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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Annual Report on
FORM 10-K
For the fiscal year ended December 31, 1999
Commission file number 0-29828
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NORTHPOINT COMMUNICATIONS GROUP, INC.
(Exact name of registrant as specified in charter)
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Delaware 52-2147716
(State of Incorporation of Registrant) (I.R.S. Employer I.D. No.)
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303 Second Street
San Francisco, California 94107
(Address of principal executive offices)
(415) 403-4003
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001
(traded on the Nasdaq National Market)
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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 [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, as of March 10, 2000, was approximately $3,732,881,437 (based on
the closing price for shares of the registrant's common stock as reported by
the Nasdaq National Market for the last trading day prior to that date). Shares
of common stock held by each officer, director and holder of 5% or more of the
outstanding common stock have been excluded in that such persons may be deemed
affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.
As of March 10, 2000, 128,167,603 shares of the registrant's common stock
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A in connection
with its 2000 Annual Meeting of Stockholders are incorporated herein by
reference into Part III of this Report. Such proxy statement will be filed with
the Securities and Exchange Commission not later than 120 days after the
registrant's fiscal year ended December 31, 1999.
Certain exhibits filed with the registrant's Registration Statement on Form
S-1 (File No. 333-13183), as amended, and Quarterly Reports on Form 10-Q for
the fiscal quarter ended June 30, 1999 are incorporated by reference into Part
IV of this report.
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TABLE OF CONTENTS
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Item Page
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PART I.................................................................... 1
Item 1.Business.......................................................... 1
Item 2.Properties........................................................ 32
Item 3.Legal Proceedings................................................. 32
Item 4.Submission of Matters to a Vote of Security Holders............... 32
PART II................................................................... 33
Item 5.Market for Registrant's Common Equity and Related Stockholder
Matters................................................................. 33
Item 6.Selected Financial Data........................................... 34
Item 7.Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................... 36
Item 7a.Quantitative and Qualitative Disclosures About Market Risk....... 44
Item 8.Financial Statements and Supplementary Data....................... 44
Item 9.Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.................................................... 44
PART III.................................................................. 45
Item 10.Directors and Executive Officers of The Registrant............... 45
Item 11.Executive Compensation........................................... 45
Item 12.Security Ownership of Certain Beneficial Owners and Management... 45
Item 13.Certain Relationships and Related Transactions................... 45
PART IV................................................................... 46
Item 14.Exhibits, Financial Statement Schedules and Reports on Form 8-K.. 46
SIGNATURES................................................................ 50
FINANCIAL STATEMENTS
Index to Consolidated Financial Statements .......................... F-1
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NorthPoint Communications is a registered service mark of NorthPoint
Communications, Inc.
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PART I
Certain statements in this report, including, but not limited to, in this
Item 1--"Business" and in Item 7--"Management's Discussion and Analysis of
Financial Condition and Results of Operations," constitute "forward-looking
statements." The statements contained in this report which are not historical
facts may be deemed to contain forward-looking statements. Such statements are
indicated by words or phrases such as "anticipate," "estimate," "projects,"
"believes," "intends," "expects" and similar words and phrases. Actual results
may differ materially from those expressed or implied in any forward-looking
statement as a result of certain risks and uncertainties, including, without
limitation, the company's dependence on strategic third parties to market and
resell its services, intense competition for the company's service offerings,
dependence on growth in demand for DSL-based services, ability to raise
additional capital and other risks and uncertainties detailed herein under
"Risk Factors" and in our Securities and Exchange Commission filings.
Prospective investors are cautioned not to place undue reliance on such
forward-looking statements. We disclaim any obligation to update any of the
forward-looking statements contained herein to reflect future events or
developments.
ITEM 1. BUSINESS
History
NorthPoint was founded in May 1997 by six former MFS/WorldCom executives who
developed and implemented the first commercial DSL service. We began offering
our network services in March 1998 and have since entered into strategic and
commercial relationships with Microsoft, Tandy (the parent company of the
RadioShack stores), Yahoo!, Excite@Home, SBC/Pacific Bell Internet Services,
Intel, Verio, Cable & Wireless, Frontier Corporation (a subsidiary of Global
Crossing Holdings Limited), Concentric Network, ICG Communications, Enron
Communications, Network Plus, Netopia, GTE, iBeam, Equinix, and High Speed
Access Corporation, among others. Most of these companies and The Carlyle
Group, Vulcan Ventures, Accel Partners, Benchmark Capital, Greylock and others
have invested in our company.
In May 1999, we sold 17,250,000 shares of our common stock in our initial
public offering with net proceeds to us of $386,441,000. In December 1999, we
entered into a secured credit facility with a syndicate of lenders which
provides us access to $250 million, $85 million of which has been drawn down.
In February 2000, we issued senior notes in the aggregate principal amount of
$400 million.
In February 2000, NorthPoint unveiled its plans to expand beyond the U.S.
broadband market by announcing a Canadian joint venture with Call-Net, Canada's
leading competitive service provider. Service will launch under the NorthPoint
brand in the third quarter of this year, subject to regulatory conditions.
Another foreign joint venture was announced in March 2000, between NorthPoint
and VersaTel Telecom International N.V., the leading alternative broadband
local access network operator in the Benelux and the Northwest Rhine region of
Germany. The new company, VersaPoint, will initially offer wholesale DSL
service in The Netherlands, Germany and Belgium (as the local loop is
unbundled), and then in other markets as they open in the European Union.
Industry Overview
Data communications is the fastest growing segment of the telecommunications
industry. Small- and medium-sized businesses, people working in home offices
and telecommuters are increasingly demanding high-speed data connections for
applications such as Internet access, intranets, extranets, telecommuting,
e-commerce, e-mail, video conferencing and multimedia.
The number of Internet users worldwide has increased substantially over the
last several years, reaching nearly 140 million in 1998. Forrester Research,
Inc. projects that the total market for data networking services
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and Internet access will grow from $6.2 billion in 1997 to approximately $49.7
billion by 2002, of which approximately $27.9 billion will be from services to
businesses. Further, Forrester Research estimates that Internet commerce
revenue could reach $3.2 trillion by 2003.
International Data Corporation, or IDC, predicts that business DSL revenues
will grow from $300 million in 1999 to $5.6 billion by 2003 and that
residential DSL revenues will grow from $78 million in 1999 to $2.3 billion by
2003.
Small- and Medium-Sized Businesses. We expect that a significant portion of
the growth in data communications will be generated by small- and medium-sized
businesses with up to 500 employees. Data communications, including the
Internet, allow these businesses to compete more effectively by streamlining
communications among employees, customers and suppliers. However, to take full
advantage of these productivity-enhancing applications and the Internet, small-
and medium-sized businesses need high-speed, secure and dedicated data
connectivity.
Home Offices, Telecommuters and Residential Users. We expect that people
using computers from their homes to connect to corporate networks or to the
Internet for in-home business purposes will also be a significant source of
demand for high-speed data connectivity. According to IDC there were 26 million
residences with computers in their home offices in the U.S. in 1998, growing to
an estimated 39.2 million by 2002. A significant portion of people who work in
home offices and telecommuters need access to corporate networks and/or the
Internet for a variety of applications, including e-mail, databases and
corporate intranets. According to The Yankee Group, the market for remote
access services is expected to grow from $460 million in 1998 to $2 billion by
2002.
Traditionally, small- and medium-sized businesses, people who work in home
offices and telecommuters have relied on low-speed lines for data transport.
For example, according to IDC, approximately 78% of Internet access revenues
derived from small- and medium-sized businesses in 1997 were generated through
the traditional telephone system, using relatively slow 28.8 to 56 kilobits per
second dial-up modems or integrated services digital network (ISDN) lines. For
higher speed connections, these end users have had to purchase T1 service, a
digital transmission link which is fast (1.544 megabits per second) and always-
on, but expensive (typically $300 to $1000 per month depending upon distance
and region).
Neither the slow dial-up modems and integrated services digital network
service nor the expensive T1 option is an adequate solution for most small- and
medium-sized businesses, people who work in home offices and telecommuters. The
lack of optimal price-performance solutions has left these end users
underserved, since when using a T1 service, the cost is high, and when using a
dial-up modem or integrated-services digital network service, the speed of data
transmission is slow.
Our Solution
We believe that our DSL networks and the wide range of price-performance
data transport options we provide meet the demands of this large, underserved
group of end users. We attach high-speed digital equipment at both ends of a
copper line, allowing data transmission to bypass the components of the
traditional telephone system that are responsible for creating the local data
bottleneck. By using our services with their own Internet access and other data
applications, our network service provider customers--Internet service
providers, long-distance and local telephone companies, and data service
providers--can offer small- and medium-sized businesses, people who work in
home offices and telecommuters:
. A Range of Speed Options. We offer a wide range of data transport
speeds, each with a combination of price and performance that is
superior to traditional options.
. Scaleable Services. End users can upgrade service to higher performance
levels without adding hardware.
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. Always-On Connectivity. Traditional networks require a user or system to
dial a phone number and wait while the modem connects to a data service
provider such as an Internet service provider. Our service is always on,
providing instantaneous connections and the capability to receive or
transmit information continuously.
. Reliability. We can remotely monitor and troubleshoot an end user's
connection to ensure reliable performance.
. Secure Transport of Sensitive Business Data. We offer our services over
dedicated copper telephone lines, which ensures that data is protected
on its path to and from an end user.
Our networks and services offer a number of advantages to our network
service provider customers over alternative local access solutions, including:
. A Rapid, Capital-Efficient Method for Providing Service in a
Metropolitan Area. By connecting at one point to each of our
metropolitan networks, a network service provider can immediately offer
service to any end user within the geographic boundaries served by
traditional telephone company central offices in which we have installed
our equipment. Using our networks in this way reduces the capital and
operating investment a network service provider would otherwise need to
reach end users in metropolitan areas that we serve.
. Electronic Connections to Our National Operations Support Systems. We
provide our customers an electronic connection to our national pre-
qualification, order entry, customer support, provisioning, accounting
and billing systems. This provides streamlined operations and lower
overhead costs for our customers.
. Guaranteed Data Transmission Speeds and Service Quality. We guarantee
data throughput at high speeds on our networks.
. Continuously Monitored Networks. We have remote monitoring capabilities
and continuously monitor the entire network from our network control
center. We use three methods to monitor our networks so that we can
continue to monitor the networks even if one or two methods fail.
Strategy
Our objective is to become the leading national provider of local data
networks and transport services to network service providers serving small- and
medium-sized businesses, people who work in home offices and telecommuters. To
achieve this objective, we will:
. Focus Initially on Business District Central Offices. Before entering a
market, we prepare a detailed analysis of that market's central office
service areas using industry data and business demographic statistics.
We use this analysis to identify attractive service areas and develop a
schedule for network deployment and expansion. We have initially
targeted central offices in those target markets with the highest
density of small- and medium-sized businesses. Based upon our analysis,
we believe that when complete, our networks will be able to reach
approximately 5.5 million businesses, including more than 80% of the
small- and medium-sized businesses in our 60 markets. By focusing
initially on high-density business districts, we believe we can secure
scarce space in central offices, open markets more rapidly, maximize the
economic return from our capital expenditures and enable our customers
to address a significant portion of their target end users in each
geographic market quickly.
. Enter Markets Early. We seek to obtain an advantage by being the first,
or one of the first, DSL providers in our target markets to offer
optimized local data transport solutions. We believe that the first
mover advantage is valuable because after a network service provider
establishes a relationship with a local data network service provider,
there are costs associated with adding additional providers or switching
providers. We are already providing services to network service
providers in 33 metropolitan areas.
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. Rapidly Expand Our National Presence. Our goal is to offer local data
network and transport services to our customers in 60 metropolitan areas
by year-end 2000. We expect that offering high speed local data
transport solutions in many metropolitan areas will make our services
more attractive to national and regional network service providers by
enabling them to use our single system interface and uniform
provisioning procedures in each of our markets.
. Design Networks for Business End Users. Our networks are designed for
business users and business applications and have the appropriate
security, reliability and performance characteristics for those users
and applications. Currently, we are using a type of DSL technology that
permits symmetric data transmission--the same speed of data transport to
and from the end user--which we believe is the best-suited for most
business applications. We believe that business end users will not
compromise the security, reliability and performance of their data
connections and are willing to pay for those features.
. Focus on Wholesale Marketing. We market our local data transport
solutions on a wholesale basis to network service providers who, in
turn, sell to and support end users. By marketing to network service
providers, we:
. minimize sales and marketing expenses by enabling our sales force to
focus on prospective high-volume wholesale customers;
. amortize the cost of our fixed capital expenses over a large base of
end users more rapidly;
. minimize our end user support costs; and
. achieve a nationwide presence more quickly.
. Provide Excellent Customer Service. We are dedicated to providing our
customers and their end users superior customer support and service. Our
systems provide management reports and other critical, real-time data
for our network service provider customers.
. Exploit Our Scaleable Systems. Our operations support systems have been
designed to take advantage of efficiencies in our digital networks and
can grow with our business. We believe that these systems, including our
electronic connections to traditional telephone companies, will minimize
our overhead and increase both customer and end user satisfaction. Our
systems also give us the capability to monitor usage by our network
service providers' end users and notify network service providers when
an end user's usage patterns indicate that an upgrade in speed is
warranted. These upgrades can be performed remotely and require no
additional capital expenditures.
. Continue to Develop Strategic Relationships. We have entered into
strategic relationships with Microsoft, Tandy, Yahoo!, Excite@Home,
SBC/Pacific Bell Internet Services, Intel, Verio, Cable & Wireless,
Frontier Corporation (a subsidiary of Global Crossing Holdings Limited),
Concentric Network, ICG Communications, Enron Communications, Network
Plus, Netopia, iBeam, Equinix, and High Speed Access Corporation. We
anticipate entering into additional relationships with others. We
believe that these relationships are valuable because they provide
additional technical, marketing and distribution expertise and, in some
cases, involve capital investment and guaranteed or targeted numbers of
new end-user lines.
We plan to work closely with our strategic partners to maximize the
mutual benefit of these relationships. For example, we recently
expanded our longstanding relationships with Microsoft and Tandy to be
the exclusive DSL provider for Tandy's RadioShack customers that
purchase broadband Internet access from Microsoft at RadioShack stores
located within our market footprint.
. Extend Product Offering to the Residential Market. The establishment of
a uniform ADSL standard called g.lite and a recent FCC decision
requiring traditional telephone companies to share the use of a single
phone line for both voice and data have created a favorable environment
for us to begin offering a lower-priced residential product. This
product will be targeted at the approximately
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45 million households in the U.S. that we believe we will be able to
reach upon completion of our planned expansion. We plan to leverage our
existing relationships with Tandy, Microsoft and other channel partners
to facilitate the distribution of this product offering.
. Develop New Data Products and Solutions. We intend to expand our product
offerings by providing additional value-added services over our networks
and enhanced transport solutions.
Our Markets
We currently provide service in 33 metropolitan areas and intend to offer
services in a total of 60 metropolitan areas by the end of this year. We
believe that offering local data network and transport services in many areas
makes our services more attractive to national and regional network service
providers because they can use our single system interface and uniform
provisioning procedures in each of our markets. Our existing and planned
markets for 2000 are:
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West Central East
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Fresno Albuquerque East
Las Vegas *Austin ----
*Los Angeles(1) Birmingham <S>
*Phoenix *Chicago Albany
*Portland Cincinnati *Atlanta
*Sacramento *Cleveland *Baltimore
Salt Lake City *Columbus *Boston
*San Diego *Dallas Buffalo
*San Francisco Bay Area(2) Dayton Charlotte
Santa Barbara *Denver Greensboro
*Seattle *Detroit Harrisburg
Tucson Grand Rapids Hartford
*Houston Jacksonville
*Indianapolis *Miami/Fort Lauderdale
*Kansas City *New York(3)
Louisville Norfolk
Memphis *Orlando
*Milwaukee *Philadelphia
*Minneapolis *Providence
Nashville *Raleigh-Durham
New Orleans Rochester
Oklahoma City Richmond
*Pittsburgh Syracuse
*San Antonio *Tampa-St. Petersburg
*St. Louis *Washington, D.C.(4)
Wichita
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* Markets in which we currently provide services.
(1) Includes Orange County.
(2) Includes San Francisco, Oakland and San Jose.
(3) Includes northern New Jersey.
(4) Includes northern Virginia and parts of Maryland.
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Network Architecture
We establish each of our regional networks by installing digital
communications equipment in the traditional telephone company central offices
with the highest density of small- and medium-sized businesses. DSL technology
provides for high speed transmission of information over existing copper
telephone lines by encoding the information in a digital format. Our equipment
uses this technology to transmit high speed data over copper lines between the
central office and the end user. In turn, we connect our equipment in each
central office to our metropolitan node, a facility where data is collected in
each metropolitan area. Our customers in each metropolitan area are connected,
typically by leased fiber optic lines, to the metropolitan node. For our
customers, having this single point of interconnection with us in each city
reduces their capital expenditures and local network costs because we aggregate
and disseminate their traffic to and from a central place. By leasing and
reusing the existing copper wire and fiber optic infrastructure, we are able to
use our capital to purchase and develop value-added elements of the network,
including packet switches, digital communications equipment for each central
office, and operations support systems.
Our Equipment. We install DSL modems at the end user's premises and lease
copper telephone wires from the traditional telephone company. These wires run
from the end user's premises to the central office of the telephone company,
where we lease space under tariff or renewable interconnection agreements.
Within this space, we maintain equipment that connects to the local copper
wires. Our central office equipment supplies the digital line code that enables
high speed data transport over copper lines, organizes that data into packets
and aggregates end-user traffic for transport to and from our metropolitan
node. Data traffic is aggregated from various central offices at the
metropolitan node and then transported to the network service providers over
leased fiber optic lines. Our systems allow data transmission to bypass the
components of the traditional telephone system that are responsible for
creating inefficient data transmission. Therefore, while using the existing
copper telephone wires from each end user to the central office, we are able to
offer high speed data transmission.
Central Office Installation. We contract with Lucent on a per-order basis to
install our equipment in all traditional telephone company central offices in
which we have space nationwide. Lucent preconfigures this equipment in
accordance with our blueprint and ships it to our central offices for
installation by Lucent's field operations personnel. We maintain our own field
operations personnel to oversee this process and for subsequent maintenance and
upgrades of the central office equipment.
Sales and Marketing
We provide local data network and transport services on a wholesale basis to
Internet service providers, long-distance and local telephone companies, and
data service providers, whom we call network service providers. Our customers
bundle our services with Internet access or other data-intensive applications
for their customers, who are typically small- and medium-sized businesses,
people who work in home offices and telecommuters. We are providing or have
entered into agreements to provide our services to more than 200 network
service providers and have connected over 23,500 of their end users.
Our Sales Staff. We sell exclusively through wholesale channels. Our
indirect sales and support model allows us to benefit from the sales and
support organization of our customers, and upon implementation of the Company's
signed agreement with Tandy, 2,000 Tandy-owned RadioShack stores nationwide.
Our 165 member sales organization currently consists of account executives who
are responsible for securing new customers and assisting customers in
increasing the number of end users. The account executives are supported by
regional marketing managers who provide localized marketing, competitive
analysis, cooperative marketing programs, and sales support within each of our
current 33 markets. As of December 31, 1999, we had 165 dedicated sales staff,
including 9 temporary personnel. We intend to increase the size of our sales
and marketing staff as we enter an additional 27 markets by year-end 2000.
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Business Quality Services. Our networks and data transport services have
been designed to enable our customers to meet the rapidly increasing
information needs of their end users. By using NorthPoint's networks, network
service providers can offer data services with better price and performance
characteristics than dial-up and integrated services digital network modems and
1.54 megabit per second connections. Our current range of services and pricing
(before volume discounts) in California (although pricing in other markets may
vary) is as follows. Some of our higher speed services may be unavailable to
certain end users whose premises are too far from a central office.
NorthPoint Business Quality Service Offerings
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Monthly Pricing
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Connection Speed NorthPoint ILEC
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56 kbps.................................................... -- $ 125
128 kbps (ISDN Speed)...................................... -- $ 40-200
144 kbps................................................... $ 75 --
160 kbps................................................... $ 75 --
200 kbps................................................... $ 90 --
416 kbps................................................... $125 --
784 kbps................................................... $165 --
1.04 Mbps.................................................. $199 --
1.54 Mbps (T1 Speed)....................................... $250 $300-1000
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* As represented above, 56 kbps service is dedicated.
ISDN pricing is usage-based.
ILEC T1 pricing varies by distance between the end user and the service
provider.
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Each of our existing services is symmetric, providing the same speed to and
from the end user. We believe that this design is well-suited for business data
applications such as Internet access, intranets, extranets, telecommuting, e-
commerce, e-mail, video conferencing and multimedia.
The table below summarizes our business quality services and the targeted
end users for each service. Some of our higher speed services may be
unavailable to certain end users whose premises are too far from a central
office. The column marked "Maximum Range (feet)" in the following table means
the estimated maximum distance between a central office and the end user for
each of our services.
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Speed Wholesale Maximum
Speed to From End Price Range
Service End User User ($/mo.) (feet) Use/Market
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NorthPoint DSL 144 144 kbps 144 kbps 75 35,000 . ubiquitous flat-rate
service at speeds
comparable to
integrated services
digital network (ISDN)
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NorthPoint DSL 160 160 kbps 160 kbps 75 24,000 . always on e-mail and
web browsing solution
for individuals
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NorthPoint DSL 200 200 kbps 200 kbps 90 22,850 . small businesses of
less than four
employees with
standard e-mail and
web usage
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NorthPoint DSL 416 416 kbps 416 kbps 125 18,000 . e-mail and higher
bandwidth Internet
solution for small
businesses with less
than 10 employees
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NorthPoint DSL 784 784 kbps 784 kbps 165 13,500 . remote local area
network access, web
surfing for businesses
under 25 employees
. supports high-bandwith
intensive e-commerce
and video-conferencing
applications
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NorthPoint DSL 1.04 1.04 Mbps 1.04 Mbps 199 12,350 . remote local area
network access, web
surfing for businesses
. supports large file
transfers and web
hosting
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NorthPoint DSL T1 1.54 Mbps 1.54 Mbps 250 10,000 . T1 performance
. pricing not distance-
sensitive
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Performance Upgrades. We can remotely increase an end user's speed from 160
kilobits per second through 1.54 megabits per second without upgrading the
equipment located at the end user's premises. Remote upgrades allow an end user
to have improved performance without service interruptions or additional
equipment investment. Approximately 62% of the end users currently connected to
our networks are within 10,000 feet of the central office and can be upgraded
to our fastest service. In general, we expect that end users' needs will evolve
over time, resulting in demand for faster connections. The cost to upgrade an
end user's speed is minimal and the cost to provide faster service is not
substantial.
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The Value Proposition to Network Service Providers. In addition to providing
reliable, high quality data network services, we offer our customers:
. Immediate, Capital-Efficient Access to Markets. In the past, network
service providers would have had to make significant capital investments
to provide dedicated data services in their targeted service areas. With
a single connection to our metropolitan node, however, network service
providers can immediately provide high speed dedicated data services to
end users connected to each central office we serve in that metropolitan
area. Using our networks in this way reduces the capital investment a
network service provider would otherwise need to reach end users in our
metropolitan areas and enables network service providers to provide
services in any or all of our markets more quickly than if they built
their own network infrastructure.
. Single-Source Provider. We serve as a single-source provider to our
customers. Because we maintain the physical connection with the
traditional telephone company in each market and assume responsibility
for managing all end-user installations and for monitoring and managing
our data networks, the network service provider does not need to have
relationships with traditional telephone companies, inside wiring
companies or equipment maintenance and monitoring service providers.
. Avoidance of Regulatory Burden. To provide DSL service on its own, an
Internet service provider or other data service provider would have to
be authorized as a competitive telecommunications company in each state
in which it planned to provide service. Network service providers who
partner with us avoid the costs, delays and complexities of achieving
competitive telecommunications company status in each market.
. Transparent Service Delivery to End Users. Our automated order entry,
provisioning and maintenance systems are designed to allow network
service providers to interface directly with our support systems and
provide their end users with completely transparent service delivery.
Our systems also enable our network service providers to pre-qualify
prospective end users. The end user receives a bill from the network
service provider and is not billed by the traditional telephone
companies or NorthPoint.
. Electronic Interfaces. We have designed our national operations support
systems to interface directly with network service providers' existing
provisioning, management, accounting and billing systems. This enables
two-way trouble ticketing and secure connections for both proactive and
query-based status checking on all aspects of service delivery and
billing.
. Broad Range of Speeds and Prices. Our wide range of price and
performance options enables network service providers to match their
service offerings with an end user's specific need for data transmission
capacity. Current options available from traditional telephone companies
are more limited and often fail to address the needs of small- and
medium-sized businesses, people who work in home offices and
telecommuters.
. Identification of Service Upgrade Opportunities. As an end user's data
transmission needs evolve, our operations support systems track end user
usage and identify opportunities on a timely basis for the network
service provider to recommend service upgrades to its end users.
. Reliability and Guaranteed Data Transmission Speeds. We design our
networks for business-quality service, including 24 hours a day, 7 days
a week monitoring, network management links, guaranteed data throughput
and consistent high speed transmission.
. Secure Connections. Our network architecture enables network service
providers to offer to their end users applications that require a secure
connection for transmission of sensitive data.
. Marketing Support. We support our customers by providing sales leads,
co-marketing programs and training for network service provider sales
and service representatives.
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Residential Product Offering
We have begun to extend our existing business plan to address the broader
residential market. The following are key components of this strategy:
. Use Existing and Planned Network Coverage. We will use our network
infrastructure assets to reduce deployment costs and accelerate our
entry into the residential market. Upon completion of our planned
expansion, we will be able to reach approximately 45 million households.
. Leverage Strategic Partnerships with Tandy and Microsoft. Tandy, the
parent company of RadioShack, will be our primary distribution channel
for the residential service offering. We estimate that approximately
2,000 RadioShack stores nationwide will be within our footprint by the
end of 2000. In addition, Microsoft recently signed an agreement with
Tandy to offer its MSN services bundled with NorthPoint DSL service
through RadioShack stores.
. Develop g.lite Product. We have been actively engaged in technology
trials of the g.lite standard in conjunction with Intel. We believe that
a residential service offering based on this standard should result in
lower costs, streamlined service activation and end-user modems that are
universally compatible. The technology supports both data and voice
services over a single copper pair.
Aggressively Pursue Implementation of Key Regulatory Initiatives. A recent
FCC decision requires traditional telephone companies to allow competitive
carriers like us the ability to offer DSL services over an end user's primary
voice line. Once implemented, this ruling would eliminate the need for
installing a second line and would result in a significant reduction in the
costs to us of recurring and non-recurring charges for the copper loop that we
lease from the traditional telephone companies. We expect that it will take six
to nine months to implement the requirements of this line sharing decision.
Operations Support Systems
Our operations support systems are designed to grow with our business and
provide us with significantly enhanced operational efficiencies.
Connections to Our Customers. Our Web-based ordering system not only allows
network service providers to place orders on-line, but assists them in
marketing the service to new and existing end users, as well as pre-qualifying
prospective end users for the maximum level of service that will be available
to them. Our systems also interface with our customers' management,
provisioning, accounting and billing systems. Our network statistics allow the
network service provider to track historical usage and suggest service upgrades
based upon customer need.
Connections to the Traditional Telephone Companies. We have implemented
electronic connections with Pacific Bell and Ameritech, are in implementation
testing with Bell Atlantic, and are in development stage with three additional
ILEC suppliers. The connections will provide us with a single electronic
ordering interface and will facilitate provisioning large volumes of orders.
Deployment and Operations
To provide and monitor data transport services to end users, network service
providers have traditionally been required to coordinate multiple service and
equipment suppliers. We act as a single-source provider of a network service
provider's local data networking and transport needs, eliminating both
complexity and inconvenience for our customers.
Interconnecting With New Network Service Providers. When a network service
provider decides to use our services in a metropolitan market, we arrange for
the leasing, testing and monitoring of a fiber connection between our
metropolitan node in the area and the network service provider's local point of
presence. Our customers pay a monthly fee for the connection and for our data
traffic aggregation and monitoring services.
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<PAGE>
Provisioning with the Traditional Telephone Company. We order from the
traditional telephone companies and test copper wire loops that link central
offices and end users. In most cases, if the line is not testing to our
specifications at the time of provisioning or later, our network control center
is able to help the traditional telephone company pinpoint the source of the
problem.
End User Installation. We contract with third parties for the installation
of lines to end users, including any necessary wiring inside end users'
premises. Our contractors also deliver, install and test the customer premise
equipment and test the connection over our network. Our network service
provider customer generally pays an installation charge to us and sells the
modem and/or other customer premise equipment to the end user.
Network Monitoring. We monitor all of our metropolitan networks from our
network control center on a continuous basis, enabling us to identify and
resolve network problems before they affect our customers or their end users.
The network control center maintains visibility into each element of our
networks, allowing us to provide reliable service and efficient customer
installation, as well as rapid responses to customer inquiries.
Key Strategic and Commercial Relationships
We have entered into strategic and commercial relationships that we believe
are valuable because they provide additional technical, marketing and
distribution expertise and, in some cases, involve capital investment and
guaranteed or targeted numbers of new end-user lines. We anticipate entering
into additional strategic and commercial relationships with others.
Our strategic and commercial relationships, and the corresponding
investments in our capital stock by the companies with which we have such
relationships, include:
<TABLE>
<CAPTION>
Investment in
NorthPoint
(millions) Description
------------- -----------
<C> <C> <S>
Microsoft Corporation............ $30.0 Software and services company
Tandy Corporation................ 20.0 Parent company of the
RadioShack electronics,
computing and communications
stores
Verio Inc. ...................... 10.0 Business Internet solutions
provider, targeting small- and
medium-sized businesses
ICG Communications, Inc. ........ 10.0 Competitive integrated
communications provider
Excite@Home...................... 8.0 Broadband data service
provider with a division,
@Work, focused on small- and
medium-sized businesses
Cable & Wireless USA, Inc. ...... 5.0 Affiliate of multinational
telecommunications company
with extensive international
data and Internet business
Concentric Network Corporation... 5.0 Internet service provider,
targeting small- and medium-
sized businesses
Frontier Corporation............. 4.9 Integrated communications
provider offering services in
major markets across the U.S.
through its subsidiaries
(a wholly owned subsidiary of
Global Crossing Holdings
Limited)
Network Plus Corporation......... 2.5 Integrated communications
provider targeting small- and
medium-sized businesses in the
Northeast and Southwest
Intel Corporation................ 2.0 Designs, develops,
manufactures and markets
computer components and
related products at various
levels of integration
Netopia, Inc..................... 1.0 Develops, markets and supports
products and services to
enable businesses to use the
Internet
Enron Communications, Inc........ -- Network applications provider
delivering broadband content
and applications to businesses
in the U.S.
Yahoo!........................... -- Global Internet media company
offering a branded network of
information, communication and
shopping services
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Investment in
NorthPoint
(millions) Description
------------- -----------
<C> <C> <S>
SBC/Pacific Bell Internet Services.. -- Provides landline and
wireless telecommunications
services and equipment,
directory advertising,
publishing services and
Internet access services
Equinix............................. -- Owns and operates Internet
Business Exchange centers,
which provide tariff free
interconnection points for
Carriers, Internet Service
Providers, Content
Providers, and Component
Services Providers
iBeam............................... -- Provides multimedia
streaming content over the
Internet delivered via
satellite
High Speed Access Corporation....... -- Provides high-speed
Internet access via cable
modems to residential and
commercial customers.
</TABLE>
Microsoft. Microsoft purchased $30 million of our common stock in our IPO.
In April 1999, NorthPoint entered into a strategic relationship with Microsoft.
Under the two-year commercial agreement with Microsoft, NorthPoint and
Microsoft will jointly market and promote NorthPoint's DSL services, and
Microsoft intends to use its existing channels, websites and direct sales force
to augment NorthPoint's marketing efforts. Together, NorthPoint and Microsoft
will also develop the specifications for an open standard to allow broadband
content and application providers to optimize the use of high-speed networks to
deliver their products and services. Microsoft will also provide software
consulting services to NorthPoint. In addition, Microsoft received a warrant to
purchase an additional $30 million of Class B common stock at a price equal to
50% above the initial public offering price.
In September 1999, Microsoft launched the Windows Media Broadband Jumpstart
initiative. The Microsoft program, which leverages the success of Windows Media
Technologies, intends to stimulate broadband technology adoption by providing a
comprehensive solution that tackles the major industry barriers. Microsoft will
work with several industry partners including NorthPoint to provide consumers
with high-quality broadband services, compelling new broadband content and
improved performance. Through the development of the existing NorthPoint and
Microsoft relationship, the partnership will help to address the infrastructure
required to deliver broadband content. In addition, Microsoft and NorthPoint
have collaborated on DSL services offered within Microsoft's bCentral business
portal. bCentral users searching for high-quality DSL services can instantly
determine DSL availability at their business address using the NorthPoint pre-
qualification tools and place an order directly with NorthPoint from the
bCentral site.
In December 1999, NorthPoint and Microsoft expanded their strategic
relationship through a four year agreement under which NorthPoint will serve as
the preferred DSL service provider for Microsoft's MSN Internet Access offering
in Tandy's RadioShack stores located within NorthPoint's network footprint.
MSN, powered by NorthPoint DSL, will also be available through other Microsoft
sales channels. In addition, the agreement provides that NorthPoint and
Microsoft will develop enhanced services and content designed for DSL-enabled
consumers and to make these services available from the MSN portal.
Tandy. Tandy purchased $20 million of our common stock in our IPO. In April
1999, NorthPoint entered into a strategic alliance with Tandy, parent company
of the RadioShack stores. Under the terms of the five-year agreement, Tandy
designated NorthPoint a preferred provider of DSL services for sale to its
customers in markets NorthPoint serves. NorthPoint expects its network to cover
approximately 2,000 Tandy-owned RadioShack stores nationwide by the end of
2000. In these stores, RadioShack will demonstrate NorthPoint's services and
sell high-speed Internet access using the Company's network services.
NorthPoint and Tandy have agreed to install DSL connections and certain
hardware in RadioShack stores that will be selling NorthPoint's services.
Verio. In March 1999, NorthPoint entered into a strategic relationship with
Verio. Verio has designated NorthPoint as its preferred provider in 21 of its
existing 33 markets. Verio also committed to purchase a specified number of DSL
lines over the two-year term of the agreement. As part of this agreement, Verio
markets NorthPoint DSL services through a broadcast media campaign including
television and radio
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<PAGE>
advertisements in which the NorthPoint DSL service is "co-branded" with Verio's
Internet services. In connection with these agreements, Verio provided
NorthPoint with $5.6 million pursuant to a subordinated convertible promissory
note and invested $4.4 million in NorthPoint's Series D-1 preferred stock.
Verio's $10 million investment converted into Class B common stock at the time
of our IPO.
ICG. In March 1999, NorthPoint entered into several strategic agreements
with subsidiaries of ICG. Pursuant to these agreements, ICG designated
NorthPoint as its preferred provider of DSL services, sold NorthPoint all of
its DSL network equipment, agreed to share certain of its central office space
with NorthPoint, committed to purchase a specified number of DSL lines and
agreed to provide NorthPoint with local transport services. In conjunction with
these agreements, ICG invested $10 million in the Company's Series D-1
preferred stock, which converted into Class B common stock at the time of our
IPO.
Excite@Home. In June 1998, NorthPoint entered into a strategic agreement
with @Work (a division of Excite@Home) in which @Work agreed to sell
NorthPoint's services to its small- and medium-sized business customers. In
March 1999, NorthPoint entered into an amended agreement with @Work in which
@Work established targeted volume commitment levels and agreed to jointly
develop and implement marketing programs to expand the demand for @Work DSL
lines supplied by NorthPoint. In addition, Excite@Home and NorthPoint will
jointly pursue additional online activities that will provide services to
small- and medium-sized businesses and promote awareness of NorthPoint's
services. In July 1998, Excite@Home purchased $2 million of NorthPoint's Series
C preferred stock and in March 1999, it invested $6 million in Series D-1
preferred stock. The Series C preferred stock converted to common stock and the
Series D-1 converted into Class B common stock at the time of our IPO.
Cable & Wireless. In March 1999, NorthPoint signed a two-year agreement with
Cable & Wireless in which NorthPoint was designated as Cable & Wireless'
preferred DSL provider in the U.S. NorthPoint will work with Cable & Wireless
to develop new products for the domestic and international markets, as well as
to jointly market DSL and other products. In conjunction with the agreement,
Cable & Wireless invested $5 million in NorthPoint's Series D-1 preferred
stock, which converted into Class B common stock at the time of our IPO.
Concentric. In April 1999, Concentric committed to purchase a specified
number of DSL lines over the two-year term of the strategic agreement with
NorthPoint. Concentric also agreed to use NorthPoint's services in 20
metropolitan areas, in addition to the seven metropolitan areas in which they
currently offer services. In addition, Concentric and NorthPoint will undertake
development and co-marketing of new products. In conjunction with the
agreement, Concentric invested $5 million in NorthPoint's Series D-1 preferred
stock, which converted into Class B common stock at the time of our IPO.
Frontier. In April 1999, a subsidiary of Frontier signed a strategic
development and services agreement with NorthPoint. In the two-year agreement,
Frontier designated NorthPoint as a preferred provider of DSL services. In
addition, NorthPoint and Frontier will jointly undertake development of new
products and systems interfaces. NorthPoint may also purchase transport,
hosting, peering and collocation services from Frontier. In conjunction with
the agreement, another affiliate of Frontier invested $4.9 million in
NorthPoint's Series D-1 preferred stock, which converted into Class B common
stock at the time of our IPO. Frontier was recently acquired by Global Crossing
Holdings Limited.
Network Plus. In March 1999, NorthPoint entered into a two-year agreement
with Network Plus in which NorthPoint was designated as Network Plus' preferred
provider of DSL lines. Network Plus also committed to purchase a specific
number of DSL Lines. NorthPoint will also work with Network Plus to develop new
products. In conjunction with the agreement, Network Plus invested $2.5 million
in NorthPoint's Series D-1 preferred stock, which converted into Class B common
stock at the time of our IPO.
Intel. NorthPoint has entered into a strategic relationship with Intel, a
company that designs, develops, manufactures and markets computer components
and related products at various levels of integration. Intel is also one of the
supporters of the g.lite specification for a consumer version of DSL.
NorthPoint is working with
13
<PAGE>
Intel to enhance service offerings. In August 1998, Intel purchased $2 million
of NorthPoint's Series C preferred stock and acquired warrants to purchase
212,568 shares of NorthPoint's common stock at the same price per share. The
Series C converted to common stock at the time of our IPO.
Netopia. In April 1999, Netopia designated NorthPoint as the preferred
provider for its Small Business DSL Education Center and DSL Affiliate Program
on the GeoCities Internet Portal website. This partnership allows NorthPoint to
receive customer referrals as a result of Netopia's and GeoCities' promotional
activities. The approximately 3.5 million GeoCities website owners (called
Homesteaders) will have the opportunity to participate in the Netopia DSL
Affiliate Program and the approximately 19.5 million GeoCities visitors per
month will have the opportunity to visit the DSL Education Center. In
conjunction with the agreement, Netopia invested $1 million in NorthPoint's
Series D-1 preferred stock, which converted into Class B common stock at the
time of our IPO.
Enron Communications. In April 1999, Enron Communications entered into a
strategic product distribution agreement with NorthPoint. Under this agreement,
NorthPoint's networks will deliver Enron's advanced, broadband applications to
end users on the Company's networks. NorthPoint will receive a portion of the
revenue generated by such applications. NorthPoint and Enron have agreed to
cooperate in distributing future products and applications that meet the needs
of their customers and end users and will jointly promote such services to the
Company's NSPs. Enron Communications is the communications subsidiary of Enron
Corp., one of the world's leading integrated natural gas and electricity
companies.
Yahoo!. In November 1999, NorthPoint entered a strategic relationship with
Yahoo! to offer high-quality broadband streaming media solutions. The
relationship includes the creation of a co-branded broadband portal
(http://northpoint.my.yahoo.com) to serve as an entry point to broadband
enabled content and applications provided over the NorthPoint DSL network.
NorthPoint and Yahoo! will market the co-branded start page with NorthPoint DSL
service. The agreement will provide Yahoo! users with a path to NorthPoint DSL
to access the bandwidth necessary for advanced Internet applications and
specialized content and services designed for broadband enabled businesses and
consumers. The content will include streaming audio, video, and other
multimedia applications that require a high bandwidth connection.
SBC/Pacific Bell Internet Services. In October 1999, NorthPoint entered into
an agreement with Pacific Bell Internet Services, a division of SBC
Communications. Under the terms of the agreement, NorthPoint will provide IDSL
services to Pacific Bell Internet Services in the company's California
territory. The relationship will enhance the DSL coverage capability of Pacific
Bell Internet Services as part of SBC Communications' Project Pronto broadband
initiative. The relationship with NorthPoint extends the reach of Pacific Bell
Internet Services DSL offerings beyond 17,500 feet from the Pacific Bell
central offices.
Equinix. In October 1999, NorthPoint entered into a strategic relationship
with Equinix, a provider of collocation space for Internet Service Providers,
Content Service Providers, and Component Service Providers. The relationship
enables NorthPoint to access an aggregated population of service providers
collocated within the Equinix Internet Business Exchanges. In exchange for this
access, NorthPoint will collocate in selected Equinix facilities. In order to
facilitate interconnection operations, NorthPoint will encourage existing and
future NorthPoint partners to collocate within the Equinix facilities. The
collocated NorthPoint partners will also have convenient access to exclusive
Equinix value added services. NorthPoint will be Equinix's preferred DSL
provider for both Equinix's own uses and for any DSL referrals. In addition,
NorthPoint invested $5 million in Equinix.
iBeam. In October 1999, NorthPoint entered a strategic relationship with
iBeam Broadcasting to provide high-quality streaming content over NorthPoint's
network. Content will be transmitted from iBeam's satellites into the
NorthPoint network. We believe this content distribution relationship will
permit the reliable transmission of content to broadband users by bypassing the
congestion of the Internet.
High Speed Access Corp. In October 1999, NorthPoint entered a strategic
partnership to extend the reach and offerings of High Speed Access. High Speed
Access is a leading provider of high-speed Internet
14
<PAGE>
access via cable modems to residential and commercial customers. The agreement
allows High Speed Access to expand the broadband options available to its small
and medium-sized business customers by providing increased broadband
applications, e-commerce activities, and high-speed Internet connectivity to
customers not passed by the cable network. High Speed Access has the ability to
extend the enhanced capabilities provided through the NorthPoint relationship
to additional cable operators through its long-term exclusive relationships.
Alternative Data Transport Technologies
We believe that our DSL-enabled networks offer price and performance
characteristics that are attractive to network service providers for many of
their end users when compared with other options:
. Dial-up Analog Modems. Analog modems use the traditional telephone
system, and are the most commonly used data transport technology today.
Because the electronic components of the traditional telephone system
limit data transmission speeds, however, these traditional modems rarely
exceed data throughput of 56 kilobits per second. In addition, modems
generally require that the user or system dial a phone number to connect
with a data service, which creates delays in making connections and may
present security concerns.
. Integrated Services Digital Network (ISDN). Integrated services digital
network is a technology that works with the traditional telephone system
to send voice and data over existing copper wires at speeds up to 144
kilobits per second. Integrated services digital network is equal in
speed or slower than all of our services. Integrated services digital
network is typically priced with usage charges, making an always-on
connection with an integrated services digital network modem
prohibitively expensive.
. T1 Service. T1 service provides data transmission speed of 1.544
megabits per second. T1 pricing has traditionally been sensitive to the
distance between an end user and its service provider, creating
marketing difficulties and pricing anomalies.
. Cable Modems. Cable modem networks have penetrated certain residential
markets, but only about one-third of all homes in the United States and
Canada passed by existing cable infrastructure have cable modem
capacity. In addition, we believe that many of our target business end
users are not passed by existing cable infrastructure. Moreover,
although cable modems offer high speed services, they operate over a
shared cable infrastructure and therefore cannot offer guaranteed
bandwidth or the network security features that we believe a majority of
our targeted end users demand. In addition, cable modems do not offer
symmetric bandwidth, which we believe is important for business
applications.
. Wireless. Few of our target end users are served today by fixed wireless
infrastructure. We believe further rollout will be slowed by the need
for fixed wireless service providers to obtain roof rights and overcome
technological limitations and interference from terrain, obstructions
and weather.
. Fiber. Fiber optic lines provide high speed data transport, but today
reach only a fraction of our target end users. Local fiber optic builds
have generally targeted large corporations based in downtown office
buildings. Moreover, even where fiber passes a building, our DSL-enabled
network may be more cost effective for small- to medium-sized
businesses.
For more information about the highly competitive market in which we
operate, see "Risk Factors--The Market in Which We Operate is Highly
Competitive, and We May Not Be Able to Compete Effectively, Especially Against
Established Industry Competitors with Significantly Greater Financial
Resources."
Government Regulation
Overview. Our telecommunications services are subject to varying degrees of
federal, state and local regulation. The FCC and state utility commissions
regulate telecommunications common carriers. A
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<PAGE>
telecommunications common carrier is a company that offers telecommunications
services to the public or to all prospective users on standardized rates and
terms. Our data transport services are common carrier services.
The FCC exercises jurisdiction over telecommunications common carriers, and
their facilities and services, to the extent they are providing interstate or
international communications. The various state regulatory commissions retain
jurisdiction over telecommunications carriers, and their facilities and
services, to the extent they are used to provide communications that originate
and terminate within the same state. The degree of regulation varies from state
to state.
In recent years, the regulation of the telecommunications industry has been
in a state of flux as the United States Congress and various state legislatures
have passed laws seeking to foster greater competition in telecommunications
markets. The FCC and state utility commissions have adopted many new rules to
implement these new laws and encourage competition. These changes, which are
still incomplete, have created new opportunities and challenges for us and our
competitors. The following summary of regulatory developments and legislation
does not purport to describe all present and proposed federal, state and local
regulations and legislation affecting the telecommunications industry. Certain
of these and other existing federal and state regulations are currently the
subject of judicial proceedings, legislative hearings and administrative
proposals which could change, in varying degrees, the manner in which this
industry operates. Neither the outcome of these proceedings nor their impact
upon the telecommunications industry or us can be predicted at this time.
Federal Regulation. Although we currently are not subject to price cap or
rate of return regulation at the federal level and are not currently required
to obtain FCC authorization for the installation, acquisition or operation of
our network facilities, we nevertheless must comply with the requirements of
common carriage under the Communications Act of 1934 (the "Communications
Act"), as amended, to the extent we provide interstate services. Pursuant to
the Communications Act, we are subject to the general requirement that our
charges and regulations for communications services must be "just and
reasonable" and that we may not make any "unjust or unreasonable
discrimination" in our charges or regulations. Certain other specific
regulations applicable to us are discussed below. The FCC also has jurisdiction
to act upon complaints against any common carrier for failure to comply with
its statutory obligations.
Comprehensive amendments to the Communications Act were made by the
Telecommunications Act, which was signed into law on February 8, 1996. The
Telecommunications Act effected plenary changes in regulation at both the
federal and state levels that affect virtually every segment of the
telecommunications industry. The stated purpose of the Telecommunications Act
is to promote competition in all areas of telecommunications. While it may take
years for the industry to feel the full impact of the Telecommunications Act,
it is already clear that the legislation provides us with both new
opportunities and new challenges.
The Telecommunications Act greatly expands the interconnection requirements
on the incumbent local exchange carriers, or ILECs. The Telecommunications Act
requires the ILECs to:
. provide physical collocation, which allows companies such as us and
other interconnectors to install and maintain their own network
termination equipment in ILEC central offices, and virtual collocation
only if requested or if physical collocation is demonstrated to be
technically infeasible;
. unbundle components of their local service networks so that other
providers of local service can compete for a wide range of local
services customers;
. establish "wholesale" rates for their services to promote resale by
competitive local exchange carriers, or CLECs, and other competitors;
. establish number portability, which will allow a customer to retain its
existing phone number if it switches from the ILEC to a competitive
local service provider;
. establish dialing parity, which ensures that customers will not detect a
quality difference in dialing telephone numbers or accessing operators
or emergency services; and
. provide nondiscriminatory access to telephone poles, ducts, conduits and
rights-of-way.
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<PAGE>
The FCC is charged with establishing national guidelines to implement
certain portions of the Telecommunications Act. The FCC issued its
Interconnection Order on August 8, 1996. On July 18, 1997, however, the United
States Court of Appeals for the Eighth Circuit issued a decision vacating the
FCC's pricing rules, as well as certain other portions of the FCC's
interconnection rules, on the grounds that the FCC had improperly intruded into
matters reserved for state jurisdiction. On January 25, 1999, the Supreme Court
largely reversed the Eighth Circuit's order, holding that the FCC has general
jurisdiction to implement the local competition provisions of the
Telecommunications Act. In so doing, the Supreme Court stated that the FCC has
authority to set pricing guidelines for unbundled network elements, to prevent
ILECs from disaggregating existing combinations of network elements, and to
establish "pick and choose" rules regarding interconnection agreements (which
would permit a carrier seeking interconnection to "pick and choose" among the
terms of service from other interconnection agreements between the ILECs and
other CLECs). This action reestablishes the validity of many of the FCC rules
vacated by the Eighth Circuit. Although the Supreme Court affirmed the FCC's
authority to develop pricing guidelines, the Supreme Court did not evaluate the
specific pricing methodology adopted by the FCC and has remanded the case to
the Eighth Circuit for further consideration. In its decision, however, the
Supreme Court also vacated the FCC's rule that identifies the unbundled network
elements that ILECs must provide to CLECs. The Supreme Court found that the FCC
had not adequately considered certain statutory criteria for requiring ILECs to
make those network elements available to CLECs and must reexamine the matter.
The FCC completed that reexamination in the fall of 1999 and largely reaffirmed
its prior decision regarding access to unbundled network elements, including
the unbundled copper loops and transport facilities utilized by data carriers
like NorthPoint. The FCC's decision is subject to review by the Courts and
further consideration by the FCC in subsequent proceedings. We cannot predict
the ultimate disposition of those matters. The possible impact of this
decision, including the portion dealing with unbundled network elements, on
existing interconnection agreements between traditional telephone companies and
CLECs or on agreements that may be negotiated in the future also cannot be
determined at this time.
As a result of the pro-competitive provisions of the Telecommunications Act,
we have been able to obtain authorizations to operate as a CLEC in California,
Colorado, Connecticut, District of Columbia, Florida, Georgia, Illinois,
Indiana, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan,
Minnesota, Missouri, Montana, Nevada, New Hampshire, New Jersey, New York,
North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina,
Texas, Utah, Virginia, Washington, and Wisconsin. We have signed
interconnection agreements in all these states except Michigan, New Hampshire,
Rhode Island, South Carolina, Connecticut, and Louisiana, where we are
procuring unbundled network elements out of tariff.
The FCC has established different levels of regulation for dominant and non-
dominant carriers. Of domestic common carrier service providers, only GTE, the
regional Bell operating companies and other traditional telephone companies are
classified as dominant carriers and all other providers of domestic common
carrier services, including us, are classified as non-dominant carriers. As a
non-dominant carrier, we are subject to less FCC regulation than dominant
carriers.
The Telecommunications Act also directs the FCC, in cooperation with state
regulators, to establish a universal service fund that will provide subsidies
to carriers that provide service to under-served individuals and in high cost
areas. A portion of carriers' contributions to the universal service fund also
will be used to provide telecommunications-related facilities for schools,
libraries and certain rural health care providers. The FCC released its initial
order in June 1997. This order will require us to contribute to the universal
service fund, but may also allow us to receive payments from the fund if we are
deemed eligible. We also may provide service to under-served customers in lieu
of making universal service fund payments. The FCC's implementation of
universal service requirements remains subject to judicial and additional FCC
review. Additional changes to the universal service regime, which would
increase our costs, could have adverse consequences for us.
Various regional Bell operating companies have filed petitions with the FCC
requesting regulatory relief in connection with the provision of data services,
including DSL services. In response to these petitions, the FCC initiated a
comprehensive proceeding to review Advanced Services, including DSL issues.
That proceeding has resulted in a number of rulemakings and orders that enhance
the ability of competitive DSL companies to, among other things, access DSL-
capable unbundled copper loops, access and utilize various forms of central
17
<PAGE>
office collocation space, provide a variety of DSL services to end-users by
setting open rules for spectrum compatibility and access "shared-lines" by
requiring traditional telephone companies to provide competitive DSL companies
access to the high-frequency portion of existing voice service lines for the
provision of high speed DSL services.
By allowing DSL competitive companies to provide some DSL services on
shared-lines, the FCC's line sharing decision is intended to increase the
addressable subscriber market and to reduce costs by sharing loop efficiencies.
The decision is subject to review by the Courts and the FCC and further subject
to implementation on a state-by-state basis. The benefits of the decision may
be diluted or delayed if the implementation processes are protracted or
frustrated through legal challenges, arbitrations, or other actions in any
given state.
State Regulation. To the extent that we provide telecommunications services
which originate and terminate within the same state, we are subject to the
jurisdiction of that state's public service commission. As noted above, we have
obtained authorizations to operate as a CLEC in 53 of our 60 target markets. We
are not subject to price cap or rate of return regulation in any state in which
we are currently certificated to provide local exchange service.
The Telecommunications Act preempts state statutes and regulations that
prohibit or have the effect of prohibiting the provision of competitive local
services. As a result of this sweeping legislation, we will be free to provide
the full range of intrastate local and long distance services in all states in
which we currently operate, and in any states into which we may wish to expand.
While this action greatly increases our addressable customer base, it also
increases the amount of competition to which we may be subject.
Although the Telecommunications Act's prohibition of state barriers to
competitive entry took effect on February 8, 1996, various legal and policy
matters still must be resolved before the Telecommunications Act's policies
promoting local competition are fully implemented.
To the extent we provide intrastate services, we may be required to file
tariffs with the state public service commission setting forth the terms,
conditions and prices for services classified as intrastate. Like the FCC, most
states also consider complaints relating to a carrier's intrastate services or
rates.
As we expand our operations into other states, we may become subject to the
jurisdiction of their respective public service commissions for certain
services offered by us.
Local Government Authorizations. We may be required to obtain from municipal
authorities street opening and construction permits to install our facilities
in certain cities. In some of the areas where we provide service, we are
subject to municipal franchise requirements requiring us to pay license or
franchise fees either on a percentage of gross revenue, flat fee or other
basis. The Telecommunications Act requires municipalities to charge
nondiscriminatory fees to all telecommunications providers, but it is uncertain
how quickly this requirement will be implemented by particular municipalities
in which we operate or plan to operate or whether it will be implemented
without a legal challenge.
Customers
We market our network and data transport services to Internet service
providers, broadband data service providers and long-distance and local
telephone companies. During the year ended December 31, 1999, our two largest
customers, Flashcom, Inc. and Concentric Network Corporation, accounted for 32%
of our revenues. For more information, see "Risk Factors--A Limited Number of
Customers Account for a High Percentage of Our Revenues and the loss of a
Significant Customer Could Harm Our Business."
Employees
As of December 31, 1999, NorthPoint had 1,090 employees (including 142
temporary personnel and consultants), employed in engineering, sales,
marketing, customer support and related activities, and general and
administrative functions. None of NorthPoint's employees are represented by a
labor union, and we consider relations with our employees to be good. See "Risk
Factors--Our Success Depends on Our Retention of Executive Officers and Other
Key Personnel and Our Ability to Hire Additional Key Personnel."
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RISK FACTORS
In addition to the other information contained herein, you should carefully
consider the following risk factors in evaluating our company.
Because We Have a Limited Operating History, It Is Difficult to Evaluate Our
Business
We were formed in May 1997 and began offering commercial services in the San
Francisco Bay Area in March 1998. Because of our limited operating history, you
have limited operating and financial data about our company upon which to base
an evaluation of our performance and an investment in our company.
You should consider the risks, expenses and difficulties we may encounter,
including those frequently encountered by early stage companies in new and
rapidly evolving markets. As a result, we may be unable to:
. develop our operational support systems and other information technology
systems;
. obtain central office space and suitable copper wire loops;
. expand our customer base;
. raise additional capital;
. maintain adequate control of our expenses;
. attract and retain qualified personnel;
. enter into and implement interconnection agreements with traditional
telephone companies, some of which are our competitors or potential
competitors;
. expand the geographic coverage of our network;
. obtain governmental authorizations to operate as a competitive
telecommunications company in new markets;
. continue to upgrade our technologies and enhance our product features;
and
. respond to technological changes and competitive market conditions.
We Expect Our Losses and Negative Cash Flow to Continue
To date, we have incurred substantial operating losses, net losses and
negative cash flow on both an annual and quarterly basis. For the year ended
December 31, 1998, we had operating losses of approximately $25,362,000, net
losses of $28,847,000, and negative cash flow from operating and investing
activities of $52,913,000. For the year ended December 31, 1999, we had
operating losses of approximately $168,426,000, net losses of $183,698,000, and
negative cash flow from operating and investing activities of $439,571,000. We
cannot assure our investors that we will ever achieve profitability or generate
positive cash flow.
We expect our operating expenses will increase significantly, especially in
the areas of operations, sales and marketing, as we develop and expand our
business and, as a result, we will need to increase our revenue to become
profitable. If our revenue does not grow as expected or increases in our
expenses are not in line with our plans, there could be a material adverse
effect on our business, prospects, financial condition and results of
operations.
We Cannot Predict Whether We Will be Successful Because Our Business Model Is
Unproven and Our Market Is Developing
Our business strategy is unproven. To be successful, we must, among other
things, develop and market data networks and services that are widely accepted
by our customers and their end users at prices that will yield a profit.
Because our business and the overall market for high speed data communications
services are in the early stages of development, we are unsure whether or when
our DSL services will achieve commercial acceptance.
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Our Failure to Achieve or Sustain Market Acceptance at Desired Pricing Levels
Could Impair Our Ability to Achieve Profitability or Positive Cash Flow
Prices for digital communication services have fallen historically, a trend
we expect will continue. Accordingly, we cannot predict to what extent we may
need to reduce our prices to remain competitive or whether we will be able to
sustain future pricing levels as our competitors introduce competing services
or similar services at lower prices. Our failure to achieve or sustain market
acceptance at desired pricing levels could impair our ability to achieve
profitability or positive cash flow, which would have a material adverse effect
on our business, prospects, financial condition and results of operations.
Our Quarterly Operating Results Are Likely to Fluctuate Significantly, Causing
Our Stock Price to be Volatile or to Decline
We cannot accurately forecast our revenue because of our limited operating
history and the emerging nature of the data communications industry in our
markets. Our revenue could fall short of our expectations if we experience
delays or cancellations by even a small number of our customers. A number of
factors are likely to cause fluctuations in our operating results, including:
. the rate at which we are able to attract and retain customers, and
whether larger customers fulfill their volume commitments to us;
. the ability of our customers to generate significant end user demand;
. the timing and willingness of traditional telephone companies to provide
and construct the required central office facilities;
. the timing and willingness of traditional telephone companies to provide
suitable copper wire loops at favorable prices;
. the prices our customers and, in turn, their end users pay for our
services;
. availability of financing to continue to fund our expansion;
. our ability to deploy our services on a timely basis to satisfy end user
demand;
. the mix of line orders between lower priced and higher priced lines;
. the amount and timing of capital expenditures and operating costs as we
expand our network;
. the announcement or introduction of new or enhanced services by our
competitors; and
. technical difficulties or network downtime.
As a result, it is likely that in some future quarters our operating results
will be below the expectations of securities analysts and investors. If this
happens, the trading price of our common stock would likely be materially
adversely affected.
A Limited Number of Customers Account for a High Percentage of Our Revenues and
the Loss of a Significant Customer Could Harm Our Business
We currently provide or have agreements to provide data transport solutions
to more than 200 network service providers. For the year ended December 31,
1999, our two largest customers accounted for 32% of our revenues. We
anticipate that, as we expand our business, we will continue to rely upon a
limited number of customers for a high percentage of our revenue and end-user
lines. As a result of this concentration of our customer base, a loss of or
decrease in business from one or more of our customers could have a material
adverse effect on our business, prospects, financial condition and results of
operations.
Similarly, if our customers are unsuccessful in competing for end users in
their own intensely competitive markets or experience other financial or
operating difficulties, our business, prospects, financial condition and
results of operations would be materially adversely affected.
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Many of our agreements with our customers are non-exclusive, and many of our
customers are also customers of, or have invested in, our competitors. To the
extent our significant customers strengthen their commercial relationships with
our competitors, our business would be materially adversely affected.
We May Not Be Able to Continue to Grow Our Business If We Do Not Obtain
SignificantAdditional Funds
We believe our current capital resources, together with the proceeds of this
offering, will be sufficient for the funding and working capital requirements
needed for the deployment of our networks in our 60 targeted markets. If we
decide to accelerate the timing of the buildout of our networks or target
additional markets, we may need significant additional funds. We expect that
the actual amount and timing of our future capital requirements, if any, will
depend upon the demand for our services and regulatory, technological and
competitive developments, including additional market developments and new
opportunities in our industry. These future capital requirements may be
substantial. In addition, we may seek additional financing if:
. our plans or projections change or prove to be inaccurate;
. we acquire other companies or businesses; or
. market conditions allow us to raise public or privately financed capital
on attractive terms.
We may be unsuccessful in raising sufficient additional capital at all or on
terms that we consider acceptable. If we are unable to obtain adequate funds on
acceptable terms, our ability to deploy and operate our networks, fund our
expansion or respond to competitive pressures could be significantly impaired.
Such limitation could have a material adverse effect on our business,
prospects, financial condition or results of operations.
Our Business Activities and Our Ability to Raise Additional Funds Are Limited
by Covenants Contained in Our Financing Agreements and the Indenture
Our debt agreements, including our secured credit facility, the indenture
governing our senior notes and other financing agreements contain and will
contain restrictions on our activities and financial covenants with which we
will be required to comply. If we fail to comply with these requirements, we
would be in default and our debt could be declared immediately due and payable.
We may be unable to make such required payments, or to raise sufficient funds
from other sources.
In addition, the terms of proposed new indebtedness or other funding may not
be permitted by the terms of our current financing agreements, including our
secured credit facility and the indenture. This may impair our ability to
develop our business. If we fail to raise sufficient funds, we may be required
to modify, delay or abandon some of our expansion plans, which could have a
material adverse effect on our business, prospects, financial condition and
results of operations.
We Need to Make Significant Capital Expenditures, and the Amounts, Timing and
Returns are Uncertain
In 2000, we will have to make significant capital expenditures, estimated at
$220,000,000 to $250,000,000, to develop our business and deploy our services
and systems. We may also need to make additional capital expenditures in
connection with the acquisition of other companies. In addition, the amount and
timing of these expenditures are uncertain and will depend upon our ability to
execute our plans in a timely and cost-effective manner. We will need to
increase our revenue in order to earn a return from our capital expenditures.
If our revenue does not grow as expected, or capital expenditures exceed our
estimates, there could be a material adverse effect on our business, prospects,
financial condition and results of operations.
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Our Failure to Manage Our Growth Effectively Could Impair Our Business
If we are successful in implementing our business plan, our operations will
expand rapidly. This rapid expansion could place a significant strain on our
management, financial and other resources. Our ability to manage future growth,
if it occurs, will depend upon our ability to:
. control costs;
. maintain regulatory compliance;
. implement and significantly expand our financial and operating systems;
. maintain our operations support systems; and
. expand, train and manage our employee base.
We may be unable to do these things successfully. In addition, we may not
successfully obtain, integrate and use our employees and management, operating
and financial resources. Our business, prospects, financial condition and
results of operations will be materially adversely affected if we are unable to
manage our growth effectively.
The Data Communications Industry Is Undergoing Rapid Technological Changes and
New Technologies May Be Superior to the Technology We Use
The data communications industry is subject to rapid and significant
technological change, including continuing developments in DSL technology,
which does not presently have widely accepted standards, and alternative
technologies for providing high speed data communications such as cable modem
technology. As a consequence:
. we will rely on third parties, including some of our competitors and
potential competitors, to develop and provide us with access to
communications and networking technology;
. our success will depend on our ability to anticipate or adapt to new
technology on a timely basis; and
. we expect that new products and technologies will emerge that may be
superior to, or may not be compatible with, our products and
technologies.
If we fail to adapt successfully to technological changes or obsolescence or
fail to obtain access to important technologies, our business, prospects,
financial condition and results of operations could be materially adversely
affected.
Our Success in Attracting and Retaining Customers Significantly Depends on Our
Ability to Obtain Central Office Space from Traditional Telephone Companies
We believe the growth and success of our business will depend upon securing
physical central office space for our equipment in the central offices of
traditional telephone companies in our target markets. We have experienced
initial rejections of our applications to obtain space in some central offices.
We believe we will continue to receive rejections of requested physical central
office space as we expand our existing and planned networks. Although to date a
majority of our applications to obtain physical central office space that were
initially rejected have subsequently been accepted, we cannot assure you that
we will be successful in reversing the pending rejections or any other rejected
applications for space in desired central offices. Nor can we predict the
extent of these rejections or their impact on our ability to provide service in
our target markets. The rejection of our applications for central office space
has in the past and could in the future result in delays and increased costs as
we expand our services in our target markets. This may materially adversely
affect our business, prospects, financial condition and results of operations.
As we grow, we may be unable to secure central office space on a timely
basis or at all. In some cases, although physical central office space is
available, traditional telephone companies have claimed that they must
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refurbish space to make it suitable for our equipment--for example, by adding
separate entrances, removing asbestos or obsolete machinery, or increasing
power supply and air conditioning--which in some cases has made the cost to
obtain that physical central office space prohibitively expensive. We expect
physical central office space to become increasingly scarce due to increasing
demand from a growing number of competitive telecommunications companies.
Even when space is available, we may face delays ranging from four months to
more than a year after we place an order before space for our equipment is made
available. If our applications for physical central office space are rejected,
or the costs or delays associated with obtaining central office space become
too expensive, our expansion plans could be adversely affected, which could
have a material adverse effect on our business, prospects, financial condition
and results of operations.
Broad service availability is also important to our customers and potential
customers that want to provide Internet access or other data services on a
national or regional basis. Our inability to obtain physical central office
space in a timely manner could have a material adverse effect on our ability to
attract and retain customers.
Any disputes with traditional telephone companies over the types of
equipment we seek to install in the central office space could also delay our
installation and even impair our ability to provide service in the manner we
deem appropriate. These delays or refusals could have a material adverse effect
on our business, prospects, financial condition and results of operations.
Our Success Depends on Interconnection Agreements With Traditional Telephone
Companies in Each of Our Markets
The success of our strategy depends on our ability to enter into and renew
interconnection agreements with traditional telephone companies in each of our
target markets on a timely basis. Delays in obtaining additional
interconnection agreements would postpone our entry into a market, which could
have a material adverse effect on our business, prospects, financial condition
and results of operations.
Interconnection agreements have limited terms of two to three years and we
cannot assure you that existing or new agreements will be extended or
negotiated on terms favorable to us. Interconnection agreements are also
subject to state commission, FCC and judicial oversight. These government
bodies may modify the terms or prices of our interconnection agreements in ways
that adversely affect our business, prospects, financial condition and results
of operations.
Our Business Could Suffer if High Quality Copper Lines Are Not Available or
Cost Us More Than We Expect
We significantly depend on the quality of the copper lines and the
traditional telephone companies' maintenance of such lines. We cannot assure
you that we will be able to obtain the copper lines and the services we require
from the traditional telephone companies at quality levels, prices, terms and
conditions satisfactory to us. Our failure to do so would have a material
adverse effect on our business, prospects, financial condition and results of
operations.
Under federal law, traditional telephone companies have an obligation to
negotiate with us in good faith to enter into interconnection agreements,
including agreements on the price at which we can obtain suitable lines from
these telephone companies. If no agreement can be reached, either side may
petition the applicable state commission to arbitrate remaining disagreements.
These arbitration proceedings can last up to nine months. Moreover, the state
commission must approve any interconnection agreement resulting from
negotiation or arbitration, and any party may appeal an adverse decision by the
state commission to federal district court. The potential cost in resources and
delay from this process could harm our ability to compete in certain markets,
and there is no guarantee that a state commission would resolve disputes,
including pricing disputes, regarding
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our access to suitable lines in our favor. Moreover, the FCC rules governing
pricing standards for access to the networks of the traditional telephone
companies are currently being challenged in federal court. If the courts
overturn the FCC's pricing rules, the FCC may adopt a new pricing methodology
that would require us to pay a higher price to traditional telephone companies
for access to suitable lines. This could have a detrimental effect on our
business.
We have not yet established a history of ordering and obtaining the
provisioning and repair of very large volumes of lines from any traditional
telephone company. We also depend on cooperation from traditional telephone
companies for repair of transmission facilities. The traditional telephone
companies in turn rely significantly on unionized labor. Labor-related issues
and actions on the part of the traditional telephone companies have in the
past, and may in the future, adversely affect traditional telephone companies'
provision of services and network components that we order.
Our dependence on the traditional telephone companies has caused and could
continue to cause us to encounter delays in establishing our networks,
provisioning lines and upgrading our services. These delays could adversely
affect our relationships with our customers, harm our reputation or otherwise
have a material adverse effect on our business, prospects, financial condition
and results of operations.
We Depend on Market Acceptance for DSL-Based Services
The market for small- and medium-sized business, telecommuter and
residential Internet access is in the early stages of development. Because we
offer services to a new and evolving market and because current and future
competitors are likely to introduce competing services, it is difficult for us
to predict the rate at which these markets will grow. Various providers of
high-speed digital communications services are testing products from various
suppliers for various applications, and it is unclear if DSL will offer the
same or more attractive price-performance characteristics. If the markets for
our services fail to develop, grow more slowly than anticipated or become
saturated with competitors, our business, prospects, financial condition and
results of operations could be materially adversely affected.
We Depend on Our Billing, Customer Service and Information Support Systems,
Which Need Further Development
Sophisticated information and processing systems are vital to our growth and
ability to monitor costs, bill customers, process customer orders and achieve
operating efficiencies. Our plans for the development and implementation of our
operations support systems rely, for the most part, on acquiring products and
services offered by third-party vendors and integrating those products and
services in-house to produce efficient operational solutions. However, we may
not successfully identify all of our information and processing needs or
implement these systems on a timely basis or at all, and these systems may not
perform as expected.
In addition, our right to use these systems is dependent upon license
agreements with third-party vendors. Some of those agreements may be cancelable
by the vendor and the cancellation or nonrenewal of these agreements may have a
material adverse effect on our business, prospects, financial condition and
results of operations.
Similar issues are applicable to the operations support systems and other
systems of our customers, and to the interface between our systems and those of
our customers. Therefore, failures at our customers could also have a material
adverse effect on our business, prospects, financial condition and results of
operations.
We May Be Unable to Expand Our Network Services Effectively and Provide High
Performance to a Substantial Number of End Users
Due to the limited deployment of our services, the ability of our DSL
network to connect and manage a substantial number of end users at high
transmission speeds is still unknown. While peak digital data transmission
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speeds across our DSL network to and from the central office and the end user
can exceed 1.5 megabits per second, the actual data transmission speeds over
our network could be significantly slower due to:
. the type of DSL technology deployed;
. the distance an end user is located from a central office;
. the configuration of the telecommunications line being used;
. the gauge of the copper lines; and
. the presence and severity of interfering transmissions on nearby lines.
For example, we are not certain whether we can successfully deploy higher
DSL speeds through digital loop carrier systems which, because they connect
copper lines to a fiber link, currently limit DSL service to a maximum speed of
144 kilobits per second.
Because we rely on traditional telephone companies to overcome technical
limitations associated with loop carrier systems, we cannot assure you that we
will be able to successfully deploy high speed DSL service to all areas in our
markets. As a result, our network may not be able to achieve and maintain the
highest possible digital transmission speed. Our failure to achieve or maintain
high speed digital transmissions would have a material adverse effect on our
business, prospects, financial condition and results of operations.
Our Success Depends on Our Retention of Executive Officers and Other Key
Personnel and Our Ability to Hire Additional Key Personnel
We are managed by a small number of executive officers. Competition for
qualified executives in the data communications services industry is intense,
and there are a limited number of persons with comparable experience. We depend
upon our executive officers because we believe there are few managerial
personnel with qualifications to swiftly implement a business plan integrating
DSL technology with the existing telephone infrastructure. We do not have
employment agreements with any of our executive officers, so any of these
individuals may terminate his or her employment with us at any time. We do not
have "key person" life insurance policies on any of our executive officers. The
loss of these key individuals could have a material adverse effect on our
business, prospects, financial condition and results of operations.
We believe that our success will depend in large part on our ability to
retain and attract qualified technical, marketing, managerial and other
personnel. Additionally, we believe an effective sales force is critical to our
success. The industry in which we compete is characterized by a high level of
employee mobility and aggressive recruiting of skilled personnel. We may be
unable to hire or retain necessary personnel in the future. Our inability to
attract and retain key personnel would have a material adverse effect on our
business, prospects, financial condition and results of operations.
The Market in Which We Operate is Highly Competitive, and We May Not Be Able to
Compete Effectively, Especially Against Established Industry Competitors With
Significantly Greater Financial Resources
We face competition from many competitors with significantly greater
financial resources, well-established brand names and larger customer bases. We
also expect competition to intensify in the future. We expect significant
competition from traditional and new telephone and telecommunications
companies, including national long distance carriers, cable modem service
providers, Internet service providers, on-line service providers, and wireless
and satellite data service providers.
Other Competitive Telecommunications Companies, Some With Greater Financial
Resources, Compete in the Same Markets for the Same Customers. Other
competitive telecommunications companies have entered and may continue to enter
the market and offer high speed data services using a business strategy similar
to ours. Some competitors, including those focusing on data transport such as
Rhythms NetConnections Inc., HarvardNet Inc., @Link Networks L.L.C., New Edge
Networks, Covad Communications Group, Inc., BlueStar Communications,
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JATO, Telocity, Vitts Network, DSL.net and Network Access Solutions
Corporation, have begun to offer DSL-based access services, and others are
likely to do so in the future. Finally, traditional voice-based telephone
companies such as BTI Telecom, Hyperion, MCG, McLeod Communications, Allegiance
and Network Plus, are entering the DSL market. Certain of our customers have
made investments in our competitors, which may enhance their relationships with
these competitors at our expense. The Telecommunications Act of 1996
specifically grants any competitive local exchange carrier, or competitive
telecommunications company, the right to negotiate interconnection agreements
with traditional telephone companies, or incumbent local exchange carriers. The
Telecommunications Act also allows competitive telecommunications companies to
enter into interconnection agreements which are identical in all respects to
ours. In addition, some competitive telecommunications companies have extensive
fiber networks in many metropolitan areas primarily providing high speed
digital and voice circuits to large corporations, and have interconnection
agreements with traditional telephone companies pursuant to which they have
acquired space in traditional telephone companies' central offices in many of
our markets. As a result, our customers may contract with other competitive
telecommunications companies, which may decrease our customers' demand for our
services.
Traditional Telephone Companies With Greater Resources Than Ours May
Directly Compete in Our Markets. The traditional telephone companies have an
established brand name and reputation for high quality in their service areas,
possess significant capital to deploy DSL equipment rapidly, have their own
copper lines and can bundle digital data services with their existing analog
voice services to achieve economies of scale in serving customers. In addition,
most traditional telephone companies have established or are establishing their
own Internet service provider businesses, and all of the largest traditional
telephone companies that are present in our target markets are conducting
market trials of or have commenced offering DSL-based access services. For
example, Bell Atlantic, BellSouth, Cincinnati Bell, Pacific Bell and
Southwestern Bell are offering commercial services in some territories in which
we offer services, U S WEST is offering commercial DSL services and Ameritech
has announced commercial DSL services in some areas of Michigan and Illinois.
We recognize that the traditional telephone companies have the potential to
quickly deploy DSL services and are in a position to offer service from central
offices where we may be unable to secure space in traditional telephone
companies' central offices. In addition, the FCC is considering establishing
requirements for separate subsidiaries through which the traditional telephone
companies could provide DSL service on a largely deregulated basis. As a
result, we expect traditional telephone companies to be strong competitors in
each of our target markets.
National Long Distance Carriers May Begin to Compete for Our Small- and
Medium-Sized Business Customers. Many of the leading traditional national long
distance carriers, including MCI WorldCom, Inc., AT&T Corp. and Sprint
Corporation, are expanding their capabilities to support high speed, end-to-end
data networking services. They also have interconnection agreements with many
of the traditional telephone companies and a number of spaces in traditional
telephone companies' central offices from which they could begin to offer
competitive DSL services. The newer national long distance carriers, such as
Level 3 Communications, Inc., The Williams Companies, Inc. and Qwest
Communications International, Inc. are building and managing high speed fiber-
based national data networks and partnering with Internet service providers to
offer services directly to the public. These companies could modify their
current business focus to include small- and medium-sized business customers
using DSL or other technologies in combination with their current fiber
networks. Sprint has already launched services in Las Vegas and Charlotte.
Cable Modem Service Providers May Offer High Speed Internet Access at More
Competitive Rates Than Ours, Forcing Us to Lower Our Prices. Cable modem
service providers, such as At Home Corporation and Road Runner, Inc. (with
their cable partners), are deploying high speed internet access services over
hybrid fiber coaxial cable networks. Where deployed, these networks provide
similar and in some cases higher speed Internet access than we provide. They
also offer these services at lower price points than our services. Actual or
prospective cable modem service provider competition may have a significant
negative effect on our ability to secure customers and may create downward
pressure on the prices we can charge for our services.
Internet Service Providers, Our Targeted Customers, May Begin to Provide DSL
Services Directly. Internet service providers, such as Verio Inc., GTE
Internetworking, UUNET (a subsidiary of MCI WorldCom,
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Inc.), Sprint, Concentric Network Corporation, MindSpring Enterprises, Inc. and
PSINet, Inc., provide Internet access to residential and business customers,
generally using the existing telephone system. Some regional Internet service
providers, such as HarvardNet Inc., BlueStar Communications, New Edge Networks,
@Link Networks L.L.C., InterAccess Co., Vitts Networks Inc. and Prism
Solutions, Inc., have begun offering DSL-based services. Internet service
providers could become competing DSL service providers if they attain
certification as competitive telecommunications companies in the states in
which they planned to operate.
On-line Service Providers, Our Targeted Customers, May Begin to Provide DSL
Services Directly. On-line service providers, such as America Online, Inc.,
Compuserve (a subsidiary of America Online), Microsoft Network, Prodigy, Inc.,
and WebTV Networks, Inc. (a subsidiary of Microsoft), provide, over the
Internet and on proprietary on-line services, content and applications ranging
from news and sports to consumer video conferencing. These services are
designed for broad consumer access over telecommunications-based transmission
media, which enable digital services to be provided to the significant number
of consumers who have personal computers with modems. In addition, on-line
service providers provide Internet connectivity, ease-of-use and consistency of
environment. Many of these on-line service providers have developed their own
access networks for modem connections. AOL has announced that it will purchase
DSL services from Bell Atlantic and SBC Communications. If these on-line
service providers were to extend their owned access networks to DSL, they would
be our competitors.
Wireless and Satellite Data Service Providers May Begin to Offer Wireless
and Satellite-Based Internet Connectivity, Also Competing Against Us. Wireless
and satellite data service providers are developing wireless and satellite-
based Internet connectivity. We may face competition from terrestrial wireless
services, including multi-channel multipoint distribution systems, local
multipoint distribution systems, wireless communication service and point-to-
point microwave systems. The FCC recently adopted new rules to permit multi-
channel multipoint distribution system licensees to use their systems to offer
two-way services, including high speed data, rather than solely to provide one-
way video services. The FCC also has auctioned local multipoint distribution
system licenses in all markets for wireless systems, which can be used for high
speed data services. In addition, companies such as Teligent, Inc., Advanced
Radio Telecom Corp., NEXTLINK and WinStar Communications, Inc. hold point-to-
point and/or point-to-multipoint microwave licenses to provide fixed wireless
services such as voice, data and video conferencing.
We also may face competition from satellite-based systems. Motorola
Satellite Systems, Inc., Hughes Communications, Inc. (a subsidiary of General
Motors Corporation), Teledesic LLC and others have filed applications with the
FCC for global satellite networks which can be used to provide broadband voice
and data services.
In January 1997, the FCC allocated 300 MHz of spectrum in the 5 GHz band for
unlicensed devices to provide short-range, high speed wireless digital
communications. These frequencies must be shared with incumbent users without
causing interference. Although the allocation is designed to facilitate the
creation of new wireless local area networks, it is too early to predict what
kind of equipment might ultimately be manufactured and for what purposes it
might be used.
The telecommunications industry is subject to rapid and significant changes
in technology, and we cannot predict the effect of technological changes on our
business, such as continuing developments in DSL technology and alternative
technologies for providing high speed data communications. These technological
developments in the telecommunications industry could have a material adverse
effect on our competitive position and therefore on our business, prospects,
financial condition and results of operations.
Industry Consolidation Could Make Competing More Difficult
Consolidation of companies offering high speed local data transport is
occurring through acquisitions, joint ventures and licensing arrangements
involving our competitors and our customers' competitors. As a company with
limited operating history, we cannot assure that we will be able to compete
successfully in an increasingly
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consolidated industry. Any heightened competitive pressures that we may face
may have a material adverse effect on our business, prospects, financial
condition and results of operations. Additionally, because we rely on our
customers' marketing channels to provide our services to business and
residential end users, if our customers are adversely affected by consolidation
and integration in the market, our business, prospects, financial condition and
results of operations could be materially adversely affected.
Our Services Are Subject to Uncertain Government Regulation, and Changes in
Current or Future Laws or Regulations Could Restrict the Way We Operate Our
Business
We are subject to federal, state and local regulation of our
telecommunications business. With the passage of the Telecommunications Act in
1996, Congress sought to foster competition in the telecommunications industry
and to promote the deployment of advanced telecommunications technology.
Implementation of the Telecommunications Act is the subject of ongoing
administrative proceedings at the federal and state levels, litigation in
federal and state courts, and legislation in federal and state legislatures. We
cannot predict the outcome of the various proceedings, litigation and
legislation or whether or to what extent these proceedings, litigation and
legislation may adversely affect our business, prospects, financial condition
and results of operations.
As a competitive telecommunications company, we are subject to FCC
regulation for our contractual, or interconnection, arrangements with the
traditional telephone companies, or incumbent local exchange carriers, in our
markets, but the scope of this regulation is uncertain because it is the
subject of ongoing court and administrative proceedings. Several parties have
brought court challenges to the FCC's interconnection rules, including the
rules that establish the terms under which a competitive telecommunications
company may use portions of a traditional telephone company's network. Although
the Supreme Court recently held that the FCC has the authority to adopt
interconnection rules and specifically upheld several of these rules, other
rules are still being considered by the courts. If a rule that is beneficial to
our business is struck down, it could harm our ability to compete. In
particular, the courts have not yet resolved the lawfulness of the methodology
that the FCC established to determine the price that competitive
telecommunications companies would have to pay traditional telephone companies
for use of the traditional telephone companies' networks. The courts may
determine that the FCC's pricing rules are unlawful, which would require the
FCC to establish a new pricing methodology. If this occurs, the new pricing
methodology that the FCC adopts may result in our having to pay a higher price
to traditional telephone companies if we were to use a portion of their
networks in providing our services, and this could have a detrimental effect on
our business.
In response to the Supreme Court's decision vacating certain portions of the
FCC's rules implementing provisions of the Telecommunications Act, the FCC
revisited the requirements imposed upon traditional telephone companies that
they make available certain network elements for use by competitive telephone
companies such as NorthPoint. In its decision in September 1999, the FCC
reaffirmed and strengthened the requirements imposed upon traditional telephone
companies to make available unbundled network elements and affirmed the
availability of those network elements utilized by NorthPoint in the provision
of its services. The FCC's decision is subject to review by the courts and
further consideration by the FCC in subsequent proceedings. Any reversal or
material change in the unbundling rules with regard to those elements used by
NorthPoint would have a material adverse effect on NorthPoint's ability to
provide its services.
Recently, various traditional telephone companies have requested the FCC to
grant them regulatory relief in the provision of data transmission services,
including DSL services, which would allow the traditional telephone companies
to compete more directly with DSL providers such as NorthPoint. In response,
the FCC initiated a comprehensive proceeding to review Advanced Services,
including DSL issues. That proceeding has resulted in a number of rulemakings
and orders that enhance the ability of competitive DSL companies like
NorthPoint to, among other things, access DSL-capable unbundled copper loops,
access and utilize various forms of central office collocation space, provide a
variety of DSL services to end-users by setting open rules for spectrum
compatibility, and access "shared-lines" by requiring the traditional telephone
companies to provide access to the high-frequency portion of existing voice
service lines to DSL competitive companies like
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NorthPoint for the provision of high speed DSL services. The decision with
respect to shared-lines is not final, is subject to review by the courts and
the FCC, and is subject to implementation on a state-by-state basis. We
anticipate the traditional telephone companies will require six to nine months
to implement the requirements (including technical trials) of the FCC decision.
The benefits of this decision may be diluted or delayed if the implementation
processes are protracted or frustrated through legal challenges, arbitrations,
or other actions in any given state.
Our Debt Creates Financial and Operating Risk That Could Limit the Growth of
Our Business
As of December 31, 1999, we had approximately $88,277,000 of indebtedness
and $308,061,000 of stockholders' equity.
The degree to which we are leveraged could have important consequences to
holders of our common stock, including, but not limited to, the following:
. our ability to obtain additional financing or refinancing in the future
for capital expenditures, repayment of outstanding indebtedness, working
capital, acquisitions, general corporate or other purposes may be
materially limited or impaired;
. our cash flow, if any, may be unavailable for building our business, as
a substantial portion of our cash flow may be dedicated to the payment
of principal and interest on our indebtedness or other indebtedness that
we may incur in the future, and our failure to generate sufficient cash
flow to service such indebtedness could result in a default;
. our debt agreements will contain restrictions and financial covenants
which, if we fail to meet them, could result in our indebtedness being
declared due prematurely, at a time when we could not make the required
payments;
. our leverage may make us more vulnerable to economic downturns, may
limit our ability to withstand competitive pressures and may reduce our
flexibility in responding to changing business and economic conditions;
and
. we may from time to time be more highly leveraged than many of our
competitors, which may place us at a competitive disadvantage.
We Rely on Our Intellectual Property Which We May Be Unable to Protect, or We
May Be Found to Infringe the Rights of Others
Our success depends in part on our ability to protect our proprietary
intellectual property. In addition, we may be sued over intellectual property
rights. These lawsuits, or our inability to protect our intellectual property
rights, could have a material adverse effect on our business, prospects,
financial condition and results of operations.
In April 1999, we received a letter from one of our competitors, Covad
Communications Group, Inc., indicating that it had been informed of allowance
of a United States patent application. According to Covad's letter, their
patent application related to digital subscriber loop implementations
supporting (a) a bandwidth of 128 kbps or 144 kbps combined with (b) a
bandwidth greater than 128 or 144 kbps. The patent described in Covad's letter
has now issued. We have requested a copy of the patent but have not yet had an
opportunity to examine the patent. As a result, we are unable to evaluate fully
the validity or relevance of the patent to our business. If the patent is
valid, and if we infringe this patent, we could be required to obtain a license
under the
patent. While Covad has indicated that we may be interested in obtaining a
license from them at the appropriate time, we cannot be certain that such a
license, if needed, would be available on commercially acceptable terms.
A System Failure or Breach of Network Security Could Delay or Interrupt Service
to Our Customers
The reliability of our transmission services in our markets would be
impaired by a natural disaster or other unanticipated interruption of service
or damage at any of our facilities. Additionally, failure of a traditional
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telephone company or other service provider to provide communications capacity
required by us, as a result of a natural disaster, operational disruption or
for any other reason, could cause interruptions in our services. Damage or
failure that causes interruptions in our services could have a material adverse
effect on our business, prospects, financial condition and results of
operations.
Our network may be vulnerable to unauthorized access, computer viruses and
other disruptive problems. Unauthorized access could also potentially
jeopardize the security of confidential information stored in the computer
systems of our customers, which might result in liability to our customers, and
also might deter potential customers. Although we intend to implement security
measures that are standard within the telecommunications industry, we may be
unable to implement such measures in a timely manner or, if and when
implemented, our security measures may be circumvented. Eliminating computer
viruses and alleviating other security problems may require interruptions,
delays or cessation of service to our customers and these customers' end users.
Any of the foregoing factors relating to network security could have a material
adverse effect on our business, prospects, financial condition and results of
operations.
Our Business Could Suffer from a Reduction or Interruption from Our Equipment
Suppliers or Other Third Parties on Whom We Rely for Installation and Provision
of Field Service
We plan to purchase all of our equipment from various vendors and outsource
the installation and field service of our networks to third parties. We also
depend on the availability of fiber optic transmission facilities from third
parties to connect our equipment within and between metropolitan areas. Any
reduction of or interruption from our equipment suppliers, such as Copper
Mountain Network, Inc., from which we purchase most of our digital subscriber
line access equipment, or interruption in service from any significant
installer or field service provider, such as Lucent Technologies, Inc., which
has installed and maintained our equipment in all of our markets, could have a
disruptive effect on our business, prospects, financial condition and results
of operations.
In addition, the pricing of the equipment we purchase may substantially
increase over time, increasing the costs we pay in the future, or decrease over
time, providing later market entrants with a cost advantage over us. The
availability and pricing of the equipment we purchase would be adversely
affected if our suppliers were to compete with us, or if our competitors enter
into exclusive or restrictive arrangements with our suppliers. It could take a
significant period of time to establish relationships with alternative
suppliers for each of our technologies and substitute their technologies into
our network.
Uncertain Federal and State Tax and Other Surcharges on Our Services May
Increase Our Payment Obligations
Telecommunications providers are subject to a variety of complex federal and
state surcharges and fees on their gross revenues from interstate and
intrastate services, including regulatory fees, and surcharges related to the
support of universal service. A finding that we misjudged the applicability of
the surcharges and fees could increase our payment obligations and have a
material adverse effect on our business, prospects, financial condition and
results of operations.
Claims of Interference Could Harm Our Ability to Deploy Our Services
Certain technical laboratory tests and field experience indicate that some
types of DSL, in particular, asymmetrical DSL-in which data transport to the
end user is faster than transport from the end user-may cause interference with
and be interfered with by other signals present in a traditional telephone
company copper plant. Citing this potential interference, some traditional
telephone companies have imposed restrictions on the use of DSL technology over
their copper lines. However, we do not believe that our symmetrical DSL
technology equipment, which permits the same speed of data transport to and
from the end user, poses interference risks. If traditional telephone companies
were to restrict our use of our technology or equipment in the future, our
business, prospects, financial condition and results of operations could be
materially adversely affected.
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Our Stock Price May Be Volatile
The trading price of our common stock has been and is likely to continue to
be highly volatile. Our stock price is likely to be volatile and may fluctuate
substantially due to factors such as:
. our historical and anticipated quarterly and annual operating results;
. variations between our actual results and analyst and investor
expectations;
. announcements by us or others and developments affecting our business;
. investor perceptions of our company and comparable public companies; and
. conditions and trends in the data communications and Internet-related
industries.
In particular, the stock market has from time to time experienced
significant price and volume fluctuations affecting the common stocks of
technology companies, which may include data communications and Internet-
related companies. These fluctuations may result in a material decline in the
market price of our common stock.
The Sale of Shares or the Perception of Future Sales Could Depress Our Stock
Price
Sales of a large number of shares of common stock in the market or the
perception that sales may occur could cause the market price of our common
stock to drop. As of March 10, 2000, we had 128,167,603 shares of common stock
outstanding and 2,466,724 shares of Class B common stock. Of these common
shares, approximately 110,831,988 shares are freely tradeable, except for any
such shares held at any time by an "affiliate" of NorthPoint, as defined under
Rule 144 under the Securities Act, and approximately 17,335,615 are "restricted
securities" as defined in Rule 144 under the Securities Act. These shares may
be sold in the future without registration under the Securities Act to the
extent permitted by Rule 144 or an exemption under the Securities Act.
Our Principal Stockholders and Management Own a Significant Percentage of
NorthPoint, and Will Be Able to Exercise Significant Influence
Our executive officers and directors and principal stockholders together
beneficially own approximately 50% of our common stock. These stockholders, if
they vote together, will be able to exercise significant influence over all
matters requiring stockholder approval, including the election of directors and
approval of significant corporate transactions. This concentration of ownership
may also delay or prevent a change in control of NorthPoint.
Our Certificate of Incorporation and Bylaws Contain Provisions That Could Delay
or Prevent a Change In Control of NorthPoint
Certain provisions of our certificate of incorporation and bylaws could make
it more difficult for a third party to acquire control of NorthPoint, even if a
change in control would be beneficial to stockholders. Our certificate of
incorporation allows our board of directors to issue, without stockholder
approval, preferred stock with terms set by the board of directors. The
preferred stock could be issued quickly with terms that delay or prevent a
change in control of NorthPoint or make removal of management more difficult.
Also, the issuance of preferred stock may cause the market price of the common
stock to decrease.
If Unexpected Year 2000 Issues Arise, We May Incur Significant Costs and Our
Business Could Suffer
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. As a result,
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. Although we have not
experienced any year 2000 problems and have not been informed of any material
year 2000 problems by our customers and vendors, we cannot assure you that our
systems or the systems of other companies on whose services we depend or with
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whom our systems interconnect will not experience unexpected year 2000 problems
during the course of the year. This could result in system failures or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices or engage
in similar normal business activities. This could, in turn, have a material
adverse effect on our business, prospects, financial condition and results of
operations.
Forward-Looking Statements are Inherently Uncertain
Certain statements under this Item 1. Business and under Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations, and elsewhere in this report are "forward-looking statements."
These forward-looking statements include, but are not limited to, statements
about our plans, objectives, expectations, intentions and assumptions and other
statements contained in the report that are not historical facts. When used in
this report, the words "expect," "anticipate," "intend," "plan," "believe,"
"seek," "estimate" and similar expressions are generally intended to identify
forward-looking statements. Because these forward-looking statements involve
risks and uncertainties, including those described in this "Risk Factors"
section, actual results may differ materially from those expressed or implied
by these forward-looking statements. We do not intend to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
ITEM 2. PROPERTIES
We are headquartered in facilities consisting of approximately 111,000
square feet in San Francisco which we occupy under a five-year lease. In
addition, we occupy three facilities in Emeryville, California, consisting of a
37,500 square foot facility under a seven-year lease, a 81,600 square foot
facility under a seven-year lease, and a 10,000 square foot facility under a
ten-year lease. NorthPoint has short-term leases for 34 of its regional
offices. We consider this space adequate for our current operations. We also
lease space in a number of traditional telephone company central offices and
private facilities in which we locate our equipment.
ITEM 3. LEGAL PROCEEDINGS
We are not a party to any legal proceedings other than various claims and
lawsuits arising in the ordinary course of its business which, in the opinion
of management, are not individually or in the aggregate material to our
business.
We are, however, subject to state commission, FCC and court decisions as
they relate to the interpretation and implementation of the Telecommunications
Act, the interpretation of CLEC interconnection agreements in general and our
interconnection agreements in particular. In some cases, we may be deemed to be
bound by the results of ongoing proceedings of these bodies or the legal
outcomes of other contested interconnection agreements that are similar to our
agreements. The results of any of these proceedings could have a material
adverse effect on our business, prospects, financial condition and results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the quarter
ended December 31, 1999.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Our common stock is traded on the Nasdaq National Market under the symbol
"NPNT." The common stock was initially offered to the public on May 5, 1999 at
$24.00 per share. The following table sets forth the range of high and low
sales prices on the Nasdaq National Market of our common stock for the periods
indicated, as reported by Nasdaq. Such quotations represent inter-dealer prices
without retail markup, markdown or commission and may not necessarily represent
actual transactions.
<TABLE>
<CAPTION>
Fiscal 1999 High Low
----------- -------- --------
<S> <C> <C>
Second Quarter (May 5 through June 30).................... $48.7500 $24.0000
Third Quarter............................................. $43.6250 $17.6250
Fourth Quarter............................................ $39.1250 $17.8125
</TABLE>
To date, the Company has neither declared nor paid any dividends on the
Common Stock. The Company currently intends to retain all future earnings, if
any, for use in the operation and development of its business and, therefore,
does not expect to declare or pay any cash dividends on the Common Stock in the
foreseeable future. As of March 10, 2000, there were 351 holders of record of
the Common Stock.
In May 1999, we commenced and completed a firm commitment underwritten
initial public offering of 17,250,000 shares of our common stock, including
2,250,000 shares related to the underwriters' overallotment option, at a price
of $24.00 per share. The shares were registered with the Securities and
Exchange Commission pursuant to a Registration Statement on Form S-1 (File No.
333-73065), which was declared effective on May 5, 1999. The public offering
was underwritten by a syndicate of underwriters led by Goldman, Sachs & Co.,
Morgan Stanley Dean Witter and Credit Suisse First Boston as their
representatives. After deducting underwriting discounts and commissions of
$25,500,000 and expenses of $2,059,000, we received net proceeds of
$386,441,000.
As of December 31, 1999, we had invested the net proceeds from our initial
public offering in the purchase of property and equipment and in short-term
investments in order to meet anticipated cash needs for future working capital.
We invested our available cash principally in high- quality corporate issuers
and in debt instruments of the U.S. government and its agencies. The use of
proceeds from the offering does not represent a material change in the use of
proceeds described in our Registration Statement on Form S-1, as amended (File
No. 333-73065). None of the net proceeds of the offering were paid directly or
indirectly to any director or officer of NorthPoint Communications Group, Inc.,
persons owning 10% or more of any class of our equity securities or any of our
affiliates.
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ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for the period from May
16, 1997 (inception) to December 31, 1997, for the years ended December 31,
1998 and 1999 and as of December 31, 1999 have been derived from our audited
financial statements and the related notes, which are included elsewhere in
this report. You should read the following consolidated summary financial data
together with Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations and our consolidated financial statements
and the related notes included elsewhere in this report.
Our revenues consist of service revenues and revenue from the sale of end-
user modems. EBITDA consists of net loss excluding net interest, taxes,
amortization of deferred stock compensation, depreciation and amortization. We
have provided EBITDA because it is a measure of financial performance commonly
used in the telecommunications industry, but other companies may calculate it
differently from us. We have presented EBITDA to enhance your understanding of
our operating results. You should not construe it as an alternative to
operating income as an indicator of our operating performance or as an
alternative to cash flows from operating activities as a measure of liquidity.
<TABLE>
<CAPTION>
Inception to Year Ended Year Ended
December 31, December 31, December 31,
1997 1998 1999
------------ ------------ ------------
($ in thousands, except per share
data)
<S> <C> <C> <C>
Consolidated Statement of Operations
Data:
Revenues............................. $ -- $ 931 $ 21,140
Operating expenses:
Network expenses................... 55 3,970 50,354
Selling, marketing, general and
administrative.................... 1,374 18,340 117,899
Amortization of deferred
compensation...................... 174 2,664 5,406
Depreciation and amortization...... 27 1,319 15,907
----------- ----------- -----------
Total operating expenses......... 1,630 26,293 189,566
----------- ----------- -----------
Income (loss) from operations........ (1,630) (25,362) (168,426)
Interest income...................... 190 209 12,310
Interest expense..................... -- (3,694) (27,582)
----------- ----------- -----------
Net income (loss).................... $ (1,440) $ (28,847) $ (183,698)
=========== =========== ===========
Net (loss) per common share.......... $ (0.07) $ (1.18) $ (2.02)
=========== =========== ===========
Shares used in computing net (loss)
per common share.................... 21,733,560 24,379,445 90,764,996
=========== =========== ===========
Other Data:
EBITDA............................... $ (1,430) $ (21,379) $ (146,936)
Capital expenditures................. 701 41,550 196,817
Consolidated Cash Flow Data:
Provided by (used in) operating
activities.......................... $ (1,094) $ (11,363) $ (123,050)
Provided by (used in) investing
activities.......................... (701) (41,550) (316,521)
Provided by (used in) financing
activities.......................... 11,243 54,421 523,634
</TABLE>
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The pro forma balance sheet information below reflects the receipt of
estimated net proceeds of $387.5 million from the offering of our 12 7/8%
Senior Notes due 2010 which was completed in February 2000, after deducting
estimated offering expenses payable by NorthPoint.
<TABLE>
<CAPTION>
As of
December 31,
1999
------------------
Actual Pro Forma
-------- ---------
($ in thousands)
<S> <C> <C>
Consolidated Balance Sheet Data:
Cash, cash equivalents and short term investments............ $210,053 $597,553
Property and equipment, net.................................. 227,124 227,124
Total assets................................................. 479,160 879,160
Long-term obligations, including current portion............. 88,277 487,680
Total stockholders' equity (deficit)......................... 308,061 308,061
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of NorthPoint's financial condition
and results of operations should be read in conjunction with Item 6. Selected
Consolidated Financial Data and our financial statements and related notes
included elsewhere in this report. In the discussion below, we refer to the
period from inception to December 31, 1997 as "1997".
