ended June 30, 1999.
Extraordinary gain on sales of operations of NETCOM. The Company reported
an extraordinary gain on the sales of the operations of NETCOM during the six
months ended June 30, 1999 of $193.0 million, net of income taxes of $6.4
million. Offsetting the gain on the sales is approximately $16.6 million of net
losses of operations of NETCOM from November 3, 1998 through the dates of the
sales and $26.0 million of deferred sales proceeds from the sale of certain of
the domestic operating assets and liabilities of NETCOM to MindSpring. The
deferred proceeds are recognized on a periodic basis over the term of the
Company's network capacity agreement with MindSpring.
Liquidity and Capital Resources
The Company's growth has been funded through the proceeds from its 1998
debt financings (the 10% Notes and the 9 7/8% Notes issued in February and April
1998, respectively) and the proceeds from the sales of the operations of NETCOM.
As of June 30, 1999, the Company had current assets of $258.8 million, including
$101.6 million of cash, cash equivalents and short-term investments, which
exceeded current liabilities of $72.1 million, providing working capital of
$186.7 million. The Company primarily invests excess funds in short-term,
interest-bearing, investment-grade securities until such funds are used to fund
the capital investments and operating needs of the Company's business. The
Company's short term investment objectives are safety, liquidity and yield, in
that order.
Net Cash Provided By Operating Activities
The Company's operating activities provided $6.4 million and $6.3 million
for the six months ended June 30, 1998 and 1999, respectively. Net cash provided
by operating activities is primarily due to losses from continuing operations,
which are more than offset by changes in working capital items and non-cash
expenses, such as deferred interest expense and depreciation.
The Company does not expect to generate significant cash flows from
operating activities while the Company continues to expand its operations.
Consequently, the Company does not anticipate that cash provided by the
operations of ICG Equipment alone will be sufficient to fund operating
activities, including the operations of NetAhead, in the near term. The Company
anticipates that cash used by operating activities will improve when the Company
expands leasing operations under ICG Equipment and increases revenue from
services offered by NetAhead to ICG and to customers other than MindSpring, any
of which may not occur.
Net Cash Used By Investing Activities
The Company's investing activities used $68.2 million and $16.5 million for
the six months ended June 30, 1998 and 1999, respectively. Net cash used by
investing activities for the six months ended June 30, 1998 includes the
acquisition of property, equipment and other assets and the purchase of
short-term investments available for sale. Net cash used by investing activities
for the six months ended June 30, 1999 includes the acquisition of property,
equipment and other assets of $290.8 million, the purchase of the 49% equity
interest in ChoiceCom of $35.1 million and the purchase of long-term investments
of $10.0 million, offset by the sales of the operations of NETCOM of $252.9
million and the proceeds from the sale of short-term investments and marketable
securities of $66.5 million. The Company will continue to use cash in 1999 and
subsequent periods for the purchase of telecommunications equipment by ICG
Equipment for lease to ICG Telecom, the expansion of NetAhead's operations and,
24
<PAGE>
potentially, for acquisitions. The Company acquired assets under capital leases
of $6.2 million during the six months ended June 30, 1999.
Net Cash Provided (Used) By Financing Activities
The Company's financing activities provided $533.8 million and used $2.4
million for the six months ended June 30, 1998 and 1999, respectively. Net cash
provided by financing activities for the six months ended June 30, 1998 includes
net proceeds from the private placement of the 10% Notes and the 9 7/8% Notes
issued in February and April 1998, respectively, proceeds from purchases under
NETCOM's employee stock purchase plan (which was dissolved in conjunction with
NETCOM's merger with ICG in January 1998) and proceeds from the exercise of
NETCOM stock options. For the six months ended June 30, 1999, the Company's
financing activities consist of principal payments on capital leases and
deferred financing and lease administration costs.
On August 12, 1999, ICG Equipment and NetAhead entered into a $200.0
million senior secured financing facility (the "Senior Facility") consisting of
a $75.0 million term loan, a $100.0 million term loan and a $25.0 million
revolving line of credit. As required under the terms of the loan, the Company
borrowed on August 12, 1999 the available $75.0 million on the $75.0 million
term loan. The loan bears interest at an annual interest rate of LIBOR plus 3.5%
or the base rate, as defined in the credit agreement, plus 2.5%, at the option
of the Company (10.5% on August 12, 1999). Quarterly repayments commence
September 30, 1999 and require quarterly loan balance reductions of 0.25%
through June 30, 2005 with the remaining outstanding balance to be repaid during
the final three quarters of the loan term. The $75.0 million term loan matures
on March 31, 2006. On August 12, 1999, the Company borrowed $5.0 million on the
$100.0 million term loan, which is available for borrowing through August 10,
2000 at an initial annual interest rate of LIBOR plus 3.125% or the base rate,
as defined in the credit agreement, plus 2.125%, at the Company's option
(10.125% on August 12, 1999). Quarterly repayments commence September 30, 2002
and require aggregate loan balance reductions of 25% through June 30, 2003, 35%
through June 30, 2004 and 40% through June 30, 2005. The $100.0 million term
loan matures on June 30, 2005. The $25.0 million revolving line of credit is
available through the maturity date of June 30, 2005 at an initial annual
interest rate of LIBOR plus 3.125% or the base rate, as defined in the credit
agreement, plus 2.125%, at the Company's option.
As of June 30, 1999, the Company had an aggregate accreted value of
approximately $624.2 million outstanding under the 10% Notes and the 9 7/8%
Notes. The 10% Notes require payments of interest to be made in cash commencing
August 15, 2003 and mature February 15, 2008. The 9 7/8% Notes require payments
of interest to be made in cash commencing November 1, 2003 and mature May 1,
2008. As of June 30, 1999, the Company had $9.6 million of capital lease
obligations and $33.1 million of other indebtedness outstanding. With respect to
senior indebtedness outstanding on June 30, 1999, the Company has cash interest
payment obligations of approximately $44.5 million in 2003 and $89.0 million in
2004, 2005 and each year thereafter through 2007. Accordingly, the Company may
have to refinance a substantial amount of indebtedness and obtain substantial
additional funds prior to August 2003. The Company's ability to do so will
depend on, among other things, its financial condition at the time, restrictions
in the instruments governing its indebtedness, and other factors, including
market conditions, beyond the control of the Company. There can be no assurance
that the Company will be able to refinance such indebtedness or obtain
additional funds, and if the Company is unable to effect such refinancing or
obtain additional funds, the Company's ability to make principal and interest
payments on its indebtedness would be adversely affected.
Other Cash Commitments and Capital Requirements
The Company's capital expenditures of continuing operations were $52.2
million and $297.0 million for the six months ended June 30, 1998 and 1999,
respectively. The Company anticipates that the expansion of the Company's
businesses will require capital expenditures of approximately $156.0 million for
the remainder of 1999. To facilitate the expansion of its services and networks,
the Company has entered into equipment purchase agreements with various vendors
under which the Company will purchase equipment and other assets, including a
full range of switching systems, fiber optic cable, network electronics,
software and services. If the Company fails to meet the minimum purchase level
in any given year, the vendor may discontinue certain discounts, allowances and
incentives otherwise provided to the Company. Actual capital expenditures will
depend on numerous factors, including certain factors beyond the Company's
control. These factors include the nature of future expansion and acquisition
25
<PAGE>
opportunities, economic conditions, competition, and the availability of equity,
debt and lease financing.
Management believes that the Company's cash on hand and amounts expected to
be available through cash flows from operations, vendor financing arrangements
and credit facilities will provide sufficient funds necessary for the Company to
expand ICG Equipment's and NetAhead's businesses and to fund its operating
deficits as currently planned. Changes in the Company's business plan may
require additional sources of cash which may be obtained through public and
private debt financings, capital leases and other financing arrangements. To
date, the Company has been able to secure sufficient amounts of financing to
meet its capital and operating needs. There can be no assurance that additional
financing will be available to the Company or, if available, that it can be
obtained on terms acceptable to the Company. The failure to obtain sufficient
amounts of financing could result in the delay or abandonment of some or all of
the Company's development and expansion plans, which could have a material
adverse effect on the Company's business.
Year 2000 Compliance
As a wholly owned subsidiary of ICG, the Company's Year 2000 compliance
plan is embedded within ICG's Year 2000 compliance plan for its consolidated
operations. It is not practicable for ICG to address the state of Year 2000
readiness, compliance costs, risks or contingency plans of the Company, or for
any other legal entity on a stand-alone basis, as ICG's plan was designed to
resolve Year 2000 compliance issues for all entities combined, which is the most
cost-effective manner. Moreover, as a result of the Company's and ICG's shared
management and administrative personnel and ICG Equipment's and NetAhead's
dependence upon the continuing successful operations of ICG Telecom, evaluating
the Company's plan for Year 2000 compliance on a stand-alone basis is not
meaningful. Accordingly, the following paragraphs describe ICG's plan for
addressing Year 2000 compliance issues, of which the issues facing the Company
are an integral part.
Importance
Many computer systems, software applications and other electronics
currently in use worldwide are programmed to accept only two digits in the
portion of the date field which designates the year. The "Year 2000 problem"
arises because these systems and products cannot properly distinguish between a
year that begins with "20" and the familiar "19." If these systems and products
are not modified or replaced, many will fail, create erroneous results and/or
may cause interfacing systems to fail.
Year 2000 compliance issues are of particular importance to ICG since its
operations rely heavily upon computer systems, software applications and other
electronics containing date-sensitive embedded technology. Some of these
technologies were internally developed and others are standard purchased systems
which may or may not have been customized for ICG's particular application. ICG
also relies heavily upon various vendors and suppliers that are themselves very
reliant on computer systems, software applications and other electronics
containing date-sensitive embedded technology. These vendors and suppliers
include: (i) ILECs and other local and long distance carriers with which ICG has
interconnection or resale agreements; (ii) manufacturers of the hardware and
related operating systems that ICG uses directly in its operations; (iii)
providers that create custom software applications that ICG uses directly in its
operations; and (iv) providers that sell standard or custom equipment or
software which allow ICG to provide administrative support to its operations.
Strategy
ICG's approach to addressing the potential impact of Year 2000 compliance
issues is focused upon ensuring, to the extent reasonably possible, the
continued, normal operation of its business and supporting systems. Accordingly,
ICG has developed a four-phase plan which it is applying to each functional
category of ICG's computer systems and components. Each of ICG's computer
systems, software applications and other electronics containing date-sensitive
embedded technology is included within one of the following four functional
categories:
o Networks and Products, which consists of all components whether
hardware, software or embedded technology used directly in ICG's
operations, including components used by ICG's circuit and data
switches and collocations and telecommunications products;
26
<PAGE>
o IT Systems, which consists of all components used to support ICG's
operations, including provisioning and billing systems;
o Building and Facilities, which consists of all components with
embedded technology used at ICG's corporate headquarters building and
other leased facilities, including security systems, elevators and
internal use telephone systems;
o Office Equipment, which consists of all office equipment with
date-sensitive embedded technology.
For each of the categories described above, ICG is applying the following
four-phase approach to identifying and addressing the potential impact of Year
2000 compliance issues:
o Phase I - Assessment
During this phase, ICG's technology staff performed an inventory of
all components currently in use by ICG. Based upon this inventory,
ICG's business executives and technology staff jointly classified each
component as a "high," "medium" or "low" priority item, determined
primarily by the relative importance that the particular component has
to ICG's normal business operations, the number of people internally
and externally which would be affected by any failure of such
component and the interdependence of such component with other
components used by ICG that may be of higher or lower priority.
Based upon such classifications, ICG's business executives and
information technology staff jointly set desired levels of Year 2000
readiness for each component inventoried, using the following
criteria, as defined by ICG:
- Capable, meaning that such computer system or component will be
capable of managing and expressing calendar years in four digits;
- Compliant, meaning that ICG will be able to use such component
for the purpose for which ICG intended it by adapting to its
ability to manage and express calendar years in only two digits;
- Certified, meaning that ICG has received testing results to
demonstrate, or the vendor or supplier is subject to contractual
terms which requires, that such component requires no Year 2000
modifications to manage and express calendar years in four
digits; or
- Non-critical, meaning that ICG expects to be able to continue to
use such component unmodified or has determined that the
estimated costs of modification exceed the estimated costs
associated with its failure.
The Company has completed all areas of Phase I.
o Phase II - Remediation
During this phase, ICG is developing and executing a remediation plan
for each component based upon the priorities set in Phase I.
Remediation may include component upgrade, reprogramming, replacement,
receipt of vendor and supplier certification or other actions as
deemed necessary or appropriate.
o Phase III - Testing
During this phase, ICG is performing testing sufficient to confirm
that the component meets the desired state of Year 2000 readiness.
This phase consists of: (i) testing the component in isolation, or
unit testing; (ii) testing the component jointly with other
components, or system testing; and (iii) testing interdependent
systems, or environment testing.
o Phase IV - Implementation
During the last phase, ICG is implementing each act of remediation
developed and tested for each component, as well as implementing
adequate controls to ensure that future upgrades and changes to ICG's
27
<PAGE>
computer systems, for operational reasons other than Year 2000
compliance, do not alter ICG's Year 2000 state of readiness.
Current State of Readiness
ICG has either already completed or has commenced all of the phases within
its Year 2000 compliance strategy for each of its functional system categories,
as shown by the table set forth below. Since ICG has not waited until the
completion of a phase for all functional category components together before
commencing the next phase, the information set forth below represents only a
general description of the phase status for each functional category. For
systems and products which the Company intends to abandon or replace prior to
January 1, 2000, the Company has currently terminated all Year 2000 compliance
efforts.
<TABLE>
<CAPTION>
- ------------------------------- ----------------------------------------------------------------------------------------------
Phase
- ------------------------------- ----------------------------------------------------------------------------------------------
I II III IV
System and Level of Priority Assessment Remediation Testing Implementation
- ------------------------------- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Networks and Products
- ------------------------------- ----------------------------------------------------------------------------------------------
High Complete Complete In progress In progress
To complete Q3 1999 To complete Q3 1999
- ------------------------------- ---------------------- ----------------------- ----------------------- -----------------------
Medium Complete Complete In progress In progress
To complete Q3 1999 To complete Q3 1999
- ------------------------------- ---------------------- ----------------------- ----------------------- -----------------------
Low Complete Complete Complete Complete
- ------------------------------- ---------------------- ----------------------- ----------------------- -----------------------
IT Systems
- ------------------------------- ----------------------------------------------------------------------------------------------
High Complete In progress In progress In progress
To complete Q3 1999 To complete Q3 1999 To complete Q3 1999
- ------------------------------- ---------------------- ----------------------- ----------------------- -----------------------
Medium Complete In progress In progress In progress
To complete Q3 1999 To complete Q3 1999 To complete Q3 1999
- ------------------------------- ---------------------- ----------------------- ----------------------- -----------------------
Low Complete Complete In progress In progress
To complete Q3 1999 To complete Q3 1999
- ------------------------------- ---------------------- ----------------------- ----------------------- -----------------------
Building and Facilities
- ------------------------------- ----------------------------------------------------------------------------------------------
High Complete Complete In progress In progress
To complete Q3 1999 To complete Q3 1999
- ------------------------------- ---------------------- -----------------------------------------------------------------------
Medium Complete Based on the results of Phase I,
Further remediation not considered necessary
- ------------------------------- ---------------------- -----------------------------------------------------------------------
Low Complete Based on the results of Phase I,
Further remediation not considered necessary
- ------------------------------- ---------------------- -----------------------------------------------------------------------
Office Equipment
- ------------------------------- ----------------------------------------------------------------------------------------------
High Complete Complete Complete Complete
- ------------------------------- ---------------------- ----------------------- ----------------------- -----------------------
Medium Complete Complete Complete Complete
- ------------------------------- ---------------------- ----------------------- ----------------------- -----------------------
Low Complete Complete Complete Complete
- ------------------------------- ---------------------- ----------------------- ----------------------- -----------------------
</TABLE>
Costs
ICG expenses all incremental costs to ICG associated with Year 2000
compliance issues as incurred. Through June 30, 1999, such costs incurred were
approximately $1.1 million, consisting of approximately $0.6 million of
replacement hardware and software and approximately $0.5 million of consulting
fees and other miscellaneous costs of Year 2000 compliance reference and
planning materials. ICG has also incurred certain internal costs, including
salaries and benefits for employees dedicating various portions of their time to
Year 2000 compliance issues, of which costs ICG believes has not exceeded $0.5
million through June 30, 1999. ICG expects that total future incremental costs
28
<PAGE>
of Year 2000 compliance efforts will be approximately $3.8 million, consisting
of $2.3 million in consulting fees, $1.5 million in replacement hardware and
software and other miscellaneous costs. These anticipated costs have been
included in ICG's fiscal 1999 budget and represent approximately 4% of ICG's
budgeted expenses for information technology through fiscal 1999. Such cost
estimates are based upon presently available information and may change as ICG
continues with its Year 2000 compliance plan. ICG intends to use cash on hand
for Year 2000 compliance costs, as necessary.
Risk, Contingency Planning and Reasonably Likely Worst Case Scenario
While ICG is heavily reliant upon its computer systems, software
applications and other electronics containing date-sensitive embedded technology
as part of its business operations, such components upon which ICG primarily
relies were developed with current state-of-the-art technology and, accordingly,
ICG's four-phase approach has demonstrated that many of its high-priority
systems do not present material Year 2000 compliance issues. For computer
systems, software applications and other electronics containing date-sensitive
embedded technology that have met ICG's desired level of Year 2000 readiness,
ICG is using its existing contingency plans to mitigate or eliminate problems it
may experience if an unanticipated system failure were to occur. For components
that have not met ICG's desired level of readiness, ICG will develop a specific
contingency plan to determine the actions ICG would take if such component
failed.
ICG believes that a reasonably likely worst case scenario of a Year 2000
compliance failure could include the temporary failure of a minimal number of
operating systems, despite ICG's execution and satisfactory completion of its
comprehensive Year 2000 compliance plan. However, under this scenario, ICG also
believes that any such failed systems or components would be fully recovered
within a short period subsequent to failure and, accordingly, ICG does not
expect to experience any significant or long term operational disruption as a
result of the failure of any systems or components directly within ICG's
control.
ICG acknowledges the possibility that ICG may become subject to potential
claims by customers if ICG's operations are interrupted for an extended period
of time. However, it is not possible to predict either the probability of such
potential litigation, the amount that could be in controversy or upon which
party a court would place ultimate responsibility for any such interruption.
ICG views Year 2000 compliance as a process that is inherently dynamic and
will change in response to changing circumstances. While ICG believes that
through execution and satisfactory completion of its Year 2000 compliance
strategy its computer systems, software applications and electronics will be
Year 2000 compliant, there can be no assurance until the Year 2000 occurs that
all systems and all interfacing technology when running jointly will function
adequately. Additionally, there can be no assurance that the assumptions made by
ICG within its Year 2000 compliance strategy will prove to be correct, that the
strategy will succeed or that the remedial actions being implemented will be
able to be completed by the time necessary to avoid system or component
failures. In addition, disruptions with respect to the computer systems of
vendors or customers, which systems are outside the control of ICG, could impair
ICG's ability to obtain necessary products or services to sell to its customers.
Disruptions of ICG's computer systems, or the computer systems of ICG's vendors
or customers, as well as the cost of avoiding such disruption, could have a
material adverse effect on ICG's financial condition and results of operations.
29
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's financial position and cash flows are subject to a variety of
risks in the normal course of business, which include market risks associated
with movements in interest rates and equity prices. The Company routinely
assesses these risks and has established policies and business practices to
protect against the adverse effects of these and other potential exposures. The
Company does not, in the normal course of business, use derivative financial
instruments for trading or speculative purposes.
Interest Rate Risk
The Company's exposure to market risk associated with changes in interest
rates relates primarily to the Company's investments in marketable securities
and its senior indebtedness.
The Company invests primarily in high grade short-term investments which
consist of money market instruments, commercial paper, certificates of deposit,
government obligations and corporate bonds, all of which are considered to be
available for sale and generally have maturities of one year or less. The
Company's short term investment objectives are safety, liquidity and yield, in
that order. As of June 30, 1999, the Company had approximately $101.6 million in
cash, cash equivalents and short-term investments available for sale, at a
weighted average fixed interest rate of 4.82% for the six months ended June 30,
1999. A hypothetical 10% fluctuation in market rates of interest would cause a
change in the fair value of the Company's investment in marketable securities at
June 30, 1999 of approximately $0.2 million and, accordingly, would not cause a
material impact on the Company's financial position, results of operations or
cash flows.
At June 30, 1999, the Company's indebtedness included $624.2 million under
the 10% Notes and 9 7/8% Notes. These instruments contain fixed annual interest
rates and, accordingly, any change in market interest rates would have no impact
on the Company's financial position, results of operations or cash flows. Future
increases in interest rates could increase the cost of any new borrowings by the
Company. The Company does not hedge against future changes in market rates of
interest.
On August 12, 1999, the Company entered into the Senior Facility,
consisting of two term loans and a revolving line of credit. All components of
the Senior Facility bear variable annual rates of interest, based on changes in
LIBOR, the Royal Bank of Canada prime rate and the federal funds rate.
Consequently, additional borrowings under the Senior Facility and increases in
LIBOR, the Royal Bank of Canada prime rate and the federal funds rate will
increase the Company's indebtedness and may increase the Company's interest
expense in future periods. Additionally, under the terms of the Senior Facility,
the Company is required to hedge the interest rate risk on $100.0 million of the
Senior Facility if LIBOR exceeds 9.0% for 15 consecutive days. As of August 13,
1999, the Company had $80.0 million outstanding under the Senior Facility.
Equity Price Risk
On February 17, 1999, the Company completed the sale of the domestic
operations of NETCOM to MindSpring, in exchange for a combination of cash and
376,116 shares of common stock of MindSpring, valued at approximately $79.76 per
share, or $30.0 million, at the time of the transaction. Through April 16, 1999,
the Company bore some risk of market price fluctuations in its investment in
MindSpring. In order to mitigate the risk associated with a decrease in the
market value of the Company's investment in MindSpring, the Company entered into
a hedging contract. In April 1999, the Company sold its investment in MindSpring
for net proceeds of approximately $30.4 million. The Company recorded a gain on
its investment in MindSpring of approximately $0.4 million in its statement of
operations for the six months ended June 30, 1999. The hedging contract was
terminated upon the sale of the common stock of MindSpring.
On March 30, 1999, the Company purchased, for approximately $10.0 million
in cash, 454,545 shares of NorthPoint Preferred Stock. The NorthPoint Preferred
Stock has no voting rights and is ultimately convertible into a voting class of
common stock of NorthPoint, at an exchange price which represents a discount, as
provided in the relevant documentation, to the initial public offering price of
NorthPoint's common stock. The Company is restricted from selling the NorthPoint
Preferred Stock or securities obtained upon conversion of the NorthPoint
Preferred Stock until March 23, 2000. Accordingly, the Company will be subject
to the effects of fluctuations in the fair value of the common stock of
NorthPoint until such time when the Company is permitted to liquidate its
30
<PAGE>
investment in NorthPoint. Although changes in the fair market value of the
common stock of NorthPoint may affect the fair market value of the Company's
investment in NorthPoint and cause unrealized gains or losses, such gains or
losses will not be realized until the securities are sold.
31
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
See Note 7 to the Company's unaudited condensed consolidated financial
statements for the quarterly period ended June 30, 1999 contained
elsewhere in this Quarterly Report.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES AND USE OF PROCEEDS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits.
(10) Material Contracts.
10.1: Amended and Restated Loan Agreement, dated
as of May 1, 1999, by and among TriNet
Realty Capital, Inc. and ICG 161, L.P.
10.2: Assumption and Modification Agreement, dated
as of May 1, 1999, by and among ICG
Services, Inc., ICG 161, L.P. and TriNet
Realty Capital, Inc.
10.3: Credit Agreement, dated as of August 12,
1999, among ICG Equipment, Inc. and ICG
NetAhead, Inc., as Borrowers, ICG Services,
Inc., as Parent, the Initial Lenders and the
Initial Issuing Bank, as Initial Lenders and
Initial Issuing Bank, Royal Bank of Canada,
as Administrative Agent and Collateral
Agent, Morgan Stanley Senior Funding, Inc.,
as Sole Book-Runner and Lead Arranger and
Bank of America, N.A. and Barclays Bank PLC,
as Co-Documentation Agents.
10.4: Security Agreement, dated August 12, 1999,
from ICG Equipment, Inc. and ICG NetAhead,
Inc., as Grantors to Royal Bank of Canada,
as Collateral Agent.
(27) Financial Data Schedule.
27.1: Financial Data Schedule of ICG Services,
Inc. for the Six Months Ended June 30, 1999.
(B) Reports on Form 8-K.
None.
32
<PAGE>
INDEX TO EXHIBITS
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
<PAGE>
INDEX TO EXHIBITS
10.1: Amended and Restated Loan Agreement, dated as of May 1, 1999, by and
among TriNet Realty Capital, Inc. and ICG 161, L.P.
10.2: Assumption and Modification Agreement, dated as of May 1, 1999, by and
among ICG Services, Inc., ICG 161, L.P. and TriNet Realty Capital, Inc.
10.3: Credit Agreement, dated as of August 12, 1999, among ICG Equipment,
Inc. and ICG NetAhead, Inc., as Borrowers, ICG Services, Inc., as
Parent, the Initial Lenders and the Initial Issuing Bank, as Initial
Lenders and Initial Issuing Bank, Royal Bank of Canada, as
Administrative Agent and Collateral Agent, Morgan Stanley Senior
Funding, Inc., as Sole Book-Runner and Lead Arranger and Bank of
America, N.A. and Barclays Bank PLC, as Co-Documentation Agents.
10.4: Security Agreement, dated August 12, 1999, from ICG Equipment, Inc. and
ICG NetAhead, Inc., as Grantors to Royal Bank of Canada, as Collateral
Agent.
27.1: Financial Data Schedule of ICG Services, Inc. for the Six Months Ended
June 30, 1999.
<PAGE>
EXHIBIT 10.1
Amended and Restated Loan Agreement, dated as of May 1, 1999, by and among
TriNet Realty Capital, Inc. and ICG 161, L.P.
<PAGE>
EXHIBIT 10.2
Assumption and Modification Agreement, dated as of May 1, 1999, by and among ICG
Services, Inc., ICG 161, L.P. and TriNet Realty Capital, Inc.
<PAGE>
EXHIBIT 10.3
Credit Agreement, dated as of August 12, 1999, among ICG Equipment, Inc. and ICG
NetAhead, Inc., as Borrowers, ICG Services, Inc., as Parent, the Initial Lenders
and the Initial Issuing Bank, as Initial Lenders and Initial Issuing Bank, Royal
Bank of Canada, as Administrative Agent and Collateral Agent, Morgan Stanley
Senior Funding, Inc., as Sole Book-Runner and Lead Arranger and Bank of America,
N.A. and Barclays Bank PLC, as Co-Documentation Agents.
<PAGE>
EXHIBIT 10.4
Security Agreement, dated August 12, 1999, from ICG Equipment, Inc. and ICG
NetAhead, Inc., as Grantors to Royal Bank of Canada, as Collateral Agent.
<PAGE>
EXHIBIT 27.1
Financial Data Schedule of ICG Services, Inc. for the Six Months Ended
June 30, 1999.
<PAGE>
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 thereunto duly authorized, on August 13, 1999.
ICG SERVICES, INC.
Date: August 13, 1999 By: /s/ Harry R. Herbst
---------------------------------------------
Harry R. Herbst, Executive Vice President
and Chief Financial Officer (Principal
Financial Officer)
Date: August 13, 1999 By: /s/ John V. Colgan
---------------------------------------------
John V. Colgan, Vice President of Finance
and Controller (Principal Accounting Officer)
AMENDED AND RESTATED LOAN AGREEMENT
Dated as of May 1, 1999,
by and among
TRINET REALTY CAPITAL, INC.,
as Lender,
and
ICG 161, L.P.,
as Borrower
<PAGE>
TABLE OF CONTENTS
1. Definitions; Certain Terms................................................ 1
1.1 Definitions..................................................... 1
1.2 Certain Terms................................................... 9
1.3 Replacement of Prior Loan Agreement............................. 9
2. The Loan; Payment Due on Maturity Date.................................... 9
2.1 Execution of Loan Documents..................................... 9
2.2 Payment on Maturity............................................. 9
3. Interest Rate Provisions; Payments........................................ 9
3.1 Applicable Interest Rate........................................ 9
3.2 Payments....................................................... 10
3.3 Computations................................................... 10
4. Late Charges; Prepayment................................................. 10
4.1 Late Charges................................................... 10
4.2 Prepayment..................................................... 10
5. Manner of Payment........................................................ 11
6. Conditions............................................................... 11
6.1 Documents...................................................... 11
6.2 Other Actions.................................................. 13
6.3 Opinions and Assurances........................................ 13
6.4 Representations................................................ 13
6.5 Closing Expenses............................................... 13
7. Representations and Warranties........................................... 13
7.1 Due Authorization.............................................. 14
7.2 Enforceability................................................. 14
7.3 Restricted Activities.......................................... 14
7.4 Borrower Obligations........................................... 14
7.5 General Partner................................................ 15
7.6 Transactions with Affiliates................................... 15
7.7 Employees...................................................... 15
7.8 No Violation................................................... 15
7.9 Consents....................................................... 15
7.10 Solvency...................................................... 16
7.11 Delinquent Property Liens..................................... 16
7.12 Defenses...................................................... 16
7.13 Lien Priority................................................. 16
7.14 Improvements.................................................. 17
7.15 Casualty; Condemnation........................................ 17
7.16 Zoning and Other Laws......................................... 17
7.17 Leases........................................................ 17
7.18 Tenant Estoppels.............................................. 17
7.19 Litigation.................................................... 17
7.20 Brokerage and Other Fees...................................... 17
7.21 Investment Company............................................ 17
7.22 Other Agreements.............................................. 17
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<PAGE>
8. Affirmative Covenants.................................................... 18
8.1 Financial Statements; Other Information........................ 18
8.2 Maintenance of Existence and Property.......................... 18
8.3 Inspection of Property; Books and Records; Discussions; Bank
Accounts and Funds............................................. 18
8.4 Notices........................................................ 18
8.5 Expenses....................................................... 19
8.6 Loan Documents................................................. 19
8.7 Indemnification................................................ 19
8.8 Property Management............................................ 20
8.9 Impositions.................................................... 20
8.10 Insurance..................................................... 20
9. Negative Covenants....................................................... 20
9.1 Indebtedness................................................... 20
9.2 Consolidation and Merger....................................... 21
9.3 Sale of Assets-Encumbrances.................................... 21
9.4 Transactions with Affiliates................................... 21
9.5 Restricted Activities.......................................... 21
9.6 Fiscal Year.................................................... 21
9.7 Manager........................................................ 22
9.8 Leases......................................................... 22
10. Events of Default....................................................... 22
10.1 Payment Default............................................... 22
10.2 Misrepresentation............................................. 22
10.3 Negative Covenant Default..................................... 22
10.4 Other Loan Defaults........................................... 22
10.5 Bankruptcy, etc............................................... 23
10.6 Judgments..................................................... 23
10.7 Defaults Under Other Agreements............................... 23
10.8 Net Worth..................................................... 23
10.9 Tenant Defaults............................................... 24
10.10 Additional Borrower Cure Right............................... 24
10.11 Remedies..................................................... 24
11. Miscellaneous Provisions................................................ 24
11.1 Assignment.................................................... 24
11.2 Agents........................................................ 24
11.3 Cumulative Rights; No Waiver.................................. 24
11.4 Entire Agreement.............................................. 25
11.5 Survival...................................................... 25
11.6 Notices....................................................... 25
11.7 Headings...................................................... 26
11.8 Modifications in Writing...................................... 26
11.9 Execution in Counterparts..................................... 26
11.10 Severability of Provisions................................... 26
11.11 WAIVER OF JURY TRIAL......................................... 26
11.12 Reinstatement; Recapture..................................... 26
11.13 Governing Law................................................ 26
11.14 Cross Collateralization; Marshalling, etc.................... 27
-ii-
<PAGE>
Table of Schedules
Schedule 6.1(iv) UCC Filings
Schedule 7.6 Transactions with Affiliates
Schedule 7.14 Encroachments
Schedule 7.19 Litigation
Table of Exhibits
Exhibit A Form of Environmental Indemnity
Exhibit B Form of Guaranty
Exhibit C Form of Assumption Agreement
-iii-
<PAGE>
AMENDED AND RESTATED LOAN AGREEMENT
AMENDED AND RESTATED LOAN AGREEMENT, dated as of May 1, 1999, by and
between TRINET REALTY CAPITAL, INC., a Maryland corporation ("Lender"), as
lender, and ICG 161, L.P., a Delaware limited partnership ("Borrower"), as
borrower.
RECITALS
A. Lender made a Loan to ICG Services, Inc., a Delaware corporation
("Guarantor"), the proceeds of which Guarantor used to purchase the Property.
B. Guarantor intends to sell the Property to Borrower, and Borrower wishes
to acquire the Property subject to the Deed of Trust and to assume Guarantor's
obligations under the Loan Documents.
C. Lender is willing to allow Borrower to assume the Loan and Guarantor's
obligations under the Loan Documents, on the terms and conditions set forth
herein and in the other Loan Documents.
AGREEMENT
In consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. Definitions; Certain Terms.
1.1 Definitions. For purposes of this Agreement, the terms set forth below
shall have the following meanings:
"Affiliate" shall mean, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control," when used with respect
to any specified Person, means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise. The terms "controlling" and "controlled"
have meanings correlative to the foregoing.
"Agreement" shall mean this Amended and Restated Loan Agreement, as it may
be amended from time to time in accordance with its terms.
"Assumption Agreement" shall mean the Assumption and Modification Agreement
dated as of May 1, 1999, among Borrower, Guarantor and Lender.
1
<PAGE>
"Borrower" shall have the meaning given such term in the introductory
paragraph of this Agreement.
"Borrower Partnership Agreement" shall mean the Limited Partnership
Agreement of ICG 161, L.P., dated as of May 1, 1999, between General Partner, as
general partner, and Limited Partner, as limited partner, as such agreement may
be amended or otherwise modified from time to time in accordance with the terms
thereof and hereof.
"Business Day" means any day other than Saturdays, Sundays and days on
which national banks are permitted to be closed in accordance with Federal
banking laws and regulations.
"Closing Date" shall mean the date on which all of the conditions precedent
set forth in Section 6 below shall all have been satisfied or waived.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or any
successor statute(s).
"Collateral" shall mean the Property and the other "Mortgaged Property," as
defined in the Deed of Trust.
"Deed of Trust" shall mean the Deed of Trust, Assignment of Rents and
Security Agreement dated as of January 1, 1999, among Guarantor, as trustor, the
Public Trustee of Arapahoe County, Colorado, as trustee, and Lender, as
beneficiary, as modified by the Assumption Agreement.
"Default Rate" shall mean a rate of interest equal to five hundred (500)
basis points in excess of the Interest Rate in effect from time to time.
"Effective Date" shall mean May 1, 1999.
"Environmental Indemnity" shall mean a Secured Environmental Indemnity,
dated as of the Effective Date, in the form attached hereto as Exhibit A.
"Environmental Laws" shall mean all laws, ordinances, rules, regulations,
orders and other requirements of any government or public authority now in force
or that may hereafter be in force relating to protection of human health or the
environment, including all requirements pertaining to reporting, licensing,
permitting, investigation and remediation of emissions, discharges, storage,
disposal or releases of Hazardous Substances and all requirements pertaining to
the protection of the health and safety of employees or the public.
"Escrow Company" shall mean Land Title Guarantee Company.
"Event of Default" shall have the meaning given such term in Section 10.
2
<PAGE>
"GAAP" shall mean generally accepted accounting principles in the United
States of America as in effect on the applicable date.
"General Partner" shall mean ICG Corporate Headquarters, L.L.C., a Colorado
limited liability company, in its capacity as general partner of Borrower, and
any successor general partner of Borrower.
"Governmental Authority" shall mean any federal, state, local or foreign
court, agency, authority, board, bureau, commission, department, office or
instrumentality of any nature whatsoever or any governmental or
quasi-governmental unit, whether now or hereafter in existence, or any officer
or official thereof, having jurisdiction over Borrower or the Property.
"Guarantor" shall have the meaning given such term in Recital A of this
Agreement.
"Guaranty" shall mean the Guaranty executed by Guarantor in the form of
Exhibit B attached hereto.
"Hazardous Substance" shall mean any hazardous or toxic substance, material
or waste, or any pollutant or contaminant, or words of similar import, that is
or becomes regulated by any Governmental Authority, and includes, but is not
limited to, any material or substance that is, (i) designated as a "hazardous
substance" pursuant to section 311 of the Federal Water Pollution Control Act
(33 U.S.C. section 1317), (ii) defined as a "hazardous waste" pursuant to
section 1004 of the Federal Resource Conservation and Recovery Act, 42 U.S.C.
section 6901 et seq. (42 U.S.C. section 6903), (iii) defined as a "hazardous
substance" pursuant to section 101 of the Comprehensive Environmental Response
Compensation and Liability Act (42 U.S.C. section 9601 et seq.), (iv) asbestos,
(v) petroleum (including crude oil or any fraction thereof, natural gas, natural
gas liquids, liquefied natural gas, or synthetic gas usable for fuel, or any
mixture thereof), (vi) petroleum products, (vii) polychlorinated biphenyls,
(viii) urea formaldehyde, (ix) radon gas, (x) radioactive matter, (xi) medical
waste, and (xii) chemicals that may cause cancer or reproductive toxicity.
"ICGC" shall mean ICG Communications, Inc., a Delaware corporation.
"ICGC Financial Statements" shall have the meaning set forth in Section
1.19 of the Deed of Trust.
"ICG Lease" shall mean that certain Lease dated as of January 15, 1998,
between TEFX, as landlord, and Tenant, as tenant, as amended by that certain
First Amendment to Lease dated as of January 1, 1999 and by that Second
Amendment to Lease dated as of May 1, 1999.
3
<PAGE>
"ICG Parties" shall mean, collectively, Borrower, Guarantor, ICGC and all
Significant Subsidiaries of Borrower, Guarantor and ICGC.
"Impositions" shall have the meaning set forth in Section 1.8 of the Deed
of Trust.
"Improvements" shall mean all buildings and improvements now or hereafter
located or placed in or on the Land, including the existing office building that
has a gross area of approximately 239,749 square feet, together with any
additions thereto or alterations or replacements thereof.
"Indebtedness" of any Person shall mean, without duplication, (i) any
liability of such Person, to the extent it would appear as a liability on a
balance sheet of such Person prepared in accordance with GAAP, (a) for borrowed
money, (b) evidenced by a bond, note, debenture or similar instrument (including
a purchase money obligation) given in connection with the acquisition of any
businesses, properties or assets of any kind (other than a trade payable or a
current liability arising in the ordinary course of business), (c) for the
payment of money relating to a capitalized lease obligation or (d) evidenced by
a currency agreement or an interest rate agreement; (ii) any liability of such
Person under any reimbursement obligation relating to a letter of credit,
statutory obligation, performance or surety bond; (iii) any liability of others
described in the preceding clauses (i) and (ii) that such Person has guaranteed
or that is otherwise its legal liability or that is secured by a Lien on
property of such Person; and (iv) any amendment, supplement, modification,
deferral, renewal, extension or refunding of any liability of the types referred
to in clauses (i), (ii) and (iii) above.
"Indemnified Parties" shall have the meaning given such term in Section
8.7.
"Insurance Requirements" shall mean all provisions of the insurance
policies covering or applicable to all or any part of the Property or the
ownership, occupancy, right to possession, use, improvement, operation or
maintenance thereof, all requirements of the issuer of any of such insurance
policies and all orders, rules, regulations and other requirements of the
National Board of Fire Underwriters (or any other body exercising similar
functions, including any local board of fire underwriters) that, pursuant to an
insurance policy, are binding upon Borrower and applicable to the Property.
"Interest Rate" shall have the meaning set forth in Section 3.1.
"Land" shall mean the real property described in Exhibit A to the Deed of
Trust.
4
<PAGE>
"Leases" shall mean all leases, licenses, rental agreements, subleases,
occupancy agreements, licenses and other agreements respecting the occupancy or
use of any part of the Real Property, in effect at any time during the term of
this Agreement.
"Lender" shall have the meaning set forth in the introductory paragraph to
this Agreement.
"Lien" shall mean any lien, mortgage, pledge, security interest or other
encumbrance of any nature upon any property of any Person, including any
mechanic's lien, materialmen's lien, conditional sale or other title retention
agreement or lease in the nature thereof.
"Limited Partner" shall mean TriNet Realty Investors V, Inc., a Maryland
corporation.
"Loan" shall mean the loan evidenced by the Note.
"Loan Assumption" shall mean Borrower's assumption of the Loan and the
obligations of the borrower under the Loan Documents.
"Loan Documents" shall mean, collectively, this Agreement, the Assumption
Agreement, the Note, the Deed of Trust, the Guaranty, the Environmental
Indemnity, any certificates delivered by Guarantor, General Partner or Borrower
in connection with the closing of the Loan or the Loan Assumption and any other
document, instrument or agreement executed by Guarantor, General Partner or
Borrower and delivered to Lender and evidencing, securing or relating to the
Note, as any of the same may from time to time be amended in accordance with
their terms and the terms hereof.
"Loan Year" shall mean each twelve-month period during the term of the
Loan, with the first Loan Year commencing on February 1, 1999 and terminating
January 31, 2000, and each subsequent Loan Year commencing on the next day,
February 1, and ending the following January 31.
"Losses" shall have the meaning given such term in Section 8.7.
"Management Agreement" shall mean that certain Agreement, dated as of
January 1, 1999, between Borrower's predecessor in interest, as owner, and
TriNet Property Management, Inc., a Maryland corporation, as manager, pursuant
to which property management services are being provided for the Real Property,
as it may be amended from time to time in accordance with its terms and the
terms hereof.
"Material Adverse Effect" means a material adverse effect on (a) the
business, assets, operations, prospects or financial condition of Borrower, (b)
5
<PAGE>
the ability of Borrower to pay the Obligations in accordance with their terms,
(c) the Property or its value or utility, or (d) the Liens of Lender in the
Collateral or the priority of such Liens; provided, however, that a subdivision
of the Property pursuant to the Subdivision Agreement shall not constitute a
Material Adverse Effect.
"Maturity Date" shall mean January 31, 2013.
"Note" shall mean the $33,076,754 Promissory Note dated as of January 1,
1999, executed by Guarantor in favor of Lender and assumed by Borrower.
"Obligations" shall mean all loans, advances, debts, liabilities,
obligations, covenants and duties owing to Lender by Borrower of any kind or
nature, present or future, whether or not evidenced by any note, guaranty or
other instrument, arising under this Agreement, the Note or any of the other
Loan Documents, whether or not for the payment of money, arising by reason of an
extension of credit, absolute or contingent, due or to become due, now existing
or hereafter arising, including all principal, interest, charges, expenses,
fees, attorneys' fees and disbursements and any other sum chargeable to Borrower
under this Agreement or any other Loan Document.
"Officer's Certificate" shall mean a certificate of an authorized officer
of General Partner.
"Permitted Exceptions" shall mean (i) the Liens created by the Deed of
Trust, the Memorandum of Right of First Refusal and the Option and Option
Agreement (as each are defined in the Borrower Partnership Agreement), (ii) the
ICG Lease, (iii) any future Leases, to the extent permitted hereunder, that are
or can be, without any action other than notice by Borrower, subordinate to the
Deed of Trust, (iv) any covenants, conditions, Liens, restrictions, rights of
way, easements and other matters, whether or not of public record or identified
in the Title Policy approved in writing by Lender and (v) other covenants,
conditions, restrictions, rights of way, easements and other matters, excluding
mortgages and other similar monetary encumbrances, to which like properties are
commonly subject and that do not impose any material affirmative obligations on
the owner of the Property or require the removal of any improvements from the
Property and that individually and in the aggregate do not and will not either
(a) materially interfere with the benefits of the security intended to be
provided by the Deed of Trust or the current use of the Property or (b)
materially impair the value or marketability of the Property.
"Person" shall mean any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, or Governmental Authority.
6
<PAGE>
"Personal Property" shall mean all tangible personal property of Borrower
now or at any time hereafter located on or at the Real Property or used or
usable in connection with the intended use of the Real Property or any other
future occupancy or use of the Real Property and any replacements thereof,
including, but without limiting the generality of the foregoing, landscaping,
water treatment, garage and power equipment and supplies, engines, lifting,
cleaning, fire prevention, fire extinguishing, and communications apparatus,
incinerating equipment, shades, awnings, screens, storm doors and windows,
partitions, carpets, rugs, furnishings, televisions, radios, lamps, mirrors,
paintings and other works of art, wall hangings, decorations, and maintenance
equipment; excluding, however, any Personal Property owned by Tenant, any tenant
under any other Lease or by the Property Manager.
"Potential Default" shall mean an event or condition which, but for the
lapse of time or the giving of notice, or both, would, unless cured or waived,
constitute an Event of Default.
"Property" shall mean, collectively, the Real Property and the Personal
Property.
"Property Manager" shall mean the manager under the Management Agreement
and its successors and assigns.
"Real Property" shall mean, collectively, the Land and the Improvements.
"Requirements of Law" shall mean, as to any Person, (i) the corporate
charter and by-laws (in the case of a corporation), partnership agreement and
certificate or statement of partnership (in the case of a partnership) or other
organizational or governing documents of such Person, (ii) any legal requirement
including any local, state, federal or foreign statute, law, ordinance, code,
treaty, rule or regulation now or hereafter in effect (including Environmental
Laws and the Americans with Disabilities Act of 1991), or final and binding
determination of an arbitrator, or order, judgment, decree, injunction, permit,
license, authorization, certificate, franchise, approval, notice, demand letter,
direction or determination of any Governmental Authority applicable to or
binding upon such Person or any of its property (or the operation, management,
use or condition of its property) or to which such Person or any of its property
(or the operation, management, use or condition of its property) is subject or
(iii) any recorded deed of restriction, declaration, covenant running with the
land or otherwise, now or hereafter in force (including any such deed,
declaration or covenant that constitutes a Permitted Exception) other than any
such deed, declaration or covenant (a) the noncompliance with which will not
have a material adverse effect on the value, utility or legal compliance of the
Property or (b) as to which the Title Policy contains affirmative insurance
7
<PAGE>
against any failure or reversion or title and against loss of priority of the
Lien of the Deed of Trust as a result of noncompliance therewith.
"Significant Subsidiaries" shall mean, as to any Person at any date of
determination, any Subsidiary of such Person that, together with its
Subsidiaries, (i) for the most recent fiscal year of such Person, accounted for
more than ten percent (10%) of the consolidated revenues of such Person and its
Subsidiaries, or (ii) as of the end of such fiscal year, was the owner of more
than ten percent (10%) of the consolidated assets of such Person and its
Subsidiaries, all as set forth on the most recently available consolidated
financial statements of such Person for such fiscal year.
"Subdivision Agreement" shall have the meaning given such term in Section
5.14 of the Deed of Trust.
"Subsidiary" shall mean, with respect to any Person, (i) any corporation,
association, or other business entity (other than a partnership) of which more
than fifty percent (50%) of the total voting power of shares of Capital Stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time of
determination owned or controlled, directly or indirectly, by such Person or one
or more of the other Subsidiaries of such Person or a combination thereof, and
(ii) any partnership, joint venture, limited liability company or similar entity
of which (a) more than fifty percent (50%) of the capital accounts, distribution
rights, total equity and voting interests or general or limited partnership
interests, as applicable, are owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of such Person or a
combination thereof whether in the form of membership, general, special or
limited partnership or otherwise, and (b) such Person or any Subsidiary of such
Person is a general partner or otherwise controls such entity.
"Taking" shall mean a governmental taking described in Section 1.13 of the
Deed of Trust.
"Tangible Net Worth" shall mean the book value of the consolidated assets
of Guarantor and its Subsidiaries (exclusive of goodwill, patents, trademarks,
trade names, deferred organization costs, treasury stock, deferred charges and
other like intangibles, and exclusive of any receivable where the receivable
debtor is a direct or indirect Subsidiary of Guarantor or is an officer of
Guarantor or an officer of a direct or indirect Subsidiary of Guarantor) less
(a) reserves applicable thereto, and (b) all liabilities net of unamortized debt
discounts (including accrued and deferred income taxes).
"TEFX" shall mean TriNet Essential Facilities X, Inc., a Maryland
corporation.
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"Tenant" shall mean ICG Holdings, Inc., a Colorado corporation.
"Title Company" shall mean Chicago Title Insurance Company.
"Title Policy" shall have the meaning given such term in Section 6.1(x).
"Transactions" shall mean the transactions contemplated by the Loan
Documents.
1.2 Certain Terms. Unless the context indicates otherwise, all accounting
terms are used herein as defined under GAAP. All references to Sections,
Schedules, Exhibits, etc. are to Sections, Schedules or Exhibits of or to this
Agreement unless otherwise specified. Any of the terms defined in Section 1.1
may, unless the context otherwise requires, be used in the singular or plural
depending on the reference. "Herein," "hereunder" and words of similar import
refer to this Agreement as an entirety and not to particular Sections of this
Agreement. The word "including" shall be construed to be followed by the words
"without limitation."
1.3 Replacement of Prior Loan Agreement. As of the Closing Date, this
Agreement replaces and supercedes in its entirety that certain Loan Agreement
dated as of January 1, 1999, between Guarantor, as borrower, and Lender, as
lender.
Section 2. The Loan; Payment Due on Maturity Date.
2.1 Execution of Loan Documents. On the terms and subject to the conditions
set forth herein, on the Closing Date, Borrower shall execute this Agreement,
and Borrower and Guarantor shall execute the Assumption Agreement and the
Environmental Indemnity, and Guarantor shall execute the Guaranty.
2.2 Payment on Maturity. On the Maturity Date, Borrower shall pay to Lender
an amount equal to the then outstanding principal balance of the Note, plus
interest accrued and unpaid thereon and any other amounts due and unpaid under
the Loan Documents. Upon payment in full of all amounts described in the
preceding sentence, Lender, at the request of Borrower, shall execute and
deliver or cause to be executed and delivered such documents as may be required
to release the Lien of the Deed of Trust, including a "Request for Release of
Deed of Trust," and tender to Borrower the original Note marked "canceled and
paid in full."
Section 3. Interest Rate Provisions; Payments.
3.1 Applicable Interest Rate. Except when the Default Rate is in effect as
provided in Section 4.1, the principal amount outstanding under the Note shall
bear interest from and after the Effective Date to and including the date
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of payment in full at the following rates of interest (the "Interest Rate"):
during the first Loan Year, at the rate of fourteen and seven thousand six
hundred eighty-six ten thousandths percent (14.7686%) per annum; and during the
second Loan Year and each Loan Year thereafter, at a rate of interest equal to
one hundred three percent (103%) of the Interest Rate in effect for the
immediately preceding Loan Year. For example, the Interest Rate during the
second Loan Year shall be fifteen and two thousand one hundred seventeen ten
thousandths percent (15.2117%) per annum, and the Interest Rate during the third
Loan Year shall be fifteen and six thousand six hundred eighty-one ten
thousandths percent (15.6681%) per annum.
3.2 Payments. On the first day of each calendar month during the term of
the Loan, Borrower shall pay, in advance, all interest, at the Interest Rate,
that will accrue during such month against the principal sum of the Loan, as
provided in the Note. So long as no Event of Default has occurred, each monthly
installment paid under the Note shall be applied to accrued interest accruing
during the applicable month.
3.3 Computations. All computations of interest payable hereunder shall be
on the basis of a 360-day year of twelve 30-day months and, for partial months,
the actual days elapsed.
Section 4. Late Charges; Prepayment.
4.1 Late Charges. If any installment under the Note is not paid on the date
due, such installment shall bear interest at the lesser of five hundred basis
points (500) in excess of the prime or reference rate announced from time to
time by Bank of America NT&SA or twelve percent (12%) per annum, from the due
date until such installment is paid. In addition, Borrower shall pay to Lender a
late charge equal to six percent (6%) of the amount of any installment under the
Note that is not paid within five (5) Business Days of the date due. As long as
an Event of Default under this Agreement, the Note or any other Loan Document
exists, and from and after maturity of the Loan, whether or not resulting from
acceleration, the entire unpaid balance of the principal sum of the Note shall
bear interest at the Default Rate.
4.2 Prepayment. Except as expressly provided to the contrary in this
Agreement, Borrower shall have no right, at any time, to prepay the Note in
whole or in part. Borrower agrees that every payment of any portion of the
unpaid balance of the principal sum of the Note before the Maturity Date shall
constitute a prepayment under the Note, whether such payment occurs voluntarily,
involuntarily, or by acceleration of the maturity of the indebtedness evidenced
by the Note by Lender. Borrower further agrees that, upon any such payment of
the Note before the Maturity Date, Borrower shall, with such payment, pay to
Lender a prepayment charge determined in accordance with this Section 4.2.
Without limiting the foregoing, following any acceleration of the maturity of
the indebtedness evidenced by the Note, such prepayment charge shall be included
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in the total amount due to Lender at any foreclosure sale under the Deed of
Trust and any tender of payment of the indebtedness evidenced by the Note
before, at or after any foreclosure sale under the Deed of Trust shall include
such prepayment charge. The prepayment charge shall be equal to five percent
(5%) of the entire unpaid balance of the principal sum of the Note as of the
prepayment date. Borrower agrees that material individual weight to the
consideration in this transaction has been given for the foregoing waiver and
agreement, and Borrower shall be estopped from claiming hereafter that
Borrower's agreement to pay such prepayment charge in accordance with this
Agreement is invalid or unenforceable in any respect for any reason.
4.3 Permitted Prepayment. Notwithstanding anything to the contrary
contained herein, Borrower may prepay all, but not less than all, of the
principal and interest outstanding under the Note prior to the Maturity Date
without paying the prepayment charge upon the occurrence of either one or both
of the following events:
(a) the closing of the option to purchase the partnership
interests of General Partner or the option to purchase the Real
Property pursuant to Articles X and XI of the Borrower Partnership
Agreement; or
(b) the occurrence of a lease termination pursuant to Section
16.1 of the Lease dated January 15, 1998, between Tenant and
Borrower's predecessor, following a condemnation or exercise of
eminent domain power.
Any prepayment that occurs pursuant to subsection 4.3 (a) shall be effective as
of the first day of the month in which the prepayment is made, unless the
purchase option is exercised as a result of the Put Option (as defined in the
Borrower Partnership Agreement), in which case the prepayment shall be effective
on the date paid.
Section 5. Manner of Payment. All payments made hereunder shall be made in
accordance with the provisions hereof without setoff or counterclaim as against
Lender, in lawful money of the United States of America, free and clear of and
without deduction for any taxes, fees or other charges of any nature whatsoever
imposed by any taxing authority.
Section 6. Conditions. Lender's obligation to consent to the Loan
Assumption and to perform any other obligation of Lender herein contemplated to
be performed on or after the Closing Date is subject to the following
conditions:
6.1 Documents. Borrower shall have delivered or shall have caused to be
delivered as of the Closing Date to Lender each of the following, in form and
substance satisfactory to Lender:
(i) A duly executed original of this Agreement;
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(ii) An original Assumption Agreement, duly executed and acknowledged by
Borrower and Guarantor, in the form of Exhibit C to this Agreement;
(iii) An original Guaranty, executed by Guarantor;
(iv) A duly executed original of each of the UCC financing statements and
fixture filings described in Schedule 6.1(iv);
(v) An original Environmental Indemnity, executed by Guarantor and
Borrower;
(vi) Appropriate organizational and authorization documents for Borrower
and Guarantor authorizing the execution and delivery of all Loan Documents
required to be delivered by such party on the Closing Date, which documents
shall include (a) Borrower's certificate of limited partnership, certified by
the appropriate Governmental Authority, (b) the articles of organization or
certificates of incorporation of Guarantor and General Partner, certified by the
appropriate Governmental Authority, (c) the operating agreement for Borrower,
(d) the by-laws of General Partner and of Guarantor, and (e) authorizing
resolutions of each of Borrower, General Partner and Guarantor, with respect to
the Loan Documents to which it is a party;
(vii) Good-standing certificates or other evidence of qualification to do
business for each of Borrower, General Partner and Guarantor, in each case
certifying that such entity is duly qualified to do business and is in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification;
(viii) A legal opinion or opinions of counsel to Borrower and Guarantor
dated as of the Closing Date, covering such matters as Lender may reasonably
request, including without limitation, the enforceability of the Loan Documents;
(ix) Certificates evidencing insurance for the Real Property in amount and
scope and with loss payment provisions as required by the Deed of Trust;
(x) An ALTA extended coverage lender's policy of title insurance Form
1992-B (the "Title Policy") (including all coverages, endorsements and
reinsurance reasonably requested by Lender) or an irrevocable and unconditional
commitment to issue such Title Policy from the Title Company, dated as of the
Closing Date, in an amount of $33,076,754, showing fee simple title to the Real
Property vested in Borrower, and insuring the Deed of Trust as a valid first
Lien on the Real Property subject only to the Permitted Exceptions;
(xi) An Officer's Certificate dated the Closing Date, to the effect that on
and as of the Closing Date: (i) the representations and warranties of Borrower
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contained in the Loan Documents shall be accurate and complete in all material
respects and (ii) there shall not exist an Event of Default or Potential
Default;
(xii) An original Subdivision Agreement duly executed by Borrower and
Tenant;
(xiii) An original Subordination, Non-Disturbance and Attornment Agreement,
in form acceptable to Lender, executed by Borrower and Tenant; and
(xiv) An estoppel certificate from Tenant in the form attached as Exhibit A
to the Lease.