Certain statements set forth below constitute "forward-looking statements."
Such forward-looking statements involve certain risks and uncertainties
including, but not limited to, those discussed herein under "Risk Factors" that
may cause actual results to differ materially from those expressed or implied
in any forward-looking statement. Investors and prospective investors are
cautioned not to place undue reliance on such forward-looking statements. We
disclaim any obligation to update the forward-looking statements contained
herein to reflect future events or developments. See "Risk Factors--Forward-
Looking Statements are Inherently Uncertain."
Overview
We are a national provider of high speed, local data network services. Our
networks use digital subscriber line, or DSL, technology to enable data
transport over telephone company copper lines at guaranteed speeds up to 25
times faster than common dial-up modems. We market our network and data
transport services to internet service providers, long-distance and local
telephone companies and data service providers, whom we call network service
providers. Our customers can use our fast, secure and reliable data networks to
provide continuously connected, economical Internet access and other data-
intensive applications to end users. These end users are typically small- and
medium-sized businesses with up to 500 employees, people who work in home
offices, and telecommuters. We have recently begun to offer, on a limited
basis, network and data transport services for residential end users as well.
We are currently providing services in 33 metropolitan areas, spanning 62
metropolitan statistical areas, in the United States and intend to offer
service in a total of over 60 metropolitan areas, spanning 110 metropolitan
statistical areas by the end of 2000. We have been and expect to be the first,
or one of the first, to offer DSL services in these markets. Our networks
consist principally of digital communications equipment that we own and install
in telephone company offices known as "central offices" and existing copper
telephone lines that we lease to connect our equipment with end users'
premises. We will initially install our equipment in the central offices with
the highest density of small- and medium-sized businesses in our targeted
markets. As of December 31, 1999, we had secured space in over 1,560 central
offices and were providing services from 1,027 of those central offices. We
intend to expand the coverage of our networks in these markets over time by
installing equipment in additional central offices.
We are currently providing or have entered into agreements to provide our
services to more than 200 network service providers. As of December 31, 1999,
we had connected over 23,500 of their end users to our networks. Upon
completion of our planned expansion, our networks will be able to reach
approximately 5.5 million businesses and 45 million households, including more
than 80% of the small- and medium-sized businesses in our 60 markets.
Since inception on May 16, 1997, our principal activities have included:
. developing our business plans;
. procuring governmental authorizations and space in central offices;
. raising capital and hiring management and other key personnel;
. working on the design and development of our network architecture and
operations support systems;
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<PAGE>
. acquiring equipment and facilities; and
. negotiating interconnection agreements.
As a result of our development activities, we have experienced operating
losses. We expect to experience increasing operating losses as we expand our
operations.
We introduced our commercial services in March 1998 in the San Francisco Bay
Area. We subsequently launched service in 32 additional markets. We intend to
offer our services in 27 additional metropolitan areas by year-end 2000.
Deployment of our networks will require significant upfront capital
expenditures. We were offering service from 1,027 operational central offices
at the end of 1999 and plan to offer service from an additional 673 central
offices by the year end 2000 to allow us to achieve blanket coverage in our 33
markets as well as 27 additional targeted markets.
The principal capital expenditures we incur when we enter any market
include:
. the establishment of a metropolitan node--a facility at which we
aggregate and disseminate data traffic in each metropolitan area--and
the purchase and installation of electronic switching equipment for that
node;
. the procurement, design and construction of the collocation cage in each
central office;
. the purchase and installation of the network management and network test
equipment in those cages; and
. the capitalized cost of the installation of such equipment.
In addition, we will incur operations, sales and market development expenses
in order to enter a new market. Once we have deployed our network in a market,
the majority of our additional capital expenditures will be dependent upon
orders to connect new end users. These success-based capital expenditures
include DSL line cards, incremental digital subscriber line access multiplexer
and network test equipment, and line cards for our electronic switches in our
metropolitan node. In addition to the capital expenditures required to enter a
market, we will be required to fund each market's cash flow deficit as we build
our customer base.
Financial performance varies from market to market, and the time when we
will achieve positive EBITDA, if at all, will depend on factors such as:
. the size of the addressable market;
. the level of upfront sales and marketing expenses;
. the number and sequencing of central offices built out;
. the cost of the necessary infrastructure;
. the timing of market entry;
. the commercial acceptance of our services; and
. the rate at which we can provision lines.
EBITDA is a measure of financial performance commonly used in the
telecommunications industry. We define it as earnings before net interest,
taxes, amortization of deferred stock compensation, depreciation and
amortization. Other companies' definition of EBITDA may differ from ours. You
should not construe it as an alternative to operating income as an indicator of
our operating performance or as an alternative to cash flows from operating
activities as a measure of liquidity.
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Factors Affecting Future Operations
Revenues. We derive our revenues from monthly recurring and nonrecurring
charges to internet service providers, long-distance and local telephone
companies and data service providers, whom we call network service providers.
Monthly recurring revenues consist of end user line fees, based upon the number
of installed lines, for the network service providers' end users connected to
our networks and interconnection fees for each connection to our metropolitan
node in each market. Nonrecurring revenues include charges for the installation
and activation of new end users and in some cases, for end-user modems or other
electronic equipment. Prior to the quarter ended September 30, 1999, we had
sold only minimal amounts of end-user modems or other electronic equipment.
During the fourth quarter of 1999, we began to sell an increasing amount of
such equipment to support the needs of our growing network service provider
partner base.
We seek to price our services competitively in relation to those of the
traditional telephone companies and other competitive telecommunications
companies in each market. Current standard end user line prices that we charge
to our network service providers for our services generally range from $75 per
month for 160 kilobits per second service to $250 per month for 1.5 megabits
per second service, before volume discounts. Although pricing will be an
important part of our strategy, we believe that customer relationships,
customer care and consistent quality will be the key to generating customer
loyalty. During the past several years, market prices for many
telecommunications services have been declining, which is a trend that we
believe will likely continue. As prices decline for any given speed of service,
we expect that the total number of end users and the proportion of our end
users purchasing our higher-speed, higher-priced services will increase. The
cost to upgrade an end user's speed is generally minimal.
We accelerated our deployment during the course of 1999 into additional
geographic markets, successfully enabling us to sign more network service
provider partners than previously planned. We plan to continue this strategy.
We believe this strategy leaves us well-positioned to capitalize on the demand
for our products. In view of this rapid deployment, we need to continue to
enhance our abilities to develop the markets where we offer service.
Specifically, our accelerated deployment plan requires us to introduce
provisioning processes and interfaces with all of the eight major local
telephone companies simultaneously. We also must increase and enhance training
of our employees as well as our existing and new network service provider
partners. We anticipate continuing strong increases in end user line
installations in the next two to three quarters due to gained efficiencies
through more advanced provisioning processes and interfaces, as well as
anticipated growth in demand for DSL services from our expanded partner base in
existing and new geographic markets. Acceleration of line installation is
dependent upon our ability to upgrade our provisioning processes, the timing of
which could affect future quarterly results.
Network Expenses. Our network expenses consist of nonrecurring and monthly
recurring charges for the commodity transport elements we choose to lease
rather than own. Nonrecurring network expenses include transport and loop
installation fees. We expect these costs will be largely related to the
activation of new central offices and new end users. Monthly recurring network
expenses include loop fees, rent, power and other fees charged by traditional
telephone companies, competitive telecommunications companies and other
providers. As our customer and end user base grows, we expect the largest
element of network expenses to be traditional telephone company charges for
leased copper lines, which have historically been $3 to $40 per line per month,
depending on the identity of the traditional telephone company and the location
of the lines.
Selling, Marketing, General and Administrative Expenses. Our selling,
marketing, general and administrative expenses primarily consist of costs
related to selling, marketing, customer care, provisioning, billing,
regulatory, corporate administration, network engineering and maintenance. On
occasion, we will participate in various sales promotions with our customers by
advancing market development funds to assist in their marketing efforts,
particularly for new markets. These costs are deferred and amortized over the
estimated duration of the promotion's effect in those markets. Additionally, we
incur other costs associated with administrative overhead, office leases and
bad debt. In general, we reserve for bad debt expense based upon our experience
and estimates of collectibility. Because our history is limited, it is possible
that, on occasion, we
38
<PAGE>
may have to increase our bad debt reserves in excess of our past experience.
The timing of these increases, if any, could affect future quarterly results.
We expect that our selling, marketing, general and administrative costs will
grow significantly as we expand our operations and that administrative overhead
will be a large portion of these expenses during the start-up phase of our
business. However, we expect these expenses to decline as a percentage of our
revenues as we build our customer base and the number of end users connected to
our networks increases.
We plan to employ a regional sales team in each market we enter. To attract
and retain a highly qualified sales force, we plan to offer our sales and
customer care personnel a compensation package consisting of commissions and
stock options. We expect to incur significant selling and marketing costs as we
continue to expand our operations. In addition, we plan to offer sales
promotions, especially in the first few years as we establish our market
presence.
Amortization of Deferred Stock Compensation. Deferred stock compensation
arises as a result of the granting of stock options to employees with exercise
prices per share subsequently determined to be below the fair values per share
for financial reporting purposes of our common stock at dates of grant. The
deferred compensation is being amortized over the vesting period of the
associated options.
Depreciation and Amortization. We expect depreciation and amortization
expense to increase significantly as more of our network becomes operational
and as we increase capital expenditures to expand our network. Depreciation and
amortization expense includes:
. depreciation of network infrastructure equipment;
. depreciation of information systems, furniture and fixtures;
. amortization of improvements to central offices, network control center
facilities and corporate facilities;
. amortization of central office collocation space improvements; and
. amortization of software.
Taxation. We have not generated any taxable income to date and therefore
have not paid any federal income taxes since inception. State taxes were
limited to nominal amounts. Use of our net operating loss carryforwards, which
begin to expire in 2003, may be subject to limitations under Section 382 of the
Internal Revenue Code of 1986, as amended. We have recorded a full valuation
allowance on the deferred tax asset, consisting primarily of net operating loss
carryforwards, because of uncertainty regarding its recoverability.
Results of Operations
Year Ended December 31, 1998 and Year Ended December 31, 1999
Revenues. We began our commercial operations in March 1998 and recognized
$931,000 in revenues for the year ended December 31, 1998, 75% of which
consisted of recurring revenues and did not include sales of end user modems or
other electronic equipment. Revenues for the year ended December 31, 1999 were
approximately $21,140,000, 54% of which consisted of recurring revenues. The
increase in revenues is due to the expansion of our installed end user base
that has occurred over the past year. In addition, nonrecurring revenues as a
proportion of total revenues increased from the prior year as we sold an
increasing amount of end-user modems and other electronic equipment during the
year to support the needs of our growing network service provider partner base.
We expect that non-recurring revenues as a percentage of total revenues will
decrease over time as we add end users to our networks.
Network Expenses. Network expenses were approximately $3,970,000 for the
year ended December 31, 1998 and $50,354,000 for the year ended December 31,
1999. These costs consisted primarily of monthly rental costs for lines between
end users and central offices, between central offices and our metropolitan
nodes,
39
<PAGE>
between our metropolitan nodes and our network service providers, end user line
installation and costs, costs of end user modems, and costs charged to us by
the traditional telephone companies. The increase in network expenses reflects
the growth in our network as we expand into new markets and connect new end
users. In addition, 1998 network expenses did not include the cost of end user
modems, as we began to sell such modems in the second quarter of 1999.
Selling, Marketing, General and Administrative Expenses. Selling, marketing,
general and administrative expenses were approximately $18,340,000 for the year
ended December 31, 1998 and $117,899,000 for the year ended December 31, 1999.
These expenses consisted primarily of salaries and related expenses for the
development of our business, network architecture and software, the
establishment of our management team and the development of corporate
identification, promotional and advertising materials. As the staffing levels
and operations of the Company have expanded over the past year, so have these
operating expenses to support such growth.
Amortization of Deferred Stock Compensation. Amortization of deferred stock
compensation was $2,664,000 for the year ended December 31, 1998 and $5,406,000
for the year ended December 31, 1999. This increase in deferred stock
compensation expense is due to the stock option grants to new employees. The
unamortized balance of $12,405,000 at December 31, 1999 will be amortized over
the remaining vesting period of each grant.
Depreciation and Amortization. Depreciation and amortization expenses were
approximately $1,319,000 for the year ended December 31, 1998 and $15,907,000
for the year ended December 31, 1999. Such expenses consisted primarily of
depreciation of network equipment, information systems, office equipment,
furniture and fixtures and amortization of leasehold improvements. The increase
in depreciation and amortization is primarily due to the additional property
and equipment that has been acquired and placed into service as we continue to
build out our networks.
Interest Income and Expense. Interest income for the year ended December 31,
1998 was $209,000. This interest income was earned primarily from the proceeds
raised in the Series B preferred stock financing in August 1997 and the cash on
hand from a line of credit borrowing on a bridge loan closed in July 1998. The
interest income for the year ended December 31, 1999 was $12,310,000 and was
earned primarily from the proceeds raised in our initial public offering in May
1999, our Series D Preferred Stock equity investments from strategic partners
in March and April of 1999, and our Series C equity investments in February of
1999.
Interest expense in 1998 was approximately $3,694,000. Interest expense for
the year ended December 31, 1998 includes amortization of $1,868,000 and
$198,000 related to debt discount recorded in conjunction with the issuance of
bridge loan warrants and equipment lease warrants, respectively. Interest
expense for the year ended December 31, 1999 was $27,582,000 and primarily
represents the interest associated with our senior secured credit facilities,
which we closed in April 1999 and replaced with a larger facility in December
1999.
Period from Inception to December 31, 1997 and Year Ended December 31, 1998
Revenues. We commercially introduced our services in March 1998.
Accordingly, we recognized no revenues in 1997. Revenues for the year ended
December 31, 1998 were approximately $931,000, 75% of which consisted of
recurring revenues and did not include sales of end user modems or other
electronic equipment.
Network Expenses. Network expenses were approximately $55,000 in 1997 and
$3,970,000 in the year ended December 31, 1998. These costs consisted primarily
of monthly rental costs for lines between end users and central offices,
between central offices and our metropolitan nodes, between our metropolitan
nodes and our network service providers, and end user line installation and
costs charged to us by the traditional telephone companies.
40
<PAGE>
Selling, Marketing, General and Administrative Expenses. Selling, marketing,
general and administrative expenses were approximately $1,374,000 for 1997 and
$18,340,000 for the year ended December 31, 1998. These expenses consisted
primarily of salaries and related expenses for the development of our business,
network architecture and software, the establishment of our management team and
the development of corporate identification, promotional and advertising
materials.
Amortization of Deferred Stock Compensation. Amortization of deferred
compensation was $174,000 in 1997 and $2,664,000 for the year ended December
31, 1998.
Depreciation and Amortization. Depreciation and amortization expenses were
approximately $27,000 for 1997 and $1,319,000 for the year ended December 31,
1998. Such expenses consisted primarily of depreciation of network equipment,
information systems, office equipment, furniture and fixtures and amortization
of leasehold improvements.
Interest Income and Expense. We incurred minimal interest expense in 1997.
Interest expense in 1998 was approximately $3,694,000. Interest expense for the
year ended December 31, 1998 includes amortization of $1,868,000 and $198,000
related to debt discount recorded in conjunction with the issuance of bridge
loan warrants and equipment lease warrants, respectively. Interest income was
approximately $190,000 for 1997 and $209,000 for the year ended December 31,
1998. This interest income was earned primarily from the proceeds raised in the
Series B preferred stock financing in August 1997.
Quarterly Financial Information (Unaudited)
The following table sets forth certain consolidated statements of operations
data for our most recent ten quarters. This information has been derived from
our unaudited consolidated financial statements. In our management's opinion,
this unaudited information has been prepared on the same basis as the annual
consolidated financial statements and includes all adjustments (consisting only
of normal recurring adjustments) necessary for a fair presentation of the
information for the quarters presented. This information should be read in
conjunction with our consolidated financial statements and the related notes
included elsewhere in this report. The operating results for any quarter are
not necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
Three Months Ended ($ in thousands)
---------------------------------------------------------------------------------------------------
Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1997 1997 1998 1998 1998 1998 1999 1999 1999 1999
--------- -------- -------- -------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............. $ -- $ -- $ 35 $ 128 $ 237 $ 531 $ 1,283 $ 2,504 $ 5,734 $ 11,619
----- ------- ------- ------- ------- -------- -------- -------- -------- --------
Operating expenses:
Network expenses..... 5 51 145 263 851 2,711 3,932 7,801 13,547 25,074
Selling, marketing,
general and
administrative...... 511 863 1,542 2,565 4,505 9,728 14,379 23,914 34,203 45,402
Amortization of
deferred stock
compensation........ 40 134 200 334 1,038 1,092 1,592 1,215 1,404 1,195
Depreciation and
amortization........ 6 21 77 195 321 726 1,387 2,813 5,226 6,481
----- ------- ------- ------- ------- -------- -------- -------- -------- --------
Total operating
expenses............ 562 1,069 1,964 3,357 6,715 14,257 21,290 35,743 54,380 78,152
----- ------- ------- ------- ------- -------- -------- -------- -------- --------
Loss from
operations.......... (562) (1,069) (1,929) (3,229) (6,478) (13,726) (20,007) (33,239) (48,646) (66,533)
Interest income...... 64 126 106 50 19 34 238 3,026 4,709 4,337
Interest expenses.... -- -- (47) (75) (1,323) (2,249) (3,583) (7,689) (2,554) (13,757)
----- ------- ------- ------- ------- -------- -------- -------- -------- --------
Net Loss............. $(498) $ (943) $(1,870) $(3,254) $(7,782) $(15,941) $(23,352) $(37,902) $(46,491) $(75,953)
===== ======= ======= ======= ======= ======== ======== ======== ======== ========
</TABLE>
We have generated greater revenues in each successive quarter in the last
eight quarters, reflecting increases in the number of customers and end users.
Our network expenses have increased in every quarter, reflecting costs
associated with customer and end user growth and the deployment of our networks
in existing and new markets. Our selling, marketing, general and administrative
expenses have increased in every quarter and include operations, sales and
marketing costs associated with the acquisition of customers and end users,
including sales commissions, and the development of regional and corporate
infrastructure. Depreciation and amortization has increased in each quarter,
41
<PAGE>
primarily reflecting the purchase of equipment associated with the deployment
of our networks. We have experienced increasing net losses on a quarterly basis
as we increased our capital expenditures and operating expenses. See "Risk
Factors--We Expect Our Losses and Negative Cash Flow to Continue."
Liquidity and Capital Resources
Our operations have required substantial capital investment for the
procurement, design and construction of our central office collocation space
improvements and cages, the purchase of telecommunications equipment and the
design and development of our networks. Capital expenditures were approximately
$41,550,000 for the year ended December 31, 1998 and $196,817,000 for the year
ended December 31, 1999.
Although we have no material commitments for capital expenditures during
2000, we plan to make total capital expenditures in 2000 estimated at
$220,000,000 to $250,000,000 to develop our networks. In each market, we will
initially target the central offices with the highest density of small- and
medium-sized businesses. We will expand into other central offices when we
obtain adequate demand or volume commitments from our customers. We will also
incur capital expenditures for building a metropolitan node in each market and
for expanding our network control center in the San Francisco Bay Area.
As of December 31, 1999, we had an accumulated operating deficit of
$213,985,000 and cash and cash equivalents of $95,019,000.
Net cash used in operating activities was $11,363,000 for the year ended
December 31, 1998 and $123,050,000 for the year ended December 31, 1999. The
net cash used in operations in both years was primarily due to net losses,
offset in part by increases in accrued expenses and accounts payable. The net
cash used in investing activities was $41,550,000 for the year ended December
31, 1998 and $316,521,000 for the year ended December 31, 1999. Investing
activities were principally acquisitions of property and equipment in both
years. Net cash provided by financing activities was $54,421,000 for the year
ended December 31, 1998, of which $4,441,000 related to the issuance of
preferred stock and $50,724,000 related to borrowings, offset in part by the
repayment of certain capital lease obligations of approximately $744,000. Net
cash provided by financing activities was approximately $523,634,000 for the
year ended December 31, 1999 and relates to the proceeds from the issuance of
common and preferred stock as well as borrowings under our secured credit
facilities.
On February 3, 2000, we issued senior notes in the aggregate principal
amount of $400.0 million. These notes bear interest at a fixed annual rate of
12 7/8% to be paid in cash every six months and mature on February 15, 2010.
Net proceeds from these notes were approximately $387.5 million.
On December 9, 1999 we entered into a secured credit facility with a
syndicate of lenders. The credit facility consists of the following:
. Revolving credit facility in an amount up to $55,000,000. The revolving
credit facility is to be used for general corporate purposes. We have
not borrowed any amount under the revolving credit facility.
. Delayed draw term loan facility in the amount of $110,000,000. We have
not borrowed any amount of the delayed draw term loan facility but we
are required to borrow the entire facility on or before December 9,
2000.
. Term loan facility in the amount of $85,000,000. We borrowed the entire
term loan facility amount on December 9, 1999.
The credit facility also provides for the issuance of letters of credit on
our behalf by the lenders.
Borrowings under the credit facility are collateralized by a first priority
lien against substantially all of our assets. Our obligations under the credit
facility are guaranteed by all of our subsidiaries and collateralized by a
first priority lien on the assets of those subsidiaries. We further pledged to
the lenders under the credit facility
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<PAGE>
all of the capital stock of NorthPoint Communications, Inc. held by us. The
lenders under the credit facility have agreed that the liens which
collateralize the credit facility may also collateralize an additional
$50,000,000 of additional borrowings in the event the credit facility is
extended, but the lenders have no obligation to provide such additional
financing.
Loans under the facilities bear interest at floating rates based on the
prime rate or the London Offered Interbank Rate (LIBOR) plus, in each case, an
additional interest rate margin.
In March and April 1999, we issued and sold an aggregate of 3,968,174 shares
of Series D-1 preferred stock with total proceeds of approximately $38,800,000.
Purchasers of our Series D-1 preferred stock included ICG Services, Inc. (an
affiliate of ICG Communications, Inc.), Excite@Home, Verio Inc., Cable &
Wireless USA, Inc., Concentric Network Corporation, ALC Communications
Corporation (an affiliate of Global Crossing Holdings Limited), Network Plus
Corporation and Netopia, Inc.
In May 1999, we sold 17,250,000 shares of our common stock at $24 per share
in our initial public offering. Net proceeds to us were $386,441,000. Microsoft
Corporation and Tandy Corporation purchased $30,000,000 and $20,000,000,
respectively, of our stock in this offering.
We believe that our current capital resources, together with the proceeds
from the sale of senior notes in February 2000, will be sufficient for the
funding and working capital requirements needed for the deployment of our
networks in our 60 targeted markets. However, we may decide to seek additional
capital depending upon the demand for our services and regulatory,
technological and competitive developments, including additional market
developments and new opportunities, in our industry. We may also need
additional financing if:
. we alter the schedule, targets or scope of our network rollout plan;
. our plans or projections change or prove to be inaccurate; or
. we acquire other companies or businesses.
We may obtain additional financing through commercial bank borrowings,
equipment financing or the private or public sale of equity or debt securities.
We may be unsuccessful in raising sufficient additional capital. In
particular, we may be unable to raise additional capital on terms that we
consider acceptable, that are within the limitations contained in our financing
agreements and that will not impair our ability to develop our business. If we
fail to raise sufficient funds, we may need to modify, delay or abandon some of
our planned future expansion or expenditures, which could have a material
adverse effect on our business, prospects, financial condition and results of
operations.
Year 2000 Compliance
We believe that our computer systems and software are year 2000 compliant.
We have inventoried and tested our enterprise application systems, including
internally-developed and vendor-developed applications and off-the-shelf
software and hardware relating to our internal information systems, and believe
that such systems are year 2000 compliant. We requested assurances regarding
year 2000 compliance from our equipment and software vendors and the
traditional telephone companies. We have also learned that the traditional
telephone companies have informed the Federal Communications Commission that
they are year 2000 compliant. We requested that they provide assurances of
their year 2000 compliance directly to us. Furthermore, we have not experienced
any year 2000 problems and we have not been informed of any material year 2000
problems by our customers and vendors. Our aggregate historical costs for year
2000 analysis, planning and remediation have not been material to date and,
based on the tests we have performed on our computer systems and software and
assurances received from our vendors and the traditional telephone companies,
we do not expect to incur material costs to resolve year 2000 issues in the
future.
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<PAGE>
Recently Issued Accounting Pronouncements
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial
Statements. SAB 101 provides guidance for revenue recognition under certain
circumstances. The Company is currently evaluating the impact of SAB 101 on its
financial statements and related disclosures.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are currently exposed to the impact of interest rate changes and changes
in market values of investments through our investment portfolio. The majority
of our debt is in the form of fixed interest rate obligations. Our principal
exposure to financial market fluctuations relates to our secured credit
facility, which is floating rate debt. We do not believe a hypothetical 10%
adverse rate change in our variable rate debt obligations would be material to
our results of operations.
We believe our market risk exposure with regard to marketable debt
securities in our investment portfolio is limited to changes in quoted market
prices for such securities. Based upon the composition of our marketable debt
securities at December 31, 1999, we do not believe a hypothetical 10% adverse
change in quoted market prices would be material to our results of operations.
ITEM 8. FINANCIAL STATEMENTS
The Company's financial statements at December 31, 1999 and 1998, and for
each of the three years in the period ended December 31, 1999, and the Report
of PricewaterhouseCoopers LLP, Independent Accountants, are included in this
Report on pages F-1 through F-19.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
44
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item will be set forth under the captions
"Election of Directors," "Executive Officers" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Company's definitive proxy statement to
be filed with the Securities and Exchange Commission in connection with its
2000 Annual Meeting of Stockholders, which proxy statement is incorporated by
reference herein.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be set forth under the caption
"Executive Compensation" in our definitive proxy statement to be filed with the
Securities and Exchange Commission in connection with our 2000 Annual Meeting
of Stockholders, which proxy statement is incorporated by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item will be set forth under the caption
"Security Ownership of Certain Beneficial Owners and Management" in our
definitive proxy statement to be filed with the Securities and Exchange
Commission in connection with our 2000 Annual Meeting of Stockholders, which
proxy statement is incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item will be set forth under the caption
"Certain Transactions" in our definitive proxy statement to be filed with the
Securities and Exchange Commission in connection with our 2000 Annual Meeting
of Stockholders, which proxy statement is incorporated by reference herein.
45
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT, SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements. The following financial statements of
NorthPoint Communications Group, Inc. and Report of Independent
Accountants are filed as part of this report:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants.................................. F-2
Consolidated Balance Sheets as of December 31, 1999 and 1998....... F-3
Consolidated Statements of Operations for the years ended December
31, 1999 and 1998 and for the period from May 16, 1997 (date of
inception) through December 31, 1997 ............................. F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the
years ended December 31, 1999 and 1998 and for the period from May
16, 1997 (date of inception) through December 31, 1997............ F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1999 and 1998 and for the period from May 16, 1997
(date of inception) through December 31, 1997..................... F-6
Notes to Consolidated Financial Statements......................... F-7
</TABLE>
(2) Financial Statement Schedules. The following financial statement
schedule is transmitted with this report and should be read in
conjunction with the consolidated financial statements contained
herein. All other financial statement schedules not filed herein
are omitted because of the absence of conditions under which they
are required or because the information called for is shown in the
exhibits or the consolidated financial statements and notes
thereto:
Schedule II--Valuation and Qualifying Accounts for the years ended
December 31, 1999 and 1998 and for the period from May 16, 1997
(date of inception) through December 31, 1997.
(3) Exhibits. See Item 14(c) below for a list of the exhibits filed as
part of this report.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed by the Company during the
fourth quarter of the fiscal year ended December 31, 1999.
(c) The following exhibits are filed as part of this report. Where such
filing is made by incorporation by reference to a previously filed
statement or report, such statement or report is identified in
parentheses:
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
3.1 Third Amended and Restated Certificate of Incorporation of NorthPoint
Communications Group, Inc. (incorporated by reference to Exhibit 3.1
to Amendment No. 2 to the company's Registration Statement on Form S-1
(File Number 333-73065) filed with the SEC on April 19, 1999).
3.2 Amended and Restated Bylaws of NorthPoint Communications Group, Inc.*
4.1 Form of Specimen Common Stock Certificate of NorthPoint Communications
Group, Inc. (incorporated by reference to Exhibit 4.1 to Amendment No.
4 to the company's Registration Statement on Form S-1 (File Number
333-73065) filed with the SEC on May 4, 1999).
4.2 Indenture dated as of February 8, 2000, between NorthPoint
Communications Group, Inc. and The Bank of New York, as Trustee,
including form of 12 7/8% Senior Note due 2010.*
4.3 Registration Rights Agreement dated as of February 8, 2000, among
NorthPoint Communications Group, Inc. and Goldman, Sachs & Co., Morgan
Stanley & Co. Incorporated, CIBC World Markets Corp. and Credit Suisse
First Boston Corporation.*
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
9.1 Second Amended and Restated Voting Agreement among NorthPoint
stockholders, dated March 22, 1999 (incorporated by reference to
Exhibit 9.1 to Amendment No. 2 to the company's Registration Statement
on Form S-1 (File Number 333-73065) filed with the SEC on April 19,
1999).
10.1 The Amended and Restated NorthPoint Communications Group, Inc.
Employee Stock Purchase Plan (incorporated by reference to Exhibit
10.1 to the company's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1999 filed with the SEC on July 30, 1999).
10.2 1997 Stock Option Plan of NorthPoint Communications, Inc.
(incorporated by reference to Exhibit 10.2 to the company's
Registration Statement on Form S-1 (File Number 333-73065) filed with
the SEC on February 26, 1999).
10.3 Amended and Restated Series C Preferred Stock Purchase Agreement among
NorthPoint Communications, Inc. and certain of its stockholders, dated
January 20, 1999 (incorporated by reference to Exhibit 10.3 to the
company's Registration Statement on Form S-1 (File Number 333-73065)
filed with the SEC on February 26, 1999).
10.4 Fourth Amended and Restated Right of First Refusal and Co-Sale
Agreement among stockholders, dated March 22, 1999 (incorporated by
reference to Exhibit 10.4 to Amendment No. 2 to the company's
Registration Statement on Form S-1 (File Number 333-73065) filed with
the SEC on April 19, 1999).
10.5 Fifth Amended and Restated Rights Agreement among NorthPoint
Communications, Inc., 1999 (incorporated by reference to Exhibit 10.5
to Amendment No. 2 to the company's Registration Statement on Form S-1
(File Number 333-73065) filed with the SEC on April 19, 1999).
10.6 Side letter relating to the purchase of Series C preferred stock
between NorthPoint Communications, Inc. and Vulcan Ventures
Incorporated, dated February 19, 1999 (incorporated by reference to
Exhibit 10.6 to the company's Registration Statement on Form S-1 (File
Number 333-73065) filed with the SEC on February 26, 1999).
10.7 Side letter relating to the purchase of Series C preferred stock among
NorthPoint Communications, Inc. and certain of its stockholders, dated
February 19, 1999 (incorporated by reference to Exhibit 10.7 to the
company's Registration Statement on Form S-1 (File Number 333-73065)
filed with the SEC on February 26, 1999).
10.8 Side letter relating to mirror warrants among NorthPoint
Communications Group, Inc. and certain of its stockholders, dated
March 22, 1999 (incorporated by reference to Exhibit 10.8 to Amendment
No. 1 to the company's Registration Statement on Form S-1 (File Number
333-73065) filed with the SEC on March 31, 1999).
10.9 Guaranty dated March 22, 1999 from NorthPoint Communications Group,
Inc. as Guarantor (incorporated by reference to Exhibit 10.11 to
Amendment No. 1 to the company's Registration Statement on Form S-1
(File Number 333-73065) filed with the SEC on March 31, 1999).
10.10 Amended and Restated Convertible Promissory Note made by NorthPoint
Communications, Inc. and NorthPoint Communications Group, Inc. in
favor of Verio, Inc., dated March 26, 1999 (incorporated by reference
to Exhibit 10.12 to Amendment No. 2 to the company's Registration
Statement on Form S-1 (File Number 333-73065) filed with the SEC on
April 19, 1999).
10.11 Series C Preferred Stock Purchase Warrant Agreement between NorthPoint
Communications, Inc. and Intel Corporation, dated August 26, 1998
(incorporated by reference to Exhibit 10.15 to the company's
Registration Statement on Form S-1 (File Number 333-73065) filed with
the SEC on February 26, 1999).
10.12 Letter agreement dated March 22, 1999 between NorthPoint
Communications Group, Inc. and Morgan Stanley Senior Funding, Inc.
(incorporated by reference to Exhibit 10.16 to Amendment No. 1 to the
company's Registration Statement on Form S-1 (File Number 333-73065)
filed with the SEC on March 31, 1999).
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
10.13 Addendum to Series C Preferred Stock Purchase Agreement among
NorthPoint Communications, Inc. and certain of its stockholders, dated
August 26, 1998 (incorporated by reference to Exhibit 10.17 to the
company's Registration Statement on Form S-1 (File Number 333-73065)
filed with the SEC on February 26, 1999).
10.14 Subscription Agreement between NorthPoint Communications, Inc. and CNA
Trust FBO Michael W. Hall, dated December 31, 1997 (incorporated by
reference to Exhibit 10.18 to the company's Registration Statement on
Form S-1 (File Number 333-73065) filed with the SEC on February 26,
1999).
10.15 The Amended and Restated NorthPoint Communications Group, Inc. 1999
Stock Plan.*
10.16 Form of Indemnification Agreement of NorthPoint Communications Group,
Inc. (incorporated by reference to Exhibit 10.21 to Amendment No. 1 to
the company's Registration Statement on Form S-1 (File Number 333-
73065) filed with the SEC on March 31, 1999).
10.17 Agreement and Plan of Merger of NorthPoint Merger Sub, Inc.,
NorthPoint Communications Group, Inc. and NorthPoint Communications,
Inc., dated March 22, 1999 (incorporated by reference to Exhibit 10.22
to Amendment No. 1 to the company's Registration Statement on Form S-1
(File Number 333-73065) filed with the SEC on March 31, 1999).
10.18 Assignment and Assumption Agreement between NorthPoint Communications,
Inc. and NorthPoint Communications Group, Inc., dated March 22, 1999
(incorporated by reference to Exhibit 10.23 to Amendment No. 1 to the
company's Registration Statement on Form S-1 (File Number 333-73065)
filed with the SEC on March 31, 1999).
10.19 First Amendment to Note Purchase Agreement dated as of March 22, 1999
between NorthPoint Communications, Inc. and Morgan Stanley Senior
Funding, Inc. (incorporated by reference to Exhibit 10.24 to Amendment
No. 1 to the company's Registration Statement on Form S-1 (File Number
333-73065) filed with the SEC on March 31, 1999).
10.20 Form of Series D-1 Preferred Stock Purchase Agreement entered into
between NorthPoint Communications Group, Inc. and each of Network Plus
Corporation, ICG Services, Inc., Verio Inc., ALC Communications
Corporation, At Home Corporation, Cable & Wireless USA, Inc., Netopia,
Inc. and Concentric Network Corporation (incorporated by reference to
Exhibit 10.25 to Amendment No. 2 to the company's Registration
Statement on Form S-1 (File Number 333-73065) filed with the SEC on
April 19, 1999).
10.21 Warrant and Rights Agreement between NorthPoint Communications Group,
Inc. and Microsoft Corporation, dated April 7, 1999 (incorporated by
reference to Exhibit 10.26 to Amendment No. 2 to the company's
Registration Statement on Form S-1 (File Number 333-73065) filed with
the SEC on April 19, 1999).
10.22 Class B Common Stock Purchase Warrant dated May 10, 1999, made by
NorthPoint Communications Group, Inc. in favor of Microsoft
Corporation (incorporated by reference to Exhibit 10.27 to Amendment
No. 2 to the company's Registration Statement on Form S-1 (File Number
333-73065) filed with the SEC on April 19, 1999).
10.23 Office Lease dated June 17, 1999, between The Equitable Life Assurance
Society of the United States and NorthPoint Communications, Inc.
(incorporated by reference to Exhibit 10.31 to the company's Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 1999 filed
with the SEC on July 30, 1999).
10.24 Office Lease dated June 5, 1999, between Emery Station Associates, LLC
and NorthPoint Communications, Inc. (incorporated by reference to
Exhibit 10.32 to the company's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 1999 filed with the SEC on July 30,
1999).
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
10.25 Credit and Guaranty Agreement dated as of December 9, 1999 among
NorthPoint Communications, Inc., NorthPoint Communications Group,
Inc., Certain Subsidiaries of NorthPoint Communications, Inc., as
Guarantors, Various Lenders, Goldman Sachs Credit Partners, L.P.,
Canadian Imperial Bank of Commerce, and Newcourt Commercial Financial
Corporation, including forms of notes.*
10.26 Pledge and Security Agreement dated December 9 between NorthPoint
Communications, Inc., NorthPoint Communications Group, Inc.,
NorthPoint Communications of Virginia, Inc. and Canadian Imperial Bank
of Commerce.*
10.27 Amendment to Credit Agreement dated as of February 2, 2000 among
NorthPoint Communications, Inc., NorthPoint Communications Group,
Inc., Certain Subsidiaries of NorthPoint Communications, Inc., as
Guarantors, Various Lenders, Goldman Sachs Credit Partners, L.P.,
Canadian Imperial Bank of Commerce, and Newcourt Commercial Financial
Corporation.*
10.28 Form of Option Agreement under the Amended and Restated NorthPoint
Communications Group, Inc. 1999 Stock Plan.*
10.29 Employment Agreement dated March 7, 2000 between NorthPoint
Communications, Inc. and Elizabeth A. Fetter.*
10.30 Employment Agreement dated March 7, 2000 between NorthPoint
Communications, Inc. and Herman W. Bluestein.*
10.31 Employment Agreement dated March 7, 2000 between NorthPoint
Communications, Inc. and Steven J. Gorosh.*
10.32 Employment Agreement dated March 7, 2000 between NorthPoint
Communications, Inc. and Nancy J. Hemmenway.*
10.33 Employment Agreement dated March 7, 2000 between NorthPoint
Communications, Inc. and Michael G. Parks.*
11 Statement re: Computation of Earnings Per Share.*
21 Subsidiaries.*
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants. *
27.1 Financial Data Schedule.*
</TABLE>
- --------
*Filed herewith.
(d) Financial Statement Schedules. See Item 14(a)(2) above.
49
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the city of San
Francisco, state of California, on March 30, 2000.
NORTHPOINT COMMUNICATIONS GROUP, INC.
By: /s/ Elizabeth A. Fetter
-----------------------------------
Elizabeth A. Fetter
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Elizabeth A. Fetter Chief Executive Officer, March 30, 2000
_____________________________________ President and Director
Elizabeth A. Fetter (Principal Executive Officer)
/s/ Henry P. Huff Chief Financial Officer March 30, 2000
_____________________________________ (Principal Financial Officer
Henry P. Huff and Principal Accounting
Officer)
/s/ Michael W. Malaga Chairman of the Board March 30, 2000
_____________________________________ Founder
Michael W. Malaga
/s/ Robert K. Dahl Director March 30, 2000
_____________________________________
Robert K. Dahl
/s/ Michael J. Fitzpatrick Director March 30, 2000
_____________________________________
Michael J. Fitzpatrick
/s/ Reed E. Hundt Director March 30, 2000
_____________________________________
Reed E. Hundt
/s/ Andrew S. Rachleff Director March 30, 2000
_____________________________________
Andrew S. Rachleff
/s/ Dino J. Vendetti Director March 30, 2000
_____________________________________
Dino J. Vendetti
/s/ J. Peter Wagner Director March 30, 2000
_____________________________________
J. Peter Wagner
/s/ Frank D. Yeary Director March 30, 2000
_____________________________________
Frank D. Yeary
</TABLE>
50
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
NorthPoint Communications Group, Inc.
The following consolidated financial statements include separate
consolidated financial statements of NorthPoint Communications Group, Inc. as
of December 31, 1999. In March 1999, NorthPoint Communications, Inc. merged
with and into NorthPoint Merger Sub, Inc., a wholly owned subsidiary of
NorthPoint Communications Group, Inc. The following consolidated financial
statements as of December 31, 1998 do not include separate consolidated
financial statements of NorthPoint Communications Group, Inc. as management has
determined that the consolidation of NorthPoint Communications Group, Inc.
would not be material to investors. This determination is based on the fact
that, as of December 31, 1998, on a consolidated basis, (i) NorthPoint
Communications Group, Inc. had not commenced operations, (ii) NorthPoint
Communications Group, Inc. had no significant assets, liabilities, contingent
liabilities or commitments, and (iii) the merger of NorthPoint Communications,
Inc., with and into NorthPoint Merger Sub, Inc., a wholly owned subsidiary of
NorthPoint Communications Group, Inc., was a reorganization under common
control.
NorthPoint Communications Group, Inc.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants........................................ F-2
Consolidated Balance Sheets as of December 31, 1999 and 1998............. F-3
Consolidated Statements of Operations for the years ended December 31,
1999 and 1998 and for the period from May 16, 1997 (date of inception)
through December 31, 1997............................................... F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the years
ended December 31, 1999 and 1998 and for the period from May 16, 1997
(date of inception) through December 31, 1997........................... F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1999 and 1998 and for the period from May 16, 1997 (date of inception)
through December 31, 1997............................................... F-6
Notes to Consolidated Financial Statements............................... F-7
</TABLE>
The financial statements of NorthPoint Communications, Inc. have been
included because they would represent virtually all of the operations, assets
and liabilities of NorthPoint Communications Group, Inc., had the merger been
completed as of December 31, 1998.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of NorthPoint Communications Group,
Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of stockholders' equity (deficit) and of
cash flows present fairly, in all material respects, the financial position of
NorthPoint Communications Group, Inc. and subsidiaries (the Company) as of
December 31, 1999 and 1998, and the results of their operations and their cash
flows for the three years ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. These
consolidated financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
San Francisco, California
March 6, 2000
F-2
<PAGE>
NORTHPOINT COMMUNICATIONS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in 000's, except share and per share amounts)
<TABLE>
<CAPTION>
December 31,
-------------------
1999 1998
--------- --------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents............................... $ 95,019 $ 10,956
Short-term investments.................................. 115,034 --
Accounts receivable, net of an allowance of $834 and
$19, respectively...................................... 10,558 523
Inventories............................................. 4,439 --
Prepaid expenses and other assets....................... 19,555 2,649
--------- --------
Total current assets.................................. 244,605 14,128
Property and equipment, net............................... 227,124 46,078
Long-term investment...................................... 6,740 --
Deposits.................................................. 691 296
--------- --------
Total assets.......................................... $ 479,160 $ 60,502
========= ========
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable, including related party payables of
$6,161 and $5,189, respectively........................ $ 56,004 $ 9,379
Accrued expenses........................................ 25,675 5,481
Deferred revenue........................................ -- 189
Deferred short-term credits............................. 348 --
Capital lease obligations, current portion, net of
unamortized debt discount of $265 and $265,
respectively........................................... 1,027 925
Line of credit borrowings, net of unamortized debt
discount of $0 and $2,303, respectively................ -- 48,422
--------- --------
Total current liabilities............................. 83,054 64,396
--------- --------
Capital lease obligations, long term portion, net of
unamortized debt discount of $332 and $598,
respectively............................................. 1,653 2,640
Deferred long-term credits................................ 1,392 --
Term loan................................................. 85,000 --
--------- --------
Total liabilities..................................... 171,099 67,036
--------- --------
Commitments and contingencies (Note 6).
Stockholders' equity (deficit):
Convertible preferred stock, $0.001 par value,
101,250,000 and 49,060,250 shares authorized at
December 31, 1999 and 1998, respectively; 38,499,054
shares issued and outstanding at December 31, 1998;
liquidation preference of $15,493 at December 31,
1998................................................... -- 38
Common stock, $0.001 par value, 281,250,000 and
112,500,000 shares authorized at December 31, 1999 and
1998, respectively; 126,469,210 (including 2,466,724
shares of Class B common stock) and 24,592,950 shares
issued and outstanding at December 31, 1999 and 1998,
respectively........................................... 126 25
Warrants.................................................. 8,701 5,232
Additional paid-in capital................................ 525,294 31,480
Deferred stock compensation............................... (12,405) (13,022)
Accumulated other comprehensive income.................... 330 --
Accumulated deficit....................................... (213,985) (30,287)
--------- --------
Total stockholders' equity (deficit).................. 308,061 (6,534)
--------- --------
Total liabilities and stockholders' equity (deficit).. $ 479,160 $ 60,502
========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
NORTHPOINT COMMUNICATIONS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in 000's, except share and per share amounts)
<TABLE>
<CAPTION>
Years Ended December May 16, 1997
31, (date of inception)
------------------------ to December 31,
1999 1998 1997
----------- ----------- -------------------
<S> <C> <C> <C>
Revenues......................... $ 21,140 $ 931 $ --
Operating expenses:
Network expenses............... 50,354 3,970 55
Selling, general and
administrative (excludes
amortization of deferred stock
compensation of $5,406,
$2,664, and $174,
respectively)................. 117,899 18,340 1,374
Amortization of deferred stock
compensation.................. 5,406 2,664 174
Depreciation and amortization.. 15,907 1,319 27
----------- ----------- -----------
Total operating expenses..... 189,566 26,293 1,630
----------- ----------- -----------
Loss from operations......... (168,426) (25,362) (1,630)
----------- ----------- -----------
Interest income.................. 12,310 209 190
Interest expense................. (27,582) (3,694) --
----------- ----------- -----------
Net loss..................... $ (183,698) $ (28,847) $ (1,440)
=========== =========== ===========
Net loss per common share
attributable to common
stockholders--basic and
diluted......................... $ (2.02) $ (1.18) $ (.07)
=========== =========== ===========
Weighted average shares used in
computing net loss per
common share--basic and
diluted......................... 90,764,996 24,379,445 21,733,560
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
NORTHPOINT COMMUNICATIONS GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(Amounts in 000's)
<TABLE>
<CAPTION>
Convertible
Preferred Accumulated Total
Stock Common Stock Additional Deferred Other Stockholders
--------------- -------------- Paid-in Stock Accumulated Comprehensive Equity
Shares Amount Shares Amount Warrants Capital Compensation Deficit Income (Deficit)
------- ------ ------- ------ -------- ---------- ------------ ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
inception (May
16, 1997)........ -- $-- -- $-- $ -- $ -- $ -- $ -- $-- $ --
Issuance of
common stock.... 22,700 23 77 100
Issuance of
preferred stock
Series A........ 13,095 13 569 582
Conversion of
preferred stock
Series A into
preferred stock
Series B........ (11,153) -- --
Issuance of
preferred stock
Series B........ 35,072 24 10,485 10,509
Issuance of
common stock.... 1,645 2 49 51
Deferred stock
compensation.... 1,204 (1,204) --
Amortization of
deferred stock
compensation.... 174 174
Net loss........ (1,440) (1,440)
------- ---- ------- ---- ------- -------- -------- --------- ---- ---------
Balances at
December 31,
1997............. 37,014 37 24,345 25 -- 12,384 (1,030) (1,440) -- 9,976
Issuance of
common stock.... 248 -- 39 39
Issuance of
preferred stock
Series C........ 1,485 1 4,401 4,402
Issuance of
common and
preferred stock
warrants........ 5,232 5,232
Deferred stock
compensation.... 14,656 (14,656) --
Amortization of
deferred stock
compensation.... 2,664 2,664
Net loss........ (28,847) (28,847)
------- ---- ------- ---- ------- -------- -------- --------- ---- ---------
Balances at
December 31,
1998............. 38,499 38 24,593 25 5,232 31,480 (13,022) (30,287) -- (6,534)
Issuance of
preferred stock
Series C........ 39,036 39 56,868 56,907
Issuance of
preferred stock
Series D........ 3,968 4 38,797 38,801
Issuance of
common stock for
cash in initial
public offering,
net of offering
expenses of
$27,559......... 17,250 17 386,424 386,441
Conversion of
preferred stock
to common stock
in conjunction
with initial
public
offering........ (81,503) (81) 79,691 79 2 --
Issuance of
common stock.... 3,719 4 2,893 2,897
Issuance of
common stock
from conversion
of note
payable......... 311 -- 5,600 5,600
Issuance of
common stock
from exercise of
stock warrants.. 905 1 (1,061) 1,060 --
Issuance of
common stock
warrants........ 1,911 1,911
Issuance of
common stock
warrants
(Microsoft
Corporation).... 2,619 (2,619) --
Deferred stock
compensation
(net of
cancellations).. 4,789 (4,789) --
Amortization of
deferred stock
compensation.... 5,406 5,406
Other
comprehensive
income.......... 330 330
Net loss........ (183,698) (183,698)
------- ---- ------- ---- ------- -------- -------- --------- ---- ---------
Balances at
December 31,
1999............. -- $-- 126,469 $126 $ 8,701 $525,294 $(12,405) $(213,985) $330 $ 308,061
======= ==== ======= ==== ======= ======== ======== ========= ==== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
NORTHPOINT COMMUNICATIONS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in 000's)
<TABLE>
<CAPTION>
Years Ended May 16, 1997
December 31, (date of inception)
------------------- to December 31,
1999 1998 1997
--------- -------- -------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss............................ $(183,698) $(28,847) $(1,440)
Adjustments to reconcile net loss to
net cash used by operating
activities:
Depreciation and amortization..... 15,907 1,319 27
Amortization of deferred stock
compensation..................... 5,406 2,664 174
Amortization of debt discount..... 4,480 2,066 --
Changes in assets and liabilities:
Accounts receivable............... (10,035) (523) --
Inventories....................... (4,439) -- --
Prepaid expenses and other
assets........................... (16,906) (2,590) (59)
Deposits.......................... (395) (223) (73)
Accounts payable.................. 46,625 9,101 --
Accrued expenses.................. 20,194 5,481 277
Deferred revenue.................. (189) 189 --
--------- -------- -------
Net cash used by operating
activities..................... (123,050) (11,363) (1,094)
--------- -------- -------
Cash flows from investing activities:
Purchase of short-term investments.. (114,704) -- --
Purchase of long-term investments... (5,000) -- --
Purchase of property and equipment.. (196,817) (41,550) (701)
--------- -------- -------
Net cash used by investing
activities..................... (316,521) (41,550) (701)
--------- -------- -------
Cash flows from financing activities:
Net proceeds from issuance of common
and preferred stock................ 485,046 4,441 11,242
Payments on credit facilities....... (50,725) -- --
Borrowings from credit facilities... 85,000 50,724 1
Proceeds from note payable.......... 5,600 -- --
Principal payments on capital lease
obligations........................ (1,287) (744) --
--------- -------- -------
Net cash provided by financing
activities..................... 523,634 54,421 11,243
--------- -------- -------
Net increase in cash and cash
equivalents.......................... 84,063 1,508 9,448
Cash and cash equivalents at beginning
of period............................ 10,956 9,448 --
--------- -------- -------
Cash and cash equivalents at end of
period............................... $ 95,019 $ 10,956 $ 9,448
========= ======== =======
Supplemental cash flow information and
noncash activities:
Fixed assets obtained through
capital lease...................... $ 136 $ 4,085 $ 1,102
Warrants issued for bridge loan,
capital lease and with issuance of
equity (Microsoft investment)...... $ 4,530 $ 5,232 $ --
Warrants received in connection with
investment ........................ $ 1,740 $ -- $ --
Conversion of convertible promissory
note to Class B common stock....... $ 5,600 $ -- $ --
Income taxes paid................... $ 24 $ 1 $ 1
Interest paid....................... $ 23,297 $ 992 $ --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
NORTHPOINT COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Basis of Presentation
The Company
NorthPoint Communications, Inc. was formed in May 1997 to provide high speed
network and data transport services, allowing Internet Service Providers
(ISPs), broadband data service providers and long distance and local phone
companies (collectively, network service providers or NSPs) to meet the rapidly
increasing information needs of small and medium-sized businesses, people who
work in home offices and telecommuters.
Basis of Presentation
The consolidated financial statements include the accounts of NorthPoint
Communications Group, Inc. and its wholly-owned subsidiary NorthPoint
Communications, Inc., together with its wholly-owned subsidiary NorthPoint
Communications of Virginia, Inc. Effective March 22, 1999, NorthPoint
Communications, Inc. consummated a reorganization pursuant to which it became a
wholly-owned subsidiary of NorthPoint Communications Group, Inc., a newly
created holding company. The reorganization was effected by a merger of
NorthPoint Communications, Inc., with and into NorthPoint Merger Sub, Inc., a
wholly-owned subsidiary of NorthPoint Communications Group, Inc., with
NorthPoint Communications, Inc., as the surviving corporation of such merger.
As a result of the reorganization, the stockholders of NorthPoint
Communications, Inc. immediately before the reorganization became the only
stockholders of NorthPoint Communications Group, Inc. immediately after the
reorganization. All material intercompany accounts and transactions have been
eliminated.
All financial statements have been restated to give retroactive effect for
all periods to a common stock split of 2.0178 for 1 effective August 16, 1997,
a 3 for 2 common and preferred stock split effective April 9, 1999 and a 3 for
2 common and preferred stock split effective April 16, 1999.
2. Summary of Significant Accounting Policies
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
Certain prior year balances have been reclassified to conform with the
current year presentation.
Business risks and credit concentrations
The Company's operations are subject to significant risks and uncertainties
including competitive, financial, developmental, operational, technological,
regulatory and other risks associated with an emerging business.
The Company sells its services on a wholesale basis to NSPs. For the years
ended December 31, 1999 and 1998, two NSP customers accounted for 32% and 70%
of revenue, respectively. These same customers accounted for 33% and 55% of
accounts receivable at December 31, 1999 and 1998, respectively.
The Company is dependent upon a small number of major suppliers and service
providers.
F-7
<PAGE>
NORTHPOINT COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Cash and cash equivalents
The Company considers all highly liquid monetary instruments with an
original maturity of three months or less at the date of purchase to be cash
equivalents.
A portion of the Company's cash deposits is restricted since it supports
letters of credit that the Company has provided to secure office space. The
balance of restricted cash at December 31, 1999 and 1998 was $4,365,400 and
$375,000, respectively.
Short-term and long-term investments
Short-term and long-term investments are accounted for in accordance with
Statement of Financial Accounting Standards No. 115 Accounting for Certain
Investments in Debt and Equity Securities. This statement requires that
securities be classified as "held to maturity," "available-for-sale" or
"trading," and the securities in each classification be accounted for at either
amortized cost or fair market value, depending upon their classification. The
Company classifies its investments as held-to-maturity and available-for-sale.
Held-to-maturity securities are reported at amortized cost. Available-for-sale
securities are carried at fair value, with the unrealized gains and losses, net
of tax, reported as other comprehensive income, a separate component of
stockholders' equity. At the time of sale, any gains or losses will be
recognized as a component of operating results. The Company recorded other
comprehensive income of $330,414 as of December 31, 1999 related to the net
unrealized gains of certain available-for-sale investments.
Inventories
Inventories consist of communications equipment that will be installed at
subscriber locations. Inventories are accounted for using the first-in first-
our method at the lower of cost or market.
Property and equipment
Property and equipment, including property and equipment under capital
leases, are recorded at cost and are depreciated using the straight-line method
over the shorter of their useful lives or, for leased assets, the remaining
lease term. The estimated useful life is three years for software, and five
years for all other property and equipment. Maintenance and repairs are charged
to expense as incurred, and improvements and betterments are capitalized. When
assets are retired or otherwise disposed of, the cost and accumulated
depreciation are removed from the accounts and any resulting gain or loss is
reflected in operations in the period in which they are realized.
Central office collocation space improvements represent payments to
compensate carriers for infrastructure improvements within their central
offices to allow the Company to install its equipment, which allows the Company
to interconnect with the carrier's network. These payments are capitalized and
are amortized over their estimated useful lives of five years.
The Company capitalizes costs associated with the design and implementation
of the Company's network including internally and externally developed software
in accordance with SOP 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. Capitalized external software costs
include the actual costs to purchase existing software from vendors.
Capitalized internal software costs generally include personnel costs incurred
in the enhancement and implementation of purchased software packages. As of
December 31, 1999, 1998 and 1997, no internal costs have been capitalized.
Long-lived assets
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,
requires that long-lived assets and certain intangible assets
F-8
<PAGE>
NORTHPOINT COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
be reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. If undiscounted expected
future cash flows are less than the carrying value of the assets, an impairment
loss is to be recognized based on the fair value of the assets. No impairment
losses have been recognized to date.
Revenues
Revenues from transport services are recognized when the services are
provided. Payments received in advance of providing services are recorded as
deferred revenue until the period such services are provided. Revenues related
to installation services are recognized when the installation is completed. To
date, such installation service revenues approximate the related costs.
Advertising and sales promotion costs
Advertising and sales promotion costs are expensed as incurred and totaled
$2,012,221 and $281,539 in 1999 and 1998, respectively. There were no
advertising and sales promotion costs in 1997.
Income taxes
The Company accounts for income taxes using the liability method in
accordance with Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes. Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement and tax
bases of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts
expected to be realized.
Fair value of financial instruments
Amounts reported for cash and cash equivalents, accounts receivable,
accounts payable, line of credit borrowings, and other accrued expenses are
considered to approximate fair value, primarily due to their short maturities.
Based on borrowing rates currently available to the Company for loans with
similar terms, the carrying value of the capital lease obligations approximates
fair value.
Earnings (loss) per share
The Company computes net loss per share pursuant to Statement of Financial
Accounting Standards No. 128, Earnings Per Share. Basic net loss per share is
computed by dividing income or loss applicable to common stockholders by the
weighted average number of shares of the Company's common stock outstanding
during the period after having given consideration to shares subject to
repurchase. Diluted net loss per share is determined in the same manner as
basic net loss per share except that the number of shares is increased assuming
exercise of dilutive stock options and warrants using the treasury stock method
and conversion of the Company's convertible preferred stock.
F-9
<PAGE>
NORTHPOINT COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table presents the calculation of basic and diluted net loss
per share and pro forma basic and diluted net loss per share for the periods
indicated:
<TABLE>
<CAPTION>
May 16, 1997
For the years ended (date of
December 31, Inception) to
------------------------- December 31,
1999 1998 1997
------------ ----------- ----------------
<S> <C> <C> <C> <C>
Net loss.......................... $183,698,217 $28,846,706 $ 1,440,269
============ =========== ===========
Basic and diluted:
Weighted average shares of common
stock outstanding............... 90,781,871 24,419,328 21,733,560
Less weighted average shares
subject to repurchase........... 16,875 39,883 --
------------ ----------- -----------
Weighted average shares used in
computing basic and diluted net
loss per share.................. 90,764,996 24,379,445 21,733,560
===========
Weighted average effect of pro
forma conversion of preferred
stock........................... 27,291,384 38,499,054
------------ -----------
Weighted average shares used in
computing pro forma basic and
diluted net loss per share...... 118,056,380 62,878,499
============ ===========
Net loss per share:
Basic and diluted................ $ (2.02) $ (1.18) $ (0.07)
============ =========== ===========
Pro forma basic and diluted...... $ (1.56) $ (0.46)
============ ===========
</TABLE>
The dilutive effect of options and warrants has not been considered as their
effect would be antidilutive for all periods presented.
Stock-based compensation
The Company accounts for stock-based employee compensation arrangements in
accordance with the provisions of Accounting Principles Board Opinion No. 25
(APB No. 25), Accounting for Stock Issued to Employees, and complies with the
disclosure provisions of Statement of Financial Accounting Standards No. 123
(SFAS No. 123), Accounting for Stock-Based Compensation. Under APB No. 25,
compensation expense is based on the difference, if any, on the date of the
grant, between the fair value of the Company's stock and the exercise price of
the option. The Company accounts for equity instruments issued to nonemployees
in accordance with the provisions of SFAS No. 123 and Emerging Issues Task
Force 96-18. The Company amortizes stock-based compensation recorded in
connection with certain stock options over the vesting period of the related
options.
Comprehensive income
The Company has adopted the accounting treatment prescribed by Statement of
Financial Accounting Standards No. 130, Comprehensive Income. Comprehensive
income, as defined, includes all changes in equity (net assets) during a period
from non-owner sources.
Segment information
In 1998, the Company adopted Statement of Financial Accounting Standards No.
131 (SFAS No. 131), Disclosures about Segments of an Enterprise and Related
Information. SFAS No. 131 uses the "management" approach for identifying
reportable segments. The management approach designates the internal
organization that is used by management for making operating decisions and
assessing performance as the source of the Company's reportable segments. The
Company operates in one segment: High speed network and data transport services
solely in the United States.
F-10
<PAGE>
NORTHPOINT COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Recently issued accounting pronouncements
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial
Statements. SAB 101 provides guidance for revenue recognition under certain
circumstances. The Company is currently evaluating the impact of SAB 101 on its
financial statements and related disclosures.
3. Property and Equipment
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------
1999 1998
------------ -----------
<S> <C> <C>
Networking equipment.......................... $114,304,244 $22,856,460
Central office collocation space
improvements................................. 60,744,143 14,706,047
Computers and software........................ 40,739,441 2,488,542
Leasehold improvements........................ 14,053,822 1,244,924
Furniture, fixtures and equipment............. 9,204,600 938,877
Property and equipment under capital leases:
Networking equipment........................ 3,320,894 3,184,894
Central office collocation space
improvements............................... 892,537 892,537
Furniture, fixtures and equipment........... 987,888 987,888
Leasehold improvements...................... 121,670 121,670
------------ -----------
Total property and equipment.............. 244,369,239 47,421,839
Less accumulated depreciation and
amortization................................. (17,245,739) (1,344,043)
------------ -----------
Property and equipment, net................... $227,123,500 $46,077,796
============ ===========
</TABLE>
Included in accumulated depreciation and amortization is $1,608,557 and
$630,121 of accumulated depreciation and amortization relating to property and
equipment under capital leases as of December 31, 1999 and 1998.
Depreciation and amortization expense was $15,906,502 and $1,318,575 for the
years ended December 31, 1999 and 1998, respectively, including amortization of
software of $595,874 and $88,099, respectively. Depreciation and amortization
expense was $27,179 for the period from May 16, 1997 (date of inception) to
December 31, 1997, including amortization of software of $236.
4. Investment and Deferred Credit
In August 1999, the Company completed a $5,000,000 investment in a company
that provides internet exchange facilities. In conjunction with the investment,
the Company also entered into a strategic agreement to provide high speed
network and data transport services in the facilities of that same company.
Pursuant to the terms of the agreement, the Company was issued warrants to
purchase up to 225,430 shares of common stock of the investee company at an
exercise price of $0.80 per share. The warrants are immediately exercisable and
expire on August 31, 2004. The warrants are treated as a long term investment
with a value based on the intrinsic value of the warrants on issuance, which
was deemed to be similar to the value of the equipment to be installed in the
facilities by the Company. The warrant investment and related deferred credit
were valued at $1,740,210. The deferred credit will be amortized to offset the
depreciation of the related equipment. None of the value of the deferred credit
was amortized as of December 31, 1999 as the Company has not completed
installation of the equipment in the facilities of the investee.
F-11
<PAGE>
NORTHPOINT COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. Income Taxes
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
May 16, 1997
(date of
Year Ended Year Ended inception) to
December 31, 1999 December 31, 1998 December 31, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Current tax expense:
Federal............... $ -- $ -- $ --
State................. 10,525 800 800
------------ ----------- --------
10,525 800 800
Deferred tax expense:
Federal............... (67,848,238) (8,188,230) (445,065)
State................. (11,998,215) (1,397,905) --
Valuation allowance
for deferred tax
assets............... 79,846,453 9,586,135 445,065
------------ ----------- --------
Net tax expense..... $ 10,525 $ 800 $ 800
============ =========== ========
</TABLE>
The primary components of temporary differences which give rise to deferred
taxes are as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
Non-current deferred tax assets
(liabilities):
Net operating loss carryforwards.. $102,003,611 $ 9,410,087
Depreciation...................... (12,445,331) (81,222)
Other............................. 319,373 702,335
------------ ------------
Gross deferred tax asset........ 89,877,653 10,031,200
Valuation allowance............... (89,877,653) (10,031,200)
------------ ------------
Net deferred tax asset.......... $ 0 $ 0
============ ============
</TABLE>
Due to uncertainty surrounding the realization of the favorable tax
attributes in future tax returns, the Company has recorded a valuation
allowance against its net deferred tax asset at both December 31, 1999 and
December 31, 1998. Management evaluates the recoverability of the deferred tax
asset and the level of the valuation allowance. At such time as it is
determined that it is more likely than not that the deferred tax asset will be
realizable, the valuation allowance will be reduced.
At December 31, 1999 and 1998, the Company had net operating loss
carryforwards of approximately $255,009,028 and $23,525,000, respectively, for
both federal and state income tax purposes. The federal carryforwards expire in
the years 2013 through 2019. For federal and state purposes, a portion of the
Company's net operating loss may be subject to certain limitations on annual
utilization in case of changes in ownership, as defined by federal and state
tax laws. Such amount, if any, has not yet been determined.
Deferred tax assets of approximately $8,372,728 as of December 31, 1999
pertain to certain net operating loss carryforwards and credit carryforwards
resulting from the exercise of employee stock options. When recognized, the tax
benefit of these loss and credit carryforwards are accounted for as a credit to
additional paid in capital rather than a reduction in the income tax
provisions.
F-12
<PAGE>
NORTHPOINT COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A reconciliation of the provision for income tax purposes to the federal
statutory rate is as follows:
<TABLE>
<CAPTION>
May 16, 1997
Year Ended Year Ended (date of Inception) to
December 31, 1999 December 31, 1998 December 31, 1997
------------------ ----------------- ----------------------
<S> <C> <C> <C>
Provision computed at
federal statutory
rate................... $(62,070,092) $(9,705,573) $(504,094)
State taxes, net of
federal tax benefit.... (10,953,546) (1,397,906) --
Permanent difference.... (6,424,583) 1,505,761 59,029
Others.................. (387,707) 11,583 --
Change in valuation
allowance.............. 79,846,453 9,586,135 445,065
------------ ----------- ---------
Net tax provision..... $ 10,525 $ 0 $ 0
============ =========== =========
</TABLE>
The 1999 net tax provision of $10,525 represents minimum income tax payments
to the states that the Company is operating in and is included in selling,
general and administrative expense on the consolidated statement of operations.
6. Commitments and Contingencies
The Company is subject to state public utilities commission, Federal
Communications Commission and court decisions as they relate to the
interpretation and implementation of the Telecommunications Act, the
interpretation of CLEC interconnection agreements in general and the Company's
interconnection agreements in particular. In some cases the Company may be
bound by the results of ongoing proceedings of these bodies or the legal
outcomes of other contested interconnection agreements that are similar to the
Company's agreements. The Company cannot estimate the effect, if any, of these
proceedings.
The Company together with, in some instances, some of its directors and
officers, may from time to time be the subject of claims or named as a
defendant or co-defendant in various legal actions involving breach of contract
and various other claims incident to the conduct of its businesses. At this
time, management does not expect the Company to suffer any material liability
by reason of such actions, nor does it expect that such actions will have a
material effect on the Company's liquidity or operating results.
7. Capital and Operating Leases
In October 1997, the Company entered into an agreement with a lease provider
under which the Company obtained a capital lease facility of up to $7,500,000.
Under this agreement, the Company entered into capital leases for property
and equipment in 1997 and 1998. The property and equipment leased under this
facility are pledged as collateral for the lease commitment.
F-13
<PAGE>
NORTHPOINT COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company leases office space under noncancelable operating leases. Rent
expense under operating leases was $6,108,566, $830,655 and $56,838 for the
years ended December 31, 1999 and 1998 and for the period from May 16, 1997
(date of inception) to December 31, 1997, respectively, which includes
$1,902,155, $272,983 and $3,879 in sublease rent expense, respectively. The
following is a schedule of future minimum lease payments under capital and
operating leases as of December 31, 1999:
<TABLE>
<CAPTION>
Capital Leases Operating Leases
-------------- ----------------
<S> <C> <C>
2000..................................... $1,512,058 $ 8,863,583
2001..................................... 1,512,058 8,313,675
2002..................................... 597,283 8,570,196
2003..................................... -- 8,336,845
2004..................................... -- 7,722,657
Thereafter............................... -- 8,534,752
---------- -----------
Total minimum lease payments............. 3,621,399 $50,341,708
===========
Less amount representing interest........ 344,494
----------
Present value of minimum lease payments.. 3,276,905
Less discount recognized for value of
warrants................................ 597,760
----------
Net capital lease obligations............ 2,679,145
Less current portion of net capital lease
obligations............................. 1,026,505
----------
Long term portion of net capital lease
obligations............................. $1,652,640
==========
</TABLE>
8. Credit Facility
On December 9, 1999 the Company entered into a credit facility with a
syndicate of lenders. The credit facility consists of the following:
. Revolving credit facility in an amount up to $55,000,000. The available
revolving credit facility amount will be reduced in quarterly
installments beginning in March 2002 and ending in December 2005. None of
the revolving credit facility was drawn down as of December 31, 1999.
. Delayed draw term loan facility in the amount of $110,000,000. The
Company is required to borrow the entire facility on or before December
9, 2000. The outstanding delayed draw term loan amount is required to be
paid in quarterly installments beginning in March 2002 and ending in
December 2005. None of the delayed draw term loan facility was drawn down
as of December 31, 1999.
. Term loan facility in the amount of $85,000,000, all of which was drawn
down on the closing date. The outstanding term loan amount is required to
be paid in quarterly installments beginning in March 2002 and ending in
June 2006.
The credit facility also provides for the issuance of letters of credit on
our behalf by the lenders.
Borrowings under the credit facility are collateralized by a first priority
lien against substantially all of the Company's assets. The lenders under the
credit facility have agreed that the liens which collateralize the credit
facility may also collateralize an additional $50,000,000 of additional
borrowings in the event the credit facility is extended, but the lenders have
no obligation to provide such additional financing.
Loans under the facilities bear interest at floating rates based on the
prime rate or LIBOR plus, in each case, an additional interest rate of three
and one-quarter percent per year to four and one-half percent per year.
F-14
<PAGE>
NORTHPOINT COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In July 1998, the Company finalized a commitment from an investment bank to
provide up to $50,000,000 of debt financing (the "Bridge Loan"). The Bridge
Loan carried interest at 10% per annum through January 15, 1999. The interest
rate then increased to 11.5%. As of December 31, 1998, the Company had drawn
down the entire $50,000,000 available under its bridge loan commitment.
In connection with the Bridge Loan, the Company issued warrants (the "Bridge
Loan Warrants") to purchase 2,925,000 shares of common stock to this bank, at
an exercise price of $0.0044 per share for the first 562,500 shares, and
$2.9644 for the remainder.
The fair value of the warrants has been determined using a Black-Scholes
Model, applying an expected life of 5 years, a weighted average risk-free
interest rate of 5.31%, an expected dividend yield of zero percent and a
volatility of 75%. Based on the fair value of these warrants, the Company has
recognized a discount of $6,082,567 to the bridge loan, which was amortized
over the life of the loan term. Amortization of this discount amounted to
$1,352,529, $1,867,684 and $0 in 1999, 1998 and 1997, respectively. On April 5,
1999, the Company paid off the Bridge Loan and therefore all remaining
unamortized debt discount was recognized as interest expense in 1999.
9. Common Stock
The Company sold 17,250,000 shares of common stock at $24 per share it its
initial public offering on May 5, 1999. Net of underwriting discounts,
commissions, and other offering fees, the proceeds to the Company were
$386,441,000.
10. Preferred Stock
Upon the Company's initial public offering, the outstanding shares of all
Series B, Series C, and Series D-1 preferred stock automatically converted into
79,690,842 shares of common stock.
11. Stock Options
In September 1997, the Company adopted the 1997 Stock Option Plan under
which the Board of Directors may grant options to purchase common stock either
as incentive stock options to employees and directors or nonstatutory stock
options to employees, directors, and consultants. In March 1999, the Company
adopted the 1999 Stock Plan. The terms under these plans are similar. Options
granted under these plans as incentive stock options are issued at an exercise
price between 100% and 110% of fair market value, as determined by the Board of
Directors. Nonstatutory options are issued at between 85% and 110% of their
fair market value. At December 31, 1999, 1998 and 1997, 28,125,000, 16,875,000
and 8,194,639 shares of common stock, respectively, have been reserved for the
exercise of stock options.
Generally, options granted under these plans become exercisable at a rate of
1/4 of the total at the end of twelve months from the vesting commencement
date, and 1/48 of the total per month thereafter of employment. Options
generally expire ten years from the date of the grant except in the case of an
incentive stock option granted to an optionee who, at the time of the option is
granted, owns stock representing more than ten percent of the voting power of
all classes of stock outstanding. In this case, the term of the option is 5
years from the date of the grant.
F-15
<PAGE>
NORTHPOINT COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table summarizes activity under the Company's stock option
plan for the period from May 16, 1997 (date of inception) to December 31, 1997
and for the years ended December 31, 1998 and 1999:
<TABLE>
<CAPTION>
Shares Available Number of Options Weighted Average
for Grant Outstanding Exercise Price
---------------- ----------------- ----------------
<S> <C> <C> <C>
Reserved for issuance... 8,194,639
Granted............... (5,130,000) 5,130,000 $ 0.03
Exercised............. -- --
Cancelled............. -- --
----------- ---------- ------
Balances as of December
31, 1997............... 3,064,639 5,130,000 $ 0.03
Reserved for issuance... 8,680,360
Granted............... (9,088,087) 9,088,087 $ 0.29
Exercised............. -- (241,875) $ 0.15
Cancelled............. 217,969 (217,969) $ 0.10
----------- ---------- ------
Balances as of December
31, 1998............... 2,874,881 13,758,243 $ 0.20
Reserved for issuance... 11,250,000
Granted............... (11,440,307) 11,440,307 $15.98
Exercised............. -- (3,630,578) $ 0.32
Cancelled............. 1,565,167 (1,565,167) $ 9.46
----------- ---------- ------
Balances as of December
31, 1999............... 4,249,741 20,002,805 $ 8.40
=========== ========== ======
</TABLE>
The following table summarizes information with respect to stock options
outstanding and exercisable at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------- --------------------
Weighted Average Weighted Weighted
Range of Number Remaining Average Number Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices at 12/31/99 Life (Years) Price at 12/31/99 Price
------------- ----------- ---------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$.03 - $.67 10,486,570 8.33 $ .25 3,411,117 $ .18
$3.56 - $6.67 3,586,924 9.19 $ 6.09 304,532 $ 6.48
$18.00 -
$18.63 2,458,511 9.47 $18.23 -- $ --
$21.56 -
$26.75 2,044,400 9.68 $23.61 54,446 $24.00
$31.69 -
$38.25 1,277,000 9.57 $34.42 -- $ --
$43.25 149,400 9.36 $43.25 -- $ --
---------- ---------
20,002,805 8.85 $ 8.40 3,770,095 $ 1.03
========== =========
</TABLE>
The Company has elected to follow Accounting Principles Board Opinion No. 25
(APB No. 25), Accounting for Stock Options Issued to Employees and related
interpretations in accounting for its employee stock options. Under APB No. 25,
compensation expense is recognized based on the amount by which the fair value
of the underlying common stock exceeds the exercise price of the stock options
at the measurement date, which in the case of employee stock options is
typically the date of grant. For financial reporting purposes, the Company has
determined that the deemed fair market value on the date of grant of employee
stock options was in excess of the exercise price of the options. As a result,
the Company recorded deferred compensation of $6,463,280, $14,380,698 and
$1,203,614 for the years ended December 31, 1999 and 1998 and for the period
from May 16, 1997, date of inception, to December 31, 1997, respectively. This
amount was recorded as a reduction of stockholders' equity and is being
amortized as a charge to operations over the vesting period of the applicable
options.
F-16
<PAGE>
NORTHPOINT COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
During the years ended December 31, 1999 and 1998 and for the period from
May 16, 1997, date of inception, to December 31, 1997, the Company recognized
$5,406,117, $2,387,941 and $173,612, respectively, of employee stock
compensation expense.
SFAS No. 123, Accounting for Stock-Based Compensation, encourages adoption
of a fair value-based method for valuing the cost of stock-based compensation.
However, it allows companies to continue to use the intrinsic value method
under APB No. 25 for options granted to employees and disclose pro forma net
earnings and earnings per share in accordance with SFAS No. 123. Had
compensation cost for the Company's stock-based compensation plans been
determined consistent with SFAS No. 123, the Company's net earnings and
earnings per share would have been as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------ -----------
<S> <C> <C> <C>
Net loss as reported........... $(183,698,217) $(28,846,706) $(1,440,269)
Pro forma net earnings......... (209,684,526) (29,994,072) (1,453,377)
Net loss per share as
reported...................... (2.02) (1.18) (0.07)
Pro forma earnings per share... (2.31) (1.23) (0.07)
</TABLE>
The weighted average fair value of stock options granted during the years
ended December 31, 1999 and 1998 and for the period from May 16, 1997 to
December 31, 1997 was $7.83, $0.75 and $0.05, respectively.
The effects of applying SFAS No. 123 for the pro forma disclosures are not
representative of the effects expected on reported net earnings and earnings
per share in future years, since valuations are based on highly subjective
assumptions about the future, including stock price volatility and exercise
patterns.
The Company used the Black-Scholes option pricing model to determine the
fair value of grants made in 1999, 1998 and 1997. The following assumptions
were applied in determining the pro forma compensation cost:
<TABLE>
<CAPTION>
1999 1998 1997
------ ----- ----
<S> <C> <C> <C>
Weighted average risk-free interest rate................. 4.92% 5.25% 5.7%
Expected dividend yield.................................. 0% 0% 0%
Expected option life in years............................ 3.5 5 5
Volatility............................................... 87.62% 0% 0%
</TABLE>
Because the Company did not have actively traded equity securities prior to
May 1999, volatility was not considered in determining the fair value of stock-
based awards to employees during 1998 and 1997.
In 1998 the Company granted options to a non-employee and charged the
related costs to stock compensation expense. The Company applies SFAS No. 123
to account for such options. The fair value of these options issued, $275,784,
was determined using a Black-Scholes model with the above assumptions and a
volatility of 75%.
12. Employee Benefit Plan
In January 1997, the Company established the NorthPoint Communications
401(k) plan (the Plan) which covers substantially all employees. Under the
Plan, employees are permitted to contribute up to 20% of gross compensation not
to exceed the annual 402(g) limitation for any plan year. Discretionary
contributions may be made by the Company as determined by the Board of
Directors. No contributions were made by the Company during 1999, 1998 and
1997.
F-17
<PAGE>
NORTHPOINT COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In May 1999, the Company instituted an employee stock purchase plan. The
provisions of the plan allow employees to purchase the Company's stock at 85%
of the lesser of its fair market value on the first or last day of each
offering period. The first offering period commenced May 4, 1999 and ended June
30, 1999. Subsequent offering periods have a duration of six months. During the
year ended December 31, 1999, 79,448 shares of the Company's common stock were
purchased under the plan.
13. Related Party Transactions
In 1999, 1998 and 1997, legal fees of $1,166,452, $114,831 and $76,804,
respectively, were paid to law firms which, along with attorneys of the firms,
are stockholders in the Company.
A principal stockholder of the Company owns capital stock of a vendor of the
Company. The Company's payments to the vendor in 1999, 1998 and 1997 totaled
$42,497,366, $8,490,467 and $203,000, respectively.
14. Stock Warrants
Equipment Lease Warrants
In conjunction with the capital leases of property and equipment (Note 7),
the Company issued warrants to purchase up to 1,251,524 shares of common stock
to an equipment lease provider, at an exercise price of $0.30 per share. As of
December 31, 1997 and 1998, warrants to purchase 250,303 and 917,779 shares,
respectively, had vested. No additional warrants vested during 1999. The
equipment lease provider exercised all of these vested warrants during 1999.
The fair value of the warrants on each of the vesting dates has been determined
using a Black-Scholes Model, applying an expected life of 5 years, a weighted
average risk-free interest rate of 5.7%, an expected dividend yield of zero
percent and a volatility of 75%, resulting in a debt discount of $1,061,268 and
related amortization of $265,321 and $198,204 in 1999 and 1998, respectively.
Bridge Loan Warrants
In conjunction with the Bridge Loan (Note 8), the Company issued warrants to
purchase 562,500 shares of common stock for an exercise price of $0.0044 per
share and 2,362,500 shares of common stock for an exercise price of $2.9644 per
share. The Bridge Loan Warrants are exercisable immediately and expire in July
2003. These warrants carry provisions which protect the holder from dilution
caused by certain specified events, including:
. stock or cash dividends, stock splits, reverse stock splits or
reclassifications;
. issuances of common stock, rights, options or warrants at prices per
share lower than the then current market value per share;
. distributions of debt, assets or cash; and
. consolidation or merger with or into another person or sale of all or
substantially all of the Company's assets.
In these events, the exercise price and number of shares issuable upon
exercise of these warrants will be adjusted to reduce the dilution caused by
these events.
Contingent Warrants
The Company has agreed to issue warrants to purchase up to 212,568 shares of
its common stock at a price of $1.5689 per share to one of its shareholders. No
warrants have been issued under this agreement at December 31, 1999.
F-18
<PAGE>
NORTHPOINT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Microsoft Warrants
At the time of the Company's initial public offering, Microsoft purchased
common shares for $30,000,000 and the Company granted Microsoft a warrant to
purchase $30,000,000 of Class B common stock at an exercise price per share of
$36 in conjunction with this investment. This warrant is exercisable
immediately and will expire in May 2004. The fair value of the warrants has
been determined using a Black-Scholes Model. The fair value of these warrants
is $2,618,916.
15. Subsequent Events
Note offering
On February 3, 2000, the Company issued senior notes in the aggregate
principal amount of $400,000,000. The net proceeds from the issuance of the
notes was approximately $387,500,000. The notes mature on February 15, 2010 and
bear interest at a rate of twelve and seven-eighths percent per year. The
interest is payable semi-annually on each February 15 and August 15, beginning
on August 15, 2000.
F-19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders of NorthPoint Communications Group,
Inc.
Our audits of the consolidated financial statements referred to in our report
dated March 6, 2000 appearing in this Annual Report on Form 10-K to
Stockholders of NorthPoint Communications Group, Inc. also included an audit of
the financial statement schedule listed in Item 14(a)(2) of this Form 10-K. In
our opinion, the financial statement schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
San Francisco, California
March 6, 2000
<PAGE>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Period from May 16, 1997 (date of inception) through December 31, 1997 and
Years Ended December 31, 1998 and 1999
Valuation allowance for doubtful accounts
<TABLE>
<CAPTION>
Additions
charged
Balance at to costs Charged
beginning and to other Balance at
For the period ended: of period expenses accounts Deductions end of period
- --------------------- ---------- --------- -------- ---------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
December 31, 1997........ $ 0 -- -- -- $ 0
December 31, 1998........ $ 0 $ 19 -- -- $ 19
December 31, 1999........ $ 19 $ 1,045 -- ($230) $ 834
Valuation allowance for inventory reserve
<CAPTION>
Additions
charged
Balance at to costs Charged
beginning and to other Balance at
For the period ended: of period expenses accounts Deductions end of period
- --------------------- ---------- --------- -------- ---------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
December 31, 1997........ $ 0 -- -- -- $ 0
December 31, 1998........ $ 0 -- -- -- $ 0
December 31, 1999........ $ 0 $ 400 -- -- $ 400
Valuation allowance for deferred tax asset
<CAPTION>
Additions
charged
Balance at to costs Charged
beginning and to other Balance at
For the period ended: of period expenses accounts Deductions end of period
- --------------------- ---------- --------- -------- ---------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
December 31, 1997........ $ 0 $ 445 -- -- $ 445
December 31, 1998........ $ 445 $ 9,586 -- -- $10,031
December 31, 1999........ $10,031 $79,847 -- -- $89,878
</TABLE>
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this report. Where such filing
is made by incorporation by reference to a previously filed statement or
report, such statement or report is identified in parentheses.
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
3.1 Third Amended and Restated Certificate of Incorporation of NorthPoint
Communications Group, Inc. (incorporated by reference to Exhibit 3.1
to Amendment No. 2 to the company's Registration Statement on Form S-1
(File Number 333-73065) filed with the SEC on April 19, 1999).
3.2 Amended and Restated Bylaws of NorthPoint Communications Group, Inc.*
4.1 Form of Specimen Common Stock Certificate of NorthPoint Communications
Group, Inc. (incorporated by reference to Exhibit 4.1 to Amendment No.
4 to the company's Registration Statement on Form S-1 (File Number
333-73065) filed with the SEC on May 4, 1999).
4.2 Indenture dated as of February 8, 2000, between NorthPoint
Communications Group, Inc. and The Bank of New York, as Trustee,
including form of 12 7/8% Senior Note due 2010.*
4.3 Registration Rights Agreement dated as of February 8, 2000, among
NorthPoint Communications Group, Inc. and Goldman, Sachs & Co., Morgan
Stanley & Co. Incorporated, CIBC World Markets Corp. and Credit Suisse
First Boston Corporation.*
9.1 Second Amended and Restated Voting Agreement among NorthPoint
Communications, Inc., NorthPoint Communications Group, Inc. and
certain of its stockholders, dated March 22, 1999 (incorporated by
reference to Exhibit 9.1 to Amendment No. 2 to the company's
Registration Statement on Form S-1 (File Number 333-73065) filed with
the SEC on April 19, 1999).
10.1 The Amended and Restated NorthPoint Communications Group, Inc.
Employee Stock Purchase Plan (incorporated by reference to Exhibit
10.1 to the company's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1999 filed with the SEC on July 30, 1999).
10.2 1997 Stock Option Plan of NorthPoint Communications, Inc.
(incorporated by reference to Exhibit 10.2 to the company's
Registration Statement on Form S-1 (File Number 333-73065) filed with
the SEC on February 26, 1999).
10.3 Amended and Restated Series C Preferred Stock Purchase Agreement among
NorthPoint
Communications, Inc. and certain of its stockholders, dated January
20, 1999 (incorporated by reference to Exhibit 10.3 to the company's
Registration Statement on Form S-1 (File Number 333-73065) filed with
the SEC on February 26, 1999).
10.4 Fourth Amended and Restated Right of First Refusal and Co-Sale
Agreement among NorthPoint Communications, Inc., NorthPoint
Communications Group, Inc. and certain of its stockholders, dated
March 22, 1999 (incorporated by reference to Exhibit 10.4 to Amendment
No. 2 to the company's Registration Statement on Form S-1 (File Number
333-73065) filed with the SEC on April 19, 1999).
10.5 Fifth Amended and Restated Rights Agreement among NorthPoint
Communications, Inc., NorthPoint Communications Group, Inc. and
certain of its stockholders, dated March 22, 1999 (incorporated by
reference to Exhibit 10.5 to Amendment No. 2 to the company's
Registration Statement on Form S-1 (File Number 333-73065) filed with
the SEC on April 19, 1999).
10.6 Side letter relating to the purchase of Series C preferred stock
between NorthPoint Communications, Inc. and Vulcan Ventures
Incorporated, dated February 19, 1999 (incorporated by reference to
Exhibit 10.6 to the company's Registration Statement on Form S-1 (File
Number 333-73065) filed with the SEC on February 26, 1999).
10.7 Side letter relating to the purchase of Series C preferred stock among
NorthPoint Communications, Inc. and certain of its stockholders, dated
February 19, 1999 (incorporated by reference to Exhibit 10.7 to the
company's Registration Statement on Form S-1 (File Number 333-73065)
filed with the SEC on February 26, 1999).
10.8 Side letter relating to mirror warrants among NorthPoint
Communications Group, Inc. and certain of its stockholders, dated
March 22, 1999 (incorporated by reference to Exhibit 10.8 to Amendment
No. 1 to the company's Registration Statement on Form S-1 (File Number
333-73065) filed with the SEC on March 31, 1999).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
10.9 Guaranty dated March 22, 1999 from NorthPoint Communications Group,
Inc. as Guarantor (incorporated by reference to Exhibit 10.11 to
Amendment No. 1 to the company's Registration Statement on Form S-1
(File Number 333-73065) filed with the SEC on March 31, 1999).
10.10 Amended and Restated Convertible Promissory Note made by NorthPoint
Communications, Inc. and NorthPoint Communications Group, Inc. in
favor of Verio, Inc., dated March 26, 1999 (incorporated by reference
to Exhibit 10.12 to Amendment No. 2 to the company's Registration
Statement on Form S-1 (File Number 333-73065) filed with the SEC on
April 19, 1999).
10.11 Series C Preferred Stock Purchase Warrant Agreement between NorthPoint
Communications, Inc. and Intel Corporation, dated August 26, 1998
(incorporated by reference to Exhibit 10.15 to the company's
Registration Statement on Form S-1 (File Number 333-73065) filed with
the SEC on February 26, 1999).
10.12 Letter agreement dated March 22, 1999 between NorthPoint
Communications Group, Inc. and Morgan Stanley Senior Funding, Inc.
(incorporated by reference to Exhibit 10.16 to Amendment No. 1 to the
company's Registration Statement on Form S-1 (File Number 333-73065)
filed with the SEC on March 31, 1999).
10.13 Addendum to Series C Preferred Stock Purchase Agreement among
NorthPoint Communications, Inc. and certain of its stockholders, dated
August 26, 1998 (incorporated by reference to Exhibit 10.17 to the
company's Registration Statement on Form S-1 (File Number 333-73065)
filed with the SEC on February 26, 1999).
10.14 Subscription Agreement between NorthPoint Communications, Inc. and CNA
Trust FBO Michael W. Hall, dated December 31, 1997 (incorporated by
reference to Exhibit 10.18 to the company's Registration Statement on
Form S-1 (File Number 333-73065) filed with the SEC on February 26,
1999).
10.15 The Amended and Restated NorthPoint Communications Group, Inc. 1999
Stock Plan.*
10.16 Form of Indemnification Agreement of NorthPoint Communications Group,
Inc. (incorporated by reference to Exhibit 10.21 to Amendment No. 1 to
the company's Registration Statement on Form S-1 (File Number 333-
73065) filed with the SEC on March 31, 1999).
10.17 Agreement and Plan of Merger of NorthPoint Merger Sub, Inc.,
NorthPoint Communications Group, Inc. and NorthPoint Communications,
Inc., dated March 22, 1999 (incorporated by reference to Exhibit 10.22
to Amendment No. 1 to the company's Registration Statement on Form S-1
(File Number 333-73065) filed with the SEC on March 31, 1999).
10.18 Assignment and Assumption Agreement between NorthPoint Communications,
Inc. and NorthPoint Communications Group, Inc., dated March 22, 1999
(incorporated by reference to Exhibit 10.23 to Amendment No. 1 to the
company's Registration Statement on Form S-1 (File Number 333-73065)
filed with the SEC on March 31, 1999).
10.19 First Amendment to Note Purchase Agreement dated as of March 22, 1999
between NorthPoint Communications, Inc. and Morgan Stanley Senior
Funding, Inc. (incorporated by reference to Exhibit 10.24 to Amendment
No. 1 to the company's Registration Statement on Form S-1 (File Number
333-73065) filed with the SEC on March 31, 1999).
10.20 Form of Series D-1 Preferred Stock Purchase Agreement entered into
between NorthPoint Communications Group, Inc. and each of Network Plus
Corporation, ICG Services, Inc., Verio Inc., ALC Communications
Corporation, At Home Corporation, Cable & Wireless USA, Inc., Netopia,
Inc. and Concentric Network Corporation (incorporated by reference to
Exhibit 10.25 to Amendment No. 2 to the company's Registration
Statement on Form S-1 (File Number 333-73065) filed with the SEC on
April 19, 1999).
10.21 Warrant and Rights Agreement between NorthPoint Communications Group,
Inc. and Microsoft Corporation, dated April 7, 1999 (incorporated by
reference to Exhibit 10.26 to Amendment No. 2 to the company's
Registration Statement on Form S-1 (File Number 333-73065) filed with
the SEC on April 19, 1999).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
10.22 Class B Common Stock Purchase Warrant dated May 10, 1999, made by
NorthPoint Communications Group, Inc. in favor of Microsoft
Corporation (incorporated by reference to Exhibit 10.27 to Amendment
No. 2 to the company's Registration Statement on Form S-1 (File Number
333-73065) filed with the SEC on April 19, 1999).
10.23 Office Lease dated June 17, 1999, between The Equitable Life Assurance
Society of the United States and NorthPoint Communications, Inc.
(incorporated by reference to Exhibit 10.31 to the company's Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 1999 filed
with the SEC on July 30, 1999).
10.24 Office Lease dated June 5, 1999, between Emery Station Associates, LLC
and NorthPoint Communications, Inc. (incorporated by reference to
Exhibit 10.32 to the company's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 1999 filed with the SEC on July 30,
1999).
10.25 Credit and Guaranty Agreement dated as of December 9, 1999 among
NorthPoint Communications, Inc., NorthPoint Communications Group,
Inc., Certain Subsidiaries of NorthPoint Communications, Inc., as
Guarantors, Various Lenders, Goldman Sachs Credit Partners, L.P.,
Canadian Imperial Bank of Commerce, and Newcourt Commercial Financial
Corporation, including forms of notes.*
10.26 Pledge and Security Agreement dated December 9 between NorthPoint
Communications, Inc., NorthPoint Communications Group, Inc.,
NorthPoint Communications of Virginia, Inc. and Canadian Imperial Bank
of Commerce.*
10.27 Amendment to Credit Agreement dated as of February 2, 2000 among
NorthPoint Communications, Inc., NorthPoint Communications Group,
Inc., Certain Subsidiaries of NorthPoint Communications, Inc., as
Guarantors, Various Lenders, Goldman Sachs Credit Partners, L.P.,
Canadian Imperial Bank of Commerce, and Newcourt Commercial Financial
Corporation.*
10.28 Form of Option Agreement under the Amended and Restated NorthPoint
Communications Group, Inc. 1999 Stock Plan.*
10.29 Employment Agreement dated March 7, 2000 between NorthPoint
Communications, Inc. and Elizabeth A. Fetter.*
10.30 Employment Agreement dated March 7, 2000 between NorthPoint
Communications, Inc. and Herman W. Bluestein.*
10.31 Employment Agreement dated March 7, 2000 between NorthPoint
Communications, Inc. and Steven J. Gorosh.*
10.32 Employment Agreement dated March 7, 2000 between NorthPoint
Communications, Inc. and Nancy J. Hemmenway.*
10.33 Employment Agreement dated March 7, 2000 between NorthPoint
Communications, Inc. and Michael G. Parks.*
11 Statement re: Computation of Earnings Per Share.*
21 Subsidiaries.*
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants.*
27.1 Financial Data Schedule.*
</TABLE>
- --------
* Filed herewith.
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
NORTHPOINT COMMUNICATIONS GROUP, INC.
<PAGE>
ARTICLE I
CORPORATE OFFICES
-----------------
1.1 Registered Office.
-----------------
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is The Corporation Trust Company.
1.2 Other Offices.
-------------
The board of directors may at any time establish other offices at any place
or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
2.1 Place of Meetings.
-----------------
Meetings of stockholders shall be held at any place, within or outside the
State of Delaware, designated by the Board of Directors. In the absence of any
such designation, stockholders' meetings shall be held at the registered office
of the corporation.
2.2 Annual Meeting.
--------------
The annual meeting of stockholders shall be held each year on a date and at
a time designated by the board of directors. At the meeting, directors shall be
elected and any other proper business may be transacted.
2.3 Special Meeting.
---------------
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, or by the chief executive
officer or the president or vice president of the corporation.
2.4 Notice of Stockholders' Meetings.
--------------------------------
All notices of meetings with stockholders shall be in writing and shall be
sent or otherwise given in accordance with Section 2.7 of these bylaws not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notice shall specify the
place, date, and hour of the meeting,
2
<PAGE>
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called.
2.5 Advance Notice of Stockholder Nominees.
--------------------------------------
Only persons who are nominated in accordance with the procedures set forth
in this Section 2.5 shall be eligible for election as directors. Nominations of
persons for election to the board of directors of the corporation may be made at
a meeting of stockholders by or at the direction of the board of directors or by
any stockholder of the corporation entitled to vote for the election of
directors at the meeting who complies with the notice procedures set forth in
this Section 2.5. Such nominations, other than those made by or at the direction
of the board of directors, shall be made pursuant to timely notice in writing to
the secretary of the corporation.
To be timely, a stockholder's notice shall be delivered to or mailed and
received at the principal executive offices of the corporation (a) in the case
of an annual meeting, not less than sixty (60) days nor more than ninety (90)
days prior to the first anniversary of the preceding year's annual meeting;
provided, however, that in the event that the date of the annual meeting is
changed by more than thirty (30) days from such anniversary date, notice by the
stockholders to be timely must be so received not later than the close of
business on the tenth (10th) day following the earlier of the day on which such
notice of the date of the meeting was mailed or public disclosure was made and
(b) in the case of a special meeting at which directors are to be elected, not
later than the close of business on the tenth (10th) day following the earlier
of the day on which notice of the date of the meeting was mailed or public
disclosure was made. Such stockholder's notice shall set forth (a) as to each
person whom the stockholder proposes to nominate for election or re-election as
a director, (i) the name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such person, (iii) the
class and number of shares of the corporation which are beneficially owned by
such person and (iv) any other information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors,
or is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (including, without limitation, such
person's written consent to being named in the proxy statement as a nominee and
to serving as a director if elected, and (b) as to the stockholder giving the
notice, (i) the name and address, as they appear on the corporation's books, of
such stockholder, and (ii) the class and number of shares of the corporation
which are beneficially owned by such stockholder and also which are owned of
record by such stockholder.
At the request of the board of directors, any person nominated by the board
of directors for election as a director shall furnish to the secretary of the
corporation that information required to be set forth in a stockholder's notice
of nomination which pertains to the nominee. No person shall be eligible for
election as a director of the corporation unless nominated in accordance with
the procedures set forth in this Section 2.5. The chairman of the meeting shall,
if the facts warrant, determine and
3
<PAGE>
declare to the meeting that a nomination was not made in accordance with the
procedures prescribed by the bylaws, and, if he or she should so determine, he
or she shall so declare to the meeting and the defective nomination shall be
disregarded. Notwithstanding the foregoing provisions of this Bylaw, a
stockholder shall also comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder with
respect to the matters set forth in this Bylaw.
2.6 Advance Notice of Stockholder Business.
--------------------------------------
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the annual meeting. To be
properly brought before an annual meeting, business must be (a) pursuant to the
corporation's notice of meeting (or any supplement thereto), (b) by or at the
direction of the board of directors or (c) by any stockholder of the corporation
who is a stockholder of record at the time of giving of the notice provided for
in this Section 2.6, who shall be entitled to vote at such meeting and who
complies with the notice procedures set forth in this Section 2.6.
Business to be brought before an annual meeting by a stockholder shall not
be considered properly brought if the stockholder has not given timely notice
thereof in writing to the secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not less than sixty (60) nor more
than ninety (90) days prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that the date of the
meeting is changed by more than thirty (30) days from such anniversary date,
notice by the stockholder to be timely must be so received not later than the
close of business on the tenth (10th) day following the earlier of the day on
which such notice of the date of the meeting was mailed or such public
disclosure was made. A stockholder's notice to the secretary shall set forth as
to each matter the stockholder proposes to bring before the meeting: (i) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting, (ii) the name and address,
as they appear on the corporation's books, of the stockholder proposing such
business, and the name and address of the beneficial owner, if any, on whose
behalf the proposal is made, (iii) the class and number of shares of the
corporation, which are owned by the stockholder of record and by the beneficial
owner, if any, on whose behalf the proposal is made, (iv) any material interest
of the stockholder of record and the beneficial owner, if any, on whose behalf
the proposal is made in such business, and (v) any other information that is
required by law to be provided by the stockholder in his or her capacity as a
proponent of a stockholder proposal.
Notwithstanding anything in these bylaws to the contrary, no business shall
be conducted at an annual meeting except in accordance with the procedures set
forth in this Section 2.6. The chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by the bylaws, and, if he or she
should so determine, he or she shall so declare to the meeting and the defective
nomination shall be disregarded. Notwithstanding the
4
<PAGE>
foregoing provisions of this Bylaw, a stockholder shall also comply with all
applicable requirements of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder with respect to the matters set forth in
this Bylaw.
2.7 Manner of Giving Notice; Affidavit of Notice.
--------------------------------------------
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein. If mailed, such notice
shall be deemed to be given when deposited in the mail, postage prepaid,
directed to the stockholder at his address as it appears on the records of the
corporation.
2.8 Quorum.
------
The holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the certificate of incorporation.
If, however, such quorum is not present or represented at any meeting of the
stockholders, then either (a) the chairman of the meeting or (b) the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.9 Adjourned Meeting; Notice.
-------------------------
When a meeting is adjourned to another time or place, unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.10 Conduct of Business.
-------------------
The chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of business.
5
<PAGE>
2.11 Voting.
------
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.14 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners
of stock and to voting trusts and other voting agreements).