6.2 Other Actions. All acts and conditions and things (including the
obtaining of any necessary approvals of Governmental Authorities and the making
of any required filings, recordings or registrations) required to be done and
performed by Borrower and to have happened prior to or simultaneously with the
execution, delivery and performance of the Loan Documents and to constitute the
same legal, valid and binding obligations of Borrower, enforceable in accordance
with their respective terms, shall have been done and performed and shall have
happened in compliance with all applicable Requirements of Law.
6.3 Opinions and Assurances. All opinions, certificates and other
instruments required hereunder or by any other Loan Document, and all
proceedings in connection with the Transactions shall be reasonably satisfactory
in form and substance to Lender. Lender shall have received copies of all
instruments and other evidence as Lender may reasonably require, in form and
substance reasonably satisfactory to it, with respect to the Transactions and
the taking of all corporate proceedings in connection therewith.
6.4 Representations. On and as of the Closing Date: (i) the representations
and warranties of Borrower and Guarantor contained in the Loan Documents shall
be accurate and complete in all material respects and (ii) there shall not
exist, after giving effect to the execution and delivery of the Loan Documents,
an Event of Default or Potential Default.
6.5 Closing Expenses. Borrower shall have paid or caused to be paid to the
Escrow Company amounts sufficient to pay all transfer taxes and recording
charges required to be paid in connection with the Transactions as well as all
title premiums for the Title Policy and other reasonable title and escrow
charges. Borrower shall have paid the attorneys' fees and expenses of Lender's
counsel incurred in connection with the preparation and negotiation of the Loan
Documents.
Section 7. Representations and Warranties. As an inducement to Lender to
allow Borrower to assume the obligations of the borrower under the Loan
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Documents as provided herein, Borrower represents and warrants to Lender that as
of the Closing Date each of the following statements shall be true and correct:
7.1 Due Authorization. Borrower is a limited partnership duly formed and
validly existing under the laws of the State of Colorado, with the requisite
partnership power and authority to own its properties, enter into the Loan
Documents and consummate the Transactions; and Borrower is qualified to do
business in Colorado and each other jurisdiction in which its properties are
located or where its ownership, leasing or operation of its property or the
conduct of its business requires such qualification.
7.2 Enforceability. The Loan Documents to which it is a party executed on
or before the Closing Date by Borrower have been duly authorized, executed and
delivered on behalf of Borrower and constitute the legal, valid and binding
obligations of Borrower enforceable against it in accordance with their
respective terms, subject to the effect of applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws affecting the
rights of creditors generally.
7.3 Restricted Activities. The Borrower Partnership Agreement provides that
the only purposes of Borrower are to (i) purchase, hold title to and operate,
lease and otherwise deal directly or indirectly, with the Property, (ii) borrow
the Indebtedness evidenced by the Note and other Indebtedness that is not
prohibited under Section 9.1 hereof, (iii) give security for the Note and other
Indebtedness that is not prohibited under Section 9.1 hereof, (iv) enter into
contractual arrangements for the management and operation of the Property and
otherwise in furtherance of the purposes of Borrower, (v) sell, exchange and
refinance the Property and (vi) engage in such activities and exercise such
other powers permitted to limited partnerships under the laws of Delaware that
are necessarily incident to the foregoing purposes or necessary to accomplish
the foregoing purposes. The Borrower Partnership Agreement also provides that
only General Partner and Limited Partner acting together may commence or file a
bankruptcy petition or reorganization proceeding or similar proceeding by or on
behalf of Borrower under any federal or state law or any informal reorganization
or liquidation, including any arrangement for the benefit of creditors, or any
similar proceeding by or on behalf of Borrower.
7.4 Borrower Obligations. Borrower (i) believes it will be able to fund
from its own assets (including its initial working capital reserve) all of its
activities, expenses and liabilities, (ii) intends to pay its own operating
expenses and liabilities from its own funds, and (iii) has at all times since
its formation identified itself, in all dealings with the public, under its own
name and as a separate and distinct entity, and has not identified itself as
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being a division or a part of any other Person, or identified any other Person
as being a division or a part of Borrower or General Partner.
7.5 General Partner. General Partner is a limited liability company, duly
organized and validly existing under the laws of Colorado, with the requisite
corporate power and authority to enter into the Loan Documents and consummate
the Transactions and to own its properties and conduct its business; and General
Partner is qualified to do business in Colorado and each other jurisdiction in
which its properties are located or where its ownership, leasing or operation of
its property or the conduct of its business requires such qualification. General
Partner is the sole General Partner of Borrower.
7.6 Transactions with Affiliates. Except as disclosed in Schedule 7.6,
Borrower has not purchased, acquired or leased any property from, or sold,
transferred or leased any property to, or loaned or advanced any money to, or
borrowed any money from, or guaranteed any obligation of, or acquired any stock,
obligations, or securities of, or entered into any merger or consolidation
agreement, or any management or similar agreement with, any Affiliate of General
Partner, or entered into any other transaction or arrangement or made any
payment to (including on account of any management fees, services fees, office
charges, consulting fees, technical services charges or tax sharing charges) or
otherwise dealt with, in the ordinary course of business or otherwise, any
Affiliate of General Partner on terms other than arm's-length commercially
reasonable terms.
7.7 Employees. Borrower has no employees.
7.8 No Violation. Neither the execution, delivery or performance of any
Loan Document nor the consummation of any of the Transactions violates or will
violate the Borrower Partnership Agreement or the charter or by-laws of General
Partner or Guarantor or violates, conflicts with or constitutes a default under
any agreement to which any of them is a party or by which any or them or the
Property is bound, violates any Requirements of Law to which Borrower or the
Property is subject or will result in the imposition of a Lien on the Property
other than Permitted Exceptions. None of the Transactions will result in a
violation of Section 7 of the Securities Exchange Act of 1934, as amended, or
any regulations issued pursuant thereto, including Regulations G, T, U, and X of
the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II.
7.9 Consents. No consents, approvals, filings, permits or notices of, from,
with or to any Person are required on the part of Borrower or Guarantor that
have not been duly obtained, made or given, as the case may be (a) for the due
execution and delivery of each of the Loan Documents to which it is a party or
(b) for the performance of the Loan Documents in accordance with their terms
(except for obtaining approvals or permits from any Governmental Authority to
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construct tenant improvements or other construction work at or about the Real
Property or for other future actions consent to which are contemplated or
required by the Loan Documents) and consummation of, or otherwise in connection
with, any of the Transactions.
7.10 Solvency. None of the Transactions will be or have been made with an
actual intent to hinder, delay or defraud any present or future creditors of
Borrower or Guarantor, and neither Borrower, Guarantor nor General Partner is,
nor will be, rendered insolvent by the Transactions, and Borrower has received
fair consideration and reasonably equivalent value in good faith for the grant
of the Lien created by the Deed of Trust. Each of Borrower, Guarantor and
General Partner is able to pay its debts as they become due, including
contingent obligations likely to become due.
7.11 Delinquent Property Liens. Except for claims that are being contested
in accordance with the Deed of Trust or that are not material in amount or that
constitute or will constitute Permitted Exceptions, to the best of Borrower's
knowledge there is no delinquent Imposition, sewer rent, water charge,
assessment or other outstanding charge against the Real Property; and, except as
shown in the Title Policy, to the best of Borrower's knowledge there are no
mechanics' or similar Liens or, to the best of Borrower's knowledge, claims for
overdue payment for labor or material affecting the Real Property that are or
could become Liens prior to, or equal with, the Lien of the Deed of Trust and
there are no mechanics' or similar Liens or, to the best of Borrower's
knowledge, claims affecting the Real Property that have not been insured or
endorsed over by the Title Policy.
7.12 Defenses. Except for the effect of applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium or similar laws affecting the rights of
creditors generally, the Loan Documents are not subject to any valid right of
rescission, setoff, abatement, diminution, counterclaim or defense as against
Lender and its successors and assigns in interest, including the defense of
usury, and the operation of any of the terms of the Loan Documents, or the
proper exercise of any right thereunder, will not render the Loan unenforceable,
in whole or in part, or subject to any right of rescission, setoff, abatement,
diminution, counterclaim or defense, including the defense of usury, and neither
Borrower nor Guarantor has taken any action that would give rise to the
assertion of any of the foregoing and no such right of rescission, setoff,
abatement, diminution, counterclaim or defense, including the defense of usury,
has been asserted with respect thereto.
7.13 Lien Priority. Upon recording, the Deed of Trust shall constitute a
valid and enforceable first Lien and perfected security interest on the Property
granted by Borrower in favor of Lender, including all buildings and fixtures
that constitute part of the Property under applicable law, and all additions,
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alterations and replacements made at any time with respect to the foregoing,
subject only to Permitted Exceptions.
7.14 Improvements. To the best of Borrower's knowledge, except as disclosed
in the Title Policy, all improvements comprising a portion of the Real Property
lie wholly within the boundary and building restriction lines of the Land and no
improvements on adjoining properties encroach upon any of the Land in any
respect except as shown in the Title Policy, on the survey or in Schedule 7.14.
7.15 Casualty; Condemnation. The Real Property is free of waste and of any
damage involving loss or destruction with a repair cost in excess of two hundred
fifty thousand dollars ($250,000), and there is no proceeding pending or, to the
best of Borrower's knowledge, threatened, for the Taking of any of the Real
Property.
7.16 Zoning and Other Laws. To the best of Borrower's knowledge, the use
and operation of the Real Property, separate and apart from any other
properties, constitutes a legal use under applicable zoning regulations and
complies in all material respects with all applicable Requirements of Law and
all applicable Insurance Requirements.
7.17 Leases. The ICG Lease is in full force and the landlord is not in
default thereunder. The ICG Lease is the only lease, sublease or other occupancy
agreement encumbering the Property, and Tenant is the only tenant, subtenant or
occupant of the Property. To the best of Borrower's knowledge, Tenant is not in
default under the ICG Lease.
7.18 Tenant Estoppels. Borrower has delivered to Lender an original tenant
estoppel certificate executed by Tenant with respect to the ICG Lease.
7.19 Litigation. Except as set forth on Schedule 7.19, no material
litigation, investigation or proceeding before any court, arbitrator or
Governmental Authority, agency or subdivision is pending or, to Borrower's best
knowledge, threatened, against Borrower or Guarantor or, to the best of
Borrower's knowledge, relating to any of the Real Property.
7.20 Brokerage and Other Fees. No brokerage or other fee, commission or
compensation is or will become due and payable by Borrower or Guarantor in
connection with the Transactions.
7.21 Investment Company. Neither Borrower nor Guarantor is now required nor
will it (by reason of this Agreement) be required to register under the
Investment Company Act of 1940, as amended.
7.22 Other Agreements. To the best of Borrower's knowledge, no party to any
deed, restriction, covenant or similar instrument that constitutes a Permitted
Exception in respect of the Real Property is in default of its obligations
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thereunder except for such defaults that in the aggregate (if such defaults
remained uncured) do not or will not have a Material Adverse Effect.
Section 8. Affirmative Covenants. Borrower hereby covenants and agrees
that, so long as the Loan remains unpaid or any other amount is owing to Lender
under any of the Loan Documents or the Real Property remains subject to the Lien
of the Deed of Trust:
8.1 Financial Statements; Other Information. Borrower shall furnish or
cause to be furnished to Lender:
(a) As and when required to be delivered pursuant to the Deed of Trust, the
financial reports and statements described in Section 1.19 of the Deed of Trust;
and
(b) promptly, such additional financial and other information, including
information regarding the Property and the occupancy thereof (including an
updated rent roll), as Lender may from time to time reasonably request.
8.2 Maintenance of Existence and Property. Borrower shall preserve and
maintain its existence and all rights, privileges and franchises necessary in
the normal conduct of its business. In all dealings with the public, Borrower
shall identify itself under its own name and as a separate and distinct entity.
8.3 Inspection of Property; Books and Records; Discussions; Bank Accounts
and Funds. Borrower shall (i) keep its own separate and proper books of record
and account in which full, true and correct entries in conformity with GAAP or
as otherwise required under any Loan Document and under all Requirements of Law
shall be made of all dealings and transactions in relation to its business and
activities, and (ii) upon reasonable notice, permit representatives of Lender
and its agents and regulatory authorities to visit and inspect the Real Property
and examine and make abstracts from any of its books and records at any
reasonable time and as often as may reasonably be desired by Lender and to
discuss the business, operations, properties and financial and other conditions
of Borrower, Guarantor and ICGC with any of their officers. Borrower shall
maintain its own bank accounts and keep its funds or other assets separate from
the funds or other assets of all other Persons.
8.4 Notices. Borrower shall give prompt written notice to Lender of (i) any
claims, proceedings or disputes (whether or not purportedly on behalf of
Borrower) against, or to Borrower's knowledge, threatened or affecting, Borrower
or the Property that, if adversely determined, could reasonably be expected to
have a Material Adverse Effect or that involve in the aggregate monetary amounts
in excess of one million dollars ($1,000,000), (ii) any proposal of which
Borrower has knowledge or has received notification by any Governmental
Authority to acquire any of the Real Property or any portion thereof or as to
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any notice or the discovery of any material violation or material alleged
violation of any Requirement of Law, (iii) the occurrence of any Potential
Default or Event of Default hereunder or (iv) any Material Adverse Effect. Such
notice shall be in the form of an Officer's Certificate specifying the nature
and details of any of the foregoing matters and the actions taken and proposed
to be taken by Borrower in response thereto.
8.5 Expenses. Borrower shall pay, indemnify and save harmless Lender with
respect to all Impositions (other than income or franchise taxes of Lender or
taxes caused by actions or elections of Lender) and all reasonable charges, fees
and out-of-pocket expenses (including reasonable fees and disbursements of
counsel of Lender) incident to the enforcement (including any foreclosure of the
Liens held by Lender) and administration (out-of-pocket expenses only) of the
Loan Documents and the preparation, negotiation, enforcement and administration
(out-of-pocket expenses only) of any amendments, waivers and renewals relating
to any thereof and the protection of the rights of Lender under the Loan
Documents whether by judicial proceedings or otherwise, including in connection
with bankruptcy, insolvency, liquidation, reorganization, moratorium or other
similar proceedings involving Borrower or a "workout" of the Loan. The Loan
shall not be considered to have been paid in full unless all obligations under
this Section 8.5 shall have been fully performed, are fully covered by insurance
or security satisfactory to Lender has been provided therefor (except for
contingent indemnification obligations for which no claim has actually been made
in good faith pursuant to this Agreement).
8.6 Loan Documents. Borrower and Guarantor shall comply with and observe
all terms and conditions of the Loan Documents to which they are a party. Until
released in accordance with this Agreement, Borrower warrants that the Deed of
Trust will at all times constitute a valid, subsisting and enforceable first
Lien and perfected security interest on the Property granted by Borrower in
favor of Lender, including all buildings and fixtures that constitute part of
the Property under applicable law, and all additions, alterations and
replacements made at any time with respect to the foregoing, subject only to
Permitted Exceptions.
8.7 Indemnification. Borrower shall indemnify and hold harmless Lender and
its directors, officers, shareholders, partners, employees, attorneys, agents,
representatives, successors and assigns (the "Indemnified Parties"), from and
against all damages as a result of liabilities, claims, actions, penalties and
fines (collectively and severally, "Losses") assessed against any of them
resulting from the claims of any party relating to the matters set forth in
Section 1.22 of the Deed of Trust, except for Losses otherwise covered under the
provisions of Section 8.5 and Losses directly caused by the gross negligence or
willful misconduct of the Indemnified Party seeking recovery hereunder; and
Borrower shall reimburse each Indemnified Party for any expenses (including the
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fees and disbursements of legal counsel) incurred in connection with the
investigation of, preparation for or defense of any actual or threatened claim,
action or proceeding arising therefrom (including any such costs of responding
to discovery requests or subpoenas), regardless of whether Lender or such other
Indemnified Person is a party thereto. The provisions of Section 1.22 the Deed
of Trust are incorporated herein by reference. The Loan shall not be considered
to have been paid in full unless all obligations of Borrower under this Section
8.7 shall have been fully performed, are fully covered by insurance or security
satisfactory to Lender has been provided therefor (except for contingent
indemnification obligations for which no claim has actually been made in good
faith pursuant to this Agreement).
8.8 Property Management. Borrower shall cause the Property to be managed on
terms substantially similar to the terms and conditions of the Management
Agreement by the Property Manager; provided, however, that if the Management
Agreement is terminated pursuant to its terms, Borrower may replace Property
Manager with another property manager reasonably acceptable to Lender.
8.9 Impositions. Borrower shall promptly pay or cause to be paid all
Impositions pursuant to the provisions of Section 1.8 of the Deed of Trust,
subject to Borrower's right to contest such Impositions as provided in Section
1.8 of the Deed of Trust.
8.10 Insurance. Borrower shall maintain insurance with respect to the
Property as required under the Deed of Trust.
Section 9. Negative Covenants. Borrower hereby agrees that, so long as the
Loan remains unpaid or any other amount is owing to Lender under any of the Loan
Documents and any Property remains subject to the Lien of the Deed of Trust,
Borrower shall not, directly or indirectly:
9.1 Indebtedness. Create, incur or assume any Indebtedness except for: (i)
the Loan and other obligations to Lender under the Loan Documents or in
connection with the Transactions, and (ii) Indebtedness incurred in the ordinary
course of business on a basis and upon terms consistent with customary practices
of owners of office buildings, including indebtedness arising from obligations
in respect of performance or surety bonds and letters of credit required to be
posted by Borrower in connection with statutory obligations, tenant improvements
or similar work, but excluding indebtedness for borrowed money (other than
payments made in installments for goods and services obtained in the ordinary
course of business) and (iii) Indebtedness in respect of Impositions,
assessments, governmental charges or Liens and claims for labor, materials and
supplies, in each case, in respect of the Collateral to the extent the validity
or amount thereof is being currently contested in good faith by appropriate
proceedings in accordance with Section 1.8(d) or 1.15 of the Deed of Trust.
20
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9.2 Consolidation and Merger. Liquidate or dissolve or enter into any
consolidation, merger, partnership, joint venture, syndicate or other
combination.
9.3 Sale of Assets-Encumbrances. Subject to Borrower's rights under section
1.15 of the Deed of Trust, suffer to exist any Lien with respect to any
Collateral other than Permitted Exceptions or sell, transfer, lease, assign,
exchange, contribute, encumber, abandon or create any Lien with respect to, or
otherwise dispose of, directly or indirectly, any Collateral or any interest
therein, except as permitted by the Subdivision Agreement.
9.4 Transactions with Affiliates. Purchase, acquire or lease any property
from, or sell, transfer or lease any property to, or lend or advance any money
to, or borrow any money from, or guarantee any obligation of, or acquire any
stock, obligations or securities of, or enter into any merger or consolidation
agreement, or any management or similar agreement with, any Affiliate of
Borrower, or enter into any other transaction or arrangement or make any payment
to (including on account of any management fees, service fees, office charges,
consulting fees, technical services charges or tax sharing charges) or otherwise
deal with, in the ordinary course of business or otherwise, any Affiliate of
Borrower on terms other than arm's-length commercially reasonable terms, except
for any of the following: (i) transactions relating to the sharing of
facilities, equipment, office space and actual overhead expenses, including
managerial, payroll and accounting and legal expenses, for which charges
assessed against Borrower is not greater than would be incurred by Borrower in
similar arm's-length transactions with non-Affiliates, and (ii) the ICG Lease.
9.5 Restricted Activities. Purchase or acquire any interest in any real
properties other than the Real Property, conduct any business other than that
permitted under the Borrower Partnership Agreement, have any assets or
liabilities other than assets or liabilities derived from or related to the
Property or otherwise related to a business that is permitted under the Borrower
Partnership Agreement, violate any of the provisions of the Borrower Partnership
Agreement or amend the Borrower Partnership Agreement. Borrower shall not allow
General Partner to purchase, acquire or own any assets other than its general
partnership interest in Borrower, conduct any business unrelated to acting as
general partner of Borrower or incur any Indebtedness. Borrower shall not
identify itself, in any dealings with the public, as being a division or a part
of any other Person, and shall not identify any other Person as being a division
or a part of Borrower or General Partner; provided, however, identifying General
Partner or Limited Partner as a partner in Borrower shall not be prohibited by
this Section 9.5.
9.6 Fiscal Year. Change its fiscal year.
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9.7 Manager. Replace the Property Manager without Lender's prior written
consent, which shall not be unreasonably withheld, or terminate or amend the
Management Agreement.
9.8 Leases. Except as specifically permitted in Section 1.16 of the Deed of
Trust, Borrower shall not: (a) enter into any Lease; (b) amend, modify or revise
the ICG Lease or any other Lease; or (c) cancel, terminate or permit the
termination of, accept the surrender of any or all of the space demised under,
or waive any right or remedy under, the ICG Lease or any other Lease.
Section 10. Events of Default. The occurrence of any of the following
events shall constitute an "Event of Default" hereunder:
10.1 Payment Default. Borrower shall fail to make or cause to be made (i)
any payment of principal or interest under the Note or this Agreement within
five (5) days after the date due, or (ii) any other payment due hereunder or
under any other Loan Document within ten (10) days after demand therefor shall
have been made; or
10.2 Misrepresentation. Any representation, warranty or certification made
by Borrower or Guarantor under any Loan Document, or in any Officer's
Certificate or financial statement furnished by Borrower or Guarantor in
connection with any Loan Document, shall be materially inaccurate or incomplete
as of the date made; provided, however, if such inaccuracy or incompleteness is
susceptible to cure, no Event of Default shall occur if Borrower cures or causes
to be cured the same within thirty (30) days after written notice thereof from
Lender, or if such matter is susceptible of cure but cannot, with due diligence,
be cured within thirty (30) days, then no Event of Default shall occur if such
cure is commenced within that thirty (30) day period and diligently prosecuted
to completion within such longer period of time (but in no event to exceed
ninety (90) days from the date Borrower received notice of such breach); or
10.3 Negative Covenant Default. Borrower shall fail to perform or observe
the terms, provisions, covenants, obligations or agreements contained in any of
Sections 9.1 through 9.8; or
10.4 Other Loan Defaults. Borrower or Guarantor shall fail to perform or
observe in any material respect any of the covenants, obligations or agreements
contained in the Loan Documents (other than those referred to in Section 10.1,
10.2 or 10.3 above) and such failure shall, in each such case, continue for
thirty (30) days after written notice thereof from Lender, or if such cure
cannot, with due diligence, occur within thirty (30) days, such longer period of
time (not to exceed ninety (90) days from the date Borrower received notice of
such breach) as is reasonably required for such cure, provided Borrower is
diligently attempting to cure such failure; or
22
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10.5 Bankruptcy, etc. (i) Any ICG Party shall commence any case, proceeding
or other action (a) under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have an order for relief entered with respect to
it, or seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (b) seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or substantially all of its assets, or any ICG Party shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against any ICG Party any case, proceeding or other action of a nature
referred to in clause (i) above that (a) results in the entry of any order for
relief or any such adjudication or appointment, and (b) remains undismissed,
undischarged or unbonded for a period of ninety (90) days; or (iii) there shall
be commenced against any ICG Party any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar process
against all or substantially all of its assets that results in the entry of an
order for any such relief that shall not have been vacated, discharged, stayed,
satisfied or bonded pending appeal within ninety (90) days from the entry
thereof; or (iv) any ICG Party shall generally not, or shall be unable to, or
shall admit in writing its inability to, pay its debts as they become due;
10.6 Judgments.
(a) One or more judgments or decrees (not covered by insurance) in an
aggregate amount exceeding five million dollars ($5,000,000) shall be entered
against Borrower or any Significant Subsidiary of Borrower and all such
judgments or decrees shall not have been vacated, discharged, stayed, satisfied
or bonded pending appeal within sixty (60) days from the entry thereof.
(b) Any adverse judgment in an amount greater than ten million dollars
($10,000,000) is entered against Guarantor or any Significant Subsidiary of
Guarantor that is not covered by insurance and is not stayed, satisfied or
bonded pending appeal within sixty (60) days from entry thereof.
10.7 Defaults Under Other Agreements. The occurrence of any monetary
default or other default resulting in acceleration of the obligation by
Guarantor or any Significant Subsidiary of Guarantor under any loan agreement,
note or other debt instrument where such obligation or liability exceeds ten
million dollars ($10,000,000).
10.8 Net Worth. The Tangible Net Worth of Guarantor and its Subsidiaries
shall be less than fifty million dollars ($50,000,000) at the end of any fiscal
quarter during the term of the Loan, as evidenced by the financial statements
delivered to Lender by Borrower pursuant to Section 8.1 of this Agreement.
23
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10.9 Tenant Defaults. Any "Event of Default" (as defined in the ICG Lease)
occurs and is not waived by Borrower or cured by Tenant within thirty (30) days
after the occurrence of the breach giving rise to such "Event of Default."
10.10 Additional Borrower Cure Right. Borrower shall have the right to
effectuate a cure of an Event of Default described in Sections 10.6, 10.7 and
10.8 of this Agreement by posting a clean, irrevocable and unconditional letter
of credit in the full, outstanding principal amount of the Loan for the benefit
of Lender in form and substance reasonably satisfactory to Lender.
10.11 Remedies. Automatically upon the occurrence of an Event of Default
under Section 10.5, or at the option of Lender upon the occurrence of any other
Event of Default, the principal balance of the Loan and interest and other
charges accrued but unpaid thereon shall become immediately due and payable and
the Maturity Date shall be deemed to have occurred; and Lender may exercise all
rights and remedies available to it hereunder, under the other Loan Documents,
at law or in equity. Notwithstanding the foregoing, Lender agrees that Borrower
shall not be liable to Lender for compensatory money damages as a result of
Borrower's unknowing breach of any representation, warranty or certification
referred to in Section 10.2 (but Lender shall have all other remedies hereunder
and at law or in equity, including acceleration of the principal balance of the
Loan and accrued but unpaid interest and other charges, and collection of
interest on unpaid amounts at the Default Rate).
Section 11. Miscellaneous Provisions.
11.1 Assignment. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
Nothing expressed herein is intended or shall be construed to give any Person
other than the Persons referred to in the preceding sentence any legal or
equitable right, remedy or claim under or in respect of this Agreement. Lender,
in its sole and absolute discretion and without notice to Borrower, may sell
participations, assign its rights or interest, or both, in all or any part of
this Agreement or the other Loan Documents. Borrower may not assign its rights
or interest or delegate its duties hereunder or under the other Loan Documents,
except that if Lender or an Affiliate of Lender acquires the Property, such
Person shall be entitled to assume the Loan and the borrower's obligations under
the Loan Documents.
11.2 Agents. Lender may use one or more agents or mortgage servicers to
administer the Loan Documents or perform its obligations hereunder or under the
other Loan Documents.
11.3 Cumulative Rights; No Waiver. The rights, powers and remedies of
Lender hereunder are cumulative and in addition to all rights, powers and
remedies provided under any and all agreements by Borrower or any ICG Party with
or for the benefit of Lender under the Loan Documents or incident to the
Transactions, at law, in equity or otherwise. Any delay or failure by Lender to
24
<PAGE>
exercise any right, power or remedy shall not constitute a waiver thereof by
Lender, and no single or partial exercise by Lender of any right, power or
remedy shall preclude other or further exercise thereof or any exercise of any
other rights, powers or remedies. No delay or omission of Lender to exercise any
right or remedy accruing upon any Event of Default shall impair any such right
or remedy or constitute a waiver of any such Event of Default or an acquiescence
therein. Every right and remedy given by this Agreement or the other Loan
Documents or by law to Lender may be exercised from time to time, and as often
as may be deemed expedient by Lender.
11.4 Entire Agreement. This Agreement and the other Loan Documents embody
the entire agreement and understanding between the parties hereto with respect
to the Loan and supersede all prior agreements and understandings relating to
the subject matter hereof and thereof.
11.5 Survival. All representations and warranties, covenants and agreements
herein contained on the part of Borrower shall survive the closing and funding
of the Loan.
11.6 Notices. All approvals, consents, notices and other communications
under this Agreement shall be properly given only if made in writing and mailed
by certified mail, return receipt requested, postage prepaid, or delivered by
hand (including messenger or recognized delivery, courier or air express
service) to the party at the address set forth in this Agreement or such other
address as such party may designate by notice to the other party. Such
approvals, consents, notices and other communications shall be effective on the
date of receipt (evidenced by the certified mail receipt) if mailed or on the
date of such hand delivery if hand delivered. If any such approval, consent,
notice or other communication is not received or cannot be delivered due to a
change in the address of the receiving party of which notice was not previously
given to the sending party or due to a refusal to accept by the receiving party,
such approval, consent, notice or other communication shall be effective on the
date delivery is attempted. Any approval, consent, notice or other communication
under this Agreement may be given on behalf of a party by the attorney for such
party.
(a) The address of Lender is: One Embarcadero Center, 33rd Floor, San
Francisco, California 94111, attention: Capital Markets, with additional copies
to Pillsbury Madison & Sutro, 235 Montgomery Street, San Francisco, California
94104, Attention: Glenn Q. Snyder, Esq.
(b) The address of Borrower is: 161 Inverness Drive West, Englewood,
Colorado 80112, Attention: Director of Real Estate, Facilities and Corporate
Services, with an additional copy to 161 Inverness Drive West, Englewood,
Colorado 80112, Attention: Assistant General Counsel.
25
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11.7 Headings. The Section headings used in this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
11.8 Modifications in Writing. No amendment, modification, supplement,
termination or waiver of or to any provision of this Agreement or any other Loan
Document to which Lender is a party, or consent to any departure by Borrower or
Guarantor therefrom, shall be effective unless in writing and signed by Lender
and Borrower and, if applicable, Guarantor. Any amendment, modification or
supplement of or to any provision of this Agreement or any such other Loan
Document, any waiver of any provision thereof, and any consent to any departure
by Borrower or Guarantor from the terms of any provision thereof shall be
effective only in the specific instance and for the specific purpose for which
made or given. Borrower shall not amend in any material respect any of the Loan
Documents to which Lender is not a party, and no purported amendment thereof
shall be effective, unless Lender shall have given its prior written consent
thereto.
11.9 Execution in Counterparts. This Agreement and any amendments, waivers,
consents or supplements hereto may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original, but all such
counterparts shall constitute one and the same agreement.
11.10 Severability of Provisions. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
11.11 WAIVER OF JURY TRIAL. BORROWER AND EACH OTHER PARTY HERETO HEREBY
WAIVES ANY RIGHTS TO A TRIAL BY JURY OF ANY MATTER OR CAUSE RELATING TO THIS
AGREEMENT.
11.12 Reinstatement; Recapture. To the extent Lender receives any payment
by or on behalf of Borrower or Guarantor, which payment or any part thereof is
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to such party or its estate, trustee, receiver,
custodian 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 repayment,
the obligation or part thereof that has been paid, reduced or satisfied by the
amount so repaid shall be reinstated by the amount so repaid and shall be
included within the liabilities of Borrower to Lender as of the date such
initial payment, reduction or satisfaction occurred.
11.13 Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF COLORADO.
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11.14 Cross Collateralization; Marshalling, etc. Borrower represents,
warrants and covenants that in the case of an Event of Default that is
continuing (i) Lender shall have the right to pursue all of its rights and
remedies in one proceeding, or separately and independently in separate
proceedings from time to time, as Lender, in its sole and absolute discretion,
shall determine from time to time, (ii) Lender is not required to either
marshall assets, sell Collateral in any inverse order of alienation or be
subject to any "election of remedies" law or rule, (iii) the exercise by Lender
of any remedies against any one item of Collateral will not impede Lender from
subsequently or simultaneously exercising remedies against any other item of
Collateral, and (iv) all Liens and other rights, remedies or privileges provided
to Lender shall remain in full force and effect until Lender has exhausted all
of its remedies against the Collateral and all Collateral has been foreclosed,
sold and/or otherwise realized upon in satisfaction of the Loan or until the
Secured Obligations (as defined in the Deed of Trust) have been fully satisfied.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
LENDER:
TRINET REALTY CAPITAL, INC., a Maryland
corporation
By /s/ Kevin E. Deeble
------------------------------------
Its Vice President
-----------------------------
27
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BORROWER:
ICG 161, L.P., a Delaware limited liability
company
By ICG CORPORATE HEADQUARTERS, L.L.C.,
a Colorado limited liability company,
its general partner
By ICG SERVICES, INC., a Delaware
corporation, its manager
By /s/ H. Don Teague
------------------------------
Its Executive Vice President
------------------------
28
<PAGE>
SCHEDULE 6.1(iv)
UCC FILINGS
1
<PAGE>
UCC-1 Fixture Filing to be recorded in the Official Records of the County of
Arapahoe, State of Colorado.
UCC-1 Financing Statement to be filed in the Office of the Secretary of State,
State of Colorado.
<PAGE>
SCHEDULE 7.6
TRANSACTIONS WITH AFFILIATES
1
<PAGE>
SCHEDULE 7.14
ENCROACHMENTS
None.
1
<PAGE>
SCHEDULE 7.19
LITIGATION
None.
1
<PAGE>
EXHIBIT A
ENVIRONMENTAL INDEMNITY
1
<PAGE>
EXHIBIT B
GUARANTY
1
<PAGE>
EXHIBIT C
FORM OF ASSUMPTION AGREEMENT
1
Recorded at the Request of:
Land Title Guarantee Company
When Recorded Mail to:
PILLSBURY MADISON & SUTRO LLP
P.O. Box 7880
San Francisco, CA 94120-7880
Attn: Laura E. Hannusch, Esq.
ASSUMPTION AND MODIFICATION AGREEMENT
THIS ASSUMPTION AND MODIFICATION AGREEMENT ("Agreement") is entered into as
of the 1st day of May 1999, by and among ICG SERVICES, INC., a Delaware
corporation ("Grantor"), whose address is 161 Inverness Drive West, Englewood,
Colorado 80112, ICG 161, L.P., a Delaware limited partnership ("Grantee"), whose
address is 161 Inverness Drive West, Englewood, Colorado 80112, and TRINET
REALTY CAPITAL, INC., a Maryland corporation ("Lender") whose address is One
Embarcadero Center, 33rd Floor, San Francisco, California 94111.
W I T N E S S E T H:
WHEREAS, Grantor is the owner of certain real property located in Arapahoe
County, Colorado, more particularly described in Exhibit A attached hereto (the
"Premises"); and
WHEREAS, Lender previously made a loan to Grantor in the original principal
amount of thirty-three million seventy-six thousand seven hundred fifty-four
dollars ($33,076,754) (the "Loan"), which Loan is evidenced by a Note executed
by Grantor in favor of Lender dated as of January 1, 1999, in the amount of the
Loan (the "Note"), and which Note is secured by, among other things, a Deed of
Trust, Assignment of Rents and Security Agreement dated as of January 1, 1999
(as amended from time to time, the "Deed of Trust"), encumbering the Premises,
executed by Grantor, in favor of the Public Trustee of Arapahoe County,
Colorado, as trustee, for the benefit of Lender, said Deed of Trust recorded in
the Official Records of Arapahoe County, Colorado, as Reception No.
_________________; and
WHEREAS, Lender is the owner and holder of the indebtedness and obligations
secured by the Deed of Trust (the "Secured Indebtedness"); and
WHEREAS, Grantor is the current owner of the Premises; and
WHEREAS, Grantor wishes to convey the Premises to Grantee subject to the
Deed of Trust; and
<PAGE>
WHEREAS, the Deed of Trust prohibits Grantor from conveying the Premises to
Grantee without the prior written consent of Lender; and
WHEREAS, Lender is willing to consent to the proposed conveyance of the
Premises to Grantee and the assumption by Grantee of the Secured Indebtedness,
subject to certain terms and conditions, including but not limited to those
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the provisions hereof, as an inducement
to cause Lender to consent to the proposed conveyance, and for other valuable
consideration, the receipt and sufficiency of which are acknowledged, it is
agreed as follows:
(A) Capitalized terms used herein, but not otherwise defined, shall have
the meaning given them in the Deed of Trust.
(B) Consent to Transfer. Lender hereby consents to the conveyance by
Grantor to Grantee of Grantor's interest in the Premises. Except as expressly
provided herein or in the Loan Documents (as defined below), such consent by
Lender shall not constitute a consent to any further or subsequent sale,
transfer, disposition or encumbering of any kind whatsoever, by deed of trust or
otherwise, of the Mortgaged Property, or any part thereof or interest therein,
or waive the necessity of further consent from Lender whenever such consent is
required pursuant to the Loan Documents.
(C) Amount of Indebtedness. Lender warrants, as of the date hereof, that
the outstanding principal balance under the Note is $33,076,754 and that Grantor
is not in default under the Loan Documents.
(D) Assignment of the Loan; Assumption by Grantee. Effective as of May 1,
1999 (the "Transfer Date"), Grantor assigns to Grantee all of such Grantor's
obligations, rights, powers, equities, remedies, and interests in, to, and
arising out of the Loan, together with the Loan Documents, to have and to hold
the obligations, rights, powers, equities, remedies, and interests of Grantor
in, to, and arising out of the Loan and Loan Documents unto Grantee, its
permitted successors and assigns, from and after the date hereof for all the
remaining duration of the Loan, subject to the covenants, conditions, and
provisions of such Loan as provided in the Note and the other Loan Documents.
Effective as of the Transfer Date, Grantee assumes Grantor's liability for the
payment of the Secured Indebtedness and all of the obligations of Grantor with
respect to the Loan, including but not limited to the obligations set forth in
the following documents executed in connection therewith:
(i) Note;
(ii) Deed of Trust; and
2
<PAGE>
(iii) Assignment of Leases and Rents and other Income dated as of
January 1, 1999, from Grantor, as assignor, to Lender, as assignee.
(The foregoing documents, together with any other documents executed in
connection with the Loan, being herein collectively referred to as the "Loan
Documents.") Grantee shall not assume the obligations of Grantor under the Loan
Agreement or the Secured Environmental Indemnity, each dated as of January 1,
1999 (collectively, the "Restated Agreements"), between Grantor and Lender, as
such agreements are being amended and restated and will be executed by Grantee
directly. If Lender so requests, Grantee shall sign a new promissory note
containing the same terms and conditions and in the same principal amount of the
Note to further evidence Grantee's liability for the payment of the Secured
Indebtedness and Lender and Grantee shall exchange such new promissory note for
the Note.
(E) Modification of Loan Documents.
(i) It is understood and agreed that, effective as of the Transfer Date,
Grantee shall be substituted for Grantor in each of the Loan Documents and each
of the Loan Documents shall be modified to amend the term or terms defined to
identify Grantor, such as "Maker" in the Note, "Trustor" in the Deed of Trust
and "Borrower" in the other Loan Documents, so that all such terms identify
Grantee effective as of the Transfer Date.
(ii) Section 1.19 of the Deed of Trust is hereby amended by adding the
following language at the end of such Section 1.19:
ATrustor shall deliver to Beneficiary, within forty-five (45) days
after the end of each fiscal quarter, income statements, balance
sheets and statements of cash flow of ICG Services, Inc. ("Guarantor")
and its Subsidiaries (as defined in the Loan Agreement), on a
consolidated basis, for such quarter, and a certificate of compliance,
signed by an officer of Guarantor, certifying the accuracy of such
statements and Guarantor's compliance with its obligation to maintain
at the end of each fiscal quarter a Tangible Net Worth (as defined in
the Loan Agreement) of at least fifty million dollars ($50,000,000).
In addition, Trustor shall deliver to Beneficiary as soon as
practicable, but in any event no later than one hundred five (105)
days after each fiscal year, an income statement, balance sheet and
statement of cash flow of Guarantor and its Subsidiaries, on a
consolidated basis, for such fiscal year, all certified as to accuracy
by an independent certified public accountant or representative of
Guarantor reasonably acceptable to Beneficiary. All such financial
3
<PAGE>
statements shall be prepared in accordance with generally accepted
accounting principles consistently applied. Such financial statements
shall be in form and detail reasonably satisfactory to Beneficiary."
(iii) Section 1.21 of the Deed of Trust is hereby amended by adding
"(except with respect to a transfer described in Section 5.14 hereof)" after
"any interest in the Mortgaged Property" and before ", of if there is any
change. . ."
(iv) The Deed of Trust is hereby modified by adding a new Section 5.14,
which reads as follows:
"5.14 Partial Release. As of May 4, 1999, Trustor, Beneficiary, TEFX
and Tenant have entered into that certain Agreement Regarding Subdivision
(the "Subdivision Agreement"), whereby the parties thereto have agreed
that, at the request of either Beneficiary or Tenant, the Property will be
subdivided, with the portion of the Property currently improved with a
building and parking facilities (the "Improved Parcel") forming one parcel,
and the "Expansion Site" determined in accordance with the Subdivision
Agreement forming a second parcel, all on the terms and conditions set
forth in the Subdivision Agreement. In such case and upon satisfaction of
all of the conditions set forth in the Subdivision Agreement, Beneficiary
shall release, or direct the Trustee to release, the Expansion Site from
the lien of this Deed of Trust. All expenses of Beneficiary and Trustee
incurred in connection with preparing, negotiation and recording such
release documents, and the cost of any endorsement to Beneficiary's title
insurance policy reasonably required by Beneficiary, shall be paid by
Trustor, as set forth in the Subdivision Agreement."
(F) The effectiveness of this Agreement and the consents granted by Lender
are conditioned on delivery to Lender of:
(i) An Amended and Restated Loan Agreement, in form acceptable to
Lender, dated as of May 4, 1999, executed by Grantee;
(ii) An Unsecured Environmental Indemnity (the "Indemnity"), in form
acceptable to Lender, dated as of May 4, 1999, executed by Grantor and
Grantee; and
(iii) A Continuing Guaranty (the "Guaranty"), in form acceptable to
Lender, dated as of May 4, 1999, executed by Grantor.
(G) Release. Effective as of the Transfer Date, Lender releases Grantor
from any and all liability and obligation under the Loan Documents and the
Restated Agreements, and each of them, but not from the documents referenced in
paragraphs (F)(ii) and (iii) of this Agreement.
4
<PAGE>
(H) Modifications and Renewals. Lender may hereafter enter into any
modification, extension or renewal of the Secured Indebtedness with the consent
of Grantee alone, and Grantor hereby waive notice of any of the same. Any
renewal notes, modification or extension agreements or other documents
pertaining to the Secured Indebtedness may hereafter be entered into by Grantee
without the joinder of Grantor and without limiting the liability of Grantor for
payment of the Secured Indebtedness pursuant to the Guaranty or the Indemnity.
(I) Estoppels. Grantor hereby certifies and confirms for the benefit of
Lender, the following:
(i) The Loan Documents are in full force and effect.
(ii) Lender has complied with all terms, conditions and provisions of
the Loan Documents to be complied with by Lender, and no event has occurred
and no circumstance exists that would, with the passage of time or the
giving of notice, or both, constitute a default by Lender under the Loan
Documents. There is no existing basis for Grantor to exercise any remedy
available to it by virtue of a default or other action by Lender.
(iii) There are no charges, liens, defenses, offsets, claims or
credits known or asserted by Grantor against the payments due under the
Note or other sums due Lender or against the performance of Grantor's
obligations under the Loan Documents.
(iv) There are no pending suits, proceedings, judgments, bankruptcies,
liens or executions against Grantor or any affiliate of Grantor that could
adversely affect the Premises.
(J) Representations and Warranties. Grantee hereby represents and warrants
for the benefit of Lender, the following:
(i) Grantee is a Delaware limited partnership, is duly formed and
validly existing under the laws of the State of Delaware and is qualified
to do business in the State of Colorado. Grantee's federal tax
identification number is 84-1448147.
(ii) Grantee has full power and authority to enter into this Agreement
and to perform this Agreement. The execution, delivery and performance of
this Agreement by Grantee have been duly and validly authorized by all
necessary action on the part of Grantee and all required consents and
approvals have been duly obtained.
5
<PAGE>
(iii) This Agreement is a legal, valid and binding obligation of
Grantee, enforceable against Grantee in accordance with its terms.
(K) No Marshalling of Assets. Lender may proceed against collateral
securing the Secured Indebtedness and against parties liable therefor in such
order as it may elect, and neither Grantor nor Grantee nor any surety or
guarantor for either of them nor any creditor of either Grantor or Grantee shall
be entitled to require Lender to marshall assets. The benefit of any rule of law
or equity to the contrary is hereby expressly waived.
(L) Impairment of Collateral. Lender may, in its sole discretion, release
the Deed of Trust or any other collateral securing the Secured Indebtedness or
release any party liable therefor. The defenses of impairment of collateral and
impairment of recourse and any requirement of diligence on Lender's part in
collecting the Secured Indebtedness are hereby waived.
(M) Amendment and Waiver in Writing. No provision of this Agreement can be
amended or waived, except by a statement in writing signed by all parties to
this Agreement.
(N) Assignment. This Agreement and all related documents shall be binding
upon and inure to the benefit of the respective heirs, successors and assigns of
Grantor, Grantee and Lender.
(O) Entire Agreement. This Agreement and the documents referenced herein
and those executed concurrently herewith represent the entire agreement among
the parties concerning the Loan.
(P) Severability. Should any provision of this Agreement be invalid or
unenforceable for any reason, the remaining provisions hereof shall remain in
full effect.
(Q) Applicable Law. The validity and construction of this Agreement and all
other documents executed with respect to the Secured Indebtedness shall be
determined according to the laws of Colorado applicable to contracts executed
and performed within that state.
(R) Gender and Number. Words used herein indicating gender or number shall
be read as context may require.
(S) Captions Not Controlling. Captions and headings have been included in
this Agreement for the convenience of the parties, and shall not be construed as
affecting the content of the respective paragraphs.
6
<PAGE>
(T) Counterparts. This Agreement may be executed by counterpart signature
pages, and it shall not be necessary that the signatures of all parties be
contained on any one counterpart. Each counterpart shall be deemed an original,
but all of them together shall constitute one and the same instrument
Executed the date first written above.
THE UNDERSIGNED ACKNOWLEDGE A THOROUGH UNDERSTANDING OF THE TERMS OF THIS
AGREEMENT AND AGREE TO BE BOUND THEREBY:
GRANTOR:
ICG SERVICES, INC., a Delaware corporation
By /s/ H. Don Teague
----------------------------------
Its Executive Vice President
----------------------------
GRANTEE:
ICG 161, L.P., a Delaware limited partnership
By ICG CORPORATE HEADQUARTERS, L.L.C., a Colorado
limited liability company, its general partner
By ICG SERVICES, INC., a Delaware corporation,
its manager
By /s/ H. Don Teague
----------------------------------
Its Executive Vice President
---------------------------
LENDER:
TRINET REALTY CAPITAL, INC., a Maryland corporation
By
----------------------------------
Its
---------------------------
7
<PAGE>
STATE OF Colorado )
) ss.
CITY AND COUNTY OF Denver )
The foregoing instrument was acknowledged before me this 13th day of May,
1999, by H. Don Teague as Executive Vice President of ICG SERVICES, INC., a
Delaware corporation.
My commission expires: 1/3/2000
Witness my hand and official seal.
/s/ Elizabeth G. Gashins
-------------------------
Notary Public
STATE OF Colorado )
) ss.
CITY AND COUNTY OF Denver )
The foregoing instrument was acknowledged before me this 13th day of May,
1999, by H. Don Teague as Executive Vice President of ICG Services, Inc., the
general partner of ICG 161, L.P., a Delaware limited partnership.
My commission expires: 1/3/2000
Witness my hand and official seal.
/s/ Elizabeth G. Gashins
-------------------------
Notary Public
<PAGE>
(T) Counterparts. This Agreement may be executed by counterpart signature
pages, and it shall not be necessary that the signatures of all parties be
contained on any one counterpart. Each counterpart shall be deemed an original,
but all of them together shall constitute one and the same instrument
Executed the date first written above.
THE UNDERSIGNED ACKNOWLEDGE A THOROUGH UNDERSTANDING OF THE TERMS OF THIS
AGREEMENT AND AGREE TO BE BOUND THEREBY:
GRANTOR:
ICG SERVICES, INC., a Delaware corporation
By
----------------------------------
Its
----------------------------
GRANTEE:
ICG 161, L.P., a Delaware limited partnership
By ICG CORPORATE HEADQUARTERS, L.L.C., a Colorado
limited liability company, its general partner
By ICG SERVICES, INC., a Delaware corporation,
its manager
By
----------------------------------
Its
---------------------------
LENDER:
TRINET REALTY CAPITAL, INC., a Maryland corporation
By /s/ Kevin E. Deeble
----------------------------------
Its Vice President
---------------------------
7
<PAGE>
STATE OF California )
) ss.
COUNTY OF San Francisco )
The foregoing instrument was acknowledged before me this 12th day of
May, 1999, by Kevin E. Deeble as Vice President of TRINET REALTY
CAPITAL, INC., a Maryland corporation.
My commission expires: November 7, 2002
Witness my hand and official seal.
Mary Sainsbury
--------------------------
Notary Public
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
All that certain real property in the County of Arapahoe, State of
Colorado, described as follows:
LOT 1, INVERNESS SUBDIVISION FILING NO. 22, COUNTY OF ARAPAHOE, STATE OF
COLORADO
EXECUTION COPY
$200,000,000
CREDIT AGREEMENT
Dated as of August 12, 1999
Among
ICG EQUIPMENT, INC.
ICG NETAHEAD, INC.
as Borrowers
and
ICG SERVICES, INC.
as Parent
THE INITIAL LENDERS AND THE INITIAL ISSUING BANK
as Initial Lenders and Initial Issuing Bank
and
ROYAL BANK OF CANADA
as Administrative Agent and Collateral Agent
and
MORGAN STANLEY SENIOR FUNDING, INC.
as Sole Book-Runner and Lead Arranger
and
BANK OF AMERICA, N.A.
and
BARCLAYS BANK PLC
as Co-Documentation Agents
<PAGE>
T A B L E O F C O N T E N T S
Section Page
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.01. Certain Defined Terms...................................................1
1.02. Computation of Time Periods; Other Definitional Provisions.............28
1.03. Accounting Terms.......................................................28
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
2.01. The Advances and the Letters of Credit.................................29
2.02. Making the Advances....................................................30
2.03. Issuance of and Drawings and Reimbursement Under Letters of Credit.....32
2.04. Repayment of Advances..................................................33
2.05. Termination or Reduction of the Commitments............................35
2.06. Prepayments............................................................36
2.07. Interest...............................................................38
2.08. Fees...................................................................38
2.09. Conversion of Advances.................................................39
2.10. Increased Costs, Etc...................................................40
2.11. Payments and Computations..............................................41
2.12. Taxes..................................................................43
2.13. Sharing of Payments, Etc...............................................45
2.14. Use of Proceeds........................................................45
2.15. Defaulting Lenders.....................................................46
ARTICLE III
CONDITIONS OF LENDING AND
ISSUANCES OF LETTERS OF CREDIT
3.01. Conditions Precedent to Initial Extension of Credit....................48
3.02. Conditions Precedent to Each Borrowing and Issuance and Renewal........54
3.03. Determinations Under Section 3.01......................................55
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01. Representations and Warranties of the Borrower.........................55
<PAGE>
Section Page
ARTICLE V
COVENANTS OF THE LOAN PARTIES
5.01. Affirmative Covenants..................................................61
5.02. Negative Covenants.....................................................66
5.03. Reporting Requirements.................................................72
5.04. Financial Covenants....................................................76
ARTICLE VI
EVENTS OF DEFAULT
6.01. Events of Default......................................................79
6.02. Actions in Respect of the Letters of Credit upon Default...............85
ARTICLE VII
PARENT GUARANTY
7.01. Guaranty...............................................................86
7.02. Guaranty Absolute......................................................86
7.03. Waiver.................................................................87
7.04. Subrogation............................................................87
ARTICLE VIII
THE AGENTS
8.01. Authorization and Action...............................................88
8.02. Agents' Reliance, Etc..................................................88
8.03. Agents and Affiliates..................................................88
8.04. Lender Party Credit Decision...........................................89
8.05. Indemnification........................................................89
8.06. Successor Agents.......................................................90
ARTICLE IX
MISCELLANEOUS
9.01. Amendments, Etc........................................................91
9.02. Notices, Etc...........................................................91
9.03. No Waiver; Remedies....................................................92
ii
<PAGE>
Section Page
9.04. Costs and Expenses.....................................................92
9.05. Right of Set-off.......................................................93
9.06. Binding Effect.........................................................94
9.07. Assignments and Participations.........................................94
9.08. Execution in Counterparts..............................................97
9.09. No Liability of the Issuing Bank.......................................97
9.10. Confidentiality........................................................98
9.11. Release of Collateral..................................................98
9.12. Jurisdiction, Etc......................................................98
9.13. Governing Law..........................................................98
9.14. Waiver of Jury Trial...................................................99
SCHEDULES
Schedule I - Commitments and Applicable Lending Offices
Schedule II - Subsidiary Guarantors
Schedule 4.01(a) - Equity Investors
Schedule 4.01(b) - Subsidiaries
Schedule 4.01(d) - Authorizations, Approvals, Actions, Notices and Filings
Schedule 4,01(q) - Tax Matters
Schedule 4.01(s) - Existing Debt
Schedule 4.01(t) - Liens
Schedule 4.01(u) - Owned Real Property
Schedule 4.01(v) - Leased Real Property
Schedule 4.01(w) - Investments
Schedule 4.01(x) - Intellectual Property
Schedule 4.01(y) - Material Contracts
EXHIBITS
Exhibit A-1 - Form of Tranche A Term Note
Exhibit A-2 - Form of Tranche B Term Note
Exhibit A-3 - Form of Working Capital Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Security Agreement
Exhibit E - Form of Subsidiary Guaranty
Exhibit F - Form of Solvency Certificate
Exhibit G - Form of Opinion of Counsel to the Loan Parties
Exhibit H - Form of Opinion of Local Counsel
Exhibit I - Form of Borrowing Base Certificate
iii
<PAGE>
EXECUTION COPY
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of August 12, 1999, among ICG Equipment, Inc., a
Colorado corporation ("ICG Equipment"), ICG NetAhead, Inc., a Delaware
corporation ("ICG NetAhead" and, together with ICG Equipment, the "Borrowers"),
ICG Services, Inc., a Delaware corporation (the "Parent"), the banks, financial
institutions and other institutional lenders listed on the signature pages
hereof as the Initial Lenders (the "Initial Lenders") and the bank listed on the
signature pages hereof as the Initial Issuing Bank (the "Initial Issuing Bank"
and, together with the Initial Lenders, the "Initial Lender Parties"), Morgan
Stanley Senior Funding, Inc. ("Morgan Stanley"), as sole book-runner and lead
arranger (the "Lead Arranger"), Royal Bank of Canada, as collateral agent
(together with any successor collateral agent appointed pursuant to Article VII,
the "Collateral Agent") and as administrative agent (together with any successor
administrative agent appointed pursuant to Article VII, the "Administrative
Agent") for the Lender Parties (as hereinafter defined)) and Bank of America,
N.A. and Barclays Bank Plc, as co-documentation agents (the "Co-Documentation
Agents" and, together with the Lead Arranger and the Collateral Agent, the
"Agents").
PRELIMINARY STATEMENTS:
(1) Each Borrower has requested that the Lenders make Advances (as
hereinafter defined) to such Borrower on the terms and conditions set forth
herein.
(2) The Lenders are willing to make Advances to each Borrower, on the terms
and subject to the conditions set forth herein.
(3) Each Borrower wishes to enter into the transactions contemplated hereby
for significant commercial purposes associated with its ongoing operations
(including, without limitation, the Internet Service Business and the
Telecommunications Business) (each, as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Administrative Agent" has the meaning specified in the recital of
parties to this Agreement.
<PAGE>
"Administrative Agent's Account" means the account of the
Administrative Agent as the Administrative Agent shall specify in writing
to the Lender Parties.
"Advance" means a Tranche A Term Advance, a Tranche B Term Advance, a
Working Capital Advance or a Letter of Credit Advance.
"Affiliate" means, as to any Person, any other Person that, directly
or indirectly, controls, is controlled by or is under common control with
such Person or is a director or officer of such Person. For purposes of
this definition, the term "control" (including the terms "controlling",
"controlled by" and "under common control with") of a Person means the
possession, direct or indirect, of the power to vote 10% or more of the
Voting Interests of such Person or to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
Voting Interests, by contract or otherwise.
"Agents" has the meaning specified in the recital of parties to this
Agreement.