Except as provided in the certificate of incorporation, each stockholder
shall be entitled to one vote for each share of capital stock held by such
stockholder.
2.12 Waiver of Notice.
----------------
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these bylaws.
2.13 No Stockholder Action by Written Consent Without a Meeting Following
---------------------------------------------------------------------
Initial Public Offering.
-----------------------
Any action required to be taken at any annual or special meeting of
stockholders of the corporation, or any action that may be taken at any annual
or special meeting of such stockholders, must be taken at an annual or special
meeting of stockholders of the corporation, with prior notice and with a vote,
and may not be taken by a consent in writing.
2.14 Record Date for Stockholder Notice; Voting.
------------------------------------------
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
If the board of directors does not so fix a record date:
6
<PAGE>
(i) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held.
(ii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
2.15 Proxies.
-------
Each stockholder entitled to vote at a meeting of stockholders may
authorize another person or persons to act for him by a written proxy, signed by
the stockholder and filed with the secretary of the corporation, but no such
proxy shall be voted or acted upon after three (3) years from its date, unless
the proxy provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney-in-fact. The revocability of a proxy that states on its
face that it is irrevocable shall be governed by the provisions of Section
212(c) of the General Corporation Law of Delaware.
ARTICLE III
DIRECTORS
---------
3.1 Powers.
------
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the certificate of incorporation or these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
3.2 Number of Directors.
-------------------
The authorized number of directors shall consist of nine (9) persons until
changed by a proper amendment of this Section 3.2.
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
7
<PAGE>
3.3 Election, Qualification and Term of Office of Directors.
-------------------------------------------------------
The board of directors shall be divided into three classes, as nearly equal
in number as possible with the term of office of the first class to expire at
the 2000 annual meeting of stockholders or any special meeting in lieu thereof,
the term of office of the second class to expire at the 2001 annual meeting of
stockholders or any special meeting in lieu thereof and the term of office of
the third class to expire at the 2002 annual meeting of stockholders or any
special meeting in lieu thereof. At each annual meeting of stockholders or
special meeting in lieu thereof following such initial classification, directors
elected to succeed those directors whose terms expire shall be elected for a
term of office to expire at the third succeeding annual meeting of the
stockholders or special meeting in lieu thereof after their election and until
their successors are duly elected and qualified. The foregoing provisions shall
become effective only when the corporation becomes a listed corporation within
the meaning of Section 301.5 of the California Corporations Code. Directors need
not be stockholders unless so required by the certificate of incorporation or
these bylaws, wherein other qualifications for directors may be prescribed.
Subject to the rights of the holders of any series of Preferred Stock then
outstanding, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the board of directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled only by a majority vote of the directors
then in office even though less than a quorum, or by a sole remaining director.
In the event of any increase or decrease in the authorized number of directors,
(a) each director then serving as such shall nevertheless continue as a director
of the class of which he or she is a member until the expiration of his or her
current term or his or her prior death, retirement, removal or resignation and
(b) the newly created or eliminated directorships resulting from such increase
or decrease shall if reasonably possible be apportioned by the board of
directors among the three classes of directors so as to ensure that no one class
has more than one director more than any other class. To the extent reasonably
possible, consistent with the foregoing rule, any newly created directorships
shall be added to those classes whose terms of office are to expire at the
latest dates following such allocation and newly eliminated directorships shall
be subtracted from those classes whose terms of office are to expire at the
earliest dates following such allocation, unless otherwise provided for from
time to time by resolution adopted by a majority of the directors then in
office, although less than a quorum. In the event of a vacancy in the board of
directors, the remaining directors, except as otherwise provided by law, may
exercise the powers of the full board of directors until the vacancy is filled.
Notwithstanding the foregoing, each director shall serve until his or her
successor is duly elected and qualified or until his or her death, resignation
or removal. No decrease in the number of directors constituting the board of
directors shall shorten the term of any incumbent director.
Elections of directors need not be by written ballot.
8
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There shall be no right with respect to shares of stock of the corporation
to cumulate votes in the election of directors.
3.4 Place of Meetings; Meetings by Telephone.
----------------------------------------
The board of directors of the corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.5 Regular Meetings.
----------------
Regular meetings of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.
3.6 Special Meetings; Notice.
------------------------
Special meetings of the board for any purpose or purposes may be called at
any time by the chairman of the board, the president, any vice president, the
secretary or any two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at lest four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.7 Quorum.
------
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute
9
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or by the certificate of incorporation. If a quorum is not present at any
meeting of the board of directors, then the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum is present.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.
3.8 Waiver of Notice.
----------------
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these bylaws. If a quorum is not present at any meeting of the
board of directors, then the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum is present.
3.9 Board Action by Written Consent Without a Meeting.
-------------------------------------------------
Unless otherwise restricted by the certificate of incorporation or these
bylaws, any action required or permitted to be taken at any meeting of the board
of directors, or of any committee thereof, may be taken without a meeting if all
members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee. Written consents representing actions taken by the board
or committee may be executed by telex, telecopy or other facsimile transmission,
and such facsimile shall be valid and binding to the same extent as if it were
an original.
3.10 Fees and Compensation of Directors.
----------------------------------
Unless otherwise restricted by the certificate of incorporation or these
bylaws, the board of directors shall have the authority to fix the compensation
of directors. No such compensation shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
10
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3.11 Approval of Loans to Officers.
-----------------------------
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.12 Removal of Directors.
--------------------
The holders of a majority of the shares then entitled to vote at an
election of directors may remove, only with cause, a director or directors of
the corporation.
No reduction in the authorized number of directors shall have the effect of
removing any director prior to the expiration of such director's term of office.
3.13 Chairman of the Board of Directors.
----------------------------------
The corporation may also have, at the discretion of the board of directors,
a chairman of the board of directors who shall not be considered an officer of
the corporation.
ARTICLE IV
COMMITTEES
----------
4.1 Committees of Directors.
-----------------------
The board of directors may, by resolution passed by a majority of the whole
board, designate one or more committees, with each committee to consist of one
or more of the directors of the corporation. The board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the board of
directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
board of directors or in the bylaws of the corporation, shall have and may
exercise all the powers and authority of the board of directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers that may require it; but no
such committee shall have the power
11
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or authority to (i) amend the certificate of incorporation (except that a
committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the board of directors
as provided in Section 151(a) of the General Corporation Law of Delaware, fix
the designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the corporation), (ii) adopt an agreement of merger or
consolidation under Sections 251 or 252 of the General Corporation Law of
Delaware, (iii) recommend to the stockholders the sale, lease or exchange of all
or substantially all of the corporation's property and assets, (iv) recommend to
the stockholders a dissolution of the corporation or a revocation of a
dissolution, or (v) amend the bylaws of the corporation; and, unless the board
resolution establishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 Committee Minutes.
-----------------
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
4.3 Meetings and Action of Committees.
---------------------------------
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these bylaws, Section 3.4
(place of meetings and meetings by telephone), Section 3.5 (regular meetings),
Section 3.6 (special meetings and notice), Section 3.7 (quorum), Section 3.8
(waiver of notice) and Section 3.10 (action without a meeting), with such
changes in the context of those bylaws as are necessary to substitute the
committee and its members for the board of directors and its members; provided,
however, that the time of regular meetings of committees may also be called by
resolution of the board of directors and that notice of special meetings of
committees shall also be given to all alternate members, who shall have the
right to attend all meetings of the committee. The board of directors may adopt
rules for the government of any committee not inconsistent with the provisions
of these bylaws.
ARTICLE V
OFFICERS
--------
5.1 Officers.
--------
The officers of the corporation shall be a chief executive officer, a
president, a secretary, and a chief financial officer. The corporation may also
have, at the discretion
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of the board of directors, one or more vice presidents, one or more assistant
secretaries, one or more assistant treasurers, and any such other officers as
may be appointed in accordance with the provisions of Section 5.3 of these
bylaws. Any number of offices may be held by the same person.
5.2 Appointment of Officers.
-----------------------
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall
be chosen by the board of directors, subject to the rights, if any, of an
officer under any contract of employment.
5.3 Subordinate Officers.
--------------------
The board of directors may appoint, or empower the chief executive officer
or the president to appoint, such other officers and agents as the business of
the corporation may require, each of whom shall hold office for such period,
have such authority, and perform such duties as are provided in these bylaws or
as the board of directors may from time to time determine.
5.4 Removal and Resignation of Officers.
-----------------------------------
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 Vacancies in Offices.
--------------------
Any vacancy occurring in any office of the corporation shall be filled by
the board of directors.
5.6 Chief Executive Officer.
-----------------------
Subject to such supervisory powers, if any, as may be given by the board of
directors to the chairman of the board, the chief executive officer of the
corporation shall, subject to the control of the board of directors, have
general supervision, direction and
13
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control of the business and officers of the corporation. The chief executive
officer shall preside at all meetings of the stockholders and, in the absence or
nonexistence of a chairman of the board, at all meetings of the board of
directors. The chief executive officer shall have the general powers and duties
of management usually vested in the office of chief executive officer of a
corporation and shall have such other powers and duties as may be prescribed by
the board of directors or these bylaws.
5.7 President.
---------
Subject to such supervisory powers, if any, as may be given by the board of
directors to the chairman of the board or the chief executive officer, the
president of the corporation shall have general supervision, direction and
control of the business and officers of the corporation. The president shall
have the general powers and duties of management usually vested in the office of
president of a corporation and shall have such other powers and duties as may be
prescribed by the board of directors or these bylaws.
5.8 Vice Presidents.
---------------
In the absence or disability of the chief executive officer and president,
the vice presidents, if any, in order of their rank as fixed by the board of
directors or, if not ranked, a vice president designated by the board of
directors, shall perform all the duties of the president and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
board of directors, these bylaws, the president or the chairman of the board.
5.9 Secretary.
---------
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or at such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and stockholders. The minutes shall show the time and place of
each meeting, the names of those present at directors' meetings or committee
meetings, the number of shares present or represented at stockholders' meetings,
and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the board of directors required to be given by law or by
these bylaws. The secretary shall keep the seal of the corporation, if one be
adopted, in safe custody and
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shall have such other powers and perform such other duties as may be prescribed
by the board of directors or by these bylaws.
5.10 Chief Financial Officer.
-----------------------
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other valuables
in the name and to the credit of the corporation with such depositories as may
be designated by the board of directors. The chief financial officer shall
disburse the funds of the corporation as may be ordered by the board of
directors, shall render to the president and directors, whenever they request
it, an account of all his or her transactions as chief financial officer and of
the financial condition of the corporation, and shall have other powers and
perform such other duties as may be prescribed by the board of directors or by
the bylaws.
5.11 Representation of Shares of Other Corporations.
----------------------------------------------
The chairman of the board, the chief executive officer, the president, any
vice president, the chief financial officer, the secretary or any assistant
secretary of this corporation, or any other person authorized by the board of
directors or the chief executive officer or the president or a vice president,
is authorized to vote, represent, and exercise on behalf of this corporation all
rights incident to any and all shares of any other corporation or corporations
standing in the name of this corporation. The authority granted herein may be
exercised either by such person directly or by any other person authorized to do
so by proxy or power of attorney duly executed by such person having the
authority.
5.12 Authority and Duties of Officers.
--------------------------------
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the board of directors or the stockholders.
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ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS,
---------------------------------------
EMPLOYEES AND OTHER AGENTS
--------------------------
6.1 Indemnification of Directors and Officers.
-----------------------------------------
The corporation shall, to the maximum extent and in the manner permitted by
the General Corporation Law of Delaware, indemnify each of its directors and
officers against expenses (including attorneys' fees), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was an
agent of the corporation. For purposes of this Section 6.1, a "director" or
"officer" of the corporation includes any person (i) who is or was a director or
officer of the corporation, (ii) who is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was a director or officer of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
6.2 Indemnification of Others.
-------------------------
The corporation shall have the power, to the extent and in the manner
permitted by the General Corporation Law of Delaware, to indemnify each of its
employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation (other
than a director or officer) includes any person (i) who is or was an employee or
agent of the corporation, (ii) who is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was an employee or agent of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
6.3 Payment of Expenses in Advance.
------------------------------
Expenses incurred in defending any action or proceeding for which
indemnification is required pursuant to Section 6.1 or for which indemnification
is permitted pursuant to Section 6.2 following authorization thereof by the
board of directors shall be paid by the corporation in advance of the final
disposition of such action or proceeding upon receipt of an undertaking by or on
behalf of the indemnified party to repay such amount if it shall ultimately be
determined that the indemnified party is not entitled to be indemnified as
authorized in this Article 6.
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6.4 Indemnity Not Exclusive.
-----------------------
The indemnification provided by this Article 6 shall not be deemed
exclusive of any other rights which those seeking indemnification may be
entitled under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent that
additional rights to indemnification are authorized in the certificate of
incorporation.
6.5 Insurance.
---------
The corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Law of Delaware.
6.6 Conflicts.
---------
No indemnification or advance shall be made under this Article 6, except
where such indemnification or advance is mandated by law or the order, judgment
or decree of any court of competent jurisdiction, in any circumstance where it
appears:
(i) That it would be inconsistent with a provision of the certificate
of incorporation, these bylaws, a resolution of the stockholders or an agreement
in effect at the time of the accrual of the alleged cause of the action asserted
in the proceeding in which the expenses were incurred or other amounts were
paid, which prohibits or otherwise limited indemnification; or
(ii) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
-------------------
7.1 Maintenance and Inspection of Records.
-------------------------------------
The corporation shall, either at its principal executive office or at such
place or places as designated by the board of directors, keep a record of its
shareholders listing their names and addresses and the number and class of
shares held by each shareholder, a copy of these bylaws as amended to date,
accounting books, and other records.
17
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Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
7.2 Inspection by Directors.
-----------------------
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 Annual Statement to Stockholders.
--------------------------------
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by the vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
ARTICLE VII
GENERAL MATTERS
---------------
8.1 Checks.
------
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.2 Execution of Corporate Contracts and Instruments.
------------------------------------------------
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute
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any instrument in the name of and on behalf of the corporation; such authority
may be general or confined to specific instances. Unless so authorized or
ratified by the board of directors or within the agency power of an officer, no
officer, agent or employee shall have any power or authority to bind the
corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or for any amount.
8.3 Stock Certificates; Partly Paid Shares.
--------------------------------------
The shares of a corporation shall be represented by certificates, provided
that the board of directors of the corporation may provide by resolution or
resolutions that some or all of any or all classes or series of its stock shall
be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the board of directors, or the chief executive officer or the president or vice-
president, and by the chief financial officer or an assistant treasurer, or the
secretary or an assistant secretary of such corporation representing the number
of shares registered in certificate form. Any or all of the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
has ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.4 Special Designation on Certificates.
-----------------------------------
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a
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statement that the corporation will furnish without charge to each stockholder
who so requests the powers, the designations, the preferences, and the relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
8.5 Lost Certificates.
-----------------
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
8.6 Construction; Definitions.
-------------------------
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
8.7 Dividends.
---------
The directors of the corporation, subject to any restrictions contained in
the certificate of incorporation, may declare and pay dividends upon the shares
of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the corporation's
capital stock.
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 Fiscal Year.
-----------
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
20
<PAGE>
8.9 Seal.
----
The corporation may have a corporate seal, which shall be adopted and
which may be altered by the board of directors, and may use the same by causing
it or a facsimile thereof, to be impressed or affixed or in any other manner
reproduced.
8.10 Transfer of Stock.
-----------------
Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction in its books.
8.11 Stock Transfer Agreements.
-------------------------
The corporation shall have power to enter into and perform any agreement
with any number of shareholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
8.12 Registered Stockholders.
-----------------------
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
----------
The bylaws of the corporation may be adopted, amended or repealed by the
stockholders entitled to vote; provided, however, that the corporation may, in
its certificate of incorporation, confer the power to adopt, amend or repeal
bylaws upon the directors. The fact that such power has been so conferred upon
the directors shall not divest the stockholders of the power, nor limit their
power to adopt, amend or repeal bylaws.
21
<PAGE>
CERTIFICATE OF ADOPTION OF
AMENDED AND RESTATED BYLAWS
OF
NORTHPOINT COMMUNICATIONS GROUP, INC.
The undersigned hereby certifies that he is the duly elected, qualified,
and acting Secretary of NorthPoint Communications Group, Inc. (the
"Corporation") and that the foregoing Amended and Restated Bylaws, comprising
twenty-one (21) pages, were adopted as the Amended and Restated Bylaws of the
Corporation on January 19, 2000, by the Board of Directors of the Corporation at
a meeting on January 19, 2000.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed
the corporate seal this 19th day of January, 2000.
/s/ Steven J. Gorosh
------------------------
Steven J. Gorosh,
Secretary
<PAGE>
EXHIBIT 4.2
EXECUTION COPY
________________________________________________________________________________
NORTHPOINT COMMUNICATIONS GROUP, INC.
as Issuer
---------
TO
THE BANK OF NEW YORK
as Trustee
----------
__________
Indenture
Dated as of February 8, 2000
__________
Up to $500,000,000
12 7/8% SENIOR NOTES DUE 2010
________________________________________________________________________________
<PAGE>
EXECUTION COPY
NorthPoint Communications Group, Inc.
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Indenture
Act Section Section
- ------------------ ---------------------
(S) 310(a)(1) 609
(a)(2) 609
(a)(3) Not Applicable
(a)(4) Not Applicable
(b) 608
610
(S) 311(a) 613
(b) 613
(S) 312(a) 701
(b) 702
(c) 702
(S) 313(a) 703
(b) 703
(c) 703
(d) 703
(S) 314(a) 704
1018
(b) Not Applicable
(c)(1) 102
(c)(2) 102
(c)(3) Not Applicable
(d) Not Applicable
(e) 102
(S) 315(a) 601
(b) 602
(c) 601
(d) 601
(e) 514
(S) 316(a)(1)(A) 502
512
(a)(1)(B) 513
(a)(2) Not Applicable
(b) 508
(c) 104
(S) 317(a)(1) 503
(a)(2) 504
-2-
<PAGE>
Trust Indenture Indenture
Act Section Section
- ------------------ -----------
(b) 1003
(S) 318(a) 107
-3-
<PAGE>
EXECUTION COPY
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS OF THE COMPANY 1
ARTICLE ONE Definitions and Other Provisions of General Application
SECTION 101. Definitions 12
Acquired Debt 13
Act 13
Additional Interest 14
Additional Securities 14
Affiliate 14
Affiliate Transaction 14
Agent Member 14
Applicable Procedures 14
Asset Sale 14
Attributable Debt 15
Bankruptcy Code 15
Beneficial Owner 15
Board of Directors 15
Board Resolution 16
Business Day 16
Capital Lease Obligation 16
Capital Stock 16
Cash Equivalents 17
Change of Control 18
Clearsteam 19
Closing Price 19
Commission 19
Common Equity 20
Common Stock 20
Company 20
Company Request 20
Company Order 20
Consolidated Cash Flow 20
Consolidated Debt 21
Consolidated Net Income 21
Consolidated Net Worth 21
Consolidated Tangible Net Worth 21
Continuing Director 21
Corporate Trust Office 22
corporation 22
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
Credit Facility 23
Debt 23
Debt to Annualized Cash Flow Ratio 24
Default 25
Default Amount 25
Defaulted Interest 25
Depositary 25
Disqualified Stock 25
DTC 25
Equity Interests 25
Euroclear 26
Event of Default 26
Excess Proceeds 26
Exchange Act 26
Exchange Offer 26
Exchange Registration Statement 26
Exchange Security 26
Existing Debt 26
Expiration Date 26
Fair Market Value 26
GAAP 26
Global Security 27
Government Securities 27
Guarantee 27
Guarantor 27
Hedging Obligations 27
Holder 27
Incur 27
Indenture 28
Interest Payment Date 28
Intercompany Debt 28
Interest Rate, Currency or Commodity Price Agreement 28
Investments 28
Issue Date 29
Lien 29
Maturity 29
Measurement Period 29
Moody's 29
Net Income 29
Net Cash Proceeds 29
Non-Recourse Debt 30
Notice of Default 30
Offer 31
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
Offer to Purchase 31
Officers' Certificate 34
Opinion of Counsel 34
Original Securities 34
Outstanding 34
Pari Passu Debt 35
Paying Agent 35
Permitted Holder 35
Permitted Investments 36
Permitted Liens 37
Permitted Refinancing Debt 38
Person 39
Predecessor Security 39
Productive Assets 39
Public Equity Offering 39
Purchase Agreement 40
Purchase Amount 40
Purchase Date 40
Purchase Money Debt 40
Purchase Price 40
Purchasers 40
Redemption Date 40
Redemption Price 40
Registered Securities 40
Registration Default 41
Registration Rights Agreement 41
Regular Record Date 41
Regulation S 41
Regulation S Certificate 41
Regulation S Global Security 41
Regulation S Legend 41
Regulation S Securities 41
Resale Registration Statement 41
Responsible Officer 41
Restricted Global Security 42
Restricted Investment 42
Restricted Payments 42
Restricted Period 42
Restricted Securities 42
Restricted Securities Certificate 42
Restricted Securities Legend 42
Restricted Subsidiary 42
Rule 144A 42
Rule 144A Securities 43
S&P 43
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
Sale and Leaseback Transaction 43
SEC Reports 43
Securities 43
Securities Act 43
Securities Act Legend 43
Security Register 43
Security Registrar 43
Significant Subsidiary 43
Special Record Date 43
Stated Maturity 44
Step-Down Date 44
Step-Up 44
Strategic Equity Placement 44
Strategic Investment 44
Strategic Investor 44
Subordinated Debt 44
Subsidiary 44
Successor Security 45
Telecommunications Business 45
Telecommunications Related Assets 45
Total Common Equity 45
Trading Day 45
Trustee 46
Trust Indenture Act 46
Unrestricted Securities Certificate 46
Unrestricted Subsidiary 46
Vice President 47
Voting Stock 47
Weighted Average Life to Maturity 47
Wholly Owned Restricted Subsidiary 47
SECTION 102. Compliance Certificates and Opinions 47
SECTION 103. Form of Documents Delivered to Trustee 48
SECTION 104. Acts of Holders; Record Dates 49
SECTION 105. Notices, Etc., to Trustee and Company 52
SECTION 106. Notice to Holders; Waiver 53
SECTION 107. Application of Trust Indenture Act 53
SECTION 108. Effect of Headings and Table of Contents 54
SECTION 109. Successors and Assigns 54
SECTION 110. Separability Clause 54
SECTION 111. Benefits of Indenture 54
SECTION 112. No Personal Liability of Directors,Officers,Employees and
Stockholders 55
SECTION 113. Governing Law 55
SECTION 114. Legal Holidays 55
</TABLE>
-7-
<PAGE>
<TABLE>
ARTICLE TWO
Security Forms
<S> <C>
SECTION 201. Forms Generally......................................... 55
SECTION 202. Form of Face of Security................................ 57
SECTION 203. Form of Reverse of Security............................. 57
SECTION 204. Additional Provisions Required in GlobalSecurity........ 61
SECTION 205. Form of Trustee's Certificate of Authentication......... 67
ARTICLE THREE
The Securities
SECTION 301. Title and Terms......................................... 68
SECTION 302. Denominations........................................... 71
SECTION 303. Execution, Authentication, Delivery and Dating.......... 71
SECTION 304. Temporary Securities.................................... 72
SECTION 305. Registration, Registration of Transfer and Exchange..... 73
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities........ 79
SECTION 307. Payment of Interest; Interest Rights Preserved.......... 80
SECTION 308. Persons Deemed Owners................................... 82
SECTION 309. Cancellation............................................ 82
SECTION 310. Computation of Interest................................. 83
SECTION 311. CUSIP Numbers........................................... 83
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture................. 84
SECTION 402. Application of Trust Money.............................. 85
ARTICLE FIVE
Remedies
SECTION 501. Events of Default....................................... 85
SECTION 502. Acceleration of Maturity; Rescissionand Annulment....... 88
SECTION 503. Collection of Indebtedness and Suitsfor Enforcement
by Trustee........................................... 90
SECTION 504. Trustee May File Proofs of Claim........................ 91
SECTION 505. Trustee May Enforce Claims Without Possession
of Securities........................................ 92
SECTION 506. Application of Money Collected.......................... 92
SECTION 507. Limitation on Suits..................................... 93
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest................................. 94
SECTION 509. Restoration of Rights and Remedies...................... 94
SECTION 510. Rights and Remedies Cumulative.......................... 94
SECTION 511. Delay or Omission Not Waiver............................ 95
SECTION 512. Control by Holders...................................... 95
SECTION 513. Waiver of Past Defaults.................................
SECTION 514. Undertaking for Costs................................... 96
SECTION 515. Waiver of Stay or Extension Laws........................ 97
</TABLE>
-8-
<PAGE>
<TABLE>
ARTICLE SIX
The Trustee
<S> <C>
SECTION 601. Certain Duties and Responsibilities...................... 97
SECTION 602. Notice of Defaults....................................... 98
SECTION 603. Certain Rights of Trustee................................ 98
SECTION 604. Not Responsible for Recitals or Issuance of Securities... 100
SECTION 605. May Hold Securities...................................... 101
SECTION 606. Money Held in Trust...................................... 101
SECTION 607. Compensation and Reimbursement........................... 102
SECTION 608. Disqualification; Conflicting Interests.................. 103
SECTION 609. Corporate Trustee Required; Eligibility.................. 103
SECTION 610. Resignation and Removal; Appointment of Successor........ 103
SECTION 611. Acceptance of Appointment by Successor................... 105
SECTION 612. Merger, Conversion, Consolidation or Succession to
Business................................................ 108
SECTION 613. Preferential Collection of Claims Against the Company..... 109
SECTION 614. Appointment of Authenticating Agent....................... 109
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and the Company
SECTION 701. Company to Furnish Trustee Names and Addresses
of Holders.............................................. 108
SECTION 702. Preservation of Information; Communications to Holders.... 109
SECTION 703. Reports by Trustee........................................ 110
SECTION 704. Reports by Company........................................ 111
SECTION 705. Officers' Certificate with Respect to Change in
Interest Rates.......................................... 111
ARTICLE EIGHT
Merger, Consolidation, Etc.
SECTION 801. Mergers, Consolidations and Certain Sales of Assets....... 111
SECTION 802. Successor Substituted..................................... 113
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent of Holders........ 114
SECTION 902. Supplemental Indentures with Consent of Holders........... 115
SECTION 903. Execution of Supplemental Indentures...................... 116
SECTION 904. Effect of Supplemental Indentures......................... 117
SECTION 905. Conformity with Trust Indenture Act....................... 117
SECTION 906. Reference in Securitiesto Supplemental Indentures......... 117
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and Interest............... 118
SECTION 1002. Maintenance of Office or Agency.......................... 118
SECTION 1003. Money For Security Payments to be Held in Trust.......... 118
SECTION 1004. Existence................................................ 121
</TABLE>
-9-
<PAGE>
<TABLE>
<S> <C>
SECTION 1005. Maintenance of Properties and Insurance.................. 121
SECTION 1006. Payment of Taxes and Other Claims........................ 123
SECTION 1007. Limitation on Incurrence of Debt......................... 123
SECTION 1008. Limitation on Issuances of Guarantees of Debt............ 124
SECTION 1009. Limitation on Restricted Payments........................ 125
SECTION 1010. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries...................... 129
SECTION 1011. Limitation on Liens...................................... 131
SECTION 1012. Limitation on Sale and Leaseback Transactions............ 132
SECTION 1013. Limitation on Asset Sales................................ 132
SECTION 1014. Limitation on Issuances and Sales of Equity Interests
of Restricted Subsidiaries............................. 135
SECTION 1015. Transactions with Affiliates............................. 136
SECTION 1016. Change of Control........................................ 138
SECTION 1017. Provision of Financial Information....................... 139
SECTION 1018. Statement by Officers as to Default...................... 140
SECTION 1019. Waiver of Certain Covenants.............................. 140
SECTION 1020. Limitation on Business Activities........................ 140
SECTION 1021. Designation of Restricted and Unrestricted Subsidiaries.. 141
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. Right of Redemption...................................... 142
SECTION 1102. Applicability of Article................................. 143
SECTION 1103. Election to Redeem; Notice to Trustee.................... 144
SECTION 1104. Securities to Be Redeemed Pro Rata....................... 145
SECTION 1105. Notice of Redemption..................................... 146
SECTION 1106. Deposit of Redemption Price.............................. 146
SECTION 1107. Securities Payable on Redemption Date.................... 146
SECTION 1108. Securities Redeemed in Part.............................. 147
ARTICLE TWELVE
Defeasance and Covenant Defeasance
SECTION 1201. Company's Option to Effect Defeasance or Covenant
Defeasance............................................. 147
SECTION 1202. Defeasance and Discharge................................. 148
SECTION 1203. Covenant Defeasance...................................... 148
SECTION 1204. Conditions to Defeasance or Covenant Defeasance.......... 149
SECTION 1205. Deposited Money and U.S. Government Obligations to
Be Held in Trust; Other Miscellaneous Provisions....... 152
SECTION 1206. Reinstatement............................................ 153
SECTION 1207. Repayment to Company..................................... 153
</TABLE>
ANNEX A - Form of Regulation S Certificate
-10-
<PAGE>
ANNEX B - Form of Restricted Securities Certificate
ANNEX C - Form of Unrestricted Securities Certificate
-11-
<PAGE>
INDENTURE, dated as of February 8, 2000, between NorthPoint
Communications Group, Inc., a corporation organized under the laws of the State
of Delaware (the "Company"), having its principal office at 303 Second Street,
San Francisco, California 94107, and The Bank of New York, a New York banking
corporation, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of up to
$500,000,000 aggregate principal amount of its 12 7/8% Senior Notes due 2010
(the "Securities") of substantially the tenor and amount hereinafter set forth,
and to provide therefor the Company has duly authorized the execution and
delivery of this Indenture. The Securities may consist of Original Securities
and/or Exchange Securities, each as defined herein. The Original Securities and
the Exchange Securities shall rank pari passu in right of payment with all
existing and future senior obligations of the Company.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions.
-12-
<PAGE>
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP (whether or not such is
indicated herein); and
(4) the words "herein", "hereof" and "here under" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain terms, used principally in Article Six, are defined in that
Article.
"Acquired Debt" means, with respect to any specified Person, (i) Debt
of any other Person existing at the time such other Person is merged with or
into or becomes a Restricted Subsidiary of such specified Person, including,
without limitation, Debt incurred in connection with, or in contemplation of,
such other Person merging with or into or becoming a Restricted Subsidiary of
such specified Person and (ii) Debt secured by a Lien encumbering any asset
acquired by such specified Person.
"Act", when used with respect to any Holder, has the meaning
specified in Section 104.
"Additional Interest" has the meaning set forth in the form of
Security contained in Section 202. Unless the context otherwise requires,
references herein to "interest" on the Securities shall include Additional
Interest.
-13-
<PAGE>
"Additional Securities" has the meaning specified in Section 301.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control",
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
--------
Voting Stock of a Person shall be deemed to be control. For purposes of this
definition, the terms "controlling", "controlled by" and "under common control
with" shall have correlative meanings.
"Affiliate Transaction" has the meaning specified in Section 1015.
"Agent Member" means any member of, or participant in, the
Depository.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Security or beneficial interest therein, the
rules and procedures of the Depositary for such Security, Euroclear and
Clearsteam, in each case to the extent applicable to such transaction and as in
effect from time to time.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than sales of services, assets or rights in the
ordinary course of business (including sales of Cash Equivalents); provided that
--------
the sale, lease, conveyance or other disposition of all or substantially all of
the assets of the Company and its Restricted Subsidiaries taken as a whole shall
be governed by the provisions of Section 1016 and for Section 801 and not by the
provisions of Section 1013; and (ii) the issue or sale by the Company or any of
its Subsidiaries of Equity Interests of any of the Company's Subsidiaries.
-14-
<PAGE>
Notwithstanding the foregoing, the following items shall not be deemed
to be Asset Sales: (i) any single transaction or series of related transactions
that (a) involves assets having a Fair Market Value (as conclusively determined
in good faith by the Board of Directors) of less than $1.0 million or (b)
results in net proceeds to the Company and its Subsidiaries of less than $1.0
million; (ii) a transfer of assets by the Company to a Restricted Subsidiary or
by a Restricted Subsidiary to the Company or to another Restricted Subsidiary;
(iii) an issuance of Equity Interests by a Restricted Subsidiary to the Company
or to another Restricted Subsidiary; (iv) a Restricted Payment that is permitted
by the provisions of Section 1009; (v) disposals or replacements of obsolete,
uneconomical, negligible, worn-out or surplus property in the ordinary course of
business; or (vi) a conveyance constituting or pursuant to a Permitted Lien.
"Attributable Debt" in respect of any Sale and Leaseback Transaction,
means, at the time of determination, the present value (discounted at a rate
consistent with accounting guidelines, as determined in good faith by the
Company) of the payments during the remaining term of the lease included in such
Sale and Leaseback Transaction (including any period for which such lease has
been extended or may, at the option of the lessee, be extended) or until the
earliest date on which the lessee may terminate such lease without penalty or
upon payment of a penalty (in which case the rental payments shall be calculated
to include such penalty), after excluding all amounts required to be paid on
account of maintenance and repairs, insurance, taxes, assessments, water,
utilities and similar charges.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Beneficial Owner" has the meaning assigned to such term in Rules
13d-3 and 13d-5 under the Exchange Act (or any successor rules), including the
provision of such Rules that a Person shall be deemed to have beneficial
ownership of all securities that such Person has a right to acquire within 60
days; provided that a Person will not be deemed to be a beneficial owner of, or
--------
to own beneficially, any securities if such beneficial ownership:
-15-
<PAGE>
(i) arises solely as a result of a revocable proxy delivered in
response to a proxy or consent solicitation made pursuant to, and in
accordance with, the Exchange Act; and
(ii) is not also then reportable on Schedule 13D or Schedule 13G (or
any successor schedule) under the Exchange Act.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that Board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The Borough of
Manhattan, The City of New York, New York are authorized or obligated by law or
executive order to close.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on the balance sheet of
the lessee in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock; (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock; (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited); and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of (other than distributions of assets in respect of Debt), the issuing
Person.
-16-
<PAGE>
"Cash Equivalents" means, as at any date of determination:
(i) marketable securities (a) issued or directly and unconditionally
guaranteed as to interest and principal by the United States government or
(b) issued by any agency of the United States, the obligation of which are
backed by the full faith and credit of the United States, in each case
maturing within one year after such date;
(ii) marketable direct obligations issued by any state of the United
States or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within one year after such
date and having, at the time of the acquisition thereof, a rating of at
least A-1 from S&P or at least P-1 from Moody's;
(iii) commercial paper maturing no more than one year from the date of
creation thereof and having, at the time of the acquisition thereof, a
rating of at least A-1 from S&P or at least P-1 from Moody's;
(iv) certificates of deposit, repurchase agreements, money market or
other cash management accounts, bankers acceptances and short term
Eurodollar time deposits maturing within one year after such date and
issued or accepted by any financial institution organized under the laws of
the United States or any state thereof or the District of Columbia that
either (x) has a long term deposit rating of at least A-2 from Moody's and
A from S&P or (y)(a) is at least "adequately capitalized" (as defined in
the regulations of its primary Federal banking regulator) and (b) has Tier
1 capital (as defined in such regulations) of not less than $100,000,000;
(v) floating and fixed rate obligations of major corporations, banks
and agencies, including, but not limited to, corporate bonds, medium term
notes, deposit notes and eurodollar/yankee notes and bonds; provided that
--------
(a) all such obligations shall be rated at least A-2 or A by Moody's or
S&P, respectively; (b) no such
-17-
<PAGE>
obligation shall have a duration in excess of one year; and (c) the
aggregate principal amount of all such obligations held at any time by the
Company and any of its Subsidiaries shall not exceed 50% of the aggregate
principal amount of all Cash Equivalents described in clauses (i) through
(iv) of this definition (including, with respect to Investments referred to
in clause (i) and (ii) hereof, Investments in the form permitted pursuant
to clause (vi) of this definition); and
(vi) shares of any money market mutual fund that (a) has substantially
all of its assets invested continuously in the types of investments
referred to in clauses (i) and (ii) above, (b) has net assets of not less
than $500,000,000 and (c) has the highest rating obtainable from either S&P
or Moody's.
"Change of Control" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition, in
one or a series of related transactions, of all or substantially all of the
assets of the Company and its Restricted Subsidiaries, taken as a whole, to
any Person or group (as such term is used in Section 13(d)(3) and 14(d)(2)
of the Exchange Act);
(ii) the adoption of a plan relating to the liquidation or
dissolution of the Company;
(iii) the consummation of any transaction (including by way of merger,
consolidation or otherwise) the result of which is that any Person or group
(as such term is used in Section 13(d)(3) and 14(d)(2) of the Exchange Act)
other than the Permitted Holders becomes the Beneficial Owner, directly or
indirectly, of more than 50% of the total Voting Stock or Total Common
Equity of the Company; or
(iv) the first day on which a majority of the members of the Board of
Directors are not Continuing Directors.
-18-
<PAGE>
"Clearsteam" means Clearsteam Banking S.A. (or any successor
securities clearing agency).
"Closing Price" on any Trading Day with respect to the per share
price of any shares of Capital Stock means the last reported sale price regular
way or, in case no such reported sale takes place on such day, the average of
the reported closing bid and asked prices regular way, in either case on the New
York Stock Exchange or, if such shares of Capital Stock are not listed or
admitted to trading on such exchange, on the principal national securities
exchange on which such shares are listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, on the NASDAQ
National Market or, if such shares are not listed or admitted to trading on any
national securities exchange or quoted on the NASDAQ National Market but the
issuer is a "foreign issuer" (as defined in Rule 3b-4(b) under the Exchange Act)
and the principal securities exchange on which such shares are listed or
admitted to trading is a "designated offshore securities market" (as defined in
Rule 902(b) under the Securities Act), the average of the reported closing bid
and asked prices regular way on such principal exchange, or, if such shares are
not listed or admitted to trading on any national securities exchange or quoted
on the NASDAQ National Market and the issuer and principal securities exchange
do not meet such requirements, the average of the closing bid and asked prices
in the over-the-counter market as furnished by any New York Stock Exchange
member firm selected from time to time by the Company for that purpose and
reasonably acceptable to the Trustee.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"Common Equity" of any Person means Capital Stock of such Person that
is not Disqualified Stock, and a "sale of Common Equity" includes any sale of
Common Equity effected by private sale or public offering.
-19-
<PAGE>
"Common Stock" means the common stock, par value $0.001 per share, of
the Company.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture and thereafter "Company"
shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by (i) the Chief Executive Officer, the
President or a Vice President of the Company, and (ii) the Treasurer, Assistant
Treasurer, Secretary or Assistant Secretary of the Company, and delivered to the
Trustee.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus (i) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale, to the extent such losses were deducted in computing such
Consolidated Net Income; plus (ii) provision for taxes based on income or
profits of such Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was included in computing such Consolidated
Net Income; plus (iii) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued and whether or
not capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing such
Consolidated Net Income; plus (iv) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or amortization
of a
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prepaid cash expense that was paid in a prior period) of such Person and its
Restricted Subsidiaries for such period to the extent that such depreciation,
amortization and other non-cash expenses were deducted in computing such
Consolidated Net Income; minus (v) non-cash items increasing such Consolidated
Net Income for such period, in each case, on a consolidated basis and determined
in accordance with GAAP. Notwithstanding the foregoing, the provision for taxes
on the income or profits of, and the depreciation and amortization and other
non-cash expenses of, a Restricted Subsidiary of the referent Person shall be
added to Consolidated Net Income to compute Consolidated Cash Flow only to the
extent that a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Restricted Subsidiary
without prior governmental approval (that has not been obtained), and without
direct or indirect restriction pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Restricted Subsidiary or its
stockholders.
"Consolidated Debt" means, with respect to any Person as of any date
of determination, the sum, without duplication, of (i) the total amount of Debt
of such Person and its Restricted Subsidiaries; (ii) the total amount of Debt of
any other Person, to the extent that such Debt has been guaranteed by the
referent Person or one or more of its Restricted Subsidiaries; and (iii) the
aggregate liquidation value of all preferred stock of Restricted Subsidiaries of
such Person, in each case, determined on a consolidated basis in accordance with
GAAP.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income of any Person that is an
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Unrestricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted Subsidiary
thereof; (ii) the Net Income of any Restricted Subsidiary shall be excluded to
the extent that the declaration or
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payment of dividends or similar distributions by such Restricted Subsidiary of
that Net Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to such
Restricted Subsidiary or its stockholders; (iii) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition shall be excluded; and (iv) the cumulative effect of a
change in accounting principles shall be excluded.
"Consolidated Net Worth" means with respect to any Person, the
consolidated stockholders' or partners' equity of such Person as reflected on
the most recent balance sheet of such Person, determined in accordance with
GAAP, less any amounts attributable to Disqualified Stock of such Person.
"Consolidated Tangible Net Worth" means, with respect to any Person
as of any date, Consolidated Net Worth, after deducting therefrom amounts
attributable to goodwill, trade names, patents, unamortized debt discount and
expense and any other intangibles, all as set forth on the most recent
consolidated balance sheet of such Person.
"Continuing Director" means, as of any date of determination, any
member of the Board of Directors who (1) was a member of such Board of Directors
on the Issue Date; or (2) was nominated for election to such Board of Directors
with the affirmative vote of a majority of the Continuing Directors who were
members of such Board of Directors at the time of such nomination or election or
who was elected or appointed in the ordinary course by Continuing Directors or
other directors so elected or appointed.
"Corporate Trust Office" means the principal office of the Trustee in
the Borough of Manhattan, The City of New York, New York, at which at any
particular time its corporate trust business shall be administered, which at the
date hereof is located at 101 Barclay St., 21W, New York, NY 10286.
"corporation" means a corporation, association,
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company, limited liability company, joint-stock company or business trust.
"Credit Facility" means the Credit and Guaranty Agreement, dated as
of December 8, 1999 between the Company, NorthPoint Communications, Inc.,
certain subsidiaries of NorthPoint Communications, Inc., as listed therein,
Goldman Sachs Credit Partners L.P., as lead arranger and syndication agent,
Canadian Imperial Bank of Commerce, as administrative agent and a lender, and
various lenders listed therein, as the same may be amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part, in one or more
facilities or agreements with NorthPoint and/or any of its Subsidiaries, from
time to time by the same or different lenders.
"Debt" means, with respect to any Person, any indebtedness or other
obligations of such Person, whether or not contingent (i) for borrowed money,
(ii) evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof), (iii) in respect of
banker's acceptances, (iv) representing Capital Lease Obligations, (v) in
respect of Disqualified Stock, (vi) in respect of Interest Rate, Currency or
Commodity Price Agreements, and (vii) representing the balance deferred and
unpaid of the purchase price of any property, except any such balance that
constitutes an accrued expense or trade payable; but in each case, only if and
to the extent such obligation or indebtedness (other than letters of credit,
Interest Rate, Currency or Commodity Price Agreements and Disqualified Stock)
would appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP. In addition, the term "Debt" includes all Debt of others
secured by a Lien on any asset of such Person (whether or not such Debt is
assumed by such Person, valued, if not assumed, at the lesser of the Fair Market
Value of the encumbered assets or the amount of Debt so secured) and, to the
extent not otherwise included, the Guarantee by such Person of any indebtedness
of any other Person. The "amount" of any Debt outstanding as of any date shall
be (i) the accreted value thereof, in the case of any Debt issued with original
issue discount, (ii) determined in accordance with the definition thereof, in
the case of any Capital Lease Obligations, (iii) zero, in the case of
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any permitted Interest Rate, Currency or Commodity Price Agreements, (iv) in the
case of any Debt secured by cash or Cash Equivalents, reduced by the principal
amount of any cash, Government Securities or Cash Equivalents collateral
securing on a perfected basis, and dedicated for disbursement to the payment of,
principal of or interest on the Debt, (v) the maximum fixed redemption or
repurchase price in respect thereof, in the case of Disqualified Stock, and (vi)
the principal amount thereof, in the case of any other Debt. In no event shall
Debt include trade payables or taxes.
"Debt to Annualized Cash Flow Ratio" means, as of any date of
determination, the ratio of (i) the Consolidated Debt of the Company as of such
date to (ii) two times the Consolidated Cash Flow of the Company for the two
most recent full fiscal quarters ending immediately prior to such date for which
internal financial statements are available (the "Measurement Period"), in each
case determined on a pro forma basis after giving effect to all acquisitions or
dispositions of assets, and all incurrences and repayments of Debt, made by the
Company and its Restricted Subsidiaries from the beginning of such two-quarter
period through and including such date of determination as if such acquisitions
and dispositions, and such incurrences and repayments of Debt, had occurred at
the beginning of such two-quarter period. In addition, for purposes of
calculating the Debt to Annualized Cash Flow Ratio (i) acquisitions that have
been made by the Company or any of its Restricted Subsidiaries, including
through mergers or consolidations and including any related financing
transactions, during the two-quarter Measurement Period or subsequent to such
Measurement Period and on or prior to the date of calculation shall be deemed to
have occurred on the first day of the two-quarter Measurement Period and
Consolidated Cash Flow for such Measurement Period shall be calculated without
giving effect to clause (iii) of the proviso set forth in the definition of
Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded.
"Default" means any event that is, or with the
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passage of time or the giving of notice or both would be, an Event of Default.
"Default Amount" has the meaning specified in Section 502.
"Defaulted Interest" has the meaning specified in Section 307.
"Depositary" means, with respect to the Securities issuable or issued
in whole or in part in the form of one or more Global Securities, DTC for so
long as it shall be a clearing agency registered under the Exchange Act, or such
successor (which shall be a clearing agency registered under the Exchange Act)
as the Company shall designate from time to time in an Officers' Certificate
delivered to the Trustee.
"Disqualified Stock" means any Capital Stock that, by its terms (or
by the terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Securities mature. Notwithstanding the foregoing, any Capital Stock
that would constitute Disqualified Stock solely because the holders thereof have
the right to require the Company to repurchase such Capital Stock prior to such
91st day upon the occurrence of a "change of control" or an "asset sale" shall
not constitute Disqualified Stock if the terms of such Capital Stock provide
that the Company may not repurchase or redeem any such Capital Stock pursuant to
such provisions unless such repurchase or redemption is permitted under Section
1009.
"DTC" means The Depository Trust Company.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" means the Euroclear Clearance System
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(or any successor securities clearing agency).
"Event of Default" has the meaning specified in Section 501.
"Excess Proceeds" has the meaning specified in Section 1013.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
(or any successor act) and the rules and regulations thereunder.
"Exchange Offer" has the meaning set forth in the form of the
Securities contained in Section 202.
"Exchange Registration Statement" has the meaning set forth in the
form of the Securities contained in Section 202.
"Exchange Security" means any Security issued in exchange for an
Original Security or Original Securities pursuant to the Exchange Offer or
otherwise registered under the Securities Act and any Security with respect to
which the next preceding Predecessor Security of such Security was an Exchange
Security.
"Existing Debt" means Debt of the Company and its Restricted
Subsidiaries in existence on the Issue Date.
"Expiration Date" has the meaning set forth in the definition of
"Offer to Purchase" in this Section 101.
"Fair Market Value", with respect to any asset or property, means the
sale value that would be obtained in an arm's-length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy. For purposes of assessing Fair Market
Value, the good faith determination by the Board of Directors or the Chief
Financial Officer of the Company shall be conclusive.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of
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Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
have been approved by a significant segment of the accounting profession, which
are in effect on the Issue Date.
"Global Security" means a Security in the form prescribed in Section
204 evidencing all or part of the Securities, issued to the Depositary or its
nominee, and registered in the name of such Depositary or its nominee.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which obligations
or guarantee the full faith and credit of the United States is pledged.
"Guarantee" means, with respect to any Person, without duplication, a
guarantee (other than by endorsement of negotiable instruments for collection in
the ordinary course of business), direct or indirect, in any manner (including,
without limitation, by way of a pledge of assets or through letters of credit or
reimbursement agreements in respect thereof), of all or any part of any Debt of
another Person.
"Guarantor" means any Subsidiary which is a guarantor of the
Securities, including any Person that is required after the date of this
Indenture to execute a Guarantee of the Securities pursuant to Section 1008
until a successor replaces such party pursuant to the applicable provisions of
this Indenture and, thereafter, shall mean such successor.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under any Interest Rate, Currency or Commodity Price
Agreements that are incurred for the purpose of fixing or hedging interest rate
risk with respect to any floating rate Debt that is permitted by the terms of
this Indenture to be outstanding.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Incur" means, with respect to any Debt, to incur, issue, assume,
Guarantee or otherwise become after the Issue
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Date directly or indirectly liable, contingently or otherwise with respect to
such Debt (and "incurrence", "incurred", "incurrable" and "incurring" shall have
meanings correlative to the foregoing), provided, however, that, for purposes of
--------
this Indenture, accrual of interest and accretion or amortization of original
issue discount shall not be deemed to be an incurrence of Debt.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Interest Payment Date" means the Stated Maturity of an installment
of interest on the Securities.
"Intercompany Debt" means any Debt of the Company or any Restricted
Subsidiary of the Company which, in the case of the Company, is owing to any
Restricted Subsidiary of the Company and which, in the case of any such
Restricted Subsidiary, is owing to the Company or any Restricted Subsidiary of
the Company.
"Interest Rate, Currency or Commodity Price Agreement" means, with
respect to any Person, any forward contract, futures contract, swap, option or
other financial agreement or arrangement (including, without limitation, caps,
floors, collars and similar agreements) relating to, or the value of which is
dependent upon, interest rates, currency exchange rates or commodity prices or
indices (excluding contracts for the purchase or sale of goods in the ordinary
course of business).
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees or other obligations), advances or capital
contributions (excluding commission, travel and other advances to officers and
employees made in the ordinary course of business and excluding accounts
receivable arising in the ordinary course of business), purchases or other
acquisitions for consideration of Debt, Equity Interests or other securities.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
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disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a Subsidiary of the Company, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the Fair Market Value of the Equity Interests of such Subsidiary not
sold or disposed of.
"Issue Date" means the date on which the Securities are first
authenticated and delivered under this Indenture.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement and any lease
in the nature thereof.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Measurement Period" has the meaning set forth in the definition of
"Debt to Annualized Cash Flow Ratio" in this Section 101.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (1) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to Sale and Leaseback Transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Debt of such Person or any of its
Restricted Subsidiaries and (2) any extraordinary or nonrecurring gain (but not
loss), together with any related provision for taxes on such
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extraordinary or nonrecurring gain (but not loss).
"Net Cash Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale, including, without limitation,
legal, accounting and investment banking fees, and sales commissions, and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof, in each case after taking into account (i) any available tax
credits or deductions and any tax sharing arrangements, (ii) amounts required to
be applied to the repayment of Debt secured by a Lien on the asset or assets
that were the subject of such Asset Sale, (iii) any reserve for adjustment in
respect of the sale price of such asset or assets established in accordance with
GAAP (including reserves for pension and other post-employment liabilities,
liabilities relating to environmental matters and liabilities under any
indemnification provisions associated with such Asset Sale, all as determined in
accordance with GAAP) and (iv) with respect to Asset Sales by Restricted
Subsidiaries, the portion of such cash attributable to any Persons holding a
minority interest in such Restricted Subsidiary.
"Non-Recourse Debt" means Debt (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides any undertaking, agreement
or instrument that would constitute Debt (except, with respect to an
Unrestricted Subsidiary, as a result of a pledge of the Capital Stock of such
Unrestricted Subsidiary), (b) is directly or indirectly liable as a guarantor or
otherwise, or (c) constitutes the lender, (ii) no default with respect to which
(including any rights that the holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would permit, upon notice, lapse of
time or both, any holder of any other Debt of the Company or any of its
Restricted Subsidiaries to declare a default on such other Debt or cause the
payment thereof to be accelerated or payable prior to its stated maturity, and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of the Company or
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any of its Restricted Subsidiaries.
"Notice of Default" has the meaning specified in Section 501.
"Offer" has the meaning set forth in the definition of "Offer to
Purchase" in this Section 101.
"Offer to Purchase" means a written offer (the "Offer") sent by the
Company by first class mail, postage prepaid, to each Holder at his address
appearing in the Security Register on the date of the Offer offering to purchase
up to the principal amount of Securities specified in such Offer at the purchase
price specified in such Offer (as determined pursuant to this Indenture). Unless
otherwise required by applicable law, the Offer shall specify an expiration date
(the "Expiration Date") of the Offer to Purchase which shall be, subject to any
contrary requirements of applicable law, not less than 30 days or more than 60
days after the date of such Offer and a settlement date (the "Purchase Date")
for purchase of Securities within five Business Days after the Expiration Date.
The Company shall notify the Trustee at least 15 Business Days (or such shorter
period as is acceptable to the Trustee) prior to the mailing of the Offer of the
Company's obligation to make an Offer to Purchase, and the Offer shall be mailed
by the Company or, at the Company's request, by the Trustee in the name and at
the expense of the Company. The Offer shall contain information concerning the
business of the Company and its Subsidiaries which the Company in good faith
believes will enable such Holders to make an informed decision with respect to
the Offer to Purchase (which at a minimum will include (i) the most recent
annual and quarterly financial statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained in the
documents required to be filed with the Trustee pursuant to this Indenture
(which requirements may be satisfied by delivery of such documents together with
the Offer), (ii) a description of material developments in the Company's
business subsequent to the date of the latest of such financial statements
referred to in clause (i) (including a description of the events requiring the
Company to make the Offer to Purchase), (iii) if applicable, appropriate pro
forma financial information concerning the Offer to Purchase
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and the events requiring the Company to make the Offer to Purchase and (iv) any
other information required by applicable law to be included therein). The Offer
shall contain all instructions and materials necessary to enable such Holders to
tender Securities pursuant to the Offer to Purchase. The Offer shall also state:
(a) the Section of this Indenture pursuant to which the Offer to
Purchase is being made;
(b) the Expiration Date and the Purchase Date;
(c) the aggregate principal amount of the Outstanding Securities
offered to be purchased by the Company pursuant to the Offer to Purchase
(including, if less than 100%, the manner by which such has been determined
pursuant to Section 1013 or 1016) (the "Purchase Amount");
(d) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Securities accepted for payment (as specified
pursuant to this Indenture) (the "Purchase Price");
(e) that the Holder may tender all or any portion of the Securities
registered in the name of such Holder and that any portion of a Security
tendered must be tendered in an integral multiple of $1,000 principal
amount;
(f) the place or places where Securities are to be surrendered for
tender pursuant to the Offer to Purchase;
(g) that interest on any Security not tendered or tendered but not
purchased by the Company pursuant to the Offer to Purchase will continue to
accrue;
(h) that on the Purchase Date the Purchase Price will become due and
payable upon each Security being accepted for payment pursuant to the Offer
to Purchase and that interest thereon shall cease to accrue on and after
the Purchase Date;
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(i) that each Holder electing to tender a Security pursuant to the
Offer to Purchase will be required to surrender such Security at the place
or places specified in the Offer prior to the close of business on the
Expiration Date (such Security being, if the Company or the Trustee so
requires, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereof or his attorney duly authorized in writing);
(j) that Holders will be entitled to withdraw all or any portion of
Securities tendered if the Company (or its Paying Agent) receives, not
later than the close of business on the Expiration Date, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Security the Holder tendered, the certificate number of the
Security the Holder tendered and a statement that such Holder is
withdrawing all or a portion of his tender;
(k) that (a) if Securities in an aggregate principal amount less than
or equal to the Purchase Amount are duly tendered and not withdrawn
pursuant to the Offer to Purchase, the Company shall purchase all such
Securities and (b) if Securities in an aggregate principal amount in excess
of the Purchase Amount are tendered and not withdrawn pursuant to the Offer
to Purchase, the Company shall purchase Securities having an aggregate
principal amount equal to the Purchase Amount on a pro rata basis (with
such adjustments as may be deemed appropriate so that only Securities in
denominations of $1,000 or integral multiples thereof shall be purchased);
(l) that in the case of any Holder whose Security is purchased only
in part, the Company shall execute, and the Trustee shall authenticate and
deliver to the Holder of such Security without service charge, a new
Security or Securities, of any authorized denomination as requested by such
Holder, in an aggregate principal amount equal to and in exchange for the
unpurchased portion of the Security so tendered; and
(m) the CUSIP number or numbers of the Securities
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offered to be purchased by the Company pursuant to the Offer to Purchase.
Any Offer to Purchase shall be governed by and effected in accordance with the
Offer for such Offer to Purchase.
"Officers' Certificate" means a certificate signed by (i) the Chief
Executive Officer, President, or a Vice President, and (ii) the Treasurer,
Assistant Treasurer, Secretary or Assistant Secretary, of the Company, and
delivered to the Trustee and containing the statements provided for in Section
102. One of the officers signing an Officers' Certificate given pursuant to
Section 1018 shall be the principal executive, financial or accounting officer
of the Company.
"Opinion of Counsel" means a written opinion of legal counsel, who
may be counsel for the Company, and who shall be acceptable to the Trustee, and
containing the statements provided for in Section 102.
"Original Securities" means all Securities, including Additional
Securities, if any, other than Exchange Securities.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
------
(i) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in
the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company) in trust or
set aside and segregated in trust by the Company (if the Company
shall act as its own Paying Agent) for the Holders of such
Securities; provided that, if such Securities are to be
--------
redeemed, notice of such redemption has been duly given pursuant
to this Indenture; and
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<PAGE>
(iii) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
- -------- -------
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which a Responsible Officer actually knows to
be so owned shall be so disregarded. Securities so owned which have been pledged
in good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor.
"Pari Passu Debt" means (i) any Debt of the Company that is equal in
right of payment to the Securities and (ii) with respect to any Guarantee, Debt
which ranks equal in right of payment to such Guarantee.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company. The Trustee is hereby authorized by the Company to act as a
"Paying Agent" for the purposes of this Indenture, until such time as the
Company notifies the Trustee in writing that such authorization is revoked.
"Permitted Holder" means each of (i) Michael W.
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Malaga, (ii) Tim Monahan, William Euske, Nathan Gregory, Robert Flood and Steve
Gorosh, as a group, (iii) investment funds controlled by The Carlyle Group
owning Capital Stock of the Company as of the Issue Date, as a group, and (iv)
investment funds controlled by Vulcan Ventures Incorporated owning Capital Stock
of the Company as of the Issue Date, as a group.
"Permitted Investments" means (i) any Investment in the Company or in
any Restricted Subsidiary of the Company, (ii) any Investment in Cash
Equivalents, (iii) any Investment by the Company or any Restricted Subsidiary of
the Company in a Person if, as a result of such Investment (a) such Person
becomes a Restricted Subsidiary of the Company or (b) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its Debt, Equity Interests or other securities to, or is liquidated into,
the Company or a Restricted Subsidiary of the Company, (iv) any Investment made
as a result of the receipt of non-cash consideration from an Asset Sale that was
made pursuant to and in compliance with the provisions of Section 1013, (v) any
acquisition of assets to the extent acquired in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of the Company, (vi) Strategic
Investments; provided, however, that (a) at the time of and after giving effect
-------- -------
to any such Strategic Investment, no Default or Event of Default shall have
occurred and be continuing or would occur as a consequence thereof, and (b) the
aggregate amount of Strategic Investments made pursuant to this clause (vi)
shall not exceed the greater of $100 million and 5% of the Company's Total
Common Equity at any one time outstanding, (vii) accounts receivable created or
acquired in the ordinary course of business of the Company or any Restricted
Subsidiary, (viii) Investments arising from transactions by the Company or any
Restricted Subsidiaries with trade creditors or customers in the ordinary course
of business (including any such Investment received pursuant to any plan of
reorganization or similar arrangement pursuant to the bankruptcy or insolvency
of such trade creditors or customers or otherwise in settlement of a claim),
(ix) Hedging Obligations and (x) Guarantees of commitments for the purchase of
goods or services incurred in the ordinary course of business so long as such
Guarantees, to the extent constituting Debt, are permitted to be incurred under
the
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provisions of Section 1007.
"Permitted Liens" means (i) Liens in favor of the Company, any
Restricted Subsidiary of the Company or Holders of the Securities, (ii) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Restricted Subsidiary of the Company;
provided that such Liens were in existence prior to the contemplation of such
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merger or consolidation and do not extend to any assets other than those of the
Person merged into or consolidated with the Company, (iii) Liens on property
existing at the time of acquisition thereof by the Company or any Restricted
Subsidiary of the Company; provided that such Liens were in existence prior to
--------
the contemplation of such acquisition, (iv) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business, (v)
Liens existing on the Issue Date, (vi) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other appropriate provision
--------
as shall be required in conformity with GAAP shall have been made therefor,
(vii) Liens securing Purchase Money Debt permitted by this Indenture on the
property so financed together with proceeds, product, accessions, substitutions
and replacements thereof (it being understood that all Debt owed to any single
lender or group of lenders or outstanding under any single credit facility shall
be considered a single Purchase Money Debt, whether drawn at one time or from
time to time), (viii) Liens created by "notice" or "precautionary" filings in
connection with operating leases or other transactions pursuant to which no Debt
or Attributable Debt is incurred by the Company or any Restricted Subsidiary,
(ix) Liens on securities constituting "margin stock" within the meaning of
Regulation T, U or X promulgated by the Board of Governors of the Federal
Reserve System, to the extent that the Investment by the Company or any
Restricted Subsidiary in such margin stock is not prohibited by this Indenture,
(x) Liens on Capital Stock of Unrestricted Subsidiaries, (xi) Liens in favor of
the Trustee arising under this Indenture, (xii) Liens securing the Credit
Facility permitted under clause (i) of the
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covenant described in the second paragraph of Section 1007, (xiii) Liens
securing Debt incurred to extend, renew, refinance or refund (or successive
extensions, renewals, refinancings and refundings), in whole or in part, Debt
secured by any Lien referred to in the foregoing clauses (i) through (xii) so
long as such Lien does not extend to any other property and the principal amount
of Debt so secured is not increased except as otherwise permitted under clause
(i) of the definition of Permitted Refinancing Debt, (xiv) Liens securing Debt
securities on cash and Cash Equivalents representing the proceeds of such Debt
securities and pledged for the purpose of providing for the payment of principal
of, and/or interest on, such Debt securities, and (xv) zoning restrictions,
servitudes, easements, rights-of-way, restrictions and other similar charges or
encumbrances incurred in the ordinary course of business of the Company or any
Subsidiary of the Company that (a) are not incurred in connection with the
borrowing of money or the obtaining of advances or credit (other than trade
credit in the ordinary course of business) and (b) do not in the aggregate
materially detract from the value of the property or materially impair the use
thereof in the operation of business by the Company or such Restricted
Subsidiary.
"Permitted Refinancing Debt" means any Debt of the Company or any of
its Restricted Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other Debt of
the Company or such Restricted Subsidiary (other than Intercompany Debt);
provided that (i) the principal amount (or accreted value, if issued at an
- --------
original issue discount) of such Permitted Refinancing Debt does not exceed the
principal amount of (or accreted value, if issued at an original issue
discount), plus accrued interest on, the Debt so extended, refinanced, renewed,
replaced, defeased or refunded plus the amount of any premium required to be
paid in connection with such refinancing pursuant to the terms of the Debt so
refinanced or the amount of any premium reasonably determined by the Company as
necessary to accomplish such refinancing by means of a tender offer or privately
negotiated repurchase (plus the amount of reasonable expenses incurred in
connection therewith),(ii) such Permitted Refinancing Debt has a final maturity
date later than the final maturity date of, and has a Weighted
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Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Debt being extended, refinanced, renewed, replaced, defeased or
refunded, (iii) if the Debt being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the Securities, such
Permitted Refinancing Debt has a final maturity date later than the final
maturity date of, and is subordinated in right of payment to, the Securities on
terms at least as favorable to the holders of Securities as those contained in
the documentation governing the Debt being extended, refinanced, renewed,
replaced, defeased or refunded, and (iv) such Debt is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Debt being
extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof or any other entity.
"Predecessor Security" of any particular Security means every
previous Security issued before, and evidencing all or a portion of the same
debt as that evidenced by, such particular Security; and, for the purposes of
this definition, any Security authenticated and delivered under Section 306 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall
be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen
Security.
"Productive Assets" means assets, including assets owned directly or
indirectly through Capital Stock of a Restricted Subsidiary, of a kind used or
usable in the Telecommunications Business of the Company or its Restricted
Subsidiaries.
"Public Equity Offering" means an underwritten offering of Common
Stock with gross proceeds to the Company of at least $35 million pursuant to a
registration statement that has been declared effective by the Commission
pursuant to the Securities Act (other than a registration statement on Form S-8
or otherwise relating to equity securities
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issuable under any employee benefit plan of the Company).
"Purchase Agreement" means the Purchase Agreement, dated February 3,
2000, between the Company and the Purchasers, as such agreement may be amended
from time to time.
"Purchase Amount" has the meaning set forth in the definition of
"Offer to Purchase" in this Section 101.
"Purchase Date" has the meaning set forth in the definition of "Offer
to Purchase" in this Section 101.
"Purchase Money Debt" means Debt of the Company or any Restricted
Subsidiary of the Company (including Acquired Debt and Debt represented by
Capital Lease Obligations, mortgage financings and purchase money obligations),
including any related notes, Guarantees, collateral documents, instruments and
agreements executed in connection therewith, as the same may be amended,
supplemented, modified or restated from time to time, incurred for the purpose
of financing all or any part of the cost of maintenance development,
construction, acquisition, enhancement or improvement by the Company or any
Restricted Subsidiary of the Company of (a) any Productive Assets of the Company
or any Restricted Subsidiary of the Company or (b) any Telecommunications
Related Assets.
"Purchase Price" has the meaning set forth in the definition of
"Offer to Purchase" in this Section 101.
"Purchasers" means Goldman, Sachs & Co., Morgan Stanley & Co.
Incorporated, CIBC World Markets Corp. and Credit Suisse First Boston
Corporation.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registered Securities" means the Exchange Securities and all other
Securities sold or otherwise
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disposed of pursuant to an effective registration statement under the Securities
Act, together with their respective Successor Securities.
"Registration Default" has the meaning set forth in the form of
Security contained in Section 202.
"Registration Rights Agreement" means the Registration Rights
Agreement among the Company and the Purchasers dated the Issue Date, as the same
may be amended, supplemented or otherwise modified from time to time in
accordance with its terms.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the February 1 or August 1 (whether or not a Business Day),
as the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act (or any
successor provision), as it may be amended from time to time.
"Regulation S Certificate" means a certificate substantially in the
form set forth in Annex A.
"Regulation S Global Security" has the meaning specified in Section
201.
"Regulation S Legend" means a legend substantially in the form of the
legend required in the form of Security set forth in Section 202 to be placed
upon each Regulation S Security.
"Regulation S Securities" means all Securities required pursuant to
Section 305(c) to bear a Regulation S Legend. Such term includes the Regulation
S Global Security.
"Resale Registration Statement" has the meaning set forth in the Form
of the Securities contained in Section 202.
"Responsible Officer" shall mean any officer within the corporate
trust department of the Trustee,
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including any vice president, assistant vice president, assistant secretary,
assistant treasurer, trust officer or any other officer of the Trustee who
customarily performs functions similar to those performed by the Persons who at
the time shall be such officers, respectively, or to whom any corporate trust
matter is referred because of such person's knowledge of and familiarity with
the particular subject.
"Restricted Global Security" has the meaning specified in Section
201.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Payments" has the meaning specified in Section 1009.
"Restricted Period" means the period of 41 consecutive days beginning
on and including the later of (i) the day on which Securities are first offered
to persons other than distributors (as defined in Regulation S) in reliance on
Regulation S and (ii) the original issuance date of the Securities.
"Restricted Securities" means all Securities required pursuant to
Section 305(c) to bear any Restricted Securities Legend. Such term includes the
Restricted Global Security.
"Restricted Securities Certificate" means a certificate substantially
in the form set forth in Annex B.
"Restricted Securities Legend" means, collectively, the legends
substantially in the forms of the legends required in the form of Security set
forth in Section 202 to be placed upon each Restricted Security.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary. If no referent Person
is identified, the term "Restricted Subsidiaries" shall be deemed to refer to
Restricted Subsidiaries of the Company.
"Rule 144A" means Rule 144A under the Securities
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Act (or any successor provision), as it may be amended from time to time.
"Rule 144A Securities" means the Securities purchased by the
Purchasers from the Company pursuant to the Purchase Agreement, other than the
Regulation S Securities.
"S&P" means Standard & Poor's Ratings Group, a division of The McGraw
Hill Companies, Inc., and its successors.
"Sale and Leaseback Transaction" means, with respect to any Person,
any direct or indirect arrangement pursuant to which any property (other than
Capital Stock) is sold by such Person or a Subsidiary, or, in the case of the
Company, a Restricted Subsidiary of such Person and is thereafter leased back
from the purchaser or transferee thereof by such Person or one of its
Subsidiaries or, in the case of the Company, one of its Restricted Subsidiaries.
"SEC Reports" has the meaning specified in Section 704.
"Securities" means the Exchange Securities and the Original Securities
(including Additional Securities, if any).
"Securities Act" means the Securities Act of 1933 and any statute
successor thereto, in each case as amended from time to time.
"Securities Act Legend" means a Restricted Securities Legend or a
Regulation S Legend.
"Security Register" and " Security Registrar" have the respective
meanings specified in Section 305.
"Significant Subsidiary" means any Restricted Subsidiary that would be
a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the Issue Date.
"Special Record Date" for the payment of any
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Defaulted Interest means a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity" means, with respect to any installment of interest
or principal in respect of any Debt, the date on which such payment of interest
or principal was scheduled to be paid in the original documentation governing
such Debt, and shall not include any contingent obligations to repay, redeem or
repurchase any such interest or principal prior to the date originally scheduled
for the payment thereof.
"Step-Down Date" has the meaning set forth in the form of the Security
contained in Section 202.
"Step-Up" has the meaning set forth in the form of the Security
contained in Section 202.
"Strategic Equity Placement" means an equity investment made by a
Strategic Investor in the Company in an aggregate amount of not less than $25
million.
"Strategic Investment" means an Investment in any Person primarily
engaged in a Telecommunications Business, provided that such Investment is
--------
determined by the Board of Directors to promote or significantly benefit the
businesses of the Company and its Restricted Subsidiaries as conducted on the
date of such Investment.
"Strategic Investor" means a corporation, partnership or other entity
engaged directly or indirectly in the Telecommunications Business that has, or
80% or more of the voting stock of which is owned by a Person that has, an
equity market capitalization, at the time of its initial investment in the
Company, in excess of $1 billion.
"Subordinated Debt" means Debt of the Company or a Guarantor
subordinated in right of payment to the Securities or the Guarantee of such
Guarantor, as the case may be.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors,
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managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership, limited liability
company or similar pass-through entity, (a) the sole general partner or the
managing general partner or managing member of which is such Person or a
Subsidiary of such Person or (b) the only general partners, managing members, or
Persons, however designated in corresponding roles, of which are such Person or
of one or more Subsidiaries of such Person (or any combination thereof).
"Successor Security" of any particular Security means every Security
issued after, and evidencing all or a portion of the same debt as that evidenced
by, such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 306 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.
"Telecommunications Business" means, when used in reference to any
Person, that such Person is engaged primarily in the business of transmitting,
or providing services relating to the transmission of, voice or data through
leased transmission facilities (including facilities such as fiber, copper and
switches), and any business related, ancillary or complementary thereto (as
conclusively determined in good faith by the Board of Directors).
"Telecommunications Related Assets" means all assets, rights
(contractual or otherwise) and properties, whether tangible or intangible, real
or personal, used or to be used, in connection with a Telecommunications
Business.
"Total Common Equity" of any Person means, as of any date of
determination, the product of (i) the aggregate number of outstanding primary
shares of common stock of such Person on such day (which shall not include any
options or warrants on, or securities convertible or exchangeable into, shares
of common stock of such Person) and (ii) the average Closing Price of such
common stock over the 20 consecutive Trading Days immediately preceding such
day. If no such Closing Price exists with respect to shares of any such
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class, the value of such shares for purposes of clause (ii) of the preceding
sentence shall be determined by the Board of Directors in good faith and
evidenced by a Board Resolution filed with the Trustee.
"Trading Day", with respect to a securities exchange or automated
quotation system, means a day on which such exchange or system is open for a
full day of trading.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided, however,
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that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"Unrestricted Securities Certificate" means a certificate
substantially in the form set forth in Annex C.
"Unrestricted Subsidiary" means any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution, but only to the extent that such Subsidiary (i) has no Debt other
than Non-Recourse Debt, (ii) is not party to any agreement, contract,
arrangement or understanding with the Company or any Restricted Subsidiary of
the Company unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted Subsidiary
than those that might be obtained at the time from Persons who are not
Affiliates of the Company, unless such agreement, contract, arrangement or
understanding constitutes a Restricted Payment permitted by the Indenture, (iii)
is a Person with respect to which neither the Company nor any of its Restricted
Subsidiaries has any direct or indirect obligation (a) to subscribe for
additional Equity Interests or (b) to maintain or preserve such Person's
financial condition or to cause such Person to
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achieve any specified levels of operating results, and (iv) has not Guaranteed
or otherwise directly or indirectly provided credit support for any Debt of the
Company or any of its Restricted Subsidiaries.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words (including "Senior" and "Executive") added before or after the
title "vice president".
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Weighted Average Life to Maturity" means, when applied to any Debt
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment; by (ii) the then outstanding principal
amount of such Debt.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
SECTION 102. Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act and under this Indenture. Each such
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certificate or opinion shall be given in the form of an Officers' Certificate,
if to be given by an officer of the Company, or an Opinion of Counsel, if to be
given by counsel, and shall comply with the requirements of the Trust Indenture
Act and any other requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
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Any certificate of an officer of the Company may be based, insofar as
it relates to legal matters, upon an opinion of counsel submitted therewith,
unless such officer knows, or in the exercise of reasonable care should know,
that the opinion with respect to the matters upon which his certificate is based
is erroneous. Any opinion of counsel may be based, insofar as it relates to
factual matters, upon a certificate of an officer or officers of the Company sub
mitted therewith stating the information on which counsel is relying, unless
such counsel knows, or in the exercise of reasonable care should know, that the
certificate with respect to such matters is erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders; Record Dates.
-----------------------------
Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Holders may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by agent duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 601) conclusive in favor of the Trustee and the Company,
if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such
instrument or writing pursuant to this Section 104 may be proved by the
affidavit of a witness of such execution or by a certificate of a notary public
or other officer authorized by law to take acknowledgments of
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deeds, certifying that the individual signing such instrument or writing
acknowledged to him the execution thereof. Where such execution is by a signer
acting in a capacity other than his individual capacity, such certificate or
affidavit shall also constitute sufficient proof of his authority. The fact and
date of the execution of any such instrument or writing, or the authority of the
Person executing the same, may also be proved in any other manner which the
Trustee deems sufficient.
The ownership of Securities shall be proved by the Security Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to give, make or take
any request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this Indenture to be given, made or taken by
Holders of Securities, provided that the Company may not set a record date for,
--------
and the provisions of this paragraph shall not apply with respect to, the giving
or making of any notice, declaration, request or direction referred to in the
next paragraph. If not set by the Company prior to the first solicitation of a
Holder made by any Person in respect of any such matter referred to in the
foregoing sentence, the record date for any such matter shall be the 30th day
(or, if later, the date of the most recent list of Holders required to be
provided pursuant to Section 701) prior to such first solicitation. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities on such record date, and no other Holders, shall be entitled to take
the relevant action, whether or not such Holders remain Holders after such
record date; provided that no such action shall be effective
--------
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hereunder unless taken on or prior to the applicable Expiration Date by Holders
of the requisite principal amount of Outstanding Securities on such record date.
Nothing in this paragraph shall be construed to prevent the Company from setting
a new record date for any action for which a record date has previously been set
pursuant to this paragraph (whereupon the record date previously set shall
automatically and with no action by any Person be cancelled and of no effect),
and nothing in this paragraph shall be construed to render ineffective any
action taken by Holders of the requisite principal amount of Outstanding
Securities on the date such action is taken. Promptly after any record date is
set pursuant to this paragraph, the Company, at its own expense, shall cause
notice of such record date, the proposed action by Holders and the applicable
Expiration Date to be given to the Trustee in writing and to each Holder of
Securities in the manner set forth in Section 106.
The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to join in the giving
or making of (i) any Notice of Default, (ii) any declaration of acceleration
referred to in Section 502, (iii) any request to institute proceedings referred
to in Section 507(2) or (iv) any direction referred to in Section 512. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities on such record date, and no other Holders, shall be entitled to join
in such notice, declaration, request or direction, whether or not such Holders
remain Holders after such record date; provided that no such action shall be
--------
effective hereunder unless taken on or prior to the applicable Expiration Date
by Holders of the requisite principal amount of Outstanding Securities on such
record date. Nothing in this paragraph shall be construed to prevent the Trustee
from setting a new record date for any action for which a record date has
previously been set pursuant to this paragraph (whereupon the record date
previously set shall automatically and with no action by any Person be cancelled
and of no effect), and nothing in this paragraph shall be construed to render
ineffective any action taken by Holders of the requisite principal amount of
Outstanding Securities on the date such action is taken. Promptly after any
record date is set pursuant to this paragraph, the Trustee, at the Company's
expense, shall cause notice of such record date, the proposed action by
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Holders and the applicable Expiration Date to be given to the Company in writing
and to each Holder of Securities in the manner set forth in Section 106.
With respect to any record date set pursuant to this Section, the
party hereto which sets such record dates may designate any day as the
"Expiration Date" and from time to time may change the Expiration Date to any
earlier or later day; provided that no such change shall be effective unless
--------
notice of the proposed new Expiration Date is given to the other party hereto in
writing, and to each Holder of Securities in the manner set forth in Section
106, on or prior to the existing Expiration Date. If an Expiration Date is not
designated with respect to any record date set pursuant to this Section, the
party hereto which set such record date shall be deemed to have initially
designated the 180th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as provided
in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be
later than the 180th day after the applicable record date.
Without limiting the foregoing, a Holder entitled hereunder to take
any action hereunder with regard to any particular Security may do so with
regard to all or any part of the principal amount of such Security or by one or
more duly appointed agents each of which may do so pursuant to such appointment
with regard to all or any part of such principal amount.
SECTION 105. Notices, Etc., to Trustee and Company.
-------------------------------------
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if delivered in writing to the Trustee at its
Corporate Trust Office, Attention: Corporate Trust Administration; or
(2) the Company by the Trustee or by any Holder
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<PAGE>
shall be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid,
to the Company addressed to the Company at the address of its principal
office specified in the first paragraph of this instrument or at any other
address previously furnished in writing to the Trustee by the Company.
SECTION 106. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if (i) in the case of a Global Security, in writing by facsimile and/or by
overnight mail to the Depositary, and (ii) in the case of securities other than
Global Securities, in writing and mailed, first-class postage prepaid, to each
Holder affected by such event, at his address as it appears in the Security
Register, not later than the latest date (if any), and not earlier than the
earliest date (if any), prescribed for the giving of such notice. In any case
where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other Holders. Where this
Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 107. Application of Trust Indenture Act.
----------------------------------
The Trust Indenture Act shall apply as a matter of contract to this
Indenture for purposes of interpretation,
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construction and defining the rights and obligations hereunder. If any provision
hereof limits, qualifies or conflicts with a provision of the Trust Indenture
Act that is required under such Act to be a part of and govern this Indenture,
the latter provision shall control. If any provision of this Indenture modifies
or excludes any provision of the Trust Indenture Act that may be so modified or
excluded, the latter provision shall be deemed to apply to this Indenture as so
modified or to be excluded, as the case may be.
SECTION 108. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
-------------------
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Holders of Securities, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
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SECTION 112. No Personal Liability of Directors, Officers,Employees and
----------------------------------------------------------
Stockholders.
- ------------
No past, present or future director, officer, employee, incorporator
or stockholder of the Company, as such, shall have any liability for any
obligations of the Company under the Securities, this Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder shall be deemed to have waived and released each such past, present
and future director, officer, employee, incorporator and stockholder of the
Company of any such liability by accepting a Security as part of the
consideration for the issuance of the Securities.
SECTION 113. Governing Law.
-------------
This Indenture and the Securities shall be governed by and construed
in accordance with the laws of the State of New York without regard to
principles of conflicts of law thereof.
SECTION 114. Legal Holidays.
--------------
In any case where any Interest Payment Date, Redemption Date, Purchase
Date or Stated Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal (and premium, if any) need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date, Redemption Date, Purchase
Date or at the Stated Maturity, provided that no interest shall accrue for the
--------
period from and after such Interest Payment Date, Redemption Date, Purchase Date
or Stated Maturity, as the case may be.
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally.
---------------
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<PAGE>
The Securities and the Trustee's certificates of authentication
thereof shall be in substantially the forms set forth in this Article, with such
appropriate legends, insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture, and may have such letters,
numbers or other marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules of any securities exchange
or as may, consistently herewith, be determined by the officers executing such
Securities, as evidenced by their execution of the Securities.
Upon their original issuance, Rule 144A Securities shall be issued in
the form of one or more Global Securities registered in the name of the
Depositary or its nominee and deposited with the Trustee, as custodian for the
Depositary, for credit by the Depositary to the respective accounts of
beneficial owners of the Securities represented thereby (or such other accounts
as they may direct). Such Global Securities, together with their Successor
Securities which are Global Securities other than the Regulation S Global
Security, are collectively herein called the "Restricted Global Security". Upon
their original issuance, Regulation S Securities shall be issued in the form of
one or more Global Securities registered in the name of the Depositary, or its
nominee and deposited with the Trustee, as custodian for the Depositary, for
credit to the respective accounts of the beneficial owners of the Securities
represented thereby (or such other accounts as they may direct), provided that
--------
upon such deposit all such Securities shall be credited to or through accounts
maintained at the Depositary by or on behalf of Euroclear or Clearsteam. Such
Global Securities, together with their Successor Securities which are Global
Securities other than the Restricted Global Security, are collectively herein
called the "Regulation S Global Security".
The definitive Securities shall be printed, lithographed or engraved
or produced by any combination of these methods on steel engraved borders or may
be produced in any other manner, all as determined by the officers executing
such Securities, as evidenced by their execution of such Securities.
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In certain cases described elsewhere herein, the legends set forth in
Section 202 may be omitted from Securities issued hereunder.
SECTION 202. Form of Face of Security.
------------------------
[If the Security is a Global Security, insert the legends required by
Section 204 of the Indenture]
[If Restricted Securities, then insert - THE NOTES EVIDENCED HEREBY
HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE
"SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE
TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (4) TO AN
INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES.]
[If a Regulation S Security, then insert -- THIS SECURITY HAS NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY
NOT BE OFFERED, SOLD OR DELIVERED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT
OR BENEFIT OF, ANY U.S. PERSON, UNLESS THIS SECURITY IS REGISTERED UNDER THE
SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF IS
AVAILABLE.]
NorthPoint Communications Group, Inc.
12 7/8% SENIOR NOTES DUE 2010
[IF RESTRICTED GLOBAL SECURITY - CUSIP NO. ]
[IF ANY REGULATION S SECURITY - CUSIP NO. ]
[IF REGULATION S GLOBAL SECURITY - ISIN NO. ]
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<PAGE>
No. ______ $____________
NorthPoint Communications Group, Inc., a corporation organized under
the laws of the State of Delaware (herein called the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to_____________, or registered assigns,
the principal sum of _____________ Dollars [if this Security is a Global
Security, then insert: (which principal amount may from time to time be
increased or decreased to such other principal amounts (which, taken together
with the principal amounts of all other Outstanding Securities, shall not exceed
$500,000,000 in the aggregate at any time) by adjustments made on the records of
the Trustee hereinafter referred to in accordance with the Indenture)] on
February 15, 2010, and to pay interest thereon from February 8, 2000 or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for, semi-annually on February 15 and August 15 in each year,
commencing August 15, 2000 at the rate of 12 7/8% per annum, until the principal
hereof is paid or made available for payment. [If Original Securities, then
insert: provided, however, that if (i) the Company has not filed a registration
-------- -------
statement (the "Exchange Registration Statement") under the Securities Act,
registering a security substantially identical to this Security (except that
such Security will not contain terms with respect to the Additional Interest
payments described below or transfer restrictions) pursuant to an exchange offer
(the "Exchange Offer") (or, in lieu thereof, a registration statement
registering this Security for resale (a "Resale Registration Statement")) by May
8, 2000 (or within 30 days of the date on which the obligation to file a Resale
Registration Statement first arises), (ii) the Exchange Registration Statement
relating to the Exchange Offer has not become or been declared effective by
August 6, 2000 or, if applicable, the Resale Registration Statement has not
become or been declared effective within 180 days of the date on which the
obligation to file such Resale Registration Statement first arises, or (iii) the
Exchange Offer has not been completed within 30 days after the date on which the
Exchange Registration Statement has become or been declared effective (if the
Exchange Offer is then
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<PAGE>
required to be made pursuant to the Registration Rights Agreement) or (iv)
either the Exchange Registration Statement or, if applicable, the Resale
Registration Statement is filed and declared effective (except as specifically
permitted therein) but shall thereafter cease to be effective without being
succeeded promptly by an additional registration statement filed and declared
effective, in each case (i) through (iv) upon the terms and conditions set forth
in the Registration Rights Agreement (each such event referred to in clauses (i)
through (iv), a "Registration Default"), then interest will accrue (in addition
to any stated interest on the Securities) (the "Step-Up") at a rate of 0.5% per
annum, determined daily, on the principal amount of the Securities, for the 90-
day period immediately following the occurrence of the Registration Default,
which rate shall be increased by 0.25% per annum at the beginning of each
subsequent 90-day period (provided that the rate at which such additional
--------
interest accrues shall not exceed 1.0% per annum in the aggregate) and interest
shall be payable at such increased rate until such time (the "Step-Down Date")
as no Registration Default is in effect(after which such interest rate will be
restored to its initial rate). Interest accruing as a result of the Step-Up
(which shall be computed on the basis of a 365-day year) is referred to herein
as "Additional Interest." Accrued Additional Interest, if any, shall be paid
semi-annually on February 15 and August 15 in each year; and the amount of
accrued Additional Interest shall be determined on the basis of the number of
days actually elapsed. Any accrued and unpaid interest (including Additional
Interest) on this Security upon the issuance of an Exchange Security (as defined
in the Indenture) in exchange for this Security shall cease to be payable to the
Holder hereof but such accrued and unpaid interest (including Additional
Interest) shall be payable on the next Interest Payment Date for such Exchange
Security to the Holder thereof on the related Regular Record Date.] The interest
so payable, and punctually paid or duly provided for, on any Interest Payment
Date will, as provided in such Indenture, be paid to the Person in whose name
this Security (or one or more Predecessor Securities) is registered at the close
of business on the Regular Record Date for such interest, which shall be
February 1 or August 1 (whether or not a Business Day), as the case may be, next
preceding such
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<PAGE>
Interest Payment Date. Any such interest not so punctually paid or duly provided
for will forthwith cease to be payable to the Holder on such Regular Record Date
and may either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities not less than 10
days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture.
In the case of a default in payment of principal and premium, if any,
upon acceleration or redemption, interest shall be payable pursuant to the
preceding paragraph on such overdue principal (and premium, if any), such
interest shall be payable on demand and, if not so paid on demand, such interest
shall itself bear interest at the rate of 12 7/8% per annum (to the extent that
the payment of such interest shall be legally enforceable), and shall accrue
from the date of such demand for payment to the date payment of such interest
has been made or duly provided for, and such interest on unpaid interest shall
also be payable on demand.
If this Security is issued in the form of a Global Security, payments
of the principal of (and premium, if any) and interest on this Security shall be
made in immediately available funds to the Depositary. If this Security is
issued in certificated form, payment of the principal of (and premium, if any)
and interest on this Security will be made at the corporate trust office of the
Trustee and at the office or agency of the Company maintained for that purpose
in the Borough of Manhattan, The City of New York, New York, and at any other
office or agency maintained by the Company for such purpose, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
-------- -------
option of the Company payment of interest may be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security
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<PAGE>
Register.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated:
NorthPoint Communications Group, Inc.
By______________________________
Name:
Title:
Attest:
______________________________
Name:
Title:
SECTION 203. Form of Reverse of Security.
---------------------------
This Security is one of a duly authorized issue of Securities of the
Company designated as its 12 7/8% Senior Notes due 2010 (the "Securities")
issued under an Indenture, dated as of February 8, 2000 (herein called the
"Indenture"), between the Company and The Bank of New York, as trustee (herein
called the "Trustee", which term includes any successor trustee under the
Indenture). The Securities are limited in aggregate principal amount to
$500,000,000.
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<PAGE>
Reference is hereby made to the Indenture and all indentures supplemental
thereto for a statement of the respective rights, limitations of rights, duties
and immunities thereunder of the Company, the Trustee and the Holders of the
Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered.
The Securities are subject to redemption upon not less than 30 nor
more than 60 days' notice by mail to each Holder of Securities to be redeemed at
such Holder's address appearing in the Security Register, in amounts of $1,000
or an integral multiple of $1,000, at any time on or after February 15, 2005
prior to maturity, as a whole or in part, at the election of the Company, at the
following Redemption Prices (expressed as percentages of the principal amount)
plus accrued and unpaid interest to but excluding the Redemption Date (subject
to the right of Holders of record on the relevant Regular Record Date to receive
interest due on an Interest Payment that is on or prior to the Redemption Date),
if redeemed during the 12-month period beginning February 15 of each of the
years indicated below:
Redemption
Year Price
---- ----------
2005 106.438%
2006 104.292%
2007 102.146%
2008 100.000%
and thereafter
together in the case of any such redemption with accrued interest to the
Redemption Date, but interest installments whose Stated Maturity is on or prior
to such Redemption Date will be payable to the Holders of such Securities, or
one or more Predecessor Securities, of record at the close of business on the
relevant Record Dates referred to on the face hereof, all as provided in the
Indenture.
The Securities are subject to redemption prior to February 15, 2003
only in the event that before February 15, 2003 the Company receives net
proceeds consisting of cash or Cash Equivalents from one or more Public Equity
Offerings or Strategic Equity Placements, in which case the Company may, on one
or more occasions, at its option, use all or a
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<PAGE>
portion of any such net proceeds to redeem Securities in a principal amount of
up to an aggregate amount equal to 35% of the original principal amount of the
Securities, at a Redemption Price of 112.875% of their principal amount plus
accrued and unpaid interest of the Securities to be redeemed to but excluding
the Redemption Date (subject to the right of Holders of record to receive
interest due on an Interest Payment Date that is on or prior to the Redemption
Date); provided, however, that Securities in an amount equal to at least 65% of
-------- -------
the original aggregate principal amount of the Securities remain Outstanding
after such redemption and such redemption occurs on a Redemption Date within 60
days of the closing of any such Public Equity Offering or Strategic Equity
Placement, as the case may be, and further provided, however, that a notice of
------- -------- -------
redemption is sent by mail to each Holder of Securities to be redeemed at such
Holder's address appearing in the Security Register no later than 30 days after
the closing of the related Public Equity Offering or Strategic Equity Placement,
as the case may be, is completed. The Company may only redeem the Securities in
amounts of $1,000 or an integral multiple of $1,000.
In the event of redemption of this Security in part only, a new
Security or Securities for the unredeemed portion hereof will be issued in the
name of the Holder hereof upon the cancellation hereof.
The Securities do not have the benefit of any sinking fund
obligations.
The Indenture provides that, subject to certain conditions, if (i) a
Change of Control occurs or (ii) certain Net Cash Proceeds are available to the
Company as a result of any Asset Sale, the Company shall be required to make an
Offer to Purchase for all or a specified portion of the Securities.
[If not a Global Security -- In the event of redemption or purchase
pursuant to an Offer to Purchase of this Security in part only, a new Security
or Securities of like tenor for the unredeemed or unpurchased portion hereof
will be issued in the name of the Holder hereof upon the cancellation hereof.]
[If a Global Security insert -- In the event of a
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<PAGE>
deposit or withdrawal of an interest in this Security (including upon an
exchange, transfer, redemption or repurchase of this Security in part only)
effected in accordance with the Applicable Procedures, the Security Registrar,
upon receipt of notice of such event from the Depositary's custodian for this
Security, shall make an adjustment on its records to reflect an increase or
decrease of the Outstanding principal amount of this Security resulting from
such deposit or withdrawal, as the case may be.]
If an Event of Default shall occur and be continuing, the principal
of all the Securities may be declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time of (i)
the entire indebtedness of this Security, or (ii) certain restrictive covenants
and Events of Default with respect to this Security, in each case upon
compliance with certain conditions set forth therein.
Unless the context otherwise requires, the Original Securities (as
defined in the Indenture) and the Exchange Securities (as defined in the
Indenture) shall constitute one series for all purposes under the Indenture,
including without limitation, amendments, waivers, redemptions and Offers to
Purchase.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of
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<PAGE>
this Security and of any Security issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default, the Holders of a
majority in aggregate principal amount of the Securities at the time Outstanding
shall have made written request to the Trustee to institute proceedings in
respect of such Event of Default as Trustee and offered the Trustee indemnity
reasonably satisfactory to the Trustee, and the Trustee shall not have received
from the Holders of a majority in aggregate principal amount of Securities at
the time Outstanding a direction inconsistent with such request, and shall have
failed to institute any such proceeding, for 60 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not apply to any
suit instituted by the Holder of this Security for the enforcement of any
payment of principal hereof or any premium or interest hereon on or after the
respective due dates expressed herein.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, New York, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new
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Securities, of authorized denominations and like tenor and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like tenor and aggregate principal amount of Securities of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and none of
the Company, the Trustee or any such agent shall be affected by notice to the
contrary.
Interest [If an Original Security, then insert: (other than Additional
Interest)] on this Security shall be computed on the basis of a 360-day year of
twelve 30-day months.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased in its entirety
by the Company pursuant to Section 1013 or 1016 of the Indenture, check the box:
[_]
If you want to elect to have only a part of this Security purchased by
the Company pursuant to Section 1013 or 1016 of the Indenture, state the amount:
$___________
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<PAGE>
Dated:________________ Your Signature __________________
(Sign exactly as name
appears on the other side of
this Security)
Signature Guarantee:____________________________________________________________
Notice: Signature(s) must be guaranteed by an "eligible
guarantor institution" meeting the requirements of the
Trustee, which requirements will include membership or
participation in STAMP or such other "signature guarantee
program" as may be determined by the Trustee in addition to,
or in substitution for STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
SECTION 204. Additional Provisions Required in Global Security.
-------------------------------------------------
Any Global Security issued hereunder shall, in addition to the
provisions contained in Sections 202 and 203, bear a legend in substantially the
following form:
[If a Global Security, insert -- THIS SECURITY IS A GLOBAL SECURITY
WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN
THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE
EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS
SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER
THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.]
[If a Global Security to be held by the Depository Trust Company,
insert -- UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST
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<PAGE>
COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
SECTION 205. Form of Trustee's Certificate of Authentication.
-----------------------------------------------
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated:
The Bank of New York,
as Trustee
By ____________________
Authorized Signatory
ARTICLE THREE
The Securities
SECTION 301. Title and Terms.
---------------
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $500,000,000,
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section 304,
305, 306, 906 or 1108 or in connection with an Offer to Purchase pursuant to
Section 1013 or 1016. The Trustee shall authenticate Original Securities on the
Issue
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<PAGE>
Date in an aggregate principal amount not to exceed $400,000,000. In addition,
the Trustee shall authenticate additional Original Securities ("Additional
Securities") in an aggregate principal amount not to exceed $100,000,000 upon
receipt of an Officers' Certificate specifying the amount of Securities to be
authenticated and the date on which such Securities are to be authenticated and
certifying that all conditions precedent to the issuance of the Additional
Security contained herein have been complied with and that no Default or Event
of Default would occur as a result of the issuance of such Additional
Securities.
The Company may issue Exchange Securities from time to time pursuant
to an Exchange Offer or otherwise, in each case pursuant to a Board Resolution,
subject to Section 303, included in an Officers' Certificate delivered to the
Trustee, in authorized denominations in exchange for a like principal amount of
Original Securities. Upon any such exchange the Original Securities shall be
canceled in accordance with Section 309 and shall no longer be deemed
Outstanding for any purpose. In no event shall the aggregate principal amount
of Original Securities and Exchange Securities Outstanding exceed $500,000,000.
The Securities shall be known and designated as the "12 7/8% Senior
Notes due 2010" of the Company. The Stated Maturity of the Securities shall be
February 15, 2010. The Securities shall bear interest at the rate of 12 7/8%
per annum, from February 8, 2000 or from the most recent Interest Payment Date
thereafter to which interest has been paid or duly provided for, as the case may
be, payable semi-annually on February 15 and August 15, commencing August 15,
2000, until the principal thereof is paid or made available for payment;
provided, however, with respect to Original Securities, if there has been a
- -------- -------
Registration Default, a Step-Up will occur and the Original Securities will from
then bear Additional Interest until the Step-Down Date. Accrued Additional
Interest, if any, shall be paid in cash in arrears semi-annually on February 15
and August 15 in each year, and the amount of accrued Additional Interest shall
be determined on the basis of the number of days actually elapsed. In
connection with the cash payment of any Additional Interest, the Company shall
notify the Trustee (the "Additional Interest Notice") on or before the
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later to occur of (i) the Regular Record Date preceding such payment of any
Additional Interest, and (ii) the date on which any such Additional Interest
begins to accrue, of the amount of Additional Interest to be paid by the Company
on the next Interest Payment Date. In the event of the occurrence of a Step-Down
Date during the period between the date on which the Additional Interest Notice
is given and the next Interest Payment Date, the Company shall so notify the
Trustee and shall provide the Trustee with the revised amount of Additional
Interest to be paid by the Company on such Interest Payment Date.
In the case of a default in payment of principal and premium, if any,
upon acceleration or redemption, inter est shall be payable pursuant to the
preceding paragraph on such overdue principal (and premium, if any), such
interest shall be payable on demand and, if not so paid on demand, such interest
shall itself bear interest at the rate of 12 7/8% per annum (to the extent that
the payment of such interest shall be legally enforceable), and shall accrue
from the date of such demand for payment to the date payment of such interest
has been made or duly provided for, and such interest on unpaid interest shall
also be payable on demand.
If this Security is issued in the form of a Global Security, payments
of the principal of (and premium, if any) and interest on this Security shall be
made in immediately available funds to the Depositary. If the Securities are
issued in certificated form, the principal of and premium, if any, and interest
on the Securities shall be payable at the corporate trust office of the Trustee
in the Borough of Manhattan, The City of New York, New York, maintained for such
purpose and at any other office or agency maintained by the Company for such
purpose; provided, however, that at the option of the Company payment of
-------- -------
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register.
The Securities shall be subject to repurchase by the Company pursuant
to an Offer to Purchase as provided in Sections 1013 and 1016.
The Securities shall be redeemable as provided in Article Eleven.
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The Securities shall not have the benefit of any sinking fund
obligations.
The Securities shall be subject to defeasance at the option of the
Company as provided in Article Twelve.
Unless the context otherwise requires, the Original Securities and the
Exchange Securities shall constitute one series for all purposes under this
Indenture, including without limitation, amendments, waivers, redemptions and
Offers to Purchase.
SECTION 302. Denominations.
-------------
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
----------------------------------------------
The Securities shall be executed on behalf of the Company by its Chief
Executive Officer, its President or one of its Vice Presidents and attested by
its Secretary or Assistant Secretary. The signature of any of these officers on
the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery
of this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities as in
this
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Indenture provided and not otherwise.
At any time and from time to time after the execution and delivery of
this Indenture and after the effectiveness of a Registration Statement under the
Securities Act with respect thereto, the Company may deliver Exchange Securities
executed by the Company to the Trustee for authentication, together with a
Company Order for the authentication and delivery of such Exchange Securities
and a like principal amount of Original Securities for cancellation in
accordance with Section 309 of this Indenture, and the Trustee in accordance
with the Company Order shall authenticate and deliver such Securities. In
authenticating such Exchange Securities, and accepting the additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall be entitled to receive, and (subject to Section 601) shall be
fully protected in relying upon, an Opinion of Counsel stating,
(a) that such Exchange Securities have been duly and validly issued
in accordance with the terms of this Indenture, and are entitled to all the
rights and benefits set forth herein; and
(b) that the issuance of the Exchange Securities in exchange for the
Original Securities has been effected in compliance with the Securities
Act.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder.
SECTION 304. Temporary Securities.
--------------------
Pending the preparation of definitive Securities, the Company may
execute, and upon a Company Order the
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Trustee shall authenticate and deliver, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Securities in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency of the Company designated pursuant to Section 1002, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities, the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like tenor and principal amount of definitive
Securities of authorized denominations. Until so exchanged, the temporary
Securities shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities.
SECTION 305. Registration, Registration of Transfer and Exchange.