"Agreement Value" means, for each Hedge Agreement, on any date of
determination, an amount determined by the Administrative Agent equal to:
(a) in the case of a Hedge Agreement documented pursuant to the Master
Agreement (Multicurrency-Cross Border) published by the International Swap
and Derivatives Association, Inc. (the "Master Agreement"), the amount, if
any, that would be payable by any Loan Party or any of its Subsidiaries to
its counterparty to such Hedge Agreement, as if (i) such Hedge Agreement
was being terminated early on such date of determination, (ii) such Loan
Party or Subsidiary was the sole "Affected Party", and (iii) the
Administrative Agent was the sole party determining such payment amount
(with the Administrative Agent making such determination pursuant to the
provisions of the form of Master Agreement); or (b) in the case of a Hedge
Agreement traded on an exchange, the mark-to-market value of such Hedge
Agreement, which will be the unrealized loss on such Hedge Agreement to the
Loan Party or Subsidiary of a Loan Party party to such Hedge Agreement
determined by the Administrative Agent based on the settlement price of
such Hedge Agreement on such date of determination, or (c) in all other
cases, the mark-to-market value of such Hedge Agreement, which will be the
unrealized loss on such Hedge Agreement to the Loan Party or Subsidiary of
a Loan Party party to such Hedge Agreement determined by the Administrative
Agent as the amount, if any, by which (i) the present value of the future
cash flows to be paid by such Loan Party or Subsidiary exceeds (ii) the
present value of the future cash flows to be received by such Loan Party or
Subsidiary pursuant to such Hedge Agreement; capitalized terms used and not
otherwise defined in this definition shall have the respective meanings set
forth in the above described Master Agreement.
"Applicable Lending Office" means, with respect to each Lender Party,
such Lender Party's Domestic Lending Office in the case of a Base Rate
Advance and such Lender Party's Eurodollar Lending Office in the case of a
Eurodollar Rate Advance.
"Applicable Margin" means, at any time, (a) in respect of the Tranche
A Term Facility and the Working Capital Facility, (i) for the first six
calendar months following the Effective Date, 3.125% in the case of
Eurodollar Rate Advances, and 2.125% in the case of Base Rate Advances, and
(ii) thereafter, a
2
<PAGE>
percentage per annum determined by reference to the ICG Total Leverage
Ratio as set forth below and (b) in respect of the Tranche B Term Facility,
3.500% in the case of Eurodollar Rate Advances, and 2.500% in the case of
Base Rate Advances.
ICG Total Leverage Ratio Base Rate Advances Eurodollar Rate Advances
> 10:1 2.125% 3.125%
< 10:1, and > 7.5:1 1.750% 2.750%
-
< 7.5:1, and > 5.0:1 1.500% 2.500%
- -
< 5.0:1 1.250% 2.250%
The Applicable Margin for each Base Rate Advance shall be determined by
reference to the ICG Total Leverage Ratio in effect from time to time and
the Applicable Margin for each Eurodollar Rate Advance shall be determined
by reference to the ratio in effect on the first day of each Interest
Period for such Advance; provided, however, that no change in the
Applicable Margin shall be effective until three Business Days after the
date on which the Administrative Agent receives the financial statements
required to be delivered pursuant to Section 5.03(b) or (c), as the case
may be, and a certificate of the Chief Financial Officer of each Borrower
demonstrating the ICG Total Leverage Ratio.
"Appropriate Borrower" means (a) with respect to any Borrowing, the
Borrower named in the Notice of Borrowing pursuant to Section 2.02(a)(i)
for such Advance; and (b) with respect to any Letter of Credit, the
Borrower named in the Notice of Issuance pursuant to Section 2.03(a) for
such Letter of Credit.
"Appropriate Borrower's Account" means (a) with respect to ICG
Equipment, the account of ICG Equipment as ICG Equipment shall specify in
writing to the Administrative Agent and (b) with respect to ICG NetAhead,
the account of ICG NetAhead as ICG NetAhead shall specify in writing to the
Administrative Agent.
"Appropriate Lender" means, at any time, with respect to (a) any of
the Tranche A Term Facility, Tranche B Term Facility and Working Capital
Facility, a Lender that has a Commitment with respect to such Facility at
such time, and (b) the Letter of Credit Facility, (i) the Issuing Bank and
(ii) if the other Working Capital Lenders have made Letter of Credit
Advances pursuant to Section 2.03(c) that are outstanding at such time,
each such other Working Capital Lender.
"Approved Fund" means, with respect to any Lender that is a fund that
invests in bank loans, any other fund that invests in bank loans and is
advised or managed by the same investment advisor as such Lender or by an
Affiliate of such investment advisor.
3
<PAGE>
"Assignment and Acceptance" means an assignment and acceptance entered
into by a Lender Party and an Eligible Assignee, and accepted by the
Administrative Agent, in accordance with Section 9.07 and in substantially
the form of Exhibit C hereto.
"Available Amount" of any Letter of Credit means, at any time, the
maximum amount available to be drawn under such Letter of Credit at such
time (assuming compliance at such time with all conditions to drawing).
"Base Rate" means a fluctuating interest rate per annum in effect from
time to time, which rate per annum shall at all times be equal to the
higher of:
(a) the rate of interest announced publicly by Royal Bank of
Canada in New York, New York, from time to time, as its base or prime
rate; and
(b) 2 of 1% per annum above the Federal Funds Rate.
"Base Rate Advance" means an Advance that bears interest as provided
in Section 2.07(a)(i).
"Borrowers" has the meaning specified in the recital of parties to
this Agreement.
"Borrowing" means a Tranche A Term Borrowing, a Tranche B Term
Borrowing or a Working Capital Borrowing.
"Borrowing Base Certificate" means a certificate in substantially the
form of Exhibit I hereto, duly certified by the Chief Financial Officer of
a Borrower.
"Borrowing Base Deficiency" means, at any time, the failure of (a) the
sum of the Loan Values of the Eligible Collateral at such time to equal or
exceed the (b) sum of the aggregate principal amount of the Advances
outstanding at such time plus the aggregate Available Amount under all
Letters of Credit outstanding at such time.
"Business Day" means a day of the year on which banks are not required
or authorized by law to close in New York City and, if the applicable
Business Day relates to any Eurodollar Rate Advances, on which dealings are
carried on in the London interbank market.
"Capital Expenditures" means, for any Person for any period, the sum
of, without duplication, (a) all cash expenditures made, directly or
indirectly, by such Person or any of its Subsidiaries during such period
for equipment, fixed assets, real property, improvements or other assets,
or for replacements or substitutions therefor or additions thereto and
other tangible and intangible assets that may be capitalized under GAAP,
that have been or should be, in accordance with GAAP, reflected as
additions to property, plant or equipment on a Consolidated balance sheet
of such Person or have a useful life of more than one year plus, without
duplication, (b) the aggregate principal amount of all Debt (including
Obligations under Capitalized Leases) assumed or incurred in connection
with any such expenditures. For purposes of this definition, the purchase
4
<PAGE>
price of equipment that is purchased simultaneously with the trade-in of
existing equipment or with insurance proceeds shall be included in Capital
Expenditures only to the extent of the gross amount of such purchase price
less the credit granted by the seller of such equipment for the equipment
being traded in at such time or the amount of such proceeds, as the case
may be.
"Capitalized Leases" means all leases that have been or should be, in
accordance with GAAP, recorded as capitalized leases.
"Cash Collateral Account" has the meaning s pecified in the Security
Agreement.
"Cash Equivalents" means any of the following, to the extent owned by
each Borrower or any of its respective Subsidiaries free and clear of all
Liens other than Liens created under the Collateral Documents and having a
maturity of not greater than 365 days from the date of the acquisition
thereof: (a) readily marketable direct obligations of the Government of the
United States or any agency or instrumentality thereof or obligations
unconditionally guaranteed by the full faith and credit of the Government
of the United States, (b) insured certificates of deposit of or time
deposits with any commercial bank that is a Lender Party or a member of the
Federal Reserve System, issues (or the parent of which issues) commercial
paper rated as described in clause (c) below, is organized under the laws
of the United States or any State thereof and has combined capital and
surplus of at least $1 billion or (c) commercial paper in an aggregate
amount of no more than $25,000,000 per issuer outstanding at any time,
issued by any corporation organized under the laws of any State of the
United States and rated at least "Prime-1" (or the then equivalent grade)
by Moody's Investors Service, Inc. or "A-1" (or the then equivalent grade)
by Standard & Poor's, a division of The McGraw-Hill Companies, Inc.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended from time to time.
"CERCLIS" means the Comprehensive Environmental Response, Compensation
and Liability Information System maintained by the U.S. Environmental
Protection Agency.
"Change of Control" means the occurrence of any of the following: (a)
any Person or two or more Persons acting in concert shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 of the Securities
and Exchange Commission under the Securities Exchange Act of 1934),
directly or indirectly, of Voting Interests of ICG (or other securities
convertible into such Voting Interests) representing 35% or more of the
combined voting power of all Voting Interests of ICG; or (b) (i) any Person
or two or more Persons acting in concert shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934), directly or
indirectly, of Voting Interests of ICG (or other securities convertible
into such Voting Interests) representing 20% or more of the combined voting
power of all Voting Interests of ICG and (ii) during any period of up to 24
consecutive months, commencing before or after the date of this Agreement,
individuals who at the beginning of such 24-month period were directors of
ICG shall cease for any reason to constitute a majority of the board of
directors of ICG, or (c) ICG shall cease to own directly or indirectly 100%
of the Equity Interests of the Parent; or (d) the Parent shall cease to own
directly or indirectly 100% of the Equity Interests of the Borrowers.
5
<PAGE>
"Co-Documentation Agents" has the meaning specified in the recital of
parties to this Agreement.
"Collateral" means all "Collateral" referred to in the Collateral
Documents and all other property that is or is intended to be subject to
any Lien in favor of the Collateral Agent for the benefit of the Secured
Parties.
"Collateral Agent" has the meaning specified in the recital of parties
to this Agreement.
"Collateral Documents" means Mortgages, the Security Agreement and any
other agreement that creates or purports to create a Lien in favor of the
Collateral Agent for the benefit of the Secured Parties.
"Commitment" means a Tranche A Term Commitment, a Tranche B Term
Commitment, a Working Capital Commitment or a Letter of Credit Commitment.
"Commitment Letter" means the commitment letter, dated June 25, 1999,
between the Parent and Morgan Stanley.
"Confidential Information" means information that any Loan Party
furnishes to any Agent or any Lender Party on a confidential basis, but
does not include any such information that is or becomes generally
available to the public other than as a result of a breach by such Agent or
any Lender Party of its obligations hereunder or that is or becomes
available to such Agent or such Lender Party from a source other than the
Loan Parties that is not, to the best of such Agent's or such Lender
Party's knowledge, acting in violation of a confidentiality agreement with
a Loan Party.
"Consolidated" refers to the consolidation of accounts in accordance
with GAAP.
"Contingent Obligation" means, with respect to any Person, any
Obligation or arrangement of such Person to guarantee or intended to
guarantee any Debt, Capitalized Leases, dividends or other payment
Obligations ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, (a) the direct or indirect guarantee, endorsement (other than
for collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of the
Obligation of a primary obligor, (b) the Obligation to make take-or-pay or
similar payments, if required, regardless of nonperformance by any other
party or parties to an agreement or (c) any Obligation of such Person,
whether or not contingent, (i) to purchase any such primary obligation or
any property constituting direct or indirect security therefor, (ii) to
advance or supply funds (A) for the purchase or payment of any such primary
obligation or (B) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, assets, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation or (iv) otherwise to assure or hold harmless the holder
of such primary obligation against loss in respect thereof. The amount of
6
<PAGE>
any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which
such Contingent Obligation is made (or, if less, the maximum amount of such
primary obligation for which such Person may be liable pursuant to the
terms of the instrument evidencing such Contingent Obligation) or, if not
stated or determinable, the maximum reasonably anticipated liability in
respect thereof (assuming such Person is required to perform thereunder),
as determined by such Person in good faith.
"CFC" means any Person that is a "controlled foreign corporation"
pursuant to Section 957 of the Internal Revenue Code.
"Conversion", "Convert" and "Converted" each refer to a conversion of
Advances of one Type into Advances of the other Type pursuant to Section
2.09 or 2.10.
"Current Assets" of any Person means all assets of such Person that
would, in accordance with GAAP, be classified as current assets of a
company conducting a business the same as or similar to that of such
Person, after deducting adequate reserves in each case in which a reserve
is proper in accordance with GAAP.
"Current Liabilities" of any Person means (a) all Debt of such Person
that by its terms is payable on demand or matures within one year after the
date of determination (excluding any Debt renewable or extendible, at the
option of such Person, to a date more than one year from such date or
arising under a revolving credit or similar agreement that obligates the
lender or lenders to extend credit during a period of more than one year
from such date), (b) all amounts of Funded Debt of such Person required to
be paid or prepaid within one year after such date and (c) all other items
(including taxes accrued as estimated) that in accordance with GAAP would
be classified as current liabilities of such Person.
"Debt" of any Person at any date of determination means, without
duplication, (a) all indebtedness of such Person for borrowed money, (b)
all Obligations of such Person for the deferred and unpaid purchase price
of property or services which is due more than 6 months after the date of
placing such property in service or taking delivery of title thereto or the
completion of such services, (other than trade payables and accrued current
liabilities incurred in the ordinary course of such Person's business), (c)
all Obligations of such Person evidenced by notes, bonds, debentures or
other similar instruments, (d) all Obligations of such Person created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), (e) all
Obligations of such Person as lessee under Capitalized Leases, (f) all
Obligations of such Person under acceptance, letter of credit or similar
facilities, (g) for the purposes of Sections 5.02(b) and 6.01(e) only, all
monetary Obligations of such Person to purchase, redeem, retire, defease or
otherwise make any payment in respect of any Equity Interests in such
Person or any other Person or any warrants, rights or options to acquire
such capital stock (in each case, pursuant to the terms of such Equity
Interests or capital stock) if the failure to pay such monetary obligations
allows the holders of such Equity Interests or capital stock to exercise
remedies or additional right against such Person, valued, in the case of
Redeemable Preferred Interests, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends, (h)
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all Obligations of such Person in respect of Hedge Agreements, valued at
the Agreement Value thereof, (i) all Contingent Obligations of such Person
and (j) all indebtedness and other payment Obligations referred to in
clauses (a) through (i) above of another Person secured by (or for which
the holder of such Debt has an existing right, contingent or otherwise, to
be secured by) any Lien on property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person
has not assumed or become liable for the payment of such indebtedness or
other payment Obligations.
"Debt for Borrowed Money" of any Person means all items that, in
accordance with GAAP, would be classified as indebtedness on a Consolidated
balance sheet of such Person.
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be given
or time elapse or both.
"Defaulted Advance" means, with respect to any Lender Party at any
time, the portion of any Advance required to be made by such Lender Party
to the Appropriate Borrower pursuant to Section 2.01 or 2.02 at or prior to
such time that has not been made by such Lender Party or by the
Administrative Agent for the account of such Lender Party pursuant to
Section 2.02(e) as of such time. In the event that a portion of a Defaulted
Advance shall be deemed made pursuant to Section 2.15(a), the remaining
portion of such Defaulted Advance shall be considered a Defaulted Advance
originally required to be made pursuant to Section 2.01 on the same date as
the Defaulted Advance so deemed made in part.
"Defaulted Amount" means, with respect to any Lender Party at any
time, any amount required to be paid by such Lender Party to any Agent or
any other Lender Party hereunder or under any other Loan Document at or
prior to such time that has not been so paid as of such time, including,
without limitation, any amount required to be paid by such Lender Party to
(a) the Issuing Bank pursuant to Section 2.03(c) to purchase a portion of a
Letter of Credit Advance made by such Issuing Bank, (b) the Administrative
Agent pursuant to Section 2.02(e) to reimburse the Administrative Agent for
the amount of any Advance made by the Administrative Agent for the account
of such Lender Party, (c) any other Lender Party pursuant to Section 2.13
to purchase any participation in Advances owing to such other Lender Party
and (d) any Agent or the Issuing Bank pursuant to Section 8.05 to reimburse
such Agent or the Issuing Bank for such Lender Party's ratable share of any
amount required to be paid by the Lender Parties to such Agent or the
Issuing Bank as provided therein. In the event that a portion of a
Defaulted Amount shall be deemed paid pursuant to Section 2.15(b), the
remaining portion of such Defaulted Amount shall be considered a Defaulted
Amount originally required to be paid hereunder or under any other Loan
Document on the same date as the Defaulted Amount so deemed paid in part.
"Default Termination Notice" has the meaning specified in Section
2.01(d).
"Defaulting Lender" means, at any time, any Lender Party that, at such
time, (a) owes a Defaulted Advance or a Defaulted Amount or (b) shall take
any action or be the subject of any action or proceeding of a type
described in Section 6.01(f).
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"Domestic Lending Office" means, with respect to any Lender Party, the
office of such Lender Party specified as its "Domestic Lending Office"
opposite its name on Schedule I hereto or in the Assignment and Acceptance
pursuant to which it became a Lender Party, as the case may be, or such
other office of such Lender Party as such Lender Party may from time to
time specify to each Borrower and the Administrative Agent.
"EBITDA" means, with respect to any Person for any period, the sum of
the following, determined on a Consolidated basis without duplication, in
accordance with GAAP: (a) net income (or net loss) of such Person and its
Subsidiaries for such period plus (b) the sum of the following (in each
case, to the extent deducted in determining net income) (i) income and
franchise tax expenses of such Person and its Subsidiaries, (ii) interest
expense of such Person and its Subsidiaries, (iii) amortization,
depreciation and other non-cash charges and (iv) any non-recurring
extraordinary losses, less (c) interest income of such Person and its
Subsidiaries and any non-recurring extraordinary gains.
"Effective Date" means the first date on which the conditions set
forth in Article III shall have satisfied.
"Eligible Assignee" means any commercial bank or financial institution
(including, without limitation, any fund that regularly invests in loans
similar to the Advances) as approved by the Administrative Agent and (so
long as no Event of Default has occurred and is continuing at the time of
such assignment) by each Borrower (such approvals not to be unreasonably
withheld); provided, however, that neither any Loan Party nor any Affiliate
of a Loan Party shall qualify as an Eligible Assignee under this
definition.
"Eligible Collateral" means, collectively, all property, plant and
equipment of the Borrowers and their respective Subsidiaries pledged under
the Collateral Documents and in which the Collateral Agent has a perfected
security interest that (i) is not subject to any Lien that is prior to the
security interests created under the Loan Documents and (ii) is related to
the Internet Service Business or the Telecommunications Business.
"Environmental Action" means any action, suit, demand, demand letter,
claim, notice of non-compliance or violation, notice of liability or
potential liability, investigation, proceeding, consent order or consent
agreement relating in any way to any Environmental Law, any Environmental
Permit or Hazardous Material or arising from alleged injury or threat to
health, safety or the environment, including, without limitation, (a) by
any governmental or regulatory authority for enforcement, cleanup, removal,
response, remedial or other actions or damages and (b) by any governmental
or regulatory authority or third party for damages, contribution,
indemnification, cost recovery, compensation or injunctive relief.
"Environmental Law" means any Federal, state, local or foreign
statute, law, ordinance, rule, regulation, code, order, writ, judgment,
injunction, decree or judicial or agency interpretation, policy or guidance
relating to pollution or protection of the environment, health, safety or
natural resources, including, without limitation, those relating to the
use, handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Materials.
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"Environmental Permit" means any permit, approval, identification
number, license or other authorization required under any Environmental
Law.
"Equipment" means all Equipment referred to in Section 1(a) of the
Security Agreement.
"Equity Interests" means, with respect to any Person, shares of
capital stock of (or other ownership or profit interests in) such Person,
warrants, options or other rights for the purchase or other acquisition
from such Person of shares of capital stock of (or other ownership or
profit interests in) such Person, securities convertible into or
exchangeable for shares of capital stock of (or other ownership or profit
interests in) such Person or warrants, rights or options for the purchase
or other acquisition from such Person of such shares (or such other
interests), and other ownership or profit interests in such Person
(including, without limitation, partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares,
warrants, options, rights or other interests are authorized or otherwise
existing on any date of determination.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"ERISA Affiliate" means any Person that for purposes of Title IV of
ERISA is a member of the controlled group of any Loan Party, or under
common control with any Loan Party, within the meaning of Section 414 of
the Internal Revenue Code.
"ERISA Event" means (a)(i) the occurrence of a reportable event,
within the meaning of Section 4043 of ERISA, with respect to any Plan
unless the 30-day notice requirement with respect to such event has been
waived by the PBGC or (ii) the requirements of Section 4043(b) of ERISA
apply with respect to a contributing sponsor, as defined in Section
4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9),
(10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected
to occur with respect to such Plan within the following 30 days; (b) the
application for a minimum funding waiver with respect to a Plan; (c) the
provision by the administrator of any Plan of a notice of intent to
terminate such Plan, pursuant to Section 4041(a)(2) of ERISA (including any
such notice with respect to a plan amendment referred to in Section 4041(e)
of ERISA); (d) the cessation of operations at a facility of any Loan Party
or any ERISA Affiliate in the circumstances described in Section 4062(e) of
ERISA; (e) the withdrawal by any Loan Party or any ERISA Affiliate from a
Multiple Employer Plan during a plan year for which it was a substantial
employer, as defined in Section 4001(a)(2) of ERISA; (f) the conditions for
imposition of a lien under Section 302(f) of ERISA shall have been met with
respect to any Plan; (g) the adoption of an amendment to a Plan requiring
the provision of security to such Plan pursuant to Section 307 of ERISA; or
(h) the institution by the PBGC of proceedings to terminate a Plan pursuant
to Section 4042 of ERISA, or the occurrence of any event or condition
described in Section 4042 of ERISA that constitutes grounds for the
termination of, or the appointment of a trustee to administer, such Plan.
"Eurocurrency Liabilities" has the meaning specified in Regulation D
of the Board of Governors of the Federal Reserve System, as in effect from
time to time.
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"Eurodollar Lending Office" means, with respect to any Lender Party,
the office of such Lender Party specified as its "Eurodollar Lending
Office" opposite its name on Schedule I hereto or in the Assignment and
Acceptance pursuant to which it became a Lender Party (or, if no such
office is specified, its Domestic Lending Office), or such other office of
such Lender Party as such Lender Party may from time to time specify to
each Borrower and the Administrative Agent.
"Eurodollar Rate" means, for any Interest Period for all Eurodollar
Rate Advances comprising part of the same Borrowing, an interest rate per
annum equal to the rate per annum obtained by dividing (a) the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing
on Telerate Page 3750 (or any successor page) as the London interbank
offered rate for deposits in U.S. Dollars at 11:00 A.M. (London time) two
Business Days before the first day of such Interest Period for a period
equal to such Interest Period (provided that, if for any reason such rate
is not available, the term "Eurodollar Rate" shall mean, for any Interest
Period for all Eurodollar Rate Advances comprising part of the same
Borrowing, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in U.S. Dollars at approximately 11:00
A.M. (London time) two Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period; provided,
however, if more than one rate is specified on Reuters Screen LIBO Page,
the applicable rate shall be the arithmetic mean of all such rates) by (b)
a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for
such Interest Period.
"Eurodollar Rate Advance" means an Advance that bears interest as
provided in Section 2.07(a)(ii).
"Eurodollar Rate Reserve Percentage" for any Interest Period for all
Eurodollar Rate Advances comprising part of the same Borrowing means the
reserve percentage applicable two Business Days before the first day of
such Interest Period under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation,
any emergency, supplemental or other marginal reserve requirement) for a
member bank of the Federal Reserve System in New York City with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities
(or with respect to any other category of liabilities that includes
deposits by reference to which the interest rate on Eurodollar Rate
Advances is determined) having a term equal to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
"Excess Amount" has the meaning specified in Section 6.01(q).
"Excess Cash Flow" means, for any period,
(a) the sum of:
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(i) Consolidated net income (or loss) of the Borrowers and
their Subsidiaries for such period plus
(ii) the aggregate amount of all non-cash charges deducted
in arriving at such Consolidated net income (or loss) plus
(iii) if there was a net increase in Consolidated Current
Liabilities of the Borrower and their Subsidiaries during such
period, the amount of such net increase plus
(iv) if there was a net decrease in Consolidated Current
Assets (excluding cash and Cash Equivalents) of the Borrowers and
their Subsidiaries during such period, the amount of such net
decrease less
(b) the sum of:
(i) the aggregate amount of all non-cash credits included in
arriving at such Consolidated net income (or loss) plus
(ii) if there was a net decrease in Consolidated Current
Liabilities of the Borrowers and their Subsidiaries during such
period, the amount of such net decrease plus
(iii) if there was a net increase in Consolidated Current
Assets (excluding cash and Cash Equivalents) of the Borrowers and
their Subsidiaries during such period, the amount of such net
increase plus
(iv) the aggregate amount of Capital Expenditures of the
Borrowers and their respective Subsidiaries paid in cash during
such period to the extent permitted by this Agreement plus
(v) the aggregate amount of all regularly scheduled
principal payments of Funded Debt made by the Borrowers and their
respective Subsidiaries during such period plus
(vi) cash dividend payments made to the Parent by any Loan
Party to the extent such cash is applied by the Parent to pay any
amount in respect of Debt of the Parent permitted by the Loan
Documents plus
(vii) the aggregate principal amount of all optional
prepayments of Term Advances made during such period pursuant to
Section 2.06(a) plus.
(viii) solely to the extent not deducted in determining
Consolidated net income (or loss) of the Borrowers and their
Subsidiaries for such period and without duplication of the items
contained in clauses (i) through (vii) immediately above, cash
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tax payments to governmental authorities or made pursuant to the
Tax Sharing Agreement.
"Excluded Receivables" means (i) accounts receivable reflecting
amounts due for reciprocal compensation for traffic to the internet,
and (ii) accounts receivable which are more than 120 days past the
original invoice date.
"Existing Debt" means Debt of each Loan Party and its
Subsidiaries outstanding immediately before giving effect to the
consummation of the Transaction.
"Extraordinary Receipt" means any cash received by or paid to or
for the account of any Person not in the ordinary course of business,
including, without limitation, tax refunds (excluding amounts applied
to pay taxes within 18 months of receipt thereof), pension plan
reversions, proceeds of insurance (including, without limitation, any
key man life insurance but excluding proceeds of business interruption
insurance to the extent such proceeds constitute compensation for lost
earnings), condemnation awards (and payments in lieu thereof),
indemnity payments and any purchase price adjustment received in
connection with any purchase agreement; provided, however, that an
Extraordinary Receipt shall not include cash receipts received from
proceeds of insurance, condemnation awards (or payments in lieu
thereof) or indemnity payments to the extent that such proceeds,
awards or payments (A) in respect of loss or damage to equipment,
fixed assets or real property are applied (or in respect of which
expenditures were previously incurred) to replace or repair the
equipment, fixed assets or real property in respect of which such
proceeds were received in accordance with the terms of the Loan
Documents, so long as such application is made within six months after
the occurrence of such damage or loss or (B) are received by any
Person in respect of any third party claim against such Person and
applied to pay (or to reimburse such Person for its prior payment of)
such claim and the costs and expenses of such Person with respect
thereto.
"Facility" means the Tranche A Facility, the Tranche B Facility,
the Working Capital Facility or the Letter of Credit Facility
"FCC" means the Federal Communications Commission or any
successor commission or agency of the United States of America having
jurisdiction over each Borrower or any System.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is
a Business Day, the average of the quotations for such day for such
transactions received by the Administrative Agent from three Federal
funds brokers of recognized standing selected by it.
"Fee Letter" means the fee letter dated June 25, 1999 between the
Parent, the Borrowers and Morgan Stanley, as amended.
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<PAGE>
"Fiscal Year" means a fiscal year of each Borrower and its
Consolidated Subsidiaries ending on December 31 in any calendar year.
"Fixed Charge Coverage Ratio" means, at any date of
determination, the ratio of (a) EBITDA of the Parent and its
Subsidiaries to (b) the Fixed Charges, in each case, of or by the
Parent and its Subsidiaries during the two consecutive fiscal quarters
most recently ended for which financial statements are required to be
delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as
the case may be.
"Fixed Charges" means, with respect to the Parent and its
Subsidiaries, for any period, the sum of the following determined on a
consolidated basis, without duplication, in accordance with GAAP: (a)
scheduled principal payments to be made during such period and
Interest Expense during such period, in respect of Debt of the Parent
and its Subsidiaries, (b) Capital Expenditures made by the Parent and
its Subsidiaries during such period, (c) cash taxes payable by the
Parent and its Subsidiaries during such Period and (d) cash dividends
paid by the Parent and its Subsidiaries during such period.
"Funded Debt" of any Person means Debt in respect of the
Advances, in the case of each Borrower, and all other Debt of such
Person that by its terms matures more than one year after the date of
determination or matures within one year from such date but is
renewable or extendible, at the option of such Person, to a date more
than one year after such date or arises under a revolving credit or
similar agreement that obligates the lender or lenders to extend
credit during a period of more than one year after such date,
including, without limitation, all amounts of Funded Debt of such
Person required to be paid or prepaid within one year after the date
of determination.
"GAAP" has the meaning specified in Section 1.03.
"Grantors" has the meaning specified in the Security Agreement.
"Gross PP & E" means, collectively, all property, plant and
equipment of the Borrowers and their respective Subsidiaries that is
related to the Internet Service Business or the Telecommunications
Business.
"ICG 161" means ICG 161 L.P., a Delaware limited partnership.
"ICG Corporate Headquarters" means ICG Corporate Headquarters
L.L.C., a Colorado limited liability company.
"Guaranties" means the Parent Guaranty and the Subsidiary
Guaranty.
"Guarantors" means the Parent and the Subsidiary Guarantors.
"Hazardous Materials" means (a) petroleum or petroleum products,
by-products or breakdown products, radioactive materials,
asbestos-containing materials, polychlorinated biphenyls and radon gas
and (b) any other chemicals, materials or substances designated,
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<PAGE>
classified or regulated as hazardous or toxic or as a pollutant or
contaminant under any Environmental Law.
"Hedge Agreements" means interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts and other hedging
agreements.
"Hedge Bank" means any Lender Party or an Affiliate of a Lender
Party in its capacity as a party to a Secured Hedge Agreement.
"ICG" means ICG Communications, Inc, a Delaware corporation.
"ICG Equipment" has the meaning specified in the recital of
parties this Agreement.
"ICG NetAhead" has the meaning specified in the recital of
parties this Agreement.
"ICG Total Leverage Ratio" means, at any date of determination,
the ratio of (A) Total Debt of ICG and its Subsidiaries as of the end
of the most recently completed fiscal quarter to (B) the product of
(i) two times (ii) EBITDA of ICG and its Subsidiaries for such fiscal
quarter and the immediately preceding fiscal quarter.
"Indemnified Party" has the meaning specified in Section 9.04(b).
"Initial Extension of Credit" means the earlier to occur of the
initial Borrowing and the initial issuance of a Letter of Credit
hereunder.
"Initial Issuing Bank", "Initial Lender Parties" and "Initial
Lenders" each has the meaning specified in the recital of parties to
this Agreement.
"Insufficiency" means, with respect to any Plan, the amount, if
any, of its unfunded benefit liabilities, as defined in Section
4001(a)(18) of ERISA.
"Interest Coverage Ratio" means, at any time of determination in
respect of any Person, the ratio of (a) EBITDA to (b) Interest
Expense, in each case, of or by such Person during the two consecutive
fiscal quarters most recently ended for which financial statements are
required to be delivered to the Lender Parties pursuant to Section
5.03(b) or (c), as the case may be.
"Interest Expense" means, for any period in respect of any
Person, total accrued interest less accreted interest (including,
without limitation, cash interest expense attributable to Capitalized
Leases) determined on a Consolidated basis, without duplication, for
such Person and its Subsidiaries in accordance with GAAP.
"Interest Period" means, for each Eurodollar Rate Advance
comprising part of the same Borrowing, the period commencing on the
date of such Eurodollar Rate Advance or the date of the Conversion of
any Base Rate Advance into such Eurodollar Rate Advance, and ending on
the last day of the period selected by the Appropriate Borrower
pursuant to the provisions below and, thereafter, each subsequent
period commencing on the last day of the immediately preceding
Interest Period and ending on the last day of the period selected by
such Borrower pursuant to the provisions below. The duration of each
such Interest Period shall be one, two, three or six months or, until
15
<PAGE>
the Syndication Date, 7-days, as such Borrower may, upon notice
received by the Administrative Agent not later than 11:00 A.M. (New
York City time) on the third Business Day prior to the first day of
such Interest Period, select; provided, however, that:
(a) the Appropriate Borrower may not select any Interest
Period with respect to any Eurodollar Rate Advance under a
Facility that ends after any principal repayment installment date
for such Facility unless, after giving effect to such selection,
the aggregate principal amount of Base Rate Advances and of
Eurodollar Rate Advances having Interest Periods that end on or
prior to such principal repayment installment date for such
Facility shall be at least equal to the aggregate principal
amount of Advances under such Facility due and payable on or
prior to such date;
(b) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day
of such Interest Period shall be extended to occur on the next
succeeding Business Day, provided, however, that, if such
extension would cause the last day of such Interest Period to
occur in the next following calendar month, the last day of such
Interest Period shall occur on the next preceding Business Day;
(c) whenever the first day of any Interest Period occurs on
a day of an initial calendar month for which there is no
numerically corresponding day in the calendar month that succeeds
such initial calendar month by the number of months equal to the
number of months in such Interest Period, such Interest Period
shall end on the last Business Day of such succeeding calendar
month;
(d) neither of the Borrowers may select a 7-day Interest
Period on or after the Syndication Date; and
(e) subject to clause (a) above, if the Appropriate Borrower
has failed to notify the Administrative Agent with respect to the
duration of any Interest Period, the duration of such Interest
Period shall be one month.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"Internet Service Business" has the meaning specified in the Indenture
dated as of February 12, 1998 between the Parent and Norwest Bank Colorado,
National Association, as Trustee relating to the 10% Senior Discount Notes
issued by the Parent due 2008.
"Inventory" means all Inventory referred to in Section 1(b) of the
Security Agreement.
"Investment" in any Person means any loan or advance to such Person,
any purchase or other acquisition of any Equity Interests or Debt or the
assets comprising a division or business unit or a substantial part or all
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<PAGE>
of the business of such Person, any capital contribution to such Person or
any other direct or indirect investment in such Person, including, without
limitation, any acquisition by way of a merger or consolidation and any
arrangement pursuant to which the investor incurs Debt of the types
referred to in clause (i) or (j) of the definition of "Debt" in respect of
such Person.
"Issuing Bank" means the Initial Issuing Bank and any Eligible
Assignee to which the Letter of Credit Commitment hereunder has been
assigned pursuant to Section 9.07 so long as each such Eligible Assignee
expressly agrees to perform in accordance with their terms all of the
obligations that by the terms of this Agreement are required to be
performed by it as the Issuing Bank and notifies the Administrative Agent
of its Applicable Lending Office and the amount of its Letter of Credit
Commitment (which information shall be recorded by the Administrative Agent
in the Register), for so long as the Initial Issuing Bank or Eligible
Assignee, as the case may be, shall have a Letter of Credit Commitment.
"L/C Cash Collateral Account" has the meaning specified in the
Borrowers Security Agreement.
"L/C Related Documents" has the meaning specified in Section
2.04(d)(ii)(A).
"Lead Arranger" has the meaning specified in the recital of parties to
this Agreement.
"Lender Party" means any Lender or the Issuing Bank.
"Lenders" means the Initial Lenders and each Person that shall become
a Lender hereunder pursuant to Section 9.07 for so long as such Initial
Lender or Person, as the case may be, shall be a party to this Agreement.
"Letter of Credit Advance" means an advance made by the Issuing Bank
or any Working Capital Lender pursuant to Section 2.03(c).
"Letter of Credit Agreement" has the meaning specified in Section
2.03(a).
"Letter of Credit Commitment" means, with respect to the Issuing Bank,
at any time, the amount set forth opposite the Issuing Bank's name on
Schedule I hereto under the caption "Letter of Credit Commitment" or, if
the Issuing Bank has entered into an Assignment and Acceptance, set forth
for the Issuing Bank in the Register maintained by the Administrative Agent
pursuant to Section 9.07(d) as the Issuing Bank's "Letter of Credit
Commitment", as such amount may be reduced at or prior to such time
pursuant to Section 2.05.
"Letter of Credit Facility" means, at any time, an amount equal to
$25,000,000, as such amount may be reduced at or prior to such time
pursuant to Section 2.05.
"Letters of Credit" has the meaning specified in Section 2.01(d).
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"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance on
title to real property.
"Loan Documents" means (a) for purposes of this Agreement and the
Notes and any amendment, supplement or modification hereof or thereof, (i)
this Agreement, (ii) the Notes, (iii) the Guaranties, (iv) the Collateral
Documents, (v) the Fee Letter, and (vi) each Letter of Credit Agreement and
(b) for purposes of the Guaranties and the Collateral Documents and for all
other purposes other than for purposes of this Agreement and the Notes, (i)
this Agreement, (ii) the Notes, (iii) the Guaranties, (iv) the Collateral
Documents, (v) the Fee Letter, (vi) each Letter of Credit Agreement, and
(vii) each Secured Hedge Agreement.
"Loan Parties" means the Borrowers and the Guarantors (including,
without limitation, the Parent).
"Loan Value" means 70% of the gross book value of any item of Eligible
Collateral.
"Margin Stock" has the meaning specified in Regulation U.
"Material Adverse Change" means any material adverse change in the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Parent and its Subsidiaries taken as a
whole.
"Material Adverse Effect" means a material adverse effect on (a) the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Parent and its Subsidiaries taken as a
whole, (b) the rights and remedies of any Agent or any Lender Party under
any Transaction Document or (c) the ability of any Loan Party to perform
its Obligations under any Transaction Document to which it is or is to be a
party.
"Material Contract" means (i) each agreement described as a Master
Lease Agreement, and each agreement in the nature of a master lease, to
which ICG Equipment is a party as lessor, (ii) any other material lease
agreement to which ICG Equipment is a party as lessor and (iii) each other
contract to which either Borrower or any of its Subsidiaries is a party
involving aggregate consideration payable to or by such Person of
$5,000,000 or more in any year or otherwise material to the business,
condition (financial or otherwise), operations, performance, properties or
prospects of such Person.
"Morgan Stanley" has the meaning specified in the recital of parties
to this Agreement.
"Mortgages" has the meaning specified in Section 3.01(a)(v).
"Mortgage Policies" has the meaning specified in Section
3.01(a)(v)(B).
"Multiemployer Plan" means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, to which any Loan Party or any ERISA Affiliate is
making or accruing an obligation to make contributions, or has within any
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of the preceding five plan years made or accrued an obligation to make
contributions.
"Multiple Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any
Loan Party or any ERISA Affiliate and at least one Person other than the
Loan Parties and the ERISA Affiliates or (b) was so maintained and in
respect of which any Loan Party or any ERISA Affiliate could have liability
under Section 4064 or 4069 of ERISA in the event such plan has been or were
to be terminated.
"Net Cash Proceeds" means, with respect to any sale, lease, transfer
or other disposition of any asset other than in the ordinary course of
business, or any Extraordinary Receipt received by or paid to or for the
account of any Person, the aggregate amount of cash received from time to
time (whether as initial consideration or through payment or disposition of
deferred consideration) by or on behalf of such Person in connection with
such transaction after deducting therefrom only (without duplication) (a)
brokerage commissions, underwriting or placement agent fees and discounts,
legal fees, accountant's and consultant's fees, finder's fees and other
similar fees and commissions, (b) provision for the amount of taxes payable
in connection with or as a result of such transaction, (c) the amount of
any Debt secured by a Lien on such asset that, by the terms of the
agreement or instrument governing such Debt, is required to be repaid upon
such disposition, in each case to the extent, but only to the extent, that
the amounts so deducted are, at the time of receipt of such cash, actually
paid to a Person that is not an Affiliate of such Person or any Loan Party
or any Affiliate of any Loan Party and are properly attributable to such
transaction or to the asset that is the subject thereof and (d) such other
reserves as are required by GAAP; provided, however, that in the case of
taxes that are deductible under clause (b) above but for the fact that, at
the time of receipt of such cash, such taxes have not been actually paid or
are not then payable, such Loan Party or such Subsidiary may deduct an
amount (the "Reserved Amount") equal to the amount reserved in accordance
with GAAP for such Loan Party's or such Subsidiary's reasonable estimate of
such taxes, other than taxes for which such Loan Party or such Subsidiary
is indemnified, provided further, however, that, at the time such taxes are
paid, an amount equal to the amount, if any, by which the Reserved Amount
for such taxes exceeds the amount of such taxes actually paid shall
constitute "Net Cash Proceeds" of the type for which such taxes were
reserved for all purposes hereunder; provided further that "Net Cash
Proceeds " shall not include any proceeds that are reinvested in the
Internet Service Business or the Telecommunications Business of the
Borrowers and their respective Subsidiaries so long as such reinvestment is
made within 270 days after the receipt of such proceeds.
"Note" means a Tranche A Term Note, a Tranche B Term Note or a Working
Capital Note.
"Notice of Borrowing" has the meaning specified in Section 2.02(a).
"Notice of Issuance" has the meaning specified in Section 2.03(a).
"Notice of Renewal" has the meaning specified in Section 2.01 (d).
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"Notice of Termination" has the meaning specified in Section 2.01(d).
"NPL" means the National Priorities List under CERCLA.
"Obligation" means, with respect to any Person, any payment,
performance or other obligation of such Person of any kind, including,
without limitation, any liability of such Person on any claim, whether or
not the right of any creditor to payment in respect of such claim is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
disputed, undisputed, legal, equitable, secured or unsecured, and whether
or not such claim is discharged, stayed or otherwise affected by any
proceeding referred to in Section 6.01(f). Without limiting the generality
of the foregoing, the Obligations of any Loan Party under the Loan
Documents include (a) the obligation to pay principal, interest, Letter of
Credit commissions, charges, expenses, fees, attorneys' fees and
disbursements, indemnities and other amounts payable by such Loan Party
under any Loan Document and (b) the obligation of such Loan Party to
reimburse any amount in respect of any of the foregoing that any Lender
Party, in its reasonable discretion, may elect to pay or advance on behalf
of such Loan Party.
"Open Year" has the meaning specified in Section 4.01(q)(ii).
"Other Taxes" has the meaning specified in Section 2.12(b).
"Parent" has the meaning set forth in the recital of the parties
hereto.
"Parent Guaranty" means the guaranty contained in Article VII hereof.
"Parent Total Leverage Ratio" means, at any date of determination, the
ratio of (A) Total Debt of the Parent and its Subsidiaries as of the end of
the most recently completed fiscal quarter to (B) the product of (i) two
times (ii) EBITDA of the Parent and its Subsidiaries for such fiscal
quarter and the immediately preceding fiscal quarter.
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor).
"Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall
have been commenced: (i) Liens for taxes, assessments, governmental charges
or claims that are being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made; (ii) statutory and common law
Liens of landlords and carriers, warehousemen, mechanics, attorneys,
suppliers, materialmen, repairmen or other similar Liens arising in the
ordinary course of business, unexercised rights of set off, in each case
with respect to amounts not yet delinquent or that are bonded or being
contested in good faith by appropriate legal proceedings promptly
instituted and diligently conducted and for which a reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made; (iii) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security; (iv) Liens incurred or
deposits made to secure the performance of tenders, bids, leases, licenses,
statutory or regulatory obligations, bankers' acceptances, surety,
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indemnity, performance and appeal bonds, trade or government contracts,
performance and return-of-money bonds and other obligations of a similar
nature incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (v) easements (including
reciprocal easement agreements), rights-of-way, municipal, building and
zoning ordinances and similar charges, utility agreements, covenants,
reservations, restrictions, encroachments, charges, encumbrances, title
defects or other irregularities that do not materially interfere with the
ordinary course of business of any Loan Party or any of its Subsidiaries;
(vi) leases, subleases, licenses and rights-of-use granted to others and
rights of purchase pursuant to installment sales that do not materially
interfere with the ordinary course of business of any Loan Party or any of
its Subsidiaries; (vii) any interest or title of a lessor in the property
subject to any Capitalized Lease or operating lease; (viii) Liens arising
from filing Uniform Commercial Code financing statements regarding leases
or installment sales; (ix) Liens on property of, or on shares of capital
stock or Debt, any Person existing at the time such Person becomes, or
becomes a part of, any Subsidiary of any Loan Party; provided that such
Liens do not extend to or cover any property or assets of any Loan Party or
any Subsidiary of any Loan Party of other than the property or assets
acquired; (x) Liens in favor of any Loan Party or any Subsidiary of any
Loan Party; (xi) Liens arising from the rendering of a final judgment or
order against any Loan Party or any Subsidiary of any Loan Party that does
not give rise to an Event of Default; (xii) Liens securing reimbursement
obligations with respect to letters of credit that encumber documents and
other property relating to such letters of credit and the products and
proceeds thereof; (xiii) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties in
connection with the importation of goods; and (xiv) Liens arising out of
conditional sale, installment sales, title retention, consignment or
similar arrangements for the sale of goods entered into by any Loan Party
or any of its Subsidiaries in the ordinary course of business.
"Person" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government
or any political subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
"Pledged Debt" has the meaning specified in the Security Agreement.
"Pre-Commitment Information" means all information (including, without
limitation, any confidential information) that any Loan Party has furnished
to any Agent or Lender Party at or prior to the date of, or in connection
with, the Commitment Letter.
"Preferred Interests" means, with respect to any Person, Equity
Interests issued by such Person that are entitled to a preference or
priority over any other Equity Interests issued by such Person upon any
distribution of such Person's property and assets, whether by dividend or
upon liquidation.
"Prepayment Amount" has the meaning specified in Section 5.03(a).
"Prepayment Date" has the meaning specified in Section 5.03(a).
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"Prepayment Notice" has the meaning specified in Section 5.03(a).
"Pro Rata Share" of any amount means, with respect to any Working
Capital Lender at any time, the product of such amount times a fraction the
numerator of which is the amount of such Lender's Working Capital
Commitment at such time (or, if the Commitments shall have been terminated
pursuant to Section 2.05 or 6.01, such Lender's Working Capital Commitment
as in effect immediately prior to such termination) and the denominator of
which is the Working Capital Facility at such time (or, if the Commitments
shall have been terminated pursuant to Section 2.05 or 6.01, the Working
Capital Facility as in effect immediately prior to such termination).
"PUC" means any state governmental authority having utility or
telecommunications authority over any Borrower or any System.
"Receivables" means all Receivables referred to in Section 1(c) of the
Security Agreement.
"Redeemable" means, with respect to any Equity Interest, any Debt or
any other right or Obligation, any such Equity Interest, Debt, right or
Obligation that (a) the issuer has undertaken to redeem at a fixed or
determinable date or dates, whether by operation of a sinking fund or
otherwise, or upon the occurrence of a condition not solely within the
control of the issuer or (b) is redeemable at the option of the holder.
"Reduction Amount" has the meaning specified in Section 2.06 (b)(iv).
"Register" has the meaning specified in Section 9.07(d).
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Related Documents" means the Tax Sharing Agreement.
"Required Lenders" means, at any time, Lenders owed or holding at
least a majority in interest of the sum of (a) the aggregate principal
amount of the Advances outstanding at such time, (b) the aggregate
Available Amount of all Letters of Credit outstanding at such time, (c) the
aggregate Unused Tranche A Term Commitments at such time and (d) the
aggregate Unused Working Capital Commitments at such time; provided,
however, that if any Lender shall be a Defaulting Lender at such time,
there shall be excluded from the determination of Required Lenders at such
time (A) the aggregate principal amount of the Advances owing to such
Lender (in its capacity as a Lender) and outstanding at such time, (B) such
Lender's Pro Rata Share of the aggregate Available Amount of all Letters of
Credit outstanding at such time, (C) the Unused Tranche A Term Commitment
of such Lender at such time and (D) the Unused Working Capital Commitment
of such Lender at such time. For purposes of this definition, the aggregate
principal amount of the Letter of Credit Advances owing to the Issuing Bank
and the Available Amount of each Letter of Credit shall be considered to be
owed to the Working Capital Lenders ratably in accordance with their
respective Working Capital Commitments.
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"Responsible Officer" means any officer of any Loan Party or any of
its Subsidiaries.
"Restricted Subsidiary" has the meaning specified in the Indenture
dated as of February 12, 1998 between the Parent and Norwest Bank Colorado,
National Association as Trustee, in respect of the 10% Senior Discount
Notes due 2008.
"Revenue" means, for any period, Consolidated revenues of ICG and its
Subsidiaries for such period as determined on a Consolidated basis in
accordance with GAAP.
"Secured Hedge Agreement " means any Hedge Agreement required or
permitted under Article V that is entered into by a Borrower and any Hedge
Bank.
"Secured Obligations" has the meaning specified in Section 2 of the
Security Agreement.
"Secured Parties" means the Agents, the Lender Parties and the Hedge
Banks.
"Security Agreement" has the meaning specified in Section 3.01(a)(ii).
"Senior Secured Debt" means, at any date of determination, with
respect to the Parent and its Subsidiaries, all Debt of the Parent and its
Subsidiaries that is either secured by a Lien on any assets of the Parent
and/or any of its Subsidiaries or is not Subordinated Debt.
"Senior Secured Debt Ratio" means, at any date of determination, the
ratio of (a) Senior Secured Debt as of the end of the most recently
completed fiscal quarter to (b) the product of (i) two times (ii) EBITDA of
the Parent and its Subsidiaries for such fiscal quarter and the immediately
preceding fiscal quarter.
"Senior Secured Debt Service" means, with respect to the Parent and
its Subsidiaries, for any period, the sum of (a) the aggregate amount of
all principal of, interest accrued on, and premium, if any, on any Senior
Secured Debt that is due and payable during such period and (b) the
aggregate amount of all fees, costs, expenses, indemnification payments,
insurance policy premiums and other amounts, in each case, that are due and
payable with respect to such Debt during such period.
"Senior Secured Debt Service Coverage Ratio" means, at any date of
determination, the ratio of (a) EBITDA of the Parent and its Subsidiaries
for the two most recently ended fiscal quarters of the Parent for which
financial statements are required to be delivered to the Lender Parties
pursuant to Section 5.03(b) or (c), as the case may be, to (b) Senior
Secured Debt Service for such two fiscal quarters.
"Single Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any
Loan Party or any ERISA Affiliate and no Person other than the Loan Parties
and the ERISA Affiliates or (b) was so maintained and in respect of which
any Loan Party or any ERISA Affiliate could have liability under Section
4069 of ERISA in the event such plan has been or were to be terminated.
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"Solvent" and "Solvency" mean, with respect to any Person on a
particular date, that on such date (a) the fair value of the property of
such Person is greater than the total amount of liabilities, including,
without limitation, contingent liabilities, of such Person, (b) the present
fair salable value of the assets of such Person is not less than the amount
that will be required to pay the probable liability of such Person on its
debts as they become absolute and matured, (c) such Person does not intend
to, and does not believe that it will, incur debts or liabilities beyond
such Person's ability to pay such debts and liabilities as they mature and
(d) such Person is not engaged in business or a transaction, and is not
about to engage in business or a transaction, for which such Person's
property would constitute an unreasonably small capital. The amount of
contingent liabilities at any time shall be computed as the amount that, in
the light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual
or matured liability.
"Standby Letter of Credit" means any Letter of Credit issued under the
Letter of Credit Facility, other than a Trade Letter of Credit.
"Subordinated Debt" means any Debt of any Loan Party that is
subordinated to the Obligations of such Loan Party under the Loan Documents
on, and that otherwise contains, terms and conditions satisfactory to the
Required Lenders.
"Subordinated Debt Documents" means all agreements, indentures and
instruments pursuant to which Subordinated Debt is issued, in each case as
amended, to the extent permitted under the Loan Documents.
"Subsidiary" of any Person means any corporation, partnership joint
venture, limited liability company trust or estate of which (or in which)
more than 50% of (a) the issued and outstanding capital stock having
ordinary voting power to elect a majority of the Board of Directors of such
corporation (irrespective of whether at the time capital stock of any other
class or classes of such corporation shall or might have voting power upon
the occurrence of any contingency), (b) the interest in the capital or
profits of such partnership, joint venture or limited liability company or
(c) the beneficial interest in such trust or estate is at the time directly
or indirectly owned or controlled by such Person, by such Person and one or
more of its other Subsidiaries or by one or more of such Person's other
Subsidiaries; provided, however, that, solely for the purposes of Sections
5.01(j) and 5.02(d), (e), (g), (j) and (l), "Subsidiary" shall not include
ICG 161 and ICG Corporate Headquarters.
"Subsidiary Guarantors" means the Subsidiaries of the Borrowers listed
on Schedule II hereto and each other Subsidiary of each Borrower (other
than ICG 161 and ICG Corporate Headquarters) that shall be required to
execute and deliver a guaranty pursuant to Section 5.01(j).
"Subsidiary Guaranty" has the meaning specified in Section
3.01(a)(iii).
"Syndication Date" means the earlier to occur of (a) the 30th day
following the Effective Date and (b) the date upon which the Syndication
Agent has determined in its sole discretion (and has so notified the
Borrowers) that the primary syndication of the Facilities has been
completed.
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"System" means each data communications, telecommunications or
information system (including, without limitation, any voice, video
transmission, data or Internet services), and any related, ancillary or
complementary services, owned by the Borrowers or their respective
Subsidiaries and all replacements, enhancements or additions thereto.
"Syndication Period" has the meaning specified in Section 2.02(b).
"Tax Sharing Agreement" means the Tax Sharing Agreement between ICG,
the Parent and each of the Borrowers dated as of August 9, 1999.
"Taxes" has the meaning specified in Section 2.12(a).
"Telecommunications Business" has the meaning specified in the
Indenture dated as of February 12, 1998 between the Parent and Norwest Bank
Colorado, National Association, as Trustee, in respect of the 10% Senior
Discount Notes due 2008.
"Term Advance" means a Tranche A Term Advance or a Tranche B Term
Advance.
"Term Borrowing" means a Tranche A Term Borrowing or a Tranche B Term
Borrowing.
"Term Commitment" means a Tranche A Term Commitment or a Tranche B
Term Commitment.
"Term Facility" means the Tranche A Term Facility or the Tranche B
Term Facility.
"Term Lender" means a Tranche A Term Lender or the Tranche B Term
Lender.
"Term Note" means a Tranche A Term Note or the Tranche B Term Note.
"Total Debt" means, at any date of determination, with respect to any
Person and its Subsidiaries, the sum of the following determined on a
Consolidated basis, without duplication, in accordance with GAAP: (a) all
liabilities, obligations and indebtedness for borrowed money, including,
but not limited to, obligations evidenced by bonds, debentures, notes or
other similar instruments, (b) all obligations to pay the deferred and
unpaid purchase price of property or services which is due more than 6
months after placing such property in service or taking delivery or title
thereto or the completion of such services, (exclusive of rent for real
property for which the associated lease would not be capitalized under
GAAP), including, but not limited to, all obligations under non-competition
agreements, excluding trade payables and accrued current liabilities
arising in the ordinary course of business, (c) all obligations as lessees
under capital leases (other than the interest component thereof), (d) all
guaranty obligations, (e) all obligations, liabilities and indebtedness of
any other Person secured by a Lien on any asset of such Person and its
Subsidiaries, (f) all obligations, contingent or otherwise, relative to the
face amount of letters of credit (excluding those that are cash
collateralized), whether or not drawn and banker's acceptances issued for
the account of any of such Person and its Subsidiaries, and (g) all
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Obligations of such Person in respect of Hedge Agreements, valued at the
Agreement Value thereof.
"Trade Letter of Credit" means any Letter of Credit that is issued
under the Letter of Credit Facility for the benefit of a supplier of
Inventory to either Borrower or any of its Subsidiaries to effect payment
for such Inventory.
"Tranche A Term Advance" means an advance made by any Tranche A Term
Lender pursuant to Section 2.01(a).
"Tranche A Term Borrowing" means a borrowing consisting of
simultaneous Tranche A Advances pursuant to Section 2.02(b).
"Tranche A Term Commitment" means, with respect to any Tranche A Term
Lender at any time, the amount set forth opposite such Lender's name on
Schedule I hereto under the caption "Tranche A Term Commitment" or, if such
Lender has entered into one or more Assignment and Acceptances, the
aggregate amount set forth for such Lender in the Register maintained by
the Administrative Agent pursuant to Section 9.07(d) as such Lender's
"Tranche A Term Commitment", as such amount may be reduced at or prior to
such time pursuant to Section 2.05.
"Tranche A Term Facility" means, at any time, the aggregate amount of
the Tranche A Term Lenders' Tranche A Term Commitments at such time.
"Tranche A Term Lender" means any Lender that has a Tranche A Term
Commitment.
"Tranche A Term Note" means a promissory note of each Borrower payable
to the order of any Tranche A Term Lender, in substantially the form of
Exhibit A-1 hereto, evidencing the indebtedness of such Borrower to such
Lender resulting from each Tranche A Advance made by such Lender,
evidencing the indebtedness of such Borrower to such Lender resulting from
each such Tranche A Term Advance made by such Lender, as amended.
"Tranche A Termination Date" means, for the Tranche A Term Facility,
the earlier of (a) June 30, 2005 and (b) the termination in whole of the
Tranche A Term Commitments pursuant to Section 2.05 or 6.01.
"Tranche B Term Advance" means an advance made by any Tranche B Term
Lender pursuant to Section 2.01(b).
"Tranche B Term Borrowing" means a borrowing consisting of
simultaneous Tranche B Advances pursuant to Section 2.02(b).
"Tranche B Term Commitment" means, with respect to any Tranche B Term
Lender, the amount set forth opposite such Lender's name on Schedule I
hereto under the caption "Tranche B Term Commitment" or, if such Lender has
entered into one or more Assignment and Acceptances, the aggregate amount
set forth for such Lender in the Register maintained by the Administrative
Agent pursuant to Section 9.07(d) as such Lender's "Tranche B Term
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Commitment", as such amount may be reduced at or prior to such time
pursuant to Section 2.05.