---------------------------------------------------
(a) The Company shall cause to be kept at the Corporate Trust Office
of the Trustee a register (the register maintained in such office and in any
other office or agency designated pursuant to Section 1002 being herein
sometimes collectively referred to as the "Security Register") in which, subject
to such reasonable regulations as they may prescribe, the Company shall provide
for the registration of Securities and of transfers and exchanges of Securities.
The Trustee is hereby appointed "Security Registrar" for the purpose of
registering Securities and transfers and exchanges of Securities as herein
provided.
Such Security Register shall distinguish between Original Securities
and Exchange Securities.
Subject to the other provisions of this Indenture regarding
restrictions on transfer, upon surrender for
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registration of transfer of any Security at an office or agency of the Company
designated pursuant to Section 1002 for such purpose in accordance with the
terms hereof, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denominations and of a like tenor and aggregate
principal amount and bearing such restrictive legends as may be required by this
Indenture.
At the option of the Holder and subject to the other provisions of
this Section 305, Securities may be exchanged for other Securities of any
authorized denominations and of a like tenor and aggregate principal amount and
bearing the applicable legends set forth in Section 202, upon surrender of the
Securities to be exchanged at such office or agency. Whenever any Securities
are so surrendered for exchange, the Company shall execute, and the Trustee
shall authenticate and deliver, the Securities which the Holder making the
exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the legal, valid and binding obligations of the Company,
evidencing the same debt, and (subject to the provisions in the Original
Securities regarding the payment of Additional Interest) entitled to the same
benefits under this Indenture, as the Securities surrendered upon such
registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made to the Holder for any registration of
transfer or exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of
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Securities, other than exchanges pursuant to Section 304, 305, 906 or 1108 or in
accordance with any Offer to Purchase pursuant to Section 1013 or 1016 not
involving any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of business
15 days before the day of the mailing of a notice of redemption of Securities
selected for redemption under Section 1104 and ending at the close of business
on the day of such mailing, or (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
(b) Certain Transfers and Exchanges. Notwithstanding any other
-------------------------------
provision of this Indenture or the Securities, transfers and exchanges of
Securities and beneficial interests in a Global Security of the kinds specified
in this Section 305(b) shall be made only in accordance with this Section
305(b).
(i) Restricted Global Security to Regulation S Global Security.
----------------------------------------------------------
If the owner of a beneficial interest in the Restricted Global Security
wishes at any time to transfer such interest to a Person who wishes to
acquire the same in the form of a beneficial interest in the Regulation S
Global Security, such transfer may be effected only in accordance with the
provisions of this clause (b)(i) and clause (b)(iv) below and subject to
the Applicable Procedures. Upon receipt by the Trustee, as Security
Registrar, of (A) an order given by the Depositary or its authorized
representative directing that a beneficial interest in the Regulation S
Global Security in a specified principal amount be credited to a specified
Agent Member's account and that a beneficial interest in the Restricted
Global Security in an equal principal amount be debited from another
specified Agent Member's account and (B) a Regulation S Certificate,
satisfactory to the Trustee and duly executed by the owner of such
beneficial interest in the Restricted Global Security or his attorney duly
authorized in writing, then the Trustee, as Security Registrar but subject
to clause (b)(vii) below, shall reduce the principal amount of the
Restricted Global Security and
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increase the principal amount of the Regulation S Global Security by such
specified principal amount.
(ii) Regulation S Global Security to Restricted Global Security.
----------------------------------------------------------
If the owner of a beneficial interest in the Regulation S Global Security
wishes at any time to transfer such interest to a Person who wishes to
acquire the same in the form of a beneficial interest in the Restricted
Global Security, such transfer may be effected only in accordance with this
clause (b)(ii) and subject to the Applicable Procedures. Upon receipt by
the Trustee, as Security Registrar, of (A) an order given by the Depositary
or its authorized representative directing that a beneficial interest in
the Restricted Global Security in a specified principal amount be credited
to a specified Agent Member's account and that a beneficial interest in the
Regulation S Global Security in an equal principal amount be debited from
another specified Agent Member's account and (B) if such transfer is to
occur during the Restricted Period, a Restricted Securities Certificate,
satisfactory to the Trustee and duly executed by the owner of such
beneficial interest in the Regulation S Global Security or his attorney
duly authorized in writing, then the Trustee, as Security Registrar, shall
reduce the principal amount of the Regulation S Global Security and
increase the principal amount of the Restricted Global Security by such
specified principal amount.
(iii) Non-Global Security to Non-Global Security. A Security
------------------------------------------
that is not a Global Security may be transferred, in whole or in part, to a
Person who takes delivery in the form of another Security that is not a
Global Security as provided in Section 305(a), provided that, if the
--------
Security to be transferred in whole or in part is a Restricted Security, or
is a Regulation S Security and the transfer is to occur during the
Restricted Period, then the Trustee shall have received (A) a Restricted
Securities Certificate, satisfactory to the Trustee and duly executed by
the transferor Holder or his attorney duly authorized in writing, in which
case the transferee Holder shall take delivery in the form of a Restricted
Security, or (B) a
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Regulation S Certificate, satisfactory to the Trustee and duly executed by
the transferor Holder or his attorney duly authorized in writing, in which
case the transferee Holder shall take delivery in the form of a Regulation
S Security (subject in every case to Section 305(c)).
(iv) Regulation S Global Security to be Held Through Euroclear
---------------------------------------------------------
or Clearsteam during Restricted Period. The Company shall use its best
--------------------------------------
efforts to cause the Depositary to ensure that, until the expiration of the
Restricted Period, beneficial interests in the Regulation S Global Security
may be held only in or through accounts maintained at the Depositary by
Euroclear or Clearsteam (or by Agent Members acting for the account
thereof), and no person shall be entitled to effect any transfer or
exchange that would result in any such interest being held otherwise than
in or through such an account; provided that this clause (b)(iv) shall not
--------
prohibit any transfer or exchange of such an interest in accordance with
clause (b)(ii) above.
(v) Exchanges of Book-Entry Securities for Certificated
---------------------------------------------------
Securities. A beneficial interest in a Global Security may not be
----------
exchanged for a Security in certificated form unless (i) DTC (x) notifies
the Company that it is unwilling or unable to continue as Depositary for
the Global Security or (y) has ceased to be a clearing agency registered
under the Exchange Act and in either case the Company thereupon fails to
appoint a successor Depositary, (ii) the Company, at its option, notifies
the Trustee in writing that it elects to cause the issuance of the
Securities in certificated form or (iii) there shall have occurred and be
continuing an Event of Default or any event which after notice or lapse of
time or both would be an Event of Default with respect to the Securities.
In all cases, certificated Securities delivered in exchange for any Global
Security or beneficial interests therein will be registered in the names,
and issued in any approved denominations, requested by or on behalf of the
Depositary (in accordance with its customary procedures). Any certificated
Security issued in exchange for an interest in a Global Security
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will bear the legend restricting transfers that is borne by such Global
Security. Any such exchange will be effected through the DWAC System and an
appropriate adjustment will be made in the records of the Security
Registrar to reflect a decrease in the principal amount of the relevant
Global Security.
(c) Securities Act Legends. Rule 144A Securities and their Successor
----------------------
Securities shall bear a Restricted Securities Legend, and the Regulation S
Securities and their Successor Securities shall bear a Regulation S Legend,
subject to the following:
(i) subject to the following clauses of this Section 305(c), a
Security or any portion thereof which is exchanged, upon transfer or
otherwise, for a Global Security or any portion thereof shall bear the
Securities Act Legend borne by such Global Security while represented
thereby;
(ii) subject to the following clauses of this Section 305(c), a
new Security which is not a Global Security and is issued in exchange for
another Security (including a Global Security) or any portion thereof, upon
transfer or otherwise, shall bear the Securities Act Legend borne by such
other Security, provided that, if such new Security is required pursuant to
--------
Section 305(b)(v) or (vi) to be issued in the form of a Restricted
Security, it shall bear a Restricted Securities Legend and, if such new
Security is so required to be issued in the form of a Regulation S
Security, it shall bear a Regulation S Legend;
(iii) Registered Securities shall not bear a Securities Act
Legend;
(iv) at any time after the Securities may be freely transferred
without registration under the Securities Act or without being subject to
transfer restrictions pursuant to the Securities Act, a new Security which
does not bear a Securities Act Legend may be issued in exchange for or in
lieu of a Security (other than a Global Security) or any portion thereof
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which bears such a legend if the Trustee has received an Unrestricted
Securities Certificate, satisfactory to the Trustee and duly executed by
the Holder of such legended Security or his attorney duly authorized in
writing, and after such date and receipt of such certificate, the Trustee
shall authenticate and deliver such a new Security in exchange for or in
lieu of such other Security as provided in this Article Three;
(v) a new Security which does not bear a Securities Act Legend
may be issued in exchange for or in lieu of a Security (other than a Global
Security) or any portion thereof which bears such a legend if, in the
Company's judgment, placing such a legend upon such new Security is not
necessary to ensure compliance with the registration requirements of the
Securities Act, and the Trustee, at the written direction of the Company,
shall authenticate and deliver such new Security as provided in this
Article Three; and
(vi) notwithstanding the foregoing provisions of this Section
305(c), a Successor Security of a Security that does not bear a particular
form of Securities Act Legend shall not bear such form of legend unless the
Company has reasonable cause to believe that such Successor Security is a
"restricted security" within the meaning of Rule 144, in which case the
Trustee, at the direction of the Company, shall authenticate and deliver a
new Security bearing a Restricted Securities Legend in exchange for such
Successor Security as provided in this Article Three.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
------------------------------------------------
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction loss or theft of any Security
and (ii) such
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security or indemnity as may be required by them to save each of them and any
agent of either of them harmless, then, in the absence of notice to the Company
or the Trustee that such Security has been acquired by a bona fide purchaser,
the Company shall execute and the Trustee shall authenticate and deliver, in
exchange for or in lieu of any such destroyed, lost or stolen Security, a new
Security of like tenor, form, terms and principal amount and bearing a number
not con temporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in the discretion of
the Company may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is
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registered at the close of business on the Regular Record Date for such
interest.
Any interest (including Additional Interest) on any Security which is
payable, but is not punctually paid or duly provided for, on any Interest
Payment Date (herein called "Defaulted Interest") shall (a) bear interest at the
rate per annum stated in the form of Security included herein (to the extent
that the payment of such interest shall be legally enforceable), and (b)
forthwith cease to be payable to the Holder on the relevant Regular Record Date
by virtue of having been such Holder, and such Defaulted Interest may be paid by
the Company, at its election in each case, as provided in clause (1) or (2)
below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which shall
be fixed in the following manner. The Company shall notify the Trustee
in writing of the amount of Defaulted Interest proposed to be paid on each
Security and the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest
or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be
held in trust for the benefit of the Persons entitled to such Defaulted
Interest as in this clause provided. Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest which shall
be not more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date and, in the name and at the expense
of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder at his address as it appears in
the Security Register, not less than 10 days prior to such Special
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Record Date. Notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor having been so mailed, such Defaulted
Interest shall be paid to the Persons in whose names the Securities (or
their respective Predecessor Securities) are registered at the close of
business on such Special Record Date and shall no longer be payable
pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 308. Persons Deemed Owners.
---------------------
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and premium, if
any, and (subject to Section 307) interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and none of the
Company, the Trustee or any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 309. Cancellation.
------------
All Securities surrendered for payment, redemption registration of
transfer, exchange or pursuant to any Offer to Purchase pursuant to Section 1013
or 1016
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shall, if surrendered to any Person other than the Trustee, be delivered to the
Trustee and shall be promptly cancelled by it. The Company may at any time
deliver to the Trustee for cancellation any Securities previously authenticated
and delivered hereunder which the Company may have acquired in any manner
whatsoever, and all Securities so delivered shall be promptly cancelled by the
Trustee. No Securities shall be authenticated in lieu of or in exchange for any
Securities cancelled as provided in this Section, except as expressly permitted
by this Indenture. All cancelled Securities held by the Trustee shall be
disposed of in accordance with its standard procedures or as directed by a
Company Order; provided, however, that the Trustee shall not be required to
-------- -------
destroy such Securities.
SECTION 310. Computation of Interest.
-----------------------
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months, except that Additional Interest shall be computed
on the basis of a 365-day year.
SECTION 311. CUSIP Numbers.
-------------
The Company in issuing Securities may use "CUSIP" and "ISIN" numbers
(if then generally in use) in addition to serial numbers; if so, the Trustee
shall use such "CUSIP" and "ISIN" numbers in addition to serial numbers in
notices of redemption and repurchase as a convenience to Holders; provided that
--------
any such notice may state that no representation is made as to the correctness
of such CUSIP and ISIN numbers either as printed on the Securities or as
contained in any notice of a redemption or repurchase and that reliance may be
placed only on the serial or other identification numbers printed on the
Securities, and any such redemption or repurchase shall not be affected by any
defect in or omission of such CUSIP and ISIN numbers.
ARTICLE FOUR
Satisfaction and Discharge
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SECTION 401. Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall cease to be of further effect as to all
outstanding Securities and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) the Company shall have paid or caused to be paid the
principal of and premium, if any, and interest on the Securities as
and when the same will have become due and payable; or
(B) all outstanding Securities (except lost, stolen or destroyed
Securities which have been replaced or paid) have been delivered to
the Trustee for cancellation;
and the Company, in the case of (A) above, has deposited or caused to
be deposited with the Trustee as trust funds in trust for the purpose
an amount sufficient to pay and discharge the entire indebtedness on
such Securities not theretofore delivered to the Trustee for
cancellation, for principal of and premium, if any, and interest to
the date of such deposit (in the case of Securities which have become
due and payable) or to the Stated Maturity or Redemption Date, as the
case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company;
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with; and
(4) the Trustee shall have received such other documents and
assurances as the Trustee shall have reasonably requested.
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Notwithstanding the satisfaction and discharge of this Indenture, (i) the
obligations of the Company to the Trustee under Section 607, (ii) substitution
of apparently mutilated, defaced, destroyed, lost or stolen Securities, (iii)
rights of holders of Securities to receive payment of principal of and premium,
if any, and interest on the Securities, (iv) rights, obligations and immunities
of the Trustee under this Indenture (including, if money shall have been
deposited with the Trustee pursuant to subclause (B) of clause (1) of this
Section, the obligations of the Trustee under Section 402 and the last paragraph
of Section 1003), and (v) rights of holders of the Securities as beneficiaries
of this Indenture with respect to any property deposited with the Trustee
payable to all or any of them, shall survive.
SECTION 402. Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee.
ARTICLE FIVE
Remedies
SECTION 501. Events of Default.
-----------------
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
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(1) default in the payment of any interest upon any Security when it
becomes due and payable, and continuance of such default for a period of 30
days;
(2) default in the payment of the principal of (or premium, if any,
on) any Security when due;
(3) default in the payment of the Purchase Price in respect of any
Security required to be purchased pursuant to an Offer to Purchase made in
accordance with Sections 1013 or 1016 when due and payable;
(4) default in the performance, or breach, of Section 801;
(5) default in the performance, or breach, of any other covenant or
warranty of the Company in this Indenture or in any Security (other than a
covenant or warranty a default in whose performance or whose breach is
elsewhere in this Section specifically dealt with), and continuance of such
default or breach for a period of 30 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Outstanding Securities a written notice specifying
such default or breach and requiring it to be remedied and stating that
such notice is a "Notice of Default" hereunder;
(6) a default or defaults under any bond(s), debenture(s), note(s) or
other evidence(s) of Debt by the Company or any Restricted Subsidiary of
the Company or under any mortgage(s), indenture(s) or instrument(s) under
which there may be issued or by which there may be secured or evidenced any
Debt of such type by the Company or any Restricted Subsidiary with a
principal amount then outstanding, individually or in the aggregate, in
excess of $5 million, whether such Debt or Guarantee now exists or shall
hereafter be created, which default or defaults shall constitute a failure
to pay such Debt when due at the final maturity thereof, or shall have
resulted in such Debt becoming or being declared due and payable prior to
the date on which it would otherwise have become due and payable;
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(7) a final judgment or final judgments (not covered by insurance)
for the payment of money are entered against the Company or any Restricted
Subsidiary in an aggregate amount in excess of $5 million by a court or
courts of competent jurisdiction, which judgments remain undischarged or
unstayed for a period (during which execution shall not be effectively
stayed) of 60 days after the right to appeal all such judgments has
expired; or
(8) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company, any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary in an involuntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Company, any of its Significant Subsidiaries or any group of Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary bankrupt
or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of
the Company, any of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary under any applicable Federal or State law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company, any of its Significant Subsidiaries or any
group of Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the continuance
of any such decree or order for relief or any such other decree or order
unstayed and in effect for a period of 60 consecutive days; or
(9) the commencement by the Company or any Significant Subsidiary (or
any group of Subsidiaries that, when taken as a whole, would constitute a
Significant Subsidiary) of a voluntary case or
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<PAGE>
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Company or any
Significant Subsidiary (or any group of Subsidiaries that, when taken as a
whole, would constitute a Significant Subsidiary) in an involuntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the filing by it
of a petition or answer or consent seeking reorganization or relief under
any applicable Federal or State law, or the consent by it to the filing of
such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or any Significant Subsidiary (or any group of
Subsidiaries that, when taken as a whole, would constitute a Significant
Subsidiary)or of any substantial part of its property, or the making by it
of an assignment for the benefit of creditors, or the admission by it in
writing of its inability to pay its debts generally as they become due, or
the taking of corporate action by the Company or any Significant Subsidiary
(or any group of Subsidiaries that, when taken as a whole, would constitute
a Significant Subsidiary) in furtherance of any such action.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
--------------------------------------------------
If an Event of Default (other than an Event of Default specified in
Section 501(8) or (9) with respect to the Company, any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary) occurs and is continuing, then and in every
such case the Trustee or the Holders of not less than 25% in aggregate principal
amount of the Outstanding Securities may declare the Default Amount of all the
Securities to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by Holders), and upon any such declaration
such
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Default Amount and any accrued interest, together with all other amounts due
under this Indenture, shall become immediately due and payable. If an Event of
Default specified in Section 501(8) or (9) with respect to the Company occurs,
the Default Amount of and any accrued interest on the Securities then
Outstanding, together with all other amounts due under this Indenture, shall
ipso facto become immediately due and payable without any declaration or other
Act on the part of the Trustee or any Holder.
The "Default Amount" in respect of any particular Security as of any
particular date of acceleration shall equal the principal amount of the Security
plus accrued and unpaid interest to such date.
At any time after such a declaration of acceleration has been made
and before a judgment or decree for payment of the money due based on
acceleration has been obtained by the Trustee as hereinafter in this Article
provided, the Holders of a majority in aggregate principal amount of the
Outstanding Securities, by written notice to the Company and the Trustee, may
rescind and annul such declaration and its consequences if:
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of (and premium, if any, on) any Securities
which have become due otherwise than by such declaration of
acceleration (including any Securities required to have been
purchased on the Purchase Date pursuant to an Offer to Purchase made
by the Company) and interest thereon at the rate borne by the
Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the applicable rate borne by the
Securities, and
(D) all sums paid or advanced by the Trustee
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hereunder and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel;
and
(2) all Events of Default, other than the non-payment of the
principal of Securities which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
---------------------------------------------------------------
The Company covenants that if
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or premium,
if any, on) any Security at the Maturity thereof or, with respect to any
Security required to have been purchased pursuant to an Offer to Purchase
made by the Company, at the Purchase Date thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, and, to the extent
that payment of such interest shall be legally enforceable, interest on any
overdue principal (and premium, if any) and on any overdue interest, at the rate
provided by the Securities, and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses incurred by the Trustee
under this Indenture, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
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If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
--------------------------------
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys, securities or other property payable or deliverable upon the
exchange of the Securities or upon any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 607.
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No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding; provided,
--------
however, that the Trustee may, on behalf of the Holders, vote for the election
- -------
of a trustee in bankruptcy or similar official and be a member of a creditors or
other similar committee.
SECTION 505. Trustee May Enforce Claims Without Possession of Securities.
-----------------------------------------------------------
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. Application of Money Collected.
------------------------------
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal (or premium,
if any) or interest, upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
607; and
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and
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interest on the Securities in respect of which or for the benefit of which
such money has been collected, ratably, without preference or priority of
any kind, according to the amounts due and payable on such Securities for
principal (and premium, if any) and interest, respectively.
The Trustee, upon prior written notice to the Company, may fix a record date and
payment date for any payment to the Holders pursuant to this Section 506.
SECTION 507. Limitation on Suits.
-------------------
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(2) the Holders of at least 25% in aggregate principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders have offered and provided to the Trustee
indemnity reasonably satisfactory to the Trustee against the costs,
expenses and liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer and provision of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
in principal amount of the Outstanding Securities;
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it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and
----------------------------------------------------------------
Interest.
--------
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to
Section 307) interest on such Security on the respective Stated Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date or, in the case of an Offer to Purchase made by the Company and required to
be accepted as to such Security, on the Purchase Date) and to institute suit for
the enforcement of any such payment, and such rights shall not be impaired
without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
there after all rights and remedies of the Trustee and the Holders shall
continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
------------------------------
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<PAGE>
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 306, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Security
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 Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 512. Control by Holders.
------------------
The Holders of a majority in aggregate principal amount of the
Outstanding Securities shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, provided that
--------
(1) such direction shall not be in conflict with any rule of law or
with this Indenture or expose the Trustee to personal liability (as
determined in the sole discretion of the Trustee), and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
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The Trustee may refuse, however, to follow any direction that the
Trustee, in its sole discretion, determines may be unduly prejudicial to the
rights of another Holder or that may subject the Trustee to any liability or
expense if the Trustee determines, in its sole discretion, that it lacks
sufficient indemnification against such loss or expense or the Trustee having
been advised by counsel that the action so directed may not be lawfully taken.
SECTION 513. Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in aggregate principal amount
of the Outstanding Securities may on behalf of the Holders of all the Securities
by written notice to the Trustee waive any past default hereunder and its
consequences, except a default
(1) in the payment of the principal of (or premium, if any) or
interest on any Security (including any Security which is required to have
been purchased pursuant to an Offer to Purchase which has been made by the
Company), or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court may require any party litigant in such suit to file an
undertaking to pay the costs of such suit, and may assess
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costs, including reasonable attorney's fees and expenses, against any such party
litigant, in the manner and to the extent provided in the Trust Indenture Act;
provided that neither this Section nor the Trust Indenture Act shall be deemed
- --------
to authorize any court to require such an undertaking or to make such an
assessment in any suit instituted by the Trustee or any Holder, or group of
Holders, holding in the aggregate more than 10% in principal amount of the
Outstanding Securities or in any suit instituted by any Holder for the
enforcement of principal of (and premium, if any) or interest on any Security on
or after the applicable Stated Maturity of such Security (or, in the case of
redemption, on or after the Redemption Date or, in the case of any purchase
required to be made pursuant to an Offer to Purchase, on or after the Purchase
Date).
SECTION 515. Waiver of Stay or Extension Laws.
--------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities.
-----------------------------------
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. If an Event of Default shall have occurred and be
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture, and use the same degree of care and
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skill in its exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs. Notwithstanding the
foregoing, no provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it. Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
SECTION 602. Notice of Defaults.
------------------
The Trustee shall give the Holders notice of any Default hereunder as
and to the extent provided by the Trust Indenture Act, unless such Default has
been cured or waived; provided, however, that in the case of any Default of the
-------- -------
character specified in Section 501(5), no such notice to Holders shall be given
until at least 30 days after the occurrence thereof and provided, further, that
-------- -------
the Trustee may withhold from the Holders notice of any continuing Default
(other than a Default of the character specified in Sections 501(1) and 501(2)),
if the Trustee shall determine that withholding such notice is in the interests
of the Holders.
SECTION 603. Certain Rights of Trustee.
-------------------------
Subject to the provisions of Section 601:
(a) the Trustee may conclusively rely and shall be fully protected in
acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or
other paper or document whether in its original form or facsimile form
believed by it to be genuine and to have been signed or presented by the
proper party or parties;
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(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or a Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate or an Opinion of
Counsel;
(d) the Trustee may consult with counsel of its selection and the
written advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee security or indemnity reasonably satisfactory
to the Trustee against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction reasonably
satisfactory to the Trustee;
(f) prior to the occurrence of an Event of Default and after all such
Events of Default shall have been cured, the Trustee shall not be bound to
make any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall determine to
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make such further inquiry or investigation, it shall be entitled to examine
the books, records and premises of the Company, personally or by agent or
attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder;
(h) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith which the Trustee reasonably believed to have
been authorized or within its rights or powers;
(i) except as otherwise required pursuant to the Trust Indenture Act,
the Trustee shall not be deemed to have notice of any Default or Event of
Default unless a Responsible Officer of the Trustee has actual knowledge
thereof or unless written notice of any such Default or Event of Default,
as the case may be, is received by the Trustee at the Corporate Trust
Office of the Trustee, provided that such notice references the Securities
--------
and this Indenture; and
(j) the rights, privileges, protections, immunities and benefits
given to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and shall be enforceable by, the Trustee in
each of its capacities hereunder, and to each agent, custodian and other
Person employed to act hereunder.
SECTION 604. Not Responsible for Recitals or Issuance of Securities.
------------------------------------------------------
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or the Securities. The Trustee shall not be accountable for the use
or application by the Company of Securities or the proceeds
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thereof.
SECTION 605. May Hold Securities.
-------------------
The Trustee, any Paying Agent, any Security Registrar (if other than
the Trustee) or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
608 and 613, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Paying Agent, Security Registrar or such other
agent.
SECTION 606. Money Held in Trust.
-------------------
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
SECTION 607. Compensation and Reimbursement.
------------------------------
The Company agrees
(1) to pay to the Trustee from time to time, and the Trustee shall be
entitled to, such compensation as shall be agreed in writing between the
Company and the Trustee for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust);
(2) except as otherwise expressly provided here in, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or willful
misconduct; and
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(3) to fully indemnify the Trustee and any predecessor Trustee for,
and to hold it harmless against, any and all losses, liabilities, claims,
damages or expenses (including the reasonable compensation, costs, expenses
and disbursements of its agents, accountants, experts and counsel) incurred
without negligence or willful misconduct on its part, arising out of or in
connection with the acceptance or administration of this trust, including
the costs and expenses of enforcing this Indenture against the Company
(including, without limitation, this Section 607) and of defending itself
against any claim (whether asserted by any Holder or the Company or any
other person) or liability in connection with the exercise or performance
of any of its powers or duties hereunder. The provisions of this Section
607 shall survive any termination of this Indenture and the resignation or
removal of the Trustee.
As security for the performance of the obligations of the Company
under this Section 607, the Trustee shall have a lien prior to the Securities
upon all property and funds held or collected by the Trustee, except funds held
in trust for the payment of principal of (and premium, if any) or interest on
particular Securities. The Trustee's right to receive payment of any amounts
due under this Section 607 shall not be subordinate to any other liability or
indebtedness of the Company (even though the Securities may be so subordinated).
When the Trustee Incurs expenses or renders services after an Event
of Default specified in Section 501(8) or (9) occurs, the expenses and the
compensation for such services are intended to constitute expenses of
administration under Title 11, U.S. Code, or any similar Federal state or
foreign law for the relief of debtors.
SECTION 608. Disqualification; Conflicting Interests.
---------------------------------------
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest within 90 days after ascertaining that it has such conflicting interest
or
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<PAGE>
resign, to the extent and in the manner provided by, and subject to the
provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $50,000,000 and its Corporate
Trust Office in the Borough of Manhattan, The City of New York, New York. If
such Person publishes reports of condition at least annually, pursuant to law
or to the requirements of a Federal, State, Territorial or District of
Columbia supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Person shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible
in accordance with the provisions of this Section, it shall resign immediately
in the manner and with the effect hereinafter specified in this Article.
SECTION 610. Resignation and Removal; Appointment of Successor.
-------------------------------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 611, at which
time the retiring Trustee shall be fully discharged from its obligations
hereunder.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the
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Company.
(d) If an instrument of acceptance by a successor Trustee shall not
have been delivered to the Trustee within 30 days after the giving of such
notice of removal, the Trustee being removed may petition, at the expense of the
Company, any court of competent jurisdiction for the appointment of a successor
Trustee with respect to the Securities of such series.
(e) If at any time:
(1) the Trustee shall fail to comply with Section 608 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
bankrupt or insolvent or a receiver of the Trustee or of its property shall
be appointed or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, (i) the Company, by Board resolution may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability or the
occurrence of such vacancy, a successor
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Trustee shall be appointed by Act of the Holders of a majority in principal
amount of the Outstanding Securities delivered to the Company and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance
of such appointment, become the successor Trustee and supersede the successor
Trustee appointed by the Company. If no successor Trustee shall have been so
appointed by the Company or the Holders and accepted appointment in the manner
hereinafter provided, any Holder who has been a bona fide Holder of a Security
for at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the appointment of a
successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 106. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
--------------------------------------
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on request of the Company or the
successor Trustee under Section 607, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and trusts of the
retiring Trustee and shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder. Upon
request of any such successor Trustee, the Company shall execute any and all
instruments for more fully and certainly vesting in and confirming to such
successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
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SECTION 612. Merger, Conversion, Consolidation or Succession to Business.
-----------------------------------------------------------
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided that
--------
such corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
SECTION 613. Preferential Collection of Claims Against the Company.
-----------------------------------------------------
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
SECTION 614. Appointment of Authenticating Agent.
-----------------------------------
The Trustee may appoint an Authenticating Agent or Agents with respect
to the Securities which shall be authorized to act on behalf of the Trustee to
authenticate Securities issued upon original issue and upon exchange,
registration of transfer or partial redemption thereof or pursuant to Section
306, and Securities so authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes as if
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authenticated by the Trustee hereunder. Wherever reference is made in this
Indenture to the authentication and delivery of Securities by the Trustee or the
Trustee's certificate of authentication, such reference shall be deemed to
include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation organized and
doing business under the laws of the United States of America, any State thereof
or the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all the
corporate agency or corporate trust business of an Authenticating Agent, shall
continue to be an Authenticating Agent, provided such corporation shall be
otherwise eligible under this Section, without the execution or filing of any
paper or any further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice
of resignation or upon such a
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termination, or in case at any time such Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section, the Trustee may
appoint a successor Authenticating Agent which shall be acceptable to the
Company and shall give notice of such appointment in the manner provided in
Section 106 to all Holders of Securities. Any successor Authenticating Agent
upon acceptance of its appointment hereunder shall become vested with all the
rights, powers and duties of its predecessor hereunder, with like effect as if
originally named as an Authenticating Agent. No successor Authenticating Agent
shall be appointed unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.
If an appointment is made pursuant to this Section, the Securities
may have endorsed thereon, in lieu of the Trustee's certificate of
authentication, an alternative certificate of authentication in the following
form:
This is one of the Securities referred to in the within-mentioned
Indenture.
The Bank of New York,
As Trustee
By......................................,
As Authenticating Agent
By.......................................
Authorized Signatory
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and the Company
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.
---------------------------------------------------------
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The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 15 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such Regular Record Date, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
- ---------
capacity as Security Registrar.
SECTION 702. Preservation of Information; Communications to Holders.
------------------------------------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that none of the Company, the Trustee or
any agent of any of them shall be held accountable by reason of any disclosure
of information as to names and addresses of Holders made pursuant to the Trust
Indenture Act.
SECTION 703. Reports by Trustee.
------------------
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(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
If required by Section 313 (a) of the Trust Indenture Act, the Trustee shall,
within sixty days after each January 15th following the date of this Indenture
deliver to Holders a brief report, dated as of such January 15th, which complies
with the provisions of such Section 313(a).
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, with the Commission and with the Company. The
Company shall promptly notify the Trustee of the listing of the Securities on
any stock exchange and of any delisting thereof.
SECTION 704. Reports by Company.
------------------
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act and in the manner set
forth in Section 1017; provided that any such information, documents or reports
--------
required to be filed with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act ("SEC Reports") shall be filed with the Trustee within 15 days
after the same is so required to be filed with the Commission. In the event the
Company shall cease to be required to file SEC Reports pursuant to the Exchange
Act, the Company will nonetheless continue to file such reports with the
Commission (unless the Commission will not accept such a filing) and the Trustee
and to furnish copies of such SEC Reports to the Holders of Securities at the
time the Company is required to file such reports with the Trustee and will make
such information available to investors who request it in writing.
Delivery of such reports, information and
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documents to the Trustee shall be for informational purposes only and the
Trustee's receipt of such reports, information and documents shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 705. Officers' Certificate with Respect to Change in Interest Rates.
--------------------------------------------------------------
Within five days after any Step-Up or Step-Down Date, the Company
shall deliver an Officers' Certificate to the Trustee stating the new interest
rate and the date on which it became effective.
ARTICLE EIGHT
Merger, Consolidation, Etc.
SECTION 801. Mergers, Consolidations and Certain Sales of Assets.
---------------------------------------------------
The Company may not, in a single transaction or a series of related
transactions, (i) consolidate with or merge into any other Person or permit any
other Person to consolidate with or merge into the Company, or (ii) directly or
indirectly, transfer, assign, convey, sell, lease or otherwise dispose of all or
substantially all of its assets unless:
(1) either (A) the Company shall be the surviving Person or (B) the
Person formed by or surviving any such consolidation or merger (if other
than the Company) or to which such transfer, assignment, conveyance,
sale, lease or other disposition was made shall be a corporation organized
under the laws of the United States of America or any State thereof or the
District of Columbia;
(2) the Person formed by or surviving any such consolidation or
merger (if other than the Company) or
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the entity or Person to which such sale, assignment, transfer, lease,
conveyance or other disposition was made shall expressly assume, by a
supplemental indenture executed and delivered to the Trustee in form
satisfactory to the Trustee, all of the Company's obligations under this
Indenture, the Securities and the Registration Rights Agreement;
(3) immediately after giving pro forma effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(4) in the case of a transaction other than a consolidation or merger
of a Wholly Owned Restricted Subsidiary organized under the laws of a State
of the United States or the District of Columbia into the Company (A)
immediately after giving effect to such transaction, the Company (or other
successor entity to the Company) (i) shall have a Consolidated Net Worth
that is equal to or greater than that of the Company immediately prior to
the transaction and (ii) a Debt to Annualized Cash Flow Ratio (calculated
as if such transaction had occurred at the beginning of the applicable two-
quarter Measurement Period) equal to or less than that of the Company
immediately prior to the transaction or (B) any other Person (i) assumes,
by a supplemental indenture executed and delivered to the Trustee in form
reasonably satisfactory to the Trustee, or guarantees all of the Company's
obligations under this Indenture, the Securities and the Registration
Rights Agreement, (ii) would, as a result of the applicable transaction,
properly classify the Company as a consolidated subsidiary in accordance
with GAAP and (iii) would, if the conditions set forth in subclauses (i)
and (ii) of clause A above were tested substituting such Person for the
Company, satisfy such conditions;
(5) if, as a result of any such transaction, property or assets of
the Company would become subject to a Lien prohibited by the provisions of
Section 1011, the Company or the successor entity to the Company shall have
secured the Securities as required by Section 1011; and
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(6) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each in form and substance satisfactory to the
Trustee stating that such consolidation, merger, conveyance, transfer,
lease or acquisition and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture, complies
with this Article and that all conditions precedent herein provided for
relating to such transaction have been complied with, and, with respect to
such Officers' Certificate, setting forth the manner of determination of
the Consolidated Net Worth in accordance with clause (4) of this Section
801, of the Company or, if applicable, of the Successor Company as required
pursuant to the foregoing.
SECTION 802. Successor Substituted.
---------------------
Upon any consolidation of the Company with, or merger of the Company
with or into, any other Person or any conveyance, sale, assignment, transfer or
lease of the properties and assets of the Company substantially as an entirety
in accordance with Section 801, the successor Person formed by such
consolidation or into which the Company is merged or to which such conveyance,
sale, assignment, transfer or lease is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this Indenture
with the same effect as if such successor Person had been named as the Company
herein, and thereafter, except in the case of (i) a lease or (ii) any sale,
assignment, conveyance, transfer, lease or other disposition to a Restricted
Subsidiary of the Company, the predecessor Person shall be relieved of all
obligations and covenants under this Indenture and the Securities; provided that
--------
solely for the purpose of calculating amounts under Section 1009(a), any such
surviving Person shall only be deemed to have succeeded to and be substituted
for the Company with respect to the period subsequent to the effective time of
such transaction, and the Company (before giving effect to such transaction)
shall be deemed to be the "Company" for such purposes for all prior periods.
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ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent of Holders.
--------------------------------------------------
Without the consent of any Holders, the Company, when authorized by
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the Securities;
(2) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company;
(3) to secure the Securities pursuant to the requirements of Section
1011 or otherwise;
(4) to provide for the issuance of Additional Securities in
accordance with the provisions of its Indenture;
(5) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to comply with any requirement of the
Commission in order to effect qualification of this Indenture under the
Trust Indenture Act in connection with the issuance of Exchange Securities
or thereafter to maintain the qualification of this Indenture under the
Trust Indenture Act;
(6) to cure any ambiguity or defect, to correct or supplement any
provision herein which may be inconsistent with any other provision herein,
or to make any other provisions with respect to matters or questions
arising under this Indenture which shall not be inconsistent with the
provisions of this Indenture,
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provided that such action pursuant to this clause (6) shall not adversely
--------
affect the legal rights of the Holders; or
(7) to provide for uncertificated Securities in addition to or in
place of certificated Securities.
SECTION 902. Supplemental Indentures with Consent of Holders.
-----------------------------------------------
With the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Securities, by Act of said Holders
delivered to the Company and the Trustee, and consistent with Section 513, the
Company, when authorized by Board Resolution, and the Trustee may enter into
an indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders under
this Indenture; provided, however, that no such supplemental indenture shall,
-------- -------
without the consent of the Holder of each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable thereon, or
change the place of payment where, or the coin or currency in which, any
Security or any premium or interest thereon is payable, or impair the right
to institute suit for the enforcement of any such payment on or after the
Stated Maturity thereof (or, in the case of redemption, on or after the
Redemption Date) or, in the case of an Offer to Purchase which has been
made, on or after the applicable Purchase Date;
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their
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consequences) provided for in this Indenture;
(3) modify any of the provisions of this Section, Section 513 or
Section 1019 except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby;
(4) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Securities (except a rescission
of acceleration of the Securities by the Holders of at least a majority in
aggregate principal amount of the Outstanding Securities (including the
Additional Securities, if any) and a waiver of the payment default that
resulted from such acceleration);
(5) waive a redemption payment with respect to any Security (other
than a payment required by any of the provisions of Section 1016 and
Section 1013); or
(6) following the mailing of an Offer with respect to an Offer to
Purchase pursuant to Section 1013 or 1016 and until the Expiration Date of
such Offer to Purchase, modify the provisions of this Indenture with
respect to such Offer to Purchase in a manner materially adverse to such
Holder.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof. Consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, Securities shall be treated as valid consents.
SECTION 903. Execution of Supplemental Indentures.
------------------------------------
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in
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relying upon, an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture. The
Trustee may, but shall not be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 906. Reference in Securities to Supplemental Indentures.
--------------------------------------------------
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and
the Company, to any such supplemental indenture may be prepared and executed by
the Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
ARTICLE TEN
Covenants
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SECTION 1001. Payment of Principal, Premium and Interest.
------------------------------------------
The Company will duly and punctually pay the principal of and premium,
if any, and interest on the Securities in accordance with the terms of the
Securities and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
-------------------------------
The Company will maintain in the Borough of Manhattan, The City of New
York, New York, an office or agency where Securities may be presented or
surrendered for payment, where Securities may be surrendered for registration
of transfer or exchange and where notices and demands to or upon the Company in
respect of the Securities and this Indenture may be served. The Company will
give prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee, and the
Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside the Borough of Manhattan, The City of New
York, New York) where the Securities may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
--------
however, that no such designation or rescission shall in any manner relieve the
- -------
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, New York for such purposes. The Company will
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
SECTION 1003. Money for Security Payments to be Held in Trust.
-----------------------------------------------
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If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of (and premium, if any) or interest
on any of the Securities, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal (and premium, if
any) or interest so becoming due until such sums shall be paid to such Persons
or otherwise disposed of as herein provided and will promptly notify the Trustee
in writing of its action or failure so to act. As provided in Section 504, upon
any bankruptcy or reorganization proceeding relative to the Company, the
Trustee shall serve as the Paying Agent for the Securities.
Whenever the Company shall have one or more Paying Agents, it will,
prior to each due date of the principal of (and premium, if any) or interest on
any Securities, deposit with a Paying Agent a sum sufficient to pay the
principal (and premium, if any) or interest so becoming due, such sum to be held
in trust for the benefit of the Persons entitled to such principal, premium or
interest, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee in writing of its action or failure so to act. As
provided in Section 504, upon any bankruptcy or reorganization proceeding
relative to the Company the Trustee shall serve as the Paying Agent for the
Securities.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest;
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(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent; and
(4) acknowledge, accept and agree to comply in all respects with the
provisions of this Indenture relating to the duties, rights and obligations
of such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any) or interest on any Security and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall be paid to the Company on the Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
-------- -------
Paying Agent, before being required to make any such repayment, shall, at the
expense of the Company, cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in the Borough of Manhattan, The City of New York, New York, notice
that such money remains unclaimed and that, after a date specified therein,
which shall not be less than 30 days from the date of such publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
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SECTION 1004. Existence.
---------
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence and
the existence of its Subsidiaries and the rights (charter and statutory) and
franchises of the Company and its Subsidiaries; provided, however, that the
-------- -------
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries
taken as a whole or that the loss thereof is not disadvantageous in any material
respect to the Holders.
SECTION 1005. Maintenance of Properties and Insurance.
---------------------------------------
The Company will cause all properties used or useful in the conduct
of its business or the business of any Subsidiary, to be maintained and kept in
good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
--------
however, that nothing in this Section shall prevent the Company from
- -------
discontinuing the operation or maintenance of any of such properties if such
discontinuance will not in the good faith judgment of the Board of Directors,
impair the ability of the Company to comply with the other provisions of the
Indenture, the Securities or the Registration Rights Agreement.
The Company shall, and shall cause the Subsidiaries of the Company
to, keep at all times all of their properties which are of an insurable nature
insured against loss or damage with insurers believed by the Company to be
responsible to the extent that property of similar character is usually so
insured by corporations similarly situated and owning like properties in
accordance with good business practice.
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SECTION 1006. Payment of Taxes and Other Claims.
---------------------------------
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, all material taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiaries of
the Company or upon the income, profits or property of the Company or any
Subsidiaries, except such as is being contested in good faith by appropriate
proceedings or where the failure to effect such payment does not have a material
adverse effect on the Company's financial condition or its ability to satisfy
its obligations under the Indenture, the Securities or the Registration Rights
Agreement.
SECTION 1007. Limitation on Incurrence of Debt.
--------------------------------
The Company may not, and may not permit any Restricted Subsidiary of
the Company to, directly or indirectly, Incur any Debt (including Acquired
Debt), provided, however, that the Company and its Restricted Subsidiaries may
-------- -------
Incur Debt (including Acquired Debt) if, after giving effect thereto, the
Company's Debt to Annualized Cash Flow Ratio is no greater than 6.0 to 1.0.
Notwithstanding the foregoing limitation, the Company and any
Restricted Subsidiary may Incur the following:
(i) Debt under the Credit Facility, provided that the aggregate
--------
principal amount of such Debt at any one time outstanding (with letters of
credit being deemed to have a principal amount equal to the maximum
reimbursement obligations of the Company and/or any of its Restricted
Subsidiaries thereunder) shall not exceed $325 million less the aggregate
amount of all Net Cash Proceeds of Asset Sales applied to permanently
reduce the commitments with respect to such Debt pursuant to the provisions
of Section 1013;
(ii) Purchase Money Debt;
(iii) Existing Debt;
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(iv) Debt in an aggregate principal amount (or, in the case of Debt
issued at a discount, the accreted amount at the time of incurrence,
determined in accordance with GAAP) at any one time outstanding of up to
$50 million;
(v) Debt in an aggregate principal amount of up to 2.5 times the
sum of the net cash proceeds received by the Company after the Issue Date
in connection with any issuance and sale of Equity Interests (other than
Disqualified Stock), plus the Fair Market Value of Equity Interests (other
than Disqualified Stock) issued in connection with an acquisition of a
Telecommunications Business or Telecommunications Related Assets; provided
--------
that such Debt does not mature prior to the Stated Maturity of the
Securities or has an Weighted Average Life to Maturity at least equal to
the Securities;
(vi) Debt represented by the principal amount of Original
Securities;
(vii) Permitted Refinancing Debt issued in exchange for, or the net
proceeds of which are used to refund, refinance or replace, Debt (other
than Intercompany Debt) permitted to be incurred under the first paragraph
of this Section 1007 or clauses (ii), (iii), (v) or (vi) of this paragraph;
(viii) Intercompany Debt; provided, however, that:
-------- -------
(a) any subsequent issuance or transfer of Equity Interests that
results in any such Debt being held by a Person other than the Company
or any of its Restricted Subsidiaries; and
(b) any sale or other transfer of any such Debt to a Person that
is not either the Company or a Restricted Subsidiary
shall be deemed, in each case, to constitute an incurrence of such Debt by
the Company or such
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Restricted Subsidiary, as the case may be, not permitted by this clause
(viii);
(ix) Hedging Obligations; and
(x) Debt consisting of performance and other similar bonds and
reimbursement obligations incurred in the ordinary course of business
securing the performance of contractual, franchise or license obligations
of the Company or a Restricted Subsidiary, or in respect of a letter of
credit obtained to secure such performance.
For purposes of determining compliance with this Section 1007, in the
event that an item of Debt meets the criteria of more than one of the types of
Debt the Company is permitted to Incur pursuant to this Section 1007, the
Company shall have the right, in its sole discretion, to classify such item of
Debt and shall only be required to include the amount and type of such Debt
under the clause or paragraph permitting the Debt as so classified. The
determination of any particular amount of Debt under such covenant shall be made
without duplication for Guarantees or Liens supporting Debt otherwise included
in the determination of a particular amount.
SECTION 1008. Limitation on Issuances of Guarantees of Debt.
---------------------------------------------
The Company shall not permit any Subsidiary, directly or indirectly,
to Guarantee, assume or in any other manner become liable with respect to any
Pari Passu Debt or Subordinated Debt (other than Debt permitted under clause (i)
of Section 1007) of the Company unless such Subsidiary simultaneously executes
and delivers a supplemental indenture to this Indenture providing for a
Guarantee of the Securities on the same terms as the Guarantee of such Debt,
except that:
(i) such Guarantee need not be secured unless required pursuant to
Section 1011; and
(ii) if such Debt is by its terms expressly subordinated to the
Securities, any such assumption,
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Guarantee or other liability of such Subsidiary with respect to such Debt
shall be subordinated to such Subsidiary's Guarantee of the Securities at
least to the same extent as such Debt is subordinated to the Securities.
Notwithstanding the foregoing, any Guarantee by a Subsidiary of the
Securities shall provide by its terms that it (and all Liens securing the same)
shall be automatically and unconditionally released and discharged upon (i) any
sale, exchange or transfer, to any Person not an Affiliate of the Company, of
all of the Company's Capital Stock in, or all or substantially all of the assets
of, such Subsidiary, which transaction is in compliance with the terms of this
Indenture and in which such Subsidiary is released from its Guarantees of other
Debt of the Company or any of its Subsidiaries, (ii) the designation of such
Subsidiary as an Unrestricted Subsidiary in compliance with the covenant set
forth in Section 1021 or (iii) the release of such Subsidiary from all of its
obligations under all of its Guarantees of Debt of the Company.
SECTION 1009. Limitation on Restricted Payments.
---------------------------------
(a) The Company may not, and may not permit any of its Restricted
Subsidiaries to, directly or indirectly (all such payments and other actions set
forth in clauses (i) through (iv) are collectively referred to as "Restricted
Payments"):
(i) declare or pay any dividend or make any other payment or
distribution on account of the Company or any of its Restricted
Subsidiaries' Equity Interests (including, without limitation, any payment
in connection with any merger or consolidation involving the Company or any
of its Restricted Subsidiaries) or to the direct or indirect holders of the
Company's or any of its Restricted Subsidiaries' Equity Interests in their
capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or to the Company
or a Restricted Subsidiary of the Company);
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(ii) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or
consolidation involving the Company) any Equity Interests of the Company or
any direct or indirect parent of the Company (other than any such Equity
Interests owned by the Company or any Restricted Subsidiary of the
Company);
(iii) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value, any Debt that is
subordinated to the Securities, except a payment of interest or principal
at Stated Maturity; or
(iv) make any Restricted Investment,
unless, at the time of and after giving effect to such Restricted Payment:
(i) no Default or Event of Default has occurred and is continuing or
would occur as a consequence thereof;
(ii) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable two-quarter Measurement
Period, have been permitted to Incur at least $1.00 of additional Debt
pursuant to the Debt to Annualized Cash Flow Ratio test set forth in the
first paragraph of Section 1007; and
(iii) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Company and its Restricted
Subsidiaries after the Issue Date (excluding Restricted Payments permitted
by clauses (ii), (iii) and (iv) of Section 1009(b)), is less than the sum,
without duplication, of
(a) 50% of the Consolidated Net Income of the Company for the
period (taken as one accounting period) from the beginning of the
first fiscal quarter commencing after the date of this Indenture to
the end of the Company's most recently ended fiscal quarter for which
internal
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financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a
deficit, less 100% of such deficit), plus
(b) 100% of the aggregate net cash proceeds received by the
Company since the Issue Date as a contribution to its common equity
capital or from the issue or sale of Equity Interests of the Company
(other than Disqualified Stock) or from the issue or sale of
Disqualified Stock or debt securities of the Company that have been
converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a
Subsidiary of the Company), plus
(c) 100% of the net reduction in Investments in any Unrestricted
Subsidiary since the end of the first fiscal quarter ending after the
Issue Date resulting from payments of interest on Debt, dividends,
repayments of loans or advances, or other transfers of assets, in each
case to the Company or any of its Restricted Subsidiaries (except to
the extent that any such payment is included in the calculation of
Consolidated Net Income) or from redesignations of Unrestricted
Subsidiaries as Restricted Subsidiaries (provided that the amount
--------
included in this clause (c) shall not exceed the amount of Investments
previously made by the Company and its Restricted Subsidiaries in such
Unrestricted Subsidiary.)
If the Company or any of its Restricted Subsidiaries makes a Restricted
Payment which, at the time it is made, would in the good faith determination of
the Company be permitted under this Indenture, such Restricted Payment shall be
deemed to have been made in compliance with this Indenture notwithstanding any
subsequent adjustments to the Company's financial statements made in good faith
that affect Consolidated Net Income for any period.
(b) Notwithstanding Section 1009(a), the following payments and
actions shall not be prohibited:
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(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at the date of declaration such payment would have
complied with the provisions of this Indenture;
(ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Debt or Equity Interests of the Company or
its Restricted Subsidiaries in exchange for, or out of the net cash
proceeds of the substantially concurrent sale (other than to a Subsidiary
of the Company) of, other Equity Interests of the Company (other than any
Disqualified Stock); provided that the amount of any such net cash proceeds
--------
that are used for any such redemption, repurchase, retirement, defeasance
or other acquisition shall be excluded from clause (iii)(b) of Section
1009(a);
(iii) the defeasance, redemption, repurchase or other acquisition of
subordinated Debt with the net cash proceeds from an incurrence of
Permitted Refinancing Debt;
(iv) the payment of any dividend by a Restricted Subsidiary of the
Company to the holders of its common Equity Interests on a pro rata basis,
or by the Company and/or any of its Restricted Subsidiaries in respect of
Disqualified Stock permitted to have been issued under Section 1007;
(v) the repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of the Company or any Restricted
Subsidiary of the Company held by any member of the Company's or any of its
Restricted Subsidiaries' management; provided that (a) the aggregate price
--------
paid for all such repurchased, redeemed, acquired or retired Equity
Interests shall not exceed $2,000,000 plus the aggregate cash proceeds
received by the Company since the Issue Date from issuances of its Equity
Interests to officers, managers, directors or employees of the Company or
any of its Subsidiaries and (b) no Default or Event of Default shall have
occurred and be
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continuing immediately after such transaction;
(vi) Investments made out of the net cash proceeds of a
substantially concurrent issue and sale (other than to a Subsidiary of the
Company) of Equity Interests (other than Disqualified Stock) of the
Company; provided that the amount of any such net cash proceeds that are
--------
used for any such Investment shall be excluded from clause (iii)(b) of
Section 1009(a); and
(vii) other Restricted Payments not to exceed $10 million in the
aggregate at any time outstanding (with Restricted Payments pursuant to
this clause not being counted as Restricted Payments for purposes of clause
(iii) of Section 1009(a)).
(c) The amount of all Restricted Payments (other than cash) shall be
the Fair Market Value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The Fair Market Value of any non-cash Restricted Payment shall be determined
conclusively by a Board Resolution delivered to the Trustee.
SECTION 1010. Limitation on Dividend and Other Payment Restrictions Affecting
---------------------------------------------------------------
Restricted Subsidiaries.
-----------------------
The Company may not, and may not permit any Restricted Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Restricted
Subsidiary of the Company to:
(i) pay dividends (in cash or otherwise) or make any other
distributions to the Company or any of its Restricted Subsidiaries in
respect of its Capital Stock or in respect of any other interest or
participation in, or measured by, its profits or pay any indebtedness owed
to the Company or any Restricted Subsidiary;
(ii) make loans or advances to the Company or any Restricted
Subsidiary; or
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(iii) transfer any of its property or assets to the Company or any
Restricted Subsidiary.
Notwithstanding the foregoing, the Company may, and may permit any Restricted
Subsidiary to, suffer to exist any such encumbrance or restriction pursuant to:
(a) Existing Debt as in effect on the Issue Date;
(b) the Credit Facility;
(c) this Indenture and the Securities;
(d) applicable law and regulations;
(e) any instrument governing Debt or Capital Stock of a Person
acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such Debt
was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to
any Person, or the properties or assets of any Person, other than the
Person, or the property or assets of the Person, so acquired, provided
--------
that, in the case of Debt, such Debt was permitted to be incurred
under Section 1007;
(f) customary non-assignment provisions in contracts entered
into in the ordinary course of business;
(g) customary restrictions on encumbrance, transfer or
disposition of financed assets pursuant to agreements governing
Purchase Money Debt on the property so acquired permitted by this
Indenture;
(h) any agreement for the sale of a Restricted Subsidiary that
contains restrictions applicable to that Restricted Subsidiary pending
its sale;
(i) Permitted Refinancing Debt, provided
--------
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<PAGE>
that the restrictions contained in the agreements governing such
Permitted Refinancing Debt are no more restrictive, taken as a whole,
than those contained in the agreements governing the Debt being
refinanced;
(j) any restriction on the sale or other disposition of assets
or property securing Debt as a result of a Permitted Lien, or other
Lien permitted to be incurred pursuant to the provisions of Section
1011, on such assets or property;
(k) provisions with respect to the disposition or distribution
of assets or property in joint venture agreements and other similar
agreements entered into in the ordinary course of business; and
(l) restrictions on cash or other deposits or net worth imposed
by customers under contracts entered into in the ordinary course of
business.
SECTION 1011. Limitation on Liens.
-------------------
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, Incur, assume or suffer to
exist any Lien on any asset now owned or hereafter acquired, or any income or
profits therefrom, or assign or convey any right to receive income therefrom,
except Permitted Liens without making, or causing such Restricted Subsidiary to
make, effective provision for securing the Securities:
(x) equally and ratably with (or prior to) such Debt as to such property
for so long as such Debt will be so secured or
(y) in the event such Debt is Debt of the Company which is subordinate in
right of payment to the Securities, prior to such Debt as to such property for
so long as such Debt will be so secured.
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SECTION 1012. Limitation on Sale and Leaseback Transactions.
---------------------------------------------
The Company may not, and may not permit any Restricted Subsidiary to,
directly or indirectly, enter into, assume, Guarantee or otherwise become liable
with respect to any Sale and Leaseback Transaction unless:
(i) the Company or such Restricted Subsidiary would be entitled to Incur
secured Debt by reason of the provisions of Section 1007 and Section 1011
equal in amount to the Attributable Debt with respect to such transaction;
(ii) the consideration received by the Company or the Restricted
Subsidiary from such transaction is at least equal to the Fair Market Value
of the property being transferred; and
(iii) the Net Cash Proceeds received by the Company or the Restricted
Subsidiary from such transaction are applied in accordance with Section
1013.
SECTION 1013. Limitation on Asset Sales.
-------------------------
(a) The Company may not, and may not permit any Restricted Subsidiary
to, consummate any Asset Sale unless:
(i) the Company or the Restricted Subsidiary, as the case may
be, receives consideration for such Asset Sale at least equal to the Fair Market
Value of the assets or Equity Interests issued or sold or otherwise disposed of
as determined by the Board of Directors in good faith and evidenced by a Board
Resolution set forth in an Officers' Certificate delivered before or after such
Asset Sale to the Trustee, which determination shall be conclusive; and
(ii) at least 75% of the consideration for such disposition
consists of any combination of cash or Cash Equivalents. For purposes of this
provision, each of the following are considered cash:
(1) any liabilities (as reflected on the
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Company's or the Restricted Subsidiary's most recent balance sheet) of the
Company or the Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Securities or any
Guarantee thereof) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases the Company or the
Restricted Subsidiary from further liability; and
(2) any securities, notes or other obligations received by the
Company or the Restricted Subsidiary from such transferee that are
contemporaneously (subject to ordinary settlement periods) converted by the
Company or the Restricted Subsidiary into cash (to the extent of the cash
received in that conversion).
(b) The Company and its Restricted Subsidiaries will be permitted to
consummate an Asset Sale without complying with clause (ii) of Section 1013(a)
provided that:
- --------
(i) the Company (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the
Fair Market Value (as determined in accordance with clause (i) of Section
1013(a)) of the assets or other property sold, issued or otherwise disposed
of;
(ii) at least 75% of the consideration for such Asset Sale
constitutes any combination of cash, Cash Equivalents and Productive
Assets; and
(iii) each of the following are treated as Net Cash Proceeds for
purposes of the provisions of Section 1013(c):
(1) any cash consideration;
(2) any non-cash consideration not constituting Productive
Assets received by the Company or any of its Restricted Subsidiaries
in connection with such Asset Sale that is converted into or sold or
otherwise disposed of for cash or Cash Equivalents at any time within
365 days after
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such Asset Sale; and
(3) any Productive Assets constituting cash or Cash Equivalents
received by the Company or any of its Restricted Subsidiaries in
connection with such Asset Sale.
(c) Within 365 days after the receipt of any Net Cash Proceeds from an
Asset Sale, the Company (or the Restricted Subsidiary, as the case may be) may
apply such Net Cash Proceeds to:
(i) permanently reduce the amounts permitted to be borrowed by the
Company or any Restricted Subsidiary under the terms of any of its Debt
that is not subordinated Debt or
(ii) purchase Telecommunications Related Assets or Voting Stock of
any Person engaged in the Telecommunications Business in the United States
provided that such Person concurrently becomes a Restricted Subsidiary of
--------
the Company. The Company may treat the purchase of such Telecommunications
Related Assets or Voting Stock within 180 days prior to such Asset Sale as
constituting a purchase of such Telecommunications Related Assets or Voting
Stock within such 365-day period.
Pending the final application of any such Net Cash Proceeds, the Company
may temporarily reduce revolving credit borrowings or otherwise invest such Net
Cash Proceeds in any manner that is not prohibited by this Indenture.
(d) Any Net Cash Proceeds from Asset Sales that are not applied or
invested as provided in Section 1013(c) shall constitute "Excess Proceeds". The
Company shall use any such Excess Proceeds which are in excess of the greater of
$10 million or 10% of the Consolidated Tangible Net Worth of the Company as
follows:
(i) to make an Offer to Purchase for the repurchase of the maximum
principal amount of Securities (and to the extent required by the terms
hereof, any other Pari Passu Debt at a price no greater than 100% of the
principal amount thereof plus accrued
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interest to the date of purchase, or 100% of the accreted value thereof in
the case of Debt issued at a discount) that may be purchased out of the
Excess Proceeds at an offer price, payable in cash, equal to 100% of the
principal amount of the Securities to be purchased, plus accrued and unpaid
interest to the date of purchase; and
(ii) to the extent any Excess Proceeds are not used pursuant to
clause (i) above, for any purpose not otherwise prohibited under this
Indenture.
The amount of Excess Proceeds shall be reset to zero upon completion of each
Offer to Purchase made by the Company pursuant to this Section 1013.
(e) Notwithstanding the foregoing, this Section 1013 shall not
apply to any Asset Sale which constitutes a transfer, conveyance, sale, lease or
other disposition of all or substantially all of the Company's properties or
assets within the meaning of Section 801.
(f) The Company shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable to the repurchase of
Securities pursuant to this Section 1013. To the extent that the provisions of
any securities laws or regulations conflict with this Section 1013, the Company
shall comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under this Section 1013.
SECTION 1014. Limitation on Issuances and Sales of Equity Interests of
--------------------------------------------------------
Restricted Subsidiaries.
- -----------------------
The Company may not, and may not permit any Restricted Subsidiary of
the Company to, issue, transfer, convey, sell, lease or otherwise dispose of any
Equity Interests in any Restricted Subsidiary of the Company unless:
(i) such issuance or disposition is to the
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Company or another Restricted Subsidiary;
(ii) such issuance or disposition is to directors as director's
qualifying shares, but only to the extent required under applicable law;
(iii) such issuance or disposition is treated by the Company as an
Asset Sale and the Net Cash Proceeds from such issuance or disposition are
applied in accordance with the provisions of Section 1013;
(iv) such issuance or disposition is of Disqualified Stock and is
permitted under Section 1007;
(v) such disposition is of Equity Interests of a Restricted
Subsidiary (other than pursuant to clauses (i) and (ii) above), if such
Restricted Subsidiary would no longer be a Restricted Subsidiary
immediately after such transaction and any Investment in such Person
remaining after giving effect to such disposition would have been permitted
to be made under Section 1009.
SECTION 1015. Transactions with Affiliates.
----------------------------
The Company may not, and may not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or Guarantee with, or for the benefit
of, any Affiliate (each, an "Affiliate Transaction"), unless:
(i) such Affiliate Transaction is on terms that are no less favorable
to the Company or such Restricted Subsidiary than those that could
reasonably have been obtained in a comparable transaction by the Company or
such Restricted Subsidiary with a non-Affiliate; and
(ii) the Company delivers to the Trustee:
(a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in
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excess of $5 million but less than or equal to $10 million, an
Officers' Certificate certifying that such Affiliate Transaction
complies with clause (i) above and
(b) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in
excess of $10 million, a Board Resolution set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with
clause (i) above and that such Affiliate Transaction has been approved
by a majority of the disinterested members of the Board of Directors,
or an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing.
provided, however, that the following transactions shall not be deemed to
-------- -------
be Affiliate Transactions:
(1) any employment agreement and related arrangement entered into by
the Company or any of its Restricted Subsidiaries in the ordinary course of
business;
(2) transactions between or among the Company and/or its Restricted
Subsidiaries;
(3) payment of reasonable directors fees to Persons who are not
otherwise Affiliates of the Company;
(4) Restricted Payments that are permitted under Section 1009;
(5) loans and advances to employees in the ordinary course of
business consistent with past practice; and
(6) commercial transactions in the ordinary course of business with
Affiliates of the Company on terms that are customary in the
Telecommunications Business or consistent with past practices.
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SECTION 1016. Change of Control.
-----------------
(a) Within 10 days of the occurrence of a Change of Control, the
Company shall mail a notice to each Holder and to the Trustee describing the
transaction or transactions constituting the Change of Control and offering to
make an Offer to Purchase all Outstanding Securities at a purchase price equal
to 101% of their principal amount plus accrued and unpaid interest to the date
of purchase.
(b) The Company and Trustee shall perform their respective
obligations specified in the Offer for the Offer to Purchase. On or prior to
the Purchase Date, the Company shall
(i) accept for payment Securities or portions thereof
tendered pursuant to the Offer,
(ii) deposit with the Paying Agent (or, if the Company is
acting as its own Paying Agent, segregate and hold in trust as provided in
Section 1003) money sufficient to pay the purchase price of all Securities or
portions thereof so accepted,
(iii) deliver or cause to be delivered to the Trustee all
Securities so accepted together with an Officers' Certificate stating the
aggregate principal amount of the Securities or portions thereof accepted for
payment by the Company. The Paying Agent shall promptly mail or deliver to
Holders of Securities so accepted payment in an amount equal to the purchase
price, and the Trustee shall promptly authenticate and mail or deliver to such
Holders a new Security or Securities equal in principal amount to any
unpurchased portion of the Security surrendered as requested by the Holder. Any
Security not accepted for payment shall be promptly mailed or delivered by the
Company to the Holder thereof, and
(iv) publicly announce the result of such Offer on or as
soon as practicable after the date of payment of Securities tendered pursuant to
the Offer.
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(c) The Company shall comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable to the
repurchase of Securities as a result of a Change of Control
SECTION 1017. Provision of Financial Information.
----------------------------------
The Company agrees to furnish the Trustee and file with the
Commission, in each case within the time periods specified in the Commission's
rules and regulations:
(i) all quarterly and annual financial information that would be
required to be included in filings with the Commission on Forms 10-Q and
10-K, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" that describes the financial condition
and results of operations of the Company and its consolidated Subsidiaries
(showing in reasonable detail, either on the face of the financial
statements or in the footnotes thereto and in "Management's Discussion of
Analysis of Financial Condition and Results of Operations," the financial
condition and results of operations of the Company and its Restricted
Subsidiaries separate from the financial condition and results of
operations of the Unrestricted Subsidiaries of the Company) and, with
respect to the annual information only, a report thereon by the Company's
certified independent accountants; and
(ii) all current reports that would be required to be filed with the
Commission on Form 8-K.
In addition, for so long as any Securities are outstanding, the Company
shall furnish to the Holders, securities analysts, prospective investors and
beneficial owners of the Securities, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act,
if applicable. In the event the Company shall cease to be required to file SEC
Reports pursuant to the Exchange Act, the Company shall nevertheless continue to
file such reports with the Commission (unless the Commission will not accept
such a filing) and the Trustee. The Company will furnish copies of
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the SEC Reports to the Holders of Securities at the time the Company is required
to file the same with the Trustee and will make such information available to
investors who request it in writing.
SECTION 1018. Statement by Officers as to Default.
-----------------------------------
(a) The Company shall deliver to the Trustee, within 90 days after
the end of each fiscal year of the Company ending after the date hereof, an
Officers' Certificate, stating whether or not to the best knowledge of the
signers thereof the Company is in default in the performance and observance of
any of the terms, provisions and conditions of this Indenture and if the Company
shall be in default, specifying all such defaults and the nature and status
thereof of which they may have knowledge.
(b) The Company shall deliver to the Trustee, as soon as possible and
in any event within 10 days after the Company becomes aware of the occurrence of
a Default or an Event of Default, an Officers' Certificate setting forth the
details of such Default or Event of Default and the action which the Company
proposes to take with respect thereto.
SECTION 1019. Waiver of Certain Covenants.
---------------------------
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Sections 1004 to 1017, inclusive, if before
or after the time for such compliance the Holders of at least a majority in
aggregate principal amount of the Outstanding Securities shall, by Act of such
Holders, either waive such compliance in such instance or generally waive
compliance with such covenant or condition, but no such waiver shall extend to
or affect such covenant or condition except to the extent so expressly waived,
and, until such waiver shall become effective, the obligations of the Company
and the duties of the Trustee in respect of any such covenant or condition shall
remain in full force and effect.
SECTION 1020. Limitation on Business Activities.
---------------------------------
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The Company may not, and may not permit its Restricted Subsidiaries
to, directly or indirectly engage in any business other than the
Telecommunications Business.
SECTION 1021. Designation of Restricted and Unrestricted Subsidiaries.
-------------------------------------------------------
(a) The Board of Directors may designate any Restricted Subsidiary to
be an Unrestricted Subsidiary, provided that any outstanding Investments (except
--------
to the extent repaid in cash or Cash Equivalents) (valued at their Fair Market
Value at the time of such designation) by the Company and its Restricted
Subsidiaries in such Subsidiary shall be deemed to be Restricted Payments
subject to the provisions of Section 1009; and provided, further, that such
-------- -------
designation shall be permitted only if:
(i) no Default or Event of Default would be in existence
following such designation,
(ii) such Restricted Subsidiary otherwise meets the definition of
an Unrestricted Subsidiary and
(iii) the related Restricted Payment would be permitted under
Section 1009 at the time of such designation.
If, at any time, any Unrestricted Subsidiary shall fail to meet the
requirements of the definition of an Unrestricted Subsidiary, such Subsidiary
shall immediately cease to be an Unrestricted Subsidiary for purposes of this
Indenture and, as of that date, any Debt of such Subsidiary shall be deemed to
be incurred by a Restricted Subsidiary and shall be subject to the provisions of
Section 1007.
(b) The Board of Directors may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that such designation shall
--------
be deemed to be an incurrence of Debt by a Restricted Subsidiary of any
outstanding Debt of such Unrestricted Subsidiary and such designation shall be
permitted only if:
(i) such Debt is permitted under Section 1007,
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calculated on a pro forma basis as if such designation had occurred at the
beginning of the two-quarter Measurement Period, and
(ii) no Default or Event of Default would be in existence following
such designation.
(c) Any designation by the Board of Directors shall be evidenced to
the Trustee by filing with the Trustee a certified copy of the Board Resolution
giving effect to the designation and an Officers' Certificate certifying that
such designation is in compliance with this Section 1021 and was permitted under
Section 1009.
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. Right of Redemption.
-------------------
(a) The Securities may be redeemed on one or more occasions on or
prior to February 15, 2003 by the Company, at is option, provided that:
--------
(i) on or before February 15, 2003, the Company receives net
proceeds in the form of cash or Cash Equivalents from one or more Public
Equity Offerings or Strategic Equity Placements;
(ii) the Company shall use all or a portion of the net proceeds
received in the form set forth in clause (i) above to redeem Securities in
a principal amount of up to an aggregate amount equal to 35% of the
original principal amount of the Securities at a Redemption Price of
112.875% of their principal amount plus accrued and unpaid interest, if
any, to but excluding the Redemption Date (subject to the right of Holders
of record on the relevant Regular Record Date to receive interest due on an
Interest Payment Date that is on or prior to the Redemption Date);
(iii) Securities in an amount equal to at least 65% of the
original aggregate principal amount of the
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Securities remain outstanding immediately after such redemption and such
redemption occurs on a Redemption Date within 60 days of the closing of any
such Public Equity Offering or Strategic Equity Placement and
(iv) the Company shall mail a notice of redemption no later than
30 days after the related Public Equity Offering or Strategic Equity
Placement is completed to each Holder of Securities to be redeemed at such
Holder's address appearing in the Security Register.
(b) The Securities further may be redeemed, as a whole or in
part, at the election of the Company, at any time on or after February 15, 2005
and prior to maturity, upon not less than 30 nor more than 60 days' notice by
mail to each Holder of Securities to be redeemed at such Holder's address
appearing in the Security Register, at the Redemption Prices specified in the
form of Security hereinbefore set forth, together with accrued and unpaid
interest to, but excluding, the Redemption Date (subject to the right of Holders
of record on the relevant Regular Record Date to receive interest due on an
Interest Payment Date that is on or prior to the Redemption Date).
SECTION 1102. Applicability of Article.
------------------------
Redemption of Securities at the election of the Company, as permitted
or required by any provision of this Indenture, shall be made in accordance with
such provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Securities pursuant to
Section 1101 shall be evidenced by Board Resolution. In case of any redemption
at the election of the Company, the Company shall, at least 60 days prior to the
Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee in writing of such Redemption
Date and of the principal amount of Securities to be redeemed. In the case of
any redemption of Securities prior to the expiration of any restriction on such
redemption provided in the terms of
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such Securities or elsewhere in this Indenture, the Company shall furnish the
Trustee with an Officers' Certificate evidencing compliance with such
restriction.
SECTION 1104. Securities to Be Redeemed Pro Rata.
----------------------------------
(a) If less than all the Securities are to be redeemed in any
redemption, the Securities to be redeemed shall be selected by the Trustee as
follows:
(i) if the Securities are listed, in compliance with the requirements
of the principal national securities exchange on which the Securities are
so listed; or
(ii) if the Securities are not listed, on a pro rata basis, by lot or
by such other method as the Trustee shall deem fair and appropriate.
(b) In any proration pursuant to this Section, the Trustee shall make
such adjustments, reallocations and eliminations as it shall deem proper (and in
compliance with the requirements of the principal national securities exchange
on which the Securities are listed, if any) to the end that the principal amount
of Securities so prorated shall be $1,000 or a multiple thereof, by increasing
or decreasing or eliminating the amount which would be allocable to any Holder
on the basis of exact proportion by an amount not exceeding $1,000.
(c) The Trustee in its discretion may determine the particular
Securities (if there are more than one) registered in the name of any Holder
which are to be redeemed, in whole or in part.
(d) The Trustee shall promptly notify the Company and each Security
Registrar (other than the Trustee) in writing of the Securities selected for
redemption and, in the case of any Securities selected for partial redemption,
the principal amount thereof to be redeemed.
(e) For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to
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the redemption of Securities shall relate, in the case of any Securities
redeemed or to be redeemed only in part, to the portion of the principal amount
of such Securities which has been or is to be redeemed.
SECTION 1105. Notice of Redemption.
--------------------
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at such Holder's address
appearing in the Security Register. Notices of redemption may not be
conditional.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) whether the redemption is being made pursuant to Section 1101(a)
or (b) and, if being made pursuant to Section 1101(a), a brief statement
setting forth the Company's right to effect such redemption and the
Company's basis therefor,
(4) if less than all the Outstanding Securities are to be redeemed,
the identification (and, in the case of partial redemption of any
Securities, the principal amounts) of the particular Securities to be
redeemed,
(5) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and that interest
thereon will cease to accrue on and after said date,
(6) the place or places where such Securities are to be surrendered
for payment of the Redemption Price,
(7) that in the case that a Security is only redeemed in part, the
Company shall execute and the Trustee shall authenticate and deliver to the
Holder of such Security without service charge, a new Security or
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Securities in an aggregate amount equal to the unredeemed portion of the
Security,
(8) the aggregate principal amount of Securities being redeemed, and
(9) the CUSIP number or numbers of the Securities being redeemed.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, if request is made to the Trustee
no less than 35 days prior to the Redemption Date, by the Trustee in the name
and at the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
---------------------------
Prior to 10:00 a.m. on any Redemption Date, the Company shall deposit
with the Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section 1003) an amount
of money sufficient to pay the Redemption Price of, and (except if the
Redemption Date shall be an Interest Payment Date) accrued and unpaid interest
on, all the Securities which are to be redeemed on that date.
SECTION 1107. Securities Payable on Redemption Date.
-------------------------------------
Notice of redemption having been given as afore said, the Securities
to be so redeemed shall, on the Redemp tion Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued and
unpaid interest) such Securities shall cease to bear interest. Upon surrender of
any such Security for redemption in accordance with said notice, such Security
shall be paid by the Company at the Redemption Price, together with accrued and
unpaid interest to the Redemption Date; provided, however, that
-------- -------
installments of interest whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at the close of business on the
relevant
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Record Dates according to their terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate provided by the
Security.
SECTION 1108. Securities Redeemed in Part.
---------------------------
Any Security which is to be redeemed only in part shall be surrendered
at an office or agency of the Company designated for that purpose pursuant to
Section 1002 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or his attorney duly authorized
in writing), and the Company shall execute, and the Trustee shall authenticate
and deliver to the Holder of such Security without service charge, a new
Security or Securities of like tenor, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in exchange
for the unredeemed portion of the principal of the Security so surrendered. If a
Global Security is so surrendered, such new Security shall also be a Global
Security.
ARTICLE TWELVE
Defeasance and Covenant Defeasance
SECTION 1201. Company's Option to Effect Defeasance or Covenant Defeasance.
------------------------------------------------------------
The Company may, at its option by Board Resolution at any time
(subject to 5 Business Day's prior written notification to the Trustee or such
lesser period as may be acceptable to the Trustee), elect to have either Section
1202 or Section 1203 applied to the Outstanding Securities upon compliance with
the conditions set forth below in this Article Twelve.
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SECTION 1202. Defeasance and Discharge.
------------------------
Upon the Company's exercise of the option provided in Section 1201
applicable to this Section, the Company shall be deemed to have been discharged
from its obligations with respect to the Outstanding Securities on the date the
conditions set forth below are satisfied (hereinafter, "defeasance"). For this
purpose, such defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by the Outstanding Securities and
to have satisfied all its other obligations under such Securities and this
Indenture insofar as such Securities are concerned (and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging the
same), except for the following which shall survive until otherwise terminated
or discharged hereunder:
(A) the rights of Holders of Outstanding Securities to receive, solely
from the trust fund described in Section 1204 and as more fully set forth in
such Section, payments in respect of the principal of (and premium, if any) and
interest on such Securities when such payments are due,
(B) the Company's obligations with respect to such Securities under
Sections 304, 305, 306, 1002 and 1003,
(C) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and
(D) the provisions of this Article Twelve.
Subject to compliance with this Article Twelve, the Company may exercise
its option under this Section 1202 notwithstanding the prior exercise of its
option under Section 1203.
SECTION 1203. Covenant Defeasance.
-------------------
Upon the Company's exercise of the option provided in Section 1201
applicable to this Section
(i) the Company shall be released from its obligations under Sections
1005 through 1017, inclusive, and clauses (3), (4) and (5) of Section 801.
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(ii) the occurrence of an event specified in Sections 501(4),
501(5)(with respect to Sections 1005 through 1017, inclusive and clauses (3),
(4) and (5) of Section 801) 501(6) and 501(7) shall not be deemed to be an Event
of Default, on and after the date the conditions set forth below are satisfied
(hereinafter, "covenant defeasance"). For this purpose, such covenant
defeasance means that the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
Section or Article, whether directly or indirectly by reason of any reference
elsewhere herein to any such Section or Article or by reason of any reference in
any such Section or Article to any other provision herein or in any other
document, but the remainder of this Indenture and such Securities shall be
unaffected thereby.
SECTION 1204. Conditions to Defeasance or Covenant Defeasance.
-----------------------------------------------
The following shall be the conditions to application of either Section
1202 or Section 1203 to the Outstanding Securities:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Securities,
(A) cash in U.S. Dollars, or
(B) non-callable Government Securities, or
(C) a combination thereof, sufficient, in the opinion of a
nationally recognized firm of independent certified public
accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge,
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and which shall be applied by the Trustee to pay and
discharge, the principal of, premium, if any, and each
installment of interest on the Securities on the Stated
Maturity of such principal or installment of interest on the
day on which such payments are due and payable in accordance
with the terms of this Indenture and of such Securities.
(2) No Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to defease the
Securities pursuant to this Article Twelve) or, insofar as subsections
501(8) and (9) are concerned, at any time during the period ending on the
123rd day after the date of such deposit (it being understood that this
condition shall not be deemed satisfied until the expiration of such
period).
(3) Such defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest as defined in Section 608 and for
purposes of the Trust Indenture Act with respect to any securities of the
Company.
(4) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Company or
any of its Subsidiaries is a party or by which it is bound.
(5) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel (with usual and customary exceptions
reasonably acceptable to the Trustee), each stating that all conditions
precedent provided for relating to either the defeasance under Section 1202
or the covenant defeasance under Section 1203 (as the case may be) have
been complied with.
(6) In the case of an election under
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Section 1202, the Company shall have delivered to the Trustee an Opinion of
Counsel stating that
(x) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or
(y) since the date of this Indenture there has been a change in the
applicable Federal income tax law,
in either case to the effect that, and based thereon such opinion shall confirm
that, the Holders of the Outstanding Securities will not recognize income, gain
or loss for Federal income tax purposes as a result of such deposit, defeasance
and discharge and will be subject to Federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
deposit, defeasance and discharge had not occurred.
(7) In the case of an election under Section 1203, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of the Outstanding Securities will not recognize income, gain or
loss for Federal income tax purposes as a result of such deposit and
covenant defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such covenant defeasance had not occurred.
(8) The Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that (assuming that no Holder of Securities would be
considered an insider of the Company under applicable bankruptcy or
insolvency law), after the 123rd day following the date of such deposit,
the trust funds will not constitute a "voidable preference" under Section
547 of the Bankruptcy Code and an Officers' Certificate stating that such
deposit was not made by the Company with the intent of preferring the
Holders over any other creditors of the Company or with the intent of
defeating, hindering, delaying or defrauding creditors of the Company or
any other Persons.
(9) The Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that such
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deposit and defeasance or covenant defeasance shall not result in the trust
arising from such deposit constituting an investment company as defined in
the Investment Company Act of 1940, as amended, or such trust shall be
qualified under such act or exempt from regulation thereunder.
SECTION 1205. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Other Miscellaneous Provisions.
-------------------------------------------------------------
Subject to the provisions of the last paragraph of Section 1003, all
money and Government Securities (including the proceeds thereof) deposited with
the Trustee (or other qualifying trustee--collectively, for purposes of this
Section 1205, the "Trustee") pursuant to Section 1204 in respect of the
Securities shall be held in trust and applied by the Trustee, in accordance with
the provisions of such Securities and this Indenture, to the payment, either
directly or through any Paying Agent (including the Company acting as its own
Paying Agent) as the Trustee may determine, to the Holders of such Securities,
of all sums due and to become due thereon in respect of principal (and premium,
if any) and interest, but such money need not be segregated from other funds
except to the extent required by law.
The Company shall pay and fully indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against the Government Securities
deposited pursuant to Section 1204 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Outstanding Securities.
Anything in this Article Twelve to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or Government Securities held by it as provided in Section
1204 which, in the opinion of a nationally recognized accounting firm expressed
in a written certification thereof delivered to the Trustee, are in excess of
the amount thereof which would then be required to be deposited to effect an
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equivalent defeasance or covenant defeasance.
SECTION 1206. Reinstatement.
-------------
If the Trustee or the Paying Agent is unable to apply any money in
accordance with Section 1202 or 1203 by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to this Article Twelve until such time as the Trustee or Paying Agent
is permitted to apply all such money in accordance with Section 1202 and 1203;
provided, however, that if the Company makes any payment of principal of (and
- -------- -------
premium, if any) any Security following the reinstatement of its obligations,
the Company shall be subrogated to the rights of the Holders of such Securities
to receive such payment from the money held by the Trustee or the Paying Agent.
SECTION 1207. Repayment to Company.
--------------------
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Security and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its written request or (if then held by the Company)
shall be discharged from such trust; and the Holder of such security shall
thereafter, as a creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
- -------- -------
to make any such repayment, shall at the expense of the Company cause to be
published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
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This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the day and year first above written.
NorthPoint Communications Group, Inc.
By /s/ Henry P. Huff
-------------------------------
Name: Henry P. Huff
Title: Chief Financial Officer
THE BANK OF NEW YORK, not in its individual
capacity but solely as Trustee
By /s/ Mary Beth A. Lewicki
-------------------------------
Name: Mary Beth A. Lewicki
Title: Vice President
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ANNEX A -- Form of
Regulation S Certificate
REGULATION S CERTIFICATE
(For transfers pursuant to (S) 305(b)(i), (iii) and (v)
of the Indenture)
The Bank of New York,
as Trustee
101 Barclay St., 21W
New York, NY 10286
Attention: Corporate Trust Administration
Re: 12 7/8% Senior Notes due 2010 of
NorthPoint Communications Group, Inc.
(the "Securities")
-------------------------------------
Reference is made to the Indenture, dated as of February 8, 2000 (the
"Indenture"), between NorthPoint Communications Group, Inc. (the "Company") and
The Bank of New York, as Trustee. Terms used herein and defined in the
Indenture or in Regulation S or Rule 144 under the U.S. Securities Act of 1933,
as amended (the "Securities Act") are used herein as so defined.
This certificate relates to U.S. $____________ principal amount of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s). ___________________________
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified
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Securities are represented by a Global Security, they are held through the
Depositary or an Agent Member in the name of the Undersigned, as or on behalf of
the Owner. If the Specified Securities are not represented by a Global Security,
they are registered in the name of the Undersigned, as or on behalf of the
Owner.
The Owner has requested that the Specified Securities be transferred
to a person (the "Transferee") who will take delivery in the form of a
Regulation S Security. In connection with such transfer, the Owner hereby
certifies that, unless such transfer is being effected pursuant to an effective
registration statement under the Securities Act, it is being effected in
accordance with Rule 904 or Rule 144 under the Securities Act and with all
applicable securities laws of the states of the United States and other
jurisdictions. Accordingly, the Owner hereby further certifies as follows:
(1) Rule 904 Transfers. If the transfer is being effected in
------------------
accordance with Rule 904:
(A) the Owner is not a distributor of the Securities, an
affiliate of the Company or any such distributor or a person acting on
behalf of any of the foregoing;
(B) the offer of the Specified Securities was not made to a
person in the United States;
(C) either:
(i) at the time the buy order was originated, the Transferee
was outside the United States or the Owner and any person acting
on its behalf reasonably believed that the Transferee was outside
the United States, or
(ii) the transaction is being executed in, on or through the
facilities of the Eurobond market, as regulated by the
Association of International Bond Dealers, or another designated
offshore securities market and neither the Owner nor any person
acting
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<PAGE>
on its behalf knows that the transaction has been prearranged
with a buyer in the United States;
(D) no directed selling efforts have been made in the United
States by or on behalf of the Owner or any affiliate thereof;
(E) if the Owner is a dealer in securities or has received a
selling concession, fee or other remuneration in respect of the
Specified Securities, and the transfer is to occur during the
Restricted Period, then the requirements of Rule 904(c)(1) have been
satisfied; and
(F) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
(2) Rule 144 Transfers. If the transfer is being effected pursuant
------------------
to Rule 144:
(A) the transfer is occurring after a holding period of at least
one year (computed in accordance with paragraph (d) of Rule 144) has
elapsed since the Specified Securities were last acquired from the
Company or from an affiliate of the Company, whichever is later, and
is being effected in accordance with the applicable amount, manner of
sale and notice requirements of Rule 144; or
(B) the transfer is occurring after a holding period of at least
two years has elapsed since the Specified Securities were last
acquired from the Company or from an affiliate of the Company,
whichever is later, and the Owner is not, and during the preceding
three months has not been, an affiliate of the Company.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Purchasers.
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Dated:
(Print the name of the Undersigned,
as such term is defined in the
second paragraph of this certificate.)
By:
Name:
Title:
(If the Undersigned is a corporation, partnership
or fiduciary, the title of the person signing on
behalf of the Undersigned must be stated.)
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Dated:
(Print the name of the Undersigned, as such term
is defined in the second paragraph of this
certificate.)
By:
Name:
Title:
(If the Undersigned is a corporation, partnership
or fiduciary, the title of the person signing on
behalf of the Undersigned must be stated.)
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<PAGE>
ANNEX B -- Form of Restricted
Securities Certificate
RESTRICTED SECURITIES CERTIFICATE
(For transfers pursuant to (S) 305(b)(ii), (iii), (iv) and (v)
of the Indenture)
The Bank of New York,
as Trustee
101 Barclay St., 21W
New York, NY 10286
Attention: Corporate Trust Administration
Re: 12 7/8% Senior Notes due 2010 of
NorthPoint Communications Group, Inc.
(the "Securities")
-------------------------------------
Reference is made to the Indenture, dated as of February 8, 2000 (the
"Indenture"), between NorthPoint Communications Group, Inc. (the "Company") and
The Bank of New York, as Trustee. Terms used herein and defined in the
Indenture or in Regulation S or Rule 144 under the U.S. Securities Act of 1933,
as amended (the "Securities Act") are used herein as so defined.
This certificate relates to U.S. $_____________ principal amount of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s). ___________________________
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to
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do so. Such beneficial owner or owners are referred to herein collectively as
the "Owner". If the Specified Securities are represented by a Global Security,
they are held through the Depositary or an Agent Member in the name of the
Undersigned, as or on behalf of the Owner. If the Specified Securities are not
represented by a Global Security, they are registered in the name of the
Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Securities be transferred
to a person (the "Transferee") who will take delivery in the form of a
Restricted Security. In connection with such transfer, the Owner hereby
certifies that, unless such transfer is being effected pursuant to an effective
registration statement under the Securities Act, it is being effected in
accordance with Rule 144A or Rule 144 under the Securities Act and all
applicable securities laws of the states of the United States and other
jurisdictions. Accordingly, the Owner hereby further certifies as follows:
(1) Rule 144A Transfers. If the transfer is being effected in
-------------------
accordance with Rule 144A:
(A) the Specified Securities are being transferred to a person
that the Owner and any person acting on its behalf reasonably believe
is a "qualified institutional buyer" within the meaning of Rule 144A,
acquiring for its own account or for the account of a qualified
institutional buyer; and
(B) the Owner and any person acting on its behalf have taken
reasonable steps to ensure that the Transferee is aware that the Owner
may be relying on Rule 144A in connection with the transfer.
(2) Rule 144 Transfers. If the transfer is being effected pursuant
------------------
to Rule 144:
(A) the transfer is occurring after a holding period of at least
one year (computed in accordance with paragraph (d) of Rule 144) has
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elapsed since the Specified Securities were last acquired from the
Company or from an affiliate of the Company, whichever is later, and
is being effected in accordance with the applicable amount, manner of
sale and notice requirements of Rule 144; or
(B) the transfer is occurring after a holding period of at least
two years has elapsed since the Specified Securities were last
acquired from the Company or from an affiliate of the Company,
whichever is later, and the Owner is not, and during the preceding
three months has not been, an affiliate of the Company.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Purchasers.
Dated:
(Print the name of the Undersigned,
as such term is defined in the
second paragraph of this certificate.)
By:
Name:
Title:
(If the Undersigned is a corporation, partnership
or fiduciary, the title of the person signing on
behalf of the Undersigned must be stated.)
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ANNEX C -- Form of Unrestricted
Securities Certificate
UNRESTRICTED SECURITIES CERTIFICATE
(For removal of Securities Act Legends pursuant to (S)
305(c))
The Bank of New York,
as Trustee
101 Barclay St., 21W
New York, NY 10286
Attention: Corporate Trust Administration
Re: 12 7/8% Senior Notes due 2010 of
NorthPoint Communications Group, Inc.
(the "Securities")
-------------------------------------
Reference is made to the Indenture, dated as of February 8, 2000 (the
"Indenture"), between NorthPoint Communications Group, Inc. (the "Company") and
The Bank of New York, as Trustee. Terms used herein and defined in the
Indenture or in Regulation S or Rule 144 under the U.S. Securities Act of 1933,
as amended (the "Securities Act") are used herein as so defined.
This certificate relates to U.S. $_____________ principal amount of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s). ___________________________
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to
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herein collectively as the "Owner". If the Specified Securities are represented
by a Global Security, they are held through the Depositary or an Agent Member in
the name of the Undersigned, as or on behalf of the Owner. If the Specified
Securities are not represented by a Global Security, they are registered in the
name of the Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Securities be exchanged for
Securities bearing no Securities Act Legend pursuant to Section 305(c) of the
Indenture. In connection with such exchange, the Owner hereby certifies that
the exchange is occurring after a holding period of at least two years (computed
in accordance with paragraph (d) of Rule 144) has elapsed since the Specified
Securities were last acquired from the Company or from an affiliate of the
Company, whichever is later, and the Owner is not, and during the preceding
three months has not been, an affiliate of the Company. The Owner also
acknowledges that any future transfers of the Specified Securities must comply
with all applicable securities laws of the states of the United States and other
jurisdictions.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Purchasers.
Dated:
(Print the name of the Undersigned,
as such term is defined in the
second paragraph of this certificate.)
By:
Name:
Title:
(If the Undersigned is a corporation, partnership
or fiduciary, the title of the person signing on
behalf of the Undersigned must be stated.)
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<PAGE>
Trust Indenture Indenture
Act Section Section
---------------- -------------
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<PAGE>
EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of February 8, 2000, among
NorthPoint Communications Group, Inc., a Delaware corporation (the "Company"),
and Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated, CIBC World Markets
Corp. and Credit Suisse First Boston Corporation (the "Purchasers").
The Company proposes to issue and sell to the Purchasers the Securities (as
defined herein) upon the terms set forth in the Purchase Agreement. As an
inducement to the Purchasers to enter into the Purchase Agreement and in
satisfaction of a condition to the obligations of the Purchasers thereunder, the
Company agrees with the Purchasers for the benefit of holders (as defined
herein) from time to time of the Registrable Securities (as defined herein) as
follows:
1. Certain Definitions.
For purposes of this Registration Rights Agreement, the following terms
shall have the following respective meanings:
"Additional Interest" shall have the meaning assigned thereto in Section
2(c) hereof.
The term "broker-dealer" shall mean any broker or dealer registered with
the Commission under the Exchange Act.
"Closing" shall mean the date of the closing of the issuance and sale of
the Securities pursuant to the Purchase Agreement.
"Commission" shall mean the United States Securities and Exchange
Commission, or any other federal agency at the time administering the Exchange
Act or the Securities Act, whichever is the relevant statute for the
particular purpose.
"Company" shall have the meaning assigned thereto in the recitals hereof
(together with any successor).
"Effective Time," in the case of (i) an Exchange Registration, shall mean
the time and date as of which the Commission declares the Exchange Offer
Registration Statement effective or as of which the Exchange Offer
Registration Statement otherwise becomes effective and (ii) a Resale
Registration, shall mean the time and date as of which the Commission declares
the Resale Registration Statement effective or as of which the Resale
Registration Statement otherwise becomes effective.
"Electing Holder" shall mean any holder of Registrable Securities that has
returned a completed and signed Notice and Questionnaire to the Company in
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accordance with Section 3(d)(ii) or 3(d)(iii).
"Exchange Act" shall mean the United States Securities Exchange Act of
1934, or any successor thereto, as the same shall be amended from time to
time.
"Exchange Offer" shall have the meaning assigned thereto in Section 2(a).
"Exchange Offer Registration Statement" shall have the meaning assigned
thereto in Section 2(a).
"Exchange Registration" shall have the meaning assigned thereto in Section
3(c).
"Exchange Securities" shall have the meaning assigned thereto in Section
2(a).
The term "holder" shall mean each of the Purchasers and other persons who
acquire Registrable Securities from time to time (including any successors or
assigns), in each case for so long as such person owns any Registrable
Securities.
"Indenture" shall mean the Indenture, dated as of February 8, 2000, between
the Company and The Bank of New York, as Trustee, as the same shall be amended
from time to time.
"NASD" shall mean the National Association of Securities Dealers, Inc., or
any successor thereto.
"Notice and Questionnaire" shall mean a Notice of Registration Statement
and Selling Securityholder Questionnaire substantially in the form of Exhibit
A.
"Notice of Transfer" shall mean a Notice of Transfer Pursuant to
Registration Statement substantially in the form of Exhibit B hereto.
The term "person" shall mean a corporation, association, partnership,
organization, business, individual, government or political subdivision
thereof or governmental agency.
"Purchase Agreement" shall mean the Purchase Agreement, dated February 3,
2000,among the Company and the Purchasers relating to the Securities, as the
same shall be amended from time to time.
"Registrable Securities" shall mean the Securities; provided, however, that
a Security shall cease to be a Registrable Security when (i) in the
circumstances contemplated by Section 2(a), the Security has been exchanged
for an Exchange Security in an Exchange Offer as contemplated in Section 2(a)
(provided that any
2
<PAGE>
Exchange Security received by a broker-dealer in an Exchange Offer in exchange
for a Registrable Security that was not acquired by the broker-dealer directly
from the Company will also be a Registrable Security through and including the
earlier of the expiration of the Resale Period or such time as such broker-
dealer no longer owns such Security); (ii) in the circumstances contemplated
by Section 2(b), a Resale Registration Statement registering such Security
under the Securities Act has been declared or becomes effective and such
Security has been sold or otherwise transferred by the holder thereof pursuant
to and in a manner contemplated by such effective Resale Registration
Statement; (iii) such Security is sold pursuant to Rule 144 under
circumstances in which any legend borne by such Security relating to
restrictions on transferability thereof, under the Securities Act or
otherwise, is removed by the Company or pursuant to the Indenture; (iv) such
Security is eligible to be sold pursuant to paragraph (k) of Rule 144; or (v)
such Security shall cease to be outstanding.
"Registration Default" shall have the meaning assigned thereto in Section
2(c).
"Registration Expenses" shall have the meaning assigned thereto in Section
4.
"Resale Period" shall have the meaning assigned thereto in Section 2(a).
"Resale Registration" shall have the meaning assigned thereto in Section
2(b).
"Resale Registration Statement" shall have the meaning assigned thereto in
Section 2(b).
"Restricted Holder" shall mean (i) a holder that is an affiliate of the
Company within the meaning of Rule 405, (ii) a holder who acquires Exchange
Securities outside the ordinary course of such holder's business, (iii) a
holder who has arrangements or understandings with any person to participate
in the Exchange Offer for the purpose of distributing Exchange Securities and
(iv) a holder that is a broker-dealer, but only with respect to Exchange
Securities received by such broker-dealer pursuant to an Exchange Offer in
exchange for Registrable Securities acquired by the broker-dealer directly
from the Company.
"Rule 144," "Rule 405" and "Rule 415" shall mean, in each case, such rule
promulgated under the Securities Act (or any successor provision), as the same
shall be amended from time to time.
"Securities" shall mean, collectively, the 12 7/8% Senior Notes due 2010 of
the Company to be issued and sold to the Purchasers, and securities issued in
exchange therefor or in lieu thereof pursuant to the Indenture.
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<PAGE>
"Securities Act" shall mean the United States Securities Act of 1933, or
any successor thereto, as the same shall be amended from time to time.
"Trust Indenture Act" shall mean the United States Trust Indenture Act of
1939, or any successor thereto, and the rules, regulations and forms
promulgated thereunder, all as the same shall be amended from time to time.
"Trustee" shall mean The Bank of New York, a New York banking corporation
(together with any successor).
Unless the context otherwise requires, any reference herein to a "Section"
or "clause" refers to a Section or clause, as the case may be, of this
Registration Rights Agreement, and the words "herein," "hereof" and "hereunder"
and other words of similar import refer to this Registration Rights Agreement as
a whole and not to any particular Section or other subdivision.
2. Registration Under the Securities Act.
(a) Except as set forth in Section 2(b) below, the Company agrees to use
its best efforts to file under the Securities Act, no later than 90 days after
the Closing, a registration statement relating to an offer to exchange (such
registration statement, the "Exchange Offer Registration Statement," and such
offer, the "Exchange Offer") any and all of the Securities (other than
Exchange Securities) for a like aggregate principal amount of debt securities
issued by the Company, which debt securities are substantially identical to
the Securities (and are entitled to the benefits of a trust indenture which is
substantially identical to the Indenture or is the Indenture and which has
been qualified under the Trust Indenture Act), except that they have been
registered pursuant to an effective registration statement under the
Securities Act and do not contain provisions for Additional Interest (such new
debt securities hereinafter called "Exchange Securities"). The Company agrees
to use its best efforts to cause the Exchange Offer Registration Statement to
become effective under the Securities Act as soon as practicable, but no later
than 180 days after the Closing. The Exchange Offer will be registered under
the Securities Act on the appropriate form and will comply with all applicable
tender offer rules and regulations under the Exchange Act. The Company
further agrees to use its best efforts to commence and complete the Exchange
Offer promptly, to hold the Exchange Offer open for at least 30 days and to
complete the Exchange Offer within 210 days after the Closing, and to issue
Exchange Securities for all Registrable Securities that have been properly
tendered and not withdrawn on or prior to the expiration of the Exchange
Offer. The Exchange Offer will be deemed to have been "completed" only if the
debt securities received by holders other than Restricted Holders in the
Exchange Offer for Registrable Securities are, upon receipt, transferable by
each such holder without need for further compliance with Section 5 of the
Securities Act and the Exchange Act
4
<PAGE>
(except for the requirement to deliver a prospectus included in the Exchange
Offer Registration Statement applicable to resales by any broker-dealer of
Exchange Securities received by such broker-dealer pursuant to the Exchange
Offer in exchange for Registrable Securities other than those acquired by the
broker-dealer directly from the Company), and without material restrictions
under the blue sky or securities laws of a substantial majority of the States
of the United States of America. Subject to the preceding sentence, the
Exchange Offer shall be deemed to have been completed upon the earlier to
occur of (i) the Company having exchanged the Exchange Securities for all
outstanding Registrable Securities (other than those held by Restricted
Holders) pursuant to the Exchange Offer and (ii) the Company having exchanged,
pursuant to the Exchange Offer, Exchange Securities for all Registrable
Securities that have been properly tendered and not withdrawn before the
expiration of the Exchange Offer, which shall be on a date that is at least 30
days following the commencement of the Exchange Offer. The Company agrees (x)
to include in the Exchange Offer Registration Statement a prospectus for use
in connection with any resales of Exchange Securities by a broker-dealer,
other than resales of Exchange Securities received by a broker-dealer pursuant
to an Exchange Offer in exchange for Registrable Securities acquired by the
broker-dealer directly from the Company, and (y) to keep such Exchange Offer
Registration Statement effective for a period (the "Resale Period") beginning
when Exchange Securities are first issued in the Exchange Offer and ending
upon the earlier of the expiration of the 180th day after the Exchange Offer
has been completed or such time as such broker-dealers no longer own any
Registrable Securities. With respect to such Exchange Offer Registration
Statement, each broker-dealer that holds Exchange Securities received in an
Exchange Offer in exchange for Registrable Securities not acquired by it
directly from the Company shall have the benefit of the rights of
indemnification and contribution set forth in Sections 6(a), (c), (d) and (e).