"Tranche B Term Facility" means, at any time, the aggregate amount of
the Tranche B Term Lenders' Tranche B Term Commitments at such time.
"Tranche B Term Lender" means any Lender that has a Tranche B Term
Commitment.
"Tranche B Term Note" means a promissory note of each Borrower payable
to the order of any Tranche B Term Lender, in substantially the form of
Exhibit A-2 hereto, evidencing the indebtedness of such Borrower to such
Lender resulting from each Tranche B Advance made by such Lender,
evidencing the indebtedness of such Borrower to such Lender resulting from
each such Tranche B Term Advance made by such Lender, as amended.
"Tranche B Termination Date" means, for the Tranche B Term Facility,
the earlier of (a) March 31, 2006, and (b) the termination in whole of the
Tranche B Term Commitments pursuant to Section 2.05 or 6.01.
"Transaction Documents" means, collectively, the Loan Documents and
the Related Documents.
"Type" refers to the distinction between Advances bearing interest at
the Base Rate and Advances bearing interest at the Eurodollar Rate.
"Unused Tranche A Term Commitment" means, with respect to any Tranche
A Term Lender at any time, (a) such Lender=s Tranche A Term Commitment at
such time minus (b) the aggregate principal amount of all Tranche A Term
Advances made by such Lender and outstanding at such time.
"Unused Working Capital Commitment" means, with respect to any Working
Capital Lender at any time, (a) such Lender's Working Capital Commitment at
such time minus (b) the sum of (i) the aggregate principal amount of all
Working Capital Advances and (without duplication) Letter of Credit
Advances made by such Lender (in its capacity as a Lender) and outstanding
at such time plus (ii) such Lender's Pro Rata Share of (A) the aggregate
Available Amount of all Letters of Credit outstanding at such time and (B)
the aggregate principal amount of all Letter of Credit Advances made by the
Issuing Bank pursuant to Section 2.03(c) and outstanding at such time.
"Voting Interests" means shares of capital stock issued by a
corporation, or equivalent Equity Interests in any other Person, the
holders of which are ordinarily, in the absence of contingencies, entitled
to vote for the election of directors (or persons performing similar
functions) of such Person, even if the right so to vote has been suspended
by the happening of such a contingency.
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"Welfare Plan" means a welfare plan, as defined in Section 3(1) of
ERISA, that is maintained for employees of any Loan Party or in respect of
which any Loan Party could have liability.
"Withdrawal Liability" has the meaning specified in Part I of Subtitle
E of Title IV of ERISA.
"Working Capital Advance" has the meaning specified in Section
2.01(c).
"Working Capital Borrowing" means a borrowing consisting of
simultaneous Working Capital Advances of the same Type made by the Working
Capital Lenders.
"Working Capital Commitment" means, with respect to any Working
Capital Lender at any time, the amount set forth opposite such Lender's
name on Schedule I hereto under the caption "Working Capital Commitment"
or, if such Lender has entered into one or more Assignment and Acceptances,
set forth for such Lender in the Register maintained by the Administrative
Agent pursuant to Section 9.07(d) as such Lender's "Working Capital
Commitment", as such amount may be reduced at or prior to such time
pursuant to Section 2.05.
"Working Capital Facility" means, at any time, the aggregate amount of
the Working Capital Lenders' Working Capital Commitments at such time.
"Working Capital Termination Date" means, for the Working Capital
Facility and the Letter of Credit Facility, the earlier of (a) June 30,
2005 and (b) the termination in whole of the Working Capital Commitments
and the Letter of Credit Commitments pursuant to Section 2.05 or 6.01.
"Working Capital Lender" means any Lender that has a Working Capital
Commitment.
"Working Capital Note" means a promissory note of each Borrower
payable to the order of any Working Capital Lender, in substantially the
form of Exhibit A-3 hereto, evidencing the aggregate indebtedness of such
Borrower to such Lender resulting from the Working Capital Advances and
Letter of Credit Advances, as amended.
SECTION 1.02. Computation of Time Periods; Other Definitional Provisions.
In this Agreement and the other Loan Documents in the computation of periods of
time from a specified date to a later specified date, the word "from" means
"from and including" and the words "to" and "until" each mean "to but
excluding". References in the Loan Documents to any agreement or contract "as
amended" shall mean and be a reference to such agreement or contract as amended,
amended and restated, supplemented or otherwise modified from time to time in
accordance with its terms.
SECTION 1.03. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles consistent with those applied in the preparation of the
financial statements referred to in Section 4.01(g) ("GAAP").
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ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
SECTION 2.01. The Advances and the Letters of Credit. (a) The Tranche A
Term Advances. Each Tranche A Term Lender severally agrees, on the terms and
conditions hereinafter set forth, to make advances (a "Tranche A Term Advance")
to the Appropriate Borrower on the Effective Date and, from time to time
thereafter, on any Business Day during the period from the Effective Date until
August 10, 2000 in an amount for each such Advance not to exceed such Lender's
Unused Tranche A Term Commitment at such time. Each Tranche A Term Borrowing
shall be in an aggregate amount of $5,000,000 or an integral multiple of
$1,000,000 in excess thereof and shall consist of Tranche A Term Advances made
simultaneously by the Tranche A Term Lenders ratably according to their Tranche
A Term Commitments. Amounts borrowed under this Section 2.01(a) and repaid or
prepaid may not be reborrowed.
(b) The Tranche B Term Advances. Each Tranche B Term Lender severally
agrees, on the terms and conditions hereinafter set forth, to make a single
advance (a "Tranche B Term Advance") to the Borrowers on the Effective Date in
an amount not to exceed such Lender's Tranche B Term Commitment at such time.
The Tranche B Term Borrowing shall consist of Tranche B Term Advances made
simultaneously by the Tranche B Term Lenders ratably according to their Tranche
B Term Commitments. Amounts borrowed under this Section 2.01(b) and repaid or
prepaid may not be reborrowed.
(c) The Working Capital Advances. Each Working Capital Lender severally
agrees, on the terms and conditions hereinafter set forth, to make advances
(each a "Working Capital Advance") to the Appropriate Borrower from time to time
on any Business Day during the period from the Effective Date until the Working
Capital Termination Date in an amount for each such Advance not to exceed such
Lender's Unused Working Capital Commitment at such time. Each Working Capital
Borrowing shall be in an aggregate amount of $1,000,000 or an integral multiple
of $500,000 in excess thereof (other than a Borrowing the proceeds of which
shall be used solely to repay or prepay in full outstanding Letter of Credit
Advances) and shall consist of Working Capital Advances made simultaneously by
the Working Capital Lenders ratably according to their Working Capital
Commitments. Within the limits of each Working Capital Lender's Unused Working
Capital Commitment in effect from time to time, each Borrower may borrow under
this Section 2.01(c), prepay pursuant to Section 2.06(a) and reborrow under this
Section 2.01(c).
(d) The Letters of Credit. The Issuing Bank agrees, on the terms and
conditions hereinafter set forth, to issue (or cause its Affiliate that is a
commercial bank to issue on its behalf) letters of credit (the "Letters of
Credit") for the account of the Appropriate Borrower from time to time on any
Business Day during the period from the Effective Date until 60 days before the
Working Capital Termination Date in an aggregate Available Amount (i) for all
Letters of Credit not to exceed at any time the lesser of (x) the Letter of
Credit Facility at such time and (y) the Issuing Bank's Letter of Credit
Commitment at such time and (ii) for each such Letter of Credit not to exceed an
amount equal to the Unused Working Capital Commitments of the Working Capital
Lenders at such time. No Letter of Credit shall have an expiration date
(including all rights of the Appropriate Borrower or the beneficiary to require
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renewal) later than the earlier of 60 days before the Working Capital
Termination Date and (A) in the case of a Standby Letter of Credit, one year
after the date of issuance thereof, but may by its terms be renewable annually
upon notice (a "Notice of Renewal") given to the Issuing Bank and the
Administrative Agent on or prior to any date for notice of renewal set forth in
such Letter of Credit but in any event at least three Business Days prior to the
date of the proposed renewal of such Standby Letter of Credit and upon
fulfillment of the applicable conditions set forth in Article III unless the
Issuing Bank has notified the Appropriate Borrower (with a copy to the
Administrative Agent) on or prior to the date for notice of termination set
forth in such Letter of Credit but in any event at least 30 Business Days prior
to the date of automatic renewal of its election not to renew such Standby
Letter of Credit (a "Notice of Termination") and (B) in the case of a Trade
Letter of Credit, 60 days after the date of issuance thereof; provided that the
terms of each Standby Letter of Credit that is automatically renewable annually
shall (x) require the Issuing Bank to give the beneficiary named in such Standby
Letter of Credit notice of any Notice of Termination, (y) permit such
beneficiary, upon receipt of such notice, to draw under such Standby Letter of
Credit prior to the date such Standby Letter of Credit otherwise would have been
automatically renewed and (z) not permit the expiration date (after giving
effect to any renewal) of such Standby Letter of Credit in any event to be
extended to a date later than 60 days before the Working Capital Termination
Date. If either a Notice of Renewal is not given by the Appropriate Borrower or
a Notice of Termination is given by the Issuing Bank pursuant to the immediately
preceding sentence, such Standby Letter of Credit shall expire on the date on
which it otherwise would have been automatically renewed; provided, however,
that even in the absence of receipt of a Notice of Renewal the Issuing Bank may
in its discretion, unless instructed to the contrary by the Administrative Agent
or the Appropriate Borrower, deem that a Notice of Renewal had been timely
delivered and in such case, a Notice of Renewal shall be deemed to have been so
delivered for all purposes under this Agreement. Each Standby Letter of Credit
shall contain a provision authorizing the Issuing Bank to deliver to the
beneficiary of such Letter of Credit, upon the occurrence and during the
continuance of an Event of Default, a notice (a "Default Termination Notice")
terminating such Letter of Credit and giving such beneficiary 15 days to draw
such Letter of Credit. Within the limits of the Letter of Credit Facility, and
subject to the limits referred to above, each Borrower may request the issuance
of Letters of Credit under this Section 2.01(d), repay any Letter of Credit
Advances resulting from drawings thereunder pursuant to Section 2.03(c) and
request the issuance of additional Letters of Credit under this Section 2.01(d).
SECTION 2.02. Making the Advances. (a) Except as otherwise provided in
Section 2.02(b) or 2.03, each Borrowing shall be made on notice, given not later
than 11:00 A.M. (New York City time) on the third Business Day prior to the date
of the proposed Borrowing in the case of a Borrowing consisting of Eurodollar
Rate Advances, or the first Business Day prior to the date of the proposed
Borrowing in the case of a Borrowing consisting of Base Rate Advances, by either
Borrower to the Administrative Agent, which shall give to each Appropriate
Lender prompt notice thereof by telex or telecopier. Each such notice of a
Borrowing (a "Notice of Borrowing") shall be by telephone, confirmed immediately
in writing, or telex or telecopier, in substantially the form of Exhibit B
hereto, specifying therein the requested (i) name of such Borrower, (ii) date of
such Borrowing, (ii) Facility under which such Borrowing is to be made, (iii)
Type of Advances comprising such Borrowing, (iv) aggregate amount of such
Borrowing and (v) in the case of a Borrowing consisting of Eurodollar Rate
Advances, initial Interest Period for each such Advance. Each Appropriate Lender
shall, before 11:00 A.M. (New York City time) on the date of such Borrowing,
make available for the account of its Applicable Lending Office to the
Administrative Agent at the Administrative Agent's Account, in same day funds,
such Lender's ratable portion of such Borrowing in accordance with the
respective Commitments under the applicable Facility of such Lender and the
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other Appropriate Lenders. After the Administrative Agent's receipt of such
funds and upon fulfillment of the applicable conditions set forth in Article
III, the Administrative Agent will make such funds available to the Appropriate
Borrower by crediting the Appropriate Borrower's Account in same day funds;
provided, however, that, in the case of any Working Capital Borrowing, the
Administrative Agent shall first make a portion of such funds equal to the
aggregate principal amount of any Letter of Credit Advances made by the Issuing
Bank and by any other Working Capital Lender and outstanding on the date of such
Working Capital Borrowing, plus interest accrued and unpaid thereon to and as of
such date, available to such Issuing Bank and such other Working Capital Lenders
for repayment of such Letter of Credit Advances.
(b) Anything in subsection (a) above to the contrary notwithstanding,
neither Borrower may select Eurodollar Rate Advances (i) for any initial
Borrowing hereunder and during the period from the Effective Date to the
Syndication Date (the "Syndication Period"), provided, however, that either
Borrower may select Eurodollar Rate Advances for such initial Borrowing or
during the Syndication Period, so long as such Borrower indemnifies the Agents
and each Lender Party in accordance with Section 9.04(c) and as otherwise
provided under the Loan Documents, (ii) for any Borrowing if the aggregate
amount of such Borrowing is less than $1,000,000 or (iii) if the obligation of
the Appropriate Lenders to make Eurodollar Rate Advances shall then be suspended
pursuant to Section 2.09 or 2.10.
(c) The Tranche A Advances may not be outstanding as part of more than ten
separate Borrowings, the Tranche B Term Advances may not be outstanding as part
of more than five separate Borrowing and the Working Capital Advances may not be
outstanding as part of more than ten separate Borrowings.
(d) Each Notice of Borrowing shall be irrevocable and binding on the
Appropriate Borrower. In the case of any Borrowing that the related Notice of
Borrowing specifies is to be comprised of Eurodollar Rate Advances, the
Borrowers shall indemnify each Appropriate Lender against any loss, cost or
expense incurred by such Lender as a result of any failure to fulfill on or
before the date specified in such Notice of Borrowing for such Borrowing the
applicable conditions set forth in Article III, including, without limitation,
any loss (including loss of anticipated profits), cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
such Lender to fund the Advance to be made by such Lender as part of such
Borrowing when such Advance, as a result of such failure, is not made on such
date.
(e) Unless the Administrative Agent shall have received notice from an
Appropriate Lender prior to the date of any Borrowing under a Facility under
which such Lender has a Commitment that such Lender will not make available to
the Administrative Agent such Lender's ratable portion of such Borrowing, the
Administrative Agent may assume that such Lender has made such portion available
to the Administrative Agent on the date of such Borrowing in accordance with
subsection (a) of this Section 2.02 and the Administrative Agent may, in
reliance upon such assumption, make available to the Appropriate Borrower on
such date a corresponding amount. If and to the extent that such Lender shall
not have so made such ratable portion available to the Administrative Agent,
such Lender and such Borrower severally agree to repay or pay to the
Administrative Agent forthwith on demand such corresponding amount and to pay
interest thereon, for each day from the date such amount is made available to
such Borrower until the date such amount is repaid or paid to the Administrative
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Agent, at (i) in the case of such Borrower, the interest rate applicable at such
time under Section 2.07 to Advances comprising such Borrowing and (ii) in the
case of such Lender, the Federal Funds Rate. If such Lender shall pay to the
Administrative Agent such corresponding amount, such amount so paid shall
constitute such Lender's Advance as part of such Borrowing for all purposes.
(f) The failure of any Lender to make the Advance to be made by it as part
of any Borrowing shall not relieve any other Lender of its obligation, if any,
hereunder to make its Advance on the date of such Borrowing, but no Lender shall
be responsible for the failure of any other Lender to make the Advance to be
made by such other Lender on the date of any Borrowing.
SECTION 2.03. Issuance of and Drawings and Reimbursement Under Letters of
Credit. (a) Request for Issuance. Each Letter of Credit shall be issued upon
notice, given not later than 11:00 A.M. (New York City time) on the fifth
Business Day prior to the date of the proposed issuance of such Letter of
Credit, by a Borrower to the Issuing Bank, which shall give to the
Administrative Agent and each Working Capital Lender prompt notice thereof by
telex or telecopier. Each such notice of issuance of a Letter of Credit (a
"Notice of Issuance") shall be by telephone, confirmed immediately in writing,
or telex or telecopier, specifying therein the requested (A) name of the
Borrower, (B) date of such issuance (which shall be a Business Day), (C)
Available Amount of such Letter of Credit, (D) expiration date of such Letter of
Credit, (E) name and address of the beneficiary of such Letter of Credit and (F)
form of such Letter of Credit, and shall be accompanied by such application and
agreement for letter of credit as such Issuing Bank may specify to such Borrower
for use in connection with such requested Letter of Credit (a "Letter of Credit
Agreement"). If (x) the requested form of such Letter of Credit is acceptable to
the Issuing Bank in its sole discretion and (y) it has not received notice of
objection to issuance from Lenders holding at least a majority of the Working
Capital Commitments, the Issuing Bank will, upon fulfillment of the applicable
conditions set forth in Article III, make such Letter of Credit available to the
Appropriate Borrower at its office referred to in Section 9.02 or as otherwise
agreed with such Borrower in connection with such issuance. In the event and to
the extent that the provisions of any Letter of Credit Agreement shall conflict
with this Agreement, the provisions of this Agreement shall govern.
(b) Letter of Credit Reports. The Issuing Bank shall furnish (A) to the
Administrative Agent on the first Business Day of each week a written report
summarizing issuance and expiration dates of Letters of Credit issued by the
Issuing Bank during the previous week and drawings during such week under all
Letters of Credit issued by the Issuing Bank, (B) to each Working Capital Lender
on the first Business Day of each month a written report summarizing issuance
and expiration dates of Letters of Credit issued by the Issuing Bank during the
preceding month and drawings during such month under all Letters of Credit
issued by the Issuing Bank and (C) to the Administrative Agent and each Working
Capital Lender on the first Business Day of each calendar quarter a written
report setting forth the average daily aggregate Available Amount during the
preceding calendar quarter of all Letters of Credit issued by the Issuing Bank.
(c) Drawing and Reimbursement. The payment by the Issuing Bank of a draft
drawn under any Letter of Credit shall constitute for all purposes of this
Agreement the making by such Issuing Bank of a Letter of Credit Advance, which
shall be a Base Rate Advance, in the amount of such draft. Upon written demand
by the Issuing Bank, with a copy of such demand to the Administrative Agent,
each Working Capital Lender shall purchase from the Issuing Bank, and the
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Issuing Bank shall sell and assign to each such Working Capital Lender, such
Lender's Pro Rata Share of such outstanding Letter of Credit Advance as of the
date of such purchase, by making available for the account of its Applicable
Lending Office to the Administrative Agent for the account of the Issuing Bank,
by deposit to the Administrative Agent's Account, in same day funds, an amount
equal to the portion of the outstanding principal amount of such Letter of
Credit Advance to be purchased by such Lender. Promptly after receipt thereof,
the Administrative Agent shall transfer such funds to the Issuing Bank. Each
Borrower hereby agrees to each such sale and assignment. Each Working Capital
Lender agrees to purchase its Pro Rata Share of an outstanding Letter of Credit
Advance on (i) the Business Day on which demand therefor is made by the Issuing
Bank, provided that notice of such demand is given not later than 11:00 A.M.
(New York City time) on such Business Day, or (ii) the first Business Day next
succeeding such demand if notice of such demand is given after such time. Upon
any such assignment by the Issuing Bank to any Working Capital Lender of a
portion of a Letter of Credit Advance, the Issuing Bank represents and warrants
to such other Lender that the Issuing Bank is the legal and beneficial owner of
such interest being assigned by it, free and clear of any liens, but makes no
other representation or warranty and assumes no responsibility with respect to
such Letter of Credit Advance, the Loan Documents or any Loan Party. If and to
the extent that any Working Capital Lender shall not have so made the amount of
such Letter of Credit Advance available to the Administrative Agent, such
Working Capital Lender and the Borrowers severally agree to pay to the
Administrative Agent forthwith on demand such amount together with interest
thereon, for each day from the date of demand by the Issuing Bank until the date
such amount is paid to the Administrative Agent, at the Federal Funds Rate for
its account or the account of the Issuing Bank, as applicable. If such Lender
shall pay to the Administrative Agent such amount for the account of the Issuing
Bank on any Business Day, such amount so paid in respect of principal shall
constitute a Letter of Credit Advance made by such Lender on such Business Day
for purposes of this Agreement, and the outstanding principal amount of the
Letter of Credit Advance made by the Issuing Bank shall be reduced by such
amount on such Business Day.
(d) Failure to Make Letter of Credit Advances. The failure of any Lender to
make the Letter of Credit Advance to be made by it on the date specified in
Section 2.03(c) shall not relieve any other Lender of its obligation hereunder
to make its Letter of Credit Advance on such date, but no Lender shall be
responsible for the failure of any other Lender to make the Letter of Credit
Advance to be made by such other Lender on such date.
SECTION 2.04. Repayment of Advances. (a) Tranche A Term Advances. On the
last Business Day of each calendar quarter specified below, the Borrowers shall
jointly and severally repay to the Administrative Agent for the ratable account
of the Tranche A Term Lenders an aggregate outstanding principal amount of the
Tranche A Term Advances (which amounts shall be reduced as a result of the
application of prepayments in accordance with the priorities set forth in
Section 2.06) in twelve consecutive installments, each such installment being
payable on each such quarterly date during each year indicated below (such
installments to aggregate for such year to the percentage set opposite such year
of the outstanding Tranche A Term Advances outstanding on September 27, 2002 and
to be in equal principal amounts for each such quarterly date for such year):
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Calendar Quarter Percentage
From and including the third quarter of 2002 to and 25%
including the second quarter of 2003
From and including the third quarter of 2003 to and 35%
including the second quarter of 2004
From and including the third quarter of 2004 to and 40%
including the second quarter of 2005
provided, however, that the final principal installment shall be repaid on the
Tranche A Termination Date and in any event shall be in an amount equal to the
aggregate principal amount of the Tranche A Term Advances outstanding on such
date.
(b) Tranche B Term Advances. On the last day of each calendar quarter
specified below, the Borrowers shall jointly and severally repay to the
Administrative Agent for the ratable account of the Tranche B Term Lenders the
aggregate outstanding principal amount of the Tranche B Term Advances (which
amounts shall be reduced as a result of the application of prepayments in
accordance with the order of priority set forth in Section 2.06) in 27
consecutive installments, each such installment being payable on each such
quarterly date during each year indicated below (such installments to aggregate
for such year to the percentage set opposite such year of the Tranche B Term
Advances outstanding on the Effective Date and to be in equal principal amounts
for each such quarterly date for such year):
Calendar Quarter Percentage
From and including the third quarter of 1999 to and 1%
including the second quarter of 2005
From and including the third quarter of 2005 to and 94%
including the first quarter of 2006
provided, however, that the final principal installment shall be repaid on the
Tranche B Termination Date and in any event shall be in an amount equal to the
aggregate principal amount of the Tranche B Term Advances outstanding on such
date.
(c) Working Capital Advances. The Borrowers shall jointly and severally
repay to the Administrative Agent for the ratable account of the Working Capital
Lenders on the Working Capital Termination Date the aggregate principal amount
of the Working Capital Advances then outstanding.
(d) Letter of Credit Advances. (i) The Borrowers shall jointly and
severally repay to the Administrative Agent for the account of the Issuing Bank
on the Working Capital Termination Date the outstanding principal amount of each
Letter of Credit Advance made by, and not reimbursed to, the Issuing Bank.
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(ii) The Obligations of the Borrowers under this Agreement, any Letter of
Credit Agreement and any other agreement or instrument relating to any Letter of
Credit shall be unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Agreement, such Letter of Credit Agreement and
such other agreement or instrument under all circumstances, including, without
limitation, the following circumstances (it being understood that any such
payment by the Borrowers is without prejudice to, and does not constitute a
waiver of, any rights the Borrowers might have or might acquire as a result of
the payment by the Issuing Bank of any draft or the reimbursement by the
Borrowers thereof):
(A) any lack of validity or enforceability of any Loan
Document, any Letter of Credit Agreement, any Letter of Credit or any
other agreement or instrument relating thereto (all of the foregoing
being, collectively, the "L/C Related Documents");
(B) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations of any Borrower in
respect of any L/C Related Document or any other amendment or waiver of
or any consent to departure from all or any of the L/C Related
Documents;
(C) the existence of any claim, set-off, defense or other
right that any Borrower may have at any time against any beneficiary or
any transferee of a Letter of Credit (or any Persons for which any such
beneficiary or any such transferee may be acting), the Issuing Bank or
any other Person, whether in connection with the transactions
contemplated by the L/C Related Documents or any unrelated transaction;
(D) any statement or any other document presented under a
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(E) payment by the Issuing Bank under a Letter of Credit
against presentation of a draft or certificate that does not strictly
comply with the terms of such Letter of Credit;
(F) any exchange, release or non-perfection of any Collateral
or other collateral, or any release or amendment or waiver of or
consent to departure from the Guaranties or any other guarantee, for
all or any of the Obligations of any Borrower in respect of the L/C
Related Documents; or
(G) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing, including, without limitation, any
other circumstance that might otherwise constitute a defense available
to, or a discharge of, any Loan Party or a guarantor.
SECTION 2.05. Termination or Reduction of the Commitments. (a) Optional.
The Borrowers may, upon at least five Business Days' notice to the
Administrative Agent terminate in whole or reduce in part the Unused Tranche A
Term Commitments and the Unused Working Capital Commitments; provided, however,
that each partial reduction of the Commitments (i) shall be in an aggregate
amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof and
(ii) shall be made ratably among the Appropriate Lenders in accordance with
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their Commitments with respect to such Facility. For the avoidance of doubt, the
termination or reduction of the Unused Tranche A Commitments and the Unused
Working Capital Commitments pursuant to the preceding sentence shall be deemed
to be a termination or reduction, as applicable, in the amount of such
termination or reduction of the Tranche A Term Commitments or the Working
Capital Commitment, as the case may be.
(b) Mandatory. The Facilities shall be automatically and permanently
reduced on each date a prepayment thereof is required to be made pursuant to
Section 2.06(b)(i) or (ii) in an amount equal to the amount of such prepayment,
provided that such reduction of the Facilities shall be made ratably among the
Appropriate Lenders in accordance with their relevant Commitments in accordance
with the priorities pursuant to Section 2.06(b).
SECTION 2.06. Prepayments. (a) Optional. Subject to Section 5.03(a)(ii),
the Borrowers may, upon at least one Business Day's notice in the case of Base
Rate Advances and three Business Days' notice in the case of Eurodollar Rate
Advances, in each case to the Administrative Agent stating the proposed date and
aggregate principal amount of the prepayment, and if such notice is given the
Borrowers shall, jointly and severally prepay the outstanding aggregate
principal amount of the Advances comprising part of the same Borrowing in whole
or ratably in part, together with accrued interest to the date of such
prepayment on the aggregate principal amount prepaid; provided, however, that
(x) each partial prepayment shall be in an aggregate principal amount of
$5,000,000 or an integral multiple of $1,000,000 in excess thereof; and (y) if
any prepayment of a Eurodollar Rate Advance is made on a date other than the
last day of an Interest Period for such Advance, the Borrowers shall also pay
any amounts owing pursuant to Section 9.04(c). Each such prepayment shall be
applied ratably first to the Term Facilities and to the installments thereof pro
rata and second to the Working Capital Facility as set forth in clause (b)(iv)
below.
(b) Mandatory. (i) Commencing with the Fiscal Year ending December 31,
2002, the Borrowers shall, on the 90th day following the end of such Fiscal
Year, jointly and severally prepay an aggregate principal amount of the Advances
comprising part of the same Borrowings and, thereafter, deposit an amount in the
L/C Cash Collateral Account, in an amount equal to 50% of the amount of Excess
Cash Flow for such Fiscal Year. Each such prepayment shall be applied ratably
first to the Term Facilities and to the installments thereof pro rata and second
to the Working Capital Facility as set forth in clause (iv) below.
(ii) The Borrowers shall, on the date of receipt of the Net Cash Proceeds
by any Borrower or any of their Subsidiaries from (A) the sale, lease, transfer
or other disposition of any assets of any Borrower or any of its Subsidiaries
(other than any sale, lease, transfer or other disposition of assets pursuant to
clause (i), (ii), or (iv) of Section 5.02(e)) and (B) any Extraordinary Receipt
received by or paid to or for the account of any Borrower or any of their
Subsidiaries and not otherwise included in clause (A) above, jointly and
severally prepay an aggregate principal amount of the Advances comprising part
of the same Borrowings and, thereafter, deposit an amount in the L/C Cash
Collateral Account, in an amount equal to the amount of such Net Cash Proceeds.
Each such prepayment shall be applied ratably first to the Term Facilities and
to the installments thereof pro rata and second to the Working Capital Facility
as set forth in clause (iv) below.
(iii) The Borrowers shall, on each Business Day, jointly and severally pay
to the Administrative Agent for deposit in the L/C Cash Collateral Account an
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amount sufficient to cause the aggregate amount on deposit in the L/C Cash
Collateral Account to equal the amount by which the aggregate Available Amount
of all Letters of Credit then outstanding exceeds the Letter of Credit Facility
on such Business Day.
(iv) Prepayments of the Working Capital Facility made pursuant to clause
(i) and (ii) above shall be first applied to prepay Letter of Credit Advances
then outstanding until such Advances are paid in full, second applied to prepay
Working Capital Advances then outstanding comprising part of the same Borrowings
until such Advances are paid in full and third deposited in the L/C Cash
Collateral Account to cash collateralize 100% of the Available Amount of the
Letters of Credit then outstanding; and, in the case of prepayments of the
Working Capital Facility required pursuant to clause (i) or (ii) above, the
amount remaining (if any) after the prepayment in full of the Advances then
outstanding and the 100% cash collateralization of the aggregate Available
Amount of Letters of Credit then outstanding (the sum of such prepayment
amounts, cash collateralization amounts and remaining amount being referred to
herein as the "Reduction Amount") may be retained by the Borrowers and the
Working Capital Facility shall be permanently reduced as set forth in Section
2.05(b). Upon the drawing of any Letter of Credit for which funds are on deposit
in the L/C Cash Collateral Account, such funds shall be applied to reimburse the
Issuing Bank.
(v) All prepayments under this subsection (b) shall be made together with
accrued interest to the date of such prepayment on the principal amount prepaid.
If any payment of Eurodollar Rate Advances otherwise required to be made under
this Section 2.06(b) would be made on a day other than the last day of the
applicable Interest Period therefor, the Borrowers may direct the Administrative
Agent to (and if so directed, the Administrative Agent shall) deposit such
payment in the Cash Collateral Account until the last day of the applicable
Interest Period at which time the Administrative Agent shall apply the amount of
such payment to the prepayment of such Advances; provided, however, that such
Advances shall continue to bear interest as set forth in Section 2.07 until the
last day of the applicable Interest Period therefor.
(c) Term B Opt-Out. The Administrative Agent shall promptly forward to each
Term B Lender each Prepayment Notice received by it pursuant to Section
5.03(a)(ii). With respect to any prepayment of the Term Advances, the
Administrative Agent shall ratably pay the Tranche A Term Lenders and the
Tranche B Term Lenders; provided, however, that any Tranche B Term Lender, at
its option, to the extent that any Tranche A Term Advances are then outstanding,
may elect not to accept such prepayment (such Lender being a "Declining
Lender"), in which event the provisions of the next sentence shall apply. Any
Tranche B Term Lender may elect not to accept its ratable share of the
prepayment referred to in any Prepayment Notice by giving written notice to the
Administrative Agent not later than 11:00 A.M. (New York City time) on the
fourth Business Day immediately preceding the scheduled Prepayment Date. On the
Prepayment Date, an amount equal to that portion of the Prepayment Amount
available to prepay Tranche B Term Lenders (less any amounts that would
otherwise be payable to Declining Lenders) shall be applied to prepay Tranche B
Term Advances owing to Tranche B Term Lenders other than Declining Lenders and
any amounts that would otherwise have been applied to prepay Tranche B Term
Advances owing to Declining Lenders shall instead be applied ratably to prepay
the remaining Tranche A Term Advances as provided in Sections 2.06(a) and (b);
provided, further that on prepayment in full of Term Advances owing to Term
Lenders other than Declining Lenders, the remainder of any Prepayment Amount
shall be applied ratably to prepay Tranche B Term Advances owing to Declining
Lenders.
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SECTION 2.07. Interest. (a) Scheduled Interest. The Borrowers shall jointly
and severally pay interest on the unpaid principal amount of each Advance owing
to each Lender from the date of such Advance until such principal amount shall
be paid in full, at the following rates per annum:
(i) Base Rate Advances. During such periods as such Advance is a Base
Rate Advance, a rate per annum equal at all times to the sum of (A) the
Base Rate in effect from time to time plus (B) the Applicable Margin in
effect from time to time, payable in arrears quarterly on the last day of
each quarter during such periods and on the date such Base Rate Advance
shall be Converted or paid in full.
(ii) Eurodollar Rate Advances. During such periods as such Advance is
a Eurodollar Rate Advance, a rate per annum equal at all times during each
Interest Period for such Advance to the sum of (A) the Eurodollar Rate for
such Interest Period for such Advance plus (B) the Applicable Margin in
effect from time to time, payable in arrears on the last day of such
Interest Period and, if such Interest Period has a duration of more than
three months, on each day that occurs during such Interest Period every
three months from the first day of such Interest Period and on the date
such Eurodollar Rate Advance shall be Converted or paid in full.
(b) Default Interest. Upon the occurrence and during the continuance of a
payment or bankruptcy Default or any Event of Default, each Borrower shall
jointly and severally pay interest on (i) the unpaid principal amount of each
Advance owing to each Lender, payable in arrears on the dates referred to in
clause (a)(i) or (a)(ii) above and on demand, at a rate per annum equal at all
times to 2% per annum above the rate per annum required to be paid on such
Advance pursuant to clause (a)(i) or (a)(ii) above and (ii) to the fullest
extent permitted by law, the amount of any interest, fee or other amount payable
under the Loan Documents that is not paid when due, from the date such amount
shall be due until such amount shall be paid in full, payable in arrears on the
date such amount shall be paid in full and on demand, at a rate per annum equal
at all times to 2% per annum above the rate per annum required to be paid, in
the case of interest, on the Type of Advance on which such interest has accrued
pursuant to clause (a)(i) or (a)(ii) above and, in all other cases, on Base Rate
Advances pursuant to clause (a)(i) above.
(c) Notice of Interest Period and Interest Rate. Promptly after receipt of
a Notice of Borrowing pursuant to Section 2.02(a), a notice of Conversion
pursuant to Section 2.09 or a notice of selection of an Interest Period pursuant
to the terms of the definition of "Interest Period", the Administrative Agent
shall give notice to the Appropriate Borrower and each Appropriate Lender of the
applicable Interest Period and the applicable interest rate determined by the
Administrative Agent for purposes of clause (a)(i) or (a)(ii) above.
SECTION 2.08. Fees. (a) Commitment Fee. The Borrowers shall jointly and
severally pay to the Administrative Agent for the account of the Lenders a
commitment fee, from the Effective Date in the case of each Initial Lender and
from the effective date specified in the Assignment and Acceptance pursuant to
which it became a Lender in the case of each other Lender, payable in arrears
quarterly on the last Business Day of each calendar quarter, on the available
but Unused Tranche A Term Commitment (until August 10, 2000) and the available
but Unused Working Capital Commitment (until the Working Capital Termination
Date) at the rate expressed as percentage set forth below opposite the
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percentage per annum on the average daily unused portion of each Appropriate
Lender's aggregate available Tranche A Term Commitments and Working Capital
Commitments during such quarter:
Percentage of Unused Commitments Commitment Fee
>75% 1.375%
>50% and <75% 1.250%
>25% and <50% 1.125%
<25% 0.625%
provided, however, that any commitment fee accrued with respect to any of the
Commitments of a Defaulting Lender during the period prior to the time such
Lender became a Defaulting Lender and unpaid at such time shall not be payable
by the Borrowers so long as such Lender shall be a Defaulting Lender except to
the extent that such commitment fee shall otherwise have been due and payable by
the Borrowers prior to such time; and provided further, however, that no
commitment fee shall accrue on any of the Commitments of a Defaulting Lender so
long as such Lender shall be a Defaulting Lender.
(b) Letter of Credit Fees, Etc. (i) The Borrowers shall jointly and
severally pay to the Administrative Agent for the account of each Working
Capital Lender a commission, payable in arrears quarterly on the last Business
Day of each calendar quarter, and on the earliest to occur of the full drawing,
expiration, termination or cancellation of any Letter of Credit and on the
Working Capital Termination Date, on such Lender's Pro Rata Share of the average
daily aggregate Available Amount during such quarter of (A) all Standby Letters
of Credit outstanding from time to time at a rate equal to the Applicable Margin
in effect from day to day for Eurodollar Rate Advances under the Working Capital
Facility and (B) all Trade Letters of Credit then outstanding at a rate equal to
the Applicable Margin in effect from day to day for Eurodollar Rate Advances
under the Working Capital Facility.
(ii) The Borrowers shall jointly and severally pay to the Issuing Bank, for
its own account, such commissions, issuance fees, fronting fees, transfer fees
and other fees and charges in connection with the issuance or administration of
each Letter of Credit as the Borrowers and the Issuing Bank shall agree.
(c) Agents' Fees. The Borrowers shall jointly and severally pay to each
Agent for its own account such fees as may from time to time be agreed between
the Borrower and such Agent.
SECTION 2.09. Conversion of Advances. (a) Optional. The Appropriate
Borrower may on any Business Day, upon notice given to the Administrative Agent
not later than 11:00 A.M. (New York City time) on the third Business Day prior
to the date of the proposed Conversion and subject to the provisions of Section
2.07 and Section 2.10, Convert all or any portion of the Advances of one Type
comprising the same Borrowing into Advances of the other Type; provided,
however, that any Conversion of Eurodollar Rate Advances into Base Rate Advances
shall be made only on the last day of an Interest Period for such Eurodollar
Rate Advances, any Conversion of Base Rate Advances into Eurodollar Rate
Advances shall be in an amount not less than the minimum amount specified in
Section 2.02(c), no Conversion of any Advances shall result in more separate
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Borrowings than permitted under Section 2.02(c) and each Conversion of Advances
comprising part of the same Borrowing under any Facility shall be made ratably
among the Appropriate Lenders in accordance with their Commitments under such
Facility. Each such notice of Conversion shall, within the restrictions
specified above, specify (i) the date of such Conversion, (ii) the Advances to
be Converted and (iii) if such Conversion is into Eurodollar Rate Advances, the
duration of the initial Interest Period for such Advances. Each notice of
Conversion shall be irrevocable and binding on such Borrower.
(b) Mandatory. (i) On the date on which the aggregate unpaid principal
amount of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by
payment or prepayment or otherwise, to less than $1,000,000, such Advances shall
automatically Convert into Base Rate Advances.
(ii) If the Appropriate Borrower shall fail to select the duration of any
Interest Period for any Eurodollar Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01, the
Administrative Agent will forthwith so notify such Borrower and the Appropriate
Lenders, whereupon each such Eurodollar Rate Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into a one month
Eurodollar Rate Advance.
(iii) Upon the occurrence and during the continuance of any Default, (x)
each Eurodollar Rate Advance will automatically, on the last day of the then
existing Interest Period therefor, Convert into a Base Rate Advance and (y) the
obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate
Advances shall be suspended.
SECTION 2.10. Increased Costs, Etc. (a) If, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law),
there shall be any increase in the cost to any Lender Party of agreeing to make
or of making, funding or maintaining Eurodollar Rate Advances or of agreeing to
issue or of issuing or maintaining or participating in Letters of Credit or of
agreeing to make or of making or maintaining Letter of Credit Advances
(excluding, for purposes of this Section 2.10, any such increased costs
resulting from (x) Taxes or Other Taxes (as to which Section 2.12 shall govern)
and (y) changes in the basis of taxation of overall net income or overall gross
income by the United States or by the foreign jurisdiction or state under the
laws of which such Lender Party is organized or has its Applicable Lending
Office or any political subdivision thereof), then the Borrowers shall from time
to time, upon demand by such Lender Party (with a copy of such demand to the
Administrative Agent), jointly and severally pay to the Administrative Agent for
the account of such Lender Party additional amounts sufficient to compensate
such Lender Party for such increased cost; provided, however, that a Lender
Party claiming additional amounts under this Section 2.10(a) agrees to use
reasonable efforts (consistent with its internal policy and legal and regulatory
restrictions) to designate a different Applicable Lending Office if the making
of such a designation would avoid the need for, or reduce the amount of, such
increased cost that may thereafter accrue and would not, in the reasonable
judgment of such Lender Party, be otherwise disadvantageous to such Lender
Party. A certificate as to the amount of such increased cost, and the details of
the computation thereof, submitted to the Borrowers by such Lender Party, shall
be conclusive and binding for all purposes, absent manifest error.
(b) If, due to either (i) the introduction of or any change in or in the
interpretation of any law or regulation or (ii) the compliance with any
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guideline or request from any central bank or other governmental authority
(whether or not having the force of law), there shall be any increase in the
amount of capital required or expected to be maintained by any Lender Party or
any corporation controlling such Lender Party as a result of or based upon the
existence of such Lender Party's commitment to lend or to issue or participate
in Letters of Credit hereunder and other commitments of such type or the
issuance or maintenance of or participation in the Letters of Credit (or similar
contingent obligations), then, upon demand by such Lender Party or such
corporation (with a copy of such demand to the Administrative Agent), the
Borrowers shall jointly and severally pay to the Administrative Agent for the
account of such Lender Party, from time to time as specified by such Lender
Party, additional amounts sufficient to compensate such Lender Party in the
light of such circumstances, to the extent that such Lender Party reasonably
determines such increase in capital to be allocable to the existence of such
Lender Party's commitment to lend or to issue or participate in Letters of
Credit hereunder or to the issuance or maintenance of or participation in any
Letters of Credit. A certificate as to such amounts, and the details of the
computation thereof, submitted to the Borrowers by such Lender Party shall be
conclusive and binding for all purposes, absent manifest error.
(c) If, with respect to any Eurodollar Rate Advances under any Facility,
Lenders owed at least 50% of the then aggregate unpaid principal amount thereof
notify the Administrative Agent that the Eurodollar Rate for any Interest Period
for such Advances will not adequately reflect the cost to such Lenders of
making, funding or maintaining their Eurodollar Rate Advances for such Interest
Period, the Administrative Agent shall forthwith so notify the Borrowers and the
Appropriate Lenders, whereupon (i) each such Eurodollar Rate Advance under such
Facility will automatically, on the last day of the then existing Interest
Period therefor, Convert into a Base Rate Advance and (ii) the obligation of the
Appropriate Lenders to make, or to Convert Advances into, Eurodollar Rate
Advances shall be suspended until the Administrative Agent shall notify the
Borrowers that such Lenders have determined that the circumstances causing such
suspension no longer exist.
(d) Notwithstanding any other provision of this Agreement, if the
introduction of or any change in or in the interpretation of any law or
regulation shall make it unlawful, or any central bank or other governmental
authority shall assert that it is unlawful, for any Lender or its Eurodollar
Lending Office to perform its obligations hereunder to make Eurodollar Rate
Advances or to continue to fund or maintain Eurodollar Rate Advances hereunder,
then, on notice thereof and demand therefor by such Lender to the Borrowers
through the Administrative Agent, (i) each Eurodollar Rate Advance under each
Facility under which such Lender has a Commitment will automatically, upon such
demand, Convert into a Base Rate Advance and (ii) the obligation of the
Appropriate Lenders to make, or to Convert Advances into, Eurodollar Rate
Advances shall be suspended until the Administrative Agent shall notify the
Borrowers that such Lender has determined that the circumstances causing such
suspension no longer exist; provided, however, that, before making any such
demand, such Lender agrees to use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to designate a different
Eurodollar Lending Office if the making of such a designation would allow such
Lender or its Eurodollar Lending Office to continue to perform its obligations
to make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar
Rate Advances and would not, in the judgment of such Lender, be otherwise
disadvantageous to such Lender.
SECTION 2.11. Payments and Computations. (a) The Borrowers shall make each
payment hereunder and under the Notes, irrespective of any right of counterclaim
or set-off (except as otherwise provided in Section 2.15), not later than 11:00
A.M. (New York City time) on the day when due in U.S. dollars to the
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Administrative Agent at the Administrative Agent's Account in same day funds,
with payments being received by the Administrative Agent after such time being
deemed to have been received on the next succeeding Business Day. The
Administrative Agent will promptly thereafter cause like funds to be distributed
(i) if such payment by any such Borrower is in respect of principal, interest,
commitment fees or any other Obligation then payable hereunder and under the
Notes to more than one Lender Party, to such Lender Parties for the account of
their respective Applicable Lending Offices ratably in accordance with the
amounts of such respective Obligations then payable to such Lender Parties and
(ii) if such payment by any such Borrower is in respect of any Obligation then
payable hereunder to one Lender Party, to such Lender Party for the account of
its Applicable Lending Office, in each case to be applied in accordance with the
terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and
recording of the information contained therein in the Register pursuant to
Section 9.07(d), from and after the effective date of such Assignment and
Acceptance, the Administrative Agent shall make all payments hereunder and under
the Notes in respect of the interest assigned thereby to the Lender Party
assignee thereunder, and the parties to such Assignment and Acceptance shall
make all appropriate adjustments in such payments for periods prior to such
effective date directly between themselves.
(b) The Borrowers hereby authorize each Lender Party and each of its
Affiliates, if and to the extent payment owed to such Lender Party is not made
when due hereunder or, in the case of a Lender, under the Note held by such
Lender, to charge from time to time, to the fullest extent permitted by law,
against any or all of the Borrower's accounts with such Lender Party or such
Affiliate any amount so due.
(c) All computations of interest based on the Base Rate shall be made by
the Administrative Agent on the basis of a year of 365 or 366 days, as the case
may be, and all computations of interest based on the Eurodollar Rate or the
Federal Funds Rate and of fees and Letter of Credit commissions shall be made by
the Administrative Agent on the basis of a year of 360 days, in each case for
the actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest, fees or commissions are
payable. Each determination by the Administrative Agent of an interest rate, fee
or commission hereunder shall be conclusive and binding for all purposes, absent
manifest error.
(d) Whenever any payment hereunder or under the Notes shall be stated to be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or commitment fee, as the
case may be; provided, however, that, if such extension would cause payment of
interest on or principal of Eurodollar Rate Advances to be made in the next
following calendar month, such payment shall be made on the next preceding
Business Day.
(e) Unless the Administrative Agent shall have received notice from the
Borrowers prior to the date on which any payment is due to any Lender Party
hereunder that any such Borrower will not make such payment in full, the
Administrative Agent may assume that any such Borrower has made such payment in
full to the Administrative Agent on such date and the Administrative Agent may,
in reliance upon such assumption, cause to be distributed to each such Lender
Party on such due date an amount equal to the amount then due such Lender Party.
If and to the extent any such Borrower shall not have so made such payment in
full to the Administrative Agent, each such Lender Party shall repay to the
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Administrative Agent forthwith on demand such amount distributed to such Lender
Party together with interest thereon, for each day from the date such amount is
distributed to such Lender Party until the date such Lender Party repays such
amount to the Administrative Agent, at the Federal Funds Rate.
(f) If the Administrative Agent receives funds for application to the
Obligations under the Loan Documents under circumstances for which the Loan
Documents do not specify the Advances or the Facility to which, or the manner in
which, such funds are to be applied, the Administrative Agent may, but shall not
be obligated to, elect to distribute such funds to each Lender Party ratably in
accordance with such Lender Party=s proportionate share of the principal amount
of all outstanding Advances and the Available Amount of all Letters of Credit
then outstanding, in repayment or prepayment of such of the outstanding Advances
or other Obligations owed to such Lender Party, and for application to such
principal installments, as the Administrative Agent shall direct.
SECTION 2.12. Taxes. (a) Any and all payments by the Borrowers hereunder or
under the Notes shall be made, in accordance with Section 2.11, free and clear
of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, (i) in the case of each Lender Party and each Agent, taxes
that are imposed on its overall net income by the United States and taxes that
are imposed on its overall net income (and any franchise taxes) by the state or
foreign jurisdiction under the laws of which such Lender Party or such Agent, as
the case may be, is organized or any political subdivision thereof and, (ii) in
the case of each Lender Party, taxes that are imposed on its overall net income
(and any franchise taxes) by the state or foreign jurisdiction of such Lender
Party's Applicable Lending Office or any political subdivision thereof (all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities in respect of payments hereunder or under the Notes being
hereinafter referred to as "Taxes"). If the Borrowers shall be required by law
to deduct any Taxes from or in respect of any sum payable hereunder or under any
Note to any Lender Party or any Agent, (i) the sum payable by the Borrowers
shall be increased as may be necessary so that after the Borrowers and the
Administrative Agent have made all required deductions (including deductions
applicable to additional sums payable under this Section 2.12) such Lender Party
or such Agent, as the case may be, receives an amount equal to the sum it would
have received had no such deductions been made, (ii) the Borrowers shall make
all such deductions and (iii) the Borrowers shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance with
applicable law.
(b) In addition, the Borrowers shall pay any present or future stamp,
documentary, excise, property or similar taxes, charges or levies that arise
from any payment made hereunder or under the Notes or from the execution,
delivery or registration of, performance under, or otherwise with respect to,
this Agreement, the Letters of Credit or the Notes (hereinafter referred to as
"Other Taxes").
(c) The Borrowers shall indemnify each Lender Party and each Agent for and
hold them harmless against the full amount of Taxes and Other Taxes, and for the
full amount of taxes of any kind imposed by any jurisdiction on amounts payable
under this Section 2.12, imposed on or paid by such Lender Party or such Agent
(as the case may be) and any liability (including penalties, additions to tax,
interest and expenses) arising therefrom or with respect thereto. This
indemnification shall be made within 30 days from the date such Lender Party or
such Agent (as the case may be) makes written demand therefor. Any such demand
shall show in reasonable detail the amount payable and the calculations used to
determine such amount.
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(d) Within 30 days after the date of any payment of Taxes, the Borrowers
shall furnish to the Administrative Agent, at its address referred to in Section
9.02, the original or a certified copy of a receipt evidencing such payment. In
the case of any payment hereunder or under the Notes by or on behalf of the
Borrowers through an account or branch outside the United States or by or on
behalf of the Borrowers by a payor that is not a United States person, if the
Borrowers determine that no Taxes are payable in respect thereof, the Borrowers
shall furnish, or shall cause such payor to furnish, to the Administrative
Agent, at such address, an opinion of counsel acceptable to the Administrative
Agent stating that such payment is exempt from Taxes. For purposes of
subsections (d) and (e) of this Section 2.12, the terms "United States" and
"United States person" shall have the meanings specified in Section 7701 of the
Internal Revenue Code.
(e) Each Lender Party organized under the laws of a jurisdiction outside
the United States shall, on or prior to the date of its execution and delivery
of this Agreement in the case of each Initial Lender Party and on the date of
the Assignment and Acceptance pursuant to which it becomes a Lender Party in the
case of each other Lender Party, and from time to time thereafter as requested
in writing by the Borrowers (but only so long thereafter as such Lender Party
remains lawfully able to do so), provide each of the Administrative Agent and
the Borrowers with two original Internal Revenue Service forms 1001, 4224 or
form W-8 (and, if such Lender Party delivers a form W-8, a certificate
representing that such Lender Party is not a "bank" for purposes of Section
881(c) of the Internal Revenue Code, is not a 10-percent shareholder (within the
meaning of Section 871(h)(3)(B) of the Internal Revenue Code) of the Borrowers
and is not a controlled foreign corporation related to the Borrowers (within the
meaning of Section 864(d)(4) of the Internal Revenue Code)), as appropriate, or
any successor or other form prescribed by the Internal Revenue Service,
certifying that such Lender Party is exempt from or entitled to a reduced rate
of United States withholding tax on payments pursuant to this Agreement or the
Notes or, in the case of a Lender Party providing a form W-8, certifying that
such Lender Party is a foreign corporation, partnership, estate or trust. If the
forms provided by a Lender Party at the time such Lender Party first becomes a
party to this Agreement indicate a United States interest withholding tax rate
in excess of zero, withholding tax at such rate shall be considered excluded
from Taxes unless and until such Lender Party provides the appropriate forms
certifying that a lesser rate applies, whereupon withholding tax at such lesser
rate only shall be considered excluded from Taxes for periods governed by such
forms; provided, however, that if, at the effective date of the Assignment and
Acceptance pursuant to which a Lender Party becomes a party to this Agreement,
the Lender Party assignor was entitled to payments under subsection (a) of this
Section 2.12 in respect of United States withholding tax with respect to
interest paid at such date, then, to such extent, the term Taxes shall include
(in addition to withholding taxes that may be imposed in the future or other
amounts otherwise includable in Taxes) United States withholding tax, if any,
applicable with respect to the Lender Party assignee on such date. If any form
or document referred to in this subsection (e) requires the disclosure of
information, other than information necessary to compute the tax payable and
information required on the date hereof by Internal Revenue Service form 1001,
4224 or W-8 (or the related certificate described above), that the applicable
Lender Party reasonably considers to be confidential, such Lender Party shall
give notice thereof to the Borrowers and shall not be obligated to include in
such form or document such confidential information.
(f) For any period with respect to which a Lender Party has failed to
provide the Borrowers with the appropriate form described in subsection (e)
above (other than if such failure is due to a change in law occurring after the
date on which a form originally was required to be provided or if such form
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otherwise is not required under subsection (e) above), such Lender Party shall
not be entitled to indemnification under subsection (a) or (c) of this Section
2.12 with respect to Taxes imposed by the United States by reason of such
failure; provided, however, that should a Lender Party become subject to Taxes
because of its failure to deliver a form required hereunder, the Borrowers shall
take such steps as such Lender Party shall reasonably request to assist such
Lender Party to recover such Taxes.
(g) Any Lender Party claiming any additional amounts payable pursuant to
this Section 2.12 agrees to use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to change the jurisdiction of its
Eurodollar Lending Office if the making of such a change would avoid the need
for, or reduce the amount of, any such additional amounts that may thereafter
accrue and would not, in the reasonable judgment of such Lender Party, be
disadvantageous to such Lender Party.
SECTION 2.13. Sharing of Payments, Etc. If any Lender Party shall obtain at
any time any payment (whether voluntary, involuntary, through the exercise of
any right of set-off, or otherwise, other than as a result of an assignment
pursuant to Section 9.07) (a) on account of Obligations due and payable to such
Lender Party hereunder and under the Notes at such time in excess of its ratable
share (according to the proportion of (i) the amount of such Obligations due and
payable to such Lender Party at such time to (ii) the aggregate amount of the
Obligations due and payable to all Lender Parties hereunder and under the Notes
at such time) of payments on account of the Obligations due and payable to all
Lender Parties hereunder and under the Notes at such time obtained by all the
Lender Parties at such time or (b) on account of Obligations owing (but not due
and payable) to such Lender Party hereunder and under the Notes at such time in
excess of its ratable share (according to the proportion of (i) the amount of
such Obligations owing to such Lender Party at such time to (ii) the aggregate
amount of the Obligations owing (but not due and payable) to all Lender Parties
hereunder and under the Notes at such time) of payments on account of the
Obligations owing (but not due and payable) to all Lender Parties hereunder and
under the Notes at such time obtained by all of the Lender Parties at such time,
such Lender Party shall forthwith purchase from the other Lender Parties such
interests or participating interests in the Obligations due and payable or owing
to them, as the case may be, as shall be necessary to cause such purchasing
Lender Party to share the excess payment ratably with each of them; provided,
however, that if all or any portion of such excess payment is thereafter
recovered from such purchasing Lender Party, such purchase from each other
Lender Party shall be rescinded and such other Lender Party shall repay to the
purchasing Lender Party the purchase price to the extent of such Lender Party's
ratable share (according to the proportion of (i) the purchase price paid to
such Lender Party to (ii) the aggregate purchase price paid to all Lender
Parties) of such recovery together with an amount equal to such Lender Party's
ratable share (according to the proportion of (i) the amount of such other
Lender Party's required repayment to (ii) the total amount so recovered from the
purchasing Lender Party) of any interest or other amount paid or payable by the
purchasing Lender Party in respect of the total amount so recovered. Each
Borrower agrees that any Lender Party so purchasing an interest or participating
interest from another Lender Party pursuant to this Section 2.13 may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of set-off) with respect to such interest or participating interest,
as the case may be, as fully as if such Lender Party were the direct creditor of
such Borrower in the amount of such interest or participating interest, as the
case may be.
SECTION 2.14. Use of Proceeds. The proceeds of the Advances and issuances
of Letters of Credit shall be available (and the Borrowers agree that they shall
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use such proceeds and Letters of Credit) solely for the following: (a) in the
case of the Tranche A Term Advances, (i) to pay transaction costs in connection
with the negotiation, syndication, execution and delivery of the Loan Documents;
(ii) the purchase of certain receivables (other than Excluded Receivables) from
ICG Telecom Group, Inc. and its Subsidiaries, subject to a maximum purchase
price of $50,000,000, (b) in the case of the Term Advances, to finance the cost
(including, without limitation, with respect to the cost of design, development,
acquisition construction, installation, improvement, transportation or
integration), to acquire equipment, inventory, assets, services and related
costs in connection with the Internet Service Business or Telecommunications
Business (including, without limitation, acquisitions by way of acquisitions of
real property, leasehold improvements, licenses, rights-of-use, Capitalized
Leases, installment sales and acquisitions of the capital stock of an entity
that becomes a Restricted Subsidiary to the extent of the fair market value of
the equipment, inventory or assets so acquired (but excluding goodwill)) and (c)
in the case of the Working Capital Facility, for working capital purposes.
SECTION 2.15. Defaulting Lenders. (a) In the event that, at any one time,
(i) any Lender Party shall be a Defaulting Lender, (ii) such Defaulting Lender
shall owe a Defaulted Advance to the Appropriate Borrower and (iii) such
Borrower shall be required to make any payment hereunder or under any other Loan
Document to or for the account of such Defaulting Lender, then such Borrower
may, so long as no Default shall occur or be continuing at such time and to the
fullest extent permitted by applicable law, set off and otherwise apply the
Obligation of it to make such payment to or for the account of such Defaulting
Lender against the obligation of such Defaulting Lender to make such Defaulted
Advance. In the event that, on any date, the Appropriate Borrower shall so set
off and otherwise apply its obligation to make any such payment against the
obligation of such Defaulting Lender to make any such Defaulted Advance on or
prior to such date, the amount so set off and otherwise applied by such Borrower
shall constitute for all purposes of this Agreement and the other Loan Documents
an Advance by such Defaulting Lender made on the date of such setoff. Such
Advance shall be considered, for all purposes of this Agreement, to comprise
part of the Borrowing in connection with which such Defaulted Advance was
originally required to have been made pursuant to Section 2.01, even if the
other Advances comprising such Borrowing shall be Eurodollar Rate Advances on
the date such Advance is deemed to be made pursuant to this subsection (a). The
Appropriate Borrower shall notify the Administrative Agent at any time such
Borrower exercises its right of set-off pursuant to this subsection (a) and
shall set forth in such notice (A) the name of the Defaulting Lender and the
Defaulted Advance required to be made by such Defaulting Lender and (B) the
amount set off and otherwise applied in respect of such Defaulted Advance
pursuant to this subsection (a). Any portion of such payment otherwise required
to be made by the Appropriate Borrower to or for the account of such Defaulting
Lender which is paid by such Borrower, after giving effect to the amount set off
and otherwise applied by such Borrower pursuant to this subsection (a), shall be
applied by the Administrative Agent as specified in subsection (b) or (c) of
this Section 2.15.
(b) In the event that, at any one time, (i) any Lender Party shall be a
Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Amount to
any Agent or any of the other Lender Parties and (iii) the Borrowers shall make
any payment hereunder or under any other Loan Document to the Administrative
Agent for the account of such Defaulting Lender, then the Administrative Agent
may, on its behalf or on behalf of such other Agents or such other Lender
Parties and to the fullest extent permitted by applicable law, apply at such
time the amount so paid by any of such Borrowers to or for the account of such
Defaulting Lender to the payment of each such Defaulted Amount to the extent
required to pay such Defaulted Amount. In the event that the Administrative
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Agent shall so apply any such amount to the payment of any such Defaulted Amount
on any date, the amount so applied by the Administrative Agent shall constitute
for all purposes of this Agreement and the other Loan Documents payment, to such
extent, of such Defaulted Amount on such date. Any such amount so applied by the
Administrative Agent shall be retained by the Administrative Agent or
distributed by the Administrative Agent to such other Agents or such other
Lender Parties, ratably in accordance with the respective portions of such
Defaulted Amounts payable at such time to the Administrative Agent, such other
Agents and such other Lender Parties and, if the amount of such payment made by
the Borrowers shall at such time be insufficient to pay all Defaulted Amounts
owing at such time to the Administrative Agent, such other Agents and such other
Lender Parties, in the following order of priority:
(i) first, to the Agents for any Defaulted Amounts then owing to the
Agents, ratably in accordance with such respective Defaulted Amounts then
owing to the Agents; and
(ii) second, to any other Lender Parties for any Defaulted Amounts
then owing to such other Lender Parties, ratably in accordance with such
respective Defaulted Amounts then owing to such other Lender Parties.
Any portion of such amount paid by the Borrowers for the account of such
Defaulting Lender remaining, after giving effect to the amount applied by the
Administrative Agent pursuant to this subsection (b), shall be applied by the
Administrative Agent as specified in subsection (c) of this Section 2.15.
(c) In the event that, at any one time, (i) any Lender Party shall be a
Defaulting Lender, (ii) such Defaulting Lender shall not owe a Defaulted Advance
or a Defaulted Amount and (iii) the Borrowers, any Agent or any other Lender
Party shall be required to pay or distribute any amount hereunder or under any
other Loan Document to or for the account of such Defaulting Lender, then the
Borrowers or such Agent or such other Lender Party shall pay such amount to the
Administrative Agent to be held by the Administrative Agent, to the fullest
extent permitted by applicable law, in escrow or the Administrative Agent shall,
to the fullest extent permitted by applicable law, hold in escrow such amount
otherwise held by it. Any funds held by the Administrative Agent in escrow under
this subsection (c) shall be deposited by the Administrative Agent in such
account as the Administrative Agent shall designate in writing to the Borrowers
and the Defaulting Lender, in the name and under the control of the
Administrative Agent, but subject to the provisions of this subsection (c). The
terms applicable to such account, including the rate of interest payable with
respect to the credit balance of such account from time to time, shall be the
Administrative Agent's standard terms applicable to escrow accounts maintained
with it. Any interest credited to such account from time to time shall be held
by the Administrative Agent in escrow under, and applied by the Administrative
Agent from time to time in accordance with the provisions of, this subsection
(c). The Administrative Agent shall, to the fullest extent permitted by
applicable law, apply all funds so held in escrow from time to time to the
extent necessary to make any Advances required to be made by such Defaulting
Lender and to pay any amount payable by such Defaulting Lender hereunder and
under the other Loan Documents to the Administrative Agent or any other Lender
Party, as and when such Advances or amounts are required to be made or paid and,
if the amount so held in escrow shall at any time be insufficient to make and
pay all such Advances and amounts required to be made or paid at such time, in
the following order of priority:
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(i) first, to the Agents for any amounts then due and payable by such
Defaulting Lender to the Agents hereunder, ratably in accordance with such
amounts then due and payable to the Agents;
(ii) second, to any other Lender Parties for any amount then due and
payable by such Defaulting Lender to such other Lender Parties hereunder,
ratably in accordance with such respective amounts then due and payable to
such other Lender Parties; and
(iii) third, to the Borrowers for any Advance then required to be made
by such Defaulting Lender pursuant to a Commitment of such Defaulting
Lender.
In the event that any Lender Party that is a Defaulting Lender shall, at any
time, cease to be a Defaulting Lender, any funds held by the Administrative
Agent in escrow at such time with respect to such Lender Party shall be
distributed by the Administrative Agent to such Lender Party and applied by such
Lender Party to the Obligations owing to such Lender Party at such time under
this Agreement and the other Loan Documents ratably in accordance with the
respective amounts of such Obligations outstanding at such time.
(d) The rights and remedies against a Defaulting Lender under this Section
2.15 are in addition to other rights and remedies that the Borrowers may have
against such Defaulting Lender with respect to any Defaulted Advance and that
any Agent or any Lender Party may have against such Defaulting Lender with
respect to any Defaulted Amount.
(e) Notwithstanding anything in this Section 2.15 to the contrary, upon any
payment by the Borrowers hereunder or under any other Loan Documents for the
account of a Defaulting Lender, the Administrative Agent and the Defaulting
Lender shall treat such payment as having been applied in the manner in which
the Borrower intended for purposes of calculating interest or commitment fees
owed by the Borrowers.
ARTICLE III
CONDITIONS OF LENDING AND
ISSUANCES OF LETTERS OF CREDIT
SECTION 3.01. Conditions Precedent to Initial Extension of Credit. The
obligation of each Lender to make an Advance or of the Issuing Bank to issue a
Letter of Credit on the occasion of the Initial Extension of Credit hereunder is
subject to the satisfaction of the following conditions precedent before or
concurrently with the Initial Extension of Credit:
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(a) The Administrative Agent shall have received on or before the day
of the Initial Extension of Credit the following, each dated such day
(unless otherwise specified), in form and substance satisfactory to the
Lender Parties (unless otherwise specified) and (except for the Notes) in
sufficient copies for each Lender Party:
(i) The Notes payable to the Lenders or their registered assigns.
(ii) A security agreement in substantially the form of Exhibit D
hereto (together with each other security agreement and security
agreement supplement delivered pursuant to Section 5.01(j), in each
case as amended, the "Security Agreement"), duly executed by each Loan
Party thereto;
(A) certificates representing the Pledged Shares referred to
therein accompanied by undated stock powers executed in blank and
instruments evidencing the Pledged Debt indorsed in blank,
(B) acknowledgment copies or stamped receipt copies of
proper financing statements, duly filed on or before the day of
the Initial Extension of Credit under the Uniform Commercial Code
of all jurisdictions that the Administrative Agent may deem
necessary or desirable in order to perfect and protect the first
priority liens and security interests created under the Security
Agreement, covering the Collateral described in the Security
Agreement,
(C) completed requests for information, dated on or before
the date of the Initial Extension of Credit, listing the
financing statements referred to in clause (B) above and all
other effective financing statements filed in the jurisdictions
referred to in clause (B) above that name any Loan Party as
debtor, together with copies of such other financing statements,
(D) evidence of the completion of all other recordings and
filings of or with respect to the Security Agreement that the
Administrative Agent may deem necessary or desirable in order to
perfect and protect the Liens created thereby,
(E) evidence of the insurance required by the terms of the
Security Agreement,
(F) copies of the Assigned Agreements referred to in the
Security Agreement, together with a consent to such assignment,
in substantially the form of Exhibit B to the Security Agreement,
duly executed by each party to such Assigned Agreements other
than the Loan Parties,
(G) the Pledged Account Letters referred to in the Security
Agreement, duly executed by each Pledged Account Bank referred to
in the Security Agreement, and
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(H) evidence that all other action that the Administrative
Agent may deem necessary or desirable in order to perfect and
protect the first priority liens and security interests created
under the Security Agreement have been taken (including, without
limitation, receipt of duly executed payoff letters, UCC-3
termination statements and landlords' and bailees' waiver and
consent agreements).
(iii) A guaranty in substantially the form of Exhibit E hereto
(together with each other guaranty and guaranty supplement delivered
pursuant to Section 5.01(j), in each case as amended, the "Subsidiary
Guaranty"), duly executed by each Subsidiary Guarantor.
(iv) A guaranty duly executed by the Parent.
(v) Deeds of trust, trust deeds, mortgages, leasehold mortgages
and leasehold deeds of trust in form and substance satisfactory to the
Administrative Agent and covering the properties listed on Schedules
4.01(v) and 4.01(w) hereto (together with the Assignments of Leases
and Rents referred to therein and each other mortgage delivered
pursuant to Section 5.01(j), in each case as amended, the
"Mortgages"), duly executed by the appropriate Loan Party, together
with:
(A) evidence that counterparts of the Mortgages have been
duly recorded on or before the day of the Initial Extension of
Credit in all filing or recording offices that the Administrative
Agent may deem necessary or desirable in order to create a valid
first and subsisting Lien on the property described therein in
favor of the Collateral Agent for the benefit of the Secured
Parties and that all filing and recording taxes and fees have
been paid,
(B) fully paid American Land Title Association Lender's
Extended Coverage title insurance policies (the "Mortgage
Policies") in form and substance, with endorsements and in amount
acceptable to the Administrative Agent, issued, coinsured and
reinsured by title insurers acceptable to the Administrative
Agent, insuring the Mortgages to be valid first and subsisting
Liens on the real property described therein, free and clear of
all defects (including, but not limited to, mechanics' and
materialmen's Liens) and encumbrances, excepting only Permitted
Encumbrances, and providing for such other affirmative insurance
(including endorsements for future advances under the Loan
Documents and for mechanics' and materialmen's Liens) and such
coinsurance and direct access reinsurance as the Administrative
Agent may deem necessary or desirable,
(C) American Land Title Association form surveys, dated no
more than 30 days before the day of the Initial Extension of
Credit, certified to the Administrative Agent and the issuer of
the Mortgage Policies in a manner satisfactory to the
Administrative Agent by a land surveyor duly registered and
licensed in the States in which the real property described in
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such surveys is located and acceptable to the Administrative
Agent, showing all buildings and other improvements, any off-site
improvements, the location of any easements, parking spaces,
rights of way, building set-back lines and other dimensional
regulations and the absence of encroachments, either by such
improvements or on to such property, and other defects, other
than encroachments and other defects acceptable to the
Administrative Agent,
(D) engineering, soils and other reports as to the real
properties described in the Mortgages, in form and substance and
from professional firms acceptable to the Administrative Agent,
(E) the Assignments of Leases and Rents referred to in the
Mortgages, duly executed by the appropriate Loan Party,
(F) such consents and agreements of lessors and other third
parties, and such estoppel letters and other confirmations, as
the Administrative Agent may deem necessary or desirable,
(G) evidence of the insurance required by the terms of the
Mortgages,
(H) evidence that all other action that the Administrative
Agent may deem necessary or desirable in order to create valid
first and subsisting Liens on the property described in the
Mortgages has been taken.
(vi) Certified copies of the resolutions of the Board of
Directors of each Loan Party approving the Transaction and each
Transaction Document to which it is or is to be a party, and of all
documents evidencing other necessary corporate action and governmental
and other third party approvals and consents, if any, with respect to
the Transaction and each Transaction Document to which it is or is to
be a party.
(vii) To the extent such Secretary of State customarily provides
such certificates, a copy of a certificate of the Secretary of State
of the jurisdiction of incorporation of each Loan Party, dated
reasonably near the date of the Initial Extension of Credit,
certifying (A) as to a true and correct copy of the charter of such
Loan Party and each amendment thereto on file in such Secretary's
office and (B) that (1) such amendments are the only amendments to
such Loan Party's charter on file in such Secretary's office and (2)
such Loan Party has paid all franchise taxes, if any, to the date of
such certificate and (C) such Loan Party is duly incorporated and in
good standing or presently subsisting under the laws of the State of
the jurisdiction of its incorporation.
(viii) To the extent such Secretary of State customarily provides
such certificates, a copy of a certificate of the Secretary of State
of each relevant jurisdiction, dated reasonably near the date of the
Initial Extension of Credit, stating that each Loan Party is duly
qualified and in good standing as a foreign corporation in such State
and has filed all annual reports required to be filed to the date of
such certificate.
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(ix) A certificate of each Loan Party, signed on behalf of such
Loan Party by its President or a Vice President and its Secretary or
any Assistant Secretary, dated the date of the Initial Extension of
Credit (the statements made in which certificate shall be true on and
as of the date of the Initial Extension of Credit), certifying as to
(A) the absence of any amendments to the charter of such Loan Party
since the date of the Secretary of State's certificate referred to in
Section 3.01(a)(viii), (B) a true and correct copy of the bylaws of
such Loan Party as in effect on the date on which the resolutions
referred to in Section 3.01(a)(vi) were adopted and on the date of the
Initial Extension of Credit, (C) the due incorporation and good
standing or valid existence of such Loan Party as a corporation
organized under the laws of the jurisdiction of its incorporation, and
the absence of any proceeding for the dissolution or liquidation of
such Loan Party, (D) the truth of the representations and warranties
contained in the Loan Documents as though made on and as of the date
of the Initial Extension of Credit and (E) the absence of any event
occurring and continuing, or resulting from the Initial Extension of
Credit, that constitutes a Default.
(x) A certificate of the Secretary or an Assistant Secretary of
each Loan Party certifying the names and true signatures of the
officers of such Loan Party authorized to sign each Transaction
Document to which it is or is to be a party and the other documents to
be delivered hereunder and thereunder.
(xi) Certified copies of each of the Related Documents, duly
executed by the parties thereto and in form and substance satisfactory
to the Lender Parties, together with all agreements, instruments and
other documents delivered in connection therewith as the
Administrative Agent shall request.
(xii) Certificates, in substantially the form of Exhibit F
hereto, attesting to the Solvency of each Loan Party before and after
giving effect to the Transaction, from its Chief Financial Officer.
(xiii) Evidence of insurance naming the Collateral Agent as
additional insured and loss payee with such responsible and reputable
insurance companies or associations, and in such amounts and covering
such risks, as is satisfactory to the Lender Parties.
(xiv) Certified copies of all Material Contracts of each Loan
Party and its Subsidiaries as the Administrative Agent shall request.
(xv) A Notice of Borrowing or Notice of Issuance, as applicable,
and a Borrowing Base Certificate relating to the Initial Extension of
Credit.
(xvi) Such financial, business and other information regarding
each Loan Party and its Subsidiaries as the Lender Parties shall have
requested, including, without limitation, information as to possible
contingent liabilities, tax matters, environmental matters,
obligations under Plans, Multiemployer Plans and Welfare Plans,
collective bargaining agreements and other arrangements with
employees, audited annual financial statements dated December 31,
1998, interim financial statements dated the end of the most recent
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fiscal quarter for which financial statements are available (or, in
the event the Lender Parties' due diligence review reveals material
changes since such financial statements, as of a later date within 45
days of the day of the Initial Extension of Credit), pro forma
financial statements as to the Borrower and forecasts prepared by
management of the Company, in form and substance satisfactory to the
Lender Parties, of balance sheets, income statements and cash flow
statements on a quarterly basis for the first year following the day
of the Initial Extension of Credit and on an annual basis for each
year thereafter until December 31, 2004.
(xvii) A favorable opinion of Thelen Reid & Priest LLP, counsel
for the Loan Parties, in substantially the form of Exhibit G hereto
and as to such other matters as any Lender Party through the
Administrative Agent may reasonably request.
(xviii) Favorable opinion of Sherman & Howard, local counsel to
the Loan Parties in the State of Colorado, in substantially the form
of Exhibit H hereto or in such other forms as any Lender Party through
the Administrative Agent may reasonably request.
(b) The Lender Parties shall be satisfied with the corporate and legal
structure and capitalization of each Loan Party and each of its
Subsidiaries the Equity Interests in which Subsidiaries is being pledged
pursuant to the Loan Documents, including the terms and conditions of the
charter, bylaws and each class of Equity Interest in each Loan Party and
each such Subsidiary and of each agreement or instrument relating to such
structure or capitalization.
(c) Before giving effect to the transactions contemplated by the
Transaction Documents, there shall have occurred no Material Adverse Change
since December 31, 1998.
(d) There shall exist no action, suit, investigation, litigation or
proceeding affecting any Loan Party or any of its Subsidiaries pending or
threatened before any court, governmental agency or arbitrator that (i)
could be reasonably likely to have a Material Adverse Effect or (ii)
purports to affect the legality, validity or enforceability of any
Transaction Document or the consummation of the transactions contemplated
thereby.
(e) All governmental and third party consents and approvals necessary
in connection with the Transaction Documents shall have been obtained
(without the imposition of any conditions that are not acceptable to the
Lender Parties) and shall remain in effect; all applicable waiting periods
in connection with the transactions contemplated by the Transaction
Documents shall have expired without any action being taken by any
competent authority, and no law or regulation shall be applicable in the
judgment of the Lender Parties, in each case that restrains, prevents or
imposes materially adverse conditions upon the Transaction or the rights of
the Loan Parties or their Subsidiaries freely to transfer or otherwise
dispose of, or to create any Lien on, any properties now owned or hereafter
acquired by any of them.
(f) The Lender Parties shall have completed a due diligence
investigation of the Parent and its Subsidiaries in scope, and with
results, satisfactory to the Lender Parties, and shall have been given such
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access to the management, records, books of account, contracts and
properties of the Parent and its Subsidiaries and shall have received such
financial, business and other information regarding each of the foregoing
persons as they shall have requested, including, without limitation,
information as to possible contingent liabilities, tax matters, collective
bargaining agreements and other arrangements with employees, annual
financial statements dated December 31, 1998, interim financial statements
dated the end of the most recent fiscal quarter for which financial
statements are available (or, in the event the Lenders' due diligence
review reveals material changes since such financial statements, as of a
later date within 45 days of the Effective Date), pro forma consolidated
financial statements as the Borrowers, the Parent and their Subsidiaries,
and forecasts prepared by management of the Borrowers and the Parent, in a
form satisfactory to the Lender Parties, of balance sheets and income
statements, and nothing shall have come to the attention of the Lender
Parties during the course of such due diligence investigation to lead them
to believe that any information provided to the Lender Parties was or has
become misleading, incorrect or incomplete in any material respect.
(g) The Borrower shall have paid all accrued fees of the Agents and
the Lender Parties and all accrued expenses of the Agents (including the
accrued fees and expenses of counsel to the Administrative Agent.
(h) The Related Documents shall be in full force and effect.
SECTION 3.02. Conditions Precedent to Each Borrowing and Issuance and
Renewal. The obligation of each Appropriate Lender to make an Advance (other
than a Letter of Credit Advance made by the Issuing Bank Lender pursuant to
Section 2.03(c) on the occasion of each Borrowing (including the initial
Borrowing), and the obligation of the Issuing Bank to issue a Letter of Credit
(including the initial issuance) or renew a Letter of Credit, shall be subject
to the further conditions precedent that on the date of such Borrowing or
issuance or renewal (a) the following statements shall be true and the
acceptance by the Borrower of the proceeds of such Borrowing or of such Letter
of Credit or the renewal of such Letter of Credit shall constitute a
representation and warranty by the Borrower that both on the date of such notice
and on the date of such Borrowing or issuance or renewal such statements are
true):
(i) the representations and warranties contained in each Loan Document
are correct on and as of such date, before and after giving effect to such
Borrowing or issuance or renewal and to the application of the proceeds
therefrom, as though made on and as of such date, other than any such
representations or warranties that, by their terms, refer to a specific
date other than the date of such Borrowing or issuance or renewal, in which
case as of such specific date;
(ii) no Default has occurred and is continuing, or would result from
such Borrowing or issuance or renewal or from the application of the
proceeds therefrom; and
(iii) for each Advance or issuance or renewal of any Letter of Credit,
the sum of the Loan Values of the Eligible Collateral exceeds the aggregate
principal amount of the Advances plus the aggregate Available Amount of all
Letters of Credit to be outstanding after giving effect to such Advance or
issuance or renewal, respectively;
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and (b) the Administrative Agent shall have received (i) a Borrowing Base
Certificate signed by a duly authorized officer of the Appropriate Borrower
dated the date of such Borrowing or issuance or renewal; and (ii) such other
approvals, opinions or documents as any Appropriate Lender through the
Administrative Agent may reasonably request.
SECTION 3.03. Determinations Under Section 3.01. For purposes of
determining compliance with the conditions specified in Section 3.01, each
Lender Party shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lender Parties unless an
officer of the Administrative Agent responsible for the transactions
contemplated by the Loan Documents shall have received notice from such Lender
Party prior to the Initial Extension of Credit specifying its objection thereto
and, if the Initial Extension of Credit consists of a Borrowing, such Lender
Party shall not have made available to the Administrative Agent such Lender
Party's ratable portion of such Borrowing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. The Parent
and each Borrower represents and warrants as follows:
(a) Each Loan Party and each of its Subsidiaries (i) is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (ii) is duly qualified and in good
standing as a foreign corporation in each other jurisdiction in which it
owns or leases property or in which the conduct of its business requires it
to so qualify or be licensed except where the failure to so qualify or be
licensed could not be reasonably likely to have a Material Adverse Effect
and (iii) has all requisite corporate power and authority (including,
without limitation, all governmental licenses, permits and other approvals)
to own or lease and operate its properties and to carry on its business as
now conducted and as proposed to be conducted. All of the outstanding
Equity Interests in each Borrower has been validly issued, is fully paid
and non-assessable and is owned by the Parent free and clear of all Liens,
except those created under the Collateral Documents.
(b) Set forth on Schedule 4.01(b) hereto is a complete and accurate
list of all Subsidiaries of each Loan Party, showing as of the date hereof
(as to each such Subsidiary) the jurisdiction of its incorporation, the
number of shares of each class of its Equity Interests authorized, and the
number outstanding, on the date hereof and the percentage of each such
class of its Equity Interests owned (directly or indirectly) by such Loan
Party and the number of shares covered by all outstanding options,
warrants, rights of conversion or purchase and similar rights at the date
hereof. All of the outstanding Equity Interests in each Loan Party's
Subsidiaries has been validly issued, are fully paid and non-assessable and
are owned by such Loan Party or one or more of its Subsidiaries free and
clear of all Liens, except those created under the Collateral Documents.
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(c) The execution, delivery and performance by each Loan Party of each
Transaction Document to which it is or is to be a party, and the
consummation of the Transaction, are within such Loan Party's corporate
powers, have been duly authorized by all necessary corporate action, and do
not (i) contravene such Loan Party's charter or bylaws, (ii) violate any
law, rule, regulation (including, without limitation, Regulation X of the
Board of Governors of the Federal Reserve System), order, writ, judgment,
injunction, decree, determination or award, (iii) conflict with or result
in the breach of, or constitute a default or require any payment to be made
under, any contract, loan agreement, indenture, mortgage, deed of trust,
lease or other instrument binding on or affecting any Loan Party, any of
its Subsidiaries or any of their properties in such a manner as would be
reasonably likely to have a Material Adverse Effect or (iv) except for the
Liens created under the Loan Documents, result in or require the creation
or imposition of any Lien upon or with respect to any of the properties of
any Loan Party or any of its Subsidiaries. No Loan Party or any of its
Subsidiaries is in violation of any such law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award or in breach of
any such contract, loan agreement, indenture, mortgage, deed of trust,
lease or other instrument, the violation or breach of which could be
reasonably likely to have a Material Adverse Effect.
(d) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body or any other
third party is required for (i) the due execution, delivery, recordation,
filing or performance by any Loan Party of any Transaction Document to
which it is or is to be a party, or for the consummation of the
Transaction, (ii) the grant by any Loan Party of the Liens granted by it
pursuant to the Collateral Documents, (iii) the perfection or maintenance
of the Liens created under the Collateral Documents (including the first
priority nature thereof) or (iv) the exercise by any Agent or any Lender
Party of its rights under the Loan Documents or the remedies in respect of
the Collateral pursuant to the Collateral Documents, except for the
authorizations, approvals, actions, notices and filings referred to herein
or listed on Schedule 4.01(d) hereto, all of which have been duly obtained,
taken, given or made and are in full force and effect. All applicable
waiting periods in connection with the Transaction have expired without any
action having been taken by any competent authority restraining, preventing
or imposing materially adverse conditions upon the Transaction or the
rights of the Loan Parties or their Subsidiaries freely to transfer or
otherwise dispose of, or to create any Lien on, any properties now owned or
hereafter acquired by any of them.
(e) This Agreement has been, and each other Transaction Document when
delivered hereunder will have been, duly executed and delivered by each
Loan Party party thereto. This Agreement is, and each other Transaction
Document when delivered hereunder will be, the legal, valid and binding
obligation of each Loan Party party thereto, enforceable against such Loan
Party in accordance with its terms.
(f) There is no action, suit, investigation, litigation or proceeding
affecting any Loan Party or any of its Subsidiaries, including any
Environmental Action, pending or threatened before any court, governmental
agency or arbitrator that (i) could be reasonably likely to have a Material
Adverse Effect or (ii) purports to affect the legality, validity or
enforceability of any Transaction Document or the consummation of the
Transaction.
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(g) The Consolidated and consolidating balance sheets of the Parent
and its Subsidiaries as at December 31, 1998, and the related Consolidated
and consolidating statements of income and Consolidated statement of cash
flows of the Parent and its Subsidiaries for the fiscal year then ended,
accompanied by an unqualified opinion of KPMG Peat Marwick LLP, independent
public accountants, and the Consolidated and consolidating unaudited
balance sheets of the Parent and its Subsidiaries as at June 30, 1999, and
the related unaudited Consolidated and consolidating statements of income
and Consolidated statement of cash flows of the Parent and its Subsidiaries
for the six months then ended, duly certified by the Chief Financial
Officer of the Parent, copies of which have been furnished to each Lender
Party, in each case fairly present, subject, in the case of said balance
sheet as at June 30, 1999, and said statements of income and cash flows for
the six months then ended, to year-end audit adjustments, the Consolidated
and consolidating financial condition of the Parent and its Subsidiaries as
at such dates and the Consolidated and consolidating results of operations
of the Parent and its Subsidiaries for the periods ended on such dates, all
in accordance with generally accepted accounting principles applied on a
consistent basis, and since December 31, 1998, there has been no Material
Adverse Change.
(h) The Consolidated and consolidating forecasted balance sheets,
statements of income and statements of cash flows of the Parent and its
Subsidiaries delivered to the Lender Parties pursuant to Section
3.01(a)(xvi) or 5.03 were prepared in good faith on the basis of the
assumptions stated therein, which assumptions were fair in light of the
conditions existing at the time of delivery of such forecasts, and
represented, at the time of delivery, the Parent's best estimate of its
future financial performance.
(i) Neither the Pre-Commitment Information nor any other information,
exhibit or report furnished by or on behalf of any Loan Party to any Agent
or any Lender Party in connection with the negotiation and syndication of
the Loan Documents or pursuant to the terms of the Loan Documents contained
any untrue statement of a material fact or omitted to state a material fact
necessary to make the statements made therein not misleading.
(j) The Borrower is not engaged in the business of extending credit
for the purpose of purchasing or carrying Margin Stock, and no proceeds of
any Advance or drawings under any Letter of Credit will be used to purchase
or carry any Margin Stock or to extend credit to others for the purpose of
purchasing or carrying any Margin Stock.
(k) Neither any Loan Party nor any of its Subsidiaries is an
"investment company", or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended. Neither any Loan
Party nor any of its Subsidiaries is a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding company"
or of a "subsidiary company" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended.
Neither the making of any Advances, nor the issuance of any Letters of
Credit, nor the application of the proceeds or repayment thereof by the
Borrower, nor the consummation of the other transactions contemplated by
the Transaction Documents, will violate any provision of any such Act or
any rule, regulation or order of the Securities and Exchange Commission
thereunder.
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(l) Neither any Loan Party nor any of its Subsidiaries is a party to
any indenture, loan or credit agreement or any lease or other agreement or
instrument or subject to any charter or corporate restriction that could
reasonably be expected to have a Material Adverse Effect.
(m) All filings and other actions necessary or desirable to perfect
and protect the security interest in the Collateral created under the
Collateral Documents have been duly made or taken and are in full force and
effect, and the Collateral Documents create in favor of the Collateral
Agent for the benefit of the Secured Parties a valid and, together with
such filings and other actions, perfected first priority security interest
in the Collateral, securing the payment of the Secured Obligations, and all
filings and other actions necessary or desirable to perfect and protect
such security interest have been duly taken. The Loan Parties are the legal
and beneficial owners of the Collateral free and clear of any Lien, except
for the liens and security interests created or permitted under the Loan
Documents.
(n) Each Loan Party is, individually and together with its
Subsidiaries, Solvent.
(o) (i) No ERISA Event has occurred or is reasonably expected to occur
with respect to any Plan.
(ii) Schedule B (Actuarial Information) to the most recent annual
report (Form 5500 Series) for each Plan, copies of which have been filed
with the Internal Revenue Service and furnished to the Lender Parties, is
complete and accurate and fairly presents the funding status of such Plan,
and since the date of such Schedule B there has been no material adverse
change in such funding status.
(iii) Neither any Loan Party nor any ERISA Affiliate has incurred or
is reasonably expected to incur any Withdrawal Liability to any
Multiemployer Plan.
(iv) Neither any Loan Party nor any ERISA Affiliate has been notified
by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or has been terminated, within the meaning of Title IV of
ERISA, and no such Multiemployer Plan is reasonably expected to be in
reorganization or to be terminated, within the meaning of Title IV of
ERISA.
(p) (i) The operations and properties of each Loan Party and each of
its Subsidiaries comply in all material respects with all applicable
Environmental Laws and Environmental Permits, all past non-compliance with
such Environmental Laws and Environmental Permits has been resolved without
ongoing obligations or costs, and no circumstances exist that could be
reasonably likely to (A) form the basis of an Environmental Action against
any Loan Party or any of its Subsidiaries or any of their properties that
could have a Material Adverse Effect or (B) cause any such property to be
subject to any restrictions on ownership, occupancy, use or transferability
under any Environmental Law.
(ii) None of the properties currently or formerly owned or operated by
any Loan Party or any of its Subsidiaries is listed or proposed for listing
on the NPL or on the CERCLIS or any analogous foreign, state or local list
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or is adjacent to any such property; there are no and never have been any
underground or aboveground storage tanks or any surface impoundments,
septic tanks, pits, sumps or lagoons in which Hazardous Materials are being
or have been treated, stored or disposed on any property currently owned or
operated by any Loan Party or any of its Subsidiaries or, to the best of
its knowledge, on any property formerly owned or operated by any Loan Party
or any of its Subsidiaries; there is no asbestos or asbestos-containing
material on any property currently owned or operated by any Loan Party or
any of its Subsidiaries; and Hazardous Materials have not been released,
discharged or disposed of on any property currently or formerly owned or
operated by any Loan Party or any of its Subsidiaries.
(iii) Neither any Loan Party nor any of its Subsidiaries is
undertaking, and has not completed, either individually or together with
other potentially responsible parties, any investigation or assessment or
remedial or response action relating to any actual or threatened release,
discharge or disposal of Hazardous Materials at any site, location or
operation, either voluntarily or pursuant to the order of any governmental
or regulatory authority or the requirements of any Environmental Law; and
all Hazardous Materials generated, used, treated, handled or stored at, or
transported to or from, any property currently or formerly owned or
operated by any Loan Party or any of its Subsidiaries have been disposed of
in a manner not reasonably expected to result in material liability to any
Loan Party or any of its Subsidiaries.
(q) (i) Neither any Loan Party nor any of its Subsidiaries is party to
any tax sharing agreement other than the Tax Sharing Agreement.
(ii) Except as disclosed on Schedule 4.01(q), (i) all tax returns,
statements, reports and forms (including estimated tax or information
returns) (collectively, the "Tax Returns") required to be filed with any
taxing authority by, or with respect to, each Loan Party and their
Subsidiaries have been timely filed in accordance with all applicable laws;
(ii) each Loan Party and their Subsidiaries has timely paid or made
adequate provision for payment of all taxes that are shown as due and
payable on Tax Returns that have been so filed or that are otherwise
required to be paid (including without limitation, assessments, interest
and penalties) and, as of the time of filing, each Tax Return was accurate
and complete and correctly reflected the facts regarding income, business,
assets, operations, activities and the status of each Loan Party and their
Subsidiaries (other than taxes which are being contested in good faith and
for which adequate reserves are reflected on the financial statements
delivered hereunder) and (iii) each Loan Party and its Subsidiaries have
made adequate provision for all taxes payable by such Loan Party and its
Subsidiaries for which no Tax Return has yet been filed or which are
otherwise due.
(iii) Set forth on Part I of Schedule 4.01(q) hereto is a complete and
accurate list, as of the date hereof, of each taxable year of each Loan
Party and each of its Subsidiaries and Affiliates for which Federal income
tax returns have been filed and for which the expiration of the applicable
statute of limitations for assessment or collection has not occurred by
reason of extension or otherwise (an "Open Year").
(iv) The aggregate unpaid amount, as of the date hereof, of
adjustments to the Federal income tax liability of each Loan Party and each
of its Subsidiaries and Affiliates proposed by the Internal Revenue Service
with respect to Open Years does not exceed $10,000,000. Set forth on Part
II of Schedule 4.01(q) hereto is a complete and accurate description, as of
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the date hereof, of each such item that separately, for all such Open
Years, together with applicable interest and penalties, exceeds $1,000,000.
No issues have been raised by the Internal Revenue Service in respect of
Open Years that, in the aggregate, could be reasonably likely to have a
Material Adverse Effect.
(v) The aggregate unpaid amount, as of the date hereof, of adjustments
to the state, local and foreign tax liability of each Loan Party and its
Subsidiaries and Affiliates proposed by all state, local and foreign taxing
authorities (other than amounts arising from adjustments to Federal income
tax returns) does not exceed $10,000,000. No issues have been raised by
such taxing authorities that, in the aggregate, could be reasonably likely
to have a Material Adverse Effect.
(r) Neither the business nor the properties of any Loan Party or any
of its Subsidiaries are affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo,
act of God or of the public enemy or other casualty (whether or not covered
by insurance) that could be reasonably likely to have a Material Adverse
Effect.
(s) Set forth on Schedule 4.01(s) hereto is a complete and accurate
list of all Existing Debt, showing as of the date hereof the obligor and
the principal amount outstanding thereunder.
(t) Set forth on Schedule 4.01(t) hereto is a complete and accurate
list of all Liens on the property or assets of any Loan Party or any of its
Subsidiaries, showing as of the date hereof the lienholder thereof, the
principal amount of the obligations secured thereby and the property or
assets of such Loan Party or such Subsidiary subject thereto.
(u) Set forth on Schedule 4.01(u) hereto is a complete and accurate
list of all real property owned by any Loan Party or any of its
Subsidiaries, showing as of the date hereof the street address, county or
other relevant jurisdiction, state, record owner and book and estimated
fair value thereof. Each Loan Party or such Subsidiary has good, marketable
and insurable fee simple title to such real property, free and clear of all
Liens, other than Liens created or permitted by the Loan Documents.
(v) Set forth on Schedule 4.01(v) hereto is a complete and accurate
list of all leases of real property under which any Loan Party or any of
its Subsidiaries is the lessee, showing as of the date hereof the street
address, county or other relevant jurisdiction, state, lessor, lessee,
expiration date and annual rental cost thereof. Each such lease is the
legal, valid and binding obligation of the lessor thereof, enforceable in
accordance with its terms.
(w) Set forth on Schedule 4.01(w) hereto is a complete and accurate
list of all Investments held by any Loan Party or any of its Subsidiaries
on the date hereof, showing as of the date hereof the amount, obligor or
issuer and maturity, if any, thereof.
(x) Set forth on Schedule 4.01(x) hereto is a complete and accurate
list of all patents, trademarks, trade names, service marks and copyrights,
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and all applications therefor and licenses thereof, of each Loan Party or
any of its Subsidiaries, showing as of the date hereof the jurisdiction in
which registered, the registration number, the date of registration and the
expiration date.
(y) Set forth on Schedule 4.01(y) hereto is a complete and accurate
list of all Material Contracts of each Loan Party and its Subsidiaries,
showing as of the date hereof the parties, subject matter and term thereof.
Each such Material Contract has been duly authorized, executed and
delivered by all parties thereto, has not been amended or otherwise
modified, is in full force and effect and is binding upon and enforceable
against all parties thereto in accordance with its terms, and there exists
no default under any Material Contract by any party thereto.
(z) Each Borrower has (i) initiated a review and assessment of all
areas within its and each of its Subsidiaries' business and operations
(including those affected by suppliers, vendors and customers) that could
be adversely affected by the risk that computer applications used by such
Borrower or any of its Subsidiaries (or suppliers, vendors and customers)
may be unable to recognize and perform properly date-sensitive functions
involving certain dates prior to and any date after December 31, 1999 (the
"Year 2000 Problem"), (ii) developed a plan and timetable for addressing
the Year 2000 Problem on a timely basis and (iii) to date, implemented that
plan in accordance with such timetable. Based on the foregoing, each
Borrower believes that all computer applications (including those of its
suppliers, vendors and customers) that are material to its or any of its
Subsidiaries' business and operations are reasonably expected on a timely
basis to be able to perform properly date-sensitive functions for all dates
before and after January 1, 2000 ("Year 2000 Compliant"), except to the
extent that a failure to do so could not reasonably be expected to have a
Material Adverse Effect.
ARTICLE V
COVENANTS OF THE LOAN PARTIES
SECTION 5.01. Affirmative Covenants. So long as any Advance or any other
Obligation of any Loan Party under any Loan Document shall remain unpaid, any
Letter of Credit shall be outstanding or any Lender Party shall have any
Commitment hereunder, each Loan Party will:
(a) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects, with all applicable laws,
rules, regulations and orders, such compliance to include, without
limitation, compliance with ERISA and the Racketeer Influenced and Corrupt
Organizations Chapter of the Organized Crime Control Act of 1970.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its
Subsidiaries to pay and discharge, before the same shall become delinquent,
(i) all taxes, assessments and governmental charges or levies imposed upon
it or upon its property and (ii) all lawful claims that, if unpaid, might
by law become a Lien upon its property; provided, however, that neither the
Loan Parties nor any of their Subsidiaries shall be required to pay or
discharge any such tax, assessment, charge or claim that is being contested
in good faith and by proper proceedings and as to which appropriate
reserves are being maintained.
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(c) Compliance with Environmental Laws. Comply, and cause each of its
Subsidiaries and all lessees and other Persons operating or occupying its
properties to comply, in all material respects, with all applicable
Environmental Laws and Environmental Permits; obtain and renew and cause
each of its Subsidiaries to obtain and renew all Environmental Permits
necessary for its operations and properties; and conduct, and cause each of
its Subsidiaries to conduct, any investigation, study, sampling and
testing, and undertake any cleanup, removal, remedial or other action
necessary to remove and clean up all Hazardous Materials from any of its
properties, in accordance with the requirements of all Environmental Laws;
provided, however, that neither the Loan Parties nor any of their
Subsidiaries shall be required to undertake any such cleanup, removal,
remedial or other action to the extent that its obligation to do so is
being contested in good faith and by proper proceedings and appropriate
reserves are being maintained with respect to such circumstances.
(d) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such risks
as is usually carried by companies engaged in similar businesses and owning
similar properties in the same general areas in which such Loan Party or
such Subsidiary operates.
(e) Preservation of Corporate Existence, Etc. Preserve and maintain,
and cause each of its Subsidiaries to preserve and maintain, its existence,
legal structure, rights (charter and statutory), permits, licenses,
approvals, privileges and franchises (including, without limitation, any
permits, licenses, approvals, privileges and franchises issued to such Loan
Party by the FCC or any PUC); provided, however, that each Borrower and its
Subsidiaries may consummate any merger or consolidation permitted under
Section 5.02(d) and provided further that neither any Loan Party nor any of
its Subsidiaries shall be required to preserve any right, permit, license,
approval, privilege or franchise if the Board of Directors of such Loan
Party or such Subsidiary shall determine that the preservation thereof is
no longer desirable in the conduct of the business of such Loan Party or
such Subsidiary, as the case may be, and that the loss thereof is not
disadvantageous in any material respect to such Loan Party, such Subsidiary
or the Lender Parties.
(f) Visitation Rights. At any reasonable time and from time to time,
permit any of the Agents or any of the Lender Parties, or any agents or
representatives thereof, to examine and make copies of and abstracts from
the records and books of account of, and visit the properties of, such Loan
Party and any of its Subsidiaries, and to discuss the affairs, finances and
accounts of such Loan Party and any of its Subsidiaries with any of their
officers or directors and with their independent certified public
accountants.
(g) Keeping of Books. Keep, and cause each of its Subsidiaries to
keep, proper books of record and account, in which full and correct entries
shall be made of all financial transactions and the assets and business of
such Loan Party and each such Subsidiary in accordance with generally
accepted accounting principles in effect from time to time.
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(h) Maintenance of Properties, Etc. Maintain and preserve, and cause
each of its Subsidiaries to maintain and preserve, all of its properties
that are used or useful in the conduct of its business in good working
order and condition, ordinary wear and tear excepted.
(i) Transactions with Affiliates. Conduct, and cause each of its
Subsidiaries to conduct, all transactions otherwise permitted under the
Loan Documents with any of their Affiliates on terms that are fair and
reasonable and no less favorable to such Loan Party or such Subsidiary than
it would obtain in a comparable arm's-length transaction with a Person not
an Affiliate.
(j) Covenant to Guarantee Obligations and Give Security. Upon (x) the
request of the Collateral Agent following the occurrence and during the
continuance of a Default, (y) the formation or acquisition of any new
direct or indirect Subsidiaries by any Loan Party or (z) the acquisition of
any property by any Loan Party, and such property, in the judgment of the
Collateral Agent, shall not already be subject to a perfected first
priority security interest in favor of the Collateral Agent for the benefit
of the Secured Parties, then each Loan Party shall, in each case at the
such Loan Party's expense:
(i) in connection with the formation or acquisition of a
Subsidiary, within 10 days after such formation or acquisition, cause
each such Subsidiary, and cause each direct and indirect parent of
such Subsidiary (if it has not already done so), to duly execute and
deliver to the Collateral Agent a guaranty or guaranty supplement, in
form and substance satisfactory to the Collateral Agent, guaranteeing
the other Loan Parties' obligations under the Loan Documents,
(ii) within 10 days after such request, formation or acquisition,
furnish to the Collateral Agent a description of the real and personal
properties of the Loan Parties and their respective Subsidiaries in
detail satisfactory to the Collateral Agent,
(iii) within 15 days after such request, formation or
acquisition, duly execute and deliver, and cause each such Subsidiary
(other than ICG 161 and ICG Corporate Headquarters) and each direct
and indirect parent of such Subsidiary (if it has not already done so)
to duly execute and deliver, to the Collateral Agent mortgages,
pledges, assignments, security agreement supplements and other
security agreements, as specified by and in form and substance
satisfactory to the Collateral Agent, securing payment of all the
Obligations of the applicable Loan Party, such Subsidiary or such
parent, as the case may be, under the Loan Documents and constituting
Liens on all such properties,
(iv) within 30 days after such request, formation or acquisition,
take, and cause such Subsidiary (other than ICG 161 and ICG Corporate
Headquarters) or such parent to take, whatever action (including,
without limitation, the recording of mortgages, the filing of Uniform
Commercial Code financing statements, the giving of notices and the
endorsement of notices on title documents) may be necessary or
advisable in the opinion of the Collateral Agent to vest in the
Collateral Agent (or in any representative of the Collateral Agent
designated by it) valid and subsisting Liens on the properties
purported to be subject to the mortgages, pledges, assignments,
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security agreement supplements and security agreements delivered
pursuant to this Section 5.01(j), enforceable against all third
parties in accordance with their terms,
(v) within 70 days after such request, formation or acquisition,
deliver to the Collateral Agent, upon the request of the Collateral
Agent in its sole discretion, a signed copy of a favorable opinion,
addressed to the Collateral Agent and the other Secured Parties, of
counsel for the Loan Parties reasonably acceptable to the Collateral
Agent as to the matters contained in clauses (i), (iii) and (iv) above
(subject to customary limitations), as to such guaranties, guaranty
supplements, mortgages, pledges, assignments, security agreement
supplements and security agreements being legal, valid and binding
obligations of each Loan Party thereto enforceable in accordance with
their terms, as to the matters contained in clause (iv) above, as to
such recordings, filings, notices, endorsements and other actions
being sufficient to create valid perfected Liens on such properties,
and as to such other matters as the Collateral Agent may reasonably
request,
(vi) as promptly as practicable after such request, formation or
acquisition, deliver, upon the request of the Collateral Agent in its
sole discretion, to the Collateral Agent with respect to each parcel
of real property owned or held by the entity that is the subject of
such request, formation or acquisition title reports, surveys and
engineering, soils and other reports, and environmental assessment
reports, each in scope, form and substance satisfactory to the
Collateral Agent, provided, however, that to the extent that any Loan
Party or any of its Subsidiaries shall have otherwise received any of
the foregoing items with respect to such real property, such items
shall, promptly after the receipt thereof, be delivered to the
Collateral Agent,
(vii) upon the occurrence and during the continuance of a
Default, promptly cause to be deposited any and all cash dividends
paid or payable to it or any of its Subsidiaries from any of its
Subsidiaries from time to time into the Cash Collateral Account, and
with respect to all other dividends paid or payable to it or any of
its Subsidiaries from time to time, promptly execute and deliver, or
cause such Subsidiary to promptly execute and deliver, as the case may
be, any and all further instruments and take or cause such Subsidiary
to take, as the case may be, all such other action as the Collateral
Agent may deem necessary or desirable in order to obtain and maintain
from and after the time such dividend is paid or payable a perfected,
first priority lien on and security interest in such dividends, and
(viii) at any time and from time to time, promptly execute and
deliver any and all further instruments and documents and take all
such other action as the Collateral Agent may deem necessary or
desirable in obtaining the full benefits of, or in perfecting and
preserving the Liens of, such guaranties, mortgages, pledges,
assignments, security agreement supplements, intellectual property
security agreement supplements and security agreements.
(k) Further Assurances. (i) Promptly upon request by any Agent, or any
Lender Party through the Administrative Agent, correct, and cause each of
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its Subsidiaries promptly to correct, any material defect or error that may
be discovered in any Loan Document or in the execution, acknowledgment,
filing or recordation thereof, and
(ii) Promptly upon request by any Agent, or any Lender Party through
the Administrative Agent, do, execute, acknowledge, deliver, record,
re-record, file, re-file, register and re-register any and all such further
acts, deeds, conveyances, pledge agreements, mortgages, deeds of trust,
trust deeds, assignments, financing statements and continuations thereof,
termination statements, notices of assignment, transfers, certificates,
assurances and other instruments as any Agent, or any Lender Party through
the Administrative Agent, may reasonably require from time to time in order
to (A) carry out more effectively the purposes of the Loan Documents, (B)
to the fullest extent permitted by applicable law, subject any Loan Party's
or any of its Subsidiaries' (other than ICG 161 and ICG Corporate
Headquarters) properties, assets, rights or interests to the Liens now or
hereafter intended to be covered by any of the Collateral Documents, (C)
perfect and maintain the validity, effectiveness and priority of any of the
Collateral Documents and any of the Liens intended to be created thereunder
and (D) assure, convey, grant, assign, transfer, preserve, protect and
confirm more effectively unto the Secured Parties the rights granted or now
or hereafter intended to be granted to the Secured Parties under any Loan
Document or under any other instrument executed in connection with any Loan
Document to which any Loan Party or any of its Subsidiaries is or is to be
a party, and cause each of its Subsidiaries to do so.
(l) Performance of Related Documents. Perform and observe, and cause
each of its Subsidiaries to perform and observe, all of the terms and
provisions of each Related Document to be performed or observed by it,
maintain each such Related Document in full force and effect, enforce such
Related Document in accordance with its terms, take all such action to such
end as may be from time to time requested by the Administrative Agent and,
upon request of the Administrative Agent, make to each other party to each
such Related Document such demands and requests for information and reports
or for action as any Loan Party or any of its Subsidiaries is entitled to
make under such Related Document.
(m) Compliance with Terms of Leaseholds. Make all payments and
otherwise perform all obligations in respect of all leases of real property
to which such Loan Party or any of its Subsidiaries is a party, keep such
leases in full force and effect and not allow such leases to lapse or be
terminated or any rights to renew such leases to be forfeited or cancelled,
notify the Administrative Agent of any default by any party with respect to
such leases and cooperate with the Administrative Agent in all respects to
cure any such default, and cause each of its Subsidiaries to do so, except
where the failure to do so either individually or in the aggregate, could
not be reasonably likely to have a Material Adverse Effect.
(n) Interest Rate Hedging. If the three month Eurodollar Rate exceeds
9% per annum for 15 consecutive Business Days at any time, enter into and
maintain at all times thereafter, interest rate Hedge Agreements with
Persons acceptable to the Administrative Agent and the Required Lenders,
covering a notional amount of not less than 50% of the Commitments under
all of the Facilities at such time.
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(o) Performance of Material Contracts. Perform and observe all the
terms and provisions of each Material Contract to be performed or observed
by it, maintain each such Material Contract in full force and effect,
enforce each such Material Contract in accordance with its terms, take all
such action to such end as may be from time to time reasonably requested by
the Administrative Agent and, upon request of the Administrative Agent,
make to each other party to each such Material Contract such demands and
requests for information and reports or for action as any Loan Party or any
of its Subsidiaries is entitled to make under such Material Contract, and
cause each of its Subsidiaries to do so, except, in any case, where the
failure to do so, either individually or in the aggregate, could not be
reasonably likely to have a Material Adverse Effect.
(p) Lease Arrangements. Insure that ICG Equipment is lessor under
master leases and other lease arrangements in respect of which the lease
payments, together with the residual value of the property, plant and
equipment subject thereto, are sufficient to pay all amounts due and
payable during the term of this Agreement in respect of all Debt of the
Parent and its Subsidiaries.
SECTION 5.02. Negative Covenants. So long as any Advance or any other
Obligation of any Loan Party under any Loan Document shall remain unpaid, any
Letter of Credit shall be outstanding or any Lender Party shall have any
Commitment hereunder, no Loan Party shall, at any time:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit
any of its Subsidiaries to create, incur, assume or suffer to exist, any
Lien on or with respect to any of its properties of any character
(including, without limitation, accounts) whether now owned or hereafter
acquired, or sign or file or suffer to exist, or permit any of its
Subsidiaries to sign or file or suffer to exist, under the Uniform
Commercial Code of any jurisdiction, a financing statement that names any
Loan Party or any of its Subsidiaries as debtor, or sign or suffer to
exist, or permit any of its Subsidiaries to sign or suffer to exist, any
security agreement authorizing any secured party thereunder to file such
financing statement, or assign, or permit any of its Subsidiaries to
assign, any accounts or other right to receive income, except:
(i) Liens created under the Loan Documents;
(ii) Permitted Liens;
(iii) Liens existing on the date hereof or required on the
Effective Date to be provided in the future and, in each case,
described on Schedule 4.01(u) hereto;
(iv) purchase money Liens upon or in property acquired or held by
any Borrower or any of its Subsidiaries in the ordinary course of
business to secure the purchase price of such property or to secure
Debt incurred solely for the purpose of financing the acquisition of
any such property to be subject to such Liens, or Liens existing on
any such property at the time of acquisition (other than any such
Liens created in contemplation of such acquisition that do not secure
the purchase price), or extensions, renewals or replacements of any of
the foregoing for the same or a lesser amount; provided, however, that
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no such Lien shall extend to or cover any property other than the
property being acquired, and no such extension, renewal or replacement
shall extend to or cover any property not theretofore subject to the
Lien being extended, renewed or replaced; and provided further that
the aggregate principal amount of the Debt secured by Liens permitted
by this clause (iv) shall not exceed the amount permitted under
Section 5.02(b)(iii)(B) at any time outstanding;
(v) Liens arising in connection with Capitalized Leases of any
Borrower or any of its Subsidiaries permitted under Section
5.02(b)(iii)(C); provided that no such Lien shall extend to or cover
any Collateral or assets other than the assets subject to such
Capitalized Leases;
(vi) Liens on property of a Person existing at the time such
Person is merged into or consolidated with such Borrower or any
Subsidiary of the Borrower or becomes a Subsidiary of such Borrower;
provided that such Liens were not created in contemplation of such
merger, consolidation or investment and do not extend to any assets
other than those of the Person merged into or consolidated with such
Borrower or such Subsidiary or acquired by such Borrower or such
Subsidiary; and
(vii) Liens in connection with Debt permitted under Section
5.02(b)(iii)(E); provided that no such Lien shall extend to or cover
any Collateral other than cash and Cash Equivalents in an amount equal
to the amount of such Debt.
(b) Debt. Create, incur, assume or suffer to exist, or permit any of
its Subsidiaries to create, incur, assume or suffer to exist, any Debt,
except:
(i) in the case of any Borrower,
(A) Debt in respect of Hedge Agreements designed to hedge
against fluctuations in interest rates or foreign exchange rates
incurred in the ordinary course of business and consistent with
prudent business practice.
(B) Debt owed to a wholly owned Subsidiary of such Borrower,
which Debt (x) shall, in the case of Debt owed to a Loan Party,
constitute Pledged Debt, (y) shall be on terms acceptable to the
Required Lenders and (z) shall be evidenced by promissory notes
in form and substance satisfactory to the Required Lenders and
such promissory notes shall, in the case of Debt owed to a Loan
Party, be pledged as security for the Obligations of the holder
thereof under the Loan Documents to which such holder is a party
and delivered to the Collateral Agent pursuant to the terms of
the Security Agreement.
(ii) in the case of any Subsidiary of any Borrower, Debt owed to
such Borrower or to a wholly owned Subsidiary of such Borrower,
provided that, in each case, such Debt (x) shall, in the case of Debt
owed to a Loan Party, constitute Pledged Debt, (y) shall be on terms
acceptable to the Required Lenders and (z) shall be evidenced by
promissory notes in form and substance satisfactory to the Required
Lenders and such promissory notes shall, in the case of Debt owed to a
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Loan Party, be pledged as security for the Obligations of the holder
thereof under the Loan Documents to which such holder is a party and
delivered to the Collateral Agent pursuant to the terms of the
Security Agreement; and
(iii) in the case of the Parent and its Subsidiaries,
(A) Debt under the Loan Documents,
(B) Debt secured by Liens permitted by Section 5.02(a)(iv)
not to exceed in the aggregate $25,000,000 during any consecutive
12-month period,
(C) Capitalized Leases of any Borrower or any of its
Subsidiaries not to exceed in the aggregate $385,000,000 at any
time outstanding (taking into account any reductions in such
Capitalized Leases).
(D) the Existing Debt, and
(E) Debt in respect of letters of credit in an aggregate
principal amount at any time outstanding not to exceed
$10,000,000; and
(F) other unsecured Debt in an aggregate principal amount
not to exceed $350,000,000 at any one time outstanding.
(c) Change in Nature of Business. Make, or permit any of its
Subsidiaries to make, any material change in the nature of its business as
carried on at the date hereof.
(d) Mergers, Etc. Merge into or consolidate with any Person or permit
any Person to merge into it, or permit any of its Subsidiaries to do any of
the foregoing, except that any Subsidiary of each Borrower may merge into
or consolidate with any other Subsidiary of each Borrower, provided that,
in the case of any such merger or consolidation, the Person formed by such
merger or consolidation shall be a wholly owned Subsidiary of each
Borrower, provided further that, in the case of any such merger or
consolidation to which a Subsidiary Guarantor is a party, the Person formed
by such merger or consolidation shall become a Subsidiary Guarantor and
provided, however, that in each case, immediately after giving effect
thereto, no event shall occur and be continuing that constitutes a Default.