(b) If on or prior to the date of consummation of the Exchange Offer
existing Commission interpretations are changed such that the Securities
received by holders other than Restricted Holders in the Exchange Offer for
Registrable Securities are not or would not be, upon receipt, transferable by
each such holder without need for further compliance with Section 5 of the
Securities Act (except for the requirement to deliver a prospectus included in
the Exchange Offer Registration Statement applicable to resales by a broker-
dealer of Exchange Securities received by such broker-dealer pursuant to the
Exchange Offer in exchange for Registrable Securities other than those
acquired by the broker-dealer directly from the Company), or if the Exchange
Offer is not completed within 210 days after the Closing, then the Company
shall (x) promptly deliver to holders of the Securities notice thereof and (y)
at the Company's sole expense as promptly as practical (but in no event more
than 30 days after so required or requested), file a "shelf" registration
statement providing for the registration of, and the sale on a continuous or
delayed basis by the holders of, all of the Registrable Securities, pursuant
to Rule 415 or any similar rule that may be
5
<PAGE>
adopted by the Commission (such registration, the "Resale Registration" and
such registration statement, the "Resale Registration Statement"). In
addition, in the event that, prior to the consummation of the Exchange Offer,
the Purchasers shall not have resold all of the Securities initially purchased
by them from the Company pursuant to the Purchase Agreement and the Purchasers
shall so request, the Company shall file under the Securities Act as soon as
practicable a Resale Registration Statement covering such unsold Registrable
Securities (in the case of any Resale Registration required only by the second
sentence of this Section 2(b), references herein to "Registrable Securities"
mean those Securities that the Purchasers shall have purchased from the
Company pursuant to the Purchase Agreement and shall not have resold). The
Company agrees to use its best efforts (i) to cause the Resale Registration
Statement to become or be declared effective as soon as practicable after such
Resale Registration Statement is first filed with the Commission and in any
event no later than 180 days after the obligation to file such Resale
Registration Statement arises and to keep such Resale Registration Statement
continuously effective in order to permit the prospectus forming a part
thereof to be usable by holders for resales of Registrable Securities for a
period ending on the earlier of the second anniversary of the Closing or such
time as there are no longer any Registrable Securities outstanding, provided,
however, that no holder shall be entitled to be named as a selling
securityholder in the Resale Registration Statement or to use the prospectus
forming a part thereof for resales of Registrable Securities unless such
holder is an Electing Holder, and (ii) after the Effective Time of the Resale
Registration Statement and for so long as the Resale Registration Statement is
required to be kept continuously effective pursuant to clause (i) above,
promptly upon the request of any holder of Registrable Securities that is not
then an Electing Holder, and provided that such holder shall have returned a
completed and signed Notice and Questionnaire to the Company in accordance
with Section 3(d)(iii), to take any action reasonably necessary to enable such
holder to use the prospectus forming a part thereof for resales of Registrable
Securities, including any action necessary to identify such holder as a
selling securityholder in the Resale Registration Statement. The Company
further agrees to supplement or make amendments to the Resale Registration
Statement, as and when required by the rules, regulations or instructions
applicable to the registration form used by the Company for such Resale
Registration Statement or by the Securities Act or rules and regulations
thereunder for shelf registration, and the Company agrees to furnish to each
Electing Holder copies of any such supplement or amendment prior to its being
used or promptly following its filing with the Commission.
(c) In the event that (i) the Company has not filed either the Exchange
Offer Registration Statement on or before the 90th day following the Closing
or the Resale Registration Statement 30 days after the obligation to file such
Resale Registration Statement arises, (ii) the Exchange Offer Registration
Statement or the Resale Registration Statement has not become effective or
been declared effective within the
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applicable time periods specified in Sections 2(a) and 2(b), respectively,
(iii) the Exchange Offer has not been completed within 210 days after the
Closing or (iv) the Exchange Offer Registration Statement or Resale
Registration Statement becomes or is declared effective by the Commission but
thereafter ceases to be effective or usable in connection with resales of
Registrable Securities during the periods set forth in the Exchange Offer
Registration Statement or Resale Registration Statement (each such event
referred to in clauses (i) through (iv), a "Registration Default"), then, as
liquidated damages for such Registration Default, subject to the provisions of
Section 9(b), additional interest ("Additional Interest") shall accrue on the
Securities as of the date any such Registration Default shall occur. Such
Additional Interest shall accrue at a rate of 0.50% per annum during the 90-
day period immediately following the occurrence of any Registration Default,
which rate shall increase by 0.25% per annum at the beginning of each
subsequent 90-day period, provided that in no event shall the rate of such
Additional Interest exceed 1.00% per annum, and further provided that such
Additional Interest shall only accrue until the date on which all Registration
Defaults have been cured. Such Additional Interest shall be computed on the
basis of a 365-day year and shall be payable in cash semi-annually in arrears
on each February 15 and August 15 in accordance with the Indenture.
(d) The Company shall take all reasonable actions necessary or advisable
to be taken by it to ensure that the transactions contemplated herein are
effected as so contemplated.
(e) Any reference herein to a registration statement as of any time shall
be deemed to include any document incorporated, or deemed to be incorporated,
therein by reference as of such time, and any reference herein to any
amendment to a registration statement as of any time shall be deemed to
include any document incorporated, or deemed to be incorporated, therein by
reference as of such time.
3. Registration Procedures.
If the Company files a registration statement pursuant to Section 2(a) or
Section 2(b), the following provisions shall apply:
(a) At or before the Effective Time of the Exchange Offer or the Resale
Registration, as the case may be, the Company shall qualify the Indenture
under the Trust Indenture Act.
(b) In the event that such qualification would require the appointment of
a new trustee under the Indenture, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.
(c) In connection with the Company's obligations with respect to the
registration
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of Exchange Securities as contemplated by Section 2(a) (the "Exchange
Registration"), if applicable, the Company shall, as soon as reasonably
practicable (or as otherwise specified):
(i) prepare and file with the Commission an Exchange Offer Registration
Statement on any form which may be utilized by the Company and which shall
permit the Exchange Offer and resales of Exchange Securities by broker-
dealers during the Resale Period to be effected as contemplated by Section
2(a), and use all reasonable efforts to cause such Exchange Offer
Registration Statement to become effective in accordance with this
Registration Rights Agreement;
(ii) as soon as practicable prepare and file with the Commission such
amendments and supplements to such Exchange Offer Registration Statement
and the prospectus included therein as may be necessary to effect and
maintain the effectiveness of such Exchange Offer Registration Statement
for the periods and purposes contemplated in Section 2(a) and as may be
required by the applicable rules and regulations of the Commission and the
instructions applicable to the form of such Exchange Offer Registration
Statement, and promptly provide each broker-dealer holding Exchange
Securities with such number of copies of the prospectus included therein
(as then amended or supplemented), in conformity in all material respects
with the requirements of the Securities Act and the Trust Indenture Act and
the rules and regulations of the Commission thereunder, as such broker-
dealer reasonably may request prior to the expiration of the Resale Period,
for use in connection with resales of Exchange Securities;
(iii) promptly notify each broker-dealer that has requested or received
copies of the prospectus included in the Exchange Offer Registration
Statement, and confirm such advice in writing, (A) when such Exchange Offer
Registration Statement or the prospectus included therein, or any amendment
or supplement thereto, has been filed, and, with respect to such Exchange
Offer Registration Statement or any amendment thereto, when the same has
become effective, (B) of any comments by the Commission and by the blue sky
or securities commissioner or regulator of any state with respect thereto
or any request by the Commission for amendments or supplements to such
Exchange Offer Registration Statement or prospectus or for additional
information, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of such Exchange Offer Registration Statement
or the initiation or threatening of any proceedings for that purpose, (D)
if at any time the representations and warranties of the Company
contemplated by Section 5 cease to be true and correct in all material
respects, (E) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Exchange Securities
for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose or (F) at any time during the Resale Period
when a prospectus is required to be
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delivered under the Securities Act, that such Exchange Offer Registration
Statement, prospectus, or any amendment or supplement thereto, does not
conform in all material respects to the applicable requirements of the
Securities Act and the Trust Indenture Act and the rules and regulations of
the Commission thereunder or contains an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing;
(iv) in the event that the Company would be required, pursuant to Section
3(c)(iii)(F) above, to notify any broker-dealers holding Exchange
Securities, promptly to prepare and furnish to each such holder a
reasonable number of copies of a prospectus supplemented or amended so
that, as thereafter delivered to purchasers of such Exchange Securities
during the Resale Period, such prospectus shall conform in all material
respects to the applicable requirements of the Securities Act and the Trust
Indenture Act and the rules and regulations of the Commission thereunder
and shall not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances then
existing. Each broker-dealer holding Exchange Securities during the Resale
Period agrees that upon receipt of any notice from the Company pursuant to
Section 3(c)(iii)(F) above, such broker-dealer shall forthwith discontinue
disposition of Exchange Securities pursuant to the Exchange Offer
Registration Statement applicable to such Exchange Securities until such
broker-dealer shall have received copies of such amended or supplemented
prospectus, and if so directed by the Company, such broker-dealer shall
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such broker-dealer's possession of the
prospectus covering such Exchange Securities at the time of receipt of such
notice; provided, however, that the Company hereby agrees that if it
provides notice to any broker-dealers pursuant to Section 3(c)(iii)(F)
above during the Resale Period, such Resale Period shall be extended by the
number of days in the period from and including the date of the giving of
such notice to and including the date on which the Company shall have made
available to such broker-dealers copies of the amended or supplemented
prospectus necessary to permit such broker-dealers to resume disposition of
Exchange Securities;
(v) use all reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of such Exchange Offer Registration Statement
or any amendment thereto at the earliest practicable date;
(vi) use all reasonable efforts to (A) register or qualify the Exchange
Securities under the securities laws or blue sky laws of such jurisdictions
as are contemplated by Section 2(a), if such registration or qualification
is required by
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such laws, no later than the commencement of the Exchange Offer, (B) keep
such registrations or qualifications in effect and comply with such laws so
as to permit the continuance of offers, sales and dealings therein in such
jurisdictions until the expiration of the Resale Period and (C) take any
and all other actions as may be reasonably necessary or advisable to enable
each broker-dealer holding Exchange Securities to consummate the
disposition thereof in such jurisdictions; provided, however, that the
Company shall not be required for any such purpose to (1) qualify as a
foreign corporation in any jurisdiction wherein it would not otherwise be
required to qualify but for the requirements of this Section 3(c)(vi), (2)
consent to general service of process in any such jurisdiction or (3) make
any changes to its charter or by-laws or any agreement between it and its
stockholders;
(vii) use all reasonable efforts to obtain the consent or approval of
each United States governmental agency or authority, whether federal, state
or local, which may be required to effect the Exchange Registration, the
Exchange Offer and the offering and sale of Exchange Securities by broker-
dealers during the Resale Period;
(viii) provide a CUSIP number for all Exchange Securities, not later than
the applicable Effective Time; and
(ix) comply with all applicable rules and regulations of the Commission,
and make generally available to the Company's securityholders as soon as
practicable but no later than eighteen months after the effective date of
such Exchange Offer Registration Statement, an earning statement of the
Company and its subsidiaries complying with Section 11(a) of the Securities
Act (including, at the option of the Company, Rule 158 thereunder).
(d) In connection with the Company's obligations with respect to the
Resale Registration, if applicable, the Company shall, as soon as reasonably
practicable (or as otherwise specified):
(i) prepare and file with the Commission, as soon as reasonably
practicable but in any case within the time periods specified in Section
2(b), a Resale Registration Statement on any form which may be utilized by
the Company and which shall register all of the Registrable Securities for
resale by the holders thereof in accordance with such method or methods of
disposition as may be specified by such of the holders as, from time to
time, may be Electing Holders and use its reasonable best efforts to cause
such Resale Registration Statement to become effective in accordance with
this Registration Rights Agreement;
(ii) not less than 30 calendar days prior to the Effective Time of the
Resale Registration Statement, mail the Notice and Questionnaire to the
holders of
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Registrable Securities; no holder shall be entitled to be named as a
selling securityholder in the Resale Registration Statement as of the
Effective Time, and no holder shall be entitled to use the prospectus
forming a part thereof for resales of Registrable Securities at any time,
unless such holder has returned a completed and signed Notice and
Questionnaire to the Company by the deadline for response set forth
therein; provided, however, holders of Registrable Securities shall have at
least 30 calendar days from the date on which the Notice and Questionnaire
is first mailed to such holders to return a completed and signed Notice and
Questionnaire to the Company;
(iii) after the Effective Time of the Resale Registration Statement, (A)
upon the request of any holder of Registrable Securities that is not then
an Electing Holder, promptly send a Notice and Questionnaire to such holder
and (B) upon receipt by the Company of a completed and signed Notice and
Questionnaire from any holder of Registrable Securities that is not then an
Electing Holder, take any action reasonably necessary to cause such holder
to be named as a selling securityholder in the Resale Registration
Statement and to enable such holder to use the prospectus forming a part
thereof for resales of Registrable Securities; provided that the Company
shall not be required to take any action contemplated in clause (B) of this
paragraph until such holder has returned a completed and signed Notice and
Questionnaire to the Company;
(iv) as soon as reasonably practicable prepare and file with the
Commission such amendments and supplements to such Resale Registration
Statement and the prospectus included therein as may be necessary to effect
and maintain the effectiveness of such Resale Registration Statement for
the period specified in Section 2(b) and as may be required by the
applicable rules and regulations of the Commission and the instructions
applicable to the form of such Resale Registration Statement, and furnish
to the Electing Holders copies of any such supplement or amendment
simultaneously with or prior to its being used or filed with the
Commission;
(v) comply with the provisions of the Securities Act with respect to the
disposition of all of the Registrable Securities covered by such Resale
Registration Statement in accordance with the intended methods of
disposition by the Electing Holders provided for in such Resale
Registration Statement;
(vi) provide (A) the Electing Holders, (B) the underwriters (which term,
for purposes of this Registration Rights Agreement, shall include a person
deemed to be an underwriter within the meaning of Section 2(11) of the
Securities Act), if any, thereof, (C) any sales or placement agent
therefor, (D) counsel for any such underwriter or agent and (E) not more
than one counsel for all the Electing Holders the opportunity to
participate in the preparation of such Resale
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Registration Statement, each prospectus included therein or filed with the
Commission and each amendment or supplement thereto;
(vii) for a reasonable period prior to the filing of such Resale
Registration Statement, and throughout the period specified in Section
2(b), make available at reasonable times at the Trustee's principal place
of business or such other reasonable place for inspection by the persons
referred to in Section 3(d)(vi) who shall certify to the Company that they
have a current intention to sell the Registrable Securities pursuant to the
Resale Registration such financial and other information and certified
copies of the books and records of the Company, and cause the officers,
employees, counsel and independent certified public accountants of the
Company to respond to such inquiries, as shall be reasonably necessary, in
the judgment of the Company and its counsel, to conduct a reasonable
investigation within the meaning of Section 11 of the Securities Act;
provided, however, that each such party shall be required to maintain in
confidence and not to disclose to any other person any information or
records reasonably designated by the Company in writing as being
confidential, until such time as (A) such information becomes a matter of
public record (whether by virtue of its inclusion in such registration
statement or otherwise), (B) such person shall be required so to disclose
such information pursuant to a subpoena or order of any court or other
governmental agency or body having jurisdiction over the matter (subject to
the requirements of such order, and only after such person shall have given
the Company prompt prior written notice of such requirement) or (C) such
information is required to be set forth in such Resale Registration
Statement or the prospectus included therein or in an amendment to such
Resale Registration Statement or an amendment or supplement to such
prospectus in order that such Resale Registration Statement, prospectus,
amendment or supplement, as the case may be, complies with applicable
requirements of the U.S. federal securities laws and the rules and
regulations of the Commission and does not contain an untrue statement of a
material fact or omit to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing;
(viii) promptly notify each of the Electing Holders, any sales or
placement agent therefor and any underwriter thereof (which notification
may be made through any managing underwriter that is a representative of
such underwriter for such purpose) and confirm such advice in writing, (A)
when such Resale Registration Statement or the prospectus included therein,
or any amendment or supplement thereto, has been filed, and, with respect
to such Resale Registration Statement or any amendment thereto, when the
same has become effective, (B) of any comments by the Commission and by the
blue sky or securities commissioner or regulator of any state with respect
thereto or any request by the Commission for amendments or supplements to
such Resale Registration Statement or prospectus
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<PAGE>
or for additional information, (C) of the issuance by the Commission of any
stop order suspending the effectiveness of such Resale Registration
Statement or the initiation or threatening of any proceedings for that
purpose, (D) if at any time the representations and warranties of the
Company contemplated by Section 3(d)(xvii) or Section 5 cease to be true
and correct in all material respects, (E) of the receipt by the Company of
any notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose or (F) if at any time when a
prospectus is required to be delivered under the Securities Act, such
Resale Registration Statement, prospectus, or amendment or supplement
thereto, does not conform in all material respects to the applicable
requirements of the Securities Act and the Trust Indenture Act and the
rules and regulations of the Commission thereunder or contains an untrue
statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing;
(ix) use all reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of such registration statement or any post-
effective amendment thereto at the earliest practicable date;
(x) if requested by any managing underwriter or underwriters, any
placement or sales agent or any Electing Holder, promptly incorporate in a
prospectus supplement or amendment such information as is required by the
applicable rules and regulations of the Commission and as such managing
underwriter or underwriters, such agent or such Electing Holder specifies
should be included therein relating to the terms of the sale of such
Registrable Securities, including information with respect to the principal
amount of Registrable Securities being sold by such Electing Holder or
agent or to any underwriters, the name and description of such Electing
Holder, agent or underwriter, the offering price of such Registrable
Securities and any discount, commission or other compensation payable in
respect thereof, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the offering of the
Registrable Securities to be sold by such Electing Holder or agent or to
such underwriters; and make all required filings of such prospectus
supplement or amendment promptly after notification of the matters to be
incorporated in such prospectus supplement or amendment;
(xi) furnish to each Electing Holder, each placement or sales agent, if
any, therefor, each underwriter, if any, thereof and the respective counsel
referred to in Section 3(d)(vi) an executed copy (or, in the case of an
Electing Holder, a conformed copy) of such Resale Registration Statement,
each such amendment and supplement thereto (in each case including all
exhibits thereto (in the case of an Electing Holder of Registrable
Securities, upon request) and documents
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<PAGE>
incorporated by reference therein) and such number of copies of such Resale
Registration Statement (excluding exhibits thereto and documents
incorporated by reference therein unless specifically so requested by such
Electing Holder, agent or underwriter, as the case may be) and of the
prospectus included in such Resale Registration Statement (including each
preliminary prospectus and any summary prospectus), in conformity in all
material respects with the applicable requirements of the Securities Act
and the Trust Indenture Act and the rules and regulations of the Commission
thereunder, and such other documents, as such Electing Holder, agent, if
any, and underwriter, if any, may reasonably request in order to facilitate
the offering and disposition of the Registrable Securities owned by such
Electing Holder, offered or sold by such agent or underwritten by such
underwriter and to permit such Electing Holder, agent and underwriter to
satisfy the prospectus delivery requirements of the Securities Act; and the
Company hereby consents to the use of such prospectus (including any such
preliminary or summary prospectus) and any amendment or supplement thereto
by each such Electing Holder and by any such agent and underwriter, in each
case in the form most recently provided to such person by the Company, in
connection with the offering and sale of the Registrable Securities covered
by the prospectus (including any such preliminary or summary prospectus) or
any supplement or amendment thereto;
(xii) use all reasonable efforts to (A) register or qualify the
Registrable Securities to be included in such Resale Registration Statement
under such securities laws or blue sky laws of such jurisdictions as any
Electing Holder and each placement or sales agent, if any, therefor and
underwriter, if any, thereof shall reasonably request, (B) keep such
registrations or qualifications in effect and comply with such laws so as
to permit the continuance of offers, sales and dealings therein in such
jurisdictions during the period the Resale Registration is required to
remain effective under Section 2(b) above and (C) take any and all other
actions as may be reasonably necessary or advisable to enable each such
Electing Holder, agent, if any, and underwriter, if any, to consummate the
disposition in such jurisdictions of such Registrable Securities during the
period the Resale Registration is required to remain effective under
Section 2(b) above; provided, however, that the Company shall not be
required for any such purpose to (1) qualify as a foreign corporation in
any jurisdiction wherein it would not otherwise be required to qualify but
for the requirements of this Section 3(d)(xii), (2) consent to general
service of process in any such jurisdiction or (3) make any changes to its
charter or by-laws or any agreement between it and its stockholders;
(xiii) use all reasonable efforts to obtain the consent or approval of
each United States governmental agency or authority, whether federal, state
or local, which may be required to effect the Resale Registration or the
offering or sale in connection therewith or to enable the selling holder or
holders to offer, or to
14
<PAGE>
consummate the disposition of, their Registrable Securities;
(xiv) cooperate with the Electing Holders and the managing underwriters,
if any, to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold, which certificates shall be
word processed, printed, lithographed or engraved, or produced by any
combination of such methods, and which shall not bear any restrictive
legends (except in the case of a sale to a Restricted Holder); and, in the
case of an underwritten offering, enable such Registrable Securities to be
in such denominations and registered in such names as the managing
underwriters may request at least two business days prior to any sale of
the Registrable Securities;
(xv) provide a CUSIP number for all Registrable Securities, not later
than the applicable Effective Time;
(xvi) enter into one or more underwriting agreements, engagement letters,
agency agreements, "best efforts" underwriting agreements or similar
agreements, as appropriate, including customary provisions relating to
indemnification and contribution, and take such other actions in connection
therewith as any Electing Holders aggregating at least 25% in aggregate
principal amount of the Registrable Securities at the time outstanding
shall reasonably request in order to expedite or facilitate the disposition
of such Registrable Securities;
(xvii) whether or not an agreement of the type referred to in Section
3(d)(xvi) is entered into and whether or not any portion of the offering
contemplated by the Resale Registration is an underwritten offering or is
made through a placement or sales agent or any other entity, (A) make such
representations and warranties to the Electing Holders and the placement or
sales agent, if any, therefor and the underwriters, if any, thereof in
form, substance and scope as are customarily made in connection with an
offering of debt securities pursuant to any appropriate and customary
agreement or to a registration statement filed on the form applicable to
the Resale Registration; (B) obtain an opinion of counsel to the Company in
customary form and covering such matters, of the type customarily covered
by such an opinion, as the managing underwriters, if any, or as any
Electing Holders of at least 25% in aggregate principal amount of the
Registrable Securities at the time outstanding may reasonably request,
addressed to such Electing Holder or Electing Holders and the placement or
sales agent, if any, therefor and the underwriters, if any, thereof and
dated the effective date of such Resale Registration Statement (and if such
Resale Registration Statement contemplates an underwritten offering of a
part or all of the Registrable Securities, dated the date of the closing
under the underwriting agreement relating thereto) (it being agreed that
the matters to be covered by such opinion shall include the due
incorporation of the Company and its principal subsidiaries; the due
authorization,
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<PAGE>
execution and delivery of the relevant agreement of the type referred to in
Section 3(d)(xvi); the due authorization, execution, authentication and
issuance, and the validity and enforceability, of the Securities; the
absence to such counsel's knowledge of material legal or governmental
proceedings involving the Company; the absence of governmental approvals
required to be obtained in connection with the Resale Registration, the
offering and sale of the Registrable Securities, this Registration Rights
Agreement or any agreement of the type referred to in Section 3(d)(xvi),
except such approvals, if any, as may be required under state securities or
blue sky laws; the material compliance as to form of such Resale
Registration Statement and any documents incorporated by reference therein
and of the Indenture with the requirements of the Securities Act and the
Trust Indenture Act and the rules and regulations of the Commission
thereunder, respectively; and, as of the date of the opinion and of the
Resale Registration Statement or most recent amendment thereto, as the case
may be, the absence from such Resale Registration Statement and the
prospectus included therein, as then amended or supplemented, and from the
documents incorporated by reference therein (in each case other than the
financial statements and other financial information contained therein) of
an untrue statement of a material fact or the omission to state therein a
material fact necessary to make the statements therein not misleading (in
the case of such documents, in the light of the circumstances existing at
the time that such documents were filed with the Commission under the
Exchange Act)), such opinion to be subject to customary qualifications and
limitations; (C) obtain a "cold comfort" letter or letters from the
independent certified public accountants of the Company addressed to the
selling Electing Holders, the placement or sales agent, if any, therefor or
the underwriters, if any, thereof, dated (i) the effective date of such
Resale Registration Statement and (ii) the effective date of any prospectus
supplement to the prospectus included in such Resale Registration Statement
or amendment to such Resale Registration Statement which includes unaudited
or audited financial statements as of a date or for a period subsequent to
that of the latest such statements included in such prospectus (and, if
such Resale Registration Statement contemplates an underwritten offering
pursuant to any prospectus supplement to the prospectus included in such
Resale Registration Statement or amendment to such Resale Registration
Statement which includes unaudited or audited financial statements as of a
date or for a period subsequent to that of the latest such statements
included in such prospectus, dated the date of the closing under the
underwriting agreement relating thereto), such letter or letters to be in
customary form and covering matters of the type customarily covered by
letters of such type; (D) deliver such documents and certificates,
including officers' certificates, as may be reasonably requested by any
Electing Holders of at least 25% in aggregate principal amount of the
Registrable Securities at the time outstanding or the placement or sales
agent, if any, therefor and the managing underwriters, if any, thereof to
evidence the accuracy of the representations and
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<PAGE>
warranties made pursuant to clause (A) above or those contained in Section
5(a) and the compliance with or satisfaction of any agreements or
conditions contained in the underwriting agreement or other agreement
entered into by the Company; and (E) undertake such obligations relating to
expense reimbursement, indemnification and contribution as are provided in
Section 6 hereof;
(xviii) notify in writing each holder of Registrable Securities of any
proposal by the Company to amend or waive any provision of this
Registration Rights Agreement pursuant to Section 9(i) and of any amendment
or waiver effected pursuant thereto, each of which notices shall contain
the text of the amendment or waiver proposed or effected, as the case may
be;
(xix) if applicable, in the event that any broker-dealer registered under
the Exchange Act shall underwrite any Registrable Securities or participate
as a member of an underwriting syndicate or selling group or "assist in the
distribution" (within the meaning of the Rules of Fair Practice and the By-
Laws of the NASD or any successor thereto, as amended from time to time)
thereof, whether as a holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, assist such broker-dealer in complying with the
requirements of such Rules and By-Laws, including by (A) if such Rules or
By-Laws shall so require, engaging a "qualified independent underwriter"
(as defined in Rule 2720 (or any successor thereto)) to participate in the
preparation of the Resale Registration Statement relating to such
Registrable Securities, to exercise usual standards of due diligence in
respect thereto and, if any portion of the offering contemplated by such
Resale Registration Statement is an underwritten offering or is made
through a placement or sales agent, to recommend the yield of such
Registrable Securities, (B) indemnifying any such qualified independent
underwriter to the extent of the indemnification of underwriters provided
in Section 6 hereof (or to such other customary extent as may be requested
by such underwriter) and (C) providing such information to such broker-
dealer as may be required in order for such broker-dealer to comply with
the requirements of the Rules of Fair Practice of the NASD; and
(xx) comply with all applicable rules and regulations of the Commission,
and make generally available to the Company's securityholders as soon as
practicable but in any event not later than eighteen months after the
effective date of such Resale Registration Statement, an earning statement
of the Company and its subsidiaries complying with Section 11(a) of the
Securities Act (including, at the option of the Company, Rule 158
thereunder).
(e) In the event that the Company would be required, pursuant to Section
3(d)(viii)(F), to notify the Electing Holders, the placement or sales agent,
if
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<PAGE>
any, therefor and the managing underwriters, if any, thereof, the Company
shall promptly prepare and furnish to each of the Electing Holders, to each
placement or sales agent, if any, and to each such underwriter, if any, a
reasonable number of copies of a prospectus supplemented or amended so that,
as thereafter delivered to purchasers of Registrable Securities, such
prospectus shall conform in all material respects to the applicable
requirements of the Securities Act and the Trust Indenture Act and the rules
and regulations of the Commission thereunder and shall not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing. Each Electing Holder agrees that
upon receipt of any notice from the Company pursuant to Section 3(d)(viii)(F),
such Electing Holder shall forthwith discontinue the disposition of
Registrable Securities pursuant to the Resale Registration Statement
applicable to such Registrable Securities until such Electing Holder shall
have received copies of such amended or supplemented prospectus, and if so
directed by the Company, such Electing Holder shall deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such Electing Holder's possession of the prospectus covering such Registrable
Securities at the time of receipt of such notice.
(f) In the event of a Resale Registration, in addition to the information
required to be provided by each Electing Holder in its Notice and
Questionnaire, the Company may require such Electing Holder to furnish to the
Company such additional information regarding such Electing Holder and such
Electing Holder's intended method of distribution of Registrable Securities as
the Company may from time to time reasonably request in writing, but only to
the extent that such information is required in order to comply with the
Securities Act or state securities or blue sky laws. Each such Electing Holder
agrees to notify the Company as promptly as practicable of any inaccuracy or
change in information previously furnished by such Electing Holder to the
Company or of the occurrence of any event in either case as a result of which
any prospectus relating to such Resale Registration contains or would contain
an untrue statement of a material fact regarding such Electing Holder or such
Electing Holder's intended method of disposition of such Registrable
Securities or omits to state any material fact regarding such Electing Holder
or such Electing Holder's intended method of disposition of such Registrable
Securities required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and
promptly to furnish to the Company any additional information required to
correct and update any previously furnished information or required so that
such prospectus shall not contain, with respect to such Electing Holder or the
disposition of such Registrable Securities, an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing. Each Electing Holder further agrees that in the
event the amount of Registrable Securities that are beneficially owned by such
Electing Holder and are
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<PAGE>
registered pursuant to such Resale Registration is reduced due to a sale of
such Registrable Securities under such Resale Registration, such Electing
Holder shall deliver to the Company and the Trustee, at the time of such sale,
a Notice of Transfer.
(g) Until the earlier of (i) the expiration of two years after the Closing
or (ii) such time as the Exchange Offer has been completed or the Resale
Registration Statement has become or been declared effective by the
Commission, the Company will not, and will not permit any of its subsidiaries
to, re-issue or resell any of the Securities that have been acquired by any of
them.
4. Registration Expenses.
The Company agrees to bear and to pay or cause to be paid promptly all
expenses incident to the Company's performance of or compliance with this
Registration Rights Agreement, including (a) all Commission and any NASD
registration, filing and review fees and expenses including reasonable fees and
disbursements of counsel for the placement or sales agent or underwriters in
connection with such registration, filing and review, (b) all fees and expenses
in connection with the qualification of the Securities for offering and sale
under the State securities and blue sky laws referred to in Section 3(d)(xii)
and determination of their eligibility for investment under the laws of such
jurisdictions as any managing underwriters or the Electing Holders may
reasonably designate, including any reasonable fees and disbursements of counsel
for the Electing Holders (subject to the limitations of Clause (i) below) or
underwriters in connection with such qualification and determination, (c) all
expenses relating to the preparation, printing, production, distribution and
reproduction of each registration statement required to be filed hereunder, each
prospectus included therein or prepared for distribution pursuant hereto, each
amendment or supplement to the foregoing, the expenses of preparing the
Securities for delivery and the expenses of printing or producing any
underwriting agreements, agreements among underwriters, selling agreements and
blue sky or legal investment memoranda and all other documents in connection
with the offering, sale or delivery of Securities to be disposed of (including
certificates representing the Securities), (d) messenger, telephone and delivery
expenses relating to the offering, sale or delivery of Securities and the
preparation of documents referred in clause (c) above, (e) fees and expenses of
the Trustee under the Indenture, any agent of the Trustee and any counsel for
the Trustee and of any collateral agent or custodian, (f) internal expenses
(including all salaries and expenses of the Company's officers and employees
performing legal or accounting duties), (g) reasonable fees, disbursements and
expenses of counsel and independent certified public accountants of the Company
(including the expenses of any opinions or "cold comfort" letters required by or
incident to such performance and compliance), (h) if applicable, reasonable
fees, disbursements and expenses of any "qualified independent underwriter"
engaged pursuant to Section 3(d)(xix), (i) fees, disbursements and expenses of
one counsel for the Electing Holders retained in connection with a Resale
Registration, as selected by the Electing Holders of at least a
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majority in aggregate principal amount of the Registrable Securities held by
Electing Holders (which counsel shall be reasonably satisfactory to the Company)
and (j) any fees charged by securities rating services for rating the Securities
as required by the Indenture (collectively, the "Registration Expenses"). To the
extent that any Registration Expenses are incurred, assumed or paid by any
holder of Registrable Securities or any placement or sales agent therefor or
underwriter thereof, the Company shall reimburse such person for the full amount
of the Registration Expenses so incurred, assumed or paid promptly after receipt
of a request therefor (accompanied by receipts, invoices or other documentary
evidence, as appropriate). Notwithstanding the foregoing, the holders of the
Registrable Securities being registered shall pay all agency fees and
commissions and underwriting discounts and commissions attributable to the sale
of such Registrable Securities, the fees and disbursements of any counsel or
other advisors or experts retained by such holders (severally or jointly), other
than the counsel and experts specifically referred to above, transfer taxes on
resale of any of the Securities by such holders and any advertising expenses
incurred by or on behalf of such holders in connection with any offers they may
make.
5. Representations and Warranties.
The Company represents and warrants to, and agrees with, each
Purchaser and each of the holders from time to time of Registrable
Securities that:
(a) Each registration statement covering Registrable Securities and
each prospectus (including any preliminary or summary prospectus) contained
therein or furnished pursuant to Section 3(c) or Section 3(d) and any
further amendments or supplements to any such registration statement or
prospectus, when it becomes effective or is filed with the Commission, as
the case may be, and, in the case of an underwritten offering of
Registrable Securities, at the time of the closing under the underwriting
agreement relating thereto, will conform in all material respects to the
applicable requirements of the Securities Act and the Trust Indenture Act
and the rules and regulations of the Commission thereunder and will not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; and at all times subsequent to the Effective Time
when a prospectus would be required to be delivered under the Securities
Act, other than from (i) such time as a notice has been given to holders of
Registrable Securities pursuant to Section 3(c)(iii)(F) or Section
3(d)(viii)(F) until (ii) such time as the Company furnishes an amended or
supplemented prospectus pursuant to Section 3(c)(iv) or Section 3(e), each
such registration statement, and each prospectus (including any summary
prospectus) contained therein or furnished pursuant to Section 3(c) or
Section 3(d), as then amended or supplemented, will conform in all material
respects to the applicable requirements of the Securities Act and the Trust
Indenture Act and the rules and regulations of the Commission thereunder
and will not contain an untrue statement of
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<PAGE>
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Company by or
on behalf of a holder of Registrable Securities expressly for use therein.
(b) Any documents incorporated by reference in any prospectus referred
to in Section 5(a) hereof, when they become or became effective or are or were
filed with the Commission, as the case may be, will conform or conformed in
all material respects to the requirements of the Securities Act or the
Exchange Act, as applicable, and none of such documents will contain or
contained an untrue statement of a material fact or will omit or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that this representation
and warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company by
or on behalf of a holder of Registrable Securities expressly for use therein.
(c) The compliance by the Company with all of the provisions of this
Registration Rights Agreement and the consummation of the transactions herein
contemplated will not conflict with or result in a breach of any of the terms
or provisions of, or constitute a default under, any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to which the Company
or any of its subsidiaries is a party or by which the Company or any such
subsidiary is bound or to which any of the property or assets of the Company
or any such subsidiary is subject, nor will such action result in any
violation of the provisions of the charter or by-laws of the Company or any
statute or any order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company or any such subsidiary or any of
their properties; and no consent, approval, authorization, order, registration
or qualification of or with any such court or governmental agency or body is
required for the consummation by the Company of the transactions contemplated
by this Registration Rights Agreement, except the registration under the
Securities Act of the Securities, qualification of the Indenture under the
Trust Indenture Act, and such consents, approvals, authorizations,
registrations or qualifications, if any, as may be required under State
securities or blue sky laws in connection with the offering and distribution
of the Securities.
(d) This Registration Rights Agreement has been duly authorized,
executed and delivered by the Company.
6. Indemnification.
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(a) Indemnification by the Company. In the event of a registration of the
Registrable Securities pursuant to Section 2(a) or 2(b), the Company shall,
and hereby agrees to, indemnify and hold harmless each of the holders of
Registrable Securities included in an Exchange Offer Registration Statement,
each of the Electing Holders of Registrable Securities included in a Resale
Registration Statement and each person who participates as a placement or
sales agent or as an underwriter in any offering or sale of such Registrable
Securities against any losses, claims, damages or liabilities, joint or
several, to which such holder, agent or underwriter may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in
any Exchange Offer Registration Statement or Resale Registration Statement, as
the case may be, under which such Registrable Securities were registered under
the Securities Act, or any preliminary, final or summary prospectus contained
therein or furnished by the Company to any such holder, Electing Holder, agent
or underwriter, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and the Company shall, and hereby agrees to, reimburse such
holder, such Electing Holder, such agent and such underwriter for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such action or claim as such expenses are incurred; provided,
however, that the Company shall not be liable to any such person in any such
case to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, or
preliminary, final or summary prospectus, or amendment or supplement thereto,
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of such person expressly for use therein;
(b) Indemnification by the Holders and any Agents and Underwriters. The
Company may require, as a condition to including any Registrable Securities in
any registration statement filed pursuant to Section 2(b) and to entering into
any underwriting agreement with respect thereto, that the Company shall have
received an undertaking reasonably satisfactory to the Company from the
Electing Holder of such Registrable Securities and from each underwriter named
in any such underwriting agreement, severally and not jointly, to (i)
indemnify and hold harmless the Company, and all other holders of Registrable
Securities, against any losses, claims, damages or liabilities to which the
Company or such other holders of Registrable Securities may become subject,
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
an untrue statement or alleged untrue statement of a material fact contained
in such registration statement, or any preliminary, final or summary
prospectus contained therein or furnished by the Company to any Electing
Holder,
22
<PAGE>
agent or underwriter, or any amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such Electing Holder or underwriter
expressly for use therein, and (ii) reimburse the Company for any legal or
other expenses reasonably incurred by it in connection with investigating or
defending any such action or claim as such expenses are incurred; provided,
however, that no such Electing Holder shall be required to undertake liability
to any person under this Section 6(b) for any amounts in excess of the dollar
amount of the proceeds to be received by such Electing Holder from the sale of
such Electing Holder's Registrable Securities pursuant to such registration.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified
party under subsection (a) or (b) above of written notice of the commencement
of any action, such indemnified party shall, if a claim in respect thereof is
to be made against an indemnifying party pursuant to the indemnification
provisions of or contemplated by this Section 6, notify such indemnifying
party in writing of the commencement of such action; but the omission so to
notify the indemnifying party shall not relieve it from any liability which it
may have to any indemnified party other than under the indemnification
provisions of or contemplated by Section 6(a) or 6(b) hereof. In case any such
action shall be brought against any indemnified party, and it shall notify the
indemnifying party of the commencement thereof, such indemnifying party shall
be entitled to participate therein and, to the extent that it shall wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified
party (who shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, such indemnifying party shall not be liable to such indemnified party
for any legal expenses of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party, in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the written consent of the indemnified party, effect the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(d) Contribution. If the indemnification provisions contemplated by Section
6(a) or
23
<PAGE>
Section 6(b) are unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and the indemnified party in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact relates to information supplied
by such indemnifying party or by such indemnified party, and the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission. The parties hereto agree that it would
not be just and equitable if contributions pursuant to this Section 6(d) were
determined by pro rata allocation (even if the holders or any agents or
underwriters or all of them were treated as one entity for such purpose) or by
any other method of allocation which does not take account of the equitable
considerations referred to in this Section 6(d). The amount paid or payable by
an indemnified party as a result of the losses, claims, damages, or
liabilities (or actions in respect thereof) referred to above shall be deemed
to include any legal or other fees or expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 6(d), no
holder shall be required to contribute any amount in excess of the amount by
which the dollar amount of the proceeds received by such holder from the sale
of any Registrable Securities (after deducting any fees, discounts and
commissions applicable thereto) exceeds the amount of any damages which such
holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission, and no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages
which such underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The holders' and any
underwriters' obligations in this Section 6(d) to contribute shall be several
in proportion to the principal amount of Registrable Securities registered or
underwritten, as
24
<PAGE>
the case may be, by them and not joint.
(e) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each officer, director and
partner of each holder, agent and underwriter and each person, if any, who
controls any holder, agent or underwriter within the meaning of the
Securities Act; and the obligations of the holders and any agents or
underwriters contemplated by this Section 6 shall be in addition to any
liability which the respective holder, agent or underwriter may otherwise
have and shall extend, upon the same terms and conditions, to each officer
and director of the Company and to each person, if any, who controls the
Company within the meaning of the Securities Act.
7. Underwritten Offerings.
(a) Selection of Underwriters. If any of the Registrable Securities
covered by the Resale Registration are to be sold pursuant to an
underwritten offering, the managing underwriter or underwriters thereof
shall be designated by Electing Holders holding at least a majority in
aggregate principal amount of the Registrable Securities to be included in
such offering, provided that such designated managing underwriter or
underwriters is or are reasonably acceptable to the Company.
(b) Participation by Holders. Each holder of Registrable Securities
hereby agrees with each other such holder that no such holder may
participate in any underwritten offering hereunder unless such holder (i)
agrees to sell such holder's Registrable Securities on the basis provided
in any underwriting arrangements approved by the persons entitled hereunder
to approve such arrangements and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents reasonably required under the terms of such
underwriting arrangements.
8. Rule 144.
The Company covenants to the holders of Registrable Securities that to
the extent it shall be required to do so under the Exchange Act, the
Company shall timely file the reports required to be filed by it under the
Exchange Act or the Securities Act (including the reports under Section 13
and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule
144 adopted by the Commission under the Securities Act) and the rules and
regulations adopted by the Commission thereunder, and shall take such
further action as any holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such holder
to sell Registrable Securities without registration under the Securities
Act within the limitations of the exemption provided by Rule 144 under the
Securities Act, as such Rule may be
25
<PAGE>
amended from time to time, or any similar or successor rule or regulation
hereafter adopted by the Commission. Upon the request of any holder of
Registrable Securities in connection with that holder's sale pursuant to Rule
144, the Company shall each deliver to such holder a written statement as to
whether it has complied with such requirements. The Company shall not be
required to comply with this Section 8 if the Exchange Offer has been
completed.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company represents, warrants,
covenants and agrees that it has not granted, and shall not grant,
registration rights with respect to Registrable Securities or any other
securities which would be inconsistent with the terms contained in this
Registration Rights Agreement.
(b) Specific Performance. The parties hereto acknowledge that there would
be no adequate remedy at law if the Company failed to perform any of its
obligations hereunder and that the Purchasers and the holders from time to
time of the Registrable Securities may be irreparably harmed by any such
failure, and accordingly agree that the Purchasers and such holders, in
addition to any other remedy to which they may be entitled at law or in
equity, shall be entitled to compel specific performance of the obligations of
the Company under this Registration Rights Agreement in accordance with the
terms and conditions of this Registration Rights Agreement, in any court of
the United States or any State thereof having jurisdiction.
(c) Notices. All notices, requests, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when (i) delivered by hand, if delivered personally or by courier,
(ii) transmitted by any standard form of telecommunication upon receipt of a
signal confirming receipt or (iii) three days after being deposited in the
mail (registered or certified mail, postage prepaid, return receipt requested)
as follows: If to the Company, to it at 303 Second Street, San Francisco,
California 94107, Attention: Henry P. Huff, Chief Financial Officer, and if to
a holder, to the address of such holder set forth in the security register or
other records of the Company, or to such other address as the Company or any
such holder may have furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective only upon receipt.
(d) Parties in Interest. All the terms and provisions of this
Registration Rights Agreement shall be binding upon, shall inure to the
benefit of and shall be enforceable by, the parties hereto and the holders
from time to time of the Registrable Securities and the respective successors
and assigns of the parties hereto and such holders. In the event that any
transferee of any holder of Registrable Securities shall acquire Registrable
Securities, in any manner, whether by gift, bequest, purchase,
26
<PAGE>
operation of law or otherwise, such transferee shall, without any further
writing or action of any kind, be deemed a beneficiary hereof for all purposes
and such Registrable Securities shall be held subject to all of the terms of
this Registration Rights Agreement, and by taking and holding such Registrable
Securities such transferee shall be entitled to receive the benefits of, and
be conclusively deemed to have agreed to be bound by, all of the applicable
terms and provisions of this Registration Rights Agreement. If the Company
shall so request, any such successor, assign or transferee shall agree in
writing to acquire and hold the Registrable Securities subject to all of the
applicable terms hereof.
(e) Survival. The respective indemnities, agreements, representations,
warranties and each other provision set forth in this Registration Rights
Agreement or made pursuant hereto shall remain in full force and effect
regardless of any investigation (or statement as to the results thereof) made
by or on behalf of any holder of Registrable Securities, any director, officer
or partner of such holder, any agent or underwriter or any director, officer
or partner thereof, or any controlling person of any of the foregoing, and
shall survive delivery of and payment for the Registrable Securities pursuant
to the Purchase Agreement and the transfer and registration of Registrable
Securities by such holder and the consummation of an Exchange Offer.
(f) LAW GOVERNING. THIS REGISTRATION RIGHTS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
(g) Jurisdiction, Venue and Service of Process. Each of the parties
hereto hereby submits to the jurisdiction of any Federal or State court in the
City, County and State of New York, United States of America, or to the courts
of its own corporate domicile, in respect of actions brought against it as a
defendant, in any legal suit, action or proceeding based on or arising under
this Registration Rights Agreement and agrees that all claims in respect of
such suit or proceeding may be determined in any such court. The Company
waives, to the extent permitted by law, the defense of an inconvenient forum
or objections to personal jurisdiction with respect to the maintenance of such
legal suit, action or proceeding. The Company further agrees that service of
process upon the Company by written notice of said service to the Company as
provided in Section 9(c) shall be deemed in every respect effective service of
process upon the Company in any such legal suit, action or proceeding. Nothing
herein shall affect the right of any holder or any person controlling any
holder to serve process in any other manner permitted by law.
(h) Headings. The descriptive headings of the several Sections and
paragraphs of this Registration Rights Agreement are inserted for convenience
only, do not constitute a part of this Registration Rights Agreement and shall
not affect in
27
<PAGE>
any way the meaning or interpretation of this Registration Rights
Agreement.
(i) Entire Agreement; Amendments. This Registration Rights Agreement
and the other writings referred to herein (including the Indenture and the
form of Securities) or delivered pursuant hereto which form a part hereof
contain the entire understanding of the parties with respect to its subject
matter. This Registration Rights Agreement supersedes all prior agreements
and understandings between the parties with respect to its subject matter.
This Registration Rights Agreement may be amended and the observance of any
term of this Registration Rights Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively) only
by a written instrument duly executed by the Company and the holders of at
least a majority in aggregate principal amount of the Registrable
Securities at the time outstanding. Each holder of any Registrable
Securities at the time or thereafter outstanding shall be bound by any
amendment or waiver effected pursuant to this Section 9(i), whether or not
any notice, writing or marking indicating such amendment or waiver appears
on such Registrable Securities or is delivered to such holder.
(j) Inspection. For so long as this Registration Rights Agreement
shall be in effect, this Registration Rights Agreement and a complete list
of the names and addresses of all the holders of Registrable Securities
shall be made available for inspection and copying on any business day by
any holder of Registrable Securities for proper purposes only (which shall
include any purpose related to the rights of the holders of Registrable
Securities under the Securities, the Indenture and this Agreement) at the
offices of the Company at the address thereof referred to in Section 9(c)
above and at the office of the Trustee under the Indenture.
(k) Counterparts. This agreement may be executed by the parties in
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute one and the same
instrument.
28
<PAGE>
Agreed to and accepted as of the date referred to above.
NorthPoint Communications Group, Inc.
as Company
By: /s/ Henry P. Huff
_________________________________
Name: Henry P. Huff
Title: Chief Financial Officer
Goldman, Sachs & Co.
Morgan Stanley & Co. Incorporated
CIBC World Markets Corp.
Credit Suisse First Boston Corporation
By: Goldman, Sachs & Co.
Acting on behalf of itself and
each of the Purchasers
By: /s/ Goldman, Sachs & Co.
_________________________________
(Goldman, Sachs & Co.)
29
<PAGE>
Exhibit A
NORTHPOINT COMMUNICATIONS GROUP, INC.
(the "Company")
INSTRUCTION TO DTC PARTICIPANTS
-------------------------------
(Date of Mailing)
URGENT - IMMEDIATE ATTENTION REQUESTED
DEADLINE FOR RESPONSE: [DATE]*
-----------------------------
The Depository Trust Company ("DTC") has identified you as a DTC
Participant through which beneficial interests in the Company's 12 7/8% Senior
Notes due 2010 (the "Securities"), are held.
The Company is in the process of registering the Securities under the
Securities Act of 1933 for resale by the beneficial owners thereof. In order to
have their Securities included in the registration statement, beneficial owners
must complete and return the enclosed Notice of Registration Statement and
Selling Securityholder Questionnaire.
It is important that beneficial owners of the Securities receive a copy of
--------------------------------------------------------------------------
the enclosed materials as soon as possible as their rights to have the
- ------------------------------------------
Securities included in the registration statement as of the date and time such
registration statement becomes or is declared effective by the Securities and
Exchange Commission depend upon their returning the Notice and Questionnaire by
[DEADLINE FOR RESPONSE]. Please forward a copy of the enclosed documents to each
---------------------
beneficial owner that holds interests in the Securities through you. If you
require more copies of the enclosed materials or have any questions pertaining
to this matter, please contact NorthPoint Communications Group, Inc., 222 Sutter
Street, San Francisco, California 94108, telefax: (___) ___-____, Attention:
_____________________.
_________________________________
*
Not less than 30 calendar days from date of mailing.
<PAGE>
NORTHPOINT COMMUNICATIONS GROUP, INC.
(the "Company")
Notice of Registration Statement
and
Selling Securityholder Questionnaire
------------------------------------
(Date)
Reference is hereby made to the Registration Rights Agreement (the
"Registration Rights Agreement") among the Company and the Purchasers named
therein. Pursuant to the Registration Rights Agreement, the Company has filed
with the United States Securities and Exchange Commission (the "Commission") a
registration statement on Form [___] (the "Resale Registration Statement") for
the registration and resale under Rule 415 of the Securities Act of 1933, as
amended (the "Securities Act"), of the Company's 12 7/8% Senior Notes due 2010
(the "Securities"). A copy of the Registration Rights Agreement has been made
available to you. All capitalized terms not otherwise defined herein shall have
the meanings ascribed thereto in the Registration Rights Agreement.
Each beneficial owner of Registrable Securities is entitled to have the
Registrable Securities beneficially owned by it included in the Resale
Registration Statement. In order to have Registrable Securities included in the
Resale Registration Statement as of its Effective Time, this Notice of
Registration Statement and Selling Securityholder Questionnaire ("Notice and
Questionnaire") must be completed, executed and delivered to the Company at the
address set forth herein for receipt ON OR BEFORE [DEADLINE FOR RESPONSE]. Any
------------------------------------
beneficial owner of Registrable Securities who does not complete, execute and
return this Notice and Questionnaire by such date (i) will not be named as a
selling securityholder in the Resale Registration Statement and (ii) may not use
the Prospectus forming a part thereof for resales of Registrable Securities;
provided, however, that if any such beneficial owner delivers this Notice and
Questionnaire to the Company after such date, the Company shall take any action
reasonably necessary to cause such beneficial owner to be named as a selling
securityholder in the Resale Registration Statement and to enable such
beneficial owner to use the prospectus forming a part thereof for resales of
Registrable Securities, in each case, as soon as reasonably practicable after
the Effective Time.
Certain legal consequences arise from being named as a selling
securityholder in the Resale Registration Statement and related Prospectus.
Accordingly, holders and
<PAGE>
beneficial owners of Registrable Securities are advised to consult their own
securities law counsel regarding the consequences of being named or not being
named as a selling securityholder in the Resale Registration Statement and
related Prospectus.
<PAGE>
ELECTION
The undersigned holder (the "Selling Securityholder") of Registrable
Securities hereby elects to include in the Resale Registration Statement the
Registrable Securities beneficially owned by it and listed below in Item (3).
The undersigned, by signing and returning this Notice and Questionnaire, agrees
to be bound with respect to such Registrable Securities by the terms and
conditions of this Notice and Questionnaire and the Registration Rights
Agreement, including Section 6 of the Registration Rights Agreement, as if the
undersigned Selling Securityholder were an original party thereto.
Upon any sale of Registrable Securities pursuant to the Resale Registration
Statement, the Selling Securityholder will be required to deliver to the Company
and Trustee the Notice of Transfer set forth in Appendix A to the Prospectus and
as Exhibit B to the Registration Rights Agreement.
The Selling Securityholder hereby provides the following information to the
Company and represents and warrants that such information is accurate and
complete:
<PAGE>
QUESTIONNAIRE
(1)(a) Full Legal Name of Selling Securityholder:
(b) Full Legal Name of Registered Holder (if not the same as in (a)
above) of Registrable Securities Listed in Item (3) below:
(c) Full Legal Name of DTC Participant (if applicable and if not the
same as (b) above) Through Which Registrable Securities Listed in Item (3) below
are Held:
(2) Address for Notices to Selling Securityholder:
Telephone:
Fax:
Contact Person:
(3) Beneficial Ownership of Securities:
Except as set forth below in this Item (3), the undersigned does not
beneficially own any Securities.
(a) Principal amount of Registrable Securities beneficially owned:
CUSIP No(s). of such Registrable Securities:
(b) Principal amount of Securities other than Registrable Securities
beneficially owned:
CUSIP No(s). of such other Securities:
(c) Principal amount of Registrable Securities which the undersigned
wishes to be included in the Shelf Registration Statement:
CUSIP No(s). of such Registrable Securities to be included in the Shelf
Registration Statement:
<PAGE>
(4) Relationships with the Company:
Except as set forth below, neither the Selling Securityholder nor any of
its affiliates, officers, directors or principal equity holders (5% or more) has
held any position or office or has had any other material relationship with the
Company (or any of its predecessors or affiliates) during the past three years.
State any exceptions here:
(5) Plan of Distribution:
Except as set forth below, the undersigned Selling Securityholder
intends to distribute the Registrable Securities listed above in Item (3) only
as follows (if at all): Such Registrable Securities may be sold from time to
time directly by the undersigned Selling Securityholder or, alternatively,
through underwriters, broker-dealers or agents. Such Registrable Securities may
be sold in one or more transactions at fixed prices, at prevailing market prices
at the time of sale, at varying prices determined at the time of sale, or at
negotiated prices. Such sales may be effected in transactions (which may involve
crosses or block transactions) (i) on any national securities exchange or
quotation service on which the Registered Securities may be listed or quoted at
the time of sale, (ii) in the over-the-counter market, (iii) in transactions
otherwise than on such exchanges or services or in the over-the-counter market,
or (iv) through the writing of options. In connection with sales of the
Registrable Securities or otherwise, the Selling Securityholder may enter into
hedging transactions with broker-dealers, which may in turn engage in short
sales of the Registrable Securities in the course of hedging the positions they
assume. The Selling Securityholder may also sell Registrable Securities short
and deliver Registrable Securities to close out such short positions, or loan or
pledge Registrable Securities to broker-dealers that in turn may sell such
securities.
State any exceptions here:
(6) Whether you are a corporation or not, the following three questions
should be answered. If you are a corporation these questions should also be
answered with respect to your officers, directors and holders of 5% or more of
your equity securities; if you are a partnership such questions should also be
answered with respect to your general
<PAGE>
partners.
(a) Except as set forth below in this Item (6)(a), neither the undersigned
nor any of its affiliates* is a member** of the National Association of
Securities Dealers, Inc. (the "NASD") or a person associated with a member**
of the NASD.
___________________________
* NASD Rule 2720 defines the term "affiliate" to mean a company which
---------
controls, is controlled by or is under common control with a member. The
term affiliate is presumed to include the following:
(i) a company will be presumed to control a member if the
company beneficially owns 10 percent or more of the outstanding voting
securities of a member which is a corporation, or beneficially owns a
partnership interest in 10 percent or more of the distributable profits or
losses of a member which is a partnership;
(ii) a member will be presumed to control a company if the
member and persons associated with the member beneficially own 10 percent
or more of the outstanding voting securities of a company which is a
corporation, or beneficially own a partnership interest in 10 percent or
more of the distributable profits or losses of a company which is a
partnership;
(iii) a company will be presumed to be under common control
with a member if:
(1) the same natural person or company controls
both the member and company by beneficially owning 10 percent or more
of the outstanding voting securities of a member or company which is a
corporation, or by beneficially owning a partnership interest in 10
percent or more of the distributable profits or losses of a member or
company which is a partnership; or
(2) a person having the power to direct or cause
the direction of the management or policies of the member or the
company also has the power to direct or cause the direction of the
management or policies of the other entity in question.
** Article I of the NASD's By-Laws defines the term "member" to mean any
------
broker or dealer admitted to membership in the NASD and defines the term
"person associated with a member" to mean every sole proprietor, partner,
-------------------------------
officer, director or branch manager of any member, or any natural person
occupying a similar status or performing similar functions, or any natural
person engaged in the investment banking or securities business who is
directly or indirectly controlling or controlled by such member (for
example, any employee), whether or not such person is registered or exempt
from registration with the NASD.
<PAGE>
State any exceptions here:
(b) Except as set forth below in this Item (6)(b), the undersigned does not
own stock or other securities of any NASD member not purchased in the open
market.
State any exceptions here:
(c) Except as set forth below in this Item (6)(c), the undersigned has not
made any outstanding subordinated loans to any NASD member.
State any exceptions here:
By signing below, the Selling Securityholder acknowledges that it
understands its obligation to comply, and agrees that it will comply, with the
provisions of the Exchange Act and the rules and regulations thereunder,
particularly Regulation M (which governs manipulation, stabilization and trading
activity during a distribution of securities).
In the event that the Selling Securityholder transfers all or any
portion of the Registrable Securities listed in Item (3) above after the date on
which such information is provided to the Company, the Selling Securityholder
agrees to notify the transferee(s) at the time of the transfer of its rights and
obligations under this Notice and Questionnaire and the Registration Rights
Agreement.
By signing below, the Selling Securityholder consents to the
disclosure of the information contained herein in its answers to Items (1)
through (6) above and the inclusion of such information in the Resale
Registration Statement and related Prospectus. The Selling Securityholder
understands that such information will be relied upon by the Company and any
underwriters in an underwritten offering of such Selling Securityholder's
Registrable Securities listed in Item(3) above, in connection with the
preparation of the Resale Registration Statement and related Prospectus.
In accordance with the Selling Securityholder's obligation under
Sections 3(d) and (f) of the Registration Rights Agreement to provide such
information as may be required by law for inclusion in the Resale Registration
Statement, the Selling Securityholder agrees to promptly notify the Company of
any inaccuracies or changes in
<PAGE>
the information provided herein which may occur subsequent to the date hereof at
any time while the Resale Registration Statement remains in effect. All notices
hereunder and pursuant to the Registration Rights Agreement shall be made in
writing, by hand-delivery, first-class mail, or air courier guaranteeing
overnight delivery as follows:
To the Company:
NorthPoint Communications Group, Inc.
222 Sutter Street
San Francisco, California 94108
Attention: _____________________.
Once this Notice and Questionnaire is executed by the Selling
Securityholder and received by the Company, the terms of this Notice and
Questionnaire, and the representations and warranties contained herein, shall be
binding on, shall inure to the benefit of and shall be enforceable by the
respective successors, heirs, personal representatives, and assigns of the
Company and the Selling Securityholder (with respect to the Registrable
Securities beneficially owned by such Selling Securityholder and listed in Item
(3) above). This Agreement shall be governed in all respects by the laws of the
State of New York.
<PAGE>
IN WITNESS WHEREOF, the undersigned, by authority duly given, has
caused this Notice and Questionnaire to be executed and delivered either in
person or by its duly authorized agent.
Dated: _________________
_________________________________________
Selling Securityholder
(Print/type full legal name of beneficial
owner of Registrable Securities)
By:
Name:
Title:
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR
RECEIPT ON OR BEFORE [DEADLINE FOR RESPONSE] TO THE COMPANY AT:
NorthPoint Communications Group, Inc.
222 Sutter Street
San Francisco, California 94108
Attention: _____________________.
<PAGE>
Exhibit B
NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT
.
[Address]
Attention: Trust Officer
Re: NorthPoint Communications Group, Inc. (the "Company")
12 7/8% Senior Notes due 2010
Dear Sirs:
Please be advised that _____________________ has transferred $___________
aggregate principal amount of the above-referenced Notes pursuant to an
effective Registration Statement on Form [___] (File No. 333-____) filed by the
Company.
We hereby certify that the above-named beneficial owner of the Notes is
named as a "Selling Holder" in the Prospectus dated ___________, 2000 or in
supplements thereto, and that the aggregate principal amount of the Notes
transferred are the Notes listed in such Prospectus opposite such owner's name.
Dated:
Very truly yours,
______________________________
(Name)
By:___________________________
(Authorized Signature)
<PAGE>
EXHIBIT 10.15
AMENDED AND RESTATED NORTHPOINT COMMUNICATIONS GROUP, INC.
1999 STOCK PLAN
1. Purposes of the Plan. The purposes of the 1999 Stock Plan are to
--------------------
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants and to promote the success of the Company's business. Options
granted under the Plan may be Incentive Stock Options or Nonstatutory Stock
Options, as determined by the Administrator at the time of grant. Stock Purchase
Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
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(a) "Administrator" means the Committee responsible for
-------------
conducting the general administration of the Plan in accordance with Section 4
hereof.
(b) "Applicable Laws" means the requirements relating to the
---------------
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are
granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means a committee of Independent Directors
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appointed by the Board in accordance with Section 4 hereof.
(f) "Common Stock" means the Common Stock of the Company, par
------------
value $.001 per share.
(g) "Company" means NorthPoint Communications Group, Inc., a
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Delaware corporation.
(h) "Consultant" means any consultant or adviser if: (i) the
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consultant or adviser renders bona fide services to the Company; (ii) the
services rendered by the consultant or adviser are not in connection with the
offer or sale of securities in a capital-raising transaction and do not directly
or indirectly promote or maintain a market for the Company's securities; and
(iii) the consultant or adviser is a natural person who has contracted directly
with the Company to render such services.
(i) "Director" means a member of the Board of Directors of the
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Company.
(j) "Employee" means any person, including Officers and
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Directors, employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider
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shall not cease to be an Employee in the case of (i) any leave of absence
approved by the Company or (ii) transfers between locations of the Company or
between the Company, its Parent, any Subsidiary, or any successor. For purposes
of Incentive Stock Options, no such leave may exceed ninety (90) days, unless
reemployment upon expiration of such leave is guaranteed by statute or contract.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient, by itself, to constitute "employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(l) "Fair Market Value" means, as of any date, the value of
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Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including, without limitation, the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices for the
Common Stock on the last market trading day prior to the day of determination;
or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(m) "Incentive Stock Option" means an Option intended to qualify
----------------------
as an incentive stock option within the meaning of Section 422 of the Code and
which is designated as an Incentive Stock Option by the Administrator.
(n) "Independent Director" means a Director who is not an
--------------------
Employee of the Company.
(o) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option which is not designated as an Incentive
Stock Option by the Administrator.
(p) "Officer" means a person who is an officer of the Company
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within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(q) "Option" means a stock option granted pursuant to the Plan.
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(r) "Option Agreement" means a written agreement between the Company
----------------
and an Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the Plan.
(s) "Optioned Stock" means the Common Stock subject to an Option or a
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Stock Purchase Right.
(t) "Optionee" means the holder of an outstanding Option or Stock
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Purchase Right granted under the Plan.
(u) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(v) "Plan" means the NorthPoint Communications Group, Inc. 1999 Stock
----
Plan.
(w) "Restricted Stock" means shares of Common Stock acquired pursuant
----------------
to a Stock Purchase Right granted under Section 12 below.
(x) "Rule 16b-3" means that certain Rule 16b-3 under the Exchange
----------
Act, as such Rule may be amended from time to time.
(y) "Section 16(b)" means Section 16(b) of the Securities Exchange
-------------
Act of 1934, as amended.
(z) "Service Provider" means an Employee, Director or Consultant.
----------------
(aa) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 15 below.
(bb) "Stock Purchase Right" means a right to purchase Common Stock
--------------------
pursuant to Section 12 below.
(cc) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 15 of
-------------------------
the Plan, the shares of stock subject to Options or Stock Purchase Rights shall
be Common Stock, initially shares of the Company's Common Stock, par value $.001
per share. Subject to the provisions of Section 15 of the Plan, the maximum
aggregate number of Shares which may be issued upon exercise of such Options or
Stock Purchase Rights is the sum of: (i) 11,250,000 Shares; (ii) the number of
shares of common stock of NorthPoint Communications, Inc., which remain
available for grants of options under the NorthPoint Communications, Inc. 1997
Stock Option Plan as of the date of the Plan's initial adoption by the Board and
(iii) with respect to options granted under the NorthPoint Communications, Inc.
1997 Stock Option Plan that are assumed by the Company and expire or are
canceled without having been exercised in full, the number of Shares subject to
each such option as to which such option was not exercised prior to its
expiration or cancellation;
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<PAGE>
provided, however, that, during the term of the Plan, on each anniversary of the
date of the Plan's initial adoption by the Board (commencing with the first such
anniversary), such maximum aggregate number of Shares shall be increased by
3,375,000 Shares.
Notwithstanding the foregoing, the maximum aggregate number of Shares
which may be issued upon exercise of Incentive Stock Options (the "ISO
Limitation") is 11,250,000 Shares; provided, however, that, during the term of
the Plan, on each anniversary of the date of the Plan's initial adoption by the
Board (commencing with the first such anniversary), the ISO Limitation shall be
increased by 3,375,000 Shares.
Shares issued upon exercise of Options or Stock Purchase Rights may be
authorized but unissued, or reacquired Common Stock. If an Option or Stock
Purchase Right expires or becomes unexercisable without having been exercised in
full, the unpurchased Shares which were subject thereto shall become available
for future grant or sale under the Plan (unless the Plan has terminated). Shares
which are delivered by the Optionee or withheld by the Company upon the exercise
of an Option or Stock Purchase Right under the Plan, in payment of the exercise
price thereof or tax withholding thereon, may again be optioned, granted or
awarded hereunder, subject to the limitations of this Section 3. If Shares of
Restricted Stock are repurchased by the Company at their original purchase
price, such Shares shall become available for future grant under the Plan.
Notwithstanding the provisions of this Section 3, no Shares may again be
optioned, granted or awarded if such action would cause an Incentive Stock
Option to fail to qualify as an Incentive Stock Option under Code Section 422.
4. Administration of the Plan.
Administrator. The Plan shall be administered by the Compensation Committee of
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the Board (or another committee or a subcommittee of the Board designated as the
Administrator under the Plan) which shall consist solely of two or more
Independent Directors appointed by and holding office at the pleasure of the
Board, each of whom is both a "non-employee director" as defined by Rule 16b-3
and an "outside director" for purposes of Section 162(m) of the Code. Within
the scope of such authority, the Board or the Committee may (i) delegate to a
committee of one or more members of the Board who are not Independent Directors
the authority to grant awards under the Plan to eligible persons who are either
(1) not then "covered employees," within the meaning of Section 162(m) of the
Code and are not expected to be "covered employees" at the time of recognition
of income resulting from such award or (2) not persons with respect to whom the
Company wishes to comply with Section 162(m) of the Code and/or (ii) delegate to
a committee of one or more members of the Board who are not "non-employee
directors," within the meaning of Rule 16b-3, the authority to grant awards
under the Plan to eligible persons who are not then subject to Section 16 of the
Exchange Act. The Board may abolish the Committee at any time and revest in the
Board the administration of the Plan. Appointment of Committee members shall be
effective upon acceptance of appointment. Committee members may resign at any
time by delivering written notice to the Board. Vacancies in the Committee may
be filled by the Board.
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<PAGE>
(a) Powers of the Administrator. Subject to the provisions of the Plan and
---------------------------
the specific duties delegated by the Board to such Committee, and subject to the
approval of any relevant authorities, the Administrator shall have the authority
in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may from time to time be granted hereunder;
(iii) to determine the number of Shares to be covered by each such
award granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions of any Option or Stock
Purchase Right granted hereunder (such terms and conditions include, but are not
limited to, the exercise price, the time or times when Options or Stock Purchase
Rights may be exercised (which may be based on performance criteria), any
vesting acceleration or waiver of forfeiture restrictions, and any restriction
or limitation regarding any Option or Stock Purchase Right or the Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine);
(vi) to determine whether and under what circumstances an Option may
be settled in cash under subsection 10(g) instead of Common Stock;
(vii) to prescribe, amend and rescind rules and regulations relating
to the Plan, including rules and regulations relating to sub-plans established
for the purpose of qualifying for preferred tax treatment under foreign tax
laws;
(viii)to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option or Stock Purchase Right that number of Shares having a Fair Market
Value equal to the amount required to be withheld. The Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined. All elections by Optionees to have Shares
withheld for this purpose shall be made in such form and under such conditions
as the Administrator may deem necessary or advisable; and
(ix) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
(b) Effect of Administrator's Decision. All decisions, determinations and
----------------------------------
interpretations of the Administrator shall be final and binding on all
Optionees.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may be
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granted to Service Providers. Incentive Stock Options may be granted only to
Employees. If otherwise eligible, an Employee or Consultant who has been
granted an Option or Stock Purchase Right
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<PAGE>
may be granted additional Options or Stock Purchase Rights. Each Independent
Director shall be eligible to be granted Options at the times and in the manner
set forth in Section 12.
6. Limitations.
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(a) Each Option shall be designated by the Administrator in the
Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option. However, notwithstanding such designations, to the extent that the
aggregate Fair Market Value of Shares subject to an Optionee's Incentive Stock
Options and other incentive stock options granted by the Company, any Parent or
Subsidiary, which become exercisable for the first time during any calendar year
(under all plans of the Company or any Parent or Subsidiary) exceeds $100,000,
such excess Options or other options shall be treated as Nonstatutory Stock
Options.
For purposes of this Section 6(a), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time of grant.
(b) Neither the Plan, any Option nor any Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
employment or consulting relationship with the Company, nor shall they interfere
in any way with the Optionee's right or the Company's right to terminate such
employment or consulting relationship at any time, with or without cause.
(c) No Employee shall be granted, in any calendar year, Options or
Stock Purchase Rights to purchase more than 2,100,000 Shares.
(d) The foregoing limitation shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 15.
(e) If an Option is canceled in the same fiscal year of the Company
it was granted (other than in connection with a transaction described in Section
15), the canceled Option will be counted against the limit set forth in Section
6(c). For this purpose, if the exercise price of an Option is reduced, the
transaction shall be treated as a cancellation of the Option and the grant of a
new Option.
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<PAGE>
7. Term of Plan. The Plan shall become effective upon its initial
------------
adoption by the Board. It shall continue in effect for a term of ten (10) years
unless sooner terminated under Section 17 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Option
--------------
Agreement; provided, however, that the term shall be no more than ten (10) years
from the date of grant thereof. In the case of an Incentive Stock Option
granted to an Optionee who, at the time the Option is granted, owns (or is
treated as owning under Code Section 424) stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the term of the Option shall be five (5) years from the
date of grant or such shorter term as may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
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(a) Except as provided in Section 12, the per share exercise
price for the Shares to be issued upon exercise of an Option shall be such price
as is determined by the Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of grant
of such Option, owns (or is treated as owning under Code Section 424) stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the per Share exercise price
shall be no less than one hundred ten percent (110%) of the Fair Market Value
per Share on the date of grant.
(B) granted to any other Employee, the per Share
exercise price shall be no less than one hundred percent (100%) of the Fair
Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a Service Provider who, at the time of
grant of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the exercise price shall be no less than one hundred ten percent (110%) of the
Fair Market Value per Share on the date of the grant.
(B) granted to any other Service Provider, the per
Share exercise price shall be no less than eighty-five percent (85%) of the Fair
Market Value per Share on the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted
with a per Share exercise price other than as required above pursuant to a
merger or other corporate transaction.
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<PAGE>
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) full recourse promissory note bearing interest (at no less than
such rate as shall then preclude the imputation of interest under the Code) and
payable upon such terms as may be prescribed by the Administrator), (4) other
Shares which (x) in the case of Shares acquired upon exercise of an Option, have
been owned by the Optionee for more than six (6) months on the date of
surrender, and (y) have a Fair Market Value on the date of surrender equal to
the aggregate exercise price of the Shares as to which such Option shall be
exercised, (5) surrendered Shares then issuable upon exercise of the Option
having a Fair Market Value on the date of exercise equal to the aggregate
exercise price of the Option or exercised portion thereof, (6) property of any
kind which constitutes good and valuable consideration, (7) delivery of a notice
that the Optionee has placed a market sell order with a broker with respect to
Shares then issuable upon exercise of the Options and that the broker has been
directed to pay a sufficient portion of the net proceeds of the sale to the
Company in satisfaction of the Option exercise price, provided, that payment of
such proceeds is then made to the Company upon settlement of such sale, or (8)
any combination of the foregoing methods of payment. In making its determination
as to the type of consideration to accept, the Administrator shall consider if
acceptance of such consideration may be reasonably expected to benefit the
Company.
10. Exercise of Option.
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(a) Vesting; Fractional Exercises. Except as provided in Section 13,
-----------------------------
Options granted hereunder shall be exercisable according to the terms hereof at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement, but in no case at a rate of less than twenty
percent (20%) per year over five (5) years from the date the Option is granted.
Unless the Administrator provides otherwise, vesting of Options granted
hereunder shall be tolled during any unpaid leave of absence. An Option may not
be exercised for a fraction of a Share.
(b) Deliveries upon Exercise. All or a portion of an exercisable
------------------------
Option shall be deemed exercised upon delivery of all of the following to the
Secretary of the Company or his or her office:
(i) A written or electronic notice complying with the applicable
rules established by the Administrator stating that the Option, or a portion
thereof, is exercised. The notice shall be signed by the Optionee or other
person then entitled to exercise the Option or such portion of the Option;
(ii) Such representations and documents as the Administrator, in
its absolute discretion, deems necessary or advisable to effect compliance with
Applicable Laws. The Administrator may, in its absolute discretion, also take
whatever additional actions it deems appropriate to effect such compliance,
including, without limitation, placing legends on share certificates and issuing
stop transfer notices to agents and registrars; and
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<PAGE>
(iii) In the event that the Option shall be exercised pursuant to
Section 10(f) by any person or persons other than the Optionee, appropriate
proof of the right of such person or persons to exercise the Option.
(c) Conditions to Delivery of Share Certificates. The Company shall not be
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required to issue or deliver any certificate or certificates for Shares
purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
(i) The admission of such Shares to listing on all stock
exchanges on which such class of stock is then listed;
(ii) The completion of any registration or other qualification of
such Shares under any state or federal law, or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental regulatory
body which the Administrator shall, in its absolute discretion, deem necessary
or advisable;
(iii) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Administrator shall, in its
absolute discretion, determine to be necessary or advisable;
(iv) The lapse of such reasonable period of time following the
exercise of the Option as the Administrator may establish from time to time for
reasons of administrative convenience; and
(v) The receipt by the Company of full payment for such Shares,
including payment of any applicable withholding tax, which in the discretion of
the Administrator may be in the form of consideration used by the Optionee to
pay for such Shares under Section 9(b).
(d) Termination of Relationship as a Service Provider. If an Optionee
-------------------------------------------------
ceases to be a Service Provider, such Optionee may exercise his or her Option
within such period of time as is specified in the Option Agreement to the extent
that the Option is vested on the date of termination (but in no event later than
the expiration of the term of the Option as set forth in the Option Agreement).
In the absence of a specified time in the Option Agreement, the Option shall
remain exercisable for three (3) months following the Optionee's termination.
If, on the date of termination, the Optionee is not vested as to his or her
entire Option, the Shares covered by the unvested portion of the Option shall
again become available for issuance under the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time period specified by
the Administrator in the Option Agreement relating to such Option, the Option
shall terminate, and the Shares covered by such Option shall again become
available for issuance under the Plan.
(e) Disability of Optionee. If an Optionee ceases to be a Service Provider
----------------------
as a result of the Optionee's Disability, the Optionee may exercise his or her
Option within such period of time as is specified in the Option Agreement to the
extent the Option is vested on the date of termination (but in no event later
than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
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<PAGE>
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If such disability is not a "disability" as such term is defined in
Section 22(e)(3) of the Code, in the case of an Incentive Stock Option such
Incentive Stock Option shall automatically cease to be treated as an Incentive
Stock Option and shall be treated for tax purposes as a Nonstatutory Stock
Option on the day three (3) months and one (1) day following such termination.
If, on the date of termination, the Optionee is not vested as to his or her
entire Option, the Shares covered by the unvested portion of the Option shall
revert to the Plan. If, after termination, the Optionee does not exercise his or
her Option within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(f) Death of Optionee. If an Optionee dies while a Service Provider,
-----------------
the Option may be exercised within such period of time as is specified in the
Option Agreement (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's estate or by a
person who acquires the right to exercise the Option by bequest or inheritance,
but only to the extent that the Option is vested on the date of death. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination. If, at
the time of death, the Optionee is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall immediately
revert to the Plan. The Option may be exercised by the executor or administrator
of the Optionee's estate or, if none, by the person(s) entitled to exercise the
Option under the Optionee's will or the laws of descent or distribution. If the
Option is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(g) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
11. Non-Transferability of Options and Stock Purchase Rights. Options and
--------------------------------------------------------
Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
12. Granting of Options to Independent Directors. During the term of the
--------------------------------------------
Plan, a person who is an Independent Director as of the date of the consummation
of the initial public offering of Common Stock, or a person who is initially
elected to the Board following the consummation of the initial public offering
of Common Stock and who is an Independent Director at the time of such initial
election, automatically shall be granted (i) an Option to purchase forty
thousand (40,000) shares of Common Stock (subject to adjustment as provided in
Section 15) on the date of such consummation or such initial election, as
applicable (each, an "Initial Option") and (ii) an Option to purchase thirteen
thousand (13,000) shares of Common Stock (subject to adjustment as provided in
Section 15) on the date of each annual meeting of stockholders after the date of
the Board's adoption of the Plan at which the Independent Director is reelected
to the Board (a "Subsequent Option"). Members of the Board who are employees of
the Company who
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<PAGE>
subsequently retire from the Company and remain on the Board will not receive an
initial Option grant pursuant to clause (i) of the preceding sentence, but to
the extent that they are otherwise eligible, will receive, after retirement from
employment with the Company, Options as described in clause (ii) of the
preceding sentence. All the foregoing Option grants authorized by this Section
12 are subject to stockholder approval of the Plan.
13. Terms of Options Granted to Independent Directors. The per Share price
-------------------------------------------------
of each Option granted to an Independent Director shall equal 100% of the Fair
Market Value of a share of Common Stock on the date the Option is granted;
provided, however, that the per Share price of each Option granted to an
Independent Director on the date of the initial public offering of Common Stock
shall equal the initial public offering price (net of underwriting discounts and
commissions) per Share. Initial Options (as defined in Section 12) granted to
Independent Directors shall become exercisable in cumulative monthly
installments of 1/36 of the Shares subject to such option on each of the monthly
anniversaries of the date of Initial Option grant, commencing with the first
such monthly anniversary, such that each Initial Option shall be one hundred
percent (100%) vested on the third anniversary of its date of grant. Subsequent
Options (as defined in Section 12) granted to Independent Directors shall become
vested in cumulative monthly installments of 1/12 of the Shares subject to such
Option on each of the monthly anniversaries of the date of Subsequent Option
grant, commencing with the twenty-fifth monthly anniversary of such date of
Subsequent Option grant, such that each Subsequent Option shall be one hundred
percent (100%) vested on the third anniversary of the date of Subsequent Option
grant. Subject to Section 10, the term of each Option granted to an Independent
Director shall be ten (10) years from the date the Option is granted. No portion
of an Option which is unexercisable at the time of an Independent Director's
termination of membership on the Board shall thereafter become exercisable.
14. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. Stock Purchase Rights may be issued
------------------
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing of the terms, conditions and restrictions related
to the offer, including the number of Shares that such person shall be entitled
to purchase, the price to be paid, and the time within which such person must
accept such offer. The offer shall be accepted by execution of a Restricted
Stock purchase agreement in the form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines
-----------------
otherwise, the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine, but in no case at a rate of less than twenty
percent (20%) per year over five (5) years from the date of purchase.
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<PAGE>
(c) Other Provisions. The Restricted Stock purchase agreement shall
----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
-----------------------
exercised, the purchaser shall have rights equivalent to those of a shareholder
and shall be a shareholder when his or her purchase is entered upon the records
of the duly authorized transfer agent of the Company. No adjustment shall be
made for a dividend or other right for which the record date is prior to the
date the Stock Purchase Right is exercised, except as provided in Section 15 of
the Plan.
15. Adjustments upon Changes in Capitalization, Merger or Asset Sale.
----------------------------------------------------------------
(a) In the event that the Administrator determines that any dividend
or other distribution (whether in the form of cash, Common Stock, other
securities, or other property), recapitalization, reclassification, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, liquidation, dissolution, or sale, transfer, exchange
or other disposition of all or substantially all of the assets of the Company,
or exchange of Common Stock or other securities of the Company, issuance of
warrants or other rights to purchase Common Stock or other securities of the
Company, or other similar corporate transaction or event, in the Administrator's
sole discretion, affects the Common Stock such that an adjustment is determined
by the Administrator to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan or with respect to any Option or Stock Purchase Right, then the
Administrator shall, in such manner as it may deem equitable, adjust any or all
of:
(i) the number and kind of shares of Common Stock (or other
securities or property) with respect to which Options or Stock Purchase Rights
may be granted or awarded (including, but not limited to, adjustments of the
limitations in Section 3 on the maximum number and kind of shares which may be
issued and adjustments of the maximum number of Shares that may be purchased by
any Optionee in any fiscal year pursuant to Section 6(c));
(ii) the number and kind of shares of Common Stock (or other
securities or property) subject to outstanding Options or Stock Purchase Rights;
and
(iii) the grant or exercise price with respect to any Option or
Stock Purchase Right.
(b) In the event of any transaction or event described in Section
15(a) or any unusual or nonrecurring transactions or events affecting the
Company, any affiliate of the Company, or the financial statements of the
Company or any affiliate, or of changes in Applicable Laws, regulations, or
accounting principles, the Administrator, in its sole and absolute discretion,
and on such terms and conditions as it deems appropriate, either by the terms of
the Option or Stock Purchase Right or by action taken prior to the occurrence of
such transaction or event and either automatically or upon the Optionee's
request, is hereby authorized
12
<PAGE>
to take any one or more of the following actions whenever the Administrator
determines that such action is appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan or with respect to any Option or Stock Purchase Right granted
under the Plan, to facilitate such transactions or events or to give effect to
such changes in laws, regulations or principles:
(i) To provide for either the purchase of any such Option or Stock
Purchase Right for an amount of cash equal to the amount that could have been
attained upon the exercise of such Option or Stock Purchase Right or realization
of the Optionee's rights had such Option or Stock Purchase Right been currently
exercisable or payable or fully vested or the replacement of such Option or
Stock Purchase Right with other rights or property selected by the Administrator
in its sole discretion;
(ii) To provide that such Option or Stock Purchase Right cannot vest,
be exercised or become payable after such event;
(iii) To provide that such Option or Stock Purchase Right shall be
exercisable as to all shares covered thereby, notwithstanding anything to the
contrary in the Plan or the provisions of such Option or Stock Purchase Right;
(iv) To provide that such Option or Stock Purchase Right be assumed
by the successor or survivor corporation, or a parent or subsidiary thereof, or
shall be substituted for by similar options, rights or awards covering the stock
of the successor or survivor corporation, or a parent or subsidiary thereof,
with appropriate adjustments as to the number and kind of shares and prices;
(v) To make adjustments in the number and type of shares of Common
Stock (or other securities or property) subject to outstanding Options and Stock
Purchase Rights, and/or in the terms and conditions of (including the grant or
exercise price), and the criteria included in, outstanding Options or Stock
Purchase Rights or Options or Stock Purchase Rights which may be granted in the
future; and
(vi) To provide that, for a specified period of time prior to such
event, the restrictions imposed under an Option Agreement or Restricted Stock
purchase agreement upon some or all Shares may be terminated, and, in the case
of Restricted Stock, some or all shares of such Restricted Stock may cease to be
subject to repurchase.
(c) Subject to Section 3, the Administrator may, in its discretion,
include such further provisions and limitations in any Option, Stock Purchase
Right, agreement or certificate, as it may deem equitable and in the best
interests of the Company.
(d) Notwithstanding the foregoing, in the event that the Company becomes a
party to a transaction that is intended to qualify for "pooling of interests"
accounting treatment and, but for one or more of the provisions of this Plan or
any Option Agreement or any Restricted Stock purchase agreement would so
qualify, then this Plan and any such agreement shall be interpreted so as to
preserve such accounting treatment, and to the extent that any
13
<PAGE>
provision of the Plan or any such agreement would disqualify the transaction
from pooling of interests accounting treatment (including, if applicable, an
entire Option Agreement or Restricted Stock purchase agreement), then such
provision shall be null and void. All determinations to be made in connection
with the preceding sentence shall be made by the independent accounting firm
whose opinion with respect to "pooling of interests" treatment is required as a
condition to the Company's consummation of such transaction.
(e) The existence of the Plan, any Option Agreement or
Restricted Stock purchase agreement and the Options or Stock Purchase Rights
granted hereunder shall not affect or restrict in any way the right or power of
the Company or the stockholders of the Company to make or authorize any
adjustment, recapitalization, reorganization or other change in the Company's
capital structure or its business, any merger or consolidation of the Company,
any issue of stock or of options, warrants or rights to purchase stock or of
bonds, debentures, preferred or prior preference stocks whose rights are
superior to or affect the Common Stock or the rights thereof or which are
convertible into or exchangeable for Common Stock, or the dissolution or
liquidation of the company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
16. Time of Granting Options and Stock Purchase Rights. The date of grant
--------------------------------------------------
of an Option or Stock Purchase Right shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Administrator. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option or Stock Purchase Right is so granted within a reasonable time after the
date of such grant.
17. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time wholly
-------------------------
or partially amend, alter, suspend or terminate the Plan. However, without
approval of the Company's stockholders given within twelve (12) months before or
after the action by the Board, no action of the Board may, except as provided in
Section 15, increase the limits imposed in Section 3 on the maximum number of
Shares which may be issued under the Plan or extend the term of the Plan under
Section 7.
(b) Stockholder Approval. The Board shall obtain stockholder
--------------------
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment,
----------------------------------
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee and
the Company. Termination of the Plan shall not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to Options
granted under the Plan prior to the date of such termination.
18. Inability to Obtain Authority. The inability of the Company to obtain
-----------------------------
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to
14
<PAGE>
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
19. Reservation of Shares. The Company, during the term of this Plan,
---------------------
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
20. Stockholder Approval. This Plan was originally approved by the
--------------------
Stockholders of the Company as of April 9, 1999.
21. Information to Optionees and Purchasers. The Company shall provide to
---------------------------------------
each Optionee and to each individual who acquires Shares pursuant to the Plan,
not less frequently than annually during the period such Optionee or purchaser
has one or more Options or Stock Purchase Rights outstanding, and, in the case
of an individual who acquires Shares pursuant to the Plan, during the period
such individual owns such Shares, copies of annual financial statements. The
Company shall not be required to provide such statements to key employees whose
duties in connection with the Company assure their access to equivalent
information.
22. Governing Law. The validity and enforceability of this Plan shall be
-------------
governed by and construed in accordance with the laws of the State of California
without regard to otherwise governing principles of conflicts of law.
15
<PAGE>
EXHIBIT 10.25
CREDIT AND GUARANTY AGREEMENT
dated as of December 9, 1999
among
NORTHPOINT COMMUNICATIONS, INC.,
NORTHPOINT COMMUNICATIONS GROUP INC.,
CERTAIN SUBSIDIARIES OF NORTHPOINT COMMUNICATIONS, INC.,
as Guarantors,
VARIOUS LENDERS,
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as Lead Arranger and Syndication Agent,
CANADIAN IMPERIAL BANK OF COMMERCE,
as Administrative Agent,
and
CAPITAL SYNDICATION CORPORATION,
as Documentation Agent
________________________________________________________
$250,000,000 Senior Secured Credit Facilities
________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. DEFINITIONS AND INTERPRETATION............................................... 2
1.1. Definitions........................................................... 2
1.2. Accounting Terms...................................................... 34
1.3. Interpretation, etc................................................... 35
SECTION 2. LOANS AND LETTERS OF CREDIT.................................................. 35
2.1. Revolving Loans and Delayed Draw Term Loans........................... 35
2.2. Term Loans............................................................ 37
2.3. Swing Line Loans...................................................... 37
2.4. Issuance of Letters of Credit and Purchase of Participations Therein.. 40
2.5. Pro Rata Shares; Availability of Funds................................ 46
2.6. Use of Proceeds....................................................... 46
2.7. Evidence of Debt; Register; Lenders' Books and Records; Notes......... 47
2.8. Interest on Loans..................................................... 48
2.9. Conversion/Continuation............................................... 50
2.10. Default Interest...................................................... 51
2.11. Fees.................................................................. 51
2.12. Scheduled Payments/Commitment Reductions.............................. 52
2.13. Voluntary Prepayments/Commitment Reductions........................... 55
2.14. Mandatory Prepayments/Commitment Reductions........................... 56
2.15. Application of Prepayments/Commitment Reductions...................... 58
2.16. General Provisions Regarding Payments................................. 60
2.17. Ratable Sharing....................................................... 61
2.18. Making or Maintaining Eurodollar Rate Loans........................... 62
2.19. Increased Costs; Capital Adequacy..................................... 64
2.20. Taxes; Withholding, etc............................................... 65
2.21. Obligation to Mitigate................................................ 68
2.22. Defaulting Lenders.................................................... 68
2.23. Removal or Replacement of a Lender.................................... 69
2.24. Incremental Facility Commitments and Loans............................ 70
SECTION 3. REPRESENTATIONS AND WARRANTIES............................................... 74
3.1. Organization; Powers.................................................. 74
3.2. Corporate Authorization............................................... 74
3.3. Financial Statements.................................................. 75
3.4. No Material Adverse Change............................................ 75
3.5. Litigation............................................................ 76
3.6. Tax Returns........................................................... 76
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
3.7. No Defaults........................................................... 76
3.8. Properties............................................................ 76
3.9. Collateral............................................................ 76
3.10. Licenses, Material Agreements, Intellectual Property.................. 77
3.11. Compliance With Laws.................................................. 78
3.12. ERISA................................................................. 78
3.13. Investment Company Act; Public Utility Holding Company Act............ 79
3.14. Federal Reserve Regulations........................................... 79
3.15. Insurance............................................................. 79
3.16. Capitalization and Subsidiaries....................................... 79
3.17. Real Estate Assets.................................................... 80
3.18. Solvency.............................................................. 80
3.19. Brokers, etc.......................................................... 80
3.20. No Material Misstatements............................................. 80
3.21. Year 2000 Matters..................................................... 80
SECTION 4. CONDITIONS PRECEDENT....................................................... 80
4.1. Closing Date.......................................................... 80
4.2. Conditions to Each Credit Extension................................... 84
SECTION 5. AFFIRMATIVE COVENANTS...................................................... 85
5.1. Corporate and Franchise Existence..................................... 85
5.2. Compliance with Laws, Etc............................................. 85
5.3. Maintenance of Properties............................................. 85
5.4. Insurance............................................................. 85
5.5. Taxes................................................................. 87
5.6. Financial Statements, Reports, etc.................................... 88
5.7. Litigation and Other Notices.......................................... 89
5.8. Future Properties..................................................... 90
5.9. ERISA................................................................. 90
5.10. Access to Premises and Records........................................ 90
5.11. Design, Construction.................................................. 90
5.12. Environmental Notices................................................. 90
5.13. Amendment of Organizational Documents................................. 91
5.14. Fiscal Year........................................................... 91
5.15. Future Subsidiaries................................................... 91
5.16. Accounting; Maintenance of Records.................................... 91
5.17. Collocation Agreements................................................ 92
5.18. Interest Rate Protection.............................................. 92
5.19. Further Assurances.................................................... 92
SECTION 6. NEGATIVE COVENANTS......................................................... 92
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
6.1. Indebtedness.......................................................... 92
6.2. Liens................................................................. 94
6.3. No Further Negative Pledges........................................... 95
6.4. Restricted Junior Payments............................................ 96
6.5. Restrictions on Subsidiary Distributions.............................. 96
6.6. Investments........................................................... 97
6.7. Financial Covenants................................................... 98
6.8. Fundamental Changes; Disposition of Assets; Acquisitions.............. 102
6.9. Disposal of Subsidiary Interests...................................... 103
6.10. Sales and Lease-Backs................................................. 103
6.11. Transactions with Shareholders and Affiliates......................... 103
6.12. Conduct of Business................................................... 104
6.13. Permitted Parent Guarantor Activities................................. 104
6.14. Fiscal Year........................................................... 104
SECTION 7. GUARANTY................................................................... 104
7.1. Guaranty of the Obligations........................................... 104
7.2. Contribution by Guarantors............................................ 104
7.3. Payment by Guarantors................................................. 105
7.4. Liability of Guarantors Absolute...................................... 106
7.5. Waivers by Guarantors................................................. 107
7.6. Guarantors' Rights of Subrogation, Contribution, etc.................. 108
7.7. Subordination of Other Obligations.................................... 109
7.8. Continuing Guaranty................................................... 109
7.9. Authority of Guarantors or Company.................................... 110
7.10. Financial Condition of Company........................................ 110
7.11. Bankruptcy, etc....................................................... 110
7.12. Notice of Events...................................................... 111
7.13. Discharge of Guaranty Upon Sale of Guarantor.......................... 111
SECTION 8. EVENTS OF DEFAULT.......................................................... 111
8.1. Events of Default..................................................... 111
SECTION 9. AGENTS..................................................................... 115
9.1. Appointment of Agents................................................. 115
9.2. Powers and Duties..................................................... 115
9.3. General Immunity...................................................... 116
9.4. Agents Entitled to Act as Lender...................................... 117
9.5. Lenders' Representations, Warranties and Acknowledgment............... 117
9.6. Right to Indemnity.................................................... 117
9.7. Successor Administrative Agent and Swing Line Lender.................. 118
9.8. Collateral Documents and Guaranty..................................... 119
</TABLE>
(iii)
<PAGE>
<TABLE>
<S> <C>
SECTION 10. MISCELLANEOUS......................................................... 119
10.1. Notices............................................................... 119
10.2. Expenses.............................................................. 120
10.3. Indemnity............................................................. 120
10.4. Set-Off............................................................... 121
10.5. Amendments and Waivers................................................ 121
10.6. Successors and Assigns; Participations................................ 123
10.7. Independence of Covenants............................................. 127
10.8. Survival of Representations, Warranties and Agreements................ 127
10.9. No Waiver; Remedies Cumulative........................................ 127
10.10. Marshalling; Payments Set Aside....................................... 127
10.11. Severability.......................................................... 128
10.12. Obligations Several; Independent Nature of Lenders' Rights............ 128
10.13. Headings.............................................................. 128
10.14. APPLICABLE LAW........................................................ 128
10.15. CONSENT TO JURISDICTION............................................... 128
10.16. WAIVER OF JURY TRIAL.................................................. 129
10.17. Confidentiality....................................................... 129
10.18. Usury Savings Clause.................................................. 130
10.19. Counterparts.......................................................... 130
10.20. Effectiveness......................................................... 130
</TABLE>
(iv)
<PAGE>
APPENDICES: A-1 Revolving Credit Commitments
A-2 Delayed Draw Term Loan Commitments
A-3 Term Loan Commitments
B Notice Addresses
SCHEDULES: 3.10(a) Certain Approvals
3.10(b) Material Agreements
3.12 ERISA Matters
3.16 Capitalization and Subsidiaries
3.17 Real Estate Assets
4.1(f)A Certain Leasehold Properties
4.1(f)B Certain Collocation Agreements
6.1 Certain Indebtedness
6.2 Certain Liens
6.6 Certain Investments
6.11 Certain Transactions
EXHIBITS: A-1 Funding Notice
A-2 Conversion/Continuation Notice
A-3 Issuance Notice
A-4 Incremental Facility Notice
B-1 Revolving Loan Note
B-2 Delayed Draw Term Loan Note
B-3 Term Loan Note
B-4 Swing Line Note
C Compliance Certificate
D Opinions of Counsel to Credit Parties
E Assignment Agreement
F Certificate Re Non-bank Status
G-1 Closing Date Certificate
G-2 Solvency Certificate
H Counterpart Agreement
I Pledge and Security Agreement
J-1 Lessor Waiver and Consent Agreement
J-2 ILEC Consent
(v)
<PAGE>
CREDIT AND GUARANTY AGREEMENT
This CREDIT AND GUARANTY AGREEMENT, dated as of December 9, 1999, is
entered into by and among NORTHPOINT COMMUNICATIONS, INC., a Delaware
corporation ("Company"), NORTHPOINT COMMUNICATIONS GROUP INC., a Delaware
corporation ("Parent Guarantor"), CERTAIN SUBSIDIARIES OF COMPANY, as
Guarantors, the Lenders party hereto from time to time, GOLDMAN SACHS CREDIT
PARTNERS L.P. ("GSCP"), as Lead Arranger (in such capacity,"Lead Arranger"), and
as Syndication Agent (in such capacity,"Syndication Agent"), CANADIAN IMPERIAL
BANK OF COMMERCE ("CIBC"), as Administrative Agent (together with its permitted
successors in such capacity,"Administrative Agent"), and CAPITAL SYNDICATION
CORPORATION ("CSC"), as Documentation Agent (in such capacity,"Documentation
Agent").
RECITALS:
WHEREAS, capitalized terms used in these Recitals shall have the respective
meanings set forth for such terms in Section 1.1 hereof;
WHEREAS, Lenders have agreed to extend certain credit facilities to
Company, in an aggregate amount not to exceed $150,000,000, consisting of up to
$30,000,000 aggregate principal amount of Revolving Credit Commitments,
$60,000,000 aggregate principal amount of Delayed Draw Term Loans, and
$60,000,000 aggregate principal amount of Term Loans, the proceeds of which will
be used to repay all of the Indebtedness under the Existing Loan Agreements, to
pay Transaction Costs and to finance the purchase of telecommunications
equipment and other Consolidated Capital Expenditures associated with the build-
out in certain targeted central offices of one or more local exchange carriers
and for working capital and other general corporate purposes;
WHEREAS, Company has agreed to secure all of its obligations hereunder by
granting to Administrative Agent, for the benefit of Lenders, a First Priority
Lien on substantially all of its assets, including a pledge of all of the
Capital Stock of each of its Domestic Subsidiaries and 65% of all the Capital
Stock of each of its Foreign Subsidiaries; and
WHEREAS, Guarantors have agreed to guarantee the obligations of Company
hereunder and to secure Company's and all of the Guarantors' respective
Obligations hereunder by granting to Administrative Agent, for the benefit of
Lenders, a First Priority Lien on substantially all of their assets, including a
pledge of all of the Capital Stock of each of their respective Domestic
Subsidiaries (including Company) and 65% of all the Capital Stock of each of
their respective Foreign Subsidiaries.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Company, Guarantors, Lenders, Issuing
Bank and Agents agree as follows:
DEFINITIONS AND INTERPRETATION AND INTERPRETATION
1
<PAGE>
Definitions. The following terms used herein, including in the preamble,
recitals, exhibits and schedules hereto, shall have the following meanings:
"Acknowledgment of Pledge" as defined in the Pledge and Security
Agreement.