(e) Sales, Etc., of Assets. Sell, lease, transfer or otherwise dispose
of, or permit any of its Subsidiaries to sell, lease, transfer or otherwise
dispose of, any assets, or grant any option or other right to purchase,
lease or otherwise acquire any assets other than Inventory to be sold or
leased in the ordinary course of its business, except:
(i) sales or leases of Inventory in the ordinary course of its
business;
(ii) sales of assets for cash and Cash Equivalents and for fair
value in an aggregate amount not to exceed $15,000,000 in any Fiscal
Year;
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<PAGE>
(iii) the sale of any asset by each Borrower or any Subsidiary
(other than a bulk sale of Inventory and a sale of receivables other
than delinquent accounts for collection purposes only) so long as (A)
the purchase price paid to each Borrower or such Subsidiary for such
asset shall be no less than the fair market value of such asset at the
time of such sale, (B) the purchase price for such asset shall be paid
to each Borrower or such Subsidiary solely in cash and (C) the
aggregate purchase price paid to each Borrower and all of its
Subsidiaries for such asset and all other assets sold by each Borrower
and its Subsidiaries during the same Fiscal Year pursuant to this
clause (iii) shall not exceed $25,000,000; and
(iv) sales of all of the outstanding capital stock of, or assets
of, each of ICG Satellite Services, Inc., ICG Fiber Optic
Technologies, Inc. and each of their respective Subsidiaries.
provided that in the case of sales of assets pursuant to clause (iii)
above, each Borrower shall, on the date of receipt by any Loan Party or any
of its Subsidiaries of the Net Cash Proceeds from such sale, prepay the
Advances pursuant to, and in the amount and order of priority set forth in,
Section 2.06(b)(ii), as specified therein.
(f) Investments in Other Persons. Make or hold, or permit any of its
Subsidiaries to make or hold, any Investment in any Person, except:
(i) Investments by the Parent and its Subsidiaries in their
Subsidiaries outstanding on the date hereof and additional investments
in wholly owned Subsidiaries of a Borrower now existing or organized
hereafter, provided that any such Subsidiary has become a Subsidiary
Guarantor to the extent required by Section 5.01(j).
(ii) loans and advances to employees in the ordinary course of
the business of each Borrower and its Subsidiaries as presently
conducted in an aggregate principal amount not to exceed $1,000,000 at
any time outstanding;
(iii) Investments by each Borrower in Hedge Agreements permitted
under Section 5.02(b)(i)(A);
(iv) Investments existing on the date hereof and described on
Schedule 4.01(x) hereto;
(v) Investments consisting of intercompany Debt permitted under
Section 5.02(b);
(vi) Investments consisting of the purchase by the Borrowers of
certain receivables (other than Excluded Receivables) from ICG Telecom
Group, Inc. and its Subsidiaries on market terms reasonably
satisfactory to the Required Lenders; and
(vii) other Investments in an aggregate amount invested not to
exceed $50,000,000 and Investments made solely with Equity Interests
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of the Borrowers and their Subsidiaries provided that with respect to
Investments made under this clause (vii), (1) immediately before and
after giving effect thereto, no Default shall have occurred and be
continuing or would result therefrom; and (2) immediately after giving
effect to the acquisition of a company or business pursuant to this
clause (vii), the Parent and its Subsidiaries shall be in pro forma
compliance with the covenants contained in Section 5.04, calculated
based on the financial statements most recently delivered to the
Lender Parties pursuant to Section 5.03 and as though such acquisition
had occurred at the beginning of the appropriate measurement periods
for the financial covenants, as evidenced by a certificate of the
Chief Financial Officer of the Parent delivered to the Lender Parties
demonstrating such compliance.
(g) Restricted Payments. Declare or pay any dividends, purchase,
redeem, retire, defease or otherwise acquire for value any of its Equity
Interests other than of a wholly owned Subsidiary now or hereafter
outstanding, return any capital to its stockholders, partners or members
(or the equivalent Persons thereof) as such, make any distribution of
assets, Equity Interests, obligations or securities to its stockholders,
partners or members (or the equivalent Persons thereof) as such or permit
any of its Subsidiaries to do any of the foregoing, or permit any of its
Subsidiaries to purchase, redeem, retire, defease or otherwise acquire for
value any Equity Interests in each Borrower or to issue or sell any Equity
Interests therein, except that, so long as no Default shall have occurred
and be continuing at the time of any action described in clause (i) or (ii)
below or would result therefrom:
(i) each Borrower may declare and pay dividends and distributions
payable only in stock of each Borrower,
(ii) the Borrowers may declare and pay cash dividends to the
Parent to the extent, and only to the extent, necessary to enable the
Parent to pay (a) cash interest on the Existing Debt listed on
Schedule 4.01(s), and (b) cash interest on other Debt of the Parent
permitted pursuant to Section 5.02(b) (iii)(B) and (F), and
(iii) any Subsidiary of each Borrower may (A) declare and pay
cash dividends to each Borrower, (B) declare and pay cash dividends to
any other Loan Party of which it is a Subsidiary and (C) accept
capital contributions from its Parent to the extent permitted under
Section 5.01(f)(i).
(h) Amendments of Constitutive Documents. Amend, or permit any of its
Subsidiaries to amend, its certificate of incorporation or bylaws or other
constitutive documents other than any such amendment that could not
reasonably be expected to have a Material Adverse Effect.
(i) Accounting Changes. Make or permit, or permit any of its
Subsidiaries to make or permit, any change in (i) accounting policies or
reporting practices, except as required or permitted by generally accepted
accounting principles, or (ii) Fiscal Year.
(j) Prepayments, Etc., of Debt. Prepay, redeem, purchase, defease or
otherwise satisfy prior to the scheduled maturity thereof in any manner, or
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make any payment in violation of any subordination terms of, any Debt,
except (i) the prepayment of the Advances in accordance with the terms of
this Agreement and (ii) regularly scheduled or required repayments or
redemptions of Existing Debt, or amend, modify or change in any manner any
term or condition of any Existing Debt or Subordinated Debt if such
amendment, modification or change is reasonably likely to have an adverse
impact on (a) the business, condition (financial or otherwise), operations,
performance, properties or prospects of the Parent and its Subsidiaries
taken as a whole, (b) the rights and remedies of any Agent or any Lender
Party under any Transaction Document or (c) the ability of any Loan Party
to perform its Obligations under any Transaction Document to which it is or
is to be a party, or permit any of its Subsidiaries to do any of the
foregoing other than to prepay any Debt payable to any Borrower.
(k) Amendment, Etc., of Related Documents. Cancel or terminate any
Related Document or consent to or accept any cancellation or termination
thereof, amend, modify or change in any manner any term or condition of any
Related Document or give any consent, waiver or approval thereunder, waive
any default under or any breach of any term or condition of any Related
Document, agree in any manner to any other amendment, modification or
change of any term or condition of any Related Document or take any other
action in connection with any Related Document that would impair the value
of the interest or rights of any Loan Party thereunder or that would impair
the rights or interests of any Agent or any Lender Party, or permit any of
its Subsidiaries to do any of the foregoing.
(l) Negative Pledge. Enter into or suffer to exist, or permit any of
its Subsidiaries to enter into or suffer to exist, any agreement
prohibiting or conditioning the creation or assumption of any Lien upon any
of its property or assets except (i) in favor of the Secured Parties or
(ii) in connection with (A) any Existing Debt, (B) any purchase money Debt
permitted by Section 5.02(b)(iii)(B) solely to the extent that the
agreement or instrument governing such Debt prohibits a Lien on the
property acquired with the proceeds of such Debt, (C) any Capitalized Lease
permitted by Section 5.02(b)(iii)(C) solely to the extent that such
Capitalized Lease prohibits a Lien on the property subject thereto, (D) any
Debt outstanding on the date any Subsidiary of any Borrower becomes such a
Subsidiary (so long as such agreement was not entered into solely in
contemplation of such Subsidiary becoming a Subsidiary of such Borrower)
and (E) any governmental license, permit or other approval.
(m) Partnerships, Etc. Become a general partner in any general or
limited partnership or joint venture, or permit any of its Subsidiaries
(other than a wholly owned special purpose Subsidiary of a Borrower formed
specifically for the purpose) to do so.
(n) Speculative Transactions. Engage, or permit any of its
Subsidiaries to engage, in any transaction involving commodity options or
futures contracts or any similar speculative transactions.
(o) Formation of Subsidiaries. Organize or invest, or permit any
Subsidiary to organize or invest, in any new Subsidiary unless it becomes a
Subsidiary Guarantor.
(p) Payment Restrictions Affecting Subsidiaries. Directly or
indirectly, enter into or suffer to exist, or permit any of its
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Subsidiaries to enter into or suffer to exist, any agreement or arrangement
limiting the ability of any of its Subsidiaries to declare or pay dividends
or other distributions in respect of its Equity Interests or repay or
prepay any Debt owed to, make loans or advances to, or otherwise transfer
assets to or invest in, the Borrower or any Subsidiary of any Borrower
(whether through a covenant restricting dividends, loans, asset transfers
or investments, a financial covenant or otherwise), except (i) the Loan
Documents and (ii) any agreement or instrument evidencing Existing Debt.
(q) Amendment, Etc., of Material Contracts. Cancel or terminate any
Material Contract or consent to or accept any cancellation or termination
thereof, amend or otherwise modify any Material Contract or give any
consent, waiver or approval thereunder, waive any default under or breach
of any Material Contract, agree in any manner to any other amendment,
modification or change of any term or condition of any Material Contract or
take any other action in connection with any Material Contract that would
impair the value of the interest or rights of any Loan Party thereunder or
that would impair the interest or rights of any Agent or any Lender Party,
or permit any of its Subsidiaries to do any of the foregoing, in each case
except in the ordinary course of business in a manner that would not
reasonably be expected to have a Material Adverse Effect.
(r) Capital Expenditures. Make, or permit any of its Subsidiaries to
make, any Capital Expenditures that would cause the aggregate of all such
Capital Expenditures made by the Parent and its Subsidiaries in any period
set forth in Section 6.01(q) to exceed 80% of the amount allowed pursuant
to Section 6.01(q) for such period:
SECTION 5.03. Reporting Requirements. So long as any Advance or any other
Obligation of any Loan Party under any Loan Document shall remain unpaid, any
Letter of Credit shall be outstanding or any Lender Party shall have any
Commitment hereunder, each applicable Loan Party will furnish to the Agents and
the Lender Parties:
(a) Default and Prepayment Notices. (i) As soon as possible and in any
event within two days after the occurrence of each Default or any event,
development or occurrence reasonably likely to have a Material Adverse
Effect continuing on the date of such statement, a statement of the chief
financial officer of the Borrower setting forth details of such Default and
the action that the Borrower has taken and proposes to take with respect
thereto, and (ii) as soon as possible and in any event no later than 1:00
P.M. (New York City time) at least seven Business Days before any
prepayment of Term Advances is to be made by the Borrowers pursuant to
Section 2.06 (the "Prepayment Date"), written notice of the principal
amount of such prepayment (the "Prepayment Amount") and the applicable
Prepayment Date. Each such notice (a "Prepayment Notice") shall be by telex
or telecopier or otherwise as provided in Section 9.02.
(b) Annual Financials. As soon as available and in any event within
106 days after the end of each Fiscal Year, a copy of the annual audit
report for such year for the Parent and its Subsidiaries, including therein
Consolidated and consolidating balance sheets of the Parent and its
Subsidiaries as of the end of such Fiscal Year and Consolidated and
consolidating statements of income and a Consolidated statement of cash
flows of the Parent and its Subsidiaries for such Fiscal Year, in each case
accompanied by an opinion acceptable to the Required Lenders of KPMG Peat
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Marwick or other independent public accountants of recognized standing
acceptable to the Required Lenders, together with (i) a certificate of the
Chief Financial Officer to the Lender Parties stating that in the course of
the regular audit of the business of the Parent and its Subsidiaries, which
audit was conducted by such accounting firm in accordance with generally
accepted auditing standards, such accounting firm has not indicated to such
Chief Financial Officer that it had obtained knowledge that a Default has
occurred and is continuing, or if, in the opinion of such accounting firm,
a Default has occurred and is continuing, a statement as to the nature
thereof, (ii) a schedule in form satisfactory to the Administrative Agent
of the computations used by the Chief Financial Officer in determining, as
of the end of such Fiscal Year, compliance with the covenants contained in
Section 5.04, provided that in the event of any change in GAAP used in the
preparation of such financial statements, the Parent shall also provide, if
necessary for the determination of compliance with Section 5.04, a
statement of reconciliation conforming such financial statements to GAAP
and (iii) a certificate of the Chief Financial Officer of the Parent
stating that no Default has occurred and is continuing or, if a default has
occurred and is continuing, a statement as to the nature thereof and the
action that the Parent has taken and proposes to take with respect thereto.
(c) Quarterly Financials. As soon as available and in any event within
50 days after the end of each of the first three quarters of each Fiscal
Year, Consolidated and consolidating balance sheets of the Parent and its
Subsidiaries as of the end of such quarter and Consolidated and
consolidating statements of income and a Consolidated statement of cash
flows of the Parent and its Subsidiaries for the period commencing at the
end of the previous fiscal quarter and ending with the end of such fiscal
quarter (except for the Consolidated statement of cash flows, which shall
be on a year to date basis) and Consolidated and consolidating statements
of income and a Consolidated statement of cash flows of the Parent and its
Subsidiaries for the period commencing at the end of the previous Fiscal
Year and ending with the end of such quarter, setting forth in each case in
comparative form the corresponding figures for the corresponding date or
period of the preceding Fiscal Year, all in reasonable detail and duly
certified (subject to normal year-end audit adjustments) by the Chief
Financial Officer of the Parent as having been prepared in accordance with
GAAP, together with (i) a certificate of said officer stating that no
Default has occurred and is continuing or, if a Default has occurred and is
continuing, a statement as to the nature thereof and such action that the
Parent has taken and proposes to take with respect thereto and (ii) a
schedule in form satisfactory to the Administrative Agent of the
computations used by the Parent in determining compliance with the
covenants contained in Section 5.04, provided that in the event of any
change in GAAP used in the preparation of such financial statements, the
Parent shall also provide, if necessary for the determination of compliance
with Section 5.04, a statement of reconciliation conforming such financial
statements to GAAP.
(d) Annual Forecasts. As soon as available and in any event no later
than January 31 of each Fiscal Year, forecasts prepared by management of
the Parent, in form satisfactory to the Administrative Agent, of balance
sheets, income statements and cash flow statements on a quarterly basis for
such Fiscal Year and on an annual basis for each Fiscal Year thereafter
until the Tranche B Termination Date.
(e) Litigation. Promptly after the commencement thereof, notice of all
actions, suits, investigations, litigation and proceedings before any court
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or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting any Loan Party or any of
its Subsidiaries of the type described in Section 4.01(f).
(f) Securities Reports. Promptly after the sending or filing thereof,
copies of all proxy statements, financial statements and reports that any
Loan Party or any of its Subsidiaries sends to its stockholders, and copies
of all regular, periodic and special reports, and all registration
statements, that any Loan Party or any of its Subsidiaries files with the
Securities and Exchange Commission or any governmental authority that may
be substituted therefor, or with any national securities exchange.
(g) Creditor Reports. Promptly after the furnishing thereof, copies of
any statement or report furnished to any holder of Debt securities of any
Loan Party or of any of its Subsidiaries pursuant to the terms of any
indenture, loan or credit or similar agreement and not otherwise required
to be furnished to the Lender Parties pursuant to any other clause of this
Section 5.03.
(h) Agreement Notices. Promptly upon receipt thereof, copies of all
notices, requests and other documents received by any Loan Party or any of
its Subsidiaries under or pursuant to any Related Document or Material
Contract or instrument, indenture, loan or credit or similar agreement
regarding or related to any breach or default by any party thereto or any
other event that could materially impair the value of the interests or the
rights of any Loan Party or otherwise have a Material Adverse Effect and
copies of any amendment, modification or waiver of any provision of any
Related Document or Material Contract or instrument, indenture, loan or
credit or similar agreement and, from time to time upon request by the
Administrative Agent, such information and reports regarding the Related
Documents, the Material Contracts and such instruments, indentures and loan
and credit and similar agreements as the Administrative Agent may
reasonably request.
(i) ERISA. (i) ERISA Events and ERISA Reports. (A) Promptly and in any
event within 10 days after any Loan Party or any ERISA Affiliate knows or
has reason to know that any ERISA Event has occurred, a statement of the
Chief Financial Officer of the Borrower describing such ERISA Event and the
action, if any, that such Loan Party or such ERISA Affiliate has taken and
proposes to take with respect thereto and (B) on the date any records,
documents or other information must be furnished to the PBGC with respect
to any Plan pursuant to Section 4010 of ERISA, a copy of such records,
documents and information.
(ii) Plan Terminations. Promptly and in any event within two Business
Days after receipt thereof by any Loan Party or any ERISA Affiliate, copies
of each notice from the PBGC stating its intention to terminate any Plan or
to have a trustee appointed to administer any Plan.
(iii) Plan Annual Reports. Promptly and in any event within 30 days
after the filing thereof with the Internal Revenue Service, copies of each
Schedule B (Actuarial Information) to the annual report (Form 5500 Series)
with respect to each Plan.
(iv) Multiemployer Plan Notices. Promptly and in any event within five
Business Days after receipt thereof by any Loan Party or any ERISA
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Affiliate from the sponsor of a Multiemployer Plan, copies of each notice
concerning (A) the imposition of Withdrawal Liability by any such
Multiemployer Plan, (B) the reorganization or termination, within the
meaning of Title IV of ERISA, of any such Multiemployer Plan or (C) the
amount of liability incurred, or that may be incurred, by such Loan Party
or any ERISA Affiliate in connection with any event described in clause (A)
or (B).
(j) Environmental Conditions. Promptly after the assertion or
occurrence thereof, notice of any Environmental Action against or of any
noncompliance by any Loan Party or any of its Subsidiaries with any
Environmental Law or Environmental Permit that could (i) reasonably be
expected to have a Material Adverse Effect or (ii) cause any property
described in the Mortgages to be subject to any restrictions on ownership,
occupancy, use or transferability under any Environmental Law.
(k) Real Property. As soon as available and in any event within 60
days after the end of each Fiscal Year, a report supplementing Schedules
4.01(w) and 4.01(x) hereto, including an identification of all owned and
leased real property disposed of by each Borrower or any of its
Subsidiaries during such Fiscal Year, a list and description (including the
street address, county or other relevant jurisdiction, state, record owner,
book value thereof and, in the case of leases of property, lessor, lessee,
expiration date and annual rental cost thereof) of all real property
acquired or leased during such Fiscal Year and a description of such other
changes in the information included in such Schedules as may be necessary
for such Schedules to be accurate and complete.
(l) Insurance. As soon as available and in any event within 30 days
after the end of each Fiscal Year, a report summarizing the insurance
coverage (specifying type, amount and carrier) in effect for each Loan
Party and its Subsidiaries and containing such additional information as
any Agent, or any Lender Party through the Administrative Agent, may
reasonably specify.
(m) Borrowing Base Certificate. As soon as available and in any event
within 10 days after the end of each month, a Borrowing Base Certificate,
as at the end of the previous month, certified by the Chief Financial
Officer of each Borrower.
(n) Year 2000 Compliance. Promptly after each Borrower's discovery or
determination thereof, notice (in reasonable detail) that any computer
application (including those of its suppliers, vendors and customers) that
is material to its or any of its Subsidiaries' business and operations will
not be Year 2000 Compliant (as defined in Section 4.01(z)), except to the
extent that such failure could not reasonably be expected to have a
Material Adverse Effect.
(o) Revenue Agent Reports. Within 10 days after receipt, copies of all
Revenue Agent Report (Internal Revenue Service Form 886), or other written
proposals of the Internal Revenue Service, that propose, determine or
otherwise set forth positive adjustments to the federal income tax
liability of the affiliated group (within the meaning of Section 1504(a)(1)
of the Internal Revenue Code) of which the Borrower is a member aggregating
$3,000,000 or more.
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(p) Tax Certificates. Promptly, and in any event within thirty (30)
Business Days after the due date (with extensions, if properly obtained)
for filing the final federal income tax return in respect of each taxable
year, a certificate (a "Tax Certificate") signed by the President or the
Chief Financial Officer of the Parent, stating that there has been paid to
the Internal Revenue Service or other applicable taxing authority, the full
amount that the affiliated group that includes the Parent and the Borrowers
is required to pay in respect of federal income tax for such year and that
the Parent and the Borrowers have received any amounts payable to them,
that the Parent and the Borrowers have not paid amounts in respect of taxes
(federal, state, local or foreign) in excess of the amounts, if any, they
are required to pay under the Tax Sharing Agreement in respect of such
taxable year and have received amounts, if any, due to them under the Tax
Sharing Agreement for such year.
(q) Other Information. Such other information respecting the business,
condition (financial or otherwise), operations, performance, properties or
prospects of any Loan Party or any of its Subsidiaries as any Agent, or any
Lender Party through the Administrative Agent, may from time to time
reasonably request.
SECTION 5.04. Financial Covenants. So long as any Advance or any other
Obligation of any Loan Party under any Loan Document shall remain unpaid, any
Letter of Credit shall be outstanding or any Lender Party shall have any
Commitment hereunder, the Parent will:
(a) Senior Secured Debt Service Coverage Ratio. Maintain at the end of
each fiscal quarter of the Borrowers a Senior Secured Debt Service Coverage
Ratio of not less than the amount set forth below for such period:
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 2004 2005
<S> <C> <C> <C> <C> <C> <C> <C>
1st Quarter N/A 2.50:1 2.75:1 2.75:1 3.00:1 3.00:1 3.00:1
2nd Quarter N/A 2.50:1 2.75:1 2.75:1 3.00:1 3.00:1 3.00:1
3rd Quarter 2.50:1 2.50:1 2.75:1 2.75:1 3.00:1 3.00:1 3.00:1
4th Quarter 2.50:1 2.50:1 2.75:1 2.75:1 3.00:1 3.00:1 3.00:1
</TABLE>
(b) Minimum EBITDA: Maintain quarterly EBITDA of the Parent and its
Subsidiaries as at the end of each fiscal quarter of the Parent of not less
than the amount set forth below:
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 2004 2005
<S> <C> <C> <C> <C> <C> <C> <C>
1st Quarter N/A $36,036,000 $68,412,000 $97,000,000 $129,977,000 $144,000,000 $147,000,000
2nd Quarter N/A $42,214,000 $77,199,000 $103,000,000 $135,000,000 $144,000,000 $147,000,000
3rd Quarter $23,204,000 $48,506,000 $85,471,000 $109,000,000 $140,000,000 $145,328,000 $150,000,000
4th Quarter $29,136,000 $54,249,000 $94,183,000 $117,641,000 $144,000,000 $147,000,000 $153,738,000
</TABLE>
(c) Maximum Senior Secured Leverage. Maintain at the end of each
fiscal quarter of the Parent a Senior Secured Debt Ratio of not greater
than the ratio set forth below for such fiscal quarter:
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Fiscal Quarter Ending Ratio
--------------------- -----
September 30, 1999 2.75:1
December 31, 1999 2.75:1
March 31, 2000 2.75:1
June 30, 2000 2.75:1
September 30, 2000 2:50:1
December 31, 2000 2:25:1
March 31, 2001 2:25:1
June 30, 2001 2:25:1
September 30, 2001 2:25:1
December 31, 2001 2:25:1
March 31, 2002 2:25:1
June 30, 2002 2:25:1
September 30, 2002 2:25:1
December 31, 2002 2:25:1
March 31, 2003 2:25:1
June 30, 2003 2:25:1
September 30, 2003 2:25:1
December 31, 2003 2:25:1
March 31, 2004 2:25:1
June 30, 2004 2:25:1
September 30, 2004 2:25:1
December 31, 2004 2:25:1
March 31, 2005 2:25:1
June 30, 2005 2:25:1
September 30, 2005 2:25:1
December 31, 2005 2:25:1
(d) Maximum Total Leverage. Maintain at the end of each fiscal quarter
of the Parent a Parent Total Leverage Ratio of not greater than the ratio
set forth below for such fiscal quarter:
Fiscal Quarter Ending In Ratio
------------------------ -----
September 30, 1999 8.75:1
December 31, 1999 7.75:1
March 31, 2000 7.75:1
June 30, 2000 7.25:1
September 30, 2000 7.00:1
December 31, 2000 7.00:1
March 31, 2001 7.00:1
June 30, 2001 6.50:1
September 30, 2001 6.25:1
December 31, 2001 6.00:1
March 31, 2002 5.50:1
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Fiscal Quarter Ending In Ratio
------------------------ -----
June 30, 2002 5.50:1
September 30, 2002 5.50:1
December 31, 2002 5.50:1
March 31, 2003 5.00:1
June 30, 2003 5.00:1
September 30, 2003 5.00:1
December 31, 2003 5.00:1
March 31, 2004 5.00:1
June 30, 2004 5.00:1
September 30, 2004 5.00:1
December 31, 2004 5.00:1
March 31, 2005 5.00:1
June 30, 2005 5.00:1
September 30, 2005 5.00:1
December 31, 2005 5.00:1
(e) Minimum Interest Coverage. Maintain at the end of each fiscal
quarter of the Parent a ratio of (i) EBITDA of the Parent for the most
recently ended six month period to (ii) Interest Expense of the Parent for
the most recently ended six month period of not less than 3.75:1.
(f) Minimum Fixed Charge Coverage. Maintain at the end of each fiscal
quarter of the Parent a ratio of (i) EBITDA of the Parent for the most
recently ended six month period to (ii) Fixed Charges for the most recently
ended six month period of not less than the ratio set forth below for such
fiscal quarter:
Fiscal Quarter Ending In Ratio
------------------------ -----
June 30, 2002 0.50:1
September 30, 2002 0.50:1
December 31, 2002 0.50:1
March 31, 2003 0.75:1
June 30, 2003 0.75:1
September 30, 2003 0.75:1
December 31, 2003 0.75:1
March 31, 2004 1.10:1
June 30, 2004 1.10:1
September 30, 2004 1.10:1
December 31, 2004 1.10:1
March 31, 2005 1.10:1
June 30, 2005 1.10:1
September 30, 2005 1.10:1
December 31, 2005 1.10:1
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ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events ("Events of
Default") shall occur and be continuing:
(a) (i) any Borrower shall fail to pay any principal of any Advance
when the same shall become due and payable or (ii) any Borrower shall fail
to pay any interest on any Advance, or any Loan Party shall fail to make
any other payment under any Loan Document, in each case under this clause
(ii) within five days after the same becomes due and payable; or
(b) any representation or warranty made by any Loan Party (or any of
its officers) under or in connection with any Loan Document shall prove to
have been incorrect in any material respect when made or confirmed; or
(c) any Loan Party shall fail to perform or observe any term, covenant
or agreement contained in Section 2.14, 5.01(e), (f), (i), (j), (o) or (n),
5.02, 5.03(a)(i), or 5.04; or
(d) any Loan Party shall fail to perform or observe any other term,
covenant or agreement contained in any Loan Document on its part to be
performed or observed if such failure shall remain unremedied for 30 days
after the earlier of the date on which (i) a Responsible Officer becomes
aware of such failure or (ii) written notice thereof shall have been given
to the Borrower by any Agent or any Lender Party; or
(e) any Loan Party or any of its Subsidiaries shall fail to pay any
principal of, premium or interest on or any other amount payable in respect
of any Debt of such Loan Party or such Subsidiary (as the case may be) that
is outstanding in a principal amount (or, in the case of any Hedge
Agreement, an Agreement Value) of at least $10,000,000 either individually
or in the aggregate (but excluding Debt outstanding hereunder), when the
same becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such failure shall
continue after the applicable grace period, if any, specified in the
agreement or instrument relating to such Debt; or any other event shall
occur or condition shall exist under any agreement or instrument relating
to any such Debt and shall continue after the applicable grace period, if
any, specified in such agreement or instrument, if the effect of such event
or condition is to accelerate, or to permit the acceleration of, the
maturity of such Debt or otherwise to cause, or to permit the holder
thereof to cause, such Debt to mature; or any such Debt shall be declared
to be due and payable or required to be prepaid or redeemed (other than by
a regularly scheduled required prepayment or redemption), purchased or
defeased, or an offer to prepay, redeem, purchase or defease such Debt
shall be required to be made, in each case prior to the stated maturity
thereof; or
(f) any Loan Party or any of its Subsidiaries shall generally not pay
its debts as such debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by or against
any Loan Party or any of its Subsidiaries seeking to adjudicate it a
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bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee or other similar official for it or for
any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it) that is being
diligently contested by it in good faith, either such proceeding shall
remain undismissed or unstayed for a period of 60 days or any of the
actions sought in such proceeding (including, without limitation, the entry
of an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or any substantial part of its
property) shall occur; or any Loan Party or any of its Subsidiaries shall
take any corporate action to authorize any of the actions set forth above
in this subsection (f); or
(g) any judgments or orders, either individually or in the aggregate,
for the payment of money in excess of $10,000,000 (determined net of any
applicable insurance proceeds) shall be rendered against any Loan Party or
any of its Subsidiaries and either (i) enforcement proceedings shall have
been commenced by any creditor upon such judgment or order or (ii) there
shall be any period of 25 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(h) any non-monetary judgment or order shall be rendered against any
Loan Party or any of its Subsidiaries that could be reasonably likely to
have a Material Adverse Effect, and there shall be any period of 10
consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect;
or
(i) any provision of any Loan Document after delivery thereof pursuant
to Section 3.01 or 5.01(j) shall for any reason cease to be valid and
binding on or enforceable against any Loan Party party to it, or any such
Loan Party shall so state in writing; or
(j) any Collateral Document or financing statement after delivery
thereof pursuant to Section 3.01 or 5.01(j) shall for any reason (other
than pursuant to the terms thereof) cease to create a valid and perfected
first priority lien on and security interest in the Collateral purported to
be covered thereby; or
(k) a Change of Control shall occur; or
(l) any ERISA Event shall have occurred with respect to a Plan and the
sum (determined as of the date of occurrence of such ERISA Event) of the
Insufficiency of such Plan and the Insufficiency of any and all other Plans
with respect to which an ERISA Event shall have occurred and then exist (or
the liability of the Loan Parties and the ERISA Affiliates related to such
ERISA Event) exceeds $500,000; or
(m) any Loan Party or any ERISA Affiliate shall have been notified by
the sponsor of a Multiemployer Plan that it has incurred Withdrawal
Liability to such Multiemployer Plan in an amount that, when aggregated
with all other amounts required to be paid to Multiemployer Plans by the
Loan Parties and the ERISA Affiliates as Withdrawal Liability (determined
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as of the date of such notification), exceeds $500,000 or requires payments
exceeding $100,000 per annum; or
(n) any Loan Party or any ERISA Affiliate shall have been notified by
the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or is being terminated, within the meaning of Title IV of
ERISA, and as a result of such reorganization or termination the aggregate
annual contributions of the Loan Parties and the ERISA Affiliates to all
Multiemployer Plans that are then in reorganization or being terminated
have been or will be increased over the amounts contributed to such
Multiemployer Plans for the plan years of such Multiemployer Plans
immediately preceding the plan year in which such reorganization or
termination occurs by an amount exceeding $500,000; or
(o) any Borrowing Base Deficiency shall occur; or
(p) ICG shall fail to maintain the following financial covenants:
(i) Minimum Revenue. At the end of each fiscal quarter set forth
below, maintain quarterly Revenue of not less than the amount set
forth below for such fiscal quarter:
Fiscal Quarter Ending Revenue
--------------------- -------
September 30, 1999 $110,000,000
December 31, 1999 $135,000,000
March 31, 2000 $135,000,000
June 30, 2000 $180,000,000
September 30, 2000 $225,000,000
December 31, 2000 $265,000,000
March 31, 2001 $290,000,000
June 30, 2001 $330,000,000
September 30, 2001 $365,000,000
December 31, 2001 $420,000,000
March 31, 2002 $468,000,000
June 30, 2002 $502,500,000
September 30, 2002 $542,000,000
December 31, 2002 $587,500,000
March 31, 2003 $615,000,000
June 30, 2003 $675,000,000
September 30, 2003 $710,000,000
December 31, 2003 $750,000,000
March 31, 2004 $825,000,000
June 30, 2004 $835,000,000
September 30, 2004 $840,000,000
December 31, 2004 $850,000,000
March 31, 2005 $850,000,000
June 30, 2005 $850,000,000
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Fiscal Quarter Ending Revenue
--------------------- -------
September 30, 2005 $865,000,000
December 31, 2005 $885,500,000
(ii) Minimum EBITDA. At the end of each fiscal quarter set forth
below, maintain EBITDA of ICG for such fiscal quarter of not less than
the amount set forth below (or, in the case of (A) the fiscal quarters
ending on or before March 31, 2000, EBITDA of ICG for the period from
April 1, 1999 through the end of such fiscal quarter and (B) the
fiscal quarter ended June 30, 2000, EBITDA of ICG for the most
recently ended twelve-month period):
Fiscal Quarter Ending EBITDA
--------------------- ------
September 30, 1999 $22,615,000
December 31, 1999 $52,527,000
March 31, 2000 $45,435,000
June 30, 2000 $56,958,000
September 30, 2000 $53,743,000
December 31, 2000 $71,500,000
March 31, 2001 $85,679,000
June 30, 2001 $105,843,000
September 30, 2001 $121,372,000
December 31, 2001 $149,757,000
March 31, 2002 $190,000,000
June 30, 2002 $204,000,000
September 30, 2002 $220,000,000
December 31, 2002 $238,553,000
March 31, 2003 $275,000,000
June 30, 2003 $301,675,000
September 30, 2003 $316,000,000
December 31, 2003 $334,085,000
March 31, 2004 $378,992,000
June 30, 2004 $385,491,000
September 30, 2004 $390,036,000
December 31, 2004 $395,000,000
March 31, 2005 $395,000,000
June 30, 2005 $395,000,000
September 30, 2005 $400,000,000
December 31, 2005 $406,004,000
(iii) Maximum Total Leverage. At the end of each fiscal quarter
set forth below, maintain an ICG Total Leverage Ratio of not greater
than the ratio set forth below for such fiscal quarter:
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Fiscal Quarter Ending Ratio
--------------------- -----
June 30, 2001 8.50:1
September 30, 2001 7.50:1
December 31, 2001 6.50:1
March 31, 2002 5.00:1
June 30, 2002 5.00:1
September 30, 2002 5.00:1
December 31, 2002 5.00:1
March 31, 2003 and thereafter 4.00:1
(iv) Maximum Total Debt/Gross PP & E. At the end of each fiscal
quarter set forth below, maintain a ratio of (i) Total Debt of ICG and
its Subsidiaries on such date to (ii) the gross book value of the
Gross PP & E on such date of not greater than the ratio set forth
below for such fiscal quarter:
Fiscal Quarter Ending Ratio
--------------------- -----
September 30, 1999 1.50:1
December 31, 1999 1.45:1
March 31, 2000 1.40:1
June 30, 2000 1.35:1
September 30, 2000 1.30:1
December 31, 2000 1:25:1
March 31, 2001 1:25:1
June 30, 2001 1.20:1
September 30, 2001 1.15:1
December 31, 2001 1.10:1
March 31, 2002 and thereafter 1.00:1
(v) Minimum Interest Coverage. Maintain at the end of each fiscal
quarter set forth below a ratio of (i) EBITDA of ICG for the most
recently ended six month period to (ii) Interest Expense of ICG for
the most recently ended six month period of not less than the ratio
set forth below for such fiscal quarter (or, (A) in the case of the
fiscal quarter ending December 31, 1999, a ratio of (i) EBITDA of ICG
for the most recently ended nine month period to (ii) Interest Expense
of ICG for the most recently ended nine month period and (B) in the
case of the fiscal quarters ending March 31, 2000 and June 30, 2000, a
ratio of (i) EBITDA of ICG for the most recently ended twelve month
period to (ii) Interest Expense of ICG for the most recently ended
twelve month period):
Fiscal Quarter Ending Ratio
--------------------- -----
September 30, 1999 1.75:1
December 31, 1999 1.75:1
March 31, 2000 1.75:1
June 30, 2000 1.75:1
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Fiscal Quarter Ending Ratio
--------------------- -----
September 30, 2000 2.25:1
December 31, 2000 2:25:1
March 31, 2001 2:25:1
June 30, 2001 2.25:1
September 30, 2001 2.25:1
December 31, 2001 2.25:1
March 31, 2002 and thereafter 2.50:1; or
(q) ICG shall make, or permit any of its Subsidiaries to make,
any Capital Expenditures that would cause the aggregate of all such
Capital Expenditures made by ICG and its Subsidiaries in any period
set forth below to exceed the amount set forth below for such period:
Fiscal Quarter Ending Amount
--------------------- ------
September 30, 1999 $173,000,000
December 31, 1999 229,000,000
March 31, 2000 207,000,000
June 30, 2000 202,000,000
September 30, 2000 195,000,000
December 31, 2000 190,000,000
March 31, 2001 237,000,000
June 30, 2001 229,000,000
September 30, 2001 222,000,000
December 31, 2001 213,000,000
March 31, 2002 228,280,000
June 30, 2002 228,280,000
September 30, 2002 210,720,000
December 31, 2002 210,720,000
March 31, 2003 216,060,000
June 30, 2003 216,060,000
September 30, 2003 199,440,000
December 31, 2003 199,440,000
March 31, 2004 199,680,000
June 30, 2004 199,680,000
September 30, 2004 184,320,000
December 31, 2004 184,320,000
March 31, 2005 205,670,000
June 30, 2005 205,670,000
September 30, 2005 189,850,000
December 31, 2005 189,850,000
provided, however, that if, at the end of any such period (a "Base Quarter") set
forth above, the amount specified above for such Base Quarter exceeds the amount
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of Capital Expenditures made by ICG and its Subsidiaries during such Base
Quarter (the amount of such excess being the "Excess Amount"), ICG and its
Subsidiaries shall be entitled to make additional Capital Expenditures in either
of the two succeeding periods set forth above in an amount in the aggregate over
such succeeding periods equal to the Excess Amount;
then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Required Lenders, by notice to the Borrowers,
declare the Commitments of each Lender Party and the obligation of each Lender
Party to make Advances (other than Letter of Credit Advances by the Issuing Bank
or a Working Capital Lender pursuant to Section 2.03(c)) and of the Issuing Bank
to issue Letters of Credit to be terminated, whereupon the same shall forthwith
terminate, and (ii) shall at the request, or may with the consent, of the
Required Lenders, (A) by notice to the Borrowers, declare the Notes, all
interest thereon and all other amounts payable under this Agreement and the
other Loan Documents to be forthwith due and payable, whereupon the Notes, all
such interest and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived by the Borrowers, (B) by notice to each
party required under the terms of any agreement in support of which a Standby
Letter of Credit is issued, request that all Obligations under such agreement be
declared to be due and payable and (C) by notice to the Issuing Bank, direct the
Issuing Bank to deliver a Default Termination Notice to the beneficiary of each
Standby Letter of Credit issued by it, and the Issuing Bank shall deliver such
Default Termination Notices; provided, however, that in the event of an actual
or deemed entry of an order for relief with respect to the Borrowers under the
Federal Bankruptcy Code, (x) the Commitments of each Lender Party and the
obligation of each Lender Party to make Advances (other than Letter of Credit
Advances by the Issuing Bank or a Working Capital Lender pursuant to Section
2.03(c)) and of the Issuing Bank to issue Letters of Credit shall automatically
be terminated and (y) the Notes, all such interest and all such amounts shall
automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Borrowers.
SECTION 6.02. Actions in Respect of the Letters of Credit upon Default. If
any Event of Default shall have occurred and be continuing, the Administrative
Agent may, or shall at the request of the Required Lenders, irrespective of
whether it is taking any of the actions described in Section 6.01 or otherwise,
make demand upon the Borrowers to, and forthwith upon such demand the Borrowers
will, pay to the Collateral Agent on behalf of the Lender Parties in same day
funds at the Collateral Agent's office designated in such demand, for deposit in
the L/C Cash Collateral Account, an amount equal to the aggregate Available
Amount of all Letters of Credit then outstanding. If at any time the
Administrative Agent or the Collateral Agent determines that any funds held in
the L/C Cash Collateral Account are subject to any right or claim of any Person
other than the Agents and the Lender Parties or that the total amount of such
funds is less than the aggregate Available Amount of all Letters of Credit, the
Borrowers will, forthwith upon demand by the Administrative Agent or the
Collateral Agent, pay to the Collateral Agent, as additional funds to be
deposited and held in the L/C Cash Collateral Account, an amount equal to the
excess of (a) such aggregate Available Amount over (b) the total amount of
funds, if any, then held in the L/C Cash Collateral Account that the
Administrative Agent or the Collateral Agent, as the case may be, determines to
be free and clear of any such right and claim. Upon the drawing of any Letter of
Credit for which funds are on deposit in the L/C Cash Collateral Account, such
funds shall be applied to reimburse the Issuing Bank or Working Capital Lenders,
as applicable, to the extent permitted by applicable law.
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ARTICLE VII
PARENT GUARANTY
SECTION 7.01. Guaranty. The Parent hereby unconditionally and irrevocably
guarantees the punctual payment when due, whether at stated maturity, by
acceleration or otherwise, of all Obligations of each other Loan Party now or
hereafter existing under the Loan Documents, whether for principal, interest,
fees, expenses or otherwise (such Obligations being the "Guaranteed
Obligations"), and agrees to pay any and all expenses (including reasonable
counsel fees and expenses) incurred by the Administrative Agent or the Lender
Parties in enforcing any rights under this Guaranty. Without limiting the
generality of the foregoing, the Parent0s liability shall extend to all amounts
that constitute part of the Guaranteed Obligations and would be owed by each
such Loan Party to the Agent or any Lender Party under the Loan Documents but
for the fact that they are unenforceable or not allowable due to the existence
of a bankruptcy, reorganization or similar proceeding involving any Loan Party.
SECTION 7.02. Guaranty Absolute. The Parent guarantees that the Guaranteed
Obligations will be paid strictly in accordance with the terms of the Loan
Documents, regardless of any law, regulation or order now or hereafter in effect
in any jurisdiction affecting any of such terms or the rights of the Agents or
the Lenders with respect thereto. The Obligations of the Parent under this
Guaranty are independent of the Guaranteed Obligations or any other Obligations
of any Loan Party under the Loan Documents, and a separate action or actions may
be brought and prosecuted against the Parent to enforce this Guaranty,
irrespective of whether any action is brought against any other Loan Party or
whether any other Loan Party is joined in any such action or actions. The
liability of the Parent under this Guaranty shall be irrevocable, absolute and
unconditional irrespective of, and the Parent hereby irrevocably waives any
defenses it may now or hereinafter have in any way relating to, any or all of
the following:
(a) any lack of validity or enforceability of any Loan Document or any
agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations or any other
Obligations of any other Loan Party under the Loan Documents, or any other
amendment or waiver of or any consent to departure from any Loan Document,
including, without limitation, any increase in the Guaranteed Obligations
resulting from the extension of additional credit to the Borrower or
otherwise;
(c) any taking, exchange, release or non-perfection of any collateral,
or any taking, release or amendment or waiver of or consent to departure
from any other guaranty, for all or any of the Guaranteed Obligations;
(d) any manner of application of collateral, or proceeds thereof, to
all or any of the Guaranteed Obligations, or any manner of sale or other
disposition of any collateral for all or any of the Guaranteed Obligations
or any other Obligations of any other Loan Party under the Loan Documents
or any other assets of any Loan Party or any of their Subsidiaries;
(e) any change, restructuring or termination of the corporate
structure or existence of any Loan Party or any of their Subsidiaries; or
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(f) any other circumstance (including, without limitation, any statute
of limitations) or any existence of or reliance on any representation by
the Administrative Agent or any Lender Party that might otherwise
constitute a defense available to, or a discharge of, the Borrower, any
Subsidiary Guarantor or any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case
may be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by the Administrative Agent or any
Lender Party upon the insolvency, bankruptcy or reorganization of any Loan Party
or any of their Subsidiaries or otherwise, all as though such payment had not
been made.
SECTION 7.03. Waiver. The Parent hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Guaranty and any requirement that the Administrative Agent
or any Lender Party protect, secure, perfect or insure any Lien or any property
subject thereto or exhaust any right or take any action against any Loan Party
or any other Person or any collateral. The Parent acknowledges that it will
receive direct and indirect benefits from the financing arrangements
contemplated by the Loan Documents and that the waiver set forth in this Section
7.03 is knowingly made in contemplation of such benefits
SECTION 7.04. Subrogation. The Parent will not exercise any rights that it
may now or hereafter acquire against the Borrower, any Subsidiary Guarantor or
any other guarantor that arise from the existence, payment, performance or
enforcement of the Parent0s Obligations under this Agreement or any other Loan
Document, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of the Administrative Agent or any Lender
Party against the Borrower, any Subsidiary Guarantor or any other guarantor or
any collateral, whether or not such claim, remedy or right arises in equity or
under contract, statute or common law, including, without limitation, the right
to take or receive from the Borrower, any Subsidiary Guarantor or any other
guarantor, directly or indirectly, in cash or other property or by set-off or in
any other manner, payment or security on account of such claim, remedy or right,
unless and until all of the Obligations and all other amounts payable under this
Guaranty shall have been paid in full in cash and the Commitments shall have
expired or terminated. If any amount shall be paid to the Parent in violation of
the preceding sentence at any time prior to the later of (i) the payment in full
in cash of the Guaranteed Obligations and all other amounts payable under this
Guaranty, and (ii) the later of the Tranche A Termination Date, the Tranche B
Termination Date and the Working Capital Termination Date, such amount shall be
held in trust for the benefit of the Administrative Agent and the Lender Parties
and shall forthwith be paid to the Administrative Agent to be credited and
applied to the Guaranteed Obligations and all other amounts payable under this
Guaranty, whether matured or unmatured, in accordance with the terms of the Loan
Documents, or to be held as collateral for any Guaranteed Obligations or other
amounts payable under this Guaranty thereafter arising. If (i) the Parent shall
make payment to the Administrative Agent or any Lender Party of all or any part
of the Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all
other amounts payable under this Guaranty shall be paid in full in cash and
(iii) each of the Tranche A Termination Date, the Tranche B Termination Date and
the Working Capital Termination Date shall have occurred, the Administrative
Agent and the Lender Parties will, at the Parent0s request and expense, execute
and deliver to the Parent appropriate documents, without recourse and without
representation or warranty, necessary to evidence the transfer by subrogation to
the Parent of an interest in the Guaranteed Obligations resulting from such
payment by the Parent.
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ARTICLE VIII
THE AGENTS
SECTION 8.01. Authorization and Action. Each Lender Party (in its
capacities as a Lender, Issuing Bank (if applicable) and on behalf of itself and
its Affiliates as potential Hedge Banks) hereby appoints and authorizes each
Agent to take such action as agent on its behalf and to exercise such powers and
discretion under this Agreement and the other Loan Documents as are delegated to
such Agent by the terms hereof and thereof, together with such powers and
discretion as are reasonably incidental thereto. As to any matters not expressly
provided for by the Loan Documents (including, without limitation, enforcement
or collection of the Notes), no Agent shall be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Required Lenders, and such instructions shall be
binding upon all Lender Parties and all holders of Notes; provided, however,
that no Agent shall be required to take any action that exposes such Agent to
personal liability or that is contrary to this Agreement or applicable law. Each
Agent agrees to give to each Lender Party prompt notice of each notice given to
it by any Borrower pursuant to the terms of this Agreement.
SECTION 8.02. Agents' Reliance, Etc. Neither any Agent nor any of their
respective directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them under or in connection with
the Loan Documents, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, each Agent:
(a) may treat the payee of any Note as the holder thereof until, in the case of
the Administrative Agent, the Administrative Agent receives and accepts an
Assignment and Acceptance entered into by the Lender that is the payee of such
Note, as assignor, and an Eligible Assignee, as assignee, or, in the case of any
other Agent, such Agent has received notice from the Administrative Agent that
it has received and accepted such Assignment and Acceptance, in each case as
provided in Section 9.07; (b) may consult with legal counsel (including counsel
for any Loan Party), independent public accountants and other experts selected
by it and shall not be liable for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such counsel, accountants or
experts; (c) makes no warranty or representation to any Lender Party and shall
not be responsible to any Lender Party for any statements, warranties or
representations (whether written or oral) made in or in connection with the Loan
Documents; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of any
Loan Document on the part of any Loan Party or to inspect the property
(including the books and records) of any Loan Party; (e) shall not be
responsible to any Lender Party for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of, or the perfection or
priority of any lien or security interest created or purported to be created
under or in connection with, any Loan Document or any other instrument or
document furnished pursuant thereto; and (f) shall incur no liability under or
in respect of any Loan Document by acting upon any notice, consent, certificate
or other instrument or writing (which may be by telegram, telecopy or telex)
believed by it to be genuine and signed or sent by the proper party or parties.
SECTION 8.03. Agents and Affiliates. With respect to its Commitments, the
Advances made by it and the Notes issued to it, each Agent shall have the same
rights and powers under the Loan Documents as any other Lender Party and may
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exercise the same as though it were not an Agent; and the term "Lender Party" or
"Lender Parties" shall, unless otherwise expressly indicated, include each Agent
in its individual capacity. Each Agent and its respective affiliates may accept
deposits from, lend money to, act as trustee under indentures of, accept
investment banking engagements from and generally engage in any kind of business
with, any Loan Party, any of its Subsidiaries and any Person that may do
business with or own securities of any Loan Party or any such Subsidiary, all as
if such Agent was not an Agent and without any duty to account therefor to the
Lender Parties.
SECTION 8.04. Lender Party Credit Decision. Each Lender Party acknowledges
that it has, independently and without reliance upon any Agent or any other
Lender Party and based on the financial statements referred to in Section 4.01
and such other documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Lender Party
also acknowledges that it will, independently and without reliance upon any
Agent or any other Lender Party 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 this Agreement.
SECTION 8.05. Indemnification. (a) Each Lender Party severally agrees to
indemnify each Agent (to the extent not promptly reimbursed by the Borrower)
from and against such Lender Party's ratable share (determined as provided
below) of any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever that may be imposed on, incurred by, or asserted against such
Agent in any way relating to or arising out of the Loan Documents or any action
taken or omitted by such Agent under the Loan Documents; provided, however, that
no Lender Party shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from such Agent's gross negligence or
willful misconduct as found in a final, non-appealable judgment by a court of
competent jurisdiction. Without limitation of the foregoing, each Lender Party
agrees to reimburse each Agent promptly upon demand for its ratable share of any
costs and expenses (including, without limitation, fees and expenses of counsel)
payable by the Borrowers under Section 9.04, to the extent that such Agent is
not promptly reimbursed for such costs and expenses by the Borrowers.
(b) Each Lender Party severally agrees to indemnify the Issuing Bank (to
the extent not promptly reimbursed by the Borrower) from and against such Lender
Party's ratable share (determined as provided below) of any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever that may be imposed
on, incurred by, or asserted against the Issuing Bank in any way relating to or
arising out of the Loan Documents or any action taken or omitted by the Issuing
Bank under the Loan Documents; provided, however, that no Lender Party shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Issuing Bank's gross negligence or willful misconduct as found in a
final, non-appealable judgment by a court of competent jurisdiction. Without
limitation of the foregoing, each Lender Party agrees to reimburse the Issuing
Bank promptly upon demand for its ratable share of any costs and expenses
(including, without limitation, fees and expenses of counsel) payable by the
Borrowers under Section 9.04, to the extent that the Issuing Bank is not
promptly reimbursed for such costs and expenses by the Borrowers.
(c) For purposes of this Section 8.05, the Lender Parties' respective
ratable shares of any amount shall be determined, at any time, according to the
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sum of (i) the aggregate principal amount of the Advances outstanding at such
time and owing to the respective Lender Parties, (ii) their respective Pro Rata
Shares of the aggregate Available Amount of all Letters of Credit outstanding at
such time, (iii) the aggregate unused portions of their respective Term
Commitments at such time and (iv) their respective Unused Working Capital
Commitments at such time; provided that the aggregate principal amount of Letter
of Credit Advances owing to the Issuing Bank shall be considered to be owed to
the Working Capital Lenders ratably in accordance with their respective Working
Capital Commitments. The failure of any Lender Party to reimburse any Agent or
the Issuing Bank, as the case may be, promptly upon demand for its ratable share
of any amount required to be paid by the Lender Parties to such Agent or the
Issuing Bank, as the case may be, as provided herein shall not relieve any other
Lender Party of its obligation hereunder to reimburse such Agent or the Issuing
Bank, as the case may be, for its ratable share of such amount, but no Lender
Party shall be responsible for the failure of any other Lender Party to
reimburse such Agent or the Issuing Bank, as the case may be, for such other
Lender Party's ratable share of such amount. Without prejudice to the survival
of any other agreement of any Lender Party hereunder, the agreement and
obligations of each Lender Party contained in this Section 8.05 shall survive
the payment in full of principal, interest and all other amounts payable
hereunder and under the other Loan Documents.
SECTION 8.06. Successor Agents. Any Agent may resign at any time by giving
written notice thereof to the Lender Parties and the Borrowers and may be
removed at any time with or without cause by the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint a
successor Agent, subject, so long as no Default has occurred and continuing, to
the consent of the Borrowers, such consent not to be unreasonably withheld. If
no successor Agent shall have been so appointed by the Required Lenders, and
shall have accepted such appointment, within 30 days after the retiring Agent's
giving of notice of resignation or the Required Lenders' removal of the retiring
Agent, then the retiring Agent may, on behalf of the Lender Parties, appoint a
successor Agent, subject, so long as no Default has occurred and continuing, to
the consent of the Borrowers, such consent not to be unreasonably withheld,
which shall be a commercial bank organized under the laws of the United States
or of any State thereof and having a combined capital and surplus of at least
$250,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent and, in the case of a successor Collateral Agent, upon the
execution and filing or recording of such financing statements, or amendments
thereto, and such amendments or supplements to any mortgages, and such other
instruments or notices, as may be necessary or desirable, or as the Required
Lenders may request, in order to continue the perfection of the Liens granted or
purported to be granted by the Collateral Documents, such successor Agent shall
succeed to and become vested with all the rights, powers, discretion, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations under the Loan Documents. If within 45 days
after written notice is given of the retiring Agent's resignation or removal
under this Section 8.06 no successor Agent shall have been appointed and shall
have accepted such appointment, then on such 45th day (i) the retiring Agent's
resignation or removal shall become effective, (ii) the retiring Agent shall
thereupon be discharged from its duties and obligations under the Loan Documents
and (iii) the Required Lenders shall thereafter perform all duties of the
retiring Agent under the Loan Documents until such time, if any, as the Required
Lenders appoint a successor Agent as provided above. After any retiring Agent's
resignation or removal hereunder as Agent shall have become effective, the
provisions of this Article VII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.
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ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. No amendment or waiver of any provision of
this Agreement or the Notes or any other Loan Document, nor consent to any
departure by any Loan Party therefrom, shall in any event be effective unless
the same shall be in writing and signed (or, in the case of the Collateral
Documents, consented to) by the Required Lenders, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that (a) no amendment, waiver or
consent shall, unless in writing and signed by all of the Lenders (other than
any Lender Party that is, at such time, a Defaulting Lender), do any of the
following at any time: (i) waive any of the conditions specified in Section 3.01
or, in the case of the Initial Extension of Credit, Section 3.02, (ii) change
the number of Lenders or the percentage of (x) the Commitments, (y) the
aggregate unpaid principal amount of the Advances or (z) the aggregate Available
Amount of outstanding Letters of Credit that, in each case, shall be required
for the Lenders or any of them to take any action hereunder, (iii) reduce or
limit the obligations of any Guarantor under Section 1 of the Guaranty issued by
it or release such Guarantor or otherwise limit such Guarantor's liability with
respect to the Obligations owing to the Agents and the Lender Parties (other
than, in the case of any Subsidiary Guarantor, to the extent permitted under the
Subsidiary Guaranty), (iv) release any material portion of the Collateral in any
transaction or series of related transactions or permit the creation,
incurrence, assumption or existence of any Lien on any material portion of the
Collateral in any transaction or series of related transactions to secure any
Obligations other than Obligations owing to the Secured Parties under the Loan
Documents, (v) amend Section 2.13 or this Section 9.01, (vi) increase the
Commitments of the Lenders, (vii) reduce the principal of, or interest on, the
Notes or any fees or other amounts payable hereunder, (viii) postpone any date
scheduled for any payment of principal of, or interest on, the Notes pursuant to
Section 2.04 or 2.07 or any date fixed for payment of fees or other amounts
payable hereunder, or (ix) limit the liability of any Loan Party under any of
the Loan Documents and (b) no amendment, waiver or consent shall, unless in
writing and signed by the Required Lenders and each Lender (other than any
Lender that is, at such time, a Defaulting Lender) that has a Commitment under
the Term Facilities or Working Capital Facility if such Lender is directly
affected by such amendment, waiver or consent, (i) increase the Commitments of
such Lender, (ii) reduce the principal of, or interest on, the Notes held by
such Lender or any fees or other amounts payable hereunder to such Lender, (iii)
postpone any date fixed for any payment of principal of, or interest on, the
Notes held by such Lender or any fees or other amounts payable hereunder to such
Lender, (iv) change the order of application of any prepayment set forth in
Section 2.06 in any manner that materially affects such Lender; provided further
that no amendment, waiver or consent shall, unless in writing and signed by the
Issuing Bank, as the case may be, in addition to the Lenders required above to
take such action, affect the rights or obligations of the Issuing Bank under
this Agreement; and provided further that no amendment, waiver or consent shall,
unless in writing and signed by an Agent in addition to the Lenders required
above to take such action, affect the rights or duties of such Agent under this
Agreement or the other Loan Documents.