"Adjusted Eurodollar Rate" means, for any Interest Rate Determination
Date with respect to an Interest Period for a Eurodollar Rate Loan, the rate per
annum obtained by dividing (and rounding upward to the next whole multiple of
1/100 of 1%) (i) (a) the rate per annum (rounded to the nearest 1/100 of 1%)
equal to the rate determined by Administrative Agent to be the offered rate
which appears on the page of the Telerate Screen which displays an average
British Bankers Association Interest Settlement Rate (such page currently being
page number 3740 or 3750, as applicable) for deposits (for delivery on the first
day of such period) with a term equivalent to such period in Dollars, determined
as of approximately 11:00 a.m. (London, England time) on such Interest Rate
Determination Date, or (b) in the event the rate referenced in the preceding
clause (a) does not appear on such page or service or if such page or service
shall cease to be available, the rate per annum (rounded to the nearest 1/100 of
1%) equal to the rate determined by Administrative Agent to be the offered rate
on such other page or other service which displays an average British Bankers
Association Interest Settlement Rate for deposits (for delivery on the first day
of such period) with a term equivalent to such period in Dollars, determined as
of approximately 11:00 a.m. (London, England time) on such Interest Rate
Determination Date, or (c) in the event the rates referenced in the preceding
clauses (a) and (b) are not available, the rate per annum (rounded to the
nearest 1/100 of 1%) equal to the offered quotation rate to first class banks in
the London interbank market by CIBC for deposits (for delivery on the first day
of the relevant period) in Dollars of amounts in same day funds comparable to
the principal amount of the applicable Loan of Administrative Agent, in its
capacity as a Lender, for which the Adjusted Eurodollar Rate is then being
determined with maturities comparable to such period as of approximately 11:00
a.m. (London, England time) on such Interest Rate Determination Date, by (ii) an
amount equal to (a) one minus (b) the Applicable Reserve Requirement; provided,
----- --------
notwithstanding the foregoing, the term "Adjusted Eurodollar Rate" shall mean a
rate per annum equal to the rate of interest set forth in clause (i) of this
definition with respect to any Lender that has not delivered to Company and
Administrative Agent a written notice certifying that such Lender is subject to
the Applicable Reserve Requirements.
"Administrative Agent" as defined in the preamble hereto.
"Affected Lender" as defined in Section 2.18(b).
"Affected Loans" as defined in Section 2.18(b).
"Affiliate" means, as applied to any Person, any other Person directly
or
2
<PAGE>
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power (i) to vote 10% or more of the Securities having
ordinary voting power for the election of directors of such Person or (ii) to
direct or cause the direction of the management and policies of that Person,
whether through the ownership of voting securities or by contract or otherwise.
"Agent" means each of Lead Arranger, Syndication Agent, Administrative
Agent, Documentation Agent and, if applicable, Incremental Facility Syndication
Agent.
"Aggregate Amounts Due" as defined in Section 2.17.
"Aggregate Commitment Usage" means, as of any date of determination,
an amount, stated as a percentage, calculated by dividing (i) the aggregate
amount of the Total Utilization of Revolving Credit Commitments plus the
aggregate amount of Total Utilization of Delayed Draw Term Loan Commitments as
of such date, by (ii) the aggregate amount of the Revolving Credit Commitments
plus the aggregate amount of the Delayed Draw Term Loan Commitments then in
effect as of such date.
"Aggregate Payments" as defined in Section 7.2.
"Agreement" means this Credit and Guaranty Agreement, dated as of
December 9, 1999, as it may be amended, supplemented or otherwise modified from
time to time.
"Applicable Commitment Fee Percentage" means a percentage, per annum,
determined by reference to the Aggregate Commitment Usage in effect from time to
time as set forth below:
======================================================
Aggregate Applicable Commitment
Commitment Usage Fee Percentage
------------------------------------------------------
greater than
or equal to 66% 0.75%
------------------------------------------------------
less than 66% 1.25%
greater than
or equal to 33%
------------------------------------------------------
less than 33% 1.50%
======================================================
"Applicable Margin" means (i) with respect to Eurodollar Rate Loans,
(a) from the Closing Date until the date of delivery of the Compliance
Certificate and the financial statements for the period ending June 30, 2000, a
percentage, per annum, determined by reference to the following table as if the
Total Leverage Ratio then in effect were > 8.00:1.00;
-
3
<PAGE>
and (b) thereafter, a percentage, per annum, determined by reference to the
Total Leverage Ratio in effect from time to time as set forth below:
==============================================
Total Applicable Margin
Leverage Ratio
----------------------------------------------
less than 0 or 4.25%
greater than
or equal to 8.00:1.00
----------------------------------------------
less than 8.00:1.00 3.75%
greater than
or equal to 6.50:1.00
----------------------------------------------
less than 6.50:1.00 3.50%
greater than
or equal to 5.00:1.00
----------------------------------------------
less than 5.00:1.00 3.25%
==============================================
and (ii) with respect to Base Rate Loans (including Swing Line Loans), an amount
equal to (a) the Applicable Margin for Eurodollar Rate Loans as set forth in
clause (i)(a) or (i)(b) above, as applicable, minus (b) 1.00% per annum. No
change in the Applicable Margin shall be effective until three Business Days
after the date on which Administrative Agent shall have received the applicable
financial statements and a Compliance Certificate pursuant to Section 5.6(d)
calculating the Total Leverage Ratio. At any time Company has not submitted to
Administrative Agent the applicable information as and when required under
Section 5.6(d), the Applicable Margin shall be determined as if the Total
Leverage Ratio were in excess of 8.00:1.00. Within one Business Day of receipt
of the applicable information as and when required under Section 5.6(d),
Administrative Agent shall give each Lender telefacsimile or telephonic notice
(confirmed in writing) of the Applicable Margin in effect from such date.
"Applicable Prepayment Premium Percentage" means a percentage, per
annum, in effect from time to time as set forth below:
======================================================
Period after Applicable Prepayment
the Closing Date Premium Percentage
------------------------------------------------------
0-12 months 3.00%
------------------------------------------------------
13-24 months 2.00%
======================================================
"Applicable Reserve Requirement" means, at any time, for any
Eurodollar Rate Loan, the maximum rate, expressed as a decimal, at which
reserves (including, without limitation, any basic marginal, special,
supplemental, emergency or other reserves) are required to be maintained with
respect thereto against "Eurocurrency liabilities" (as such term is defined in
4
<PAGE>
Regulation D) under regulations issued from time to time by the Board of
Governors of the Federal Reserve System or other applicable banking regulator.
Without limiting the effect of the foregoing, the Applicable Reserve Requirement
shall reflect any other reserves required to be maintained by such member banks
with respect to (i) any category of liabilities which includes deposits by
reference to which the applicable Adjusted Eurodollar Rate or any other interest
rate of a Loan is to be determined, or (ii) any category of extensions of credit
or other assets which include Eurodollar Rate Loans. A Eurodollar Rate Loan
shall be deemed to constitute Eurocurrency liabilities and as such shall be
deemed subject to reserve requirements without benefits of credit for proration,
exceptions or offsets that may be available from time to time to the applicable
Lender. The rate of interest on Eurodollar Rate Loans shall be adjusted
automatically on and as of the effective date of any change in the Applicable
Reserve Requirement.
"Asset Sale" means a sale, lease or sub-lease (as lessor or
sublessor), sale and leaseback, assignment, conveyance, transfer or other
disposition to, or any exchange of property with, any Person (other than Parent
Guarantor, Company or any Subsidiary Guarantor), in one transaction or a series
of transactions, of all or any part of Parent Guarantor's or any of its
Subsidiaries' businesses, assets or properties of any kind, whether real,
personal, or mixed and whether tangible or intangible, whether now owned or
hereafter acquired, including, without limitation, the Capital Stock of any of
Parent Guarantor's Subsidiaries, other than (i) inventory (or other assets) sold
or leased in the ordinary course of business, (ii) sales of assets for aggregate
consideration of less than $250,000 with respect to any transaction or series of
related transactions and less than $1,000,000 in the aggregate during any fiscal
year and (iii) sales of Cash Equivalents in the ordinary course of business.
"Assignment Agreement" means an Assignment Agreement substantially in
the form of Exhibit E, with such amendments or modifications as may be approved
by Administrative Agent.
"Authorized Officer" means, as applied to any Person, any individual
holding the position of chairman of the board (if an officer), chief executive
officer, president or one of its vice presidents (or the equivalent thereof),
and such Person's chief financial officer or treasurer.
"Bankruptcy Code" means title 11 of the United States Code entitled
"Bankruptcy," as now and hereafter in effect, or any successor statute.
"Base Rate" means, for any day, a rate per annum (rounded to the
nearest 1/100 of 1%) equal to the greater of (i) the Prime Rate in effect on
such day and (ii) the Federal Funds Effective Rate in effect on such day plus 2
of 1%. Any change in the Base Rate due to a change in the Prime Rate or the
Federal Funds Effective Rate shall be effective on the effective day of such
change in the Prime Rate or the Federal Funds Effective Rate, respectively.
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<PAGE>
"Base Rate Loan" means a Loan bearing interest at a rate determined by
reference to the Base Rate.
"Beneficiary" means each Agent, Issuing Bank, Lender and Lender
Counterparty.
"Benefit Plan" means a defined benefit plan as defined in Section
3(35) of ERISA (other than a Multiemployer Plan) in respect of which Company or
any ERISA Affiliate is, or within the immediately preceding six (6) years was,
an "employer" as defined in Section 3(5) of ERISA.
"Business" means the business of operating and maintaining the Systems
owned by Company and its Subsidiaries and all operations related thereto or in
support thereof.
"Business Day" means (i) any day excluding Saturday, Sunday and any
day which is a legal holiday under the laws of the State of New York or is a day
on which banking institutions located in such state are authorized or required
by law or other governmental action to close and (ii) with respect to all
notices, determinations, fundings and payments in connection with the Adjusted
Eurodollar Rate or any Eurodollar Rate Loans, the term "Business Day" shall mean
any day which is a Business Day described in clause (i) and which is also a day
for trading by and between banks in Dollar deposits in the London interbank
market.
"Capital Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is or should be accounted for as a capital lease on the
balance sheet of that Person.
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation),
including, without limitation, partnership interests and membership interests,
and any and all warrants, rights or options to purchase or other arrangements or
rights to acquire any of the foregoing.
"Cash" means money, currency or a credit balance in any demand or
Deposit Account.
"Cash Equivalents" means, as at any date of determination, (i)
marketable securities (a) issued or directly and unconditionally guaranteed as
to interest and principal by the United States Government or (b) issued by any
agency of the United States the obligations of which are backed by the full
faith and credit of the United States, in each case maturing within one year
after such date; (ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or any
public instrumentality thereof, in each case maturing within one year after such
date and having, at the time of the
6
<PAGE>
acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iii) commercial paper maturing no more than one year from the date of
creation thereof and having, at the time of the acquisition thereof, a rating of
at least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of
deposit, repurchase agreements, money market or other cash management accounts,
bankers acceptances and short term Eurodollar time deposits maturing within one
year after such date and issued or accepted by any Lender or by any financial
institution organized under the laws of the United States of America or any
state thereof or the District of Columbia that either (x) has a long term
deposit rating of at least A-2 from Moody's and A by S&P or (y) (a) is at least
"adequately capitalized" (as defined in the regulations of its primary Federal
banking regulator) and (b) has Tier 1 capital (as defined in such regulations)
of not less than $100,000,000; (v) floating and fixed rate obligations of major
corporation, banks, and agencies, including, but not limited to, corporate bond,
medium term notes, deposit notes and eurodollar/yankee notes and bonds;
provided, with respect to all obligations referred to in this clause (v), (a)
- --------
all such obligations shall be rated at least A2 or A by Moody's or S&P,
respectively; (b) no such obligation shall have a duration in excess of one
year, and (c) the aggregate principal amount of all such obligations held at any
time by all of the Credit Parties shall not exceed 50% of the aggregate
principal amount of all Cash Equivalents described in clauses (i) through (iv)
of this definition (including, with respect to investments referred to in
clauses (i) and (ii) hereof, investments in the form permitted pursuant to
clause (vi) of this definition); and (vi) shares of any money market mutual fund
that (a) has substantially all of its assets invested continuously in the types
of investments referred to in clauses (i) and (ii) above, (b) has net assets of
not less than $500,000,000, and (c) has the highest rating obtainable from
either S&P or Moody's.
"Certificate re Non-Bank Status" means a certificate substantially in
the form of Exhibit F.
"Change of Control" means, at any time, (i) for a period of one year
after the Closing Date, either of the Founders referred to in clauses (i) or
(ii) of the definition thereof shall cease to own or control at least 20% of the
Capital Stock of Parent Guarantor owned and controlled by such Founder as of the
Closing Date; (ii) any Person or "group" (within the meaning of Rules 13d-3 and
13d-5 under the Exchange Act) other than one or more of the Founders (a) shall
have acquired beneficial ownership of 30% or more on a fully diluted basis of
the voting and/or economic interest in the Capital Stock of Parent Guarantor or
(b) shall have obtained the power (whether or not exercised) to elect a majority
of the members of the board of directors (or similar governing body) of Parent
Guarantor; (iii) a "change of control" or similar event shall occur under any
Indebtedness permitted hereunder; (iv) Parent Guarantor shall cease to
beneficially own and control 100% on a fully diluted basis of the economic and
voting interest in the Capital Stock of Company; or (v) the majority of the
seats (other than vacant seats) on the board of directors (or similar governing
body) of Parent Guarantor cease to be occupied by Persons who either (a) were
members of the board of directors of Parent Guarantor on the Closing Date or (b)
were nominated for election by the board of directors of Parent Guarantor, a
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<PAGE>
majority of whom were directors on the Closing Date or whose election or
nomination for election was previously approved by a majority of such directors.
"Class" means (i) with respect to Lenders, each of the following
classes of Lenders: (a) Lenders having Revolving Credit Exposure (including
Swing Line Lender), (b) Lenders having Delayed Draw Term Loan Exposure, and (c)
Lenders having Term Loan Exposure, and (ii) with respect to Commitments and
Loans, each of the following classes of Commitments and Loans: and (a) Revolving
Credit Commitments and Revolving Loans (including Swing Line Loans), (b) Delayed
Draw Term Loan Commitments and Delayed Draw Term Loans, and (c) Term Loan
Commitments and Term Loans.
"Closing Date" means the date on which the Term Loans are made.
"Closing Date Certificate" means a Closing Date Certificate
substantially in the form of Exhibit G-1.
"Collateral" means, collectively, all of the real, personal and mixed
property (including Capital Stock) in which Liens are purported to be granted
pursuant to the Collateral Documents as security for the Obligations.
"Collateral Account" as defined in Section 2.4(h).
"Collateral Documents" means the Pledge and Security Agreement and all
other instruments, documents and agreements delivered by any Credit Party
pursuant to this Agreement or any of the other Credit Documents in order to
grant to Administrative Agent, for the benefit of Lenders, a Lien on any real,
personal or mixed property of that Credit Party as security for the Obligations.
"Commitment" means a Revolving Credit Commitment or either of the
Credit Facility Term Loan Commitments, and the term "Commitments" means the
Revolving Credit Commitments and the Credit Facility Term Loan Commitments,
collectively.
"Company" as defined in the preamble hereto.
"Compliance Certificate" means a Compliance Certificate substantially
in the form of Exhibit C.
"Consolidated Adjusted EBITDA" means, for any period, an amount
determined for Parent Guarantor and its Subsidiaries on a consolidated basis
equal to (i) the sum, without duplication, of the amounts for such period of
(a) Consolidated Net Income, (b) Consolidated Interest Expense, (c) provisions
for taxes based on income, (d) total depreciation expense, (e) total
amortization expense, (f) to the extent deducted in determining Consoli-
8
<PAGE>
dated Net Income, Market Co-Development Costs funded on or before June 30,
2001by equity Investments by non-Affiliates of Parent Guarantor; provided, all
--------
such Market Co-Development Costs included in this clause (f) shall not exceed
$5,000,000 in the aggregate in any fiscal quarter; and (e) other non-Cash items
reducing Consolidated Net Income (excluding any such non-Cash item to the extent
that it represents an accrual or reserve for potential Cash items in any future
period or amortization of a prepaid Cash item that was paid in a prior period),
minus (ii) other non-Cash items increasing Consolidated Net Income for such
- -----
period (excluding any such non-Cash item to the extent it represents the
reversal of an accrual or reserve for potential Cash item in any prior period).
"Consolidated Capital Expenditures" means, for any period, the
aggregate of all expenditures of Parent Guarantor and its Subsidiaries during
such period determined on a consolidated basis that, in accordance with GAAP,
are or should be included in "purchase of property and equipment" or similar
items reflected in the consolidated statement of cash flows of Parent Guarantor
and its Subsidiaries.
"Consolidated Capitalization" means, as at any date of determination,
the sum of (i) Consolidated Total Debt and (ii) the paid-in-equity capital,
including preferred stock but excluding additional equity issued as pay-in-kind
dividends on issued and outstanding equity Securities and excluding any
accumulated deficits resulting from operations, of Parent Guarantor and its
Subsidiaries determined on a consolidated basis in accordance with GAAP.
"Consolidated Cash Interest Expense" means, for any period,
Consolidated Interest Expense for such period, excluding any amount not payable
in Cash.
"Consolidated Current Assets" means, as at any date of determination,
the total assets of Parent Guarantor and its Subsidiaries on a consolidated
basis that may properly be classified as current assets in conformity with GAAP,
excluding Cash and Cash Equivalents.
"Consolidated Current Liabilities" means, as at any date of
determination, the total liabilities of Parent Guarantor and its Subsidiaries on
a consolidated basis that may properly be classified as current liabilities in
conformity with GAAP, excluding the current portion of long term debt.
"Consolidated Excess Cash Flow" means, for any period, an amount (if
positive) equal to: (i) the sum, without duplication, of the amounts for such
period of (a) Consolidated Adjusted EBITDA, and (b) the Consolidated Working
Capital Adjustment, minus (ii) the sum, without duplication, of the amounts for
-----
such period of (a) voluntary and scheduled repayments of Consolidated Total Debt
(excluding repayments of Revolving Loans or Swing Line Loans except to the
extent the Revolving Credit Commitments are permanently reduced in connection
with such repayments), (b) Consolidated Capital Expenditures (net of any
proceeds of any related financings with respect to such expenditures), (c)
Consolidated Cash Interest
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<PAGE>
Expense, (d) the provision for current taxes based on income of Parent Guarantor
and its Subsidiaries and payable in cash with respect to such period, (e) to the
extent not otherwise deducted in the determination of Consolidated Excess Cash
Flow, Investments permitted and actually made during such period under Section
6.6(h); and (f) Restricted Junior Payments permitted and actually made during
such period under Section 6.4(b).
"Consolidated Fixed Charges" means, for any period, the sum, without
duplication, of the amounts determined for Parent Guarantor and its Subsidiaries
on a consolidated basis equal to (i) Consolidated Principal Payments for such
period, (ii) Consolidated Interest Expense for such period, (iii) Consolidated
Capital Expenditures for such period, (iv) all payments for taxes based on
income paid in Cash by Parent Guarantor and its Subsidiaries for such period,
and (v) all dividends paid in Cash by Parent Guarantor for such period.
"Consolidated Interest Expense" means, for any period, total interest
expense (including that portion attributable to Capital Leases in accordance
with GAAP and capitalized interest) of Parent Guarantor and its Subsidiaries on
a consolidated basis with respect to all outstanding Indebtedness of Parent
Guarantor and its Subsidiaries, including all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing and net costs under Interest Rate Agreements, but excluding, however,
any amounts referred to in Section 2.11(d) payable on or before the Closing
Date.
"Consolidated Net Income" means, for any period, (i) the net income
(or loss) of Parent Guarantor and its Subsidiaries on a consolidated basis for
such period taken as a single accounting period determined in conformity with
GAAP, minus (ii) (a) the net income of any Person (other than a Subsidiary of
-----
Parent Guarantor) in which any other Person (other than Parent Guarantor or any
of its Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to Parent Guarantor or any of its
Subsidiaries by such Person during such period, (b) the net income (or loss) of
any Person accrued prior to the date it becomes a Subsidiary of Parent Guarantor
or is merged into or consolidated with Parent Guarantor or any of its
Subsidiaries or that Person's assets are acquired by Parent Guarantor or any of
its Subsidiaries, (c) the income of any Subsidiary (other than a Guarantor) of
Parent Guarantor to the extent that the declaration or payment of dividends or
similar distributions by that Subsidiary of that income is not at the time
permitted by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
that Subsidiary, (d) any after-tax gains or losses attributable to Asset Sales
or returned surplus assets of any Pension Plan, and (e) (to the extent not
included in clauses (a) through (d) above) any net extraordinary gains or net
non-cash extraordinary losses.
"Consolidated Principal Payments" means, for any period, total
scheduled principal payments (including that portion attributable to Capital
Leases in accordance with GAAP) of Parent Guarantor and its Subsidiaries on a
consolidated basis with respect to all outstanding Indebtedness of Parent
Guarantor and its Subsidiaries.
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<PAGE>
"Consolidated Senior Debt" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of Company and its
Subsidiaries referred to in Sections 6.1(a), 6.1(i), 6.1(j), and 6.1(l)
determined on a consolidated basis in accordance with GAAP.
"Consolidated Total Debt" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of Parent Guarantor
and its Subsidiaries determined on a consolidated basis in accordance with GAAP.
"Consolidated Working Capital" means, as at any date of determination,
the excess of Consolidated Current Assets over Consolidated Current Liabilities.
"Consolidated Working Capital Adjustment" means, for any period on a
consolidated basis, the amount (which may be a negative number) by which
Consolidated Working Capital as of the beginning of such period exceeds (or is
less than) Consolidated Working Capital as of the end of such period.
"Contaminant" means any pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum derived
substance or waste, or any constituent of any such substance or waste.
"Conversion/Continuation Date" means the effective date of a
continuation or conversion, as the case may be, as set forth in the applicable
Conversion/Continuation Notice.
"Conversion/Continuation Notice" means a Conversion/Continuation
Notice substantially in the form of Exhibit A-2.
"Counterpart Agreement" means a Counterpart Agreement substantially in
the form of Exhibit H.
"Contributing Guarantors" as defined in Section 7.2.
"Credit Date" means the date of a Credit Extension.
"Credit Document" means any of this Agreement, the Notes, if any, the
Collateral Documents, any documents or certificates executed by Company in favor
of Issuing Bank relating to Letters of Credit, and all other documents,
instruments or agreements executed and delivered by a Credit Party for the
benefit of Agents, Issuing Bank or any Lender in connection herewith; provided,
the term "Credit Document" shall not include any Hedge Agreement unless (x) such
Hedge Agreement is between Company and a Lender Counterparty and (y) Company and
such Lender Counterparty have agreed that such Hedge Agreement is a
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<PAGE>
"Credit Document."
"Credit Extension" means the making of a Loan or the issuing of a
Letter of Credit.
"Credit Facility Term Loan" means a Delayed Draw Term Loan or a Term
Loan, as applicable.
"Credit Facility Term Loan Commitment" means the Delayed Draw Term
Loan Commitment or the Term Loan Commitment of a Lender, as applicable, and
"Credit Facility Term Loan Commitments" means such Commitments of all Lenders in
the aggregate.
"Credit Facility Term Loan Maturity Date" means the Delayed Draw Term
Loan Maturity Date or the Term Loan Maturity Date, as applicable.
"Credit Party" means each Person (other than any Agent, Issuing Bank
or any Lender or any other representative thereof) from time to time party to a
Credit Document.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement, futures contract, option contract, synthetic cap or other
similar agreement or arrangement, each of which is for the purpose of hedging
the foreign currency risk associated with Parent Guarantor's and its
Subsidiaries' operations.
"Debt Service Coverage Ratio" means the ratio as of the last day of
any fiscal quarter of (i) two times the Consolidated Adjusted EBITDA for the
two-fiscal quarter period then ended, to (ii) the sum of (a) two times the
Consolidated Interest Expense for such two-fiscal quarter Period and (b)
Consolidated Principal Payments for such two-fiscal quarter Period and the
scheduled Consolidated Principal Payments for the immediately succeeding two-
fiscal quarter period.
"Default" means a condition or event that, after notice or lapse of
time or both, would constitute an Event of Default.
"Default Excess" means, with respect to any Defaulting Lender, the
excess, if any, of such Defaulting Lender's Pro Rata Share of the aggregate
outstanding principal amount of Revolving Loans or Delayed Draw Term Loans, as
the case may be, of all Lenders (calculated as if all Defaulting Lenders (other
than such Defaulting Lender) had funded all of their respective Defaulted Loans)
over the aggregate outstanding principal amount of all Revolving Loans or
Delayed Draw Term Loans, as applicable, of such Defaulting Lender.
"Default Period" means, with respect to any Defaulting Lender, the
period commencing on the date of the applicable Funding Default and ending on
the earliest of the
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<PAGE>
following dates: (i) the date on which all or Revolving Credit Commitments or
Delayed Draw Term Loan Commitments, as the case may be, are cancelled or
terminated and/or the Obligations are declared or become immediately due and
payable, (ii) the date on which (a) the Default Excess with respect to such
Defaulting Lender shall have been reduced to zero (whether by the funding by
such Defaulting Lender of any Defaulted Loans of such Defaulting Lender or by
the non-pro rata application of any voluntary or mandatory prepayments of the
Revolving Loans or Delayed Draw Term Loans, as the case may be, in accordance
with the terms of Section 2.13 or Section 2.14 or by a combination thereof) and
(b) such Defaulting Lender shall have delivered to Company and Administrative
Agent a written reaffirmation of its intention to honor its obligations
hereunder with respect to its applicable Commitments, and (iii) the date on
which Company, Administrative Agent and Requisite Lenders waive all Funding
Defaults of such Defaulting Lender in writing.
"Defaulting Lender" as defined in Section 2.22.
"Defaulting Loan" as defined in Section 2.22.
"Deposit Account" means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.
"Delayed Draw Term Loan" means a Delayed Draw Term Loan made by a
Lender to Company pursuant to Section 2.1(b).
"Delayed Draw Term Loan Commitment" means the Commitment of a Lender
to make or otherwise fund a Delayed Draw Term Loan to Company. The amount of
each Lender's Delayed Draw Term Loan Commitment, if any, is set forth on
Appendix A-2 or in the applicable Assignment Agreement, subject to any
adjustment or reduction pursuant to the terms and conditions hereof; "Delayed
Draw Term Loan Commitments" means such Commitments of all Lenders in the
aggregate, and the aggregate amount of the Delayed Draw Term Loan Commitments as
of the Closing Date is $110,000,000.
"Delayed Draw Term Loan Commitment Period" means the period from the
Closing Date to but excluding the Delayed Draw Term Loan Commitment Termination
Date.
"Delayed Draw Term Loan Commitment Termination Date" means the
earliest to occur of (i) December 9, 1999, if the Term Loans are not made on or
before that date; (ii) December 9, 2000, (iii) the date on which the aggregate
amount of the then outstanding Delayed Draw Term Loans equals the aggregate
amount of Delayed Draw Term Loan Commitments then in effect, (iv) the date the
Delayed Draw Term Loan Commitments are permanently reduced to zero pursuant to
Section 2.14, and (v) the date of the termination of the Delayed Draw Term Loan
Commitments pursuant to Section 8.1.
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<PAGE>
"Delayed Draw Term Loan Exposure" means, with respect to any Lender,
as of any date of determination, the outstanding principal amount of the Delayed
Draw Term Loans of such Lender; provided, at any time prior to the making of the
--------
Delayed Draw Term Loans, the Delayed Draw Term Loan Exposure of any Lender shall
be equal to such Lender's Delayed Draw Term Loan Commitment.
"Delayed Draw Term Loan Maturity Date" means the earlier of (i)
December 9, 2005, and (ii) the date that all Delayed Draw Term Loans shall
become due and payable in full hereunder, whether by acceleration or otherwise.
"Delayed Draw Term Loan Note" means a promissory note in the form of
Exhibit B-2, as it may be amended, supplemented or otherwise modified from time
to time.
"Documentation Agent" as defined in the preamble hereto.
"Dollars" and the sign "$" mean the lawful money of the United States
of America.
"Domestic Subsidiary" means any Subsidiary organized under the laws of
the United States of America, any State thereof or the District of Columbia.
"Eligible Assignee" means (i) any Lender, any Affiliate of any Lender
and any Related Fund (any two or more Related Funds being treated as a single
Eligible Assignee for all purposes hereof), and (ii) any commercial bank,
insurance company, investment or mutual fund or other entity (other than an
individual) that is an "accredited investor" (as defined in Regulation D under
the Securities Act) and which extends credit or buys loans as one of its
businesses; provided, no Affiliate of Parent Guarantor shall be an Eligible
--------
Assignee.
"Environmental Laws" means all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidance, orders and consent decrees
or other binding determination of any Governmental Authority relating to
protection of the environment, the handling, disposal or Release of Contaminants
and occupational safety and health. Such laws and regulations include but are
not limited to the Resource Conservation and Recovery Act, 33 U.S.C. ' 6901 et
--
seq., as amended; the Comprehensive Environmental Response, Compensation and
- ----
Liability Act, 42 U.S.C. ' 9601 et seq., as amended; the Toxic Substances
-- ----
Control Act, 15 U.S.C. ' 2601 et seq., as amended; the Clean Water Act, 33
-- ----
U.S.C. ' 1251 et seq., as amended; the Clean Air Act, 42 U.S.C. ' 7401 et seq.,
-- ---- -- ----
as amended; state and federal environmental lien and environmental cleanup
programs; the Occupational Safety and Health Act, 29 U.S.C. ' 651 et seq.; and
------
U.S. Department of Transportation regulations related to the transportation of
hazardous materials, each as from time to time hereafter in effect.
14
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means (i) any corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the IRC) as Company, (ii) any partnership or other trade or business (whether or
not incorporated) under common control (within the meaning of Section 414(c) of
the IRC) with Company and (iii) any member of the same affiliated service group
(within the meaning of Section 414(m) of the IRC) as Company.
"Eurodollar Rate Loan" means a Loan bearing interest at a rate
determined by reference to the Adjusted Eurodollar Rate.
"Event of Default" means each of the conditions or events set forth in
Section 8.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
"Existing Loan Agreements" means (i) that certain First Priority Loan
and Guaranty Agreement, dated as of April 5, 1999, and as amended through the
Closing Date, among Company, as borrower, NorthPoint Communications of Virginia,
Inc. ("NorthPoint Virginia") and Parent Guarantor, as guarantors, the lenders
party thereto from time to time, GSCP, as a joint lead arranger and syndication
agent, CIBC, as administrative agent, Newcourt Commercial Finance Corporation
("Newcourt"), as documentation agent and collateral agent, and CSC, as a joint
lead arranger, and (ii) that certain Second Priority Loan and Guaranty
Agreement, dated as of April 5, 1999, and as amended through the Closing Date,
among Company, as borrower, NorthPoint Virginia and Parent Guarantor, as
guarantors, the lenders party thereto from time to time, GSCP, as a joint lead
arranger and syndication agent, Newcourt, as administrative agent, collateral
agent and documentation agent, and CSC, as a joint lead arranger.
"Fair Share Contribution Amount" as defined in Section 7.2.
"Fair Share" as defined in Section 7.2.
"Fair Share Shortfall" as defined in Section 7.2.
"FCC" means the Federal Communications Commission or any successor
commission or agency of the United States of America having jurisdiction over
Company or any System.
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<PAGE>
"Federal Funds Effective Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to (i) 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 preceding
Business Day) by the Federal Reserve Bank of New York in the Composite Closing
Quotations for U.S. Government Securities; or (ii) if such rate is not so
published for any day which is a Business Day, the average of the quotations at
approximately 10:30 a.m. (New York time) for such day on such transactions as
determined by Administrative Agent from three federal funds brokers of
recognized standing selected by it.
"Financials" as defined in Section 3.3.
"Financial Officer Certification" means, with respect to the financial
statements for which such certification is required, the certification of the
chief financial officer of Parent Guarantor that such financial statements
fairly present, in all material respects, the financial condition of Parent
Guarantor and its Subsidiaries as at the dates indicated and the results of
their operations and their cash flows for the periods indicated, subject to
changes resulting from audit and normal year-end adjustments.
"First Priority" means, with respect to any Lien purported to be
created in any Collateral pursuant to any Collateral Document, that such Lien is
the only Lien to which such Collateral is subject, other than Permitted Liens.
"Fixed Charge (Interest) Coverage Ratio" means the ratio as of the
last day of any fiscal quarter of (i) two times the Consolidated Adjusted EBITDA
for the two-fiscal quarter period then ended, to (ii) two times the Consolidated
Fixed Charges for such two-fiscal quarter period; provided, for each of the two-
--------
fiscal quarter period ending on each of March 31, 2002, June 30, 2002 and
September 30, 2002, clause (ii) of this definition shall be determined only by
reference to the amount of Consolidated Interest Expense for such two-fiscal
quarter period.
"Foreign Subsidiary" means any Subsidiary that is not a Domestic
Subsidiary.
"Founders" means each of (i) Michael W. Malaga, (ii)Tim Monahan,
William Euske, Nathan Gregory, Robert Flood and Steve Gorosh, as a group, (iii)
investment funds controlled by The Carlyle Group owning capital stock of Parent
Guarantor as of the Closing Date, as a group, and (iv) investment funds
controlled by Vulcan Ventures Incorporated owning capital stock of Parent
Guarantor as of the Closing Date, as a group.
"Funding Default" as defined in Section 2.22.
"Funding Guarantors" as defined in Section 7.2.
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"Funding Notice" means a notice substantially in the form of Exhibit
A-1.
"GAAP" means, subject to the limitations on the application thereof
set forth in Section 1.2, United States generally accepted accounting principles
in effect as of the date of determination thereof.
"Governmental Approval" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any Governmental
Authority, including, without limitation, any license, permit, franchise or
certificate of public convenience and necessity issued to Company or any of its
Subsidiaries by the FCC, any PUC or any other Governmental Authority in
connection with any System.
"Governmental Authority" means any federal, state, municipal, national
or other government, governmental department, commission, board, bureau, court,
agency or instrumentality or political subdivision thereof or any entity or
officer exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to any government or any court, in
each case whether associated with a state of the United States, the United
States, or a foreign entity or government.
"Grantor" as defined in the Pledge and Security Agreement.
"Guaranteed Obligations" as defined in Section 7.1.
"Guarantor" means each of Parent Guarantor and each Domestic
Subsidiary of Parent Guarantor (other than Company).
"Guaranty" means the guaranty of each Guarantor set forth in Section
7.
"Hedge Agreement" means an Interest Rate Agreement or a Currency
Agreement entered into in order to satisfy the requirements of this Agreement or
otherwise in the ordinary course of Parent Guarantor's or any of its
Subsidiaries' businesses.
"Highest Lawful Rate" means the maximum lawful interest rate, if any,
that at any time or from time to time may be contracted for, charged, or
received under the laws applicable to any Lender which are presently in effect
or, to the extent allowed by law, under such applicable laws which may hereafter
be in effect and which allow a higher maximum nonusurious interest rate than
applicable laws now allow.
"ILEC Consent" means an ILEC Consent substantially in the form of
Exhibit J-2 with such amendments or modifications as may be approved by
Administrative Agent.
"Increased-Cost Lenders" as defined in Section 2.22.
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"Incremental Facility Commitments" as defined in Section 2.24(a)(iii).
"Incremental Facility Delayed Draw Term Loan Commitments" as defined
in Section 2.24(a)(ii).
"Incremental Facility Delayed Draw Term Loan Lender" as defined in
Section 2.24(f)(i).
"Incremental Facility Loans" as defined in Section 2.24(b)(i).
"Incremental Facility Lender" as defined in Section 2.24(b)(ii).
"Incremental Facility Maximum Amount" means $50,000,000.
"Incremental Facility Notice" means an Incremental Facility Notice
substantially in the form of Exhibit A-4.
"Incremental Facility Revolving Credit Commitments" as defined in
Section 2.24(a)(i).
"Incremental Facility Revolving Lender" as defined in Section
2.24(e)(i).
"Incremental Facility Syndication Agent" as defined in Section
2.24(c).
"Incremental Facility Term Loan Commitments" as defined in Section
2.24(a)(iii).
"Incremental Facility Term Loan" means a Loan made by an Incremental
Facility Term Loan Lender pursuant to Section 2.24(f) or 2.24(g).
"Incremental Facility Term Loan Lender" as defined in Section
2.24(g)(i).
"Indebtedness", as applied to any Person, means, without duplication,
(i) all indebtedness for borrowed money; (ii) that portion of obligations with
respect to Capital Leases that is properly classified as a liability on a
balance sheet in conformity with GAAP; (iii) notes payable and drafts accepted
representing extensions of credit whether or not representing obligations for
borrowed money; (iv) any obligation owed for all or any part of the deferred
purchase price of property or services (excluding any such obligations incurred
under ERISA and ordinary course trade payables), which purchase price is (a) due
more than six months from the date of incurrence of the obligation in respect
thereof or (b) evidenced by a note or similar written instrument; (v) all
indebtedness secured by any Lien on any property or asset owned or
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held by that Person regardless of whether the indebtedness secured thereby shall
have been assumed by that Person or is nonrecourse to the credit of that Person;
(vi) the face amount of any letter of credit (other than letters of credit
issued in support of ordinary trade liabilities or workers' compensations
obligations, unless and until drawn and unreimbursed within one Business Day
after such drawing) issued for the account of that Person or as to which that
Person is otherwise liable for reimbursement of drawings; (vii) the direct or
indirect guaranty, endorsement (otherwise 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 Indebtedness of another; (viii) any obligation of
such Person the primary purpose or intent of which is to provide assurance to an
obligee that the Indebtedness of the obligor thereof will be paid or discharged,
or any agreement relating thereto will be complied with, or the holders thereof
will be protected (in whole or in part) against loss in respect thereof; and
(ix) any liability of such Person for the Indebtedness of another through any
agreement (contingent or otherwise) (a) to purchase, repurchase or otherwise
acquire such obligation or any security therefor, or to provide funds for the
payment or discharge of such obligation (whether in the form of loans, advances,
stock purchases, capital contributions or otherwise) or (b) to maintain the
solvency or any balance sheet item, level of income or financial condition of
another if, in the case of any agreement described under subclauses (a) or (b)
of this clause (ix), the primary purpose or intent thereof is as described in
clause (viii) above; and (x) Obligations of such Person in respect of any
exchange traded or over the counter derivative transaction, including, without
limitation, any Hedge Agreement, whether entered into for hedging or speculative
purposes; provided, in no event shall Obligations under Hedge Agreements be
--------
deemed "Indebtedness" for any purpose under Section 6.7.
"Indemnified Liabilities" means, collectively, any and all
liabilities, obligations, losses, damages (including natural resource damages),
penalties, actions, judgments, suits, claims (including, without limitation,
environmental claims), costs (including the costs of any investigation, study,
sampling, testing, abatement, cleanup, removal, remediation or other response
action necessary to remove, remediate, clean up or abate any hazardous materials
activity), expenses and disbursements of any kind or nature whatsoever
(including the reasonable fees and disbursements of counsel for Indemnitees in
connection with any investigative, administrative or judicial proceeding
commenced or threatened by any Person, whether or not any such Indemnitee shall
be designated as a party or a potential party thereto, and any fees or expenses
incurred by Indemnitees in enforcing this indemnity), whether direct, indirect
or consequential and whether based on any federal, state or foreign laws,
statutes, rules or regulations (including securities and commercial laws,
statutes, rules or regulations and Environmental Laws), on common law or
equitable cause or on contract or otherwise, that may be imposed on, incurred
by, or asserted against any such Indemnitee, in any manner relating to or
arising out of (i) this Agreement or any of the other Credit Documents or the
transactions contemplated hereby or thereby (including Lenders' agreement to
make Loans or the use or intended use of the proceeds thereof or the use or
intended use of any thereof, or any enforcement of any of the Credit Documents
(including any sale of, collection from, or other realization upon any of the
Collateral or the enforcement of
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any Guaranty)); (ii) the statements contained in the commitment letter delivered
by any Lender to Company with respect thereto; or (iii) any environmental claim
or any hazardous materials activity relating to or arising from, directly or
indirectly, any past or present activity, operation, land ownership, or practice
of any Credit Party or their Affiliates.
"Indemnitee" as defined in Section 10.3.
"Installment" as defined in Section 2.12(a).
"Installment Date" as defined in Section 2.12(a).
"Intellectual Property" means "Intellectual Property" as such term is
defined in the Pledge and Security Agreement.
"Intellectual Property Collateral" means all of the Intellectual
Property subject to the Lien of the Pledge and Security Agreement.
"Interest Payment Date" means with respect to (i) any Base Rate Loan,
each March 31, June 30, September 30 and December 31 of each year, commencing on
the first such date to occur after the Closing Date and the final maturity date
of such Loan; and (ii) any Eurodollar Rate Loan, the last day of each Interest
Period applicable to such Loan; provided, in the case of each Interest Period of
--------
longer than three months "Interest Payment Date" shall also include each date
that is three months, or an integral multiple thereof, after the commencement of
such Interest Period.
"Interest Period" means, in connection with a Eurodollar Rate Loan, an
interest period of one-, two-, three- or six-months, as selected by Company in
the applicable Funding Notice or Conversion/Continuation Notice, (i) initially,
commencing on the Credit Date or Conversion/Continuation Date thereof, as the
case may be; and (ii) thereafter, commencing on the day on which the immediately
preceding Interest Period expires; provided, (a) if an Interest Period would
--------
otherwise expire on a day that is not a Business Day, such Interest Period shall
expire on the next succeeding Business Day unless no further Business Day occurs
in such month, in which case such Interest Period shall expire on the
immediately preceding Business Day; (b) any Interest Period that begins on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clauses (c) through (f), of this definition, end on
the last Business Day of a calendar month; (c) no Interest Period with respect
to any portion of any Class of Credit Facility Term Loans shall extend beyond
the Credit Facility Term Loan Maturity Date of such Class; (d) no Interest
Period with respect to any portion of the Revolving Loans shall extend beyond
the Revolving Credit Commitment Termination Date; (e) no Interest Period with
respect to any portion of Delayed Draw Term Loans shall extend beyond the
Delayed Draw Term Loan Maturity Date; and (f) no Interest Period with respect to
any portion of the Term
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Loans shall extend beyond the Term Loan Maturity Date.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement, interest rate
hedging agreement or other similar agreement or arrangement, each of which is
for the purpose of hedging the interest rate exposure associated with Parent
Guarantor's and its Subsidiaries' operations.
"Interest Rate Determination Date" means, with respect to any Interest
Period, the date that is two Business Days prior to the first day of such
Interest Period.
"Investment" means (i) any direct or indirect purchase or other
acquisition by Parent Guarantor or any of its Subsidiaries of, or of a
beneficial interest in, any of the Securities of any other Person (other than a
Subsidiary Guarantor); (ii) any direct or indirect redemption, retirement,
purchase or other acquisition for value, by any Subsidiary of Parent Guarantor
from any Person (other than Parent Guarantor or any Subsidiary Guarantor), of
any Capital Stock of such Person; and (iii) any direct or indirect loan, advance
(other than advances to employees, officers and directors for moving,
entertainment and travel expenses, drawing accounts and similar expenditures in
the ordinary course of business) or capital contribution by Parent Guarantor or
any of its Subsidiaries to any other Person (other than Parent Guarantor or any
Subsidiary Guarantor), including all indebtedness and accounts receivable from
that other Person that are not current assets or did not arise from sales to
that other Person in the ordinary course of business. The amount of any
Investment shall be reduced, but not to an amount less than $0, by the amount of
any cash distributions of (including repayment of principal) and on (including
interest and cash dividends) such Investment. Investments shall exclude
extensions of trade credit on commercially reasonable terms in accordance with
normal trade practices.
"Investment Property" as defined in the Pledge and Security Agreement.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time and any successor statutes.
"IRS" means the Internal Revenue Service or any successor agency.
"Issuance Notice" means an Issuance Notice substantially in the form
of Exhibit A-3.
"Issuing Bank" means CIBC as Issuing Bank hereunder, together with its
permitted successors and assigns in such capacity.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided, in
--------
no event shall any corporate Subsidiary of any Person be considered to be a
Joint Venture to which such Person is a party.
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<PAGE>
"Lead Arranger" as defined in the preamble hereto.
"Leasehold Property" means any leasehold interest of any Credit Party
as lessee under any lease of real property, other than any such leasehold
interest designated from time to time by Administrative Agent in its sole
discretion as not being required to be included in the Collateral.
"Lender" means each financial institution listed on the signature
pages hereto as a Lender, together with each such institution's successors and
permitted assigns.
"Lender Counterparty" means each Person that is a Lender or any
Affiliate thereof counterparty to a Hedge Agreement at the time such Hedge
Agreement was entered into.
"Lessor Waiver and Consent Agreement" means a Lessor Waiver and
Consent Agreement substantially in the form of Exhibit J-1 with such amendments
or modifications as may be approved by Administrative Agent.
"Letter of Credit" means a standby letter of credit issued or to be
issued by Issuing Bank pursuant to this Agreement.
"Letter of Credit Sublimit" means the lesser of (i) $10,000,000 and
(ii) the aggregate unused amount of the Revolving Credit Commitments then in
effect.
"Letter of Credit Usage" means, as at any date of determination, the
sum of (i) the maximum aggregate amount which is, or at any time thereafter may
become, available for drawing under all Letters of Credit then outstanding, and
(ii) the aggregate amount of all drawings under Letters of Credit honored by
Issuing Bank and not theretofore reimbursed by or on behalf of Company.
"Lien" means any lien, mortgage, pledge, assignment, security
interest, charge or encumbrance of any kind (including any agreement to give any
of the foregoing, any conditional sale or other title retention agreement, any
lease in the nature thereof, and) and any option, trust or other preferential
arrangement having the practical effect of any of the foregoing.
"Loan" means a Revolving Loan, a Delayed Draw Term Loan, a Term Loan
or a Swing Line Loan.
"Margin Stock" as defined in Regulation U of the Board of Governors of
the Federal Reserve System as in effect from time to time.
"Market Co-Development Costs" means actual cash expenses incurred by
22
<PAGE>
Company or any of its Subsidiaries in connection with the development of a
market; provided, (x) such expenses are only incurred as a result of the
development of such market in cooperation with another Person, other than an
Affiliate and (y) such expenses are not included as projected expenses in the
Projections.
"Material Adverse Effect" means, with respect to any Person, a
material adverse effect upon the business, condition (financial or otherwise),
operations, properties, or prospects of such Person, or upon the ability of such
Person to perform, or the ability of any Agent or Lender to enforce any right or
remedy, under any Credit Document.
"Maximum Available Amount" as defined in Section 2.4(i).
"Moody's" means Moody's Investor Services, Inc.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is, or within the immediately preceding six
(6) years was, contributed to by Company or an ERISA Affiliate.
"NAIC" means The National Association of Insurance Commissioners, and
any successor thereto.
"Net Asset Sale Proceeds" means, with respect to any Asset Sale, an
amount equal to: (i) Cash payments (including any Cash received by way of
deferred payment pursuant to, or by monetization of, a note receivable or
otherwise, but only as and when so received) received by Parent Guarantor or any
of its Subsidiaries from such Asset Sale, minus (ii) any bona fide direct costs
-----
(including legal, accounting, brokerage, appraisal, investment banking and
consent fees and expenses) incurred in connection with such Asset Sale,
including (a) income or gains taxes payable by the seller as a result of any
gain recognized in connection with such Asset Sale, (b) payment of the
outstanding principal amount of, premium or penalty, if any, and interest on any
Indebtedness (other than the Loans) that is secured by a Lien on the stock or
assets in question and that is required to be repaid under the terms thereof as
a result of such Asset Sale and (c) a reasonable reserve for any indemnification
payments (fixed or contingent) attributable to seller's indemnities and
representations and warranties to purchaser in respect of such Asset Sale
undertaken by Parent Guarantor or any of its Subsidiaries in connection with
such Asset Sale.
"Net Insurance/Condemnation Proceeds" means an amount equal to: (i)
any Cash payments or proceeds received by Parent Guarantor or any of its
Subsidiaries (a) under any casualty insurance policy in respect of a covered
loss thereunder or (b) as a result of the taking of any assets of Parent
Guarantor or any of its Subsidiaries by any Person pursuant to the power of
eminent domain, condemnation or otherwise, or pursuant to a sale of any such
assets to a purchaser with such power under threat of such a taking, minus (ii)
-----
(a) any actual and reasonable
23
<PAGE>
costs incurred by Parent Guarantor or any of its Subsidiaries in connection with
the adjustment or settlement of any claims of Parent Guarantor or such
Subsidiary in respect thereof, and (b) any bona fide direct costs incurred in
connection with any sale of such assets as referred to in clause (i)(b) of this
definition, including income taxes payable as a result of any gain recognized in
connection therewith.
"Non-US Lender" as defined in Section 2.20(c).
"Note" means a Revolving Loan Note, a Delayed Draw Term Note, a Term
Note or a Swing Line Note.
"Notice" means a Funding Notice, an Issuance Notice, a
Conversion/Continuation Notice or an Incremental Facility Notice.
"Obligations" means all obligations of every nature of each Credit
Party from time to time owed to the Agents, the Lenders or any of them or their
respective Affiliates under any Credit Document or Hedge Agreement (including,
without limitation, with respect to a Hedge Agreement, obligations owed
thereunder to any Person who was a Lender or an Affiliate of a Lender at the
time such Hedge Agreement was entered into), whether for principal, interest
(including interest which, but for the filing of a petition in bankruptcy with
respect to such Credit Party, would have accrued on any Obligation, whether or
not a claim is allowed against such Credit Party for such interest in the
related bankruptcy proceeding), reimbursement of amounts drawn under Letters of
Credit, payments for early termination of Hedge Agreements, fees, expenses,
indemnification or otherwise. Obligations shall not include any obligations
under a Hedge Agreement unless Company and the applicable Lender Counterparty
thereto have agreed that such Hedge Agreement is a Credit Document.
"Obligee Guarantor" as defined in Section 7.7.
"Organizational Documents" means (i) with respect to any corporation,
its certificate or articles of incorporation, as amended, and its by-laws, as
amended, (ii) with respect to any limited partnership, its certificate of
limited partnership, as amended, and its partnership agreement, as amended,
(iii) with respect to any general partnership, its partnership agreement, as
amended, and (iv) with respect to any limited liability company, its articles of
organization, as amended, and its operating agreement, as amended. In the event
any term or condition of this Agreement or any other Credit Document requires
any Organizational Document to be certified by a secretary of state or similar
governmental official, the reference to any such "Organizational Document" shall
only be to a document of a type customarily certified by such governmental
official.
"Parent Guarantor" as defined in the preamble hereto.
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<PAGE>
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.
"Permitted Acquisition" means any acquisition, whether by purchase,
merger or otherwise, of all or substantially all of the assets of, all of the
Capital Stock of, or a business line or unit or a division of, any Person;
provided,
- --------
(i) immediately prior to, and after giving effect thereto, no
Default or Event of Default shall have occurred and be continuing or would
result therefrom;
(ii) all transactions in connection therewith shall be
consummated in accordance with all applicable laws and in conformity with
all applicable Governmental Approvals;
(iii) in the case of the acquisition of Capital Stock of any
Person, such Capital Stock shall constitute at least 85% of the Capital
Stock (except for any Capital Stock in the nature of directors' qualifying
shares required pursuant to applicable law) of such Person, such Capital
Stock shall be acquired by Company or a Subsidiary Guarantor and Company
shall have taken, or caused to be taken, as of the date such Person becomes
a Subsidiary of Company, each of the actions set forth in Section 5.15, as
applicable;
(iv) Parent Guarantor and its Subsidiaries shall be in
compliance with, immediately before and after giving pro forma effect to
such acquisition, Section 6.7 (as determined in accordance with Section
6.7(c));
(v) Company shall have delivered to Administrative Agent, a
Compliance Certificate evidencing compliance with Section 6.7 as required
under clause (iv) above, together with all relevant financial information
with respect to such acquired assets, including, without limitation, the
aggregate consideration for such acquisition and any other information
required to demonstrate compliance with Section 6.7; and
(vi) any Person or assets or division as acquired in accordance
herewith shall be in same business or lines of business in which Company
and/or its Subsidiaries are engaged as of the Closing Date.
"Permitted Investments" means an Investment in the Capital Stock of
any Person; provided, (i) such Person is organized under the laws of the United
--------
States of America, any State thereof or the District of Columbia, (ii) all
Investments by Parent Guarantor and its Subsidiaries in such Person do not, in
the aggregate, both before and after giving effect to any proposed Investment,
exceed 49% of the voting and economic interests in the Capital Stock of such
Person on a fully diluted basis, and (iii) upon giving effect to any Investment
therein, such Person's financial results and conditions would not be
consolidated, in accordance with GAAP,
25
<PAGE>
with the financial results and condition of Parent Guarantor or any Subsidiary
thereof.
"Permitted Liens" means each of the Liens permitted pursuant to
Section 6.2.
"Permitted Parent Guarantor Indebtedness" means Indebtedness of Parent
Guarantor that (i) is not secured by any real, mixed or personal property of
Parent Guarantor or any of its Subsidiaries, including Company; (ii) is not
guaranteed by Company or any other Subsidiary of Parent Guarantor; (iii) does
not require cash payments of principal or interest (except as otherwise
permitted pursuant to clause (v) of this definition) or any mandatory redemption
or other repayments (other than in the case of a change of control or a sale of
assets so long as no such repayment is required with respect to asset sales if
the net proceeds thereof are applied pursuant to Section 2.13(a)) with respect
thereto (whether before or after default, at maturity, as a result of
acceleration or otherwise); (iv) does not have a scheduled maturity earlier than
six months after the scheduled Term Loan Maturity Date; (v) of which no more
than $200,000,000 at any time is outstanding in the form of a Security that pays
interest on a current pay basis (other than any paid from the pre-funded
interest in accordance with clause (vi) of this definition); and (vi) is not in
the form of a Security the interest obligation of which is pre-funded (other
than from the proceeds of the issuance thereof) for any period of time.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, limited
liability partnerships, joint stock companies, Joint Ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and Governmental Authorities.
"Plan" means any employee benefit plan as defined in Section 3(3) of
ERISA (other than a Multiemployer Plan) in respect of which Company or any ERISA
Affiliate is, or within the immediately preceding six (6) years was, an
"employer" as defined in Section 3(5) of ERISA.
"Pledge and Security Agreement" means the Pledge and Security
Agreement substantially in the form of Exhibit I, as it may be amended,
supplemented or otherwise modified from time to time.
"Prepayment Premium" as defined in Section 2.15(e).
"Prime Rate" means a rate per annum equal to the prime rate announced
by CIBC from time to time, changing when and as such rate changes, it being
understood that such rate of interest is not necessarily the lowest or best rate
charged by CIBC to its customers.
"Principal Office" means, for each of Administrative Agent, Swing Line
Lender and Issuing Bank, such Person's "Principal Office" as set forth on
Appendix B, or such other
26
<PAGE>
office as such Person may from time to time designate in writing to Company,
Administrative Agent and each Lender.
"Production Ready Physical Central Offices" means a central office (i)
where Company has secured physical collocation, (ii) where equipment and
transport installation have been successfully completed, (iii) with respect to
which paid traffic is being billed and (iv) that has obtained all necessary
Governmental Approvals.
"Projections" as defined in Section 3.3.
"Pro Rata Share" means (i) with respect to all payments, computations
and other matters relating to the Revolving Credit Commitment or Revolving Loans
of any Lender or any Letters of Credit issued or participations purchased
therein by any Lender or any participations in any Swing Line Loans purchased by
any Lender, the percentage obtained by dividing (a) the Revolving Credit
Exposure of that Lender by (b) the aggregate Revolving Credit Exposure of all
Lenders; (ii) with respect to all payments, computations and other matters
relating to the Delayed Draw Term Loan Commitment or the Delayed Draw Term Loans
of any Lender, the percentage obtained by dividing (a) the Delayed Draw Term
Loan Exposure of that Lender by (b) the aggregate Delayed Draw Term Loan
Exposure of all Lenders; and (iii) with respect to all payments, computations
and other matters relating to the Term Loan of any Lender, the percentage
obtained by dividing (a) the Term Loan Exposure of that Lender by (b) the
aggregate Term Loan Exposure of all Lenders. For all other purposes with
respect to each Lender, "Pro Rata Share" means the percentage obtained by
dividing (A) an amount equal to the sum of the Revolving Credit Exposure, the
Delayed Draw Term Loan Exposure and the Term Loan Exposure of that Lender, by
(B) an amount equal to the sum of the aggregate Revolving Credit Exposure, the
aggregate Delayed Draw Term Loan Exposure and the aggregate Term Loan Exposure
of all Lenders.
"PUC" means any state Governmental Authority having utility or
telecommunications regulatory authority over Parent Guarantor or any of its
Subsidiaries, including Company, or any System.
"Real Estate Asset" means, at any time of determination, any interest
then owned by any Credit Party in any real property, including, without
limitation, all easements, rights of way, rights of occupancy, licenses and
similar rights with respect thereto.
"Reduction" as defined in Section 2.12(b).
"Reduction Date" as defined in Section 2.12(b).
"Refunded Swing Line Loans" as defined in Section 2.3(c).
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<PAGE>
"Register" as defined in Section 2.7(b).
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Reimbursement Date" as defined in Section 2.4(d).
"Related Fund" means, with respect to any Lender that is an investment
fund, any other investment fund that invests in commercial loans and that is
managed or advised by the same investment advisor as such Lender or by an
Affiliate of such investment advisor.
"Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the environment or into or out of any property, including the movement of
Contaminants through or in the air, soil, surface water, groundwater or
property.
"Remedial Action" means actions required to (i) clean up, remove,
treat or in any other way address Contaminants in the environment; (ii) prevent
the Release or threat of Release or prevent or minimize the further Release of
Contaminants so they do not migrate or endanger or threaten to endanger public
health or welfare or the environment; or (iii) perform preremedial studies and
investigations and postremedial monitoring and care.
"Reportable Event" means any reportable event as defined in Section
4043 of ERISA unless the reporting requirement with respect to such reportable
event has been waived by the PBGC or other appropriate Governmental Authority.
"Replacement Lender" as defined in Section 2.22.
"Required Prepayment Date" as defined in Section 2.15(c).
"Requisite Class Lenders" means, at any time of determination, (i) for
the Class of Lenders having Revolving Credit Exposure, Lenders having or holding
more than 50% of the aggregate Revolving Credit Exposure of all Lenders; (ii)
for the Class of Lenders having Delayed Draw Term Loan Exposure, Lenders having
or holding more than 50% of the aggregate Delayed Draw Term Loan Exposure of all
Lenders; and (iii) for the Class of Lenders having Term Loan Exposure, Lenders
having or holding more than 50% of the aggregate Term Loan Exposure of all
Lenders.
"Requisite Lenders" means one or more Lenders having or holding
Revolving Credit Exposure, Delayed Draw Term Loan Exposure and/or Term Loan
Exposure representing more than 50% of the sum of (i) the aggregate Revolving
Credit Exposure of all Lenders, (ii) the aggregate Delayed Draw Term Loan
Exposure of all Lenders and (iii) the aggregate Term Loan
28
<PAGE>
Exposure of all Lenders.
"Restricted Junior Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
of Parent Guarantor or Company now or hereafter outstanding, except a dividend
payable solely in shares of stock; (ii) any redemption, retirement, sinking fund
or similar payment, purchase or other acquisition for value, direct or indirect,
of any shares of any class of stock of Parent Guarantor or Company now or
hereafter outstanding; (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock of Parent Guarantor or Company now or hereafter
outstanding; and (iv) any payment or prepayment of principal of, premium, if
any, or interest on, or redemption, purchase, retirement, defeasance (including
in-substance or legal defeasance), sinking fund or similar payment with respect
to, the Permitted Parent Guarantor Indebtedness.
"Revolving Credit Commitment" means the Revolving Credit Commitment of
a Lender to make or otherwise fund any Credit Extension (other than any Credit
Facility Term Loan). The amount of each Lender's Revolving Credit Commitment,
if any, is set forth on Appendix A-1 or in the applicable Assignment Agreement,
subject to any adjustment or reduction pursuant to the terms and conditions
hereof; Revolving Credit Commitments" means such Commitments of all Lenders in
the aggregate, and the aggregate amount of the Revolving Credit Commitments as
of the Closing Date is $55,000,000.
"Revolving Credit Commitment Period" means the period from the Closing
Date to but excluding the Revolving Credit Commitment Termination Date.
"Revolving Credit Commitment Termination Date" means the earliest to
occur of (i) December 9, 1999, if the Term Loans are not made on or before that
date; (ii) December 9, 2005, (iii) the date the Revolving Credit Commitments are
permanently reduced to zero pursuant to Section 2.13(b) or 2.14, and (iv) the
date of the termination of the Revolving Credit Commitments pursuant to Section
8.1.
"Revolving Credit Exposure" means, with respect to any Lender as of
any date of determination, (i) prior to the termination of the Revolving Credit
Commitments, that Lender's Revolving Credit Commitment; and (ii) after the
termination of the Revolving Credit Commitments, the sum of (a) the aggregate
outstanding principal amount of the Revolving Loans of that Lender, (b) in the
case of Issuing Bank, the aggregate Letter of Credit Usage in respect of all
Letters of Credit issued by that Lender (net of any participations by Lenders in
such Letters of Credit), (c) the aggregate amount of all participations by that
Lender in any outstanding Letters of Credit or any unreimbursed drawing under
any Letter of Credit, (d) in the case of Swing Line Lender, the aggregate
outstanding principal amount of all Swing Line Loans (net of any participations
therein by other Lenders), and (e) the aggregate amount of all participations
therein by that Lender in any outstanding Swing Line Loans.
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"Revolving Loan" means a Loan made by a Lender to Company pursuant to
Section 2.1(a).
"Revolving Loan Note" means a promissory note in the form of Exhibit
B-1, as it may be amended, supplemented or otherwise modified from time to time.
"Saving" as defined in Section 2.20(d).
"S&P" means Standard & Poor's Ratings Group, a division of The McGraw
Hill Corporation.
"Securities" means any stock, shares, partnership interests, voting
trust certificates, certificates of interest or participation in any profit-
sharing agreement or arrangement, options, warrants, bonds, debentures, notes,
or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
"securities" or any certificates of interest, shares or participations in
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and any successor statute.
"Senior Leverage Ratio" means the ratio as of the last day of any
fiscal quarter of (i) Consolidated Senior Debt as of such day to (ii) two times
the Consolidated Adjusted EBITDA for the two-fiscal quarter period ending on
such date.
"Solvency Certificate" means a Solvency Certificate substantially in
the form of Exhibit G-2.
"Solvent" means, at any time of determination, with respect to any
Person:
(i) the assets of such Person, at a fair valuation, are in
excess of the total amount of its debts (including, without limitation,
contingent liabilities);
(ii) the present fair saleable value of its assets is greater
than its probable liability on its existing debts as such debts become
absolute and matured;
(iii) it is then able and expects to be able to pay its debts
(including, without limitation, contingent debts and other commitments) as
they mature; and
(iv) it has capital sufficient to carry on its business as
conducted or
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<PAGE>
contemplated to be conducted.
For purposes of determining whether a Person is Solvent, the amount of any
contingent liability shall be computed as the amount that, in light of all the
facts and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or mature liability.
"Subject Transaction" as defined in Section 6.7(c).
"Subsidiary" means, with respect to any Person, any corporation,
partnership, limited liability company, association, joint venture or other
business entity of which more than 50% of the total voting power of shares of
stock or other ownership interests entitled (without regard to the occurrence of
any contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar functions)
having the power to direct or cause the direction of the management and policies
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof; provided, in determining the percentage of ownership interests of any
--------
Person controlled by another Person, no ownership interest in the nature of a
"qualifying share" of the former Person shall be deemed to be outstanding.
"Subsidiary Guarantor" means each Subsidiary of Parent Guarantor that
is a Guarantor.
"Swing Line Lender" means CIBC in its capacity as Swing Line Lender
hereunder, together with its permitted successors and assigns in such capacity.
"Swing Line Loan" means a Revolving Loan made by Swing Line Lender to
Company pursuant to Section 2.3.
"Swing Line Note" means a promissory note in the form of Exhibit B-4,
as it may be amended, supplemented or otherwise modified from time to time.
"Swing Line Sublimit" means the lesser of (i) $5,000,000, and (ii) the
aggregate unused amount of Revolving Credit Commitments then in effect.
"Syndication Agent" as defined in the preamble hereto.
"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 Company or any of its Subsidiaries and all
replacements, enhancements or additions thereto.
<PAGE>
"Taxes" means any and all license, documentation, recording and
registration fees, and all taxes, including, without limitation, income (other
than taxes on net income or profits and franchise taxes imposed on the Lenders
or any Agent by the United States of America, or by the jurisdiction under the
laws of which such recipient is organized or in which its principal office is
located or, in the case of any Lender, in which its applicable lending office is
located), gross receipts, sales, value-added, use, excise, personal property
(tangible and intangible), real estate and stamp, documentary, transfer or
recording taxes, levies, imposts, deductions, duties, assessments, fees,
charges, and withholdings of any nature whatsoever, whether or not presently in
existence, together with any penalties, fines, additions to tax, or interest
thereon, imposed by any taxing authority or other Governmental Authority.
"Term Loan" means a Term Loan made by a Lender to Company pursuant to
Section 2.2(a).
"Term Loan Commitment" means the Commitment of a Lender to make or
otherwise fund a Term Loan to Company. The amount of each Lender's Term Loan
Commitment, if any, is set forth on Appendix A-3 or in the applicable Assignment
Agreement, subject to any adjustment or reduction pursuant to the terms and
conditions hereof; "Term Loan Commitments" means such Commitments of all Lenders
in the aggregate, and the aggregate amount of the Term Loan Commitments as of
the Closing Date is $85,000,000.
"Term Loan Exposure" means, with respect to any Lender, as of any date
of determination, the outstanding principal amount of the Term Loans of such
Lender; provided, at any time prior to the making of the Term Loans, the Term
--------
Loan Exposure of any Lender shall be equal to such Lender's Term Loan
Commitment.
"Term Loan Maturity Date" means the earlier of (i) June 9, 2006, and
(ii) the date that all Term Loans shall become due and payable in full
hereunder, whether by acceleration or otherwise.
"Term Loan Note" means a promissory note in the form of Exhibit B-3,
as it may be amended, supplemented or otherwise modified from time to time.
"Terminated Lender" as defined in Section 2.22.
"Termination Event" means (i) a Reportable Event with respect to a
Benefit Plan; (ii) the withdrawal of Company or any ERISA Affiliate from a
Benefit Plan during a plan year in which Company or such ERISA Affiliate was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA; (iii) the
imposition of an obligation on Company or any ERISA Affiliate under Section 4041
of ERISA to provide affected parties written notice of intent to terminate a
Benefit Plan in a distress termination described in Section 4041(c) of ERISA;
(iv) the institution by the PBGC of proceedings to terminate a Benefit Plan; (v)
the termination of, or the
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appointment of a trustee to administer, any Benefit Plan pursuant to Section
4042 of ERISA; or (vi) the partial or complete withdrawal of Company or any
ERISA Affiliate from a Multiemployer Plan, in each case, provided that such
event results or is reasonably likely to result in a material liability to
Company.
"Third Party Interactives" means all Persons with whom Company
exchanges data electronically in the ordinary course of business, including
without limitation, customers, suppliers, third-party vendors, subcontractors,
processors-converters, shippers and warehousemen.
"Total Leverage Ratio" means the ratio as of the last day of any
fiscal quarter of (i) Consolidated Total Debt as of such day to (ii) two times
the Consolidated Adjusted EBITDA for the two-fiscal quarter period ending on
such date.
"Total Utilization of Delayed Draw Term Loan Commitments" means, as at
any date of determination, the sum of the aggregate principal amount of all
outstanding Delayed Draw Term Loans.
"Total Utilization of Revolving Credit Commitments" means, as at any
date of determination, the sum of (i) the aggregate principal amount of all
outstanding Revolving Loans (other than Revolving Loans made for the purpose of
repaying any Refunded Swing Line Loans or reimbursing Issuing Bank for any
amount drawn under any Letter of Credit, but not yet so applied), (ii) the
aggregate principal amount of all outstanding Swing Line Loans, and (iii) the
Letter of Credit Usage.
"Transaction Costs" means the fees, costs and expenses payable by
Company on or before the Closing Date in connection with the transactions
contemplated by the Credit Documents.
"Type of Loan" means (i) with respect to Revolving Loans or either of
the Credit Facility Term Loans, a Base Rate Loan or a Eurodollar Rate Loan, and
(ii) with respect to Swing Line Loans, a Base Rate Loan.
"UCC" means the Uniform Commercial Code (or any similar or equivalent
legislation) as in effect in any applicable jurisdiction.
"Waivable Mandatory Prepayment" as defined in Section 2.15(c).
"Year 2000 Corrective Actions" means, as to each of the Credit
Parties, all actions necessary to eliminate such Credit Party's Year 2000
Problems, including, without limitation, computer code enhancements and
revisions, upgrades and replacements of Year 2000 Date-Sensitive
Systems/Components, and coordination of such enhancements, revisions,
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<PAGE>
upgrades and replacements with Third Party Interactives.
"Year 2000 Corrective Plan" means, with respect to each of the Credit
Parties, a comprehensive plan to eliminate all of its Year 2000 Problems on or
before August 31, 1999, including without limitations (i) computer code
enhancements or revisions, (ii) upgrades or replacements of Year 2000 Date-
Sensitive Systems/Components, (iii) test and validation procedures, (iv) an
implementation time line and budget and (v) designation of specific employees
who will be responsible for planning, coordinating and implementing each phase
or subpart of the Year 2000 Corrective Plan.
"Year 2000 Date-Sensitive System/Component" means, as to any Person,
any system software, network software, applications software, database, computer
file, embedded microchip, firmware or hardware that accepts, creates,
manipulates, sorts, sequences, calculates, compares or outputs calendar-related
data accurately; such systems and components shall include, without limitation,
mainframe computers, file server/client system, computer workstations, routers,
hubs, other network-related hardware, and other computer-related software,
firmware or hardware and information processing and delivery systems of any kind
and telecommunications systems and other communications processors, security
systems, alarms, elevators and HVAC systems.
"Year 2000 Implementation Testing" means, as to each of the Credit
Parties, (i) the performance of test and validation procedures regarding Year
2000 Corrective Actions on a unit basis and a system wide basis, (ii) the
performance of test and validation procedures regarding data exchanges among the
Credit Parties' Year 2000 Date-Sensitive Systems/Components and data exchanges
with Third Party Interactives, and (iii) the design and implementation of
additional Year 2000 Corrective Actions, the need for which has been
demonstrated by test and validation procedures.
"Year 2000 Problems" means, with respect to each of the Credit
Parties, limitations on the capacity or readiness of any such Credit Party's
Year 2000 Date-Sensitive Systems/Components to accurately accept, create,
manipulate, sort, sequence, calculate, compare or output calendar date
information with respect to calendar year 1999 or any subsequent calendar year
beginning on or after January 1, 2000 (including leap year computations),
including, without limitation, exchanges of information among Year 2000 Date-
Sensitive Systems/Components of the Credit Parties and exchanges of information
among the Credit Parties and Year 2000 Date-Sensitive Systems/Components of
Third Party Interactives and functionality of peripheral interfaces, firmware
and embedded microchips.
Accounting Terms. Except as otherwise expressly provided herein, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP. Financial statements and other information
required to be delivered by Parent Guarantor to Lenders pursuant to Section
5.6(a) and 5.6(b) shall be prepared in accordance with GAAP as in effect at the
time of such preparation (and delivered together with the reconciliation
statements
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<PAGE>
provided for in Section 5.6(e), if applicable). Subject to the foregoing,
calculations in connection with the definitions, covenants and other provisions
hereof shall utilize accounting principles and policies in conformity with those
used to prepare the Financials.
Interpretation, etc, etc. Any of the terms defined herein may, unless the
context otherwise requires, be used in the singular or the plural, depending on
the reference. References herein to any Section, Appendix, Schedule or Exhibit
shall be to a Section, an Appendix, a Schedule or an Exhibit, as the case may
be, hereof unless otherwise specifically provided. The use herein of the word
"include" or "including", when following any general statement, term or matter,
shall not be construed to limit such statement, term or matter to the specific
items or matters set forth immediately following such word or to similar items
or matters, whether or not nonlimiting language (such as "without limitation" or
"but not limited to" or words of similar import) is used with reference thereto,
but rather shall be deemed to refer to all other items or matters that fall
within the broadest possible scope of such general statement, term or matter.
LOANS AND LETTERS OF CREDIT
Revolving Loans and Delayed Draw Term Loans.
Commitments.
-----------
Revolving Credit Commitments. During the Revolving Credit
Commitment Period, subject to the terms and conditions hereof, each Lender
severally agrees to make Revolving Loans to Company in the aggregate amount up
to but not exceeding such Lender's Revolving Credit Commitment; provided, after
--------
giving effect to the making of any Revolving Loans in no event shall the Total
Utilization of Revolving Credit Commitments exceed the Revolving Credit
Commitments then in effect. Amounts borrowed pursuant to this Section 2.1(a)(i)
may be repaid and reborrowed during the Revolving Credit Commitment Period.
Each Lender's Revolving Credit Commitment shall expire on the Revolving Credit
Commitment Termination Date and, subject to Section 2.14, all Revolving Loans
and all other amounts owed hereunder with respect to the Revolving Loans and the
Revolving Credit Commitments shall be paid in full no later than such date.
Delayed Draw Term Loan Commitments. During the Delayed Draw Term
Loan Commitment Period, subject to the terms and conditions hereof, each Lender
severally agrees to make Delayed Draw Term Loans to Company in the aggregate
amount up to but not exceeding such Lender's Delayed Draw Term Loan Commitment;
provided, after giving effect to the making of any Delayed Draw Term Loans in no
- --------
event shall the Total Utilization of Delayed Draw Term Loan Commitments exceed
the Delayed Draw Term Loan Commitments then in effect. Any amount borrowed
pursuant to this Section 2.1(a)(ii) and subsequently repaid or
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<PAGE>
prepaid may not be reborrowed. Each Lender's Delayed Draw Term Loan Commitment
shall expire on the Delayed Draw Term Loan Commitment Termination Date. Subject
to Sections 2.12(a) and 2.14, all amounts owed hereunder with respect to the
Delayed Draw Term Loans shall be paid in full no later than the Delayed Draw
Term Loan Maturity Date.
Borrowing Mechanics.
-------------------
(i) Except pursuant to Section 2.3(c) or 2.4(d), Revolving
Loans that are Base Rate Loans shall be made in an aggregate minimum amount of
$1,000,000 and integral multiples of $250,000 in excess of that amount, and
Revolving Loans that are Eurodollar Rate Loans shall be in an aggregate minimum
amount of $5,000,000 and integral multiples of $1,000,000 in excess of that
amount.
(ii) Delayed Draw Term Loans that are Base Rate Loans shall be
made in an aggregate minimum amount of $1,000,000 and integral multiples of
$250,000 in excess of that amount, and Delayed Draw Term Loans that are
Eurodollar Rate Loans shall be in an aggregate minimum amount of $5,000,000 and
integral multiples of $1,000,000 in excess of that amount.
(iii) Whenever Company desires that Lenders make Revolving Loans
or Delayed Draw Term Loans, as the case may be, Company shall deliver to
Administrative Agent a fully executed and delivered Funding Notice no later than
10:00 a.m. (New York City time) at least three Business Days in advance of the
proposed Credit Date in the case of a Eurodollar Rate Loan, and at least one
Business Day in advance of the proposed Credit Date in the case of a Base Rate
Loan. Except as otherwise provided herein, a Funding Notice for any Eurodollar
Rate Loan shall be irrevocable on and after the related Interest Rate
Determination Date.
(iv) Notice of receipt of each Funding Notice in respect of
Revolving Loans or Delayed Draw Term Loans, as the case may be, together with
the amount of each Lender's Pro Rata Share thereof, if any, together with the
applicable interest rate, shall be provided by Administrative Agent to each
applicable Lender by telefacsimile with reasonable promptness.
(v) Each Lender shall make the amount of its Revolving Loan or
Delayed Draw Term Loan, as the case may be, available to Administrative Agent
not later than 12:00 p.m. (New York City time) on the applicable Credit Date by
wire transfer of same day funds in Dollars, at Administrative Agent's Principal
Office. Except as provided herein, upon satisfaction or waiver of the
conditions precedent specified herein, Administrative Agent shall make the
proceeds of such Loans available to Company on the applicable Credit Date by
causing an amount of same day funds in Dollars equal to the proceeds of all such
Loans received by Administrative Agent from Lenders to be credited to the
account of Company at Administrative Agent's Principal Office or such other
account as may be designated in writing to Administrative
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Agent by Company.
Total Funding of Delayed Draw Term Loan Commitments. Notwithstanding
---------------------------------------------------
anything herein to the contrary, Company shall be deemed to have delivered to
Administrative Agent a Funding Notice for Delayed Draw Term Loans three Business
Days prior to the Delayed Draw Term Loan Commitment Termination Date in an
amount equal to the excess, if any, of the Delayed Draw Term Loan Commitments in
effect as of such date and the Total Utilization of Delayed Draw Term Loan
Commitments as of such date. Thereafter, Company shall be obligated to borrow,
and Company shall borrow, such amount of Delayed Draw Term Loans on the Delayed
Draw Term Loan Commitment Termination Date in accordance with the terms and
conditions hereof.
Term Loans.
Commitments. Subject to the terms and conditions hereof, each Lender
-----------
severally agrees to make, on the Closing Date, a Term Loan to Company in an
amount equal to such Lender's Term Loan Commitment. Company may make only one
borrowing under the Term Loan Commitments which shall be on the Closing Date.
Any amount borrowed under this Section 2.2(a) and subsequently repaid or prepaid
may not be reborrowed. Subject to Sections 2.12(a) and 2.14, all amounts owed
hereunder with respect to the Term Loans shall be paid in full no later than the
Term Loan Maturity Date. Each Lender's Term Loan Commitment shall terminate
immediately and without further action on the Closing Date after giving effect
to the funding of such Lender's Term Loan Commitment on such date.
Borrowing Mechanics.
-------------------
Company shall deliver to Administrative Agent a fully executed
and delivered Closing Date Certificate (which shall be deemed to be a Funding
Notice with respect to the Term Loans for all purposes hereof) on or before
10:00 a.m. (New York City time) on the Closing Date. Promptly upon receipt by
Administrative Agent of such Certificate, Administrative Agent shall notify each
Lender of the proposed borrowing.
Each Lender shall make its Term Loan available to Administrative
Agent not later than 12:00 p.m. (New York City time) on the Closing Date, by
wire transfer of same day funds in Dollars, at Administrative Agent's Principal
Office. Upon satisfaction or waiver of the conditions precedent specified
herein, Administrative Agent shall make the proceeds of the Term Loans available
to Company on the Closing Date by causing an amount of same day funds in Dollars
equal to the proceeds of all such Loans received by Administrative Agent from
Lenders to be credited to the account of Company at Administrative Agent's
Principal Office or to such other account as may be designated in writing to
Administrative Agent by Company.
Swing Line Loans.
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<PAGE>
Commitment. During the Revolving Credit Commitment Period, subject to
----------
the terms and conditions hereof, Swing Line Lender hereby agrees to make Swing
Line Loans to Company in the aggregate amount up to but not exceeding the Swing
Line Sublimit; provided, after giving effect to the making of any Swing Line
--------
Loan, in no event shall the Total Utilization of Revolving Credit Commitments
exceed the Revolving Credit Commitments then in effect. Amounts borrowed
pursuant to this Section 2.3 may be repaid and reborrowed during the Revolving
Credit Commitment Period. Swing Line Lender's Revolving Credit Commitment shall
expire on the Revolving Credit Commitment Termination Date and all Swing Line
Loans and all other amounts owed hereunder with respect to the Swing Line Loans
and the Revolving Credit Commitments shall be paid in full no later than such
date.
Borrowing Mechanics.
-------------------
Swing Line Loans shall be made in an aggregate minimum amount of
$250,000 and integral multiples of $100,000 in excess of that amount.
Whenever Company desires that Swing Line Lender make a Swing Line
Loan, Company shall deliver to Administrative Agent a Funding Notice no later
than 12:00 p.m. (New York City time) on the proposed Credit Date.
Swing Line Lender shall make the amount of its Swing Line Loan
available to Administrative Agent not later than 2:00 p.m.(New York City time)
on the applicable Credit Date by wire transfer of same day funds in Dollars, at
Administrative Agent's Principal Office. Except as provided herein, upon
satisfaction or waiver of the conditions precedent specified herein,
Administrative Agent shall make the proceeds of such Swing Line Loans available
to Company on the applicable Credit Date by causing an amount of same day funds
in Dollars equal to the proceeds of all such Swing Line Loans received by
Administrative Agent from Swing Line Lender to be credited to the account of
Company at Administrative Agent's Principal Office, or to such other account as
may be designated in writing to Administrative Agent by Company.
Refunded Swing Line Loans. With respect to any Swing Line Loans which
-------------------------
have not been voluntarily prepaid by Company pursuant to Section 2.13, Swing
Line Lender may at any time in its sole and absolute discretion, deliver to
Administrative Agent (with a copy to Company), no later than 11:00 a.m. (New
York City time) at least one (1) Business Day in advance of the proposed Credit
Date, a notice (which shall be deemed to be a Funding Notice given by Company)
requesting that each Lender holding a Revolving Credit Commitment make Revolving
Loans that are Base Rate Loans to Company on such Credit Date in an amount equal
to the amount of such Swing Line Loans (the "Refunded Swing Line Loans")
outstanding on the date such notice is given which the Swing Line Lender
requests Lenders to prepay. Anything contained in this Agreement to the
contrary notwithstanding, (i) the proceeds of such Revolving
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Loans made by the Lenders other than Swing Line Lender shall be immediately
delivered by Administrative Agent to Swing Line Lender (and not to Company) and
applied to repay a corresponding portion of the Refunded Swing Line Loans and
(ii) on the day such Revolving Loans are made, Swing Line Lender's Pro Rata
Share of the Refunded Swing Line Loans shall be deemed to be paid with the
proceeds of a Revolving Loan made by Swing Line Lender to Company, and such
portion of the Swing Line Loans deemed to be so paid shall no longer be
outstanding as Swing Line Loans and shall no longer be due under the Swing Line
Note of Swing Line Lender but shall instead constitute part of Swing Line
Lender's outstanding Revolving Loans to Company and shall be due under the
Revolving Loan Note issued by Company to Swing Line Lender. Company hereby
authorizes Administrative Agent and Swing Line Lender to charge Company's
accounts with Administrative Agent and Swing Line Lender (up to the amount
available in each such account) in order to immediately pay Swing Line Lender
the amount of the Refunded Swing Line Loans to the extent the proceeds of such
Revolving Loans made by Lenders, including the Revolving Loan deemed to be made
by the Swing Line Lender, are not sufficient to repay in full the Refunded Swing
Line Loans. If any portion of any such amount paid (or deemed to be paid) to
Swing Line Lender should be recovered by or on behalf of Company from Swing Line
Lender in bankruptcy, by assignment for the benefit of creditors or otherwise,
the loss of the amount so recovered shall be ratably shared among all Lenders in
the manner contemplated by Section 2.17.
Lenders' Purchase of Participations in Swing Line Loans. If for any
-------------------------------------------------------
reason Revolving Loans are not made pursuant to Section 2.3(c) in an amount
sufficient to repay any amounts owed to Swing Line Lender in respect of any
outstanding Swing Line Loans on or before the third Business Day after demand
for payment thereof by Swing Line Lender, each Lender holding a Revolving Credit
Commitment shall be deemed to, and hereby agrees to, have purchased a
participation in such outstanding Swing Line Loans, and in an amount equal to
its Pro Rata Share of the applicable unpaid amount together with accrued
interest thereon. Upon one (1) Business Day's notice from Swing Line Lender,
each Lender holding a Revolving Credit Commitment shall deliver to Swing Line
Lender an amount equal to its respective participation in the applicable unpaid
amount in same day funds at the Principal Office of Swing Line Lender. In order
to evidence such participation each Lender holding a Revolving Credit Commitment
agrees to enter into a participation agreement at the request of Swing Line
Lender in form and substance reasonably satisfactory to Swing Line Lender. In
the event any Lender holding a Revolving Credit Commitment fails to make
available to Swing Line Lender the amount of such Lender's participation as
provided in this paragraph, Swing Line Lender shall be entitled to recover such
amount on demand from such Lender together with interest thereon for three
Business Days at the rate customarily used by Swing Line Lender for the
correction of errors among banks and thereafter at the Base Rate, as applicable.
Obligations Absolute. Notwithstanding anything contained herein to
--------------------
the contrary, each Lender's obligation to make Revolving Loans for the purpose
of repaying any Refunded Swing Line Loans pursuant to Section 2.3(c) and each
Lender's obligation to purchase a
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<PAGE>
participation in any unpaid Swing Line Loans pursuant to Section 2.3(d) shall be
absolute and unconditional and shall not be affected by any circumstance,
including without limitation (i) any set-off, counterclaim, recoupment, defense
or other right which such Lender may have against Swing Line Lender, any Credit
Party or any other Person for any reason whatsoever; (ii) the occurrence or
continuation of a Default or Event of Default; (iii) any adverse change in the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of any Credit Party; (iv) any breach of this Agreement or any other
Credit Document by any party thereto; or (v) any other circumstance, happening
or event whatsoever, whether or not similar to any of the foregoing; provided
--------
that such obligations of each Lender are subject to the condition that Swing
Line Lender believed in good faith that all conditions under Section 4.2 to the
making of the applicable Refunded Swing Line Loans or other unpaid Swing Line
Loans were satisfied at the time such Refunded Swing Line Loans or unpaid Swing
Line Loans were made, or the satisfaction of any such condition not satisfied
had been waived by Requisite Lenders prior to or at the time such Refunded Swing
Line Loans or other unpaid Swing Line Loans were made. Swing Line Lender shall
not be obligated to make any Swing Line Loans (1) if it has elected not to do so
after the occurrence and during the continuation of a Default or Event of
Default or (2) at a time when a Funding Default with respect to the Revolving
Loans exists unless Swing Line Lender has entered into arrangements satisfactory
to it and Company to eliminate Swing Line Lender's risk with respect to the
Defaulting Lender's participation in such Swing Line Loan, including by cash
collateralizing such Defaulting Lender's Pro Rata Share of the outstanding Swing
Line Loans.
Issuance of Letters of Credit and Purchase of Participations Therein.
Letters of Credit. During the Revolving Credit Commitment Period,
-----------------
subject to the terms and conditions hereof, Issuing Bank agrees to issue Letters
of Credit for the account of Company in the aggregate amount up to but not
exceeding the Letter of Credit Sublimit; provided, (i) each Letter of Credit
--------
shall be denominated in Dollars; (ii) the stated amount of each Letter of Credit
shall not be less than $250,000 or such lesser amount as is acceptable to
Issuing Bank; (iii) after giving effect to such issuance, in no event shall the
Total Utilization of Revolving Credit Commitments exceed the Revolving Credit
Commitments then in effect; (iv) after giving effect to such issuance, in no
event shall the Letter of Credit Usage exceed the Letter of Credit Sublimit then
in effect; and (v) in no event shall any Letter of Credit have an expiration
date later than the earlier of (1) the Revolving Credit Commitment Termination
Date and (2) with respect to any standby letter of credit, the date which is one
year from the date of issuance thereof. Subject to the foregoing, Issuing Bank
may agree that a standby letter of credit will automatically be extended for one
or more successive periods not to exceed one year each, unless Issuing Bank
elects not to extend for any such additional period; provided, Issuing Bank
--------
shall not extend any such letter of credit if it has received written notice
that an Event of Default has occurred and is continuing at the time Issuing Bank
must elect to allow such extension; provided, further, in the event a Funding
-------- -------
Default with respect to the Revolving Loans exists, Issuing Bank
40
<PAGE>
shall not be required to issue any Letter of Credit the amount of which Letter
of Credit includes the amount of the Pro Rata Share of the Defaulting Lender.
Notice of Issuance. Whenever Company desires the issuance of a Letter
------------------
of Credit, it shall deliver to Administrative Agent an Issuance Notice no later
than 12:00 p.m. (New York City time) at least three Business Days or such
shorter period as may be agreed to by Issuing Bank in any particular instance,
in advance of the proposed date of issuance. Upon satisfaction or waiver of the
conditions set forth in Section 4.2, Issuing Bank shall issue the requested
Letter of Credit only in accordance with Issuing Bank's standard operating
procedures. Upon the issuance of any Letter of Credit or amendment or
modification to a Letter of Credit, Issuing Bank shall promptly notify each
Lender of such issuance.
Responsibility of Issuing Bank With Respect to Requests for Drawings
--------------------------------------------------------------------
and Payments. In determining whether to honor any drawing under any Letter of
- ------------
Credit by the beneficiary thereof, Issuing Bank shall be responsible only to
examine the documents delivered under such Letter of Credit with reasonable care
so as to ascertain whether they appear on their face to be in accordance with
the terms and conditions of such Letter of Credit. As between Company and
Issuing Bank, Company assumes all risks of the acts and omissions of, or misuse
of the Letters of Credit issued by Issuing Bank and by the respective
beneficiaries of such Letters of Credit. In furtherance and not in limitation
of the foregoing, Issuing Bank shall not be responsible for: (i) the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance of
any such Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) failure of the beneficiary of
any such Letter of Credit to comply fully with any conditions required in order
to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (v) errors in
interpretation of technical terms; (vi) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any such
Letter of Credit or of the proceeds thereof; (vii) the misapplication by the
beneficiary of any such Letter of Credit of the proceeds of any drawing under
such Letter of Credit; or (viii) any consequences arising from causes beyond the
control of Issuing Bank, including any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto government or
Governmental Authority; none of the above shall affect or impair, or prevent the
vesting of, any of Issuing Bank's rights or powers hereunder. Without limiting
the foregoing and in furtherance thereof, any action taken or omitted by Issuing
Bank under or in connection with the Letters of Credit or any documents and
certificates delivered thereunder, if taken or omitted in good faith, shall not
put Issuing Bank under any resulting liability to Company. Notwithstanding
anything to the contrary contained in this Section 2.4(c), Company shall retain
any and all rights it may have against Issuing Bank for any liability arising
solely out of the gross
41
<PAGE>
negligence or willful misconduct of Issuing Bank.
Reimbursement by Company of Amounts Drawn or Paid Under Letters of
------------------------------------------------------------------
Credit. In the event Issuing Bank has determined to honor a drawing under a
- ------
Letter of Credit, it shall immediately notify Company and Administrative Agent,
and Company shall reimburse Issuing Bank on or before the Business Day
immediately following the date on which such drawing is honored (the
"Reimbursement Date") in an amount in Dollars and in same day funds equal to the
amount of such honored drawing; provided, anything contained herein to the
--------
contrary notwithstanding, (i) unless Company shall have notified Administrative
Agent and Issuing Bank prior to 10:00 a.m. (New York City time) on the date such
drawing is honored that Company intends to reimburse Issuing Bank for the amount
of such honored drawing with funds other than the proceeds of Revolving Loans,
Company shall be deemed to have given a timely Funding Notice to Administrative
Agent requesting Lenders to make Revolving Loans that are Base Rate Loans on the
Reimbursement Date in an amount in Dollars equal to the amount of such honored
drawing, and (ii) subject to satisfaction or waiver of the conditions specified
in Section 4.2, Lenders shall, on the Reimbursement Date, make Revolving Loans
that are Base Rate Loans in the amount of such honored drawing, the proceeds of
which shall be applied directly by Administrative Agent to reimburse Issuing
Bank for the amount of such honored drawing; and provided further, if for any
-------- -------
reason proceeds of Revolving Loans are not received by Issuing Bank on the
Reimbursement Date in an amount equal to the amount of such honored drawing,
Company shall reimburse Issuing Bank, on demand, in an amount in same day funds
equal to the excess of the amount of such honored drawing over the aggregate
amount of such Revolving Loans, if any, which are so received. Nothing in this
Section 2.4(d) shall be deemed to relieve any Lender from its obligation to make
Revolving Loans on the terms and conditions set forth herein, and Company shall
retain any and all rights it may have against any Lender resulting from the
failure of such Lender to make such Revolving Loans under this Section 2.4(d).
Lenders' Purchase of Participations in Letters of Credit. Immediately
--------------------------------------------------------
upon the issuance of each Letter of Credit, each Lender having a Revolving
Credit Commitment shall be deemed to have purchased, and hereby agrees to
irrevocably purchase, from Issuing Bank a participation in such Letter of Credit
and any drawings honored thereunder in an amount equal to such Lender's Pro Rata
Share (with respect to the Revolving Credit Commitments) of the maximum amount
which is or at any time may become available to be drawn thereunder. In the
event that Company shall fail for any reason to reimburse Issuing Bank as
provided in Section 2.4(d), Issuing Bank shall promptly notify each Lender of
the unreimbursed amount of such honored drawing and of such Lender's respective
participation therein based on such Lender's Pro Rata Share of the Revolving
Credit Commitments. Each Lender shall make available to Issuing Bank an amount
equal to its respective participation, in Dollars and in same day funds, at the
office of Issuing Bank specified in such notice, not later than 12:00 p.m. (New
York City time) on the first business day (under the laws of the jurisdiction in
which such office of Issuing Bank is located) after the date notified by Issuing
Bank. In the event that any Lender fails to make available to Issuing Bank on
such business day the amount of such Lender's participation
42
<PAGE>
in such Letter of Credit as provided in this Section 2.4(e), Issuing Bank shall
be entitled to recover such amount on demand from such Lender together with
interest thereon for three Business Days at the rate customarily used by Issuing
Bank for the correction of errors among banks and thereafter at the Base Rate.
Nothing in this Section 2.4(e) shall be deemed to prejudice the right of any
Lender to recover from Issuing Bank any amounts made available by such Lender to
Issuing Bank pursuant to this Section in the event that it is determined that
the payment with respect to a Letter of Credit in respect of which payment was
made by such Lender constituted gross negligence or willful misconduct on the
part of Issuing Bank. In the event Issuing Bank shall have been reimbursed by
other Lenders pursuant to this Section 2.4(e) for all or any portion of any
drawing honored by Issuing Bank under a Letter of Credit, Issuing Bank shall
distribute to each Lender which has paid all amounts payable by it under this
Section 2.4(e) with respect to such honored drawing such Lender's Pro Rata Share
of all payments subsequently received by Issuing Bank from Company in
reimbursement of such honored drawing when such payments are received. Any such
distribution shall be made to a Lender at its primary address set forth below
its name on Appendix B or at such other address as such Lender may request.
Obligations Absolute. The obligation of Company to reimburse Issuing
--------------------
Bank for drawings honored under the Letters of Credit issued by it and to repay
any Revolving Loans made by Lenders pursuant to Section 2.4(d) and the
obligations of Lenders under Section 2.4(e) shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms hereof under
all circumstances including any of the following circumstances: (i) any lack of
validity or enforceability of any Letter of Credit; (ii) the existence of any
claim, set-off, defense or other right which Company or any Lender may have at
any time against a beneficiary or any transferee of any Letter of Credit (or any
Persons for whom any such transferee may be acting), Issuing Bank, Lender or any
other Person or, in the case of a Lender, against Company, whether in connection
herewith, the transactions contemplated herein or any unrelated transaction
(including any underlying transaction between Company or one of its Subsidiaries
and the beneficiary for which any Letter of Credit was procured); (iii) any
draft or other document presented under any 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; (iv) payment by Issuing Bank
under any Letter of Credit against presentation of a draft or other document
which does not substantially comply with the terms of such Letter of Credit; (v)
any adverse change in the business, operations, properties, assets, condition
(financial or otherwise) or prospects of Parent Guarantor or any of its
Subsidiaries; (vi) any breach hereof or any other Credit Document by any party
thereto; (vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing; or (viii) the fact that an Event of Default or
a Default shall have occurred and be continuing; provided, in each case, that
--------
payment by Issuing Bank under the applicable Letter of Credit shall not have
constituted gross negligence or willful misconduct of Issuing Bank under the
circumstances in question.
Indemnification. Without duplication of any obligation of Company
---------------
under Section 10.2 or 10.3, in addition to amounts payable as provided herein,
Company hereby agrees
43
<PAGE>
to protect, indemnify, pay and save harmless Issuing Bank from and against any
and all claims, demands, liabilities, damages, losses, costs, charges and
expenses (including reasonable fees, expenses and disbursements of counsel and
allocated costs of internal counsel) which Issuing Bank may incur or be subject
to as a consequence, direct or indirect, of (i) the issuance of any Letter of
Credit by Issuing Bank, other than as a result of (1) the gross negligence or
willful misconduct of Issuing Bank or (2) the wrongful dishonor by Issuing Bank
of a proper demand for payment made under any Letter of Credit issued by it, or
(ii) the failure of Issuing Bank to honor a drawing under any such Letter of
Credit as a result of any act of any Governmental Authority.
Collateral Account. Administrative Agent is hereby authorized to
------------------
establish and maintain at Administrative Agent's Principal Office, as a blocked
account in the name of Administrative Agent and under the sole dominion and
control thereof, a restricted deposit account designated as "NorthPoint
Collateral Account" (the "Collateral Account"). All amounts at any time held in
the Collateral Account shall be beneficially owned by Company but shall be held
in the name of Administrative Agent, for the benefit of Lenders, as collateral
security for the Obligations upon the terms and conditions set forth herein.
Company shall have no right to withdraw, transfer or, except as expressly set
forth herein, otherwise receive any funds deposited into the Collateral Account.
Anything contained herein to the contrary notwithstanding, the 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. All deposits of funds in the Collateral Account shall be made by
wire transfer (or, if applicable, by intra-bank transfer from another account of
Company) of immediately available funds, in each case addressed to
Administrative Agent's Principal Office. Company shall, promptly after
initiating a transfer of funds to the Collateral Account, give notice to
Administrative Agent by telefacsimile of the date, amount and method of delivery
of such deposit. To the extent permitted under Regulation Q of the Board of
Governors of the Federal Reserve System, any cash held in the Collateral Account
shall bear interest at the standard rate paid by Administrative Agent to its
customers for deposits of like amounts and terms. Subject to Administrative
Agent's rights hereunder, any interest earned on deposits of cash in the
Collateral Account shall be deposited directly in, and held in the Collateral
Account.
Application of Collateral Account Proceeds. Upon the occurrence and
------------------------------------------
during the continuance of an Event of Default at the request of Issuing Bank or
Lenders holding more than 50% of the aggregate Revolving Credit Exposure,
Company shall deliver funds for deposit in the Collateral Account pay to
Administrative Agent an amount equal to the Letter of Credit Usage at such time.
If for any reason the aggregate amount delivered by Company for deposit in the
Collateral Account as aforesaid is less than the Letter of Credit Usage at such
time, the aggregate amount so delivered by Company shall be apportioned among
all outstanding Letters of Credit for purposes of this Section 2.4(i) in
accordance with the ratio of the maximum amount available for drawing under each
such Letter of Credit (as to such Letter of Credit, the "Maximum Available
Amount") to the Letter of Credit Usage at such time. Upon any drawing under any
44
<PAGE>
outstanding Letter of Credit in respect of which Company has deposited in the
Collateral Account any amounts described above, Administrative Agent shall apply
such amounts to reimburse Issuing Bank for the amount of such drawing. In the
event of cancellation or expiration of any Letter of Credit in respect of which
Company has deposited in the Collateral Account any amount described above, or
in the event of any reduction in the Maximum Available Amount under such Letter
of Credit, Administrative Agent shall apply the amount then on deposit in the
Collateral Account in respect of such Letter of Credit (less, in the case of
such a reduction, the Maximum Available Amount under such Letter of Credit
immediately after such reduction):
first, to the payment of any amounts payable to Administrative Agent
pursuant to Section 9;
second, to the extent of any excess, to the cash collateralization
pursuant to the terms of this Agreement of any outstanding Letters of
Credit in respect of which Company has failed to pay all or a portion of
the amounts described above (such cash collateralization to be apportioned
among all such Letters of Credit in the manner described above); and
third, to the extent of any further excess, to the payment of any
other outstanding Obligations in such order as directed by the Lenders
holding more than 50% of the sum of outstanding Revolving Credit
Commitments and Revolving Loans.
Resignation or Removal of Issuing Bank. Issuing Bank may resign at
--------------------------------------
any time by giving one hundred eighty (180) days prior written notice to
Administrative Agent, Lenders and Company, and may be removed at any time by
Company by notice to Issuing Bank, Administrative Agent and Lenders, subject in
each case to the appointment by Company of a replacement Issuing Bank reasonably
satisfactory to Administrative Agent; provided, Issuing Bank may not resign as
to any Letter of Credit previously issued by it. Subject to the next succeeding
sentences of this Section 2.4(j), upon the acceptance of any appointment as
Issuing Bank hereunder by a successor Issuing Bank (which shall be a Lender),
such successor shall succeed to and become vested with all the interests, rights
and obligations of the retiring Issuing Bank and the retiring Issuing Bank shall
be discharged from its obligations to issue additional Letters of Credit
hereunder. At the time such removal or resignation shall become effective,
Company shall pay all accrued and unpaid fees of Issuing Bank pursuant to
Section 2.11(b). The acceptance of any appointment as Issuing Bank hereunder by
a successor Issuing Bank shall be evidenced by an agreement entered into by such
successor, in a form satisfactory to Company and Administrative Agent, and, from
and after the effective date of such agreement, (i) such successor Issuing Bank
shall have all the rights and obligations of the previous Issuing Bank under
this Agreement and the other Credit Documents and (ii) references herein and in
the other Credit Documents to the term "Issuing Bank" shall be deemed to refer
to such successor or to any previous Issuing Bank, or to such successor and all
previous Issuing Banks, as the context
45
<PAGE>
shall require. After the resignation or removal of Issuing Bank hereunder, the
retiring Issuing Bank shall remain a party hereto and shall continue to have all
the rights and obligations of an Issuing Bank under this Agreement and the other
Credit Documents with respect to Letters of Credit issued thereby prior to such
resignation or removal (including the right to receive accrued and unpaid fees
pursuant to Section 2.11(b)), but shall not be required to issue additional
Letters of Credit.
Pro Rata Shares; Availability of Funds.
Pro Rata Shares. All Loans shall be made, and all participations
---------------
purchased, by Lenders simultaneously and proportionately to their respective Pro
Rata Shares, it being understood that no Lender shall be responsible for any
default by any other Lender in such other Lender's obligation to make a Loan
requested hereunder or purchase a participation required hereby nor shall the
Commitment of any Lender be increased or decreased as a result of a default by
any other Lender in such other Lender's obligation to make a Loan requested
hereunder or purchase a participation required hereby.
Availability of Funds. Unless Administrative Agent shall have been
---------------------
notified by any Lender prior to the applicable Credit Date that such Lender does
not intend to make available to Administrative Agent the amount of such Lender's
Loan requested on such Credit Date, Administrative Agent may assume that such
Lender has made such amount available to Administrative Agent on such Credit
Date and Administrative Agent may, in its sole discretion, but shall not be
obligated to, make available to Company a corresponding amount on such Credit
Date. If such corresponding amount is not in fact made available to
Administrative Agent by such Lender, Administrative Agent shall be entitled to
recover such corresponding amount on demand from such Lender together with
interest thereon, for each day from such Credit Date until the date such amount
is paid to Administrative Agent, at the customary rate set by Administrative
Agent for the correction of errors among banks for three Business Days and
thereafter at the Base Rate. If such Lender does not pay such corresponding
amount forthwith upon Administrative Agent's demand therefor, Administrative
Agent shall promptly notify Company and Company shall immediately pay such
corresponding amount to Administrative Agent together with interest thereon, for
each day from such Credit Date until the date such amount is paid to
Administrative Agent, at the rate payable hereunder for such Class of Loans.
Nothing in this Section 2.5(b) shall be deemed to relieve any Lender from its
obligation to fulfill its Commitments hereunder or to prejudice any rights that
Company may have against any Lender as a result of any default by such Lender
hereunder.
Use of Proceeds. The proceeds of the Term Loans, Delayed Draw Term Loans,
if any, and the Revolving Loans, if any, made on the Closing Date shall be
applied by Company to repay all of the Indebtedness and other obligations
outstanding under the Existing Loan Agreements and to pay Transaction Costs. The
proceeds of the Delayed Draw Term Loans, Revolving Loans, Swing Line Loans and
Letters of Credit made after the Closing Date shall be
46
<PAGE>
applied by Company to finance the purchase of telecommunications equipment and
other Consolidated Capital Expenditures associated with the build-out in certain
targeted central offices of one or more local exchange carriers and for working
capital and other general corporate purposes of Parent Guarantor and its
Subsidiaries, including Permitted Acquisitions. No portion of the proceeds of
any Credit Extension shall be used by Parent Guarantor or any of its
Subsidiaries in any manner that might cause such Credit Extension or the
application of such proceeds to violate Regulation T, Regulation U or Regulation
X of the Board of Governors of the Federal Reserve System or any other
regulation thereof or to violate the Exchange Act, in each case as in effect on
the date or dates of such Credit Extension and such use of proceeds.
Evidence of Debt; Register; Lenders' Books and Records; Notes.
Lenders' Evidence of Debt. Each Lender shall maintain on its internal
-------------------------
records an account or accounts evidencing the Indebtedness of Company to such
Lender, including the amounts of the Loans made by it and each repayment and
prepayment in respect thereof. Any such recordation shall be prima facie
evidence of such matters, absent manifest error; provided, failure to make any
--------
such recordation, or any error in such recordation, shall not affect any
Lender's Commitments or Company's Obligations in respect of any applicable
Loans; and provided further, in the event of any inconsistency between the
-------- -------
Register and any Lender's records, the recordations in the Register shall
govern.
Register. Administrative Agent shall maintain at its Principal Office
--------
a register for the recordation of the names and addresses of Lenders and the
Commitments and Loans of each Lender from time to time (the "Register"). The
Register shall be available for inspection by Company or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
Administrative Agent shall record in the Register the Commitments and the Loans,
and each repayment or prepayment in respect of the principal amount of the
Loans, and any such recordation shall be prima facie evidence of such matters;
provided, failure to make any such recordation, or any error in such
- --------
recordation, shall not affect any Lender's Commitments or Company's Obligations
in respect of any Loan. Company hereby designates CIBC to serve as Company's
agent solely for purposes of maintaining the Register as provided in this
Section 2.7, and Company hereby agrees that, to the extent CIBC serves in such
capacity, CIBC and its officers, directors, employees, agents and affiliates
shall constitute "Indemnitees."
Notes. If so requested by any Lender by written notice to Company
-----
(with a copy to Administrative Agent) at least two Business Days prior to the
Closing Date, or at any time thereafter, Company shall execute and deliver to
such Lender (and/or, if applicable and if so specified in such notice, to any
Person who is an assignee of such Lender pursuant to Section 10.6) on the
Closing Date (or, if such notice is delivered after the Closing Date, promptly
after Company's receipt of such notice) a Note or Notes to evidence such
Lender's Revolving Loans, Delayed Draw Term Loans, Term Loans or Swing Line
Loans, as applicable.
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Interest on Loans.
Except as otherwise set forth herein, each Class of Loans shall bear
interest on the unpaid principal amount thereof from the date made through
repayment thereof (whether by acceleration or otherwise) as follows:
in the case of Revolving Loans and Delayed Draw Term Loans:
(1) if a Base Rate Loan, at the Base Rate plus the
Applicable Margin; and
(2) if a Eurodollar Rate Loan, at the Adjusted Eurodollar
Rate plus the Applicable Margin;
in the case of Swing Line Loans, at the Base Rate plus the
Applicable Margin; and
in the case of Term Loans:
(1) if a Base Rate Loan, at the Base Rate plus 3.50% per
annum; or
(2) if a Eurodollar Rate Loan, at the Adjusted Eurodollar
Rate plus 4.50% per annum.
The basis for determining the rate of interest with respect to any
Loan (except a Swing Line Loan which can be made and maintained only as a Base
Rate Loan), and the Interest Period with respect to any Eurodollar Rate Loan,
shall be selected by Company and notified to Administrative Agent and Lenders
pursuant to the applicable Funding Notice or Conversion/Continuation Notice, as
the case may be; provided, (i) all Loans made on the Closing Date shall be made
--------
as Base Rate Loans, which may be converted pursuant to Section 2.9(a)(i) to
Eurodollar Rate Loans having an Interest Period of one month; provided further,
-------- -------
until the earlier of (y) one month following the Closing Date and (z) the date
that Syndication Agent notifies Company that the primary syndication of the
Loans and Commitments has been completed, as determined by Syndication Agent,
all Loans shall be maintained as either Base Rate Loans or Eurodollar Rate Loans
having an Interest Period of no longer than one month. If on any day a Loan is
outstanding with respect to which a Funding Notice or Conversion/Continuation
Notice has not been delivered to Administrative Agent in accordance with the
terms hereof specifying the applicable basis for determining the rate of
interest, then for that day such Loan shall be a Base Rate Loan.
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<PAGE>
In connection with Eurodollar Rate Loans there shall be no more than
ten (10) Interest Periods outstanding at any time. In the event Company fails
to specify between a Base Rate Loan or a Eurodollar Rate Loan in the applicable
Funding Notice or Conversion/Continuation Notice, such Loan (if outstanding as a
Eurodollar Rate Loan) will be automatically converted into a Base Rate Loan on
the last day of the then-current Interest Period for such Loan (or if
outstanding as a Base Rate Loan will remain as, or (if not then outstanding)
will be made as, a Base Rate Loan). In the event Company fails to specify an
Interest Period for any Eurodollar Rate Loan in the applicable Funding Notice or
Conversion/Continuation Notice, Company shall be deemed to have selected an
Interest Period of one month. A soon as practicable after 10:00 a.m. (New York
City time) on each Interest Rate Determination Date, Administrative Agent shall
determine (which determination shall, absent manifest error, be final,
conclusive and binding upon all parties) the interest rate that shall apply to
the Eurodollar Rate Loans for which an interest rate is then being determined
for the applicable Interest Period and shall promptly give notice thereof (in
writing or by telephone confirmed in writing) to Company and each Lender.
Interest payable pursuant to Section 2.8(a) shall be computed (i) in
the case of Base Rate Loans on the basis of a 365-day or 366-day year, as the
case may be, and (ii) in the case of Eurodollar Rate Loans, on the basis of a
360-day year, in each case for the actual number of days elapsed in the period
during which it accrues. In computing interest on any Loan, the date of the
making of such Loan or the first day of an Interest Period applicable to such
Loan or, with respect to a Base Rate Loan being converted from a Eurodollar Rate
Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate
Loan, as the case may be, shall be included, and the date of payment of such
Loan or the expiration date of an Interest Period applicable to such Loan or,
with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the
date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the
case may be, shall be excluded; provided, if a Loan is repaid on the same day on
--------
which it is made, one day's interest shall be paid on that Loan.
Except as otherwise set forth herein, interest on each Loan shall be
payable in arrears on and to (i) each Interest Payment Date applicable to that
Type of Loan; (ii) any prepayment of that Loan, whether voluntary or mandatory,
to the extent accrued on the amount being prepaid; and (iii) at maturity,
including final maturity; provided, however, with respect to any prepayment of a
--------
Base Rate Loan, accrued interest shall instead be payable on the applicable
Interest Payment Date.
Company agrees to pay to Issuing Bank, with respect to drawings
honored under any Letter of Credit, interest on the amount paid by Issuing Bank
in respect of each such honored drawing from the date such drawing is honored to
but excluding the date such amount is reimbursed by or on behalf of Company at a
rate equal to (i) for the period from the date such drawing is honored to but
excluding the applicable Reimbursement Date, the rate of interest otherwise
payable hereunder with respect to Revolving Loans that are Base Rate Loans, and
(ii)
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thereafter, a rate which is 2% per annum in excess of the rate of interest
otherwise payable hereunder with respect to Revolving Loans that are Base Rate
Loans.
Interest payable pursuant to Section 2.8(f) shall be computed on the
basis of a 365-day year for the actual number of days elapsed in the period
during which it accrues, and shall be payable on demand or, if no demand is
made, on the date on which the related drawing under a Letter of Credit is
reimbursed in full. Promptly upon receipt by Issuing Bank of any payment of
interest pursuant to Section 2.8(f), Issuing Bank shall distribute to each
Lender, out of the interest received by Issuing Bank in respect of the period
from the date such drawing is honored to but excluding the date on which Issuing
Bank is reimbursed for the amount of such drawing (including any such
reimbursement out of the proceeds of any Revolving Loans), the amount that such
Lender would have been entitled to receive in respect of the letter of credit
fee that would have been payable in respect of such Letter of Credit for such
period if no drawing had been honored under such Letter of Credit. In the event
Issuing Bank shall have been reimbursed by Lenders for all or any portion of
such honored drawing, Issuing Bank shall distribute to each Lender which has
paid all amounts payable by it under Section 2.4(e) with respect to such honored
drawing such Lender's Pro Rata Share of any interest received by Issuing Bank in
respect of that portion of such honored drawing so reimbursed by Lenders for the
period from the date on which Issuing Bank was so reimbursed by Lenders to but
excluding the date on which such portion of such honored drawing is reimbursed
by Company.
Conversion/Continuation.
Conversion/Continuation. Subject to Section 2.18, Company shall have
-----------------------
the option:
to convert at any time all or any part of any Loan equal to
$5,000,000 and integral multiples of $1,000,000 in excess of that amount from
one Type of Loan to another Type of Loan; provided, a Eurodollar Rate Loan may
--------
only be converted on the expiration of the Interest Period applicable to such
Eurodollar Rate Loan unless Company shall pay all amounts due under Section 2.18
in connection with any such conversion; provided, further, in the event any
-------- -------
Default or Event of Default as described in Section 8.1(a) shall have occurred
and then be continuing, then, notwithstanding the foregoing, Company shall not
have the option to convert any Revolving Loan that is a Base Rate Loan to a
Eurodollar Rate Loan; and
subject to the proviso of Section 2.10, upon the expiration of
any Interest Period applicable to any Eurodollar Rate Loan, to continue all or
any portion of such Loan equal to $5,000,000 and integral multiples of
$1,000,000 in excess of that amount as a Eurodollar Rate Loan.
Mechanics. The Company shall deliver a Conversion/Continuation Notice
---------
to Administrative Agent no later than 10:00 a.m. (New York City time) at least
one Business Day
50
<PAGE>
in advance of the proposed conversion date (in the case of a conversion to a
Base Rate Loan) and at least three Business Days in advance of the proposed
conversion/continuation date (in the case of a conversion to, or a continuation
of, a Eurodollar Rate Loan). Except as otherwise provided herein, a
Conversion/Continuation Notice for conversion to, or continuation of, any
Eurodollar Rate Loans (or telephonic notice in lieu thereof) shall be
irrevocable on and after the related Interest Rate Determination Date, and
Company shall be bound to effect a conversion or continuation in accordance
therewith.
Default Interest. Upon the occurrence and during the continuance of an
Event of Default, the principal amount of all Loans and, to the extent permitted
by applicable law, any interest payments on the Loans or any fees or other
amounts owed hereunder not paid when due, in each case whether at stated
maturity, by notice of prepayment, by acceleration or otherwise, shall
thereafter bear interest (including post-petition interest in any proceeding
under the Bankruptcy Code or other applicable bankruptcy laws) payable on demand
at a rate that is 2% per annum in excess of the interest rate otherwise payable
hereunder with respect to the applicable Loans (or, in the case of any such fees
and other amounts, at a rate which is 2% per annum in excess of the interest
rate otherwise payable hereunder for Base Rate Loans); provided, in the event
--------
that such an Event of Default is as described in Section 8.1(a), all Revolving
Loans that are Eurodollar Rate Loans, upon the expiration of the Interest Period
in effect at the time any such increase in interest rate is effective such
Eurodollar Rate Loans shall thereupon become Base Rate Loans and shall
thereafter bear interest payable upon demand at a rate which is 2% per annum in
excess of the interest rate otherwise payable hereunder for Base Rate Loans.
Payment or acceptance of the increased rates of interest provided for in this
Section 2.10 is not a permitted alternative to timely payment and shall not
constitute a waiver of any Event of Default or otherwise prejudice or limit any
rights or remedies of Administrative Agent or any Lender.
Fees.
Company agrees to pay to Lenders the following fees:
with respect to Lenders having Revolving Credit Exposure and/or
Delayed Draw Term Loan Exposure, commitment fees equal to (1) the average of the
daily difference between (A) the sum of the Revolving Credit Commitments plus
the Delayed Draw Term Loan Commitments, and (B) the sum of (x) the aggregate
principal amount of outstanding Revolving Loans (but not any outstanding Swing
Line Loans) plus Delayed Draw Term Loans plus (y) the Letter of Credit Usage,
times (2) the Applicable Commitment Fee Percentage; and
with respect to Lenders having Revolving Credit Exposure, letter
of credit fees equal to (1) the Applicable Margin for Eurodollar Rate Loans,
times (2) the average daily maximum amount available to be drawn under all such
Letters of Credit (regardless of whether any conditions for drawing could then
be met and determined as of the close of business on any date of determination);
51
<PAGE>
All fees referred to in this Section 2.11(a) shall be paid to Administrative
Agent at its Principal Office and upon receipt, Administrative Agent shall
promptly distribute to each Lender its Pro Rata Share thereof.
Company agrees to pay directly to Issuing Bank, for its own account,
the following fees:
a fronting fee equal to 0.25%, per annum, times the aggregate
daily amount available to be drawn under all Letters of Credit (determined as of
the close of business on any date of determination); and
such documentary and processing charges for any issuance,
amendment, transfer or payment of a Letter of Credit as are in accordance with
Issuing Bank's standard schedule for such charges and as in effect at the time
of such issuance, amendment, transfer or payment, as the case may be.
All fees referred to in Section 2.11(a) and 2.11(b)(i) shall be
calculated on the basis of a 360-day year and the actual number of days elapsed
and shall be payable quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year during the Revolving Credit Commitment Period,
commencing on the first such date to occur after the Closing Date, and on the
Revolving Credit Commitment Termination Date.
In addition to any of the foregoing fees, Company agrees to pay to
Agents such other fees in the amounts and at the times separately agreed upon.
Scheduled Payments/Commitment Reductions.
Scheduled Payments. The principal amounts of the Credit Facility Term
------------------
Loans shall be repaid in the aggregate annual amounts set forth below in
consecutive quarterly installments (each, an "Installment") on the last day of
each fiscal quarter (each, an "Installment Date") set forth below, commencing
March 31, 2002:
================================================================================
Delayed Draw Term Loan
Fiscal Quarter Term Loan Installments Installments
- --------------------------------------------------------------------------------
March 31, 2002 $2,250,000 $1,500,000
- --------------------------------------------------------------------------------
June 30, 2002 $2,250,000 $1,500,000
- --------------------------------------------------------------------------------
September 30, 2002 $2,250,000 $1,500,000
- --------------------------------------------------------------------------------
================================================================================
52
<PAGE>
Delayed Draw Term Loan
Fiscal Quarter Term Loan Installments Installments
----------------------------------------------------------------------
December 31, 2002 $2,250,000 $1,500,000
----------------------------------------------------------------------
March 31, 2003 $3,000,000 $1,500,000
----------------------------------------------------------------------
June 30, 2003 $3,000,000 $1,500,000
----------------------------------------------------------------------
September 30, 2003 $3,000,000 $1,500,000
----------------------------------------------------------------------
December 31, 2003 $3,000,000 $1,500,000
----------------------------------------------------------------------
March 31, 2004 $4,500,000 $1,500,000
----------------------------------------------------------------------
June 30, 2004 $4,500,000 $1,500,000
----------------------------------------------------------------------
September 30, 2004 $4,500,000 $1,500,000
----------------------------------------------------------------------
December 31, 2004 $4,500,000 $1,500,000
----------------------------------------------------------------------
March 31, 2005 $5,250,000 $1,500,000
----------------------------------------------------------------------
June 30, 2005 $5,250,000 $1,500,000
----------------------------------------------------------------------
September 30, 2005 $5,250,000 $1,500,000
----------------------------------------------------------------------
December 9, 2005 $5,250,000 ------
----------------------------------------------------------------------
December 31, 2005 ------ $1,500,000
----------------------------------------------------------------------
March 31, 2006 ------ $9,000,000
----------------------------------------------------------------------
June 9, 2006 ------ $27,000,000
======================================================================
; provided, in the event any Incremental Facility Term Loans are made, such
--------
Incremental Facility Term Loans shall be repaid on each Installment Date
occurring on or after the applicable Incremental Facility Effective Date in an
amount equal to (i) the aggregate principal amount of Incremental Facility Term
Loans of the applicable Class of Credit Facility Term Loans as of such
Incremental Facility Effective Date, times (ii) the ratio (expressed as a
percentage) of (y) the amount of other Credit Facility Term Loans of the same
Class as the Incremental Facility Term Loans being repaid on such Installment
Date and (z) the total aggregate amount of other Credit Facility Term Loans of
the same Class as the Incremental Facility Term Loans outstanding on such
Incremental Facility Effective Date.
Notwithstanding the foregoing, (i) all outstanding Installments shall be reduced
in connection with any voluntary or mandatory prepayments of the Delayed Draw
Term Loans or the Term
53
<PAGE>
Loans, as the case may be, in accordance with Section 2.15; and (ii) the Delayed
Draw Term Loans and the Term Loans, together with all other amounts owed
hereunder with respect thereto, shall be paid in full no later than the Delayed
Draw Term Loan Maturity Date or the Term Loan Maturity Date, as the case may be.
Revolving Credit Commitment Reductions. The Revolving Credit
--------------------------------------
Commitments shall be permanently reduced in the aggregate amounts set forth
below in consecutive quarterly installments (each, a "Reduction") on the last
day of each fiscal quarter (each, a "Reduction Date") set forth below,
commencing March 31, 2002:
Fiscal Quarter Reductions
=======================================
March 31, 2002 $1,125,000
---------------------------------------
June 30, 2002 $1,125,000
---------------------------------------
September 30, 2002 $1,125,000
---------------------------------------
December 31, 2002 $1,125,000
---------------------------------------
March 31, 2003 $1,500,000
---------------------------------------
June 30, 2003 $1,500,000
---------------------------------------
September 30, 2003 $1,500,000
---------------------------------------
December 31, 2003 $1,500,000
---------------------------------------
March 31, 2004 $2,250,000
---------------------------------------
June 30, 2004 $1,500,000
---------------------------------------
September 30, 2004 $2,250,000
---------------------------------------
December 31, 2004 $2,250,000
---------------------------------------
March 31, 2005 $2,625,000
---------------------------------------
June 30, 2005 $2,625,000
---------------------------------------
September 30, 2005 $2,625,000
---------------------------------------
December 9, 2005
$2,625,000
=======================================
; provided, in the event any Incremental Facility Revolving Credit Commitments
---------
are made, such Incremental Facility Revolving Credit Commitments shall be
reduced on each Reduction Date
54
<PAGE>
occurring on or after the applicable Incremental Facility Effective Date in an
amount equal to (i) the aggregate amount of Incremental Facility Revolving
Credit Commitments as of such Incremental Facility Effective Date times (ii) the
ratio (expressed as a percentage) of (y) the amount of other Revolving Credit
Commitments being reduced on such Reduction Date and (z) the total aggregate
amount of other Revolving Credit Commitments in effect on such Incremental
Facility Effective Date.
Notwithstanding the foregoing, all Scheduled Reductions shall be reduced in
connection with any voluntary or mandatory reductions of the Revolving Credit
Commitments in accordance with Section 2.15.
Voluntary Prepayments/Commitment Reductions.
Voluntary Prepayments. (i) Any time and from time to time:
---------------------
with respect to Base Rate Loans, Company may prepay, without
premium or penalty, any such Loans on any Business Day in whole or in
part in an aggregate minimum amount of $1,000,000 and integral
multiples of $250,000 in excess of that amount;
with respect to Eurodollar Rate Loans, Company may prepay,
without premium or penalty, (except as otherwise provided in Section
2.15(e)) any such Loans on any Business Day in whole or in part, in an
aggregate minimum amount of $5,000,000 and integral multiples of
$1,000,000 in excess of that amount; and
with respect to Swing Line Loans, Company may prepay,
without premium or penalty, any such Loans on any Business Day in
whole or in part in an aggregate minimum amount of $250,000, and in
integral multiples of $250,000 in excess of that amount.
All such prepayments shall be made:
upon not less than one Business Day's prior written or
telephonic notice, in the case of Base Rate Loans;
upon not less than one Business Day's prior written or
telephonic notice, in the case of Eurodollar Rate Loans; and
upon written or telephonic notice on the date of prepayment,
in the case of Swing Line Loans;
55
<PAGE>
in each case given to Administrative Agent or Swing Line Lender, as the
case may be, by 12:00 p.m. (New York City time) on the date required and,
if given by telephone, promptly confirmed in writing to Administrative
Agent (and Administrative Agent will promptly transmit such telephonic or
original notice for Revolving Loans or Credit Facility Term Loans, as the
case may be, by telefacsimile or telephone to each applicable Lender) or
Swing Line Lender, as the case may be. Upon the giving of any such notice,
the principal amount of the Loans specified in such notice shall become due
and payable on the prepayment date specified therein.
Voluntary Revolving Credit Commitment Reductions. (i) Company may,
------------------------------------------------
upon not less than three Business Days' prior written or telephonic notice
confirmed in writing to Administrative Agent (which original written or
telephonic notice Administrative Agent will promptly transmit by telefacsimile
or telephone to each applicable Lender), at any time and from time to time
terminate in whole or permanently reduce in part, without premium or penalty,
the Revolving Credit Commitments in an amount up to the amount by which the
Revolving Credit Commitments exceed the Total Utilization of Revolving Credit
Commitments at the time of such proposed termination or reduction; provided, any
--------
such partial reduction of the Revolving Credit Commitments shall be in an
aggregate minimum amount of $5,000,000 and integral multiples of $1,000,000 in
excess of that amount.
Company's notice to Administrative Agent shall designate the date
(which shall be a Business Day) of such termination or reduction and the amount
of any partial reduction, and such termination or reduction of the Revolving
Credit Commitments shall be effective on the date specified in Company's notice
and shall reduce the Revolving Commitment of each Lender proportionately to its
Pro Rata Share thereof.
Mandatory Prepayments/Commitment Reductions.
Asset Sales. No later than the first Business Day following the date
-----------
of receipt by Parent Guarantor or any of its Subsidiaries of any Net Asset Sale
Proceeds, Company shall prepay the Loans and/or the Commitments shall be
permanently reduced as set forth in Section 2.15(b) in an aggregate amount equal
to such Net Asset Sale Proceeds; provided, so long as no Default or Event of
--------
Default shall have occurred and be continuing, and Company shall have the
option, directly or through one or more of its Subsidiaries, to invest such Net
Asset Sale Proceeds within one hundred eighty (180) days of receipt thereof in
assets useful in the business of Parent Guarantor and its Subsidiaries; provided
--------
further, pending any such investment all such Net Asset Sale Proceeds shall be
- -------
applied to prepay outstanding Revolving Loans (without a reduction in Revolving
Credit Commitments).
Insurance/Condemnation Proceeds. No later than the first Business Day
-------------------------------
56
<PAGE>
following the date of receipt by Parent Guarantor or any of its Subsidiaries, or
Administrative Agent as loss payee, of any Net Insurance/Condemnation Proceeds,
Company shall prepay the Loans and/or the Commitments shall be permanently
reduced as set forth in Section 2.15(b) in an aggregate amount equal to such Net
Insurance/Condemnation Proceeds; provided, (i) so long as no Default or Event of
--------
Default shall have occurred and be continuing, and (ii) to the extent that
aggregate Net Insurance/Condemnation Proceeds from the Closing Date through the
applicable date of determination do not exceed $500,000, Company shall have the
option, directly or through one or more of its Subsidiaries to invest such Net
Insurance/Condemnation Proceeds within one hundred eighty (180) days of receipt
thereof in assets useful in the business of Parent Guarantor and its
Subsidiaries, which investment may include the repair, restoration or
replacement of the applicable assets thereof; provided further, pending any such
-------- -------
investment all such Net Insurance/Condemnation Proceeds, as the case may be,
shall be applied to prepay outstanding Revolving Loans (without a reduction in
Revolving Credit Commitments).
Issuance of Debt. On the date of receipt by Parent Guarantor of any
----------------
Cash proceeds from the incurrence of any Permitted Parent Guarantor
Indebtedness, Company shall prepay the Loans and/or the Commitments shall be
permanently reduced as set forth in Section 2.15(b) in an aggregate amount equal
to 100% of the excess of such proceeds over $250,000,000, net of underwriting
discounts and commissions and other reasonable costs and expenses associated
therewith, including reasonable legal fees and expenses.
Consolidated Excess Cash Flow. In the event that there shall be
-----------------------------
Consolidated Excess Cash Flow for any fiscal year (commencing with fiscal year
ending December 31, 2002) in which the Total Leverage Ratio is greater than or
equal to 6.00:1.00, Company shall, no later than ninety (90) days after the end
of such fiscal year, prepay the Loans and/or the Revolving Credit Commitments
shall be permanently reduced as set forth in Section 2.15(b) in an aggregate
amount equal to 50% of such Consolidated Excess Cash Flow.
Revolving Loans and Swing Loans. Company shall from time to time
-------------------------------
prepay first, the Swing Line Loans, and second, the Revolving Loans to the
extent necessary so that the Total Utilization of Revolving Credit Commitments
shall not at any time exceed the Revolving Credit Commitments then in effect.
Prepayment Certificate. Concurrently with any prepayment of the Loans
----------------------
and/or reduction of the Commitments pursuant to Sections 2.14(a) through
2.14(d), Company shall deliver to Administrative Agent a certificate of an
Authorized Officer demonstrating the calculation of the amount of the applicable
net proceeds or Consolidated Excess Cash Flow, as the case may be. In the event
that Company shall subsequently determine that the actual amount received
exceeded the amount set forth in such certificate, Company shall promptly make
an additional prepayment of the Loans and/or the Commitments shall be
permanently reduced) in an amount equal to such excess, and Company shall
concurrently therewith deliver to Administrative Agent a certificate of an
Authorized Officer demonstrating the derivation of such excess.
57
<PAGE>
Application of Prepayments/Commitment Reductions.
Application of Voluntary Prepayments by Type of Loans. Any prepayment
-----------------------------------------------------
of any Loan pursuant to Section 2.13(a) shall be applied as specified by Company
in the applicable notice of prepayment; provided, in the event Company fails to
--------
specify the Loans to which any such prepayment shall be applied, such prepayment
shall be applied as follows:
first, to repay outstanding Swing Line Loans to the full extent
thereof;
second, to repay outstanding Revolving Loans to the full extent
thereof; and
third, to prepay the Delayed Draw Term Loans and the Term Loans
on a pro rata basis (in accordance with the respective outstanding
principal amounts thereof) and shall be further applied on a pro rata basis
to each scheduled Installment of principal of the Delayed Draw Term Loans
and Term Loans.
Application of Mandatory Prepayments by Class of Loans. Any amount
------------------------------------------------------
required to be paid pursuant to Sections 2.14(a) through 2.14(d) shall be
applied to the Revolving Credit Commitments, the Delayed Draw Term Loan
Commitments and the Term Loans on a pro rata basis (in accordance with the
respective outstanding principal amounts thereof or the aggregate amount of
Commitments then in effect, as applicable) and shall be further applied as
follows:
With respect to any amount to be applied to the Revolving Credit
Commitments:
first, to permanently reduce the unused portion, if any, of
the Revolving Credit Commitments;
second, to prepay the Swing Line Loans to the full extent
thereof and to further reduce the Revolving Credit Commitments by the
amount of such prepayment;
third, to prepay the Revolving Loans to the full extent
thereof and to further reduce Revolving Credit Commitments by the
amount of such prepayment;
fourth, to prepay outstanding reimbursement obligations with
respect to Letters of Credit and to further reduce the Revolving
Credit Commitments by the amount of such prepayment; and
58
<PAGE>
fifth, to cash collateralize Letters of Credit as provided
in Section 2.4 and to further reduce the Revolving Credit Commitments
by the amount of such cash collateralization. In addition, the amount
applied to the Revolving Credit Commitments shall be further applied
to reduce the remaining Reductions on a pro rata basis.
With respect to any amount to be applied to the Delayed Draw Term
Loans:
first, to permanently reduce the unused portion, if any, of
the Delayed Draw Term Loan Commitments to the full extent thereof; and
second, to the remaining Installments of the Delayed Draw
Term Loans on a pro rata basis.
With respect to any amount to be applied to the Term Loans, to
the outstanding Installments of the Term Loans on a pro rata basis to each such
Installment.
Waivable Mandatory Prepayment. Anything contained herein to the
-----------------------------
contrary notwithstanding, so long as any Delayed Draw Term Loans are
outstanding, in the event Company is required to make any mandatory prepayment
(a "Waivable Mandatory Prepayment") of the Term Loans, not less than five
Business Days prior to the date (the "Required Prepayment Date") on which
Company is required to make such Waivable Mandatory Prepayment, Company shall
notify Administrative Agent of the amount of such prepayment, and Administrative
Agent will promptly thereafter notify each Lender holding an outstanding Term
Loan of the amount of such Lender's Pro Rata Share of such Waivable Mandatory
Prepayment and such Lender's option to waive such prepayment. Each such Lender
may exercise such option by giving written notice to Company and Administrative
Agent of its election to do so on or before the third Business Day prior to the
Required Prepayment Date (it being understood that any Lender that does not
notify Company and Administrative Agent of its election to exercise such option
on or before the third Business Day prior to the Required Prepayment Date shall
be deemed to have elected, as of such date, not to exercise such option). On the
Required Prepayment Date, Company shall pay to Administrative Agent the amount
of the Waivable Mandatory Prepayment, which amount shall be applied (i) in an
amount equal to that portion of the Waivable Mandatory Prepayment payable to
those Lenders that have elected not to exercise such option, to prepay the Term
Loans of such Lenders (which prepayment shall be applied to the scheduled
Installments of principal of the Term Loans in accordance with Section
2.15(b)(iii)), and (ii) in an amount equal to that portion of the Waivable
Mandatory Prepayment otherwise payable to those Lenders that have elected to
exercise such option, to prepay the Delayed Draw Term Loans (which prepayment
shall be applied to the Delayed Draw Term Loan Commitments and/or the
Installments of the Delayed Draw Term Loans, as the case may be, in accordance
with
59
<PAGE>
Section 2.15(b)(ii).
Application of Prepayments of Loans to Base Rate Loans and Eurodollar
---------------------------------------------------------------------
Rate Loans. Considering each Class of Loans being prepaid separately, any
- ----------
prepayment thereof shall be applied first to Base Rate Loans to the full extent
thereof before application to Eurodollar Rate Loans, in each case in a manner
which minimizes the amount of any payments required to be made by Company
pursuant to Section 2.18(c).
Prepayment Premium. Notwithstanding anything herein to the contrary,
------------------
upon any prepayment of any Term Loan pursuant to Section 2.13, 2.14 or 8.1 on or
prior to the second anniversary of the Closing Date, Company shall also pay to
Administrative Agent, for the account of the holders of the Term Loans then
being prepaid, an amount equal to (i) the aggregate principal amount of such
Term Loans, times (ii) the Applicable Prepayment Premium Percentage (such
amount, the "Prepayment Premium") determined as of such date of prepayment. Any
payment of the Prepayment Premium shall be in addition to, and not in limitation
of, any other amount payable hereunder or under any other Credit Document in
connection with any prepayment of the Term Loans. Upon receipt thereof,
Administrative Agent shall promptly distribute each Prepayment Premium to each
applicable Lender pursuant to Section 2.16(c).
General Provisions Regarding Payments.
All payments by Company of principal, interest, fees and other
Obligations shall be made in Dollars in same day funds, without defense, setoff
or counterclaim, free of any restriction or condition, and delivered to
Administrative Agent not later than 12:00 p.m. (New York City time) on the date
due at Administrative Agent's Principal Office for the account of Lenders; funds
received by Administrative Agent after that time on such due date shall be
deemed to have been paid by Company on the next succeeding Business Day.
All payments in respect of the principal amount of any Loan shall
include payment of accrued interest on the principal amount being repaid or
prepaid interest , and all such payments (and, in any event, any payments in
respect of any Loan on a date when interest is due and payable with respect to
such Loan) shall be applied to the payment of interest before application to
principal.
Administrative Agent shall promptly distribute to each Lender at such
address as such Lender shall indicate in writing, such Lender's applicable Pro
Rata Share of all payments and prepayments of principal and interest due
hereunder, together with all other amounts due thereto, including, without
limitation, all fees payable with respect thereto, to the extent received by
Administrative Agent.
Notwithstanding the foregoing provisions hereof, if any
Conversion/Continuation Notice is withdrawn as to any Affected Lender or if any
Affected Lender makes Base Rate Loans
60
<PAGE>
in lieu of its Pro Rata Share of any Eurodollar Rate Loans, Administrative Agent
shall give effect thereto in apportioning payments received thereafter.
Subject to the provisos set forth in the definition of "Interest
Period", whenever any payment to be made hereunder shall be stated to be due on
a day that is not a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included in the
computation of the payment of interest or commitment fees hereunder.
Company hereby authorizes Administrative Agent to charge Company's
accounts with Administrative Agent in order to cause timely payment to be made
to Administrative Agent of all principal, interest, fees and expenses due
hereunder (subject to sufficient funds being available in its accounts for that
purpose).
Administrative Agent shall deem any payment by or on behalf of Company
hereunder that is not made in same day funds prior to 12:00 p.m. (New York City
time) to be a non-conforming payment. Any such payment shall not be deemed to
have been received by Administrative Agent until the later of (i) the time such
funds become available funds, and (ii) the applicable next Business Day.
Administrative Agent shall give prompt telephonic notice to Company and each
applicable Lender (confirmed in writing) if any payment is non-conforming. Any
non-conforming payment may constitute or become a Default or Event of Default in
accordance with the terms of Section 8.1(a). Interest shall continue to accrue
on any principal as to which a non-conforming payment is made until such funds
become available funds (but in no event less than the period from the date of
such payment to the next succeeding applicable Business Day) at the rate
determined pursuant to Section 2.10 from the date such amount was due and
payable until the date such amount is paid in full.
Ratable Sharing. Lenders hereby agree among themselves that, except as
otherwise provided in the Collateral Documents with respect to amounts realized
from the exercise of rights with respect to Liens on the Collateral, if any of
them shall, whether by voluntary payment (other than a voluntary prepayment of
Loans made and applied in accordance with the terms hereof), through the
exercise of any right of set-off or banker's lien, by counterclaim or cross
action or by the enforcement of any right under the Credit Documents or
otherwise, or as adequate protection of a deposit treated as cash collateral
under the Bankruptcy Code, receive payment or reduction of a proportion of the
aggregate amount of principal, interest, amounts payable in respect of Letters
of Credit, fees and other amounts then due and owing to such Lender hereunder or
under the other Credit Documents (collectively, the "Aggregate Amounts Due" to
such Lender) which is greater than the proportion received by any other Lender
in respect of the Aggregate Amounts Due to such other Lender, then the Lender
receiving such proportionately greater payment shall (a) notify Administrative
Agent and each other Lender of the receipt of such payment and (b) apply a
portion of such payment to purchase participations (which it shall be deemed to
have purchased from each seller of a participation simultaneously upon the
receipt by such seller of its portion of such payment) in the Aggregate
61
<PAGE>
Amounts Due to the other Lenders so that all such recoveries of Aggregate
Amounts Due shall be shared by all Lenders in proportion to the Aggregate
Amounts Due to them; provided, if all or part of such proportionately greater
--------
payment received by such purchasing Lender is thereafter recovered from such
Lender upon the bankruptcy or reorganization of Company or otherwise, those
purchases shall be rescinded and the purchase prices paid for such
participations shall be returned to such purchasing Lender ratably to the extent
of such recovery, but without interest. Company expressly consents to the
foregoing arrangement and agrees that any holder of a participation so purchased
may exercise any and all rights of banker's lien, set-off or counterclaim with
respect to any and all monies owing by Company to that holder with respect
thereto as fully as if that holder were owed the amount of the participation
held by that holder.
Making or Maintaining Eurodollar Rate Loans.
Inability to Determine Applicable Interest Rate. In the event that
-----------------------------------------------
Administrative Agent shall have determined (which determination shall be final
and conclusive and binding upon all parties hereto), on any Interest Rate
Determination Date with respect to any Eurodollar Rate Loans, that by reason of
circumstances affecting the London interbank market adequate and fair means do
not exist for ascertaining the interest rate applicable to such Loans on the
basis provided for in the definition of Adjusted Eurodollar Rate, Administrative
Agent shall on such date give notice (by telefacsimile or by telephone confirmed
in writing) to Company and each Lender of such determination, whereupon (i) no
Loans may be made as, or converted to, Eurodollar Rate Loans until such time as
Administrative Agent notifies Company and Lenders that the circumstances giving
rise to such notice no longer exist, and (ii) any Funding Notice or
Conversion/Continuation Notice given by Company with respect to the Loans in
respect of which such determination was made shall be deemed to be rescinded by
Company.
Illegality or Impracticability of Eurodollar Rate Loans. In the event
-------------------------------------------------------
that on any date any Lender shall have determined (which determination shall be
final and conclusive and binding upon all parties hereto but shall be made only
after consultation with Company and Administrative Agent) that (i) the making,
maintaining or continuation of its Eurodollar Rate Loans has become unlawful as
a result of compliance by such Lender in good faith with any law, treaty,
governmental rule, regulation, guideline or order (or would conflict with any
such treaty, governmental rule, regulation, guideline or order not having the
force of law even though the failure to comply therewith would not be unlawful);
(ii) adequate and fair means do not exist for ascertaining the applicable
interest rates by reference to which the Eurodollar Rate then being determined
is to be fixed; or (iii) Dollar deposits in the relevant amounts and for the
relevant Interest Period are not generally available to Lenders in the
eurodollar market at the Eurodollar Rate, then, and in any such event, such
Lender shall be an "Affected Lender" and it shall on that day give notice (by
telefacsimile or by telephone confirmed in writing) to Company and
Administrative Agent of such determination (which notice Administrative Agent
shall promptly transmit to each other Lender). Thereafter (1) the obligation of
the Affected Lender to make
62
<PAGE>
Loans as, or to convert Loans to, Eurodollar Rate Loans shall be suspended until
such notice shall be withdrawn by the Affected Lender, (2) to the extent such
determination by the Affected Lender relates to a Eurodollar Rate Loan then
being requested by Company pursuant to a Funding Notice or a
Conversion/Continuation Notice, the Affected Lender shall make such Loan as (or
continue such Loan as or convert such Loan to, as the case may be) a Base Rate
Loan, (3) the Affected Lender's obligation to maintain its outstanding
Eurodollar Rate Loans (the "Affected Loans") shall be terminated at the earlier
to occur of the expiration of the Interest Period then in effect with respect to
the Affected Loans or when required by law, and (4) the Affected Loans shall
automatically convert into Base Rate Loans on the date of such termination.
Notwithstanding the foregoing, to the extent a determination by an Affected
Lender as described above relates to a Eurodollar Rate Loan then being requested
by Company pursuant to a Funding Notice or a Conversion/Continuation Notice,
Company shall have the option, subject to the provisions of Section 2.18(c), to
rescind such Funding Notice or Conversion/Continuation Notice as to all Lenders
by giving notice (by telefacsimile or by telephone confirmed in writing) to
Administrative Agent of such rescission on the date on which the Affected Lender
gives notice of its determination as described above (which notice of rescission
Administrative Agent shall promptly transmit to each other Lender). Except as
provided in the immediately preceding sentence, nothing in this Section 2.18(b)
shall affect the obligation of any Lender other than an Affected Lender to make
or maintain Loans as, or to convert Loans to, Eurodollar Rate Loans in
accordance with the terms hereof.
Compensation for Breakage Costs. Company shall compensate each
-------------------------------
Lender, upon written request by such Lender (which request shall set forth the
basis for requesting such amounts), for all reasonable losses, expenses and
liabilities (including any interest paid by such Lender to lenders of funds
borrowed by it to make or carry its Eurodollar Rate Loans and any loss, expense
or liability sustained by such Lender in connection with the liquidation or re-
employment of such funds but excluding loss of anticipated profits and loss of
Applicable Margin) which such Lender may sustain: (i) if for any reason (other
than a default by such Lender) a borrowing of any Eurodollar Rate Loan does not
occur on a date specified therefor in a Funding Notice or a telephonic request
for borrowing, or a conversion to or continuation of any Eurodollar Rate Loan
does not occur on a date specified therefor in a Conversion/Continuation Notice
or a telephonic request for conversion or continuation; (ii) if any prepayment
or other principal payment or any conversion of any of its Eurodollar Rate Loans
occurs on a date prior to the last day of an Interest Period applicable to that
Loan; (iii) if any prepayment of any of its Eurodollar Rate Loans is not made on
any date specified in a notice of prepayment given by Company; or (iv) as a
consequence of any other default by Company in the repayment of its Eurodollar
Rate Loans when required by the terms hereof.
Booking of Eurodollar Rate Loans. Any Lender may make, carry or
--------------------------------
transfer Eurodollar Rate Loans at, to, or for the account of any of its branch
offices or the office of an Affiliate of such Lender.
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Assumptions Concerning Funding of Eurodollar Rate Loans. Calculation
-------------------------------------------------------
of all amounts payable to a Lender under this Section 2.18 and under Section
2.19 shall be made as though such Lender had actually funded each of its
relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit
bearing interest at the rate obtained pursuant to clause (i) of the definition
of Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar
Rate Loan and having a maturity comparable to the relevant Interest Period and
through the transfer of such Eurodollar deposit from an offshore office of such
Lender to a domestic office of such Lender in the United States of America;
provided, however, each Lender may fund each of its Eurodollar Rate Loans in any
- -------- -------
manner it sees fit and the foregoing assumptions shall be utilized only for the
purposes of calculating amounts payable under this Section 2.18 and under
Section 2.19.
Increased Costs; Capital Adequacy.
Compensation For Increased Costs and Taxes. Subject to the provisions
------------------------------------------
of Section 2.20 (which shall be controlling with respect to the matters covered
thereby), in the event that any Lender (which term shall include Issuing Bank
for purposes of this Section 2.19(a)) shall determine (which determination
shall, absent manifest error, be final and conclusive and binding upon all
parties hereto) that any law, treaty or governmental rule, regulation or order,
or any change therein or in the interpretation, administration or application
thereof (including the introduction of any new law, treaty or governmental rule,
regulation or order), or any determination of a court or governmental authority,
in each case that becomes effective after the date hereof, or compliance by such
Lender with any guideline, request or directive issued or made after the date
hereof by any central bank or other governmental or quasi-governmental authority
(whether or not having the force of law): (i) subjects such Lender (or its
applicable lending office, or with respect to Issuing Bank, its Principal
Office) to any additional Tax (other than any Tax on the overall net income of
such Lender) with respect to this Agreement or any of its obligations hereunder
or any payments to such Lender (or its applicable lending office, or with
respect to Issuing Bank, its Principal Office) of principal, interest, fees or
any other amount payable hereunder; (ii) imposes, modifies or holds applicable
any reserve (including any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement against assets held by, or deposits or other liabilities in or for
the account of, or advances or loans by, or other credit extended by, or any
other acquisition of funds by, any office of such Lender (other than any such
reserve or other requirements with respect to Eurodollar Rate Loans that are
reflected in the definition of Adjusted Eurodollar Rate); or (iii) imposes any
other condition (other than with respect to a Tax matter) on or affecting such
Lender (or its applicable lending office, or with respect to Issuing Bank, its
Principal Office) or its obligations hereunder or the London interbank market;
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining Loans hereunder or to reduce any amount
received or receivable by such Lender (or its applicable lending office, or with
respect to Issuing Bank, its Principal Office) with respect thereto; then, in
any such case, Company shall promptly pay to such Lender, upon receipt of the
statement
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referred to in the next sentence, such additional amount or amounts (in the form
of an increased rate of, or a different method of calculating, interest or
otherwise as such Lender in its sole discretion shall determine) as may be
necessary to compensate such Lender for any such increased cost or reduction in
amounts received or receivable hereunder. Such Lender shall deliver to Company
(with a copy to Administrative Agent) a written statement, setting forth in
reasonable detail the basis for calculating the additional amounts owed to such
Lender under this Section 2.19(a), which statement shall be conclusive and
binding upon all parties hereto absent manifest error.
Capital Adequacy Adjustment. In the event that any Lender (which term
---------------------------
shall include Issuing Bank for purposes of this Section 2.19(b)) shall have
determined that the adoption, effectiveness, phase-in or applicability after the
Closing Date of any law, rule or regulation (or any provision thereof) regarding
capital adequacy, or any change therein or in the interpretation or
administration thereof by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or its applicable lending office, or with respect to Issuing
Bank, its Principal Office) with any guideline, request or directive regarding
capital adequacy (whether or not having the force of law) of any such
Governmental Authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on the capital of such Lender or any
corporation controlling such Lender as a consequence of, or with reference to,
such Lender's Loans or Commitments or Letters of Credit, or participations
therein or other obligations hereunder with respect to the Loans or the Letters
of Credit to a level below that which such Lender or such controlling
corporation could have achieved but for such adoption, effectiveness, phase-in,
applicability, change or compliance (taking into consideration the policies of
such Lender or such controlling corporation with regard to capital adequacy),
then from time to time, within five Business Days after receipt by Company from
such Lender of the statement referred to in the next sentence, Company shall pay
to such Lender such additional amount or amounts as will compensate such Lender
or such controlling corporation on an after-tax basis for such reduction. Such
Lender shall deliver to Company (with a copy to Administrative Agent) a written
statement, setting forth in reasonable detail the basis for calculating the
additional amounts owed to Lender under this Section 2.19(b), which statement
shall be conclusive and binding upon all parties hereto absent manifest error.
Any demand for payment to be given by a Lender under Section 2.19 shall be
effective only if given within one hundred eighty (180) days of an officer of
such Lender having knowledge of the facts giving rise to the right to make
demand.
Taxes; Withholding, etc.
Payments to Be Free and Clear. All sums payable by any Credit Party
-----------------------------
hereunder and under the other Credit Documents shall (except to the extent
required by law) be paid free and clear of, and without any deduction or
withholding on account of, any Tax (other than a Tax
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on the overall net income of any Lender) imposed, levied, collected, withheld or
assessed by or within the United States of America or any political subdivision
in or of the United States of America or any other jurisdiction from or to which
a payment is made by or on behalf of any Credit Party or by any federation or
organization of which the United States of America or any such jurisdiction is a
member at the time of payment.
Withholding of Taxes. If any Credit Party or any other Person is
--------------------
required by law to make any deduction or withholding on account of any such Tax
from any sum paid or payable by any Credit Party to Administrative Agent or any
Lender (which term shall include Issuing Bank for purposes of this Section
2.20(b)) under any of the Credit Documents: (i) Company shall notify
Administrative Agent of any such requirement or any change in any such
requirement as soon as Company becomes aware of it; (ii) Company shall pay any
such Tax before the date on which penalties attach thereto, such payment to be
made (if the liability to pay is imposed on any Credit Party) for its own
account or (if that liability is imposed on Administrative Agent or such Lender,
as the case may be) on behalf of and in the name of Administrative Agent or such
Lender; (iii) the sum payable by such Credit Party in respect of which the
relevant deduction, withholding or payment is required shall be increased to the
extent necessary to ensure that, after the making of that deduction, withholding
or payment, Administrative Agent or such Lender, as the case may be, receives on
the due date a net sum equal to what it would have received had no such
deduction, withholding or payment been required or made; and (iv) within a
reasonable period after paying any sum from which it is required by law to make
any deduction or withholding, and within a reasonable period after the due date
of payment of any Tax which it is required by clause (ii) above to pay, Company
shall deliver to Administrative Agent evidence satisfactory to the other
affected parties of such deduction, withholding or payment and of the remittance
thereof to the relevant taxing or other authority; provided, no such additional
amount shall be required to be paid to any Lender under clause (iii) above
except to the extent that any change after the date hereof (in the case of each
Lender listed on the signature pages hereof on the Closing Date) or after the
effective date of the Assignment Agreement pursuant to which such Lender became
a Lender (in the case of each other Lender) in any such requirement for a
deduction, withholding or payment as is mentioned therein shall result in an
increase in the rate of such deduction, withholding or payment from that in
effect at the date hereof or at the date of such Assignment Agreement, as the
case may be, in respect of payments to such Lender.
Evidence of Exemption From U.S. Withholding Tax. Each Lender that is
-----------------------------------------------
not a United States Person (as such term is defined in Section 7701(a)(30) of
the IRC) for U.S. federal income tax purposes (a "Non-US Lender") shall deliver
to Administrative Agent for transmission to Company, on or prior to the Closing
Date (in the case of each Lender listed on the signature pages hereof on the
Closing Date) or on or prior to the date of the Assignment Agreement pursuant to
which it becomes a Lender (in the case of each other Lender), and at such other
times as may be necessary in the determination of Company or Administrative
Agent (each in the reasonable exercise of its discretion), (i) two original
copies of IRS Form W-8BEN or W-8ECI (or any successor forms), properly completed
and duly executed by such Lender, and such
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other documentation required under the IRC and reasonably requested by Company
to establish that such Lender is not subject to deduction or withholding of
United States federal income tax with respect to any payments to such Lender of
principal, interest, fees or other amounts payable under any of the Credit
Documents, or (ii) if such Lender is not a "bank" or other Person described in
Section 881(c)(3) of the IRC and cannot deliver either IRS Form W-8BEN or W-8ECI
pursuant to clause (i) above, a Certificate re Non-Bank Status together with two
original copies of IRS Form W-8 (or any successor form), properly completed and
duly executed by such Lender, and such other documentation required under the
IRC and reasonably requested by Company to establish that such Lender is not
subject to deduction or withholding of United States federal income tax with
respect to any payments to such Lender of interest payable under any of the
Credit Documents. Each Lender required to deliver any forms, certificates or
other evidence with respect to United States federal income tax withholding
matters pursuant to this Section 2.20(c) hereby agrees, from time to time after
the initial delivery by such Lender of such forms, certificates or other
evidence, whenever a lapse in time or change in circumstances renders such
forms, certificates or other evidence obsolete or inaccurate in any material
respect, that such Lender shall promptly deliver to Administrative Agent for
transmission to Company two new original copies of IRS Form W-8BEN or W-8ECI ,
or a Certificate re Non-Bank Status and two original copies of IRS Form W-8, as
the case may be, properly completed and duly executed by such Lender, and such
other documentation required under the IRC and reasonably requested by Company
to confirm or establish that such Lender is not subject to deduction or
withholding of United States federal income tax with respect to payments to such
Lender under the Credit Documents, or notify Administrative Agent and Company of
its inability to deliver any such forms, certificates or other evidence. Company
shall not be required to pay any additional amount to any Non-US Lender under
Section 2.20(b)(iii) if such Lender shall have failed to deliver the forms,
certificates or other evidence referred to in the second sentence of this
Section 2.20(c), or (2) to notify Administrative Agent and Company of its
inability to deliver any such forms, certificates or other evidence, as the case
may be; provided, if such Lender shall have satisfied the requirements of the
--------
first sentence of this Section 2.20(c) on the Closing Date or on the date of the
Assignment Agreement pursuant to which it became a Lender, as applicable,
nothing in this last sentence of Section 2.20(c) shall relieve Company of its
obligation to pay any additional amounts pursuant to Section 2.19(a) in the
event that, as a result of any change in any applicable law, treaty or
governmental rule, regulation or order, or any change in the interpretation,
administration or application thereof, such Lender is no longer properly
entitled to deliver forms, certificates or other evidence at a subsequent date
establishing the fact that such Lender is not subject to withholding as
described herein.
Tax Savings. If Company pays any additional amount under this Section
-----------
2.20 and, as a result, any Lender, together with Administrative Agent,
subsequently, in their sole discretion and based on their own interpretation of
any relevant laws (but acting in good faith) receive or are granted a final and
non-appealable credit against or deduction from or in respect of any tax payable
by such Lender, or obtain any other final and non-appealable relief in respect
of any tax, which in the opinion of such Lender and Administrative Agent, acting
in good faith, is
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both reasonably identifiable and quantifiable by them without requiring any
Lender, Administrative Agent or their professional advisers to expend a material
amount of time or incur a material cost in so identifying or quantifying (any of
the foregoing, to the extent so reasonably identifiable and quantifiable, being
referred to as a "Saving"), such Lender shall, to the extent that it can do so
without prejudice to the retention of the Saving, reimburse Company promptly
after such identification and quantification with the amount of such Saving;
provided, however, that any such Saving shall be reduced by any costs incurred
by such Lender or Administrative Agent in obtaining such Saving.
No Disclosure, Etc. Nothing in this Section 2.20 shall require any
-------------------
Lender to disclose to any Person any information regarding its tax affairs or to
arrange its tax and other affairs in any particular manner.
Obligation to Mitigate. Each Lender (which term shall include Issuing Bank
for purposes of this Section 2.21) agrees that, as promptly as practicable after
the officer of such Lender responsible for administering its Commitments, Loans
or Letters of Credit, as the case may be, becomes aware of the occurrence of an
event or the existence of a condition that would cause such Lender to become an
Affected Lender or that would entitle such Lender to receive payments under
Section 2.18, 2.19 or 2.20, it will, to the extent not inconsistent with the
internal policies of such Lender and any applicable legal or regulatory
restrictions, use reasonable efforts (a) to make, issue, fund or maintain its
Credit Extensions, including any Affected Loans, through another office of such
Lender, or (b) take such other measures as such Lender may deem reasonable, if
as a result thereof the circumstances which would cause such Lender to be an
Affected Lender would cease to exist or the additional amounts which would
otherwise be required to be paid to such Lender pursuant to Section 2.18, 2.19
or 2.20 would be materially reduced and if, as determined by such Lender in its
sole discretion, the making, issuing, funding or maintaining of such
Commitments, Loans or Letters of Credit through such other office or in
accordance with such other measures, as the case may be, would not otherwise
adversely affect such Commitments, Loans or Letters of Credit or the interests
of such Lender; provided, such Lender will not be obligated to utilize such
--------
other office pursuant to this Section 2.21 unless Company agrees to pay all
incremental expenses incurred by such Lender as a result of utilizing such other
office as described in clause (a) above. A certificate as to the amount of any
such expenses payable by Company pursuant to this Section 2.21 (setting forth in
reasonable detail the basis for requesting such amount) submitted by such Lender
to Company (with a copy to Administrative Agent) shall be conclusive absent
manifest error.
Defaulting Lenders. Anything contained herein to the contrary
notwithstanding, in the event that any Lender, at the direction or request of
any regulatory agency or authority, defaults (a "Defaulting Lender") in its
obligation to fund (a "Funding Default") any Revolving Loan or any Delayed Draw
Term Loan or its portion of any unreimbursed payment under Section 2.3(c) or
2.4(e) (in each case, a "Defaulted Loan"), then (a) during any Default Period
with respect to such Defaulting Lender, such Defaulting Lender shall be deemed
not to be a
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"Lender" for purposes of voting on any matters (including the granting of any
consents or waivers) with respect to any of the Credit Documents; (b) to the
extent permitted by applicable law, until such time as the Default Excess with
respect to such Defaulting Lender shall have been reduced to zero, (i) any
voluntary prepayment of the Revolving Loans or Delayed Draw Term Loans, as the
case may be, shall, if Company so directs at the time of making such voluntary
prepayment, be applied to the Revolving Loans or the Delayed Draw Term Loans, as
applicable, of other Lenders as if such Defaulting Lender had no Revolving Loans
or Delayed Draw Term Loans, as applicable, outstanding and the Revolving Credit
Exposure or Delayed Draw Term Loan Exposure, as applicable, of such Defaulting
Lender were zero, and (ii) any mandatory prepayment of the Revolving Loans or
Delayed Draw Term Loans, as the case may be, shall, if Company so directs at the
time of making such mandatory prepayment, be applied to the Revolving Loans or
Delayed Draw Term Loans, as applicable, of other Lenders (but not to the
Revolving Loans or Delayed Draw Term Loans, as applicable, of such Defaulting
Lender) as if such Defaulting Lender had funded all Defaulted Loans of such
Defaulting Lender, it being understood and agreed that Company shall be entitled
to retain any portion of any mandatory prepayment of the Revolving Loans or
Delayed Draw Term Loans, as the case may be, that is not paid to such Defaulting
Lender solely as a result of the operation of the provisions of this clause (b);
(c) such Defaulting Lender's Revolving Credit Commitment or Delayed Draw Term
Loan Commitment, as the case may be, and outstanding Revolving Loans and such
Defaulting Lender's Pro Rata Share of the Letter of Credit Usage or Delayed Draw
Term Loans, as applicable, shall be excluded for purposes of calculating the
commitment fees payable to Lenders in respect of any day during any Default
Period with respect to such Defaulting Lender, and such Defaulting Lender shall
not be entitled to receive any commitment fee pursuant to Section 2.11(a)(i) or
2.11(a)(ii), as applicable, with respect to such Defaulting Lender's Revolving
Credit Commitment or Delayed Draw Term Loan Commitment, as applicable, in
respect of any Default Period with respect to such Defaulting Lender; and (d)
the Total Utilization of Revolving Credit Commitments and the Total Utilization
of Delayed Draw Term Loan Commitments, as the case may be, as at any date of
determination shall be calculated as if such Defaulting Lender had funded all
Defaulted Loans of such Defaulting Lender. No Revolving Credit Commitment or
Delayed Draw Term Loan Commitment, as the case may be, of any Lender shall be
increased or otherwise affected, and, except as otherwise expressly provided in
this Section 2.22, performance by Company of its obligations hereunder and the
other Credit Documents shall not be excused or otherwise modified as a result of
any Funding Default or the operation of this Section 2.22. The rights and
remedies against a Defaulting Lender under this Section 2.22 are in addition to
other rights and remedies which Company may have against such Defaulting Lender
with respect to any Funding Default and which Administrative Agent or any Lender
may have against such Defaulting Lender with respect to any Funding Default.
Removal or Replacement of a Lender. Anything contained herein to the
contrary notwithstanding, in the event that: (a) any Lender (an "Increased-Cost
Lender") shall give notice to Company that such Lender is an Affected Lender or
that such Lender is entitled to receive payments under Section 2.18, 2.19 or
2.20, the circumstances which
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have caused such Lender to be an Affected Lender or which entitle such Lender to
receive such payments shall remain in effect, and such Lender shall fail to
withdraw such notice within five Business Days after Company's request for such
withdrawal; or (b) any Lender shall become a Defaulting Lender, the Default
Period for such Defaulting Lender shall remain in effect, and such Defaulting
Lender shall fail to cure the default as a result of which it has become a
Defaulting Lender within five Business Days after Company's request that it cure
such default; or (c) in connection with any proposed amendment, modification,
termination, waiver or consent with respect to any of the provisions hereof as
contemplated by Section 10.5(b), the consent of Requisite Lenders shall have
been obtained but the consent of one or more of such other Lenders (each a "Non-
Consenting Lender") whose consent is required shall not have been obtained;
then, with respect to each such Increased-Cost Lender, Defaulting Lender or Non-
Consenting Lender (the "Terminated Lender"), Company may, by giving written
notice to Administrative Agent and any Terminated Lender of its election to do
so, elect to cause such Terminated Lender (and such Terminated Lender hereby
irrevocably agrees) to assign its outstanding Loans and its Revolving Credit
Commitments or Delayed Draw Term Loan Commitments, if any, in full to one or
more Eligible Assignees (each a "Replacement Lender") in accordance with the
provisions of Section 10.6 and Terminated Lender shall pay any fees payable
thereunder in connection with such assignment; provided, (i) on the date of such
--------
assignment, the Replacement Lender shall pay to Terminated Lender an amount
equal to the sum of (1) an amount equal to the principal of, and all accrued
interest on, all outstanding Loans of the Terminated Lender, (2) an amount equal
to all unreimbursed drawing that have been funded by such Terminated Lender,
together with all then unpaid interest with respect thereto at such time and (3)
an amount equal to all accrued, but theretofore unpaid fees owing to such
Terminated Lender pursuant to Section 2.11; (ii) on the date of such assignment,
Company shall pay any amounts payable to such Terminated Lender pursuant to
Section 2.18(c), 2.19 or 2.20 or otherwise as if it were a prepayment; and (iii)
in the event such Terminated Lender is a Non-Consenting Lender, each Replacement
Lender shall consent, at the time of such assignment, to each matter in respect
of which such Terminated Lender was a Non-Consenting Lender; provided, Company
--------
may not make such election with respect to any Terminated Lender that is also an
Issuing Bank unless, prior to the effectiveness of such election, Company shall
have caused each outstanding Letter of Credit issued thereby to be cancelled.
Upon the prepayment of all amounts owing to any Terminated Lender and the
termination of such Terminated Lender's Revolving Credit Commitments or Delayed
Draw Term Loan Commitments, if any, such Terminated Lender shall no longer
constitute a "Lender" for purposes hereof; provided, any rights of such
--------
Terminated Lender to indemnification hereunder shall survive as to such
Terminated Lender.
Incremental Facility Commitments and Loans.
Incremental Facility Commitments. Company may elect to increase the
--------------------------------
Commitments by an aggregate amount not in excess of the Incremental Facility
Maximum Amount as follows:
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with respect to the Revolving Credit Commitments, by not less
than $25,000,000 (or such lesser amount as Company and Incremental Facility
Syndication Agent shall agree) and in integral multiples of $5,000,000 in excess
thereof (such increase, the "Incremental Facility Revolving Credit
Commitments");
with respect to the Delayed Draw Term Loan Commitments, by not
less than $25,000,000 (or such lesser amount as Company and Incremental Facility
Syndication Agent shall agree) and in integral multiples of $5,000,000 (such
increase, the "Incremental Facility Delayed Draw Term Loan Commitments"); and
with respect to the Term Loan Commitments, by not less than
$25,000,000 (or such lesser amount as Company and Incremental Facility
Syndication Agent shall agree) and in integral multiples of $5,000,000 (such
increase, the "Incremental Facility Term Loan Commitments"; and together with
the Incremental Facility Revolving Credit Commitments and the Incremental
Facility Delayed Draw Commitments, the "Incremental Facility Commitments").
Incremental Facility Mechanics. In order to make the election set
------------------------------
forth in Section 2.24(a), Company shall deliver to Administrative Agent an
Incremental Facility Notice setting forth the following:
the date (each, an "Incremental Facility Effective Date"), which
shall be not less than ten (10) Business Days after the date on which the
applicable Incremental Facility Notice is delivered to Administrative Agent, on
which Company proposes that the applicable Incremental Facility Commitment shall
be effective and, if applicable, that the Loans to be made pursuant to the
Incremental Facility Commitments (the "Incremental Facility Loans") shall be
made;
the identity of each Lender or other Person that meets the
requirements of an Eligible Assignee (each, an "Incremental Facility Lender") to
whom Company proposes any portion of the applicable Incremental Facility Credit
Commitments be allocated and the amounts of such allocations; and
if applicable, the aggregate principal amount of each Class of
Incremental Facility Loans to be made on the Incremental Facility Effective
Date.
Arrangement and Syndication. The Incremental Facility Commitments
---------------------------
shall be arranged and syndicated by GSCP in the capacity as lead arranger and
syndication agent with respect thereto (in such capacities, "Incremental
Facility Syndication Agent"), and Company shall pay to Incremental Facility
Syndication Agent such customary fees and expenses in connection with arranging,
syndicating and providing the Incremental Facility Commitments as
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may be necessary, in the reasonable judgment of Incremental Facility Syndication
Agent, to achieve a successful syndication thereof and no portion of such fees
shall be allocable to any persons other than Incremental Facility Syndication
Agent and those persons providing the Incremental Facility Commitments.
Notwithstanding anything in this Agreement to the contrary, Incremental Facility
Syndication Agent shall be entitled to the benefits of Section 9 as if it were
named therein. Any Lender given the option to participate in any Incremental
Facility Commitment may elect or decline, in its sole discretion, to provide
such Incremental Facility Commitment.
Conditions to Incremental Facility Amounts. Any Incremental Facility
------------------------------------------
Commitments shall become effective and, if applicable, any Incremental Facility
Loans shall be made as of the applicable Incremental Facility Effective Date
subject to the following conditions:
no Default or Event of Default shall exist as of such date before
or after giving effect to such Incremental Facility Commitments;
Parent Guarantor and its Subsidiaries shall be in pro forma
compliance with each of the covenants set forth in Section 6.7 as of the last
day of the most recently ended fiscal quarter after giving effect to such
Incremental Facility Loans;
both before and after giving effect to the making of any
Incremental Facility Loans, each of the conditions set forth in Section 3.2
shall be satisfied;
each increase in the Commitments shall be effected pursuant to
one or more joinder agreements, in each case in form and substance reasonably
satisfactory to Administrative Agent, and executed by each Credit Party and each
Incremental Facility Lender and delivered to Administrative Agent and recorded
in the Register;
Company shall make any payments required pursuant to Section
2.18(c); and
Company shall deliver or cause to be delivered any legal opinions
or other documents reasonably requested by Administrative Agent in connection
with any such transaction.
Incremental Facility Revolving Loans. On any Incremental Facility
------------------------------------
Effective Date on which the Incremental Facility Revolving Credit Commitments
are effected, subject to the satisfaction of the foregoing terms and conditions:
each of the Revolving Lenders shall assign to each person holding
an Incremental Facility Revolving Credit Commitment (each, an "Incremental
Facility Revolving Lender"), and each such Person shall purchase from each of
the Revolving Lenders, at the
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principal amount thereof (together with accrued interest), such interests in the
Revolving Loans outstanding on such Incremental Facility Effective Date as shall
be necessary in order that, after giving effect to all such assignments and
purchases, such Revolving Loans will be held by Revolving Lenders and
Incremental Facility Revolving Lenders ratably in accordance with their
Revolving Credit Commitments after giving effect to the addition of such
Incremental Facility Revolving Credit Commitments to the Revolving Commitments;
each Incremental Facility Revolving Credit Commitment shall be
deemed, for all purposes hereof a Revolving Credit Commitment and each Loan made
thereunder shall be deemed, for all purposes, a Revolving Loan; and
each Incremental Facility Revolving Lender shall become a Lender
hereunder with respect to the Incremental Facility Revolving Credit Commitments
and all matters relating thereto.
Incremental Facility Delayed Draw Term Loans. On any Incremental
--------------------------------------------
Facility Effective Date on which Incremental Facility Delayed Draw Term Loan
Commitments are effected, subject to the satisfaction of the foregoing terms and
conditions:
each Person holding an Incremental Facility Delayed Draw Term
Loan Commitment (each, an "Incremental Facility Delayed Draw Term Loan Lender")
shall make Delayed Draw Term Loans to Company in an amount equal to its
Incremental Facility Delayed Draw Term Loan Commitment
each such Loan shall be deemed for all purposes, a Delayed Draw
Term Loan; and
each Incremental Facility Delayed Draw Term Loan Lender shall
become a Lender hereunder with respect to the Incremental Facility Delayed Draw
Term Loan Commitments.
Incremental Facility Term Loans. On any Incremental Facility
-------------------------------
Effective Date on which Incremental Facility Term Loan Commitments are effected,
subject to the satisfaction of the foregoing terms and conditions:
each Person holding an Incremental Facility Term Loan Commitment
(each, an "Incremental Facility Term Loan Lender") shall make Term Loans to
Company in an amount equal to its Incremental Facility Term Loan Commitment
each such Loan shall be deemed for all purposes, a Term Loan; and
each Incremental Facility Term Loan Lender shall become a Lender
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hereunder with respect to the Incremental Facility Term Loan Commitments.
Effect of Incremental Facility Amounts. Administrative Agent shall
--------------------------------------
notify the Lenders promptly upon receipt of Company's notice of each Incremental
Facility Effective Date and in respect thereof the Incremental Facility
Commitments, the Incremental Facility Loans, and the Incremental Facility
Lenders, and, in the case of each notice to any Revolving Lender, the respective
interests in such Revolving Lender's Revolving Loans subject to the assignments
contemplated by this subsection. Except as otherwise may be agreed upon by
Company, Incremental Facility Syndication Agent and the applicable Class of
Incremental Facility Lenders, the terms and provisions of the Incremental
Facility Commitments and the Incremental Facility Loans shall be identical to
the Class of Commitments or Loans being increased.
REPRESENTATIONS AND WARRANTIES
In order to induce Lenders and Issuing Bank to enter into this Agreement
and to make each Credit Extension to be made thereby, each Credit Party
represents and warrants to each Lender and Issuing Bank, on the Closing Date and
on each Credit Date, that the following statements are true and correct:
Organization; Powers.
Such Credit Party (i) is a corporation or limited liability company
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization and (ii) is qualified to do business in the
jurisdiction in which its principal place of business is located and in every
other jurisdiction where such qualification is necessary except where a failure
to so qualify is not reasonably expected to have a Material Adverse Effect;
such Credit Party has the power and authority to own its properties,
to carry on its business as now conducted; and
such Credit Party has the power and the authority to enter into each
Credit Document to which it is a party and to carry out the transactions
contemplated thereby.
Corporate Authorization. The execution, delivery and performance of this
Agreement and the other Credit Documents to which such Credit Party is a party:
have been duly authorized by such Credit Party's Board of Directors or
managers and, if necessary, such Credit Party's stockholders or members;
(i) do not violate (1) any existing provision of law applicable to
such Credit Party and not immaterial to its business, (2) such Credit Party's
Organizational Documents, or (3) any
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applicable order of any court or other governmental agency, and (ii) do not
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any indenture, agreement for borrowed money, bond,
note or other similar instrument or any other material agreement to which such
Credit Party is a party or by which such Credit Party or any of such Credit
Party's property is bound;
do not result in the creation or imposition of any Lien of any nature
whatsoever upon any property or assets of such Credit Party other than the Liens
granted pursuant to this Loan Agreement or the other Credit Documents;
constitute legal, valid and binding obligations of such Credit Party,
enforceable against such Credit Party in accordance with their respective terms;
and
do not, as of the date of execution hereof, require any governmental
consent, filing, registration or approval other than any consent, filing,
registration or approval that have been made to the extent required by
applicable law, order, rule or regulations; provided, the failure of any such
consent or approval to be obtained or filing or registration to be made or
otherwise be effective shall not affect the validity or enforceability of the
Credit Documents or otherwise be adverse in any respect to any Agent or Lender.
Financial Statements. Company has furnished to Agents and Lenders (a) the
audited consolidated financial statements of Parent Guarantor and its
Subsidiaries dated as of, and covering the fiscal year ended, December 31, 1998
and (b) the unaudited financial statements of Parent Guarantor and its
Subsidiaries as at the most recently ended fiscal quarter, consisting of a
balance sheet and the related consolidated statements of income, stockholders'
equity and cash flows for the nine-month period ending on September 30, 1999
((a) and (b) together, the "Financials"). As of the respective dates of the
Financials, (i) the Financials fairly represent Parent Guarantor's and its
Subsidiaries' financial position and results of operations; and (ii) there are
no omissions from the Financials or any other facts or circumstances not
reflected in the Financials which are or may be material according to GAAP. On
and as of the Closing Date, the Projections of Parent Guarantor and its
Subsidiaries for the period from the first day of fiscal year 1999 through and
including the last day of fiscal year 2006 (the "Projections") are based on good
faith estimates and assumptions made by the management of Parent Guarantor;
provided, the Projections are not to be viewed as facts and that actual results
- --------
during the period or periods covered by the Projections may differ from such
Projections and that the differences may be material; provided further, as of
----------------
the Closing Date, management of Parent Guarantor believed that the Projections
were reasonable and attainable.
No Material Adverse Change. Since December 31, 1998, no event or change
has occurred that has caused or evidences, either in any case or in the
aggregate, a Material Adverse Effect.
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Litigation. There are no actions, suits or proceedings at law or in equity
or by or before any Governmental Authority now pending or, to the knowledge of
such Credit Party, threatened, against or affecting such Credit Party or any
property or rights of such Credit Party as to which there is a reasonable
likelihood of an adverse determination and which, if adversely determined, would
individually or in the aggregate materially impair the right of any Credit Party
to carry on business substantially as now being conducted or as presently
contemplated or which is likely to result in any Material Adverse Effect.
Tax Returns. Such Credit Party has filed or caused to be filed all
material Federal, state and local tax returns that are required to be filed,
which returns are true, correct and complete in all material respects, and has
paid or caused to be paid all taxes that have become due or shown on any
assessment received by it to the extent that such taxes have become due, except
such taxes the amount, applicability or validity of which are being contested in
good faith by appropriate proceedings and with respect to which such Credit
Party shall have set aside on its books adequate reserves with respect to such
taxes as are required by GAAP.
No Defaults. Such Credit Party is not in default (a) with respect to any
judgment, writ, injunction, decree, rule or regulation of any Governmental
Authority, or (b) in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or instrument to
which such Credit Party is a party or by which any of its assets are bound
except, in the case of any matter otherwise included in clause (a) or (b), to
the extent such matter could not reasonably be expected to have a Material
Adverse Effect.
Properties. Each Credit Party has good, sufficient, legal title beneficial
to (in the case of fee interests in real property), valid leasehold interests in
(in the case of leasehold interests in real or personal property), or good and
sufficient title to (in the case of all other personal property), all of their
respective properties and assets reflected in the Financials, except for assets
disposed of since the date of such financial statements in the ordinary course
of business or as otherwise permitted under Section 6.9. Except for permitted
Liens, all such properties and assets are free and clear of Liens.
Collateral.
The execution and delivery of the Collateral Documents by Credit
Parties, together with the actions taken on or prior to the date hereof pursuant
to Section 4.1(g), are effective to create in favor of Administrative Agent for
the benefit of Lenders, as security for the Obligations, a valid and perfected
first priority Lien on all of the Collateral, and all filings and other actions
necessary or desirable to perfect and maintain the perfection and first priority
status of such Liens have been duly made or taken and remain in full force and
effect, other than the filing of any UCC financing statements delivered to
Administrative Agent for filing (but not yet filed) and the periodic filing of
UCC continuation statements in respect of UCC financing statements filed by or
on behalf of Administrative Agent and actions necessary with respect to
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perfection of security interests not governed by the Uniform Commercial Code.
No authorization, approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for
either the pledge or grant by any Credit Party of the Liens purported to be
created in favor of Administrative Agent pursuant to any of the Collateral
Documents or the exercise by Administrative Agent of any rights or remedies in
respect of any Collateral (whether specifically granted or created pursuant to
any of the Collateral Documents or created or provided for by applicable law),
except for filings or recordings contemplated by Sections 4.1(g)(ii) and
4.1(g)(iii) and except as may be required, in connection with the disposition of
any Investment Property, by laws generally affecting the offering and sale of
securities.
Except with respect to any Permitted Lien and such as may have been
filed in favor of Administrative Agent as contemplated by Section 4.1(g), no
effective UCC financing statement, fixture filing or other instrument similar in
effect covering all or any part of the Collateral is on file in any filing or
recording office.
All information supplied to Administrative Agent by or on behalf of
any Credit Party with respect to any of the Collateral (in each case taken as a
whole with respect to any particular Collateral) is accurate and complete in all
material respects.
Licenses, Material Agreements, Intellectual Property.
Such Credit Party has obtained all approvals of any Governmental
Authority having jurisdiction over such Credit Party, which approvals are
necessary or appropriate for the construction and operation of the Systems as
are presently operating, to the extent such approvals are required to be
obtained currently. Such Governmental Approvals and approvals are listed on
Schedule 3.10(a) and constitute the only licenses, permits or franchises of any
Governmental Authority required in connection with the Systems as are presently
operating. All Governmental Approvals of such Credit Party are in full force
and effect, are duly issued in the name of, or validly assigned to, such Credit
Party and such Credit Party has the power and authority to operate thereunder.
Schedule 3.10(b) accurately and completely lists all material
agreements to which such Credit Party is a party as of the Closing Date,
including, without limitation, all purchase agreements, construction contracts,
right of way or right of occupancy agreements, lease agreements, consulting,
employment, management and related agreements. All of the foregoing agreements
are valid, subsisting and in full force and effect and none of such Credit
Party, or any other parties, are in default thereunder in any material respect.
Such Credit Party has given true and complete copies of all such agreements to
the Agents and the Lenders.
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Such Credit Party owns or possesses all the Intellectual Property
necessary for the conduct of its business as presently conducted without any
known conflict with the rights of others except where such conflict is not
reasonably expected to have a Material Adverse Effect. Schedule 2.1(b) of the
Pledge and Security Agreement accurately and completely lists all Intellectual
Property owned or possessed by or licensed to such Credit Party.
Compliance With Laws. The operations of such Credit Party comply with all
applicable federal, state or local laws and regulations, including, without
limitation, Environmental Laws and regulations promulgated by the FCC and any
PUC, and other telecommunications laws and regulations, except where
noncompliance is not reasonably expected to have a Material Adverse Effect. None
of the operations of such Credit Party is subject to any judicial or
administrative proceeding alleging the violation of any Environmental Laws. None
of the operations of such Credit Party is the subject of federal or state
investigation evaluating whether any Remedial Action is needed to respond to a
Release. Such Credit Party has not filed any notice under any federal or state
law indicating past or present treatment, storage or disposal of a hazardous
waste or reporting a Release. Such Credit Party has no contingent liability of
which such Credit Party has knowledge or (with the reasonable exercise of
diligence) should have knowledge other than contingent liabilities that are not
reasonably expected to have a Material Adverse Effect.
ERISA. None of such Credit Party or any ERISA Affiliate of such Credit
Party maintains or contributes to any Plan other than a Plan listed on Schedule
3.12 hereto. Except as disclosed on Schedule 3.12, each Plan which is intended
to be qualified under Section 401(a) of the IRC has been determined by the IRS
to be so qualified, and each trust related to any such Plan has been determined
to be exempt from federal income tax under Section 501(a) of the IRC. Except as
disclosed on Schedule 3.12, none of such Credit Party or any ERISA Affiliate
maintains or contributes to any employee welfare benefit plan within the meaning
of Section 3(1) of ERISA which provides benefits to employees after termination
of employment other than as required by Section 601 of ERISA. None of such
Credit Party or any ERISA Affiliate has breached any of the material
responsibilities, obligations or duties imposed on it by ERISA or regulations
promulgated thereunder with respect to any Plan. No Plan has incurred any
accumulated funding deficiency (as defined in Section 302(a)(2) of ERISA and
Section 412(a) of the IRC), whether waived or not waived. None of such Credit
Party or any ERISA Affiliate nor any fiduciary of any Plan which is not a
Multiemployer Plan (a) has engaged in a nonexempt "prohibited transaction"
described in Section 406 of ERISA or Section 4975 of the IRC or (b) has taken or
failed to take any action which would constitute or result in a Termination
Event; provided that, in the case of the events described in clauses (a) and
(b), such action or failure to take action results in a material liability to
Company. None of such Credit Party or any ERISA Affiliate has incurred any
liability to the PBGC which remains outstanding, other than the payment of
premiums, and there are no premium payments which have become due which are
unpaid. Schedule B to the most recent annual report filed with the IRS with
respect to each Plan is complete and accurate. Since the date of each such
Schedule B, there has been no adverse
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change in the funding status or financial condition of the Plan relating to such
Schedule B. None of such Credit Party or any ERISA Affiliate has (i) failed to
make a required contribution or payment to a Multiemployer Plan or (ii) made a
complete or partial withdrawal under Sections 4203 or 4205 of ERISA from a
Multiemployer Plan. None of such Credit Party or any ERISA Affiliate has failed
to make a required installment or any other required payment under Section 412
of the IRC on or before the due date for such installment or other payment. None
of such Credit Party or any ERISA Affiliate is required to provide security to a
Plan under Section 401(a)(29) of the IRC due to a Plan amendment that results in
an increase in current liability for the plan year.
Investment Company Act; Public Utility Holding Company Act. Such Credit
Party is not an "investment company" as that term is defined in, and is not
otherwise subject to regulation under, the Investment Company Act of 1940. Such
Credit Party is not a "holding company" as that term is defined in, and is not
otherwise subject to regulation under, the Public Utility Holding Company Act of
1935.
Federal Reserve Regulations. Such Credit Party is not engaged principally,
or as one of its important activities, in the business of extending credit for
the purpose of purchasing or carrying any margin stock (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System of the
United States), and no part of the proceeds of the Loans made to such Credit
Party will be used to purchase or carry any such margin stock or to extend
credit to others for the purpose of purchasing or carrying any such margin stock
or for any purpose that violates, or is inconsistent with, the provisions of
Regulation T, U or X of said Board of Governors.
Insurance. All insurance required to be maintained by Parent Guarantor and
its Subsidiaries pursuant to Section 5.4 is in full force and effect.
Capitalization and Subsidiaries. As of the Closing Date, the classes of
Capital Stock, number of authorized shares, number of outstanding shares and par
values or other designations of the Capital Stock or other equity securities or
beneficial interests of such Credit Party are correctly set forth on Schedule
3.16 (as supplemented from time to time pursuant to Section 5.15). All the
outstanding shares of Capital Stock or other equity securities or beneficial
interests of such Credit Party are duly and validly issued, fully paid and
nonassessable, and none of such issued and outstanding shares, equity securities
or beneficial interests has been issued in violation of, or is subject to, any
preemptive or subscription rights. Except as set forth on Schedule 3.16 (as
supplemented from time to time pursuant to Section 5.15), as of the Closing
Date, there are no (a) outstanding shares of Capital Stock of such Credit Party,
(b) outstanding rights of subscription, warrants, calls, options, contracts or
other agreements of any kind, issued, made or granted to or with any Person
under which such Credit Party may be obligated to issue, sell, purchase, retire
or redeem or otherwise acquire or dispose of any shares of Capital Stock or
other equity securities or beneficial interests of such Credit
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Party, or (c) Subsidiaries of such Credit Party.
Real Estate Assets. Set forth on Schedule 3.17 is a list of all Real Estate
Assets owned as of the Closing Date by such Credit Party, together with a street
address of each such Real Estate Assets, including a description of such
properties' current use. Such Credit Party's interests in the Real Estate Assets
are sufficient in order for such Credit Party to conduct its business and
operations as conducted on the Closing Date.
Solvency. After giving effect to the making of any Credit Extension to or
behalf of such Credit Party hereunder, the disbursement of the proceeds thereof
pursuant to such Credit Party's instructions and the execution, delivery and
performance of each of the Credit Documents and transactions contemplated
thereby, such Credit Party is Solvent and is not contemplating either the filing
of a petition by it under any state or federal bankruptcy or insolvency laws or
the liquidation of all or a substantial portion of its property, and has no
knowledge of any Person contemplating the filing of any such petition against
such Credit Party.
Brokers, etc. Such Credit Party has not dealt with any broker, finder,
commission agent or other similar Person in connection with the Loans or the
transactions being effected contemporaneously with this Agreement, and such
Credit Party covenants and agrees to indemnify and hold harmless the Agents, and
the Lenders from and against, any broker's fee, finder's fee or commission in
connection with such transactions.
No Material Misstatements. Neither any report, financial statement,
exhibit or schedule furnished by or on behalf of such Credit Party to any of the
Agents or any Lender in connection with the negotiation of this Agreement and
the other Credit Documents or included herein or therein, nor any other
information required to be furnished pursuant to the provisions of Section 5,
contains any material misstatement of fact or omits to state any material fact
necessary to make the statements therein not misleading in light of the
circumstances under which they were made.
Year 2000 Matters. Each Credit Party has eliminated all Year 2000
Problems, except where the failure to correct the same could not reasonably be
expected to have a Material Adverse Effect, either individually or in the
aggregate.
CONDITIONS PRECEDENT
Closing Date. The obligation of any Lender to make a Credit Extension on
the Closing Date is subject to the satisfaction, or waiver in accordance with
Section 10.5, of the following conditions on or before the Closing Date:
Credit Documents. Administrative Agent shall have received sufficient
----------------
copies of
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each Credit Document originally executed and delivered by each applicable Credit
Party for each Lender.
Organizational Documents; Incumbency. Administrative Agent shall have
------------------------------------
received (i) sufficient copies of each Organizational Document originally
executed and delivered by each Credit Party, as applicable, and, to the extent
applicable, certified as of a recent date by the appropriate governmental
official, for each Lender, each dated the Closing Date or a recent date prior
thereto; (ii) signature and incumbency certificates of the officers of such
Person executing the Credit Documents to which it is a party; (iii) resolutions
of the Board of Directors or similar governing body of each Credit Party
approving and authorizing the execution, delivery and performance of this
Agreement and the other Credit Documents to which it is a party or by which it
or its assets may be bound as of the Closing Date, certified as of the Closing
Date by its secretary or an assistant secretary as being in full force and
effect without modification or amendment; (iv) a good standing certificate from
the applicable Governmental Authority of each Credit Party's jurisdiction of
incorporation, organization or formation and in each jurisdiction in which it is
qualified as a foreign corporation or other entity to do business, each dated a
recent date prior to the Closing Date; and (v) such other documents as
Administrative Agent may reasonably request.
Organizational and Capital Structure. The organizational structure
------------------------------------
and the capital structure of Parent Guarantor and its Subsidiaries shall be as
set forth on Schedule 3.16.
Existing Loan Agreements. On the Closing Date, Parent Guarantor and
------------------------
its Subsidiaries shall have (i) repaid in full all of the Indebtedness and other
obligations then outstanding under the Existing Loan Agreements, (ii) terminated
any commitments to lend or make other extensions of credit thereunder, and (iii)
delivered to Syndication Agent and Administrative Agent all documents or
instruments necessary to release all Liens securing the Indebtedness under the
Existing Loan Agreements or other obligations of Parent Guarantor and its
Subsidiaries thereunder being repaid on the Closing Date.
Governmental Approvals and Consents. Each Credit Party shall have
-----------------------------------
obtained all Governmental Approvals and all consents of other Persons that are
necessary or advisable in connection with the transactions contemplated by the
Credit Documents and each of the foregoing shall be in full force and effect and
in form and substance reasonably satisfactory to Syndication Agent and
Administrative Agent. All applicable waiting periods shall have expired without
any action being taken or threatened by any competent authority which would
restrain, prevent or otherwise impose adverse conditions on the transactions
contemplated by the Credit Documents or the financing thereof and no action,
request for stay, petition for review or rehearing, reconsideration, or appeal
with respect to any of the foregoing shall be pending, and the time for any
applicable agency to take action to set aside its consent on its own motion
shall have expired.
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Certain Consents. Each applicable Credit Party shall have used its
----------------
best efforts to deliver to Administrative Agent (i) a fully executed Lessor
Consent and Waiver Agreement with respect to each of the Leasehold Properties
set forth on Schedule 4.1(f)A, and (ii) a fully executed ILEC Consent with
respect to each of the collocation agreements set forth on Schedule 4.1(f)B.
Personal Property Collateral. In order to create in favor of
----------------------------
Administrative Agent, for the benefit of Lenders, a valid and, subject to any
filing and/or recording referred to herein, perfected First Priority security
interest in the personal property Collateral, Administrative Agent shall have
received:
(1) certificates (which certificates shall be accompanied by
irrevocable undated stock powers, duly endorsed in blank and otherwise
satisfactory in form and substance to Administrative Agent) representing all
certificated shares of Capital Stock pledged pursuant to the Pledge and Security
Agreement, and Acknowledgments of Pledge from each applicable issuer of
Securities pledged pursuant to the Pledge and Security Agreement and (2) all
instruments and promissory notes (which instruments shall be accompanied by
instruments of transfer or assignment duly endorsed in blank and otherwise in
form and substance satisfactory to Administrative Agent) evidencing all
Indebtedness pledged pursuant to the Pledge and Security Agreement;
UCC financing statements, duly executed by each applicable Credit
Party with respect to all personal and mixed property Collateral of such Credit
Party, for filing in all jurisdictions as may be necessary or, in the opinion of
Syndication Agent and Administrative Agent, desirable to perfect the security
interests created in such Collateral pursuant to the Collateral Documents;
all releases, cover sheets or other documents or instruments
required to be filed in order to create or perfect Liens in respect of any
Intellectual Property Collateral;
an opinion of counsel (which counsel shall be reasonably
satisfactory to Syndication Agent and Administrative Agent) with respect to the
creation and perfection of the security interests in favor of Administrative
Agent in such Collateral and such other matters governed by the laws of each
jurisdiction in which any Credit Party or any personal property Collateral is
located as Syndication Agent and Administrative Agent may reasonably request, in
each case in form and substance reasonably satisfactory to Syndication Agent and
Administrative Agent; and
evidence that each Credit Party shall have taken or caused to be
taken any other action, executed and delivered or caused to be executed and
delivered any other agreement, document and instrument, and made or caused to be
made any other filing and recording (other than as set forth herein) reasonably
required by Syndication Agent and Administrative Agent.
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Environmental Reports. Syndication Agent and Administrative Agent
---------------------
shall have received reports and other information, in form, scope and substance
satisfactory to Syndication Agent and Administrative Agent and as either may
reasonably request, regarding environmental matters relating to the Real Estate
Assets of Parent Guarantor and its Subsidiaries.
Financials and Projections. Lenders shall have received from Parent
--------------------------
Guarantor (i) the Financials, (ii) pro forma consolidated and consolidating
balance sheets of Parent Guarantor and its Subsidiaries as at the Closing Date,
prepared in accordance with GAAP and reflecting the consummation of the related
financings and the other transactions contemplated by the Credit Documents to
occur on or prior to the Closing Date, which pro forma financial statements
shall be in form and substance satisfactory to Lenders, and (iii) the
Projections.
Evidence of Insurance. Syndication Agent and Administrative Agent
---------------------
shall have received a certificate from Company's insurance broker or other
evidence satisfactory to it that all insurance required to be maintained
pursuant to Section 5.4 is in full force and effect and that Administrative
Agent, for the benefit of Lenders has been named as additional insured and loss
payee thereunder to the extent required under Section 5.4.
Opinions of Counsel to Credit Parties. Lenders and their respective
-------------------------------------
counsel shall have received originally executed copies of the favorable written
opinions of each of Willkie, Farr & Gallagher, Latham & Watkins and Swidler
Berlin Shereff Friedman, LLP, counsel for Credit Parties, in the form of
Exhibit D and as to such other matters as Administrative Agent or Syndication
Agent may reasonably request, including, without limitation, any applicable
regulatory matters, dated as of the Closing Date and otherwise in form and
substance reasonably satisfactory to Administrative Agent and Syndication Agent.
Opinions of Counsel to Syndication Agent. Lenders shall have received
----------------------------------------
originally executed copies of one or more favorable written opinions of Skadden,
Arps, Slate, Meagher & Flom LLP, counsel to Syndication Agent, dated as of the
Closing Date, in form and substance reasonably satisfactory to Syndication Agent
and Administrative Agent.
Fees. Company shall have paid to Syndication Agent, Administrative
----
Agent and Documentation Agent, the fees payable on the Closing Date referred to
in Section 2.11(d).
Solvency Certificate. On the Closing Date, Parent Guarantor shall
--------------------
have delivered to Syndication Agent, Administrative Agent and Lenders an
originally executed Solvency Certificate dated the Closing Date together with
appropriate attachments thereto.
Completion of Proceedings. All partnership, corporate and other
-------------------------
proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto not previously found
acceptable by Administrative Agent or Syndication Agent
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and its counsel shall be satisfactory in form and substance to Administrative
Agent and Syndication Agent and such counsel, and Administrative Agent,
Syndication Agent and such counsel shall have received all such counterpart
originals or certified copies of such documents as Administrative Agent or
Syndication Agent may reasonably request.
Closing Date Certificate. Parent Guarantor and Company shall have
------------------------
delivered to Syndication Agent and Administrative Agent an originally executed
Closing Date Certificate, together with all attachments thereto.
Closing Date. Lenders shall have made the Term Loans to Company on or
------------
before December 9, 1999.
Conditions to Each Credit Extension. (a) The obligation of each Lender to
make any Loan, or Issuing Bank to issue any Letter of Credit, on any Credit
Date, including the Closing Date, are subject to the satisfaction, or waiver in
accordance with Section 10.5, of the following conditions precedent:
Administrative Agent shall have received a fully executed and
delivered Funding Notice or Issuance Notice, as the case may be;
after making the Credit Extensions requested on such Credit Date,
the Total Utilization of Revolving Credit Commitments shall not exceed the
Revolving Credit Commitments then in effect;
as of such Credit Date, the representations and warranties
contained herein and in the other Credit Documents shall be true and correct in
all material respects on and as of that Credit Date to the same extent as though
made on and as of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case such
representations and warranties shall have been true and correct in all material
respects on and as of such earlier date;
as of such Credit Date, no event shall have occurred and be
continuing or would result from the consummation of the applicable Credit
Extension that would constitute an Event of Default or a Default; and
on or before the date of issuance of any Letter of Credit,
Administrative Agent shall have received all other information required by the
applicable Issuance Notice, and such other documents or information as Issuing
Bank may reasonably require in connection with the issuance of such Letter of
Credit.
Any Notice shall be executed by an Authorized Officer in a writing
delivered to Administrative Agent. In lieu of delivering a Notice, Company may
give Administrative Agent
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telephonic notice by the required time of any proposed borrowing,
conversion/continuation or issuance of a Letter of Credit, as the case may be;
provided each such notice shall be promptly confirmed in writing by delivery of
- --------
the applicable Notice to Administrative Agent on or before the applicable date
of borrowing, continuation/conversion or issuance. Neither Administrative Agent
nor any Lender shall incur any liability to Company in acting upon any
telephonic notice referred to above that Administrative Agent believes in good
faith to have been given by a duly authorized officer or other person authorized
on behalf of Company or for otherwise acting in good faith.
AFFIRMATIVE COVENANTS
Each Credit Party covenants and agrees that so long as any Commitment is in
effect and until payment in full of all Obligations and cancellation or
expiration of all Letters of Credit, each Credit Party shall perform, and shall
cause each of its Subsidiaries to perform, all covenants in this Section 5.
Corporate and Franchise Existence. Such Credit Party shall preserve and
maintain its corporate or other organizational existence, rights, franchises,
licenses and privileges in its jurisdiction of its organization, and in all
other jurisdictions in which such qualification is necessary in view of its
business and operations and property and preserve, protect and keep in full
force and effect its material rights and its Governmental Approvals except where
the failure to do so would not reasonably be expected to have a Material Adverse
Effect.
Compliance with Laws, Etc. Such Credit Party shall comply in all material
respects with all laws and regulations applicable to it, including, without
limitation, Environmental Laws, regulations promulgated by the FCC and any PUC,
and other telecommunications laws and regulations, and all material contractual
obligations applicable to it except where the failure to do so would not
reasonably be expected to have a Material Adverse Effect.
Maintenance of Properties. Such Credit Party shall at all times maintain
in good repair, working order and condition, excepting ordinary wear and tear,
all of its properties material to its operations and make all appropriate
repairs, replacements and renewals thereof, in each case consistent with prudent
industry practices and sound business judgment and with respect to the
maintenance of machinery and equipment, in compliance with applicable government
regulations, manufacturers' warranty request and licensing requirements, except
where the failure to do so would not reasonably be expected to have a Material
Adverse Effect.
Insurance.
Coverage. Parent Guarantor shall, and shall cause each of its
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Subsidiaries to, at
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their own expense, with financially sound and reputable insurers (with such
deductibles as shall be customary for such Persons of established reputation
engaged in similar businesses as the Company) satisfactory to Administrative
Agent, keep its insurable properties, adequately insured on a all risk basis for
the full replacement value thereof at all times, and maintain in full force and
effect, pay all premiums when due in respect of, and comply with all terms and
conditions of the following insurance coverages:
All Risk Property Insurance. All risk property insurance against
physical loss or damage, including but not limited to fire and extended
coverage, collapse, flood, earth movement and comprehensive boiler and machinery
coverage (including electrical and mechanical breakdown). Such insurance shall
cover Parent Guarantor's and its Subsidiaries' entire operation and shall not
contain any exclusion for resultant damage caused by faulty workmanship, design
or materials. Coverage shall be written on a replacement cost basis in an
amount reasonably acceptable to Administrative Agent. Such insurance policy
shall contain an agreed amount endorsement waiving any coinsurance penalty;
Business Interruption. As an extension of the coverage required under
the preceding clause (i), business interruption insurance in an agreed amount
equal to twelve (12) months projected loss of net profits, continuing expenses
and debt service payment and shall contain an agreed amount endorsement waiving
any coinsurance penalty;
Comprehensive or Commercial General Liability Insurance.
Comprehensive general liability insurance written on an occurrence basis with a
limit of not less than $2,000,000. Such coverage shall include, but not be
limited to, premises/operations, explosion, collapse, underground hazards,
contractual liability, independent contractors, products, completed operations,
property damage and personal injury liability. Such insurance shall not exclude
coverage for punitive or exemplary damages where insurable by law;
Workers' Compensation/Employer's Liability. Workers' compensation
insurance in accordance with statutory provisions covering accidental injury,
illness or death of an employee of Parent Guarantor or any of its Subsidiaries
while at work or in the scope of his or her employment with Parent Guarantor or
any of its Subsidiaries and employer's liability insurance in an amount not less
than $500,000. Such coverage shall not contain any occupational disease
exclusions;
Automobile Liability. Automobile liability insurance covering owned,
non-owned, leased, hired or borrowed vehicles against bodily injury or property
damage. Such coverage shall have a limit of not less than $1,000,000;
Excess/Umbrella Liability. Excess or umbrella liability insurance in
an amount not less than $10,000,000 written on an occurrence basis providing
coverage limits in excess of the insurance limits required under clauses (iii),
(iv) (employer's liability only) and (v).
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Such insurance shall follow from the primary insurances and drop down in case of
exhaustion of underlying limits and/or aggregates. Such insurance shall not
exclude coverage for punitive or exemplary damages where insurable by law; and
Directors and Officer's Liability Insurance. Directors and
Officers Liability Insurance in an amount not less than $2,000,000.