SECTION 9.02. Notices, Etc. All notices and other communications provided
for hereunder shall be in writing (including telecopy communication) and mailed
(by certified mail), telecopied or delivered by hand; if to ICG Equipment, at
its address at 161 Inverness Drive West, Englewood, CO 80112, facsimile: (303)
414-8883, Attention: Reggie Vegliante, with a copy to H. Don Teaque, General
Counsel; if to ICG NetAhead, at its address at 161 Inverness Drive West,
Englewood, CO 80112, facsimile: (303) 414-8883, Attention: Reggie Vegliante,
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with a copy to H. Don Teague, General Counsel; if to any Initial Lender Party,
at its Domestic Lending Office specified opposite its name on Schedule I hereto;
if to any other Lender Party, at its Domestic Lending Office specified in the
Assignment and Acceptance pursuant to which it became a Lender Party; if to the
Administrative Agent or the Collateral Agent, at its address at 1 Liberty Plaza,
New York, New York 10006 Attention: Kevin Cornwell; and if to the Lead Arranger
at its address at 1585 Broadway, New York, New York 10036, Attention: Lucy
Galbraith; or, as to any party, at such other address as shall be designated by
such party in a written notice to the other parties. All such notices and other
communications shall, when mailed (by certified mail), telecopied or delivered
shall be effective when received by the party being notified. Delivery by
telecopier of an executed counterpart of any amendment or waiver of any
provision of this Agreement or the Notes or of any Exhibit hereto to be executed
and delivered hereunder shall be effective as delivery of an original executed
counterpart thereof.
SECTION 9.03. No Waiver; Remedies. No failure on the part of any Lender
Party or any Agent to exercise, and no delay in exercising, any right hereunder
or under any Note shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 9.04. Costs and Expenses. (a) Subject to the provisions of the
Commitment Letter, the Borrowers agree jointly and severally to pay on demand
(i) all costs and expenses of the Administrative Agent and the Collateral Agent
in connection with the preparation, execution, delivery, administration,
modification and amendment of the Loan Documents (including, without limitation,
(A) all due diligence, collateral review, syndication, transportation, computer,
duplication, appraisal, audit, insurance, consultant, search, filing and
recording fees and expenses and (B) the reasonable fees and expenses of counsel
for such Agents with respect thereto, with respect to advising such Agents as to
their rights and responsibilities, or the perfection, protection or preservation
of rights or interests, under the Loan Documents, with respect to negotiations
with any Loan Party or with other creditors of any Loan Party or any of its
Subsidiaries arising out of any Default or any events or circumstances that may
give rise to a Default and with respect to presenting claims in or otherwise
participating in or monitoring any bankruptcy, insolvency or other similar
proceeding involving creditors' rights generally and any proceeding ancillary
thereto) and (ii) all costs and expenses of such Agents and each Lender Party in
connection with the enforcement of the Loan Documents, whether in any action,
suit or litigation, or any bankruptcy, insolvency or other similar proceeding
affecting creditors' rights generally (including, without limitation, the
reasonable fees and expenses of counsel for the Administrative Agent and the
Collateral Agent and each Lender Party with respect thereto).
(b) The Borrowers agree to indemnify, defend and save and hold harmless the
Administrative Agent and the Collateral Agent, each Lender Party and each of
their Affiliates and their respective officers, directors, employees, agents and
advisors (each, an "Indemnified Party") from and against, and shall pay on
demand, any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and expenses of counsel) that
may be incurred by or asserted or awarded against any Indemnified Party, in each
case arising out of or in connection with or by reason of (including, without
limitation, in connection with any investigation, litigation or proceeding or
preparation of a defense in connection therewith) (i) the Facilities, the actual
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or proposed use of the proceeds of the Advances or the Letters of Credit, the
Transaction Documents or any of the transactions contemplated thereby, or (ii)
the actual or alleged presence of Hazardous Materials on any property of any
Loan Party or any of its Subsidiaries or any Environmental Action relating in
any way to any Loan Party or any of its Subsidiaries, except to the extent such
claim, damage, loss, liability or expense is found in a final, non-appealable
judgment by a court of competent jurisdiction to have resulted from such
Indemnified Party's gross negligence or willful misconduct. In the case of an
investigation, litigation or other proceeding to which the indemnity in this
Section 9.04(b) applies, such indemnity shall be effective whether or not such
investigation, litigation or proceeding is brought by any Loan Party, its
directors, shareholders or creditors or an Indemnified Party, whether or not any
Indemnified Party is otherwise a party thereto and whether or not the
Transaction is consummated. Each Borrower also agrees not to assert any claim
against any Agent, any Lender Party or any of their Affiliates, or any of their
respective officers, directors, employees, agents and advisors, on any theory of
liability, for special, indirect, consequential or punitive damages arising out
of or otherwise relating to the Facilities, the actual or proposed use of the
proceeds of the Advances or the Letters of Credit, the Transaction Documents or
any of the transactions contemplated by the Transaction Documents.
(c) If any payment of principal of, or Conversion of, any Eurodollar Rate
Advance is made by any Borrower to or for the account of a Lender Party other
than on the last day of the Interest Period for such Advance, as a result of a
payment or Conversion pursuant to Section 2.06, 2.09(b)(i) or 2.10(d),
acceleration of the maturity of the Notes pursuant to Section 6.01 or for any
other reason, or by an Eligible Assignee to a Lender Party other than on the
last day of the Interest Period for such Advance upon an assignment of rights
and obligations under this Agreement pursuant to Section 9.07 as a result of a
demand by the Borrowers pursuant to Section 9.07(a), or if the Borrowers fail to
make any payment or prepayment of an Advance for which a notice of prepayment
has been given or that is otherwise required to be made, whether pursuant to
Section 2.04, 2.06 or 6.01 or otherwise, the Borrowers shall, upon demand by
such Lender Party (with a copy of such demand to the Administrative Agent),
jointly and severally pay to the Administrative Agent for the account of such
Lender Party any amounts required to compensate such Lender Party for any
additional losses, costs or expenses that it may reasonably incur as a result of
such payment or Conversion or such failure to pay or prepay, as the case may be,
including, without limitation, any loss (including loss of anticipated profits),
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by any Lender Party to fund or maintain such
Advance.
(d) If any Loan Party fails to pay when due any costs, expenses or other
amounts payable by it under any Loan Document, including, without limitation,
fees and expenses of counsel and indemnities, such amount may be paid on behalf
of such Loan Party by the Administrative Agent or any Lender Party, in its sole
discretion.
(e) Without prejudice to the survival of any other agreement of any Loan
Party hereunder or under any other Loan Document, the agreements and obligations
of each Borrower contained in Sections 2.10 and 2.12 and this Section 9.04 shall
survive the payment in full of principal, interest and all other amounts payable
hereunder and under any of the other Loan Documents.
SECTION 9.05. Right of Set-off. Upon (a) the occurrence and during the
continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 6.01 to authorize the
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Administrative Agent to declare the Notes due and payable pursuant to the
provisions of Section 6.01, each Agent and each Lender Party and each of their
respective Affiliates is hereby authorized at any time and from time to time, to
the fullest extent permitted by law, to set off and otherwise apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Agent, such Lender Party
or such Affiliate to or for the credit or the account of each Borrower against
any and all of the Obligations of such Borrower now or hereafter existing under
the Loan Documents, irrespective of whether such Agent or such Lender Party
shall have made any demand under this Agreement or such Note or Notes and
although such Obligations may be unmatured. Each Agent and each Lender Party
agrees promptly to notify each Borrower after any such set-off and application;
provided, however, that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of each Agent and each
Lender Party and their respective Affiliates under this Section are in addition
to other rights and remedies (including, without limitation, other rights of
set-off) that such Agent, such Lender Party and their respective Affiliates may
have.
SECTION 9.06. Binding Effect. This Agreement shall become effective when it
shall have been executed by the Borrower and each Agent and the Administrative
Agent shall have been notified by each Initial Lender Party that such Initial
Lender Party has executed it and thereafter shall be binding upon and inure to
the benefit of each Borrower, each Agent and each Lender Party and their
respective successors and assigns, except that the Borrowers shall not have the
right to assign their rights hereunder or any interest herein without the prior
written consent of the Lender Parties.
SECTION 9.07. Assignments and Participations. (a) Each Lender may and, so
long as no Default shall have occurred and be continuing, if demanded by the
Borrowers (following a demand by such Lender pursuant to Section 2.10 or 2.12)
upon at least five Business Days' notice to such Lender and the Administrative
Agent, will assign to one or more Eligible Assignees all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Commitment or Commitments, the Advances owing to it and the
Note or Notes held by it); provided, however, that (i) each such assignment
shall be of a uniform, and not a varying, percentage of all rights and
obligations under and in respect of one or more Facilities, (ii) except in the
case of an assignment to a Person that, immediately prior to such assignment,
was a Lender, an Affiliate of any Lender or an Approved Fund of any Lender or an
assignment of all of a Lender's rights and obligations under this Agreement, the
aggregate amount of the Commitments being assigned to such Eligible Assignee
pursuant to such assignment (determined as of the date of the Assignment and
Acceptance with respect to such assignment) shall in no event be less than
$3,000,000 (or such lesser amount as shall be approved by the Administrative
Agent and, so long as no Default shall have occurred and be continuing at the
time of effectiveness of such assignment, the Borrower) under each Facility for
which a Commitment is being assigned, (iii) each such assignment shall be to an
Eligible Assignee, (iv) each such assignment made as a result of a demand by the
Borrower pursuant to this Section 9.07(a) shall be arranged by the Borrower
after consultation with the Administrative Agent and shall be either an
assignment of all of the rights and obligations of the assigning Lender under
this Agreement or an assignment of a portion of such rights and obligations made
concurrently with another such assignment or other such assignments that
together cover all of the rights and obligations of the assigning Lender under
this Agreement, (v) no Lender shall be obligated to make any such assignment as
a result of a demand by the Borrower pursuant to this Section 9.07(a) unless and
until such Lender shall have received one or more payments from either the
Borrower or one or more Eligible Assignees in an aggregate amount at least equal
to the aggregate outstanding principal amount of the Advances owing to such
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Lender, together with accrued interest thereon to the date of payment of such
principal amount and all other amounts payable to such Lender under this
Agreement, (vi) no such assignments shall be permitted without the consent of
the Administrative Agent until the Administrative Agent shall have notified the
Lender Parties that syndication of the Commitments hereunder has been completed
and (vii) 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, together with any Note or Notes subject to such
assignment and a processing and recordation fee of $3,000; provided, however,
that (A) such processing and recordation fee shall be $1,500 for any Person that
immediately prior to such assignment was a Lender; (B) there shall be no such
processing and recordation fee for any Person that immediately prior to such
assignment was an Affiliate of such assigning Lender; and (C) for each such
assignment made as a result of a demand by the Borrower pursuant to this Section
9.07(a), the Borrower shall pay to the Administrative Agent the applicable
processing and recordation fee.
(b) Upon such execution, delivery, acceptance and recording, from and after
the effective date specified in such Assignment and Acceptance, (i) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender or Issuing Bank, as the
case may be, hereunder and (ii) the Lender or Issuing Bank assignor thereunder
shall, to the extent that rights and obligations hereunder have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights (other than
its rights under Sections 2.10, 2.12 and 9.04 to the extent any claim thereunder
relates to an event arising prior to such assignment) and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of the remaining portion of an assigning Lender's or
Issuing Bank's rights and obligations under this Agreement, such Lender or
Issuing Bank shall cease to be a party hereto).
(c) By executing and delivering an Assignment and Acceptance, each Lender
Party assignor thereunder and each assignee thereunder confirm to and agree with
each other and the other parties thereto and hereto as follows: (i) other than
as provided in such Assignment and Acceptance, such assigning Lender Party makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with any Loan
Document or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of, or the perfection or priority of any lien or security
interest created or purported to be created under or in connection with, any
Loan Document or any other instrument or document furnished pursuant thereto;
(ii) such assigning Lender Party makes no representation or warranty and assumes
no responsibility with respect to the financial condition of any Loan Party or
the performance or observance by any Loan Party of any of its obligations under
any Loan Document or any other instrument or document furnished pursuant
thereto; (iii) such assignee confirms that it has received a copy of this
Agreement, together with copies of the financial statements referred to in
Section 4.01 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon any Agent, such assigning Lender Party or any other Lender Party
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 this Agreement; (v) such assignee confirms that it is an Eligible
Assignee; (vi) such assignee appoints and authorizes each Agent to take such
action as agent on its behalf and to exercise such powers and discretion under
the Loan Documents as are delegated to such Agent by the terms hereof and
thereof, together with such powers and discretion as are reasonably incidental
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thereto; and (vii) such assignee agrees that it will perform in accordance with
their terms all of the obligations that by the terms of this Agreement are
required to be performed by it as a Lender or Issuing Bank, as the case may be.
(d) The Administrative Agent, acting for this purpose (but only for this
purpose) as the agent of the Borrower, shall maintain at its address referred to
in Section 9.02 a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Lender Parties and the Commitment under each Facility of, and principal
amount of the Advances owing under each Facility to, each Lender Party from time
to time (the "Register"). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrower, the Agents
and the Lender Parties shall treat each Person whose name is recorded in the
Register as a Lender Party hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower or any Agent or any
Lender Party at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender Party and an assignee, together with any Note or Notes subject
to such assignment, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit C
hereto, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Borrowers and each other Agent. In the case of any assignment by a Lender,
within five Business Days after its receipt of such notice, the Borrowers, at
its own expense, shall execute and deliver to the Administrative Agent in
exchange for the surrendered Note or Notes a new Note to the order of such
Eligible Assignee in an amount equal to the Commitment assumed by it under each
Facility pursuant to such Assignment and Acceptance and, if any assigning Lender
has retained a Commitment hereunder under such Facility, a new Note to the order
of such 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 Exhibit A-1, A-2 or A-3 hereto, as the
case may be.
(f) The Issuing Bank may assign to Eligible Assignee all of its rights and
obligations under the undrawn portion of its Letter of Credit Commitment at any
time; provided, however, that (i) each such assignment shall be to an Eligible
Assignee and (ii) 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, together with a processing and recordation fee of
$3,000; provided, however, that such processing and recordation fee shall be
$1,500 for any Person that immediately prior to such assignment was a Lender.
(g) Each Lender Party may sell participations to one or more Persons (other
than any Loan Party or any of its Affiliates) in or to all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Commitments, the Advances owing to it and the Note or Notes
(if any) held by it); provided, however, that (i) such Lender Party's
obligations under this Agreement (including, without limitation, its
Commitments) shall remain unchanged, (ii) such Lender Party shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender Party shall remain the holder of any such Note for all
purposes of this Agreement, (iv) the Borrowers, the Agents and the other Lender
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<PAGE>
Parties shall continue to deal solely and directly with such Lender Party in
connection with such Lender Party's rights and obligations under this Agreement
and (v) no participant under any such participation shall have any right to
approve any amendment or waiver of any provision of any Loan Document, or any
consent to any departure by any Loan Party therefrom, except to the extent that
such amendment, waiver or consent would reduce the principal of, or interest on,
the Notes or any fees or other amounts payable hereunder, in each case to the
extent subject to such participation, postpone any date fixed for any payment of
principal of, or interest on, the Notes or any fees or other amounts payable
hereunder, in each case to the extent subject to such participation, or release
all or substantially all of the Collateral.
(h) Any Lender Party may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
9.07, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrowers furnished to such Lender
Party by or on behalf of the Borrowers; provided, however, that, prior to any
such disclosure, the assignee or participant or proposed assignee or participant
shall agree to preserve the confidentiality of any Confidential Information
received by it from such Lender Party.
(i) Notwithstanding any other provision set forth in this Agreement, any
Lender Party may at any time create a security interest in all or any portion of
its rights under this Agreement (including, without limitation, the Advances
owing to it and the Note or Notes held by it) in favor of any Federal Reserve
Bank in accordance with Regulation A of the Board of Governors of the Federal
Reserve System.
SECTION 9.08. Execution in 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 all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of an original executed counterpart of
this Agreement.
SECTION 9.09. No Liability of the Issuing Bank. The Borrowers assume all
risks of the acts or omissions of any beneficiary or transferee of any Letter of
Credit with respect to its use of such Letter of Credit. Neither the Issuing
Bank nor any of its officers or directors shall be liable or responsible for:
(a) the use that may be made of any Letter of Credit or any acts or omissions of
any beneficiary or transferee in connection therewith; (b) the validity,
sufficiency or genuineness of documents, or of any endorsement thereon, even if
such documents should prove to be in any or all respects invalid, insufficient,
fraudulent or forged; (c) payment by the Issuing Bank against presentation of
documents that do not comply with the terms of a Letter of Credit, including
failure of any documents to bear any reference or adequate reference to the
Letter of Credit; or (d) any other circumstances whatsoever in making or failing
to make payment under any Letter of Credit, except that the Borrowers shall have
a claim against the Issuing Bank, and the Issuing Bank shall be liable to the
Borrowers, to the extent of any direct, but not consequential, damages suffered
by the Borrowers that the Borrowers prove were caused by (i) the Issuing Bank's
willful misconduct or gross negligence as determined in a final, non-appealable
judgment by a court of competent jurisdiction in determining whether documents
presented under any Letter of Credit comply with the terms of the Letter of
Credit or (ii) the Issuing Bank's willful failure to make lawful payment under a
Letter of Credit after the presentation to it of a draft and certificates
strictly complying with the terms and conditions of the Letter of Credit. In
97
<PAGE>
furtherance and not in limitation of the foregoing, the Issuing Bank may accept
documents that appear on their face to be in order, without responsibility for
further investigation, regardless of any notice or information to the contrary.
SECTION 9.10. Confidentiality. Neither any Agent nor any Lender Party shall
disclose any Confidential Information to any Person without the consent of the
Borrower, other than (a) to such Agent's or such Lender Party's Affiliates and
their officers, directors, employees, agents and advisors and to actual or
prospective Eligible Assignees and participants, and then only on a confidential
basis, (b) as required by any law, rule or regulation or judicial process, (c)
as requested or required by any state, Federal or foreign authority or examiner
regulating such Lender Party and (d) to any rating agency when required by it,
provided that, prior to any such disclosure, such rating agency shall undertake
to preserve the confidentiality of any Confidential Information relating to the
Loan Parties received by it from such Lender Party.
SECTION 9.11. Release of Collateral. Upon the sale, lease, transfer or
other disposition of any item of Collateral of any Loan Party (including,
without limitation, as a result of the sale, in accordance with the terms of the
Loan Documents, of the Loan Party that owns such Collateral) in accordance with
the terms of the Loan Documents, the Collateral Agent will, at the Borrowers'
expense, execute and deliver to such Loan Party such documents as such Loan
Party may reasonably request to evidence the release of such item of Collateral
from the assignment and security interest granted under the Collateral Documents
in accordance with the terms of the Loan Documents.
SECTION 9.12. Jurisdiction, Etc. (a) Each of the parties hereto hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any New York State court or Federal court of the
United States of America sitting in New York City, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Agreement or any of the other Loan Documents to which it is a party, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in any such New York State
court or, to the fullest extent permitted by law, in such Federal court. Each of
the Loan Parties hereby agrees that service of all process in any such
proceeding in any such court may be made by registered mail or certified mail,
return receipt requested, to such Loan Party at its address provided in Section
9.02. Each of the parties hereto agrees that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right that any party may otherwise have to bring any
action or proceeding relating to this Agreement or any of the other Loan
Documents in the courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection that it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or any of the other Loan
Documents to which it is a party in any New York State or Federal court. Each of
the parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
SECTION 9.13. Governing Law. This Agreement and the Notes shall be governed
by, and construed in accordance with, the laws of the State of New York.
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<PAGE>
SECTION 9.14. Waiver of Jury Trial. Each of the Borrowers, the Agents and
the Lender Parties irrevocably waives all right to trial by jury in any action,
proceeding or counterclaim (whether based on contract, tort or otherwise)
arising out of or relating to any of the Loan Documents, the Advances, the
Letters of Credit or the actions of any Agent or any Lender Party in the
negotiation, administration, performance or enforcement thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
ICG EQUIPMENT, INC.
By /s/ H. Don Teague
---------------------
Title:
ICG NETAHEAD, INC.
By /s/ H. Don Teague
---------------------
Title:
<PAGE>
ICG SERVICES, INC.
By /s/ H. Don Teague
---------------------
Title:
<PAGE>
MORGAN STANLEY SENIOR FUNDING, INC.,
as Sole Book-Runner and Lead Arranger
By /s/ Lucy H. Galbraith
------------------------
Title: Principal
<PAGE>
ROYAL BANK OF CANADA,
as Administrative Agent and Collateral
Agent
By /s/ Stephanie Babich
------------------------
Title: Senior Manager
<PAGE>
BANK OF AMERICA, N.A.,
as Co-Documentation Agent
By /s/ Julie Schell
---------------------
Title: Vice President
<PAGE>
BARCLAYS BANK PLC
as Co-Documentation Agent
By /s/ Daniele Iacovone
------------------------
Title: Associate Director
<PAGE>
Initial Lenders
MORGAN STANLEY SENIOR FUNDING, INC.
By /s/ Lucy H. Galbraith
------------------------
Title: Principal
<PAGE>
BANK OF AMERICA, N.A.
By /s/ Julie Schell
------------------------
Title: Vice President
<PAGE>
PARIBAS, LOS ANGELES AGENCY
By /s/ Darlynn Ernst Kitcher
--------------------------
Title: Vice President
By /s/ Thomas G. Brandt
--------------------------
Title: Director
<PAGE>
FINOVA CAPITAL CORPORATION
By /s/ Andrew J. Pluta
--------------------------
Title: Vice President
<PAGE>
FIRST UNION NATIONAL BANK
By /s/ Mark L. Cook
------------------------------
Title: Senior Vice President
<PAGE>
GENERAL ELECTRIC CAPITAL CORPORATION
By /s/ Thomas P. Waters
------------------------------
Title: Senior Vice President
<PAGE>
IBM CREDIT
By /s/ Philip N. Morse
---------------------------------------
Title: Director, Commercial Financing
Americas
<PAGE>
ROYAL BANK OF CANADA
By /s/ Stephanie Babich
------------------------
Title: Senior Manager
<PAGE>
STEIN ROE FLOATING RATE LIMITED LIABILITY
COMPANY
By /s/ Brian W. Good
--------------------------
Title: Vice President
<PAGE>
PILGRIM PRIME RATE TRUST
By: Pilgrim Investments, Inc., as its
investment manager
By /s/ Michel Prince, CFA
---------------------------
Title: Vice President
EXECUTION COPY
SECURITY AGREEMENT
Dated August 12, 1999
From
THE PERSONS LISTED ON THE SIGNATURE PAGES HEREOF
as Grantors
to
ROYAL BANK OF CANADA
as Collateral Agent
<PAGE>
T A B L E O F C O N T E N T S
Section Page
1. Grant of Security..........................................................2
2. Security for Obligations...................................................6
3. Borrower Remains Liable....................................................6
4. Delivery and Control of Security Collateral and Account Collateral.........6
5. Maintaining the Cash Collateral Account and the L/C Cash Collateral
Account....................................................................7
6. Maintaining the Pledged Accounts...........................................8
7. Investing of Amounts in the Cash Collateral Account and the L/C Cash
Collateral Account.........................................................9
8. Release of Amounts.........................................................9
9. Representations and Warranties.............................................9
10. Further Assurances.......................................................11
11. As to Equipment and Inventory............................................12
12. Insurance................................................................13
13. Place of Perfection; Records; Collection of Receivables..................14
14. Voting Rights; Dividends; Etc............................................15
15. As to the Assigned Agreements............................................16
16. Payments Under the Assigned Agreements...................................17
17. Transfers and Other Liens [; Additional Shares]..........................17
18. Collateral Agent Appointed Attorney-in-Fact..............................18
19. Collateral Agent May Perform.............................................18
20. The Collateral Agent's Duties............................................18
21. Remedies.................................................................19
<PAGE>
Section Page
22. Registration Rights......................................................20
23. Indemnity and Expenses...................................................21
[Section 24. Security Interest Absolute......................................21
[25]. Amendments; Waivers; Etc...............................................22
[26]. Addresses for Notices..................................................22
[27]. Continuing Security Interest; Assignments under the Credit Agreement...23
[28]. Release and Termination................................................23
[29]. The Mortgages..........................................................24
[30]. Governing Law..........................................................24
Schedule I - Pledged Shares [,] [and] Pledged Debt [, Pledged Security
Entitlements and Pledged Commodity Contracts]
Schedule II - Assigned Agreements
Schedule III - Locations of Equipment and Inventory
Schedule IV - Intellectual Property
Schedule V - Pledged Accounts
Schedule VI - Permitted Unpledged Accounts
Exhibit A - Form of Security Agreement Supplement
Exhibit B - Form of Pledged Account Letter
Exhibit C - Form of Consent and Agreement
Exhibit D - Form of Intellectual Property Security Agreement
Exhibit E - Form of Intellectual Property Security Agreement
Supplement
ii
<PAGE>
Execution Copy
SECURITY AGREEMENT
SECURITY AGREEMENT dated August 12, 1999 made by the Persons listed on
the signature pages hereof and the Additional Grantors (as defined in Section
23(c)) (such Persons so listed and the Additional Grantors being, collectively,
the "Grantors"), to Royal Bank of Canada, as administrative agent and collateral
agent (the "Collateral Agent") for the Credit Agreement referred to below
PRELIMINARY STATEMENTS.
(1) ICG Equipment, Inc., a Colorado corporation ("ICG Equipment") and
ICG NetAhead, Inc., a Delaware corporation ("ICG NetAhead" and, together with
ICG Equipment, the "Borrowers") have entered into a Credit Agreement dated as of
August 12, 1999 (said Agreement, as it may be hereafter amended, supplemented or
otherwise modified from time to time, being the Credit Agreement) with certain
Lender Parties thereto, Royal Bank of Canada as Administrative Agent and
Collateral Agent, and Morgan Stanley Senior Funding, Inc., as Sole Book-Runner
and Lead Arranger.
(2) Each Grantor is the owner of the shares (the "Pledged Shares") of
stock set forth opposite such Grantor's name on and as otherwise described in
Part I of Schedule I hereto and issued by the corporations named therein and of
the indebtedness (the "Pledged Debt") described in Part II of said Schedule I
and issued by the obligors named therein.
(3) The Borrowers have opened a non-interest bearing cash collateral
account (the "Cash Collateral Account") with ____________________ at its office
at _______________, New York, New York _____, Account No. 277188-9, in the name
of the Borrowers but under the sole control and dominion of the Collateral Agent
and subject to the terms of this Agreement.
(4) The Borrowers have opened a non-interest bearing cash collateral
account (the "L/C Cash Collateral Account") with ____________________ at its
office at _______________, New York, New York _____, Account No. 277187-1, in
the name of the Borrowers but under the sole control and dominion of the
Collateral Agent and subject to the terms of this Agreement.
(5) It is a condition precedent to the making of Advances and the
issuance of Letters of Credit by the Lender Parties under the Credit Agreement
and the entry into Secured Hedge Agreements by the Hedge Banks from time to time
that the Grantors shall have granted the assignment and security interest and
made the pledge and assignment contemplated by this Agreement.
(6) Each Grantor will derive substantial direct and indirect benefit
from the transactions contemplated by the Loan Documents.
(7) Terms defined in the Credit Agreement and not otherwise defined in
this Agreement are used in this Agreement as defined in the Credit Agreement.
<PAGE>
(8) Unless otherwise defined in this Agreement or in the Credit
Agreement, terms defined in Article 8 or 9 of the Uniform Commercial Code in
effect in the State of New York ("N.Y. Uniform Commercial Code") are used in
this Agreement as such terms are defined in such Article 8 or 9.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Lender Parties to make Advances and issue Letters of Credit under the
Credit Agreement and to induce the Hedge Banks to enter into Secured Hedge
Agreements from time to time, each Grantor hereby agrees with the Collateral
Agent for its benefit and the ratable benefit of the Secured Parties as follows:
Section 1. Grant of Security. Each Grantor hereby assigns and pledges
to the Collateral Agent for its benefit and the ratable benefit of the Secured
Parties, and hereby grants to the Collateral Agent for its benefit and the
ratable benefit of the Secured Parties a security interest in, the following
(collectively, the "Collateral"):
(a) all of such Grantor's right, title and interest, whether now owned
or hereafter acquired, in and to all equipment in all of its forms,
wherever located, now or hereafter existing, all fixtures and all parts
thereof and all accessions thereto (including, but not limited to,
telecommunications equipment) (any and all such equipment, fixtures, parts
and accessions being the "Equipment");
(b) all of such Grantor's right, title and interest, whether now owned
or hereafter acquired, in and to all inventory (including, but not limited
to, all telecommunications equipment and goods and all ancillary equipment
and goods) in all of its forms, wherever located, now or hereafter existing
(including, but not limited to, (i) all raw materials and work in process
therefor, finished goods thereof and materials used or consumed in the
manufacture, production, preparation or shipping thereof, (ii) goods in
which such Grantor has an interest in mass or a joint or other interest or
right of any kind (including, without limitation, goods in which such
Grantor has an interest or right as consignee) and (iii) goods that are
returned to or repossessed or stopped in transit by such Grantor), and all
accessions thereto and products thereof and documents therefor (any and all
such inventory, accessions, products and documents being the "Inventory");
(c) all of such Grantor's right, title and interest, whether now owned
or hereafter acquired, in and to all accounts, contract rights, chattel
paper, instruments, deposit accounts, general intangibles and other
obligations of any kind, now or hereafter existing, whether or not arising
out of or in connection with the sale or lease of goods or the rendering of
services and whether or not earned by performance, and all rights now or
hereafter existing in and to all security agreements, leases and other
contracts, agreements and guarantees securing or otherwise relating to any
such accounts, contract rights, chattel paper, instruments, deposit
accounts, general intangibles or obligations (any and all such accounts,
contract rights, chattel paper, instruments, deposit accounts, general
intangibles and obligations, to the extent not referred to in clause (d),
(e), (f) or (g) below, being the "Receivables", and any and all such
leases, security agreements and other contracts, agreements and guarantees
being the "Related Contracts");
(d) all of the following (the "Security Collateral"):
2
<PAGE>
(i) the Pledged Shares and the certificates representing the
Pledged Shares, and all dividends, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the
Pledged Shares;
(ii) the Pledged Debt and the instruments evidencing the
Pledged Debt, and all interest, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the
Pledged Debt;
(iii) all additional shares of stock from time to time
acquired by such Grantor in any manner, and the certificates
representing such additional shares, and all dividends, cash,
instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange
for any or all of such shares;
(iv) all additional indebtedness from time to time owed to
such Grantor and the instruments evidencing such indebtedness,
and all interest, cash, instruments and other property from time
to time received, receivable or otherwise distributed in respect
of or in exchange for any or all of such indebtedness; and
(v) all other investment property (including, without
limitation, all (A) securities, whether certificated or
uncertificated, (B) security entitlements, as defined in Section
8-102(a)(17) of the N.Y. Uniform Commercial Code or, in the case
of any U.S. Treasury book-entry securities, as defined in 31
C.F.R. Section 357.2, or, in the case of any U.S. federal agency
book-entry securities, as defined in the corresponding U.S.
federal regulations governing such book-entry securities, (C)
securities accounts, (D) commodity contracts and (E) commodity
accounts) in which such Grantor has or acquires from time to time
any right, title or interest in any manner, and the certificates
or instruments, if any, representing or evidencing such
investment property, and all dividends, interest, distributions,
value, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of such investment property;
(e) all of such Grantor's right, title and interest in and to (i) each
of the agreements listed on Schedule II hereto, (ii) each additional
agreement to lease goods of any type to any Person entered into by such
Grantor as lessor thereunder, (iii) all other contracts, agreements and
guarantees securing or otherwise relating to the agreements described in
clauses (i) and (ii) above and (iv) each Hedge Agreement to which such
Grantor is now or may hereafter become a party, in each case as such
agreements may be amended, supplemented or otherwise modified from time to
time (collectively, the "Assigned Agreements"), including, without
limitation, (A) all rights of such Grantor to receive moneys due and to
become due under or pursuant to the Assigned Agreements, (B) all rights of
such Grantor to receive proceeds of any insurance, indemnity, warranty or
guaranty with respect to the Assigned Agreements, (C) claims of such
Grantor for damages arising out of or for breach of or default under the
Assigned Agreements and (D) the right of such Grantor to terminate the
Assigned Agreements, to perform thereunder and to compel performance and
otherwise exercise all remedies thereunder (all such Collateral being the
"Agreement Collateral");
3
<PAGE>
(f) all of the following (collectively, the "Account Collateral"):
(i) the Cash Collateral Account, all funds held therein and all
certificates and instruments, if any, from time to time representing
or evidencing the Cash Collateral Account;
(ii) the L/C Cash Collateral Account, all funds held therein and
all certificates and instruments, if any, from time to time
representing or evidencing the L/C Cash Collateral Account;
(iii) all Pledged Accounts (as hereinafter defined), all funds
held therein and all certificates and instruments, if any, from time
to time representing or evidencing the Pledged Accounts;
(iv) all other deposit accounts of such Grantor, all funds held
therein and all certificates and instruments, if any, from time to
time representing or evidencing such deposit accounts;
(v) all Collateral Investments (as hereinafter defined) from time
to time and all certificates and instruments, if any, from time to
time representing or evidencing the Collateral Investments;
(vi) all notes, certificates of deposit, deposit accounts, checks
and other instruments from time to time hereafter delivered to or
otherwise possessed by the Collateral Agent for or on behalf of such
Grantor in substitution for or in addition to any or all of the then
existing Account Collateral;
(vii) all interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the then
existing Account Collateral;
(g) all of such Grantor's right, title and interest, whether now owned
or hereafter acquired, in and to the following (collectively, the
"Intellectual Property Collateral"):
(i) all United States, international and foreign patents, patent
applications and statutory invention registrations, including, without
limitation, the patents and patent applications set forth in Schedule
IV hereto (as such Schedule IV may be supplemented from time to time
by supplements to this Agreement, each such supplement being in
substantially the form of Exhibit E hereto (an "IP Security Agreement
Supplement"), executed and delivered by such Grantor to the Collateral
Agent from time to time), together with all reissues, divisions,
continuations, continuations-in-part, extensions and reexaminations
thereof, all inventions therein, all rights therein provided by
international treaties or conventions and all improvements thereto,
and all other rights of any kind whatsoever of such Grantor accruing
thereunder or pertaining thereto (the "Patents");
4
<PAGE>
(ii) all trademarks (including, without limitation, service
marks), certification marks, collective marks, trade dress, logos,
domain names, product configurations, trade names, business names,
corporate names and other source identifiers, whether or not
registered, whether currently in use or not, including, without
limitation, all common law rights and registrations and applications
for registration thereof, including, without limitation, the trademark
registrations and trademark applications set forth in Schedule IV
hereto (as such Schedule IV may be supplemented from time to time by
IP Security Agreement Supplements executed and delivered by such
Grantor to the Collateral Agent from time to time), and all other
marks registered in the U.S. Patent and Trademark Office or in any
office or agency of any State or Territory of the United States or any
foreign country (but excluding any United States intent-to-use
trademark application prior to the filing and acceptance of a
Statement of Use or an Amendment to allege use in connection therewith
to the extent that a valid security interest may not be taken in such
an intent-to-use trademark application under applicable law), and all
rights therein provided by international treaties or conventions, all
reissues, extensions and renewals of any of the foregoing, together in
each case with the goodwill of the business connected therewith and
symbolized thereby, and all rights corresponding thereto throughout
the world and all other rights of any kind whatsoever of such Grantor
accruing thereunder or pertaining thereto (the "Trademarks");
(iii) all copyrights, copyright applications, copyright
registrations and like protections in each work of authorship, whether
statutory or common law, whether published or unpublished, any
renewals or extensions thereof, all copyrights of works based on,
incorporated in, derived from, or relating to works covered by such
copyrights, including, without limitation, the copyright registrations
and copyright applications set forth in Schedule IV hereto including,
without limitation, the trademark registrations and trademark
applications set forth in Schedule IV hereto (as such Schedule IV may
be supplemented from time to time by IP Security Agreement Supplements
executed and delivered by such Grantor to the Collateral Agent from
time to time), together with all rights corresponding thereto
throughout the world and all other rights of any kind whatsoever of
such Grantor accruing thereunder or pertaining thereto (the
"Copyrights");
(iv) all confidential and proprietary information, including,
without limitation, know-how, trade secrets, manufacturing and
production processes and techniques, inventions, research and
development information, technical data, financial, marketing and
business data, pricing and cost information, business and marketing
plans and customer and supplier lists and information (the "Trade
Secrets");
(v) all computer software programs and databases (including,
without limitation, source code, object code and all related
applications and data files), firmware, and documentation and
materials relating thereto, and all rights with respect to the
foregoing, together with any and all options, warranties, service
contracts, program services, test rights, maintenance rights,
improvement rights, renewal rights and indemnifications and any
substitutions, replacements, additions or model conversions of any of
the foregoing (the "Computer Software");
5
<PAGE>
(vi) all license agreements, permits, authorizations and
franchises, whether with respect to the Patents, Trademarks,
Copyrights, Trade Secrets or Computer Software, or with respect to the
patents, trademarks, copyrights, trade secrets, computer software or
other proprietary right of any other Person, including, without
limitation, the license agreements set forth in Schedule IV hereto (as
such Schedule IV may be supplemented from time to time by IP Security
Agreement Supplements executed and delivered by such Grantor to the
Collateral Agent from time to time), and all income, royalties and
other payments now or hereafter due and/or payable with respect
thereto, subject, in each case, to the terms of such license
agreements, permits, authorizations and franchises, including, without
limitation, terms requiring consent to a grant of a security interest
(the "Licenses"); and
(vii) any and all claims for damages for past, present and future
infringement, misappropriation or breach with respect to the Patents,
Trademarks, Copyrights, Trade Secrets, Computer Software or Licenses,
with the right, but not the obligation, to sue for and collect, or
otherwise recover, such damages; and
(h) all proceeds of any and all of the foregoing Collateral
(including, without limitation, proceeds that constitute property of the
types described in clauses (a) through (g) of this Section 1 and this
clause (h) and, to the extent not otherwise included, all (i) payments
under insurance (whether or not the Collateral Agent is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of loss
or damage to or otherwise with respect to any of the foregoing Collateral
and (ii) cash.
Section 2. Security for Obligations. This Agreement secures, in the
case of each Grantor, the payment of all Obligations of such Grantor now or
hereafter existing under the Loan Documents, whether direct or indirect,
absolute or contingent, and including, without limitation, any extensions,
modifications, substitutions, amendments and renewals thereof, whether for
principal, reimbursement obligations, interest, premiums, penalties, fees,
indemnifications, contract causes of action, costs, expenses or otherwise (all
such Obligations being the "Secured Obligations"). Without limiting the
generality of the foregoing, this Agreement secures the payment of all amounts
that constitute part of the Secured Obligations and would be owed by such
Grantor to any Secured Party under the Loan Documents but for the fact that they
are unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving any Grantor.
Section 3. Grantors Remain Liable. Anything herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if this
Agreement had not been executed, (b) the exercise by the Collateral Agent of any
of the rights hereunder shall not release any of the Grantors from any of its
duties or obligations under the contracts and agreements included in the
Collateral and (c) neither the Collateral Agent nor any Secured Party shall have
any obligation or liability under the contracts and agreements included in the
Collateral by reason of this Agreement or any other Loan Document, nor shall the
Collateral Agent or any Secured Party be obligated to perform any of the
obligations or duties of any of the Grantors thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.
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Section 4. Delivery and Control of Security Collateral and Account
Collateral. (a) All certificates or instruments representing or evidencing
Security Collateral or Account Collateral shall be delivered to and held by or
on behalf of the Collateral Agent pursuant hereto and shall be in suitable form
for transfer by delivery, or shall be accompanied by duly executed instruments
of transfer or assignment in blank, all in form and substance satisfactory to
the Collateral Agent. The Collateral Agent shall have the right, at any time in
its discretion and without prior notice to the Grantors, to transfer to or to
register in the name of the Collateral Agent or any of its nominees any or all
of the Security Collateral and Account Collateral, subject only to the revocable
rights specified in Section 13(a). In addition, the Collateral Agent shall have
the right at any time to exchange certificates or instruments representing or
evidencing Security Collateral or Account Collateral for certificates or
instruments of smaller or larger denominations.
(b) With respect to any Security Collateral that constitutes a
security and is not represented or evidenced by a certificate or an instrument,
the applicable Grantor shall cause the issuer thereof to agree in writing with
such Grantor and the Collateral Agent that such issuer will comply with
instructions with respect to such security originated by the Collateral Agent
without further consent of such Grantor, such agreement to be in form and
substance satisfactory to the Collateral Agent.
(c) With respect to any Security Collateral that constitutes a
security entitlement, the applicable Grantor shall cause the securities
intermediary with respect to such security entitlement either (i) to identify in
its records the Collateral Agent as having such security entitlement against
such securities intermediary or (ii) to agree in writing with such Grantor and
the Collateral Agent that such securities intermediary will comply with
entitlement orders (that is, notifications communicated to such securities
intermediary directing transfer or redemption of the financial asset to which
such Grantor has a security entitlement) originated by the Collateral Agent
without further consent of such Grantor, such agreement to be in form and
substance satisfactory to the Collateral Agent.
(d) With respect to any Security Collateral that constitutes a
commodity contract, the applicable Grantor shall cause the commodity
intermediary with respect to such commodity contract to agree in writing with
such Grantor and the Collateral Agent that such commodity intermediary will
apply any value distributed on account of such commodity contract as directed by
the Collateral Agent without further consent of such Grantor, such agreement to
be in form and substance satisfactory to the Collateral Agent.
(e) With respect to any Security Collateral that constitutes a
securities account or a commodity account, the applicable Grantor will, in the
case of a securities account, comply with subsection (c) of this Section 4 with
respect to all security entitlements carried in such securities account and, in
the case of a commodity account, comply with subsection (d) of this Section 4
with respect to all commodity contracts carried in such commodity account.
Section 5. Maintaining the Cash Collateral Account and the L/C Cash
Collateral Account. So long as any Advance shall remain unpaid, any Letter of
Credit shall be outstanding or any Lender Party shall have any Commitment under
the Credit Agreement:
(a) The Borrowers will maintain the Cash Collateral Account and the
L/C Cash Collateral Account with ____________________.
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(b) It shall be a term and condition of each of the Cash Collateral
Account and the L/C Cash Collateral Account, notwithstanding any term or
condition to the contrary in any other agreement relating to the Cash
Collateral Account or the L/C Cash Collateral Account, as the case may be,
and except as otherwise provided by the provisions of Section 20, that no
amount (including interest on Collateral Investments) shall be paid or
released to or for the account of, or withdrawn by or for the account of,
the Grantors or any other Person from the Cash Collateral Account or the
L/C Cash Collateral Account, as the case may be.
The Cash Collateral Account and the L/C Cash Collateral Account shall be subject
to such applicable laws, and such applicable regulations of the Board of
Governors of the Federal Reserve System and of any other appropriate banking or
governmental authority, as may now or hereafter be in effect.
Section 6. Maintaining the Pledged Accounts. So long as any Advance
shall remain unpaid, any Letter of Credit shall be outstanding or any Lender
Party shall have any Commitment under the Credit Agreement:
(a) Each Grantor shall maintain blocked deposit accounts ("Pledged
Accounts") only with banks ("Pledged Account Banks") that have entered into
letter agreements in substantially the form of Exhibit B with such Grantor
and the Collateral Agent ("Pledged Letters").
(b) (i) Upon the written direction of the Collateral Agent, each
Grantor shall immediately instruct each Affiliate of such Grantor obligated
at any time to make any payment to such Grantor for any reason (an
"Obligor") to make such payment to a Pledged Account or to the Cash
Collateral Account and shall pay to the Collateral Agent for deposit in the
Cash Collateral Account, at the end of each Business Day, all proceeds of
Collateral.
(ii) After the occurrence and during the continuance of any
Default and at the written direction of the Collateral Agent, each
Grantor shall immediately instruct each Person who is not an Affiliate
of such Grantor obligated at any time to make any payment to such
Grantor for any reason to make such payment to a Pledged Account or to
the Cash Collateral Account and shall pay to the Collateral Agent for
deposit in the Cash Collateral Account, at the end of each Business
Day, all proceeds of Collateral.
(c) Each Grantor shall instruct each Pledged Account Bank to transfer
to the Cash Collateral Account, at the end of each Business Day after such
written direction, in same day funds, an amount equal to the credit balance
of the Pledged Account in such Pledged Account Bank.
(d) Upon any termination of any Pledged Account Letter or other
agreement with respect to the maintenance of a Pledged Account by any
Grantor or any Pledged Account Bank, the applicable Grantor shall
immediately notify (i) the Collateral Agent, and (ii) all Obligors that
were making payments to such Pledged Account to make all future payments to
another Pledged Account or to the Cash Collateral Account. Each Grantor
agrees to terminate any or all Pledged Accounts and Pledged Letters upon
request by the Collateral Agent.
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Section 7. Representations and Warranties. Each of the Grantors
represents and warrants as follows:
(a) All of the Equipment and Inventory are located at the places
specified in Schedule III hereto, as such Schedule III may be amended from
time to time pursuant to Section 9(a). The chief place of business and
chief executive office of such Grantor and the office where such Grantor
keeps its records concerning the Receivables, and any permitted copies of
each Assigned Agreement and any permitted copies of all chattel paper that
evidence Receivables, are located at the address set forth on the signature
pages hereto beneath such Grantor's name. Only one copy of any item of
chattel paper that evidences Receivables has been originally executed by
the parties thereto and such original executed copy has been delivered to
the Collateral Agent by such Grantor. Any copy of any chattel paper
evidencing Receivables of which the Collateral Agent does not have sole
possession has been conspicuously marked with a legend indicating (i) that
such copy is not the original executed copy, (ii) that the original
executed copy is in the possession of the Collateral Agent, (iii) that such
chattel paper is subject to the security interest granted hereby and, (iv)
such other matters as may be specified in writing from time to time by the
Collateral Agent. None of the Receivables or Agreement Collateral is
evidenced by a promissory note or other instrument.
(b) Such Grantor is the legal and beneficial owner of the Collateral
of such Grantor free and clear of any Lien, claim, option or right of
others, except for the security interest created by this Agreement and
other Liens permitted by the Credit Agreement. No effective financing
statement or other instrument similar in effect covering all or any part of
the Collateral is on file in any recording office, except such as may have
been filed in favor of the Collateral Agent relating to this Agreement.
Such Grantor has the trade names listed on Schedule IV.
(c) Except for possessory interests of landlord and warehousemen, such
Grantor has exclusive possession and control of the Equipment and Inventory
(other than Inventory the subject of an Assigned Agreement).
(d) The Pledged Shares have been duly authorized and validly issued
and are fully paid and non-assessable. The Pledged Debt has been duly
authorized, authenticated or issued and delivered, is the legal, valid and
binding obligation of the issuers thereof and is not in default.
(e) As of the date hereof, the Pledged Shares constitute the
percentage of the issued and outstanding shares of stock of the issuers
thereof indicated on Schedule I. As of the date hereof, the Pledged Debt is
outstanding in the principal amount indicated on Schedule I.
(f) All of the investment property owned by such Grantor on the date
hereof is listed on Schedule I hereto. The jurisdiction (for purposes of
Section 8-110(e) of the N.Y. Uniform Commercial Code) of the securities
intermediary that maintains the securities account carrying the Pledged
Security Entitlement is ___________.
(g) The Assigned Agreements have been duly authorized, executed and
delivered by all parties thereto, have not been amended or otherwise
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modified, are in full force and effect and are binding upon and enforceable
against all parties thereto in accordance with their terms. There exists no
default under any Assigned Agreement by any party thereto. Each party to
the Assigned Agreements (other than the applicable Grantor) and each
guarantor of any such party has executed and delivered to such Grantor a
consent, in substantially the form of Exhibit C, to the assignment of the
Agreement Collateral to the Collateral Agent pursuant to this Agreement.
Only one copy of each Assigned Agreement (other than Hedge Agreements) has
been originally executed by the parties thereto and such original executed
copy has been delivered to the Collateral Agent by such Grantor. Each copy
of each Assigned Agreement of which the Collateral Agent does not have sole
possession has been conspicuously marked with a legend indicating (i) that
such copy is not the original executed copy, (ii) that the original
executed copy is in the possession of the Collateral Agent, (iii) that such
Assigned Agreement is subject to the security interest granted hereby, and
(iv) such other matters as may be specified in writing from time to time by
the Collateral Agent.
(h) Such Grantor has no deposit accounts other than the Pledged
Accounts listed on Schedule V and the permitted accounts listed on Schedule
VI.
(i) This Agreement, the pledge of the Security Collateral pursuant
hereto and the pledge and assignment of the Account Collateral pursuant
hereto create a valid and perfected first priority security interest in the
Collateral, securing the payment of the Secured Obligations, and all
filings and other actions necessary or desirable to perfect and protect
such security interest have been duly taken.
(j) No consent of any other Person and no authorization, approval or
other action by, and no notice to or filing with, any governmental
authority or regulatory body or other third party is required either (i)
for the grant by such Grantor of the assignment and security interest
granted by it hereby, for the pledge by such Grantor of the Security
Collateral pursuant hereto or for the execution, delivery or performance of
this Agreement by such Grantor, (ii) for the perfection or maintenance of
the pledge, assignment and security interest created hereby (including the
first priority nature of such pledge, assignment or security interest),
except for the filing of financing and continuation statements under the
Uniform Commercial Code, which financing statements have been duly filed
and are in full force and effect, the recordation of the Intellectual
Property Security Agreements referred to in Section 12(f) with the U.S.
Patent and Trademark Office and the U.S. Copyright Office, which Agreements
have been duly recorded and are in full force and effect and the actions
described in Section 4 with respect to Security Collateral, which actions
have been taken and are in full force and effect, or (iii) for the exercise
by the Collateral Agent of its voting or other rights provided for in this
Agreement or the remedies in respect of the Collateral pursuant to this
Agreement, except as may be required in connection with the disposition of
any portion of the Security Collateral by laws affecting the offering and
sale of securities generally.
(k) The Inventory has been produced by such Grantor in compliance with
all requirements of the Fair Labor Standards Act.
(l) As to itself and its Intellectual Property Collateral:
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(i) The rights of such Grantor in or to the Intellectual Property
Collateral do not conflict with, misappropriate or infringe upon the
intellectual property rights of any third party, and no claim has been
asserted that the use of such Intellectual Property Collateral does or
may infringe upon the intellectual property rights of any third party.
(ii) Such Grantor is the exclusive owner of the entire and
unencumbered right, title and interest in and to the Intellectual
Property Collateral and is entitled to use all such Intellectual
Property Collateral without limitation, subject only to the license
terms of the Licenses.
(iii) The Intellectual Property Collateral set forth on Schedule
IV hereto includes all of the patents, patent applications, trademark
registrations and applications, copyright registrations and
applications and Licenses owned by such Grantor.
(iv) The Intellectual Property Collateral is subsisting and has
not been adjudged invalid or unenforceable in whole or part, and to
the best of such Grantor's knowledge, is valid and enforceable. Such
Grantor is not aware of any uses of any item of Intellectual Property
Collateral that could be expected to lead to such item becoming
invalid or unenforceable.
(v) Such Grantor has made or performed all filings, recordings
and other acts and has paid all required fees and taxes to maintain
and protect its interest in each and every item of Intellectual
Property Collateral in full force and effect throughout the world, and
to protect and maintain its interest therein including, without
limitation, recordations of any of its interests in the Patents and
Trademarks with the U.S. Patent and Trademark Office and in
corresponding national and international patent offices, and
recordation of any of its interests in the Copyrights with the U.S.
Copyright Office and in corresponding national and international
copyright offices. Such Grantor has used proper statutory notice in
connection with its use of each patent, trademark and copyright of the
Intellectual Property Collateral.
(vi) No action, suit, investigation, litigation or proceeding has
been asserted or is pending or (to such Grantor's knowledge)
threatened against such Grantor (i) based upon or challenging or
seeking to deny or restrict the use of any of the Intellectual
Property Collateral, or (ii) alleging that any services provided by,
processes used by, or products manufactured or sold by, such Grantor
infringe upon or misappropriate any patent, trademark, copyright or
any other proprietary right of any third party. To the best of such
Grantor's knowledge, no Person is engaging in any activity that
infringes upon or misappropriates the Intellectual Property Collateral
or upon the rights of such Grantor therein. Except as set forth on
Schedule IV hereto, such Grantor has not granted any license, release,
covenant not to sue, non-assertion assurance, or other right to any
Person with respect to any part of the Intellectual Property
Collateral. The consummation of the transactions contemplated by the
Transaction Documents will not result in the termination or impairment
of any of the Intellectual Property Collateral.
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(vii) With respect to each material License: (A) such License is
valid and binding and in full force and effect and represents the
entire agreement between the respective licensor and licensee with
respect to the subject matter of such License; (B) such License will
not cease to be valid and binding and in full force and effect on
terms identical to those currently in effect as a result of the rights
and interest granted herein, nor will the grant of such rights and
interest constitute a breach or default under such License or
otherwise give the licensor or licensee a right to terminate such
License; (C) such Grantor has not received any notice of termination
or cancellation under such License; (D) such Grantor has not received
any notice of a breach or default under such License, which breach or
default has not been cured; (E) such Grantor has not granted to any
other third party any rights, adverse or otherwise, under such
License; and (F) neither such Grantor nor any other party to such
License is in breach or default in any material respect, and no event
has occurred that, with notice or lapse of time or both, would
constitute such a breach or default or permit termination,
modification or acceleration under such License, except for such
events that could not reasonably be expected to have a Material
Adverse Effect.
(viii) To the best of such Grantor's acknowledge, (A) none of the
Trade Secrets of such Grantor has been used, divulged, disclosed or
appropriated to the detriment of such Grantor for the benefit of any
other Person other than such Grantor; (B) no employee, independent
contractor or agent of such Grantor has misappropriated any trade
secrets of any other Person in the course of the performance of his or
her duties as an employee, independent contractor or agent of such
Grantor; and (C) no employee, independent contractor or agent of such
Grantor is in default or breach of any term of any employment
agreement, non-disclosure agreement, assignment of inventions
agreement or similar agreement or contract relating in any way to the
protection, ownership, development, use or transfer of such Grantor's
Intellectual Property Collateral in any material respect.
Section 8. Further Assurances. (a) Each Grantor agrees that from time
to time, at the expense of such Grantor, such Grantor will promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or that the Collateral Agent may reasonably
request (including, without limitation, procuring third party consents), in
order to perfect and protect any pledge, assignment or security interest granted
or purported to be granted hereby or to enable the Collateral Agent to exercise
and enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, such Grantor will: (i) mark
conspicuously each document included in the Inventory, each chattel paper
included in the Receivables, each Related Contract, each Assigned Agreement and,
at the request of the Collateral Agent, each of its records pertaining to the
Collateral with a legend, in form and substance satisfactory to the Collateral
Agent, indicating that such document, chattel paper, Related Contract, Assigned
Agreement or Collateral is subject to the security interest granted hereby; (ii)
if any Collateral shall be evidenced by a promissory note or other instrument or
chattel paper, deliver and pledge to the Collateral Agent hereunder such note or
instrument or chattel paper duly indorsed and accompanied by duly executed
instruments of transfer or assignment, all in form and substance satisfactory to
the Collateral Agent; and (iii) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or notices, as may
be necessary or desirable, or as the Collateral Agent may request, in order to
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perfect and preserve the pledge, assignment and security interest granted or
purported to be granted by such Grantor hereunder; (iv) deliver and pledge to
the Collateral Agent for benefit of the Secured Parties certificates
representing Pledged Shares accompanied by undated stock powers executed in
blank; and (v) deliver to the Collateral Agent evidence that all other action
that the Collateral Agent may deem reasonably necessary or desirable in order to
perfect and protect the security interest created by such Grantor under this
Agreement has been taken.
(b) Each Grantor hereby authorizes the Collateral Agent to file one or
more financing or continuation statements, and amendments thereto, relating to
all or any part of the Collateral without the signature of such Grantor where
permitted by law. A photocopy or other reproduction of this Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
(c) Each Grantor will furnish to the Collateral Agent from time to
time statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as the Collateral Agent
may reasonably request, all in reasonable detail.
(d) Each Grantor shall execute only one copy of each Assigned
Agreement and of any chattel paper and shall deliver to the Collateral Agent,
forthwith upon execution thereof, such original executed copy, together with all
other documents ancillary thereto or delivered by the relevant parties in
connection therewith. Such Grantor shall mark each copy of any Assigned
Agreement and any chattel paper which is not in the sole possession of the
Collateral Agent with a conspicuous legend indicating (i) that such copy is not
the original executed copy, (ii) that the original executed copy is in the
possession of the Collateral Agent, (iii) that such Assigned Agreement or
chattel paper is subject to the security interest granted hereby, and (iv) such
other matters as may be specified in writing from time to time by the Collateral
Agent.
Section 9. As to Equipment and Inventory. (a) Each Grantor shall keep
its Equipment and Inventory (other than Inventory sold in the ordinary course of
business) at the places therefor specified in Section 7(a) or, upon 30 days'
prior written notice to the Collateral Agent, at such other places in a
jurisdiction where all action required by Section 8 shall have been taken with
respect to the Equipment and Inventory (and, upon the taking of such action in
such jurisdiction, Schedule III hereto shall be automatically amended to include
such other places).
(b) Each Grantor shall cause its Equipment to be maintained and
preserved in the same condition, repair and working order as when new, ordinary
wear and tear excepted, and in accordance with any manufacturer's manual, and
shall forthwith, or in the case of any loss or damage to any of such Equipment
as quickly as practicable after the occurrence thereof, make or cause to be made
all repairs, replacements and other improvements in connection therewith that
are necessary or desirable to such end. Each Grantor shall promptly furnish to
the Collateral Agent a statement respecting any loss or damage to any of the
Equipment or Inventory of such Grantor.
(c) Each Grantor shall pay promptly when due all property and other
taxes, assessments and governmental charges or levies imposed upon, and all
claims (including claims for labor, materials and supplies) against, its
Equipment and Inventory. In producing the Inventory, each Grantor shall comply
with all requirements of the Fair Labor Standards Act.
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Section 10. Insurance. (a) Each Grantor shall, at its own expense,
maintain insurance with respect to its Equipment and Inventory in such amounts,
against such risks, in such form and with such insurers, as shall be
satisfactory to the Collateral Agent from time to time. Each policy for property
insurance shall provide for all losses to be paid on behalf of the Collateral
Agent and such Grantor as their interests may appear, and each policy for
property damage insurance shall provide for all losses (except for losses of
less than $5,000,000 per occurrence) to be paid directly to the Collateral
Agent. Each such policy shall in addition (i) name such Grantor and the
Collateral Agent as insured parties thereunder (without any representation or
warranty by or obligation upon the Collateral Agent) as their interests may
appear, (ii) contain the agreement by the insurer that any loss thereunder shall
be payable to the Collateral Agent notwithstanding any action, inaction or
breach of representation or warranty by such Grantor, (iii) provide that there
shall be no recourse against the Collateral Agent for payment of premiums or
other amounts with respect thereto and (iv) provide that at least 10 days' prior
written notice of cancellation or of lapse shall be given to the Collateral
Agent by the insurer. Each Grantor shall, if so requested by the Collateral
Agent, deliver to the Collateral Agent original or duplicate policies of such
insurance and, as often as the Collateral Agent may reasonably request, a report
of a reputable insurance broker with respect to such insurance. Further, each
Grantor shall, at the request of the Collateral Agent, duly exercise and deliver
instruments of assignment of such insurance policies to comply with the
requirements of Section 8 and cause the insurers to acknowledge notice of such
assignment.
(b) Reimbursement under any liability insurance maintained by any
Grantor pursuant to this Section 10 may be paid directly to the Person who shall
have incurred liability covered by such insurance. In case of any loss involving
damage to Equipment or Inventory when subsection (c) of this Section 10 is not
applicable, the applicable Grantor shall make or cause to be made the necessary
repairs to or replacements of such Equipment or Inventory as deemed desirable in
the reasonable opinion of the Grantor, and any proceeds of insurance maintained
by such Grantor pursuant to this Section 10 shall be paid to such Grantor as
reimbursement for the costs of such repairs or replacements.
(c) Upon the occurrence and during the continuance of any Default or
the actual or constructive total loss (in excess of $5,000,000 per occurrence)
of any Equipment or Inventory, all insurance payments in respect of such
Equipment or Inventory shall be paid to and applied by the Collateral Agent as
specified in Section 20(b).
Section 11. Place of Perfection; Records; Collection of Receivables.
(a) Each Grantor shall keep its chief place of business and chief executive
office and the office where it keeps its records concerning the Collateral, and
any copies of the Assigned Agreements not required to be delivered to the
Collateral Agent hereunder and any copies of all chattel paper not required to
be delivered to the Collateral Agent hereunder that evidence Receivables, at the
location therefor specified in Section 7(a) or, upon 30 days' prior written
notice to the Collateral Agent, at such other locations in a jurisdiction where
all actions required by Section 8 shall have been taken with respect to the
Collateral of such Grantor. Each Grantor will hold and preserve such records,
Assigned Agreements and chattel paper and will permit representatives of the
Collateral Agent at any time during normal business hours upon reasonable notice
to inspect and make abstracts from such records, Assigned Agreements and chattel
paper. If the jurisdiction of the securities intermediary that maintains the
security account carrying the Pledged Security Entitlements shall change from
that jurisdiction specified in Section 7(f), the applicable Grantor shall
promptly notify the Collateral Agent of such change and of such new
jurisdiction.
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(b) Except as otherwise provided in this subsection (b), each Grantor
shall continue to collect, at its own expense, all amounts due or to become due
such Grantor under the Receivables in the manner such Grantor currently collects
such amounts. In connection with such collections made in respect of Receivables
owing from a Person being an affiliate of such Grantor, such Grantor may take
(and, at the Collateral Agent's direction, shall take) such action as such
Grantor or the Collateral Agent may reasonably deem necessary or advisable to
enforce or expedite collection of the Receivables; provided, however, that the
Collateral Agent shall have the right at any time, upon written notice to such
Grantor of its intention to do so, to notify the Obligors under any Receivables
of the assignment of such Receivables to the Collateral Agent and to direct such
Obligors to make payment of all amounts due or to become due to such Grantor
thereunder directly to the Collateral Agent or its designee and, upon such
notification and at the expense of such Grantor, to enforce collection of any
such Receivables directly against the relevant Obligor, and to adjust, settle or
compromise the amount or payment thereof, in the same manner and to the same
extent as such Grantor might have done. In connection with such collections made
in respect of Receivables owing from a Person not an affiliate of such Grantor,
such Grantor may take (and, at the Collateral Agent's direction, shall take),
after the occurrence and during the continuance of any Default, such action as
such Grantor or the Collateral Agent may reasonably deem necessary or advisable
to enforce or expedite collection of the Receivables; provided, however, that
the Collateral Agent shall have the right at any time after the occurrence and
during the continuance of any Default, upon written notice to such Grantor of
its intention to do so, to notify the Obligors under any Receivables of the
assignment of such Receivables to the Collateral Agent and to direct such
Obligors to make payment of all amounts due or to become due to such Grantor
thereunder directly to the Collateral Agent or its designee and, upon such
notification and at the expense of such Grantor, to enforce collection of any
such Receivables directly against the relevant Obligor, and to adjust, settle or
compromise the amount or payment thereof, in the same manner and to the same
extent as such Grantor might have done. After receipt by such Grantor of the
notice from the Collateral Agent referred to in the proviso to the preceding
sentences, (i) all amounts and proceeds (including instruments) received by such
Grantor in respect of the Receivables shall be received in trust for the benefit
of the Collateral Agent hereunder, shall be segregated from other funds of such
Grantor and shall be forthwith paid over to the Collateral Agent in the same
form as so received (with any necessary indorsement) and (ii) such Grantor shall
not adjust, settle or compromise the amount or payment of any Receivable,
release wholly or partly any Obligor thereof, or allow any credit or discount
thereon.
(c) No Grantor will permit or consent to the subordination of its
right to payment under any of the Receivables or the Related Contracts to any
other indebtedness or obligations of the Obligor thereof.
SECTION 12. As to Intellectual Property Collateral.
(a) With respect to each item of its Intellectual Property Collateral,
each Grantor agrees to take, at its expense, all necessary steps, including,
without limitation, in the U.S. Patent and Trademark Office, the U.S. Copyright
Office and any other governmental authority, to (i) maintain the validity and
enforceability of each such item of Intellectual Property Collateral and
maintain each such item of Intellectual Property Collateral in full force and
effect, and (ii) pursue the registration and maintenance of each patent,
trademark, or copyright registration or application, now or hereafter included
in the Intellectual Property Collateral of such Grantor, including, without
limitation, the payment of required fees and taxes, the filing of responses to
office actions issued by the U.S. Patent and Trademark Office, the U.S.
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Copyright Office or other governmental authorities, the filing of applications
for renewal or extension, the filing of affidavits under Sections 8 and 15 of
the U.S. Trademark Act, the filing of divisional, continuation,
continuation-in-part, reissue and renewal applications or extensions, the
payment of maintenance fees and the participation in interference,
reexamination, opposition, cancellation, infringement and misappropriation
proceedings. No Grantor shall, without the written consent of the Collateral
Agent, discontinue use of or otherwise abandon any Intellectual Property
Collateral, or abandon any right to file an application for letters patent,
trademark, or copyright, unless such Grantor shall have previously determined
that such use or the pursuit or maintenance of such Intellectual Property
Collateral is no longer desirable in the conduct of such Grantor's business and
that the loss thereof would not be reasonably likely to have a Material Adverse
Effect, in which case, such Grantor will give prompt notice of any such
abandonment to the Collateral Agent.
(b) Each Grantor agrees promptly to notify the Collateral Agent if
such Grantor learns (i) that any item of the Intellectual Property Collateral
may have become abandoned, placed in the public domain, invalid or
unenforceable, or of any adverse determination or development regarding such
Grantor's ownership of any of the Intellectual Property Collateral or its right
to register the same or to keep and maintain and enforce the same, or (ii) of
any adverse determination or the institution of any proceeding (including,
without limitation, the institution of any proceeding in the U.S. Patent and
Trademark Office or any court) regarding any item of the Intellectual Property
Collateral.
(c) In the event that any Grantor becomes aware that any item of the
Intellectual Property Collateral is being infringed or misappropriated by a
third party, such Grantor shall promptly notify the Collateral Agent and shall
take such actions, at its expense, as such Grantor or the Collateral Agent deems
reasonable and appropriate under the circumstances to protect such Intellectual
Property Collateral, including, without limitation, suing for infringement or
misappropriation and for an injunction against such infringement or
misappropriation.
(d) Each Grantor shall use proper statutory notice in connection with
its use of each item of its Intellectual Property Collateral. No Grantor shall
do or permit any act or knowingly omit to do any act whereby any of its
Intellectual Property Collateral may lapse or become invalid or unenforceable or
placed in the public domain.
(e) Each Grantor shall take all steps which it or the Collateral Agent
deems reasonable and appropriate under the circumstances to preserve and protect
each item of its Intellectual Property Collateral, including, without
limitation, maintaining the quality of any and all products or services used or
provided in connection with any of the Trademarks, consistent with the quality
of the products and services as of the date hereof, and taking all steps
necessary to ensure that all licensed users of any of the Trademarks use such
consistent standards of quality.
(f) With respect to its Intellectual Property Collateral, each Grantor
agrees to execute an agreement, in substantially the form set forth in Exhibit D
hereto (an "Intellectual Property Security Agreement"), for recording the
security interest granted hereunder to the Collateral Agent in such Intellectual
Property Collateral with the U.S. Patent and Trademark Office, the U.S.
Copyright Office and any other governmental authorities necessary to perfect the
security interest hereunder in such Intellectual Property Collateral.
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<PAGE>
(g) Each Grantor agrees that, should it obtain an ownership interest
in any item of the type set forth in Section 1(g) which is not on the date
hereof a part of the Intellectual Property Collateral (the "After-Acquired
Intellectual Property"), (i) the provisions of Section 1 shall automatically
apply thereto, (ii) any such After-Acquired Intellectual Property and, in the
case of trademarks, the goodwill of the business connected therewith or
symbolized thereby, shall automatically become part of the Intellectual Property
Collateral subject to the terms and conditions of this Agreement with respect
thereto, (iii) such Grantor shall give prompt written notice thereof to the
Collateral Agent in accordance herewith and (iv) such Grantor shall execute and
deliver to the Collateral Agent an IP Security Agreement Supplement covering
such After-Acquired Intellectual Property as "Additional Collateral" thereunder
and as defined therein, and shall record such IP Security Agreement Supplement
with the U.S. Patent and Trademark Office, the U.S. Copyright Office and any
other governmental authorities necessary to perfect the security interest
hereunder in such After-Acquired Intellectual Property.
Section 13. Voting Rights; Dividends; Etc. (a) So long as no
Event of Default shall have occurred and be continuing:
(i) Each Grantor shall be entitled to exercise any and all voting and
other consensual rights pertaining to its Security Collateral or any part
thereof for any purpose not inconsistent with the terms of this Agreement
or the other Loan Documents; provided, however, that such Grantor shall not
exercise or refrain from exercising any such right if, in the Collateral
Agent's judgment, such action would have a material adverse effect on the
value of the Security Collateral or any part thereof.
(ii) Each Grantor shall be entitled to receive and retain any and all
dividends, interest and other distributions paid in respect of its Security
Collateral; provided, however, that any and all
(A) dividends, interest and other distributions paid or payable
other than in cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect of, or in
exchange for, such Security Collateral,
(B) dividends and other distributions paid or payable in cash in
respect of such Security Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in-surplus and
(C) cash paid, payable or otherwise distributed in respect of
principal of, or in redemption of, or in exchange for, any Security
Collateral
shall be, and shall be forthwith delivered to the Collateral Agent to hold
as, Security Collateral and shall, if received by such Grantor, be received
in trust for the benefit of the Collateral Agent, be segregated from the
other property or funds of such Grantor and be forthwith delivered to the
Collateral Agent as Security Collateral in the same form as so received
(with any necessary indorsement).
(iii) The Collateral Agent shall execute and deliver (or cause to be
executed and delivered) to each Grantor all such proxies and other
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<PAGE>
instruments as such Grantor may reasonably request for the purpose of
enabling such Grantor to exercise the voting and other rights that it is
entitled to exercise pursuant to paragraph (i) above and to receive the
dividends or interest payments that it is authorized to receive and retain
pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of a Default
or an Event of Default:
(i) All rights of each Grantor (x) to exercise or refrain from
exercising the voting and other consensual rights that it would otherwise
be entitled to exercise pursuant to Section 13(a)(i) shall, upon notice to
such Grantor by the Collateral Agent, cease and (y) to receive the
dividends, interest and other distributions that it would otherwise be
authorized to receive and retain pursuant to Section 13(a)(ii) shall
automatically cease, and all such rights shall thereupon become vested in
the Collateral Agent, which shall thereupon have the sole right to exercise
or refrain from exercising such voting and other consensual rights and to
receive and hold as Security Collateral such dividends, interest and other
distributions.
(ii) All dividends, interest and other distributions that are received
by each Grantor contrary to the provisions of paragraph (i) of this Section
13(b) shall be received in trust for the benefit of the Collateral Agent,
shall be segregated from other funds of such Grantor and shall be forthwith
paid over to the Collateral Agent as Security Collateral in the same form
as so received (with any necessary indorsement).
Section 14. As to the Assigned Agreements. (a) Each Grantor shall
at its expense:
(i) perform and observe all the terms and provisions of the Assigned
Agreements to be performed or observed by it, maintain the Assigned
Agreements in full force and effect, enforce the Assigned Agreements in
accordance with their terms and take all such reasonable action to such end
as may be from time to time requested by the Collateral Agent; and
(ii) furnish to the Collateral Agent promptly upon receipt thereof
copies of all notices, requests and other documents received by such
Grantor under or pursuant to the Assigned Agreements, and from time to time
(A) furnish to the Collateral Agent such information and reports regarding
the Collateral as the Collateral Agent may reasonably request and (B) upon
request of the Collateral Agent make to each other party to any Assigned
Agreement such demands and requests for information and reports or for
action as such Grantor is entitled to make thereunder.
(b) Each Grantor agrees that it shall not:
(i) cancel or terminate any Assigned Agreement or consent to or accept
any cancellation or termination thereof, except in the ordinary course of
business and in a manner that would not reasonably be expected to have a
Material Adverse Effect;
(ii) amend or otherwise modify any Assigned Agreement or give any
consent, waiver or approval thereunder;
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(iii) waive any default under or breach of any Assigned Agreement; or
(iv) take any other action in connection with any Assigned Agreement
that would materially impair the value of the interest or rights of such
Grantor thereunder or that would materially impair the interest or rights
of any Secured Party.
(c) Each Grantor hereby consents on its behalf and on behalf of its
Subsidiaries to the assignment and pledge to the Collateral Agent for benefit of
the Secured Parties of each Assigned Agreement to which it is a party by any
other Grantor hereunder.
Section 15. Payments Under the Assigned Agreements. Each Grantor
agrees, and has effectively so instructed each other party to each Assigned
Agreement, that all payments due or to become due under or in connection with
such Assigned Agreement shall be made in accordance with the terms of the
consents referred to in Section 7(g) above.
Section 16. Transfers and Other Liens; Additional Shares. (a) Each
Grantor agrees that it shall not (i) other than in accordance with the Loan
Documents, sell, assign (by operation of law or otherwise) or otherwise dispose
of, or grant any option with respect to, any of the Collateral, except sales of
Inventory in the ordinary course of business, or (ii) create or suffer to exist
any Lien upon or with respect to any of the Collateral except for the pledge,
assignment and security interest created by this Agreement.
(b) Each Grantor agrees that it shall (i) cause each issuer of the
Pledged Shares not to issue any stock or other securities in addition to or in
substitution for the Pledged Shares issued by such issuer, except to such
Grantor, and (ii) pledge hereunder, immediately upon its acquisition (directly
or indirectly) thereof, any and all additional shares of stock or other
securities of each issuer of the Pledged Shares.
Section 17. Collateral Agent Appointed Attorney-in-Fact. Each Grantor
hereby irrevocably appoints the Collateral Agent such Grantor's
attorney-in-fact, with full authority in the place and stead of such Grantor and
in the name of such Grantor or otherwise, from time to time in the Collateral
Agent's discretion, to take any action and to execute any instrument that the
Collateral Agent may deem necessary or advisable to accomplish the purposes of
this Agreement, including, without limitation:
(a) to obtain and adjust insurance required to be paid to the
Collateral Agent pursuant to Section 10,
(b) to ask for, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under or
in respect of any of the Collateral,
(c) to receive, indorse and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) or (b) above,
and
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(d) to file any claims or take any action or institute any proceedings
that the Collateral Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce compliance with
the terms and conditions of any Assigned Agreement or the rights of the
Collateral Agent with respect to any of the Collateral.
Section 18. Collateral Agent May Perform. If any Grantor fails to
perform any agreement contained herein, the Collateral Agent may itself perform,
or cause performance of, such agreement, and the expenses of the Collateral
Agent incurred in connection therewith shall be payable by such Grantor under
Section 22(b).
Section 19. The Collateral Agent's Duties. The powers conferred on the
Collateral Agent hereunder are solely to protect the Secured Parties' interest
in the Collateral and shall not impose any duty upon it to exercise any such
powers. Except for the safe custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Collateral Agent
shall have no duty as to any Collateral, as to ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not any Secured Party has or is
deemed to have knowledge of such matters, or as to the taking of any necessary
steps to preserve rights against any parties or any other rights pertaining to
any Collateral. The Collateral Agent shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its
possession if such Collateral is accorded treatment substantially equal to that
which it accords its own property.
(b) Anything contained herein to the contrary notwithstanding, the
Collateral Agent may from time to time, when the Collateral Agent deems it to be
necessary, appoint one or more subagents (each a "Subagent") for the Collateral
Agent hereunder with respect to all or any part of the Collateral. In the event
that the Collateral Agent so appoints any Subagent with respect to any
Collateral, (i) the assignment and pledge of such Collateral and the security
interest granted in such Collateral by each Grantor hereunder shall be deemed
for purposes of this Security Agreement to have been made to such Subagent, in
addition to the Collateral Agent, for the ratable benefit of the Secured
Parties, as security for the Secured Obligations of such Grantor, (ii) such
Subagent shall automatically be vested, in addition to the Collateral Agent,
with all rights, powers, privileges, interests and remedies of the Collateral
Agent hereunder with respect to such Collateral, and (iii) the term "Collateral
Agent," when used herein in relation to any rights, powers, privileges,
interests and remedies of the Collateral Agent with respect to such Collateral,
shall include such Subagent; provided, however, that no such Subagent shall be
authorized to take any action with respect to any such Collateral unless and
except to the extent expressly authorized in writing by the Collateral Agent.
Section 20. Remedies. If any Event of Default shall have occurred
and be continuing:
(a) The Collateral Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party upon
default under the N.Y. Uniform Commercial Code (whether or not the N.Y.
Uniform Commercial Code applies to the affected Collateral) and also may
(i) require any of the Grantors to, and each Grantor hereby agrees that it
will at its expense and upon request of the Collateral Agent forthwith,
assemble all or part of the Collateral as directed by the Collateral Agent
and make it available to the Collateral Agent at a place to be designated
by the Collateral Agent that is reasonably convenient to both parties and
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<PAGE>
(ii) without notice except as specified below, sell the Collateral or any
part thereof in one or more parcels at public or private sale, at any of
the Collateral Agent's offices or elsewhere, for cash, on credit or for
future delivery, and upon such other terms as are commercially reasonable;
(iii) occupy any premises owned or leased by any of the Grantors where the
Collateral or any part thereof is assembled or located for a reasonable
period in order to effectuate its rights and remedies hereunder or under
law, without obligation to such Grantor in respect of such occupation; and
(iv) exercise any and all rights and remedies of any of the Grantors under
or in connection with the Assigned Agreements, the Receivables and the
Related Contracts or otherwise in respect of the Collateral, including,
without limitation, any and all rights of such Grantor to demand or
otherwise require payment of any amount under, or performance of any
provision of, the Assigned Agreements, the Receivables and the Related
Contracts. Each Grantor agrees that, to the extent notice of sale shall be
required by law, at least ten days' notice to such Grantor of the time and
place of any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. The Collateral Agent shall
not be obligated to make any sale of Collateral regardless of notice of
sale having been given. The Collateral Agent may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
(b) All cash proceeds received by the Collateral Agent in respect of
any sale of, collection from, or other realization upon all or any part of
the Collateral may, in the discretion of the Collateral Agent, be held by
the Collateral Agent as collateral for, and/or then or at any time
thereafter applied (after payment of any amounts payable to the Collateral
Agent pursuant to Section 22) in whole or in part by the Collateral Agent
for the ratable benefit of the Secured Parties against, all or any part of
the Secured Obligations in such order as the Collateral Agent shall elect.
Any surplus of such cash or cash proceeds held by the Collateral Agent and
remaining after payment in full of all the Secured Obligations shall be
paid over to the applicable Grantor or to whomsoever may be lawfully
entitled to receive such surplus.
(c) All payments received by each Grantor under or in connection with
any Assigned Agreement or otherwise in respect of the Collateral shall be
received in trust for the benefit of the Collateral Agent, shall be
segregated from other funds of such Grantor and shall be forthwith paid
over to the Collateral Agent in the same form as so received (with any
necessary indorsement).
(d) The Collateral Agent may, without notice to any Grantor except as
required by law and at any time or from time to time, charge, set-off and
otherwise apply all or any part of the Secured Obligations against the Cash
Collateral Account or the L/C Cash Collateral Account or any part thereof.
(e) In the event of any sale or other disposition of any of the
Intellectual Property Collateral of any Grantor, the goodwill of the
business connected with and symbolized by any Trademarks subject to such
sale or other disposition shall be included therein, and such Grantor shall
supply to the Collateral Agent or its designee such Grantor's know-how and
expertise, and documents and things relating to any Intellectual Property
21
<PAGE>
Collateral subject to such sale or other disposition, and such Grantor's
customer lists and other records and documents relating to such
Intellectual Property Collateral and to the manufacture, distribution,
advertising and sale of products and services of such Grantor.
Section 21. Registration Rights. With respect to Security Collateral
issued by entities (controlled by a Grantor) where the securities are registered
under Section 12(b) or 12(g) of the Securities Act of 1934, if the Collateral
Agent shall determine to exercise its right to sell all or any of the Security
Collateral pursuant to Section 20, each Grantor agrees that, upon request of the
Collateral Agent, such Grantor will, at its own expense:
(a) execute and deliver, and cause each issuer of the Security
Collateral contemplated to be sold and the directors and officers thereof
to execute and deliver, all such instruments and documents, and do or cause
to be done all such other acts and things, as may be necessary or, in the
opinion of the Collateral Agent, advisable to register such Security
Collateral under the provisions of the Securities Act of 1933, as from time
to time amended (the "Securities Act"), to cause the registration statement
relating thereto to become effective and to remain effective for such
period as prospectuses are required by law to be furnished and to make all
amendments and supplements thereto and to the related prospectus that, in
the opinion of the Collateral Agent, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto;
(b) use its best efforts to qualify the Security Collateral under the
state securities or "Blue Sky" laws and to obtain all necessary
governmental approvals for the sale of the Security Collateral, as
requested by the Collateral Agent;
(c) cause each such issuer to make available to its security holders,
as soon as practicable, an earnings statement that will satisfy the
provisions of Section 11(a) of the Securities Act;
(d) provide the Collateral Agent with such other information and
projections as may be necessary or, in the opinion of the Collateral Agent,
advisable to enable the Collateral Agent to effect the sale of such
Security Collateral; and
(e) do or cause to be done all such other acts and things as may be
necessary to make such sale of the Security Collateral or any part thereof
valid and binding and in compliance with applicable law.
The Collateral Agent is authorized, in connection with any sale of the Security
Collateral pursuant to Section 19, to deliver or otherwise disclose to any
prospective purchaser of the Security Collateral (i) any registration statement
or prospectus, and all supplements and amendments thereto, prepared pursuant to
clause (a) above, (ii) any information and projections provided to it pursuant
to clause (d) above and (iii) any other information in its possession relating
to the Security Collateral.
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Section 22. Indemnity and Expenses. (a) Each Grantor agrees to
indemnify the Collateral Agent from and against any and all claims, losses and
liabilities growing out of or resulting from this Agreement (including, without
limitation, enforcement of this Agreement), except claims, losses or liabilities
resulting from the Collateral Agent's gross negligence or willful misconduct as
determined by a final judgment of a court of competent jurisdiction.
(b) Each Grantor will upon demand pay to the Collateral Agent the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, that the Collateral Agent
may incur in connection with (i) the administration of this Agreement, (ii) the
custody, preservation, use or operation of, or the sale of, collection from or
other realization upon, any of the Collateral, (iii) the exercise or enforcement
of any of the rights of the Collateral Agent or the Secured Parties hereunder or
(iv) the failure by such Grantor to perform or observe any of the provisions
hereof.
Section 23. Amendments; Waivers; Etc. (a) No amendment or waiver of
any provision of this Agreement, and no consent to any departure by any Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Collateral Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
(b) No failure on the part of the Collateral Agent to exercise, and no
delay in exercising any right, power or privilege hereunder, shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right,
power or privilege preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.
(c) Upon the execution and delivery by any Person of a security
agreement supplement in substantially the form of Exhibit A hereto (each a
"Security Agreement Supplement"), (i) such Person shall be referred to as an
"Additional Grantor" and shall be and become a Grantor, and each reference in
this Agreement to "Grantor" shall also mean and be a reference to such
Additional Grantor and (ii) the Schedules attached to each Security Agreement
Supplement shall be incorporated into and become a part of and supplement
Schedules I through VI hereto, and the Collateral Agent may attach such
Schedules as supplements to such Schedules, and each reference to such Schedules
shall mean and be a reference to such Schedules, as supplemented pursuant
hereto.
Section 24. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing (including telecopy
communication) and, mailed (by certified mail), telecopied, or delivered by hand
to the Borrowers or to the Collateral Agent, as the case may be, in each case
addressed to such Person at its address specified in the Credit Agreement or, as
to any other Grantor at its address set forth below the name of such Grantor on
the signature pages hereto, or to the Security Agreement Supplement to which it
is a party, as the case may be, or as to any party, either party, at such other
address as shall be designated by such party in a written notice to each other
party complying as to delivery with the terms of this Section. All such notices
and other communications shall, when mailed (by certified mail), telecopied, or
delivered shall be effective when received by the party being notified. Delivery
by telecopier of an executed counterpart of any amendment or waiver of any
provision of this Agreement, any Security Agreement Supplement hereto, or of any
Schedule hereto to be executed and delivered hereunder shall be effective as
delivery of an original executed counterpart hereto.
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Section 25. Continuing Security Interest; Assignments under the Credit
Agreement. This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the later of (i)
the payment in full in cash of the Secured Obligations and (ii) the later of the
Tranche A Termination Date, the Tranche B Termination Date, and the Working
Capital Termination Date, (b) be binding upon each Grantor, its successors and
assigns and (c) inure, together with the rights and remedies of the Collateral
Agent hereunder, to the benefit of the Collateral Agent, the Secured Parties and
their respective successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c), any Lender Party may assign or otherwise
transfer all or any portion of its rights and obligations under the Credit
Agreement (including, without limitation, all or any portion of its Commitment,
the Advances owing to it and the Note or Notes held by it to any other Person,
and such other Person shall thereupon become vested with all the benefits in
respect thereof granted to such Lender herein or otherwise, in each case as
provided in Section 9.07 of the Credit Agreement.
Section 26. Release and Termination. (a) Upon any sale, lease,
transfer or other disposition of any item of Collateral in accordance with the
terms of the Loan Documents (other than sales of Inventory in the ordinary
course of business), the Collateral Agent will, at the applicable Grantor's
expense, execute and deliver to such Grantor such documents as such Grantor
shall reasonably request to evidence the release of such item of Collateral from
the assignment and security interest granted hereby; provided, however, that (i)
at the time of such request and such release no Default shall have occurred and
be continuing, (ii) the applicable Grantor shall have delivered to the
Collateral Agent, at least ten Business Days prior to the date of the proposed
release, a written request for release describing the item of Collateral and the
terms of the sale, lease, transfer or other disposition in reasonable detail,
including the price thereof and any expenses in connection therewith, together
with a form of release for execution by the Collateral Agent and a certification
by such Grantor to the effect that the transaction is in compliance with the
Loan Documents and as to such other matters as the Collateral Agent may request
and (iii) the proceeds of any such sale, lease, transfer or other disposition
required to be applied in accordance with Section 2.05 of the Credit Agreement
shall be paid to, or in accordance with the instructions of, the Collateral
Agent at the closing.
(b) Upon the later of (i) the payment in full in cash of the Secured
Obligations, and (ii) the later of the Tranche A Termination Date, the Tranche B
Termination Date, and the Working Capital Termination Date, the pledge,
assignment and security interest granted hereby shall terminate and all rights
to the Collateral shall revert to the applicable Grantor. Upon any such
termination, the Collateral Agent will, at the applicable Grantor's expense,
execute and deliver to such Grantor such documents as such Grantor shall
reasonably request to evidence such termination.
Section 27. Investing of Amounts in the Cash Collateral Account and
the L/C Cash Collateral Account. If requested by a Borrower, the Collateral
Agent will, subject to the provisions of Section 20, from time to time (a)
invest amounts on deposit in the Cash Collateral Account and the L/C Cash
Collateral Account in such Cash Equivalents (as to which all action required by
Section 8 shall have been taken) as such Borrower may select and the Collateral
Agent may approve and (b) invest interest paid on the Cash Equivalents referred
to in clause (a) above, and reinvest other proceeds of any such Cash Equivalents
that may mature or be sold, in each case in such Cash Equivalents (as to which
all actions required by Section 8 shall have been taken) as such Borrower may
select and the Collateral Agent may approve (the Cash Equivalents referred to in
clauses (a) and (b) above being collectively "Collateral Investments"). Interest
and proceeds that are not invested or reinvested in Collateral Investments as
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provided above shall be deposited and held in the Cash Collateral Account or the
L/C Cash Collateral Account, as the case may be.
Section 28. Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of an original executed
counterpart of this Agreement.
Section 29. The Mortgages. In the event that any of the Collateral
hereunder is also subject to a valid and enforceable Lien under the terms of any
Mortgage and the terms of such Mortgage are inconsistent with the terms of this
Agreement, then with respect to such Collateral, the terms of such Mortgage
shall be controlling in the case of fixtures and leases, letting and licenses
of, and contracts and agreements relating to the lease of real property, and the
terms of this Agreement shall be controlling in the case of all other
Collateral.
Section 30. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, except to the
extent that the validity or perfection of the security interest hereunder, or
remedies hereunder, in respect of any particular Collateral are governed by the
laws of a jurisdiction other than the State of New York.
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IN WITNESS WHEREOF, each Grantor has caused this Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
ICG EQUIPMENT, INC.
By /s/ H. Don Teague
---------------------
Title:
Address: 161 Inverness Drive West
Englewood, CO 80112
ICG NETAHEAD, INC.
By /s/ H. Don Teague
---------------------
Title:
Address: 161 Inverness Drive West
Englewood, CO 80112
<PAGE>
Schedule I
PLEDGED SHARES AND PLEDGED DEBT
Part I
<TABLE>
<CAPTION>
Percentage of
Stock Certificate Number Outstanding
Stock Issuer Class of Stock Par Value No(s) of Shares Shares
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NIL NIL NIL NIL NIL NIL
</TABLE>
Part II
<TABLE>
Original
Principal
Debt Issuer Description of Debt Debt Certificate No(s). Final Maturity Amount
- ----------------------------------------------------------------------------------------------
<S><C> <C> <C> <C> <C>
NIL NIL NIL NIL NIL
</TABLE>
<PAGE>
Schedule II
ASSIGNED AGREEMENTS
Please see attached lists.
<PAGE>
Schedule III
LOCATIONS OF EQUIPMENT AND INVENTORY
Locations of Equipment & Inventory: see attached list
<PAGE>
Schedule IV to the
Security Agreement
PATENTS, TRADEMARKS AND
TRADE NAMES, COPYRIGHTS AND LICENSES
Grantor Patents Country Patent No. Applic. No. Filing Date Issue Date
- --------------------------------------------------------------------------------
NONE.
Trademarks and Reg. Applic. Filing Issue
Grantor Trade Names Country Mark No. No. Date Date
- --------------------------------------------------------------------------------
NONE.
Filing Issue
Grantor Copyrights Country Title Reg. No. Applic. No. Date Date
- --------------------------------------------------------------------------------
NONE.
Grantor Licenses Title Date Parties
- --------------------------------------------------------------------------------
ORDINARY COURSE OF BUSINESS SOFTWARE AGREEMENTS.
<PAGE>
Schedule V
PLEDGED ACCOUNTS
Name and Address of Bank Grantor Account Number
NIL NIL NIL
<PAGE>
Schedule VI
PERMITTED UNPLEDGED ACCOUNTS
Name and Address Account
of Bank Number
Please see attached list.
<PAGE>
Exhibit A to the
Security Agreement
FORM OF SECURITY AGREEMENT SUPPLEMENT
[Date of Security Agreement Supplement]
Royal Bank of Canada,
as the Collateral Agent for the
Secured Parties referred to in the
Credit Agreement referred to below
1585 Broadway
New York, New York
Attn: ___________________
ICG Equipment, Inc.
ICG NetAhead, Inc.
Ladies and Gentlemen:
Reference is made to (i) the Credit Agreement dated as of August 12, 1999
(as amended, amended and restated, supplemented or otherwise modified from time
to time, the "Credit Agreement"), among ICG Equipment, Inc., a Colorado
corporation, ICG NetAhead, Inc., a Delaware corporation, the Lender Parties
party thereto, Royal Bank of Canada, as collateral agent (together with any
successor collateral agent appointed pursuant to Article VII of the Credit
Agreement, the "Collateral Agent"), and Royal Bank of Canada, as administrative
agent for the Lender Parties, and (ii) the Security Agreement dated August 12,
1999 (as amended, amended and restated, supplemented or otherwise modified from
time to time, the "Security Agreement") made by the Grantors from time to time
party thereto in favor of the Collateral Agent for the Secured Parties. Terms
defined in the Credit Agreement or the Security Agreement and not otherwise
defined herein are used herein as defined in the Credit Agreement or the
Security Agreement.
Section 1. Grant of Security. The undersigned hereby assigns and
pledges to the Collateral Agent for the ratable benefit of the Secured Parties,
and hereby grants to the Collateral Agent for the ratable benefit of the Secured
Parties, a security interest in, all of its right, title and interest in and to
all of the Collateral of the undersigned, whether now owned or hereafter
acquired by the undersigned, wherever located and whether now or hereafter
existing or arising, including, without limitation, the property and assets of
the undersigned set forth on the attached supplemental schedules to the
Schedules to the Security Agreement.
Section 2. Security for Obligations. The pledge and assignment of, and
the grant of a security interest in, the Collateral by the undersigned under
this Security Agreement Supplement and the Security Agreement secures the
payment of all Obligations of the undersigned now or hereafter existing under or
in respect of the Loan Documents, whether direct or indirect, absolute or
contingent, and whether for principal, reimbursement obligations, interest,
premiums, penalties, fees, indemnifications, contract causes of action, costs,
<PAGE>
expenses or otherwise. Without limiting the generality of the foregoing, this
Security Agreement Supplement and the Security Agreement secures the payment of
all amounts that constitute part of the Secured Obligations and that would be
owed by the undersigned to any Secured Party under the Loan Documents but for
the fact that such Secured Obligations are unenforceable or not allowable due to
the existence of a bankruptcy, reorganization or similar proceeding involving
the undersigned or any Grantor.
Section 3. Supplements to Security Agreement Schedules. The
undersigned has attached hereto supplemental Schedules I, II, III, IV, V, VI and
VII to Schedules I, II, III, IV, V, VI and VII, respectively, to the Security
Agreement, and the undersigned hereby certifies, as of the date first above
written, that such supplemental schedules have been prepared by the undersigned
in substantially the form of the equivalent Schedules to the Security Agreement
and are complete and correct in all material respects.
Section 4. Representations and Warranties. The undersigned hereby
makes each representation and warranty set forth in Section 7 of the Security
Agreement (as supplemented by the attached supplemental schedules) to the same
extent as each other Grantor.
Section 5. Obligations Under the Security Agreement. The undersigned
hereby agrees, as of the date first above written, to be bound as a Grantor by
all of the terms and provisions of the Security Agreement to the same extent as
each of the other Grantors. The undersigned further agrees, as of the date first
above written, that each reference in the Security Agreement to an "Additional
Grantor" or a "Grantor" shall also mean and be a reference to the undersigned.
Section 6. Governing Law. This Security Agreement Supplement shall
be governed by, and construed in accordance with, the laws of the State of New
York.
Very truly yours,
[NAME OF ADDITIONAL GRANTOR]
By_______________________________
Title:
Address for notices:
_______________________
_______________________
_______________________
<PAGE>
Exhibit B
FORM OF PLEDGED ACCOUNT LETTER
_______________, 19__
[Name and address
of Pledged Account Bank]
ICG Equipment, Inc.
ICG NetAhead, Inc.
Gentlemen/women:
Reference is made to [deposit account no. __________] [the certain
deposit accounts listed on Schedule I hereto] into which certain monies,
instruments and other properties are deposited from time to time and deposit
account no. __________ (collectively, the "Pledged Account") maintained with you
by ____________________ (the "Grantor"). Pursuant to the Security Agreement
dated August 12, 1999 (the "Security Agreement"), the Grantor has granted to
Royal Bank of Canada, as collateral agent (the "Agent") for the Lender Parties
referred to in the Credit Agreement dated as of August 12, 1999 (the "Credit
Agreement") with ICG Equipment, Inc., and ICG NetAhead, Inc., a security
interest in certain property of the Grantor, including, among other things, the
following (the "Account Collateral"): the Pledged Account, all funds held
therein and all certificates and instruments, if any, from time to time
representing or evidencing the Pledged Account, all interest, dividends, cash,
instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the then
existing Account Collateral and all proceeds of any and all of the foregoing
Account Collateral and, to the extent not otherwise included, all (i) payments
under insurance (whether or not the Collateral Agent is the loss payee thereof),
or any indemnity, warranty or guaranty, payable by reason of loss or damage to
or otherwise with respect to any of the foregoing Account Collateral and (ii)
cash. It is a condition to the continued maintenance of the Pledged Account with
you that you agree to this letter agreement.
By signing this letter agreement, you acknowledge notice of, and
consent to the terms and provisions of, the Security Agreement and confirm to
the Collateral Agent that the description of the Pledged Account set forth on
Schedule V of the Security Agreement is correct and that you have received no
notice of any other pledge or assignment of the Pledged Account. Further, you
hereby agree with the Collateral Agent that:
(a) Notwithstanding anything to the contrary in any other agreement
relating to the Pledged Account, the Pledged Account is and will be subject
to the terms and conditions of the Security Agreement, will be maintained
solely for the benefit of the Collateral Agent, will be entitled "Royal
Bank of Canada, as Collateral Agent, Re: [name of the Grantor]" and will be
subject to written instructions only from an officer of the Collateral
Agent.
(b) You will collect mail from the Pledged Account on each of your
business days at times that coincide with the delivery of mail thereto.
<PAGE>
(c) You will follow your usual operating procedures for the handling
of any remittance received in the Pledged Account that contains restrictive
endorsements, irregularities (such as a variance between the written and
numerical amounts), undated or postdated items, missing signatures,
incorrect payees, etc.
(d) You will endorse and process all eligible checks and other
remittance items not covered by paragraph (c) and deposit such checks and
remittance items in the Pledged Account.
(e) You will maintain a record of all checks and other remittance
items received in the Pledged Account and, in addition to providing the
Grantor with photostats, vouchers, enclosures, etc. of such checks and
remittance items on a daily basis, furnish to the Collateral Agent (i) a
monthly statement of the Pledged Account and (ii) a daily collection and
check float report, to be transmitted electronically to the Collateral
Agent at: 1585 Broadway, New York, New York, Attention: __________.
(f) You will transfer, in same day funds, on each of your business
days, [after you have received written notice from the Collateral Agent
that a Default has occurred under the Credit Agreement] all amounts
collected from the Pledged Account on such day to the following account
(the "Cash Collateral Account"):
ICG Equipment, Inc.
ICG NetAhead, Inc.
Account No. __________
______________________
______________,
New York, New York _____
Attention: ____________________
Each such transfer of funds shall neither comprise only part of a
remittance nor reflect the rounding off of any funds so transferred.
(g) All transfers referred to in paragraph (f) above shall be made by
the undersigned irrespective of, and without deduction for, any
counterclaim, defense, recoupment or set-off and shall be final, and the
undersigned will not seek to recover from the Collateral Agent for any
reason any such payment once made.
(h) All service charges and fees with respect to the Pledged Account
shall be payable by the Grantor, and deposited checks returned for any
reason shall not be charged to the Pledged Account.
(i) The Collateral Agent shall be entitled to exercise any and all
rights of the Grantor in respect of the Pledged Account in accordance with
the terms of the Security Agreement, and the undersigned shall comply in
all respects with such exercise.
You hereby represent and warrant that the person executing this letter
agreement on your behalf is duly authorized to do so.
No amendment or waiver of any provision of this letter agreement, nor
consent to any departures by you or the Grantor herefrom, shall be effective
unless the same shall be in writing as signed by you, the Grantor and the
Collateral Agent.
2
<PAGE>
This letter agreement shall be binding upon you and your successors
and assigns and shall inure to the benefit of the Collateral Agent, the Secured
Parties and their successors, transferees and assigns. You may terminate this
letter agreement only upon thirty days' prior written notice to the Grantor and
the Collateral Agent. Upon such termination you shall close the Pledged Account
and transfer all funds in the Pledged Account to the Cash Collateral Account.
After any such termination, you shall nonetheless remain obligated promptly to
transfer to the Cash Collateral Account all funds and other property received in
respect of the Pledged Account.
This letter 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 all of which when taken together
shall constitute one and the same agreement. Delivery of an executed counterpart
of a signature page to this letter agreement by telecopier shall be effective as
delivery of an original executed counterpart of this letter agreement.
Please indicate your acknowledgment of and agreement to the provisions
of this letter agreement by signing in the appropriate space provided below and
returning this letter agreement to Royal Bank of Canada, 1585 Broadway, New
York, New York, Telecopier No.: (212) ___-____, Attention: ________________. If
you elect to deliver this letter agreement by telecopier, please arrange for the
executed original to follow by next-day courier.
This letter agreement shall be governed by and construed in accordance
with the laws of the State of New York.
Very truly yours,
[NAME OF GRANTOR]
By:
Title:
Royal Bank of Canada, as Collateral Agent
By:
Title:
Acknowledged and agreed to as of
the date first above written:
[NAME OF BANK]
By:
Title:
3
<PAGE>
Exhibit C to
the Security Agreement
FORM OF CONSENT AND AGREEMENT
The undersigned hereby acknowledges notice of, and consents to the
terms and provisions of, the Security Agreement dated August 12, 1999 (the
"Security Agreement", the terms defined therein being used herein as therein
defined) from ____________________ (the "Grantor") to Royal Bank of Canada as
collateral agent (the "Collateral Agent") for the Lender Parties referred to
therein, and hereby agrees with the Collateral Agent that:
(a) The undersigned will make all payments to be made by it under or
in connection with the __________ Agreement dated _______________, 19__
(the "Assigned Agreement") between the undersigned and the Grantor directly
to the Cash Collateral Account or otherwise in accordance with the
instructions of the Collateral Agent.
(b) All payments referred to in paragraph (a) above shall be made by
the undersigned irrespective of, and without deduction for, any
counterclaim, defense, recoupment or set-off and shall be final, and the
undersigned will not seek to recover from the Collateral Agent or any
Lender Party for any reason any such payment once made.
(c) The Collateral Agent shall be entitled to exercise any and all
rights and remedies of the Grantor under the Assigned Agreement in
accordance with the terms of the Security Agreement, and the undersigned
shall comply in all respects with such exercise.
(d) The undersigned has not and will not, without the prior written
consent of the Collateral Agent, (i) assign, cancel or terminate the
Assigned Agreement or consent to or accept any assignment, cancellation or
termination thereof, or (ii) amend or otherwise modify the Assigned
Agreement, or (iii) consent to any assignment of the Assigned Agreements to
any Person other than the Collateral Agent for the Secured Parties.
(e) In the event of a default by the Grantor in the performance of any
of its obligations under the Assigned Agreement, or upon the occurrence or
non-occurrence of any event or condition under the Assigned Agreement which
would immediately or with the passage of any applicable grace period or the
giving of notice, or both, enable the undersigned to terminate or suspend
its obligations under the Assigned Agreement, the undersigned shall not
terminate the Assigned Agreement until it first gives written notice
thereof to the Collateral Agent and permits the Grantor and the Collateral
Agent the period of time afforded to the Grantor under the Assigned
Agreement to cure such default.
(f) The undersigned shall deliver to the Collateral Agent,
concurrently with the delivery thereof to the Grantor, a copy of each
notice, request or demand given by the undersigned pursuant to the Assigned
Agreement.
(g) Except as specifically provided in this Consent and Agreement,
neither the Collateral Agent nor any other Secured Party shall have any
liability or obligation under the Assigned Agreement as a result of this
Consent and Agreement, the Security Agreement or otherwise.
<PAGE>
In order to induce the Lender Parties to make Advances and issue
Letters of Credit under the Credit Agreement and the Hedge Banks to enter into
Secured Hedge Agreements from time to time, the undersigned repeats and
reaffirms for the benefit of the Secured Parties the representations and
warranties made by it in the Assigned Agreement.
This letter 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 all of which when taken together
shall constitute one and the same agreement. Delivery of an executed counterpart
of a signature page to this letter agreement by telecopier shall be effective as
delivery of an original executed counterpart of this letter agreement.
This Consent and Agreement shall be binding upon the undersigned and
its successors and assigns, and shall inure, together with the rights and
remedies of the Collateral Agent hereunder, to the benefit of the Collateral
Agent, the Lender Parties and their successors, transferees and assigns. This
Consent and Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
IN WITNESS WHEREOF, the undersigned has duly executed this Consent
and Agreement as of the date set opposite its name below.
Dated: _______________, 19__ [NAME OF OBLIGOR]
By:
Title:
3
<PAGE>
Exhibit D to the
Security Agreement
FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT
This INTELLECTUAL PROPERTY SECURITY AGREEMENT (as amended, amended and
restated, supplemented or otherwise modified from time to time, the "IP Security
Agreement") dated August 12, 1999, is made by the Persons listed on the
signature pages hereof (collectively, the "Grantors") in favor of Royal Bank of
Canada, as collateral agent (the "Collateral Agent") for the Secured Parties (as
defined in the Credit Agreement referred to below).
WHEREAS, __________________________, a ________ corporation, has
entered into a Credit Agreement dated as of August 12, 1999 (as amended, amended
and restated, supplemented or otherwise modified from time to time, the "Credit
Agreement"), with Royal Bank of Canada, as Administrative Agent, Royal Bank of
Canada, as Collateral Agent, and the Lender Parties party thereto. Terms defined
in the Credit Agreement and not otherwise defined herein are used herein as
defined in the Credit Agreement.
WHEREAS, as a condition precedent to the making of Advances and the
issuance of Letters of Credit by the Lender Parties under the Credit Agreement
and the entry into Secured Hedge Agreements by the Hedge Banks from time to
time, each Grantor has executed and delivered that certain Security Agreement
made by the Grantors to the Collateral Agent dated August 12, 1999 (as amended,
amended and restated, supplemented or otherwise modified from time to time, the
"Security Agreement").
WHEREAS, under the terms of the Security Agreement, Grantors have
granted a security interest in, among other property, certain intellectual
property of the Grantors to the Collateral Agent for the ratable benefit of the
Secured Parties, and have agreed as a condition thereof to execute this IP
Security Agreement covering such intellectual property for recording with the
U.S. Patent and Trademark Office, the United States Copyright Office and other
governmental authorities.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each Grantor agrees as follows:
SECTION 1. Grant of Security. Each Grantor hereby grants to the
Collateral Agent for the ratable benefit of the Secured Parties a security
interest in and to all of such Grantor's right, title and interest in and to the
following (the "Collateral"):
(i) The United States, international, and foreign patents, patent
applications and patent licenses set forth in Schedule A hereto (as such
Schedule A may be supplemented from time to time by supplements to the
Security Agreement and this IP Security Agreement, each such supplement
being in substantially the form of Exhibit G to the Security Agreement (an
"IP Security Agreement Supplement"), executed and delivered by such Grantor
to the Collateral Agent from time to time), together with all reissues,
divisions, continuations, continuations-in-part, extensions and
reexaminations thereof, and all rights therein provided by international
treaties or conventions (the "Patents");
(ii) The United States and foreign trademark and service mark
registrations, applications, and licenses set forth in Schedule B hereto
<PAGE>
(as such Schedule B may be supplemented from time to time by IP Security
Agreement Supplements executed and delivered by such Grantor to the
Collateral Agent from time to time), (the "Trademarks");
(iii) The copyrights, United States and foreign copyright
registrations and applications and copyright licenses set forth in Schedule
C hereto (as such Schedule C may be supplemented from time to time by IP
Security Agreement Supplements executed and delivered by such Grantor to
the Collateral Agent from time to time) (the "Copyrights");
(iv) any and all claims for damages for past, present and future
infringement, misappropriation or breach with respect to the Patents,
Trademarks and Copyrights, with the right, but not the obligation, to sue
for and collect, or otherwise recover, such damages; and
(v) any and all proceeds of the foregoing.
SECTION 2. Recordation. Each Grantor authorizes and requests that the
Register of Copyrights, the Commissioner of Patents and Trademarks and any other
applicable government officer record this IP Security Agreement.
SECTION 3. Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute one and the same
agreement.
SECTION 4. Grants, Rights and Remedies. This IP Security Agreement has
been entered into in conjunction with the provisions of the Security Agreement.
Each Grantor does hereby acknowledge and confirm that the grant of the security
interest hereunder to, and the rights and remedies of, the Collateral Agent with
respect to the Collateral are more fully set forth in the Security Agreement,
the terms and provisions of which are incorporated herein by reference as if
fully set forth herein.
IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
[NAME OF BORROWER]
By
Name:
Title:
Address for Notices:
161 Inverness Drive West
Englewood, CO 80112
2
<PAGE>
[NAME OF GRANTOR]
By
Name:
Title:
Address for Notices:
[NAME OF GRANTOR]
By
Name:
Title:
Address for Notices:
[ETC.]
[IS AN ACKNOWLEDGMENT FORM NECESSARY?]
3
<PAGE>
Exhibit E to the
Security Agreement
FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT SUPPLEMENT
This INTELLECTUAL PROPERTY SECURITY AGREEMENT SUPPLEMENT (this "IP
Security Agreement Supplement") dated ________, ____, is made by the Person
listed on the signature page hereof (the "Grantor") in favor of Royal Bank of
Canada, as collateral agent (the "Collateral Agent") for the Secured Parties (as
defined in the Credit Agreement referred to below).
WHEREAS, __________________________, a ________ corporation, has
entered into a Credit Agreement dated as of August 12, 1999 (as amended, amended
and restated, supplemented or otherwise modified from time to time, the "Credit
Agreement"), with Royal Bank of Canada, as Administrative Agent, Royal Bank of
Canada, as Collateral Agent, and the Lender Parties party thereto. Terms defined
in the Credit Agreement and not otherwise defined herein are used herein as
defined in the Credit Agreement.
WHEREAS, pursuant to the Credit Agreement, the Grantor and certain
other Persons have executed and delivered that certain Security Agreement made
by the Grantor and such other Persons to the Collateral Agent dated August 12,
1999 (as amended, amended and restated, supplemented or otherwise modified from
time to time, the "Security Agreement"). To create a short form version of the
Security Agreement covering certain intellectual property of the Grantor and
such other Persons for recording with the U.S. Patent and Trademark Office, the
United States Copyright Office and other governmental authorities, the Grantor
and such other Persons have executed and delivered that certain Intellectual
Property Security Agreement made by the Grantor and such other Persons to the
Collateral Agent dated ________, ______ (as amended, amended and restated,
supplemented or otherwise modified from time to time, the "IP Security
Agreement").
WHEREAS, under the terms of the Security Agreement and the IP Security
Agreement, the Grantor has granted a security interest in the Additional
Collateral (as defined in Section 1 below) of the Grantor to the Collateral
Agent for the ratable benefit of the Secured Parties and has agreed as a
condition thereof to execute this IP Security Agreement Supplement for recording
with the U.S. Patent and Trademark Office, the United States Copyright Office
and other governmental authorities.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Grantor agrees as follows:
SECTION 1. Confirmation of Grant of Security. The Grantor hereby
acknowledges and confirms the grant of a security interest to the Collateral
Agent for the ratable benefit of the Secured Parties under the Security
Agreement and the IP Security Agreement in and to all of the Grantor's right,
title and interest in and to the following (the "Additional Collateral"):
(i) The United States, international, and foreign patents, patent
applications, and patent licenses set forth in Schedule A hereto, together
with all reissues, divisions, continuations, continuations-in-part,
extensions and reexaminations thereof, and all rights therein provided by
international treaties or conventions (the "Patents");
(ii) The United States and foreign trademark and service mark
registrations, applications, and licenses set forth in Schedule B hereto
(the "Trademarks");
<PAGE>
(iii) The copyrights, associated United States and foreign copyright
registrations and applications and copyright licenses set forth in Schedule
C hereto (the "Copyrights");
(iv) any and all claims for damages for past, present and future
infringement, misappropriation or breach with respect to the Patents,
Trademarks and Copyrights, with the right, but not the obligation, to sue
for and collect, or otherwise recover, such damages; and
(v) any and all proceeds of the foregoing.
SECTION 2. Supplement to Security Agreement and IP Security Agreement.
Schedule V to the Security Agreement and Schedule[s] [A,] [B and] [C] to the IP
Security Agreement are each, effective as of the date hereof, hereby
supplemented to add to such Schedules the Additional Collateral.
SECTION 3. Recordation. The Grantor authorizes and requests that the
Register of Copyrights, the Commissioner of Patents and Trademarks and any other
applicable government officer to record this IP Security Agreement.
IN WITNESS WHEREOF, the Grantor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
[NAME OF GRANTOR]
By
Name:
Title:
Address for Notices:
161 Inverness Drive West
Englewood, CO 80112
[IS AN ACKNOWLEDGMENT FORM NECESSARY?]
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF ICG SERVICES, INC. AND SUBSIDIARIES FOR THE
SIX MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 96,674
<SECURITIES> 4,943
<RECEIVABLES> 156,520
<ALLOWANCES> 0
<INVENTORY> 67
<CURRENT-ASSETS> 258,817
<PP&E> 624,993
<DEPRECIATION> 29,852
<TOTAL-ASSETS> 929,818
<CURRENT-LIABILITIES> 72,136
<BONDS> 666,308
0
0
<COMMON> 0
<OTHER-SE> 191,374
<TOTAL-LIABILITY-AND-EQUITY> 929,818
<SALES> 0
<TOTAL-REVENUES> 34,644
<CGS> 0
<TOTAL-COSTS> 1,434
<OTHER-EXPENSES> 21,779
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,137
<INCOME-PRETAX> (7,250)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,250)
<DISCONTINUED> 0
<EXTRAORDINARY> 193,029
<CHANGES> 0
<NET-INCOME> 185,779
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