Each of the foregoing policies shall (x) name Administrative Agent and the
Lenders and their respective Affiliates as additional insureds thereunder, as
their respective interests may appear and (y) in the case of casualty insurance
policy, contain a loss payable clause or endorsement, satisfactory in form and
substance to Administrative Agent, that names Administrative Agent for the
benefit of the Lenders as the sole loss payee thereunder under a standard lender
loss payee endorsement for any covered loss in excess of $500,000 and provides
for at least thirty (30) days prior written notice to Administrative Agent of
any modification or cancellation of such policy.
Generally. Administrative Agent shall be entitled, upon reasonable
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advance notice, to review and/or receive copies of such Credit Party's (or other
appropriate party's) books and records regarding all insurance policies carried
and maintained with respect to each System and such Credit Party's obligations
under this Section 5.4. Notwithstanding anything to the contrary herein, no
provision of this Agreement or any other Credit Document shall impose on
Administrative Agent, any other Agent or any Lender any duty or obligation to
verify the existence or adequacy of the insurance coverage maintained by such
Credit Party, nor shall Administrative Agent, any other Agent or any Lender be
responsible for any representations or warranties made by or on behalf of such
Credit Party to any insurance broker, company or underwriter. Administrative
Agent, at its sole option, may obtain such insurance if not provided by such
Credit Party; in such event, such Credit Party shall reimburse Administrative
Agent upon demand for the cost thereof together with interest, and such costs
shall constitute Obligations secured by the Collateral. Not later than thirty
(30) days prior to the anticipated expiration date of any insurance coverage
required hereby, Company shall provide to Administrative Agent certificates
evidencing the renewal of each of such insurance coverage.
Taxes. Such Credit Party shall pay and discharge promptly all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or in respect of its property, as such become due, as well as
all lawful claims for labor, materials and supplies or otherwise which, if
unpaid, might become a Lien upon such properties or any part thereof; provided,
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such Credit Party shall not be required to pay and discharge or to cause to be
paid and discharged any such tax, assessment, charge, levy or claim so long as
the validity or amount thereof shall be contested in good faith by appropriate
proceedings diligently pursued, there exists no material risk of forfeiture and
such Credit Party shall set aside on its books such reserves as are required by
GAAP and in an amount satisfactory to Administrative Agent with respect to any
such tax, assessment, charge, levy or claim so contested.
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Financial Statements, Reports, etc. Credit Parties shall furnish to
Administrative Agent and the Lenders (except as otherwise provided herein):
as soon as available and in any event within fifty (50) days after the
end of each fiscal quarter during each fiscal year of Parent Guarantor,
consolidated and consolidating unaudited balance sheets and statements of
operations for Parent Guarantor and its Subsidiaries, and consolidated and
consolidating statements of stockholders' equity and cash flows of Parent
Guarantor and its Subsidiaries, and consolidated statements of stockholders'
equity and cash flows of Parent Guarantor and its Subsidiaries as of the end of
each such month or fiscal quarter, as applicable, and for the then elapsed
portion of the fiscal year;
as soon as available and in any event within ninety five (95) days
after the end of each fiscal year of Parent Guarantor, annual consolidated and
consolidating financial statements for Parent Guarantor and its Subsidiaries,
including the balance sheets and statements of operations, income, stockholders'
equity and cash flows, for such fiscal year, prepared in accordance with GAAP,
which consolidated financial statements and other above described financial
information shall have been audited by a nationally recognized independent
certified public accounting firm satisfactory to Administrative Agent, and
accompanied by such independent certified public accounting firm's unqualified
opinion;
together with the financial statements delivered pursuant to clause
(b) above a report thereon of PriceWaterhouseCoopers LLP or other independent
certified public accountants of recognized national standing selected by Parent
Guarantor and in form and substance satisfactory to Administrative Agent,
together with a written statement (which statement may contain such
qualifications as the accountants deem appropriate) by such independent
certified public accountants stating that their audit examination has included a
review of the terms of the Credit Documents, whether, in connection therewith,
any condition or event that constitutes a Default or an Event of Default has
come to their attention and, if such a condition or event has come to their
attention, specifying the nature and period of existence thereof, and that
nothing has come to their attention that causes them to believe that the
information contained in any Compliance Certificate is not correct or that the
matters set forth in such Compliance Certificate are not stated in accordance
with the terms hereof;
concurrently with the delivery of financial statements pursuant to
clauses (a) and (b) above, a Compliance Certificate;
not later than December 31 of each year (i) consolidated and
consolidating projected annual revenue and income statements (including detailed
revenue and expense statements), balance sheets and cash flow statements for
Parent Guarantor and its Subsidiaries for the succeeding fiscal year, such
statements to be reasonably acceptable to Administrative Agent, and (ii) an
annual operating budget presented on a monthly basis for such succeeding fiscal
year;
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to Administrative Agent, promptly upon their becoming available,
copies of any periodic or special documents, statements or other information
filed by any Credit Party with the FCC, PUC or other Governmental Authority in
connection with the construction and/or operation of any System or with respect
to the transactions contemplated by any of the Credit Documents, and copies of
any material notices and other material communications from the FCC, PUC or from
any other Governmental Authority;
promptly upon any officer of any Credit Party obtaining knowledge of
any condition or event which either constitutes an Event of Default or a Default
or which would result in any financial result for any fiscal year to deviate
materially and adversely from the financial results projected for such fiscal
year in the Projections, a certificate signed by an authorized officer of such
Credit Party specifying in reasonable detail the nature and period of existence
thereof and what corrective action such Credit Party has taken or proposes to
take with respect thereto;
within thirty (30) days after the end of each fiscal year of such
Credit Party, a certificate signed by an authorized officer of such Credit Party
setting forth all the Real Estate Assets acquired by such Credit Party in the
preceding year;
evidence of insurance complying with Section 5.4;
promptly upon the filing thereof, copies of all registration
statements and annual, quarterly, monthly or other regular reports which Parent
Guarantor files with the Securities and Exchange Commission; and
promptly from time to time such other information regarding the
operations (including, without limitation, construction budgeting and System
completion), business affairs and condition (financial or otherwise) of such
Credit Party as Administrative Agent may reasonably request.
Litigation and Other Notices. Such Credit Party shall give Administrative
Agent prompt written notice upon obtaining knowledge of the following: (a) all
events of default or any event that would become an event of default upon notice
or lapse of time or both under any of the terms or provisions of any note, or of
any other evidence of indebtedness or agreement or contract governing the
borrowing of money of such Credit Party; (b) any levy, attachment, execution or
other process against any of the property or assets, real or personal, of such
Credit Party; (c) the filing or commencement of any action, suit or proceeding
by or before any court or any Governmental Authority which, if adversely
determined against such Credit Party, would likely result in a Material Adverse
Effect; (d) any adverse notice, letter or other correspondence of any kind from
the FCC or the PUC relating to any material Governmental Approval or any
material aspect of any System; (e) any material default under any
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other material license, agreement or contract to which such Credit Party is a
party; and (f) any matter, individually or in the aggregate with any other
matter, which has resulted in, or which such Credit Party believes may result
in, a Material Adverse Effect on such Credit Party.
Future Properties. In the event that any Credit Party acquires an interest
in any Real Estate Asset (other than office leases entered into in the ordinary
course of business) that Administrative Agent reasonably determines is material
to such Credit Party's Business, and such interest has not otherwise been made
subject to a Lien in favor of Administrative Agent, for the benefit of Lenders,
then such Credit Party, contemporaneously with acquiring such Real Estate Asset,
shall take all such actions and execute and deliver, or cause to be executed and
delivered, all such documents, instruments, agreements, opinions and
certificates as Administrative Agent may reasonably request to establish a Lien
on such Real Estate Asset in favor of Administrative Agent for the benefit of
the Lenders. Notwithstanding the foregoing, with respect to any Leasehold
Property at which a transmission node (ATM switch center node) is located, the
applicable Credit Party shall be obligated only to use its best efforts to cause
the lessor of such Leasehold Property to execute and deliver to Administrative
Agent a Lessor Waiver and Consent Agreement with respect thereto.
ERISA. Such Credit Party shall comply in all material respects with the
applicable provisions of ERISA and furnish to the Agent, (i) as soon as
possible, and in any event within ten (10) days after such Credit Party or any
officer of such Credit Party knows or has reason to know that any Termination
Event has occurred, a statement of an officer of such Credit Party setting forth
details as to such Termination Event and the corrective action (if any) that
such Credit Party proposes to take with respect thereto, together with a copy of
the notice of any Reportable Event given to the PBGC, and (ii) promptly after
receipt thereof, a copy of any notice such Credit Party may receive from the
PBGC relating to the intention of the PBGC to terminate any Plan or to appoint a
trustee to administer any such Plan.
Access to Premises and Records. Such Credit Party shall permit
representatives of Administrative Agent and each Lender to have access to such
Credit Party's books and records and to the Collateral and the premises of such
Credit Party at reasonable times upon reasonable notice (and after the
occurrence and during the continuance of any Default or Event of Default,
without notice and at any time) and to make such excerpts from such records as
such representatives deem necessary and to inspect the Collateral.
Design, Construction, and Operation of Systems. Such Credit Party shall
design, construct, equip and operate its Systems in accordance with prudent
industry standards.
Environmental Notices. If such Credit Party shall (a) receive written
notice that any violation of any Environmental Law may have been committed or is
about to be committed by such Credit Party, (b) receive written notice that any
administrative or judicial complaint or order has been filed or is about to be
filed against such Credit Party alleging violations of any
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Environmental Law or requiring such Credit Party to take any action in
connection with any Release of any Contaminant into the environment, or (c)
receive any written notice from a Governmental Authority or private party
alleging that such Credit Party may be liable or responsible for costs
associated with a response to or cleanup of a Release or any damages caused
thereby, such Credit Party shall provide Administrative Agent with a copy of
such notice within ten (10) Business Days of such Credit Party's receipt
thereof.
Amendment of Organizational Documents. Such Credit Party shall notify
Administrative Agent of any amendment to any of its Organizational Documents
within ten (10) days of the occurrence of any such event, and provide the Agent
with copies of any amendments certified by the secretary of such Credit Party
and of all other relevant documentation. Such Credit Party shall promptly
deliver to Administrative Agent such financing statements executed by such
Credit Party which Administrative Agent may request as a result of any such
event.
Fiscal Year. Such Credit Party shall maintain a fiscal year ending on
December 31.
Future Subsidiaries. In the event that any Person becomes a Domestic
Subsidiary of Parent Guarantor, Parent Guarantor shall (a) promptly cause such
Subsidiary to become a Guarantor hereunder and a Grantor under the Pledge and
Security Agreement by executing and delivering to Administrative Agent a
Counterpart Agreement, and (b) take all such actions and execute and deliver, or
cause to be executed and delivered, all such documents, instruments, agreements,
and certificates similar to those described in Sections 4.1(b) and 4.1(g). In
the event that any Person becomes a Foreign Subsidiary of Parent Guarantor, and
the ownership interests of such Foreign Subsidiary are owned by Parent Guarantor
or by any Domestic Subsidiary thereof, Parent Guarantor shall, or shall cause
such Domestic Subsidiary to, deliver, all such documents, instruments,
agreements, and certificates as are similar to those described in Section
4.1(b), and Parent Guarantor shall take, or shall cause such Domestic Subsidiary
to take, all of the actions referred to in Section 4.1(g) necessary to grant and
to perfect a First Priority Lien in favor of Administrative Agent, for the
benefit of Lenders, under the Pledge and Security Agreement in such ownership
interests. With respect to each such Subsidiary, Parent Guarantor shall promptly
send to Administrative Agent written notice setting forth with respect to such
Person (i) the date on which such Person became a Subsidiary of Parent
Guarantor, and (ii) all of the data required to be set forth in Schedule 3.16
with respect to all Subsidiaries of Parent Guarantor; provided, such written
notice shall be deemed to supplement Schedule 3.16 for all purposes hereof.
Accounting; Maintenance of Records. Such Credit Party shall maintain a
system of accounting established and administered in accordance with GAAP. Such
Credit Party shall keep and maintain, and cause each of its Subsidiaries to keep
and maintain, in all material respects, proper books of record and account in
which entries in conformity with GAAP shall be made of all dealings and
transactions in relation to their
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respective businesses and activities.
Collocation Agreements. Notwithstanding anything contained herein or in
any other Credit Document to the contrary, each applicable Credit Party shall
use its best efforts to obtain a duly executed ILEC Consent from the applicable
incumbent local exchange carrier with respect to each collocation agreement to
which such Credit Party is a party.
Interest Rate Protection. No later than ninety (90) days following the
Closing Date and at all times thereafter, Company shall maintain, or caused to
be maintained, in effect one or more Interest Rate Agreements for a term of not
less than two years and otherwise in form and substance reasonably satisfactory
to Administrative Agent and Syndication Agent, which Interest Rate Agreements
shall at all times effectively limit the amount of Indebtedness bearing interest
at a floating rate to no more than 50% of the aggregate principal amount of
Consolidated Total Debt outstanding as of any date of determination.
Further Assurances. Such Credit Party agrees to do such further acts and
things and to execute and deliver to or Administrative Agent such additional
assignments, agreements, powers and instruments, at such Credit Party's expense,
as Administrative Agent may require or deem advisable to carry into effect the
purposes of this Agreement and the other Credit Documents or to better assure
and confirm unto Administrative Agent its rights, powers and remedies hereunder
and thereunder.
NEGATIVE COVENANTS
Each Credit Party covenants and agrees that, so long as any Commitment is
in effect and until payment in full of all Obligations and cancellation or
expiration of all Letters of Credit, such Credit Party shall perform, and shall
cause each of its Subsidiaries to perform, all covenants in this Section 6.
Indebtedness. No Credit Party shall, nor shall it permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or guaranty, or
otherwise become or remain directly or indirectly liable with respect to any
Indebtedness, except:
the Obligations;
Indebtedness of any Subsidiary Guarantor to Company or to any other
Subsidiary Guarantor, or of Company to any Subsidiary Guarantor; provided, (i)
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all such Indebtedness shall be evidenced by promissory notes and all such notes
shall be subject to a First Priority Lien pursuant to the Pledge and Security
Agreement, (ii) all such Indebtedness shall be unsecured and subordinated in
right of payment to the payment in full of the Obligations pursuant to the terms
of the applicable promissory notes or an inter company subordination agreement
that in any such
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case, is reasonably satisfactory to Administrative Agent, and (iii) any payment
by any such Subsidiary Guarantor under any guaranty of the Obligations shall
result in a pro tanto reduction of the amount of any Indebtedness owed by such
Subsidiary to Company or to any of its Subsidiaries for whose benefit such
payment is made;
Permitted Parent Guarantor Indebtedness not to exceed at any time the
aggregate outstanding principal amount of $350,000,000, or with respect to
Permitted Parent Guarantor Indebtedness issued at a discount, an initial
accreted value of $350,000,000;
Indebtedness incurred by Parent Guarantor or any of its Subsidiaries
arising from agreements providing for indemnification, adjustment of purchase
price or similar obligations, or from guaranties or letters of credit, surety
bonds or performance bonds securing the performance of Parent Guarantor or any
such Subsidiary pursuant to such agreements, in connection with Permitted
Acquisitions or permitted dispositions of any business, assets or Subsidiary of
Parent Guarantor or any of its Subsidiaries;
Indebtedness which may be deemed to exist pursuant to any guaranties,
performance, surety, statutory, appeal or similar obligations incurred in the
ordinary course of business;
Indebtedness in respect of netting services, overdraft protections and
otherwise in connection with deposit accounts;
guaranties in the ordinary course of business of the obligations of
suppliers, customers, franchisees and licensees of Parent Guarantor and its
Subsidiaries;
guaranties by Company of Indebtedness of a Subsidiary Guarantor or
guaranties by a Subsidiary of Company of Indebtedness of Company or a Subsidiary
Guarantor with respect, in each case, to Indebtedness otherwise permitted to be
incurred pursuant to this Section 6.1;
Indebtedness described in Schedule 6.1, but not any extensions,
renewals or replacements of such Indebtedness except (i) renewals and extensions
expressly provided for in the agreements evidencing any such Indebtedness as the
same are in effect on the date of this Agreement and (ii) refinancings and
extensions of any such Indebtedness if the average life to maturity thereof is
greater than or equal to that of the Indebtedness being refinanced or extended;
provided, such Indebtedness permitted under the immediately preceding clause (i)
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or (ii) above shall not (A) include Indebtedness of an obligor that was not an
obligor with respect to the Indebtedness being extended, renewed or refinanced,
(B) exceed in a principal amount the Indebtedness being renewed, extended or
refinanced (except it may be increased by an amount to cover the fees and
expenses, including consent fees, placement fees and prepayment premiums,
relating to such refinancing) or (C) incurred, created or assumed if any Default
or Event of
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Default has occurred and is continuing or would result therefrom; and
Indebtedness of Company and its Subsidiaries with respect to Capital
Leases and purchase money Indebtedness of Company and its Subsidiaries
(including any Indebtedness acquired in connection with a Permitted
Acquisition), in an aggregate amount not to exceed at any time $30,000,000;
provided, any such purchase money Indebtedness shall be secured only by the
- --------
asset acquired in connection with the incurrence of such Indebtedness (it being
understood that such assets may secure other purchase money Indebtedness to the
same lender), and shall constitute not less than 80% of the aggregate
consideration paid with respect to such asset;
Indebtedness consisting of obligations of the Company or any Guarantor
in respect of any Hedge Agreement not entered into for speculative purposes; and
other unsecured Indebtedness of the Company or any Guarantor not in
excess of $5,000,000 at any time outstanding.
Liens. No Credit Party shall, nor shall it permit any of its Subsidiaries
to, directly or indirectly, create, incur, assume or permit to exist any Lien on
or with respect to any property or asset of any kind (including any document or
instrument in respect of goods or accounts receivable) of Parent Guarantor or
any of its Subsidiaries, whether now owned or hereafter acquired, or any income
or profits therefrom, except:
Liens in favor of Administrative Agent for the benefit of Lenders and
Lender Counterparties granted pursuant to any Credit Document;
Liens for Taxes, or claims the payment of which is not, at the time,
required thereby or which are being diligently contested in good faith and by
appropriate proceedings, which does not entail any material danger of forfeiture
and for which such Credit Party shall have set aside reserves on its books as
required by GAAP;
statutory Liens of landlords, banks (and rights of set-off), of
carriers, warehousemen, mechanics, repairmen, workmen and materialmen, and other
Liens imposed by law (other than any such Lien imposed pursuant to Section 401
(a)(29) or 412(n) of the IRC or by ERISA), in each case incurred in the ordinary
course of business (i) for amounts not yet overdue or (ii) for amounts that are
overdue and that (in the case of any such amounts overdue for a period in excess
of five days) are being contested in good faith by appropriate proceedings, so
long as such reserves or other appropriate provisions, if any, as shall be
required by GAAP shall have been made for any such contested amounts;
Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases,
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government contracts, trade contracts, performance and return-of-money bonds and
other similar obligations (exclusive of obligations for the payment of borrowed
money or other Indebtedness), so long as no foreclosure, sale or similar
proceedings have been commenced with respect to any portion of the Collateral on
account thereof;
easements, rights-of-way, restrictions, encroachments, and other minor
defects or irregularities in title, in each case which do not and will not
interfere in any material respect with the ordinary conduct of the business of
Parent Guarantor or any of its Subsidiaries;
any interest or title of a lessor or sublessor under any lease
permitted hereunder;
Liens solely on any cash earnest money deposits made by Parent
Guarantor or any of its Subsidiaries in connection with any letter of intent or
purchase agreement entered into by it;
Liens incurred in connection with the purchase or shipping of goods or
assets on the related assets and proceeds thereof in favor of the seller or
shipper of such goods or assets;
Liens arising from filing precautionary UCC financing statements
relating solely to operating lease entered into the ordinary course of business;
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;
any zoning or similar law or right reserved to or vested in any
governmental office or agency to control or regulate the use of any real
property;
licenses of patents, trademarks and other intellectual property rights
granted by Parent Guarantor or any of its Subsidiaries in the ordinary course of
business and not interfering in any respect with the ordinary conduct of the
business of Company or such Subsidiary;
Liens described in Schedule 6.2 and Liens securing refinancings of
Indebtedness permitted under Section 6.1(i) provided the collateral does not
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include any asset not subject to the Lien prior to such refinancing (other than
pursuant to after acquired property provisions); and
Liens securing purchase money Indebtedness and Capital Leases
permitted pursuant to 6.1(j); provided, any such Lien shall encumber only the
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asset acquired with the proceeds of such Indebtedness and other assets financed
by the same lender or lessor.
No Further Negative Pledges. Except with respect to (a) specific property
encumbered to secure payment of particular Indebtedness or to be sold pursuant
to an executed agreement with respect to a permitted Asset Sale, (b)
restrictions by reason of
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customary provisions restricting assignments, subletting or other transfers
contained in leases, licenses and similar agreements entered into in the
ordinary course of business (provided that such restrictions are limited to the
property or assets secured by such Liens or the property or assets subject to
such leases, licenses or similar agreements, as the case may be), (c)
restrictions imposed on holders of Liens permitted by Section 6.2 but only to
the extent such restrictions apply to the property subject to such Liens, (d)
restrictions imposed on the Closing Date under Indebtedness permitted under
Section 6.1(i), and (e) restrictions imposed under any Indebtedness so long as
such restrictions do not limit the creation of Liens to secure the Obligations,
no Credit Party nor any of its Subsidiaries shall enter into any agreement
prohibiting the creation or assumption of any Lien upon any of its properties or
assets, whether now owned or hereafter acquired.
Restricted Junior Payments. No Credit Party shall, nor shall it permit any
of its Subsidiaries to, directly or indirectly, declare, order, pay, make or set
apart any sum for any Restricted Junior Payment except the following shall be
permitted:
Parent Guarantor may make regularly scheduled payments of interest and
principal in respect of any Parent Guarantor Permitted Indebtedness in
accordance with the terms of, and only to the extent required by the indenture
or other agreement pursuant to which such Indebtedness was issued;
Company may make Restricted Junior Payments to Parent Guarantor (i) so
long as no Default or Event of Default shall have occurred and be continuing or
shall be caused thereby, in an amount sufficient to Permit Parent Guarantor to
make the payments of the interest and principal reference to in the preceding
clause (a); (ii) in an aggregate amount not to exceed $1,000,000 in any fiscal
year, to the extent necessary to permit Parent Guarantor to pay general
administrative costs and expenses (including overhead, accounting and legal
fees), regulatory expenses and filing fees and expenses and out-of-pocket costs
of permitted offerings of Indebtedness and equity and (iii) to the extent
necessary to permit Parent Guarantor to discharge the consolidated tax
liabilities of Parent Guarantor and its Subsidiaries, in each case so long as
Parent Guarantor applies the amount of any such Restricted Junior Payment for
such purpose; and
Parent Guarantor may redeem Parent Guarantor Permitted Indebtedness
with the proceeds of equity offerings by the Parent Guarantor to the extent
permitted under the term of the documents pursuant to which the Parent Guarantor
Permitted Indebtedness was issued; provided that no more than 35% of the
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outstanding principal amount of any issuance of Parent Guarantor Permitted
Indebtedness may be so redeemed.
Restrictions on Subsidiary Distributions. Except as provided herein, no
Credit Party shall, nor shall it permit any of its Subsidiaries to, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction.
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of any kind on the ability of any Subsidiary of Company to (a) pay dividends or
make any other distributions on any of such Subsidiary's Capital Stock owned by
Company or any other Subsidiary of Company, (b) repay or prepay any Indebtedness
owed by such Subsidiary to Company or any other Subsidiary of Company, (c) make
loans or advances to Company or any other Subsidiary of Company, or (d) transfer
any of its property or assets to Company or any other Subsidiary of Company
other than restrictions (i) in agreements evidencing purchase money Indebtedness
permitted pursuant to Section 6.1(j) that impose restrictions on the property
acquired in connection with the increase thereof, (ii) by reason of customary
provisions restricting assignments, subletting or other transfers contained in
leases, licenses, joint venture agreements and similar agreements entered into
in the ordinary course of business, (iii) that are or were created by virtue of
any transfer of, agreement to transfer or option or right with respect to any
property, assets or Capital Stock not otherwise prohibited under this Agreement
or (iv) by reason of any applicable law, order, rule or regulation of any
applicable Governmental Authority.
Investments. No Credit Party shall, nor shall it permit any of its
Subsidiaries to, directly or indirectly, make or own any Investment in any
Person, including without limitation any Joint Venture, except:
Cash Equivalents;
equity Investments owned as of the Closing Date in any Subsidiary and
Investments made after the Closing Date in wholly-owned Subsidiaries of Company;
Investments (i) in accounts receivable arising and trade credit
granted in the ordinary course of business and in any Securities received in
satisfaction or partial satisfaction thereof from financially troubled account
debtors and (ii) deposits, prepayments and other credits to suppliers made in
the ordinary course of business consistent with the past practices of Parent
Guarantor and its Subsidiaries;
inter company loans to the extent permitted under Section 6.1(b);
Consolidated Capital Expenditures permitted by Section 6.7(a)(v);
Investments made in connection with Permitted Acquisitions permitted
pursuant to Section 6.8;
Investments described in Schedule 6.6;
Permitted Investments in an aggregate amount not to exceed at any time
$25,000,000;
Investments arising from Asset Sales otherwise permitted by this
Agreement; and
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Investments arising from distributions in bankruptcy or other
reorganization proceedings.
Financial Covenants.
Stage One. Prior to March 31, 2002, Parent Guarantor shall perform,
---------
and shall cause each of its Subsidiaries to perform, all of the covenants set
forth in this Section 6.7(a):
Consolidated Senior Debt to Consolidated Capitalization. Parent
Guarantor shall not permit the ratio of Consolidated Senior Debt to Consolidated
Capitalization as of the last day of any fiscal quarter, beginning with the
fiscal quarter ending December 31, 1999, to exceed 0.35:1.00.
Consolidated Total Debt to Consolidated Capitalization. Parent
Guarantor shall not permit the ratio of Consolidated Total Debt to Consolidated
Capitalization as of the last day of any fiscal quarter, beginning with the
fiscal quarter ending December 31, 1999, to exceed 0.50:1.00.
Minimum Production Ready Physical Central Offices. Parent
Guarantor shall not permit the aggregate minimum number of Production Ready
Physical Central Offices as at the end of any fiscal quarter, beginning with the
fiscal quarter ending December 31, 1999, to be less than the correlative numbers
set forth below:
<TABLE>
<CAPTION>
===================================================
Minimum
Fiscal Quarter Production Ready
Ending Physical Central Offices
---------------------------------------------------
<S> <C>
December 31, 1999 700
---------------------------------------------------
March 31, 2000 850
---------------------------------------------------
June 30, 2000 1,000
---------------------------------------------------
September 30, 2000 1,200
---------------------------------------------------
December 31, 2000 and
each fiscal quarter 1,250
thereafter ending
prior to March 31,
2002
===================================================
</TABLE>
Maximum Consolidated Adjusted EBITDA Losses. Parent Guarantor
shall
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not permit Consolidated Adjusted EBITDA losses as at the end of any fiscal
quarter, beginning with the fiscal quarter ending December 31, 1999, to exceed
the correlative numbers set forth below:
<TABLE>
<CAPTION>
=====================================================
Fiscal Quarter Maximum Consolidated
Ending Adjusted EBITDA Losses
-----------------------------------------------------
<S> <C>
December 31, 1999 ($60,000,000)
-----------------------------------------------------
March 31, 2000 ($60,000,000)
-----------------------------------------------------
June 30, 2000 ($60,000,000)
-----------------------------------------------------
September 30, 2000 ($55,000,000)
-----------------------------------------------------
December 31, 2000 ($50,000,000)
-----------------------------------------------------
March 31, 2001 ($30,000,000)
-----------------------------------------------------
June 30, 2001 ($17,500,000)
-----------------------------------------------------
September 30, 2001 ($7,500,000)
-----------------------------------------------------
December 31, 2001 $(1)
=====================================================
</TABLE>
Maximum Consolidated Capital Expenditures. Parent Guarantor shall
not, and shall not permit its Subsidiaries to, make or incur Consolidated
Capital Expenditures, in any fiscal year indicated below, in an aggregate amount
for Parent Guarantor and its Subsidiaries in any fiscal year set forth below in
excess of the correlative amount indicated; provided, such amount for any fiscal
--------
year shall be increased by an amount equal to the 50% of the excess, if any, of
such amount for the previous fiscal year (as adjusted in accordance with this
proviso) over the actual amount of Consolidated Capital Expenditures for such
previous fiscal year:
<TABLE>
<CAPTION>
===========================================
Fiscal Year
Ending Maximum Consolidated
December 31, Capital Expenditures
-------------------------------------------
<S> <C>
1999 $185,000,000
-------------------------------------------
2000 $195,000,000
-------------------------------------------
===========================================
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
===========================================
Fiscal Year
Ending Maximum Consolidated
December 31, Capital Expenditures
-------------------------------------------
<S> <C>
2001 $ 95,000,000
===========================================
</TABLE>
Stage Two. On and after March 31, 2002, Parent Guarantor shall
---------
perform, and shall cause each of its Subsidiaries to perform, all of the
covenants set forth in this Section 6.7(b):
Senior Leverage Ratio. Parent Guarantor shall not permit the
Senior Leverage Ratio as of the last day of any fiscal quarter, beginning with
the fiscal quarter ending March 31, 2002, to exceed the correlative ratio
indicated:
<TABLE>
<CAPTION>
===================================================
Fiscal Quarter
Ending Senior Leverage Ratio
---------------------------------------------------
<S> <C>
March 31, 2002 7.25:1.00
---------------------------------------------------
June 30, 2002
and each fiscal 5.00:1.00
quarter thereafter
===================================================
</TABLE>
Total Leverage Ratio. Parent Guarantor shall not permit the Total
Leverage Ratio as of the last day of any fiscal quarter, beginning with the
fiscal quarter ending March 31, 2002, to exceed the correlative ratio indicated:
<TABLE>
<CAPTION>
===================================================
Fiscal Quarter Total Leverage Ratio
Ending
---------------------------------------------------
<S> <C>
March 31, 2002 8.50:1.00
---------------------------------------------------
June 30, 2002 7.50:1.00
---------------------------------------------------
September 30, 2002 7.00:1.00
---------------------------------------------------
December 31, 2002 and
each fiscal quarter 6.00:1.00
thereafter
===================================================
</TABLE>
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<PAGE>
Debt Service Coverage Ratio. Parent Guarantor shall not permit
the Debt Service Coverage Ratio as of the last day of any fiscal quarter,
beginning with the fiscal quarter ending June 30, 2002, to be less than the
correlative ratio indicated :
<TABLE>
<CAPTION>
===================================================
Fiscal Quarter Debt Service
Ending Coverage Ratio
---------------------------------------------------
<S> <C>
June 30, 2002 1.10:1.00
---------------------------------------------------
September 30, 2002 1.50:1.00
---------------------------------------------------
December 31, 2002 1.50:1.00
---------------------------------------------------
March 31, 2003
and each fiscal 2.00:1.00
quarter thereafter
===================================================
</TABLE>
Fixed Charge (Interest) Coverage Ratio. Parent Guarantor shall
not permit the Fixed Charge (Interest) Coverage Ratio as of the last day of any
fiscal quarter, beginning with the fiscal quarter ending March 31, 2002, to be
less than the correlative ratio indicated:
<TABLE>
<CAPTION>
===================================================
Fiscal Quarter Fixed Charge (Interest)
Ending Coverage Ratio
---------------------------------------------------
<S> <C>
March 31, 2002 1.25:1.00
---------------------------------------------------
June 30, 2002 1.50:1.00
---------------------------------------------------
September 30, 2002 1.75:1.00
---------------------------------------------------
December 31, 2002 1.10:1.00
---------------------------------------------------
March 31, 2003 1.10:1.00
---------------------------------------------------
June 30, 2003
and each fiscal 1.20:1.00
quarter thereafter
===================================================
</TABLE>
Certain Calculations. With respect to any period during which a
--------------------
Permitted Acquisition or an Asset Sale has occurred (each, a "Subject
Transaction"), for purposes of determining compliance with the financial
covenants set forth in this Section 6.7 (but not for purposes of determining the
Applicable Margin), Consolidated Adjusted EBITDA and the
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components of Consolidated Fixed Charges shall be calculated with respect to
such period on a pro forma basis (without giving effect to adjustments to
increase Consolidated Adjusted EBITDA to account for expected improvements in
the operations of the Permitted Acquisition unless approved in writing by the
Requisite Lenders and which pro forma adjustments shall be accompanied by a
Financial Officer Certification) using the historical audited financial
statements of any business so acquired or to be acquired or sold or to be sold
and the consolidated financial statements of Parent Guarantor and its
Subsidiaries which shall be reformulated as if such Subject Transaction, and any
Indebtedness incurred or repaid in connection therewith, had been consummated or
incurred or repaid at the beginning of such period (and assuming that such
Indebtedness bears interest during any portion of the applicable measurement
period prior to the relevant acquisition at the weighted average of the interest
rates applicable to outstanding Loans incurred during such period).
Fundamental Changes; Disposition of Assets; Acquisitions. No Credit Party
shall, nor shall it permit, any of its Subsidiaries to, enter into any
transaction of merger or consolidation, or liquidate, wind-up or dissolve itself
(or suffer any liquidation or dissolution), or convey, sell, lease or sub-lease
(as lessor or sublessor), transfer or otherwise dispose of, in one transaction
or a series of transactions, all or any part of its business, assets or property
of any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible, whether now owned or hereafter acquired, or acquire by purchase or
otherwise (other than purchases or other acquisitions of inventory, materials
and equipment in the ordinary course of business) the business, property or
fixed assets of, or stock or other evidence of beneficial ownership of, any
Person or any division or line of business or other business unit of any Person,
except:
any Subsidiary of Parent Guarantor may be merged with or into Company
or any Subsidiary Guarantor, or be liquidated, wound up or dissolved, or all or
any part of its business, property or assets may be conveyed, sold, leased,
transferred or otherwise disposed of, in one transaction or a series of
transactions, to Company or any Subsidiary Guarantor; provided, in the case of
--------
such a merger, Company or such Subsidiary Guarantor, as applicable, shall be the
continuing or surviving Person;
sales or other dispositions of assets that do not constitute Asset
Sales;
Asset Sales, the proceeds of which (valued at the principal amount
thereof in the case of non-Cash proceeds consisting of notes or other debt
Securities and valued at fair market value in the case of other non-Cash
proceeds) (i) do not exceed $250,000 with respect to any single Asset Sale or
series of related Asset Sales in any fiscal year, and (ii) when aggregated with
the proceeds of all other Asset Sales made since the Closing Date, do not exceed
$1,000,000;
disposals of obsolete, worn out or surplus property;
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Permitted Acquisitions, the consideration for which constitutes (i)
not in excess of $35,000,000 in Cash and (ii) not in excess of $200,000,000 in
Capital Stock of Parent Guarantor or its Subsidiaries, in each case in the
aggregate from the Closing Date to the date of determination; and
Investments made in accordance with Section 6.6.
Disposal of Subsidiary Interests. Except for any sale of 100% of the
Capital Stock of any of its Subsidiaries in compliance with the provisions of
Section 6.10, no Credit Party shall (a) directly or indirectly sell, assign,
pledge or otherwise encumber or dispose of any Capital Stock of any of its
Subsidiaries, except to qualify directors if required by applicable law; or (b)
permit any of its Subsidiaries directly or indirectly to sell, assign, pledge or
otherwise encumber or dispose of any Capital Stock of any of its Subsidiaries,
except to another Credit Party (subject to the restrictions on such disposition
otherwise imposed herein under), or to qualify directors if required by
applicable law, provided, that transactions otherwise prohibited by clauses (a)
--------
and (b) shall be permitted if the remaining Investment in such Subsidiary is
treated as an Investment under Section 6.6(h).
Sales and Lease-Back. No Credit Party shall, nor shall it permit any of its
Subsidiaries to, directly or indirectly, become or remain liable as lessee or as
a guarantor or other surety with respect to any lease of any property (whether
real, personal or mixed), whether now owned or hereafter acquired, which such
Credit Party (a) has sold or transferred or is to sell or to transfer to any
other Person (other than Parent Guarantor or any of its Subsidiaries), or (b)
intends to use for substantially the same purpose as any other property which
has been or is to be sold or transferred by such Credit Party to any Person
(other than Parent Guarantor or any of its Subsidiaries) in connection with such
lease; provided, that the foregoing shall be permitted to the extent otherwise
--------
permitted under Sections 6.1, 6.2 and 6.8 but in any case, only with respect to
transactions involving equipment.
Transactions with Shareholders and Affiliates. No Credit Party shall, nor
shall it permit any of its Subsidiaries to, directly or indirectly, enter into
or permit to exist any transaction (including the purchase, sale, lease or
exchange of any property or the rendering of any service) with any holder of 5%
or more of any class of Capital Stock of Parent Guarantor or any of its
Subsidiaries or with any Affiliate of Parent Guarantor or of any such holder, on
terms that are less favorable to Parent Guarantor or that Subsidiary, as the
case may be, than those that might be obtained at the time from a Person who is
not such a holder or Affiliate; provided, the foregoing restriction shall not
--------
apply to (a) any transaction between Company and any Subsidiary Guarantor; (b)
reasonable and customary fees paid to members of the board of directors (or
similar governing body) of Parent Guarantor and its Subsidiaries; (c)
compensation arrangements for officers and other employees of Parent Guarantor
and its Subsidiaries entered into in the ordinary course of business; and (d)
transactions described in Schedule 6.11.
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<PAGE>
Conduct of Business. From and after the Closing Date, no Credit Party
shall, nor shall it permit any of its Subsidiaries to, engage in any business
other than the Businesses and businesses incidental and complementary thereto
and such other lines of business as may be consented to by Requisite Lenders.
Permitted Parent Guarantor Activities. Notwithstanding anything to the
contrary contained herein, Parent Guarantor shall not (a) incur, directly or
indirectly, any Indebtedness or any other obligation or liability whatsoever
other than Indebtedness otherwise permitted pursuant to Section 6.1; (b) create
or suffer to exist any Lien upon any property or assets now owned or hereafter
acquired by it other than the Liens created under the Collateral Documents to
which it is a party or as otherwise permitted pursuant to Section 6.2; (c)
engage in any business or activity or own any assets other than (i) holding 100%
of the Capital Stock of Company (ii) performing its obligations and activities
incidental thereto under the Credit Documents; and (iii) making Restricted
Junior Payments and Investments to the extent permitted by this Agreement; (d)
consolidate with or merge with or into, or convey, transfer or lease all or
substantially all its assets to, any Person; (e) sell or otherwise dispose of
any Capital Stock of any of its direct Subsidiaries; (f) create or acquire any
Subsidiary or make or own any Investment in any Person other than Company; or
(g) fail to hold itself out to the public as a legal entity separate and
distinct from all other Persons.
Fiscal Year. No Credit Party shall, nor shall it permit any of its
Subsidiaries to fiscal year-end from December 31.
GUARANTY
Guaranty of the Obligations. Subject to the provisions of Section 7.2,
Guarantors jointly and severally hereby irrevocably and unconditionally guaranty
to Administrative Agent for the ratable benefit of the Beneficiaries the due and
punctual payment in full of all Obligations when the same shall become due,
whether at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise (including amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11
U.S.C.'362(a)) (collectively, the "Guaranteed Obligations").
Contribution by Guarantors. All Guarantors desire to allocate among
themselves (collectively, the "Contributing Guarantors"), in a fair and
equitable manner, their obligations arising under this Guaranty. Accordingly, in
the event any payment or distribution is made on any date by a Guarantor (a
"Funding Guarantor") under this Guaranty that exceeds its Fair Share as of such
date, such Funding Guarantor shall be entitled to a contribution from each of
the other Contributing Guarantors in the amount of such other Contributing
Guarantor's Fair Share Shortfall as of such date, with the result that all such
contributions will cause each
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<PAGE>
Contributing Guarantor's Aggregate Payments to equal its Fair Share as of such
date. "Fair Share" means, with respect to a Contributing Guarantor as of any
date of determination, an amount equal to (a) the ratio of (i) the Fair Share
Contribution Amount with respect to such Contributing Guarantor to (ii) the
aggregate of the Fair Share Contribution Amounts with respect to all
Contributing Guarantors multiplied by (b) the aggregate amount paid or
distributed on or before such date by all Funding Guarantors under this Guaranty
in respect of the obligations Guaranteed. "Fair Share Shortfall" means, with
respect to a Contributing Guarantor as of any date of determination, the excess,
if any, of the Fair Share of such Contributing Guarantor over the Aggregate
Payments of such Contributing Guarantor. "Fair Share Contribution Amount" means,
with respect to a Contributing Guarantor as of any date of determination, the
maximum aggregate amount of the obligations of such Contributing Guarantor under
this Guaranty that would not render its obligations hereunder or thereunder
subject to avoidance as a fraudulent transfer or conveyance under Section 548 of
Title 11 of the United States Code or any comparable applicable provisions of
state law; provided, solely for purposes of calculating the "Fair Share
--------
Contribution 7.2, any assets or liabilities of such Contributing Guarantor
arising by virtue of any rights to subrogation, reimbursement or indemnification
or any rights to or obligations of contribution hereunder shall not be
considered as assets or liabilities of such Contributing Guarantor. "Aggregate
Payments" means, with respect to a Contributing Guarantor as of any date of
determination, an amount equal to (1) the aggregate amount of all payments and
distributions made on or before such date by such Contributing Guarantor in
respect of this Guaranty (including, without limitation, in respect of this
Section 7.2), minus (2) the aggregate amount of all payments received on or
before such date by such Contributing Guarantor from the other Contributing
Guarantors as contributions under this Section 7.2. The amounts payable as
contributions hereunder shall be determined as of the date on which the related
payment or distribution is made by the applicable Funding Guarantor. The
allocation among Contributing Guarantors of their obligations as set forth in
this Section 7.2 shall not be construed in any way to limit the liability of any
Contributing Guarantor hereunder. Each Guarantor is a third party beneficiary to
the contribution agreement set forth in this Section 7.2.
Payment by Guarantors. Subject to Section 7.2, Guarantors hereby jointly
and severally agree, in furtherance of the foregoing and not in limitation of
any other right which any Beneficiary may have at law or in equity against any
Guarantor by virtue hereof, that upon the failure of Company to pay any of the
Guaranteed Obligations when and as the same shall become due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or otherwise
(including amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C.'362(a)),
Guarantors will upon demand pay, or cause to be paid, in Cash, to Administrative
Agent for the ratable benefit of Beneficiaries, an amount equal to the sum of
the unpaid principal amount of all Guaranteed Obligations then due as aforesaid,
accrued and unpaid interest on such Guaranteed Obligations (including interest
which, but for Company's becoming the subject of a case under the Bankruptcy
code, would have accrued on such Guaranteed Obligations, whether or not a
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<PAGE>
claim is allowed against Company for such interest in the related bankruptcy
case) and all other Guaranteed Obligations then owed to Beneficiaries as
aforesaid.
Liability of Guarantors Absolute. Each Guarantor agrees that its
obligations hereunder are irrevocable, absolute, independent and unconditional
and shall not be affected by any circumstance which constitutes a legal or
equitable discharge of a guarantor or surety other than payment in full of the
Guaranteed Obligations. In furtherance of the foregoing and without limiting the
generality thereof, each Guarantor agrees as follows:
this Guaranty is a guaranty of payment when due and not of
collectability. This Guaranty is a primary obligation of each Guarantor and not
merely a contract of surety;
Administrative Agent may enforce this Guaranty upon the occurrence of
an Event of Default notwithstanding the existence of any dispute between Company
and any Beneficiary with respect to the existence of such Event of Default;
the obligations of each Guarantor hereunder are independent of the
obligations of Company and the obligations of any other guarantor (including any
other Guarantor) of the obligations of Company, and a separate action or actions
may be brought and prosecuted against such Guarantor whether or not any action
is brought against Company or any of such other guarantors and whether or not
Company is joined in any such action or actions;
payment by any Guarantor of a portion, but not all, of the Guaranteed
Obligations shall in no way limit, affect, modify or abridge any Guarantor's
liability for any portion of the Guaranteed Obligations which has not been paid.
Without limiting the generality of the foregoing, if Administrative Agent is
awarded a judgment in any suit brought to enforce any Guarantor's covenant to
pay a portion of the Guaranteed Obligations, such judgment shall not be deemed
to release such Guarantor from its covenant to pay the portion of the Guaranteed
Obligations that is not the subject of such suit, and such judgment shall not,
except to the extent satisfied by such Guarantor, limit, affect, modify or
abridge any other Guarantor's liability hereunder in respect of the Guaranteed
Obligations;
any Beneficiary, upon such terms as it deems appropriate, without
notice or demand and without affecting the validity or enforceability hereof or
giving rise to any reduction, limitation, impairment, discharge or termination
of any Guarantor's liability hereunder, from time to time may (i) renew, extend,
accelerate, increase the rate of interest on, or otherwise change the time,
place, manner or terms of payment of the Guaranteed Obligations; (ii) settle,
compromise, release or discharge, or accept or refuse any offer of performance
with respect to, or substitutions for, the Guaranteed Obligations or any
agreement relating thereto and/or subordinate the payment of the same to the
payment of any other obligations; (iii) request and accept other guaranties of
the Guaranteed Obligations and take and hold security for the payment hereof or
the Guaranteed Obligations; (iv) release, surrender, exchange, substitute,
compromise, settle, rescind, waive,
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<PAGE>
alter, subordinate or modify, with or without consideration, any security for
payment of the Guaranteed Obligations, any other guaranties of the Guaranteed
Obligations, or any other obligation of any Person (including any other
Guarantor) with respect to the Guaranteed Obligations; (v) enforce and apply any
security now or hereafter held by or for the benefit of such Beneficiary in
respect hereof or the Guaranteed Obligations and direct the order or manner of
sale thereof, or exercise any other right or remedy that such Beneficiary may
have against any such security, in each case as such Beneficiary in its
discretion may determine consistent herewith or the applicable Hedge Agreement
and any applicable security agreement, including foreclosure on any such
security pursuant to one or more judicial or nonjudicial sales, whether or not
every aspect of any such sale is commercially reasonable, and even though such
action operates to impair or extinguish any right of reimbursement or
subrogation or other right or remedy of any Guarantor against Company or any
security for the Guaranteed Obligations; and (vi) exercise any other rights
available to it under the Credit Documents or the Hedge Agreements; and
this Guaranty and the obligations of Guarantors hereunder shall be
valid and enforceable and shall not be subject to any reduction, limitation,
impairment, discharge or termination for any reason (other than payment in full
of the Guaranteed Obligations), including the occurrence of any of the
following, whether or not any Guarantor shall have had notice or knowledge of
any of them: (i) any failure or omission to assert or enforce or agreement or
election not to assert or enforce, or the stay or enjoining, by order of court,
by operation of law or otherwise, of the exercise or enforcement of, any claim
or demand or any right, power or remedy (whether arising under the Credit
Documents or the Hedge Agreements, at law, in equity or otherwise) with respect
to the Guaranteed Obligations or any agreement relating thereto, or with respect
to any other guaranty of or security for the payment of the Guaranteed
Obligations; (ii) any rescission, waiver, amendment or modification of, or any
consent to departure from, any of the terms or provisions (including provisions
relating to events of default) hereof, any of the other Credit Documents, any of
the Hedge Agreements or any agreement or instrument executed pursuant thereto,
or of any other guaranty or security for the Guaranteed Obligations, in each
case whether or not in accordance with the terms hereof or such Credit Document,
such Hedge Agreement or any agreement relating to such other guaranty or
security; (iii) the Guaranteed Obligations, or any agreement relating thereto,
at any time being found to be illegal, invalid or unenforceable in any respect;
(iv) the application of payments received from any source (other than payments
received pursuant to the other Credit Documents or any of the Hedge Agreements
or from the proceeds of any security for the Guaranteed Obligations, except to
the extent such security also serves as collateral for indebtedness other than
the Guaranteed Obligations) to the payment of indebtedness other than the
Guaranteed Obligations, even though any Beneficiary might have elected to apply
such payment to any part or all of the Guaranteed Obligations; (v) any
Beneficiary's consent to the change, reorganization or termination of the
corporate structure or existence of Parent Guarantor or any of its Subsidiaries
and to any corresponding restructuring of the Guaranteed Obligations; (vi) any
failure to perfect or continue perfection of a security interest in any
collateral which secures any of the Guaranteed Obligations; (vii) any
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defenses, set-offs or counterclaims which Company may allege or assert against
any Beneficiary in respect of the Guaranteed Obligations, including failure of
consideration, breach of warranty, payment, statute of frauds, statute of
limitations, accord and satisfaction and usury; and (viii) any other act or
thing or omission, or delay to do any other act or thing, which may or might in
any manner or to any extent vary the risk of any Guarantor as an obligor in
respect of the Guaranteed Obligations.
Waivers by Guarantors. Each Guarantor hereby waives, for the benefit of
Beneficiaries: (a) any right to require any Beneficiary, as a condition of
payment or performance by such Guarantor, to (i) proceed against Company, any
other guarantor (including any other Guarantor) of the Guaranteed Obligations or
any other Person, (ii) proceed against or exhaust any security held from
Company, any such other guarantor or any other Person, (iii) proceed against or
have resort to any balance of any Deposit Account or credit on the books of any
Beneficiary in favor of Company or any other Person, or (iv) pursue any other
remedy in the power of any Beneficiary whatsoever; (b) any defense arising by
reason of the incapacity, lack of authority or any disability or other defense
of Company or any other Guarantor including any defense based on or arising out
of the lack of validity or the unenforceability of the Guaranteed Obligations or
any agreement or instrument relating thereto or by reason of the cessation of
the liability of Company or any other Guarantor from any cause other than
payment in full of the Guaranteed Obligations; (c) any defense based upon any
statute or rule of law which provides that the obligation of a surety must be
neither larger in amount nor in other respects more burdensome than that of the
principal; (d) any defense based upon any Beneficiary's errors or omissions in
the administration of the Guaranteed Obligations, except behavior which amounts
to bad faith; (e) (i) any principles or provisions of law, statutory or
otherwise, which are or might be in conflict with the terms hereof and any legal
or equitable discharge of such Guarantor's obligations hereunder, (ii) the
benefit of any statute of limitations affecting such Guarantor's liability
hereunder or the enforcement hereof, (iii) any rights to set-offs, recoupments
and counterclaims, and (iv) promptness, diligence and any requirement that any
Beneficiary protect, secure, perfect or insure any security interest or lien or
any property subject thereto; (f) notices, demands, presentments, protests,
notices of protest, notices of dishonor and notices of any action or inaction,
including acceptance hereof, notices of default hereunder, the Hedge Agreements
or any agreement or instrument related thereto, notices of any renewal,
extension or modification of the Guaranteed Obligations or any agreement related
thereto, notices of any extension of credit to Company and notices of any of the
matters referred to in Section 7.4 and any right to consent to any thereof; and
(g) any defenses or benefits that may be derived from or afforded by law which
limit the liability of or exonerate guarantors or sureties, or which may
conflict with the terms hereof.
Guarantors' Rights of Subrogation, Contribution, etc. Until the Guaranteed
Obligations shall have been indefeasibly paid in full and the Commitments shall
have terminated and all Letters of Credit shall have expired or been cancelled,
each Guarantor hereby waives any claim, right or remedy, direct or indirect,
that such
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Guarantor now has or may hereafter have against Company or any other Guarantor
or any of its assets in connection with this Guaranty or the performance by such
Guarantor of its obligations hereunder, in each case whether such claim, right
or remedy arises in equity, under contract, by statute, under common law or
otherwise and including without limitation (a) any right of subrogation,
reimbursement or indemnification that such Guarantor now has or may hereafter
have against Company with respect to the Guaranteed Obligations, (b) any right
to enforce, or to participate in, any claim, right or remedy that any
Beneficiary now has or may hereafter have against Company, and (c) any benefit
of, and any right to participate in, any collateral or security now or hereafter
held by any Beneficiary. In addition, until the Guaranteed Obligations shall
have been indefeasibly paid in full and the Commitments shall have terminated
and all Letters of Credit shall have expired or been cancelled, each Guarantor
shall withhold exercise of any right of contribution such Guarantor may have
against any other guarantor (including any other Guarantor) of the Guaranteed
Obligations, including, without limitation, any such right of contribution as
contemplated by Section 7.2. Each Guarantor further agrees that, to the extent
the waiver or agreement to withhold the exercise of its rights of subrogation,
reimbursement, indemnification and contribution as set forth herein is found by
a court of competent jurisdiction to be void or voidable for any reason, any
rights of subrogation, reimbursement or indemnification such Guarantor may have
against Company or against any collateral or security, and any rights of
contribution such Guarantor may have against any such other guarantor, shall be
junior and subordinate to any rights any Beneficiary may have against Company,
to all right, title and interest any Beneficiary may have in any such collateral
or security, and to any right any Beneficiary may have against such other
guarantor. If any amount shall be paid to any Guarantor on account of any such
subrogation, reimbursement, indemnification or contribution rights at any time
when all Guaranteed Obligations shall not have been indefeasibly paid in full,
such amount shall be held in trust for Administrative Agent on behalf of
Beneficiaries and shall forthwith be paid over to Administrative Agent for the
benefit of Beneficiaries to be credited and applied against the Guaranteed
Obligations, whether matured or unmatured, in accordance with the terms hereof.
Subordination of Other Obligations. Any Indebtedness of Company or any
Guarantor now or hereafter held by any Guarantor (the "Obligee Guarantor") is
hereby subordinated in right of payment to the Guaranteed Obligations, and any
such indebtedness collected or received by the Obligee Guarantor after an Event
of Default has occurred and is continuing shall be held in trust for
Administrative Agent on behalf of Beneficiaries and shall forthwith be paid over
to Administrative Agent for the benefit of Beneficiaries to be credited and
applied against the Guaranteed Obligations but without affecting, impairing or
limiting in any manner the liability of the Obligee Guarantor under any other
provision hereof.
Continuing Guaranty. This Guaranty is a continuing guaranty and shall
remain in effect until all of the Guaranteed Obligations shall have been
indefeasibly paid in full and the Commitments shall have terminated and all
Letters of Credit shall have expired or been cancelled. Each Guarantor hereby
irrevocably waives any right to revoke this Guaranty as to
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future transactions giving rise to any Guaranteed Obligations.
Authority of Guarantors or Company. It is not necessary for any Beneficiary
to inquire into the capacity or powers of any Guarantor or Company or the
officers, directors or any agents acting or purporting to act on behalf of any
of them.
Financial Condition of Company. Any Credit Extension may be made to Company
or continued from time to time, and any Hedge Agreements may be entered into
from time to time, in each case without notice to or authorization from any
Guarantor regardless of the financial or other condition of Company at the time
of any such grant or continuation or at the time such Hedge Agreement is entered
into, as the case may be. No Beneficiary shall have any obligation to disclose
or discuss with any Guarantor its assessment, or any Guarantor's assessment, of
the financial condition of Company. Each Guarantor has adequate means to obtain
information from Company on a continuing basis concerning the financial
condition of Company and its ability to perform its obligations under the Credit
Documents and the Hedge Agreements, and each Guarantor assumes the
responsibility for being and keeping informed of the financial condition of
Company and of all circumstances bearing upon the risk of nonpayment of the
Guaranteed Obligations. Each Guarantor hereby waives and relinquishes any duty
on the part of any Beneficiary to disclose any matter, fact or thing relating to
the business, operations or conditions of Company now known or hereafter known
by any Beneficiary.
Bankruptcy, etc. (a) The obligations of Guarantors hereunder shall not be
reduced, limited, impaired, discharged, deferred, suspended or terminated by any
case or proceeding, voluntary or involuntary, involving the bankruptcy,
insolvency, receivership, reorganization, liquidation or arrangement of Company
or any other Guarantor or by any defense which Company or any other Guarantor
may have by reason of the order, decree or decision of any court or
administrative body resulting from any such proceeding.
Each Guarantor acknowledges and agrees that any interest on any
portion of the Guaranteed Obligations which accrues after the commencement of
any case or proceeding referred to in clause (a) above (or, if interest on any
portion of the Guaranteed Obligations ceases to accrue by operation of law by
reason of the commencement of such case or proceeding, such interest as would
have accrued on such portion of the Guaranteed Obligations if such case or
proceeding had not been commenced) shall be included in the Guaranteed
Obligations because it is the intention of Guarantors and Beneficiaries that the
Guaranteed Obligations which are Guaranteed by Guarantors pursuant hereto should
be determined without regard to any rule of law or order which may relieve
Company of any portion of such Guaranteed Obligations. Guarantors will permit
any trustee in bankruptcy, receiver, debtor in possession, assignee for the
benefit of creditors or similar person to pay Administrative Agent, or allow the
claim of Administrative Agent in respect of, any such interest accruing after
the date on which such case
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or proceeding is commenced.
In the event that all or any portion of the Guaranteed Obligations are
paid by Company, the obligations of Guarantors hereunder shall continue and
remain in full force and effect or be reinstated, as the case may be, in the
event that all or any part of such payment(s) are rescinded or recovered
directly or indirectly from any Beneficiary as a preference, fraudulent transfer
or otherwise, and any such payments which are so rescinded or recovered shall
constitute Guaranteed Obligations for all purposes hereunder.
Notice of Events. As soon as any Guarantor obtains knowledge thereof, such
Guarantor shall give Administrative Agent written notice of any condition or
event which has resulted in (i) a material adverse change in the financial
condition of any Guarantor or Company which is reasonably likely to have a
Material Adverse Effect or (ii) a breach of or noncompliance with any term,
condition or covenant contained herein, any other Credit Document, any Hedge
Agreement or any other document delivered pursuant hereto or thereto.
Discharge of Guaranty Upon Sale of Guarantor. If all of the Capital Stock
of any Guarantor or any of its successors in interest hereunder shall be sold or
otherwise disposed of (including by merger or consolidation) in accordance with
the terms and conditions hereof, the Guaranty of such Guarantor or such
successor in interest, as the case may be, hereunder shall automatically be
discharged and released without any further action by any Beneficiary or any
other Person effective as of the time of such Asset Sale; provided, as a
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condition precedent to such discharge and release, Administrative Agent shall
have received evidence satisfactory to it that arrangements satisfactory to it
have been made for delivery to Administrative Agent of the applicable Net Asset
Sale Proceeds of such disposition pursuant to Section 2.14(a).
EVENTS OF DEFAULT
Events of Default. If any one or more of the following conditions or
events shall occur:
failure by Company to pay (i) when due any installment of principal of
any Loan, whether at stated maturity, by acceleration, by notice of voluntary
prepayment, by mandatory prepayment or otherwise; (ii) when due any amount
payable to Issuing Bank in reimbursement of any drawing under a Letter of
Credit; or (iii) any interest on any Loan or any fee or any other amount due
hereunder within five (5) days after the date due; or
any Credit Party shall fail to observe or perform any other covenant,
condition or agreement to be observed or performed by such Credit Party in any
of the Credit Documents, and such Credit Party fails to cure such breach within
ten (10) Days after written notice thereof,
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unless the breach relates to a covenant contained in Section 5.4 or Section 6,
in which case no notice or grace period shall apply, or unless the breach
relates to Section 5.6, in which case an Event of Default shall occur on the
thirtieth (30th) day following the breach without any notice requirement, unless
the breach shall have been cured before such date; or
any representation or warranty made by any Credit Party in connection
with this Agreement or any other Credit Document, or any Credit Extension or any
statement or representation made in any report, certificate, financial statement
or other instrument furnished by or on behalf of such Credit Party pursuant to
this Agreement or any other Credit Document, shall prove to have been false or
misleading in any material respect when made or delivered or when deemed made in
accordance with the terms hereof or thereof; or
any Credit Party shall fail to make any payment due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) on
any other obligation for borrowed money in excess of $250,000 with respect to
any Credit Party (other than Parent Guarantor) or in excess of $1,000,000 with
respect to Parent Guarantor, and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such indebtedness; or any other default or event under any agreement
or instrument relating to any indebtedness for borrowed money in excess of
$250,000 with respect to any Credit Party (other than Parent Guarantor) or in
excess of $1,000,000 with respect to Parent Guarantor, or any other event, shall
occur and shall continue after the applicable grace period, if any, specified in
such agreement or instrument if the effect of such default or event is to
accelerate, or to permit the acceleration of, the maturity of such indebtedness
in excess of $250,000 with respect to any Credit Party (other than Parent
Guarantor) or in excess of $1,000,000 with respect to Parent Guarantor; or any
such indebtedness in excess of $250,000 with respect to any Credit Party (other
than Parent Guarantor) or in excess of $1,000,000 with respect to Parent
Guarantor shall be declared to be due and payable or required to be prepaid
(other than by a regularly scheduled required prepayment) prior to the stated
maturity thereof; or
any Credit Party shall (i) apply for or consent to the appointment of
a receiver, trustee, custodian, sequestrator or similar official for such Credit
Party or for a substantial part of its property, (ii) make a general assignment
for the benefit of creditors, (iii) become unable, or admit in writing its
inability, to pay its debts as they become due, (iv) voluntarily or
involuntarily dissolve, liquidate or wind up its affairs, or (v) take action for
the purpose of effecting any of the foregoing; or
a proceeding under any bankruptcy, reorganization, arrangement of
debts, insolvency or receivership law is filed by or against any Credit Party,
or any Credit Party takes any action to authorize any of the foregoing matters,
and in the case of any such proceeding instituted against any Credit Party (but
not instituted by any Credit Party), either such proceeding shall remain
undismissed or unstayed for a period of sixty (60) days or any of the actions
sought in such proceeding (including, without limitation, the entry of an order
for relief against, or the
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appointment of a receiver, trustee or other similar official for any Credit
Party or any substantial part of its property) shall be granted or shall occur;
or
a Termination Event (other than a Reportable Event) occurs which the
Requisite Lenders in good faith believe would subject Company to a liability
which is reasonably likely to have a Material Adverse Effect; or
the plan administrator of any Plan applies under Section 412(d) of the
IRC for a waiver of the minimum funding standards of Section 412(a) of the IRC
and the Requisite Lenders in good faith believe that the approval of such waiver
could subject Company or any ERISA Affiliate to liability which is reasonably
likely to have a Material Adverse Effect; or
unless it is not reasonably likely to have a Material Adverse Effect,
any of the Governmental Approvals or any other license, Governmental Approval or
other governmental consent or approval necessary for the continuing operation of
any Credit Party or any System or any other material Governmental Approval or
approval of or material filing with the FCC, any PUC or any other Governmental
Authority with respect to the conduct by any Credit Party of its business and
operations, including its Business, shall not be obtained or shall cease to be
in full force and effect, which in respect of any of the Governmental Approvals
shall, in the case of an order of the FCC, any PUC or other Governmental
Authority having jurisdiction with respect thereto, revoking, or deciding not to
renew, any such Governmental Approval, occur upon the issuance of such order,
and, in the case of any other order revoking or terminating any of the
Governmental Approvals or deciding not to renew such Governmental Approvals
prior to the termination thereof, occur when such order becomes final; or
unless it is not reasonably likely to have a Material Adverse Effect,
the FCC, any PUC or any other Governmental Authority, by final order, determines
that the existence or performance of this Agreement or any other Credit Document
will result in a revocation, suspension or material adverse modification of any
of the Governmental Approvals for any System; or
for any reason any Credit Document shall not be in full force and
effect or shall not be enforceable in accordance with its terms, or the Guaranty
set forth at Section 7 for any reason, other than the satisfaction in full of
all Obligations, shall cease to be in full force and effect (other than in
accordance with its terms) or shall be declared to be null and void or voidable
or any Guarantor shall repudiate its obligations thereunder with respect to such
Guaranty, or any security interest or lien granted pursuant thereto with respect
to Collateral having an aggregate value of $500,000 or greater shall fail to be
perfected or to have its intended priority, or any Credit Party or any Affiliate
thereof shall contest the validity of any Lien granted under, or shall disaffirm
its obligations under any Credit Document; or
unless it is not reasonably likely to have a Material Adverse Effect,
for any
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reason, any Credit Party ceases to operate any System or ceases to own any of
its Governmental Approvals necessary for the continuing operation of any System;
or
a judgment or judgments for the payment of money in excess of $500,000
individually or $1,000,000 in the aggregate at any one time shall have been
rendered against any Credit Party and the same shall have remained unsatisfied
and in effect for any period of ninety (90) days during which no stay of
execution shall have been obtained; or
unless it is not reasonably likely to have a Material Adverse Effect,
any Credit Party is enjoined, restrained or in any way prevented by the order of
any court or administrative or regulatory agency from conducting its business in
any material respect with respect to any one or more of its Systems; or
any Credit Party becomes subject to any liabilities, costs, expenses,
damages, fines or penalties which could reasonably be expected to have a
Material Adverse Effect arising out of or related to (i) any Remedial Action in
response to a Release or threatened Release at any location of any Contaminant
into the indoor or outdoor environment or (ii) any material violation of any
Environmental Law; or
a Change of Control shall occur;
THEN, (1) upon the occurrence of any Event of Default described in Section
8.1(e) or 8.1(f), automatically, and (2) upon the occurrence of any other Event
of Default, at the request of (or with the consent of) Requisite Lenders, upon
notice to Company by Administrative Agent, (w) the Commitments, if any, of each
Lender having such Commitments and the obligation of Issuing Bank to issue any
Letter of Credit shall immediately terminate; (x) each of the following shall
immediately become due and payable, in each case without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by each Credit Party: (i) the unpaid principal amount of and accrued
interest on the Loans, (ii) an amount equal to the maximum amount that may at
any time be drawn under all Letters of Credit then outstanding (regardless of
whether any beneficiary under any such Letter of Credit shall have presented, or
shall be entitled at such time to present, the drafts or other documents or
certificates required to draw under such Letters of Credit), and (iii) all other
Obligations; provided, the foregoing shall not affect in any way the obligations
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of Lenders under Section 2.3(c) or Section 2.4(e); (y) Administrative Agent may
enforce any and all Liens and security interests created pursuant to Collateral
Documents; and (z) Administrative Agent shall direct Company to pay (and Company
hereby agrees upon receipt of such notice, or upon the occurrence of any Event
of Default specified in Section 8.1(f) and (g) to pay) to Administrative Agent
such additional amounts of Cash, to be held as security for Company's
reimbursement Obligations in respect of Letters of Credit then outstanding,
equal to the Letter of Credit Usage at such time. Company hereby waives the
benefit of all valuation, appraisal and exemption laws and the posting of any
bond required of Administrative Agent or any Lender in connection with any
judicial process to realize
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on the Collateral, to enforce any judgment or other court order entered in favor
of Administrative Agent or any Lender or to enforce by specific performance,
temporary restraining order, or preliminary or permanent injunction, this
Agreement or any other Credit Documents. Company waives the right, if any, to
the benefit of, or to direct the application of, any Collateral. Company hereby
acknowledges that none of Administrative Agent or any Lender has any obligation
to resort to any Collateral or make claim against any other Person before
seeking payment or performance from Company.
AGENTS
Appointment of Agents. GSCP is hereby appointed Lead Arranger and
Syndication Agent hereunder, and each Lender hereby authorizes Lead Arranger and
Syndication Agent to act as its agents in accordance with the terms hereof and
the other Credit Documents. CIBC is hereby appointed Administrative Agent
hereunder and under the other Credit Documents and each Lender hereby authorizes
Administrative Agent to act as its agent in accordance with the terms hereof and
the other Credit Documents. CSC is hereby appointed Documentation Agent
hereunder, and each Lender hereby authorizes Documentation Agent to act as its
agent in accordance with the terms hereof and the other Credit Documents. Each
Agent hereby agrees to act upon the express conditions contained herein and the
other Credit Documents, as applicable. The provisions of this Section 9 are
solely for the benefit of Agents and Lenders and no Credit Party shall have any
rights as a third party beneficiary of any of the provisions thereof. In
performing its functions and duties hereunder, each Agent shall act solely as an
agent of Lenders and does not assume and shall not be deemed to have assumed any
obligation towards or relationship of agency or trust with or for Parent
Guarantor or any of its Subsidiaries. Each of Syndication Agent and
Documentation Agent, without consent of or notice to any party hereto, may
assign any and all of its rights or obligations hereunder to any of its
Affiliates. As of the Closing Date, all the respective obligations of GSCP, in
its capacity as Lead Arranger, Syndication Agent, and CSC, in its capacity as
Documentation Agent, shall terminate.
Powers and Duties. Each Lender irrevocably authorizes each Agent to take
such action on such Lender's behalf and to exercise such powers, rights and
remedies hereunder and under the other Credit Documents as are specifically
delegated or granted to such Agent by the terms hereof and thereof, together
with such powers, rights and remedies as are reasonably incidental thereto. Each
Agent shall have only those duties and responsibilities that are expressly
specified herein and the other Credit Documents. Each Agent may exercise such
powers, rights and remedies and perform such duties by or through its agents or
employees. No Agent shall have, by reason hereof or any of the other Credit
Documents, a fiduciary relationship in respect of any Lender; and nothing herein
or any of the other Credit Documents, expressed or implied, is intended to or
shall be so construed as to impose upon any Agent any obligations in respect
hereof or any of the other Credit Documents except as expressly set forth herein
or therein.
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General Immunity.
No Responsibility for Certain Matters. No Agent shall be responsible
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to any Lender for the execution, effectiveness, genuineness, validity,
enforceability, collectability or sufficiency hereof or any other Credit
Document or for any representations, warranties, recitals or statements made
herein or therein or made in any written or oral statements or in any financial
or other statements, instruments, reports or certificates or any other documents
furnished or made by any of Agent to Lenders or by or on behalf of any Credit
Party to any Agent or any Lender in connection with the Credit Documents and the
transactions contemplated thereby or for the financial condition or business
affairs of any Credit Party or any other Person liable for the payment of any
Obligations, nor shall any Agent be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions, covenants
or agreements contained in any of the Credit Documents or as to the use of the
proceeds of the Loans or as to the existence or possible existence of any Event
of Default or Default. Anything contained herein to the contrary
notwithstanding, Administrative Agent shall not have any liability arising from
confirmations of the amount of outstanding Loans or the Letter of Credit Usage
or the component amounts thereof.
Exculpatory Provisions. No Agent nor any of its officers, partners,
----------------------
directors, employees or agents shall be liable to Lenders for any action taken
or omitted by any Agent under or in connection with any of the Credit Documents
except to the extent caused by such Agent's gross negligence or willful
misconduct. Each Agent shall be entitled to refrain from any act or the taking
of any action (including the failure to take an action) in connection herewith
or any of the other Credit Documents or from the exercise of any power,
discretion or authority vested in it hereunder or thereunder unless and until
such Agent shall have received instructions in respect thereof from Requisite
Lenders (or such other Lenders as may be required to give such instructions
under Section 10.5) and, upon receipt of such instructions from Requisite
Lenders (or such other Lenders, as the case may be), such Agent shall be
entitled to act or (where so instructed) refrain from acting, or to exercise
such power, discretion or authority, in accordance with such instructions.
Without prejudice to the generality of the foregoing, (i) each Agent shall be
entitled to rely, and shall be fully protected in relying, upon any
communication, instrument or document believed by it to be genuine and correct
and to have been signed or sent by the proper Person or Persons, and shall be
entitled to rely and shall be protected in relying on opinions and judgments of
attorneys (who may be attorneys for Parent Guarantor and its Subsidiaries),
accountants, experts and other professional advisors selected by it; and (ii) no
Lender shall have any right of action whatsoever against any Agent as a result
of such Agent acting or (where so instructed) refraining from acting hereunder
or any of the other Credit Documents in accordance with the instructions of
Requisite Lenders (or such other Lenders as may be required to give such
instructions under Section 10.5).
Agents Entitled to Act as LenderAgents Entitled to Act as Lender. The
agency hereby created shall in no way impair or affect any of the rights and
powers of, or impose any duties or
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obligations upon, any Agent in its individual capacity as a Lender hereunder.
With respect to its participation in the Loans and the Letters of Credit, each
Agent shall have the same rights and powers hereunder as any other Lender and
may exercise the same as if it were not performing the duties and functions
delegated to it hereunder, and the term "Lender" shall, unless the context
clearly otherwise indicates, include each Agent in its individual capacity. Any
Agent and its Affiliates may accept deposits from, lend money to and generally
engage in any kind of banking, trust, financial advisory or other business with
Parent Guarantor or any of its Affiliates as if it were not performing the
duties specified herein, and may accept fees and other consideration from
Company for services in connection herewith and otherwise without having to
account for the same to Lenders.
Lenders' Representations, Warranties and Acknowledgment.
Representations and Warranties. Each Lender represents and warrants
------------------------------
that it has made its own independent investigation of the financial condition
and affairs of Parent Guarantor and its Subsidiaries in connection with Credit
Extensions hereunder and that it has made and shall continue to make its own
appraisal of the creditworthiness of Parent Guarantor and its Subsidiaries. No
Agent shall have any duty or responsibility, either initially or on a continuing
basis, to make any such investigation or any such appraisal on behalf of Lenders
or to provide any Lender with any credit or other information with respect
thereto, whether coming into its possession before the making of the Loans or at
any time or times thereafter, and no Agent shall have any responsibility with
respect to the accuracy of or the completeness of any information provided to
Lenders.
Acknowledgment. Each Lender, by delivering its signature page to this
--------------
Agreement and funding its Revolving Loan, Delayed Draw Term Loan Amount and/or
Term Loan Amount on the Closing Date, shall be deemed to have acknowledged
receipt of, and consented to and approved, each Credit Document and each other
document required to be approved by any Agent, Requisite Lenders or Lenders, as
applicable on the Closing Date.
Right to Indemnity. Each Lender, in proportion to its Pro Rata Share,
severally agrees to indemnify each Agent, to the extent that such Agent shall
not have been reimbursed by any Credit Party, for and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including counsel fees and disbursements) or disbursements of
any kind or nature whatsoever which may be imposed on, incurred by or asserted
against such Agent in exercising its powers, rights and remedies or performing
its duties hereunder or under the other Credit Documents or otherwise in its
capacity as such Agent in any way relating to or arising out hereof or the other
Credit Documents; provided, no Lender shall be liable for any portion of such
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liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from such Agent's gross negligence or
willful misconduct. If any indemnity furnished to any Agent
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for any purpose shall, in the opinion of such Agent, be insufficient or become
impaired, such Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity is
furnished; provided, in no event shall this sentence require any Lender to
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indemnify any Agent against any liability, obligation, loss, damage, penalty,
action, judgment, suit, cost, expense or disbursement in excess of such Lender's
Pro Rata Share thereof; and provided further, this sentence shall not be deemed
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to require any Lender to indemnify any Agent against any liability, obligation,
loss, damage, penalty, action, judgment, suit, cost, expense or disbursement
described in the proviso in the immediately preceding sentence.
Successor Administrative Agent and Swing Line Lender. Administrative Agent
may resign at any time by giving thirty (30) days' prior written notice thereof
to Lenders and Company, and Administrative Agent may be removed at any time with
or without cause by an instrument or concurrent instruments in writing delivered
to Company and Administrative Agent and signed by Requisite Lenders. Upon any
such notice of resignation or any such removal, Requisite Lenders shall have the
right, upon five Business Days' notice to Company, to appoint a successor
Administrative Agent which successor shall, unless a Default or Event of Default
shall have occurred and be continuing, be reasonably acceptable to Company. Upon
the acceptance of any appointment as Administrative Agent hereunder by a
successor Administrative Agent, that successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring or removed Administrative Agent and the retiring or
removed Administrative Agent shall promptly (a) transfer to such successor
Administrative Agent all sums, Securities and other items of Collateral held
under the Collateral Documents, together with all records and other documents
necessary or appropriate in connection with the performance of the duties of the
successor Administrative Agent under the Credit Documents, and (b) execute and
deliver to such successor Administrative Agent such amendments to financing
statements, and take such other actions, as may be necessary or appropriate in
connection with the assignment to such successor Administrative Agent of the
security interests created under the Collateral Documents, whereupon such
retiring or removed Administrative Agent shall be discharged from its duties and
obligations hereunder. After any retiring or removed Administrative Agent's
resignation or removal hereunder as Administrative Agent, the provisions of this
Section 9 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent hereunder. Any resignation or removal of
Administrative Agent pursuant to this Section shall also constitute the
resignation or removal of CIBC or its successor as Swing Line Lender, and any
successor Administrative Agent appointed pursuant to this Section shall, upon
its acceptance of such appointment, become the successor Swing Line Lender for
all purposes hereunder. In such event (i) Company shall prepay any outstanding
Swing Line Loans made by the retiring or removed Administrative Agent in its
capacity as Swing Line Lender, (ii) upon such prepayment, the retiring or
removed Administrative Agent and Swing Line Lender shall surrender any Swing
Line Note held by it to Company for cancellation, and (iii) Company shall issue,
if so requested by Successor Administrative Agent and Swing Line Loan Lender, a
new Swing Line Note to the
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successor Administrative Agent and Swing Line Lender, in the principal amount of
the Swing Line Loan Sublimit then in effect and with other appropriate
insertions.
Collateral Documents and Guaranty.
Administrative Agent as Agent under Collateral Documents and Guaranty.
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Each Lender hereby further authorizes Administrative Agent, on behalf of and for
the benefit of Lenders, to be the agent for and representative of Lenders with
respect to the Guaranty, the Collateral and the Collateral Documents. Subject
to Section 10.5, without further written consent or authorization from Lenders,
Administrative Agent may execute any documents or instruments necessary to (i)
release any Lien encumbering any item of Collateral that is the subject of a
sale or other disposition of assets permitted hereby or to which Requisite
Lenders (or such other Lenders as may be required to give such consent under
Section 10.5) have otherwise consented or (ii) release any Guarantor from the
Guaranty pursuant to Section 7.13 or with respect to which Requisite Lenders (or
such other Lenders as may be required to give such consent under Section 10.5)
have otherwise consented.
Administrative Agent's Right to Realize on Collateral and Enforce
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Guaranty. Anything contained in any of the Credit Documents to the contrary
- --------
notwithstanding, Company, Administrative Agent and each Lender hereby agree that
(i) no Lender shall have any right individually to realize upon any of the
Collateral or to enforce the Guaranty, it being understood and agreed that all
powers, rights and remedies hereunder may be exercised solely by Administrative
Agent, on behalf of Lenders in accordance with the terms hereof, and (ii) in the
event of a foreclosure by Administrative Agent on any of the Collateral pursuant
to a public or private sale, Administrative Agent or any Lender may be the
purchaser of any or all of such Collateral at any such sale and Administrative
Agent, as agent for and representative of Lenders (but not any Lender or Lenders
in its or their respective individual capacities unless Requisite Lenders shall
otherwise agree in writing) shall be entitled, for the purpose of bidding and
making settlement or payment of the purchase price for all or any portion of the
Collateral sold at any such public sale, to use and apply any of the Obligations
as a credit on account of the purchase price for any collateral payable by
Administrative Agent at such sale.
MISCELLANEOUS
Notices. Unless otherwise specifically provided herein, any notice or
other communication herein required or permitted to be given to a Credit Party,
Lead Arranger, Syndication Agent, Administrative Agent, Swing Line Lender,
Issuing Bank or Documentation Agent, shall be sent to such Person's address as
set forth on Appendix B or in the other relevant Credit Document, and in the
case of any Lender, the address as indicated on Appendix B or as otherwise
indicated to Administrative Agent in writing. Each notice hereunder shall be in
writing and may be personally served, telexed or sent by telefacsimile or United
States mail or courier service and shall be deemed to have been given when
delivered in person or by courier
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service and signed for against receipt thereof, upon receipt of telefacsimile or
telex, or three Business Days after depositing it in the United States mail with
postage prepaid and properly addressed; provided, no notice to any Agent shall
--------
be effective until received by such Agent.
Expenses. Whether or not the transactions contemplated hereby shall be
consummated, Company agrees to pay promptly (a) all the actual and reasonable
costs and expenses of Skadden, Arps, Slate, Meagher & Flom LLP in connection
with the preparation of the Credit Documents and any consents, amendments,
waivers or other modifications thereto; (b) all the costs of furnishing all
opinions by counsel for Company and the other Credit Parties; (c) the reasonable
fees, expenses and disbursements of one law firm acting as counsel to Agents (in
each case including allocated costs of internal counsel) in connection with the
negotiation, preparation, execution and administration of the Credit Documents
and any consents, amendments, waivers or other modifications thereto and any
other documents or matters requested by Company; (d) all the actual costs and
reasonable expenses of creating and perfecting Liens in favor of Administrative
Agent, for the benefit of Lenders pursuant hereto, including filing and
recording fees, expenses and taxes, stamp or documentary taxes, search fees,
title insurance premiums and reasonable fees, expenses and disbursements of
counsel to the Syndication Agent or Administrative Agent and of counsel
providing any opinions that Syndication Agent or Administrative Agent or
Requisite Lenders may request in respect of the Collateral or the Liens created
pursuant the Collateral Documents; (e) all the actual costs and reasonable fees,
expenses and disbursements of any auditors, accountants, consultants or
appraisers retained by the Syndication Agent or Administrative Agent; (f) all
the actual costs and reasonable expenses (including the reasonable fees,
expenses and disbursements of any appraisers, consultants, advisors and agents
employed or retained by Administrative Agent and its counsel) in connection with
the custody or preservation of any of the Collateral; (g) all other actual and
reasonable costs and expenses incurred by Syndication Agent or Administrative
Agent in connection with the syndication of the Loans and Commitments and the
negotiation, preparation and execution of the Credit Documents and any consents,
amendments, waivers or other modifications thereto and the transactions
contemplated thereby; and (h) after the occurrence of a Default or an Event of
Default, all costs and expenses, including reasonable attorneys' fees (including
allocated costs of internal counsel) and costs of settlement, incurred by any
Agent and Lenders in enforcing any Obligations of or in collecting any payments
due from any Credit Party hereunder or under the other Credit Documents by
reason of such Default or Event of Default (including in connection with the
sale of, collection from, or other realization upon any of the Collateral or the
enforcement of the Guaranty) or in connection with any refinancing or
restructuring of the credit arrangements provided hereunder in the nature of a
"work-out" or pursuant to any insolvency or bankruptcy cases or proceedings.
Indemnity. In addition to the payment of expenses pursuant to Section
10.2, whether or not the transactions contemplated hereby shall be consummated,
each Credit Party agrees to defend (subject to Indemnitees' selection of
counsel), indemnify, pay and hold harmless, each Agent and Lender and the
officers, partners, directors, trustees, employees, agents and Affiliates
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of each Agent and each Lender (each, an "Indemnitee"), from and against any and
all Indemnified Liabilities; provided, no Credit Party shall have any obligation
--------
to any Indemnitee hereunder with respect to any Indemnified Liabilities to the
extent such Indemnified Liabilities arise from the gross negligence or willful
misconduct of that Indemnitee. To the extent that the undertakings to defend,
indemnify, pay and hold harmless set forth in this Section 10.3 may be
unenforceable in whole or in part because they are violative of any law or
public policy, the applicable Credit Party shall contribute the maximum portion
that it is permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of
them.
Set-Off. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default each Lender is hereby authorized by each
Credit Party at any time or from time to time subject to the consent of
Administrative Agent (such consent not to be unreasonably withheld or delayed),
without notice to any Credit Party or to any other Person (other than
Administrative Agent), any such notice being hereby expressly waived, to set off
and to appropriate and to apply any and all deposits (general or special,
including Indebtedness evidenced by certificates of deposit, whether matured or
unmatured, but not including trust accounts) and any other Indebtedness at any
time held or owing by such Lender to or for the credit or the account of any
Credit Party against and on account of the obligations and liabilities of any
Credit Party to such Lender hereunder, the Letters of Credit and participations
therein and under the other Credit Documents, including all claims of any nature
or description arising out of or connected hereto, the Letters of Credit and
participations therein or with any other Credit Document, irrespective of
whether or not (a) such Lender shall have made any demand hereunder or (b) the
principal of or the interest on the Loans or any amounts in respect of the
Letters of Credit or any other amounts due hereunder shall have become due and
payable pursuant to Section 2 and although such obligations and liabilities, or
any of them, may be contingent or unmatured. Each Credit Party hereby further
grants to Administrative Agent and each Lender a security interest in all
Deposit Accounts maintained with Administrative Agent or such Lender as security
for the Obligations.
Amendments and Waivers. Requisite Lenders' Consent. (a) Subject to
--------------------------
Sections 10.5(b) and 10.5(c), no amendment, modification, termination or waiver
of any provision of the Credit Documents, or consent to any departure by any
Credit Party therefrom, shall in any event be effective without the written
concurrence of the Requisite Lenders.
Affected Lenders' Consent. Without the written consent of each Lender
-------------------------
(other than a Defaulting Lender) that would be affected thereby, no amendment,
modification, termination, or consent shall be effective if the effect thereof
would:
extend the scheduled final maturity of any Loan or Note;
waive, reduce or postpone any scheduled repayment (but not
prepayment);
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extend the stated expiration date of any Letter of Credit beyond
the Revolving Credit Commitment Termination Date;
reduce the rate of interest on any Loan (other than any waiver of any
increase in the interest rate applicable to any Loan pursuant to Section 2.10)
or any fee payable hereunder;
extend the time for payment of any such interest or fees;
reduce the principal amount of any Loan or any reimbursement
obligation in respect of any Letter of Credit;
amend, modify, terminate or waive any provision of this Section
10.5(b) or Section 10.5(c);
amend the definition of "Aggregate Commitment Usage", "Requisite
Lenders" or "Pro Rata Share"; provided, with the consent of Requisite Lenders,
--------
additional extensions of credit pursuant hereto may be included in the
determination of "Aggregate Commitment Usage", "Requisite Lenders" or "Pro Rata
Share" on substantially the same basis as the Credit Facility Term Loan
Commitments, the Credit Facility Term Loans, the Revolving Credit Commitments
and the Revolving Loans are included on the Closing Date;
release or otherwise subordinate all or substantially all of the
Collateral or all or substantially all of the Guarantors from the Guaranty
except as expressly provided in the Credit Documents; or
consent to the assignment or transfer by any Credit Party of any
of its rights and obligations under any Credit Document.
Other Consents. No amendment, modification, termination or waiver of
--------------
any provision of the Credit Documents, or consent to any departure by any Credit
Party therefrom, shall:
increase any Delayed Draw Term Loan Commitment of any Lender over
the amount thereof then in effect without the consent of such Lender; provided,
--------
no amendment, modification or waiver of any condition precedent, covenant,
Default or Event of Default shall constitute an increase in any Delayed Draw
Term Loan Commitment of any Lender;
increase any Revolving Credit Commitment of any Lender over the
amount thereof then in effect without the consent of such Lender; provided, no
--------
amendment, modification or waiver of any condition precedent, covenant, Default
or Event of Default shall
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constitute an increase in any Revolving Credit Commitment of any Lender;
amend, modify, terminate or waive any provision hereof relating
to the Swing Line Sublimit or the Swing Line Loans without the consent of Swing
Line Lender;
amend the definition of "Requisite Class Lenders" without the
consent of the applicable Requisite Class Lenders of such Class; provided, with
--------
the consent of the Requisite Lenders, additional extensions of credit pursuant
hereto may be included in the determination of such "Requisite Class Lenders" on
substantially the same basis as the Credit Facility Term Loan Commitments, the
Credit Facility Term Loans, the Revolving Credit Commitments and the Revolving
Loans are included on the Closing Date;
alter the required application of any repayments or prepayments
as between Classes pursuant to Section 2.15 without the consent of Requisite
Class Lenders of each Class which is being allocated a lesser repayment or
prepayment as a result thereof; provided, Requisite Lenders may waive, in whole
--------
or in part, any prepayment so long as the application, as between Classes, of
any portion of such prepayment which is still required to be made is not
altered;
amend, modify, terminate or waive any obligation of Lenders
relating to the purchase of participations in Letters of Credit as provided in
Section 2.4(e) without the written consent of Administrative Agent and of
Issuing Bank; or
amend, modify, terminate or waive any provision of Section 9 as
the same applies to any Agent or of Section 2.24 as it relates to the
Incremental Facility Syndication Agent, or any other provision hereof as the
same applies to the rights or obligations of any Agent, in each case without the
consent of such Agent.
Execution of Amendments, etc. Administrative Agent may, but shall
----------------------------
have no obligation to, with the concurrence of any Lender, execute amendments,
modifications, waivers or consents on behalf of such Lender. Any waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which it was given. No notice to or demand on any Credit Party in
any case shall entitle any Credit Party to any other or further notice or demand
in similar or other circumstances. Any amendment, modification, termination,
waiver or consent effected in accordance with this Section 10.5 shall be binding
upon each Lender at the time outstanding, each future Lender and, if signed by a
Credit Party, on such Credit Party.
Successors and Assigns; Participations.
Generally. This Agreement shall be binding upon the parties hereto
---------
and their respective successors and assigns and shall inure to the benefit of
the parties hereto and the successors and assigns of Lenders. No Credit Party's
rights or obligations hereunder nor any
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interest therein may be assigned or delegated by any Credit Party without the
prior written consent of all Lenders.
Register. Company, Administrative Agent and Lenders shall deem and
--------
treat the Persons listed as Lenders in the Register as the holders and owners of
the corresponding Commitments and Loans listed therein for all purposes hereof,
and no assignment or transfer of any such Commitment or Loan shall be effective,
in each case, unless and until an Assignment Agreement effecting the assignment
or transfer thereof shall have been delivered to and accepted by Administrative
Agent and recorded in the Register as provided in Section 10.6(e). Prior to
such recordation, all amounts owed with respect to the applicable Commitment or
Loan shall be owed to the Lender listed in the Register as the owner thereof,
and any request, authority or consent of any Person who, at the time of making
such request or giving such authority or consent, is listed in the Register as a
Lender shall be conclusive and binding on any subsequent holder, assignee or
transferee of the corresponding Commitments or Loans.
Assignments. Each Lender shall have the right at any time to sell,
-----------
assign or transfer all or a portion of its rights and obligations under this
Agreement, including, without limitation, all or a portion of its Commitment or
Loans owing to it, Note or Notes held by it, or other Obligation (provided,
--------
however, that each such assignment shall be of a uniform, and not varying,
- -------
percentage of all rights and obligations under and in respect of any Loan and
its related Commitment):
to any Person meeting the criteria of clause (i) of the
definition of the term of "Eligible Assignee" upon the giving of notice to
Company and Administrative Agent; and
to any Person meeting the criteria of clause (ii) of the
definition of the term of "Eligible Assignee" and, in the case of assignments of
Revolving Loans, Revolving Credit Commitments, Delayed Draw Term Loan
Commitments and/or Delayed Draw Term Loans to any such Person (except in the
case of assignments made by or to GSCP) consented to by each of Company and
Administrative Agent (such consent not to be unreasonably withheld or delayed
or, in the case of Company, required at any time an Event of Default shall have
occurred and then be continuing); provided, further each such assignment
--------
pursuant to this Section 10.6(c)(ii) shall be in an aggregate amount of not less
than (A) $2,000,000 (or such lesser amount as may be agreed to by Company and
Administrative Agent or as shall constitute the aggregate amount of the
Revolving Credit Commitments and Revolving Loans or the Delayed Draw Term Loan
Commitments and Delayed Draw Term Loans, as the case may be, of the assigning
Lender) with respect to the assignment of the Revolving Credit Commitments and
Revolving Loans or the Delayed Draw Term Loan Commitments and Delayed Draw Term
Loans, as the case may be, and (B) $1,000,000 (or such lesser amount as may be
agreed to by Company and Administrative Agent or as shall constitute the
aggregate amount of the Term Loan of the assigning Lender) with respect to the
assignment of the Term Loans.
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Mechanics of Assignments. The assigning Lender and the assignee
------------------------
thereof shall execute and deliver to Administrative Agent an Assignment
Agreement, together with (i) a processing and recordation fee of $500 in the
case of assignments pursuant to Section 10.6(c)(i) or made by or to GSCP, and
$2,000 in the case of all other assignments (except that only one fee shall be
payable in the case of contemporaneous assignments to Related Funds), and (ii)
such forms, certificates or other evidence, if any, with respect to United
States federal income tax withholding matters as the assignee under such
Assignment Agreement may be required to deliver to Administrative Agent pursuant
to Section 2.20(c).
Recordation and Notice. Upon its receipt of a duly executed and
----------------------
completed Assignment Agreement, together with the processing and recordation fee
referred to in Section 10.6(d) (and any forms, certificates or other evidence
required by this Agreement in connection therewith), Administrative Agent shall
accept such Assignment Agreement, shall record the information contained therein
in the Register, shall give prompt notice thereof to Company and shall maintain
a copy of such Assignment Agreement.
Representations and Warranties of Assignees. Each Lender, upon
-------------------------------------------
execution and delivery hereof or upon executing and delivering an Assignment
Agreement, as the case may be, represents and warrants as of the Closing Date or
as of the "Effective Date" (specified in the applicable Assignment Agreement
that (i) it is an Eligible Assignee; (ii) it has experience and expertise in the
making of or investing in commitments or loans such as the applicable
Commitments or Loans, as the case may be; and (iii) it will make or invest in,
as the case may be, its Commitments or Loans for its own account in the ordinary
course of its business and without a view to distribution of such Commitments or
Loans within the meaning of the Securities Act or the Exchange Act or other
federal securities laws (it being understood that, subject to the provisions of
this Section 10.6, the disposition of such Commitments or Loans or any interests
therein shall at all times remain within its exclusive control).
Effect of Assignments. Subject to the terms and conditions of this
---------------------
Section 10.6, as of the "Effective Date" specified in the applicable Assignment
Agreement: (i) the assignee thereunder shall have the rights and obligations of
a "Lender" hereunder to the extent such rights and obligations hereunder have
been assigned to it pursuant to such Assignment Agreement and shall thereafter
be a party hereto and a "Lender" for all purposes hereof; (ii) the assigning
Lender thereunder shall, to the extent that rights and obligations hereunder
have been assigned thereby pursuant to such Assignment Agreement, relinquish its
rights (other than any rights which survive the termination hereof under Section
10.8) and be released from its obligations hereunder (and, in the case of an
Assignment Agreement covering all or the remaining portion of an assigning
Lender's rights and obligations hereunder, such Lender shall cease to be a party
hereto; provided, anything contained in any of the Credit Documents to the
--------
contrary notwithstanding, (y) Issuing Bank shall continue to have all rights and
obligations thereof with respect to such Letters of Credit until the
cancellation or expiration of such Letters of Credit and the reimbursement of
any amounts drawn thereunder) and (z) such assigning Lender shall continue to be
entitled to the
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benefit of all indemnities hereunder as specified herein with respect to matters
arising out of the prior involvement of such assigning Lender as a Lender
hereunder; (iii) the Commitments shall be modified to reflect the Commitment of
such assignee and any remaining Commitment of such assigning Lender, if any; and
(iv) if any such assignment occurs after the issuance of any Note hereunder, the
assigning Lender shall, upon the effectiveness of such assignment or as promptly
thereafter as practicable, surrender its applicable Notes to Administrative
Agent for cancellation, and thereupon Company shall issue and deliver new Notes,
if so requested by the assignee and/or assigning Lender, to such assignee and/or
to such assigning Lender, with appropriate insertions, to reflect the new
Commitments and/or outstanding Loans of the assignee and/or the assigning
Lender.
Participations. Each Lender shall have the right at any time to sell
--------------
one or more participations to any Person (other than Parent Guarantor, any of
its Subsidiaries or any of their Affiliates) in all or any part of its
Commitments, Loans or in any other Obligation. The holder of any such
participation, other than an Affiliate of the Lender granting such
participation, shall not be entitled to require such Lender to take or omit to
take any action hereunder except with respect to any amendment, modification or
waiver that would (i) extend the final scheduled maturity of any Loan, Note or
Letter of Credit (unless such Letter of Credit is not extended beyond the
Revolving Credit Commitment Termination Date) in which such participant is
participating, or reduce the rate or extend the time of payment of Interest or
Fees thereon (except in connection with a waiver of applicability of any post-
default increase in interest rates) or reduce the principal amount thereof, or
increase the amount of the participant's participation over the amount thereof
then in effect (it being understood that a waiver of any Default or Event of
Default or of a mandatory reduction in any Commitment shall not constitute a
change in the terms of such participation, and that an increase in any
Commitment or Loan shall be permitted without the consent of any participant if
the participant's participation is not increased as a result thereof), (ii)
consent to the assignment or transfer by any Credit Party of any of its rights
and obligations under this Agreement or (iii) release all or substantially all
of the Collateral under the Collateral Documents (except as expressly provided
in the Credit Documents) supporting the Loans hereunder in which such
participant is participating. All amounts payable by any Credit Party
hereunder, including amounts payable to such Lender pursuant to Section 2.18(c),
2.19 or 2.20, shall be determined as if such Lender had not sold such
participation. Each Credit Party and each Lender hereby acknowledge and agree
that, solely for purposes of Sections 2.17 and 10.4, (1) any participation will
give rise to a direct obligation of each Credit Party to the participant and (2)
the participant shall be considered to be a "Lender."
Certain Other Assignments. In addition to any other assignment
-------------------------
permitted pursuant to this Section 10.6, (i) any Lender may assign and pledge
all or any portion of its Loans, the other Obligations owed to such Lender, and
its Notes, if any, to any Federal Reserve Bank as collateral security pursuant
to Regulation A of the Board of Governors of the Federal Reserve System and any
operating circular issued by such Federal Reserve Bank, and (ii) with the
consent of Administrative Agent any Lender which is an investment fund may
pledge all or
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any portion of its Notes, if any, or Loans to its trustee in support of its
obligations to such trustee; provided, no Lender, as between Company and such
--------
Lender, shall be relieved of any of its obligations hereunder as a result of any
such assignment and pledge, and provided further, in no event shall the
-------- -------
applicable Federal Reserve Bank or trustee be considered to be a "Lender" or be
entitled to require the assigning Lender to take or omit to take any action
hereunder.
Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or would otherwise be within the limitations of, another covenant shall not
avoid the occurrence of a Default or an Event of Default if such action is taken
or condition exists.
Survival of Representations, Warranties and Agreements. All
representations, warranties and agreements made herein shall survive the
execution and delivery hereof and the making of any Credit Extension.
Notwithstanding anything herein or implied by law to the contrary, the
agreements of each Credit Party set forth in Sections 2.18(c), 2.19, 2.20, 10.2,
10.3 and 10.4 and the agreements of Lenders set forth in Sections 2.17 and 9.6
shall survive the payment of the Loans, the cancellation or expiration of the
Letters of Credit and the reimbursement of any amounts drawn thereunder, and the
termination hereof.
No Waiver; Remedies Cumulative. No failure or delay on the part of
Administrative Agent or any Lender in the exercise of any power, right or
privilege hereunder or under any other Credit Document shall impair such power,
right or privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other power,
right or privilege. The rights, powers and remedies given to each Agent and each
Lender hereby are cumulative and shall be in addition to and independent of all
rights, powers and remedies existing by virtue of any statute or rule of law or
in any of the other Credit Documents or any of the Hedge Agreements. Any
forbearance or failure to exercise, and any delay in exercising, any right,
power or remedy hereunder shall not impair any such right, power or remedy or be
construed to be a waiver thereof, nor shall it preclude the further exercise of
any such right, power or remedy.
Marshalling; Payments Set Aside. Neither Administrative Agent nor any
Lender shall be under any obligation to marshal any assets in favor of any
Credit Party or any other Person or against or in payment of any or all of the
Obligations. To the extent that any Credit Party makes a payment or payments to
Administrative Agent or Lenders (or to Administrative Agent, on behalf of
Lenders), or Administrative Agent or Lenders enforce any security interests or
exercise their rights of setoff, and such payment or payments or the proceeds of
such enforcement or setoff or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party
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under any bankruptcy law, any other state or federal law, common law or any
equitable cause, then, to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied, and all Liens, rights and remedies
therefor or related thereto, shall be revived and continued in full force and
effect as if such payment or payments had not been made or such enforcement or
setoff had not occurred.
Severability. In case any provision in or obligation hereunder or any Note
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
Obligations Several; Independent Nature of Lenders' Rights. The
obligations of Lenders hereunder are several and no Lender shall be responsible
for the obligations or Commitment of any other Lender hereunder. Nothing
contained herein or in any other Credit Document, and no action taken by Lenders
pursuant hereto or thereto, shall be deemed to constitute Lenders as a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out hereof and it shall not be necessary for any other Lender to
be joined as an additional party in any proceeding for such purpose.
Headings. Section headings herein are included herein for convenience of
reference only and shall not constitute a part hereof for any other purpose or
be given any substantive effect.
APPLICABLE LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES THEREOF.
CONSENT TO JURISDICTION. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY
CREDIT PARTY ARISING OUT OF OR RELATING HERETO OR ANY OTHER CREDIT DOCUMENT, OR
ANY OF THE OBLIGATIONS, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING
AND DELIVERING THIS AGREEMENT, EACH CREDIT PARTY, FOR ITSELF AND IN CONNECTION
WITH ITS PROPERTIES, IRREVOCABLY ACCEPTS GENERALLY AND UNCONDITIONALLY THE
NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; WAIVES ANY DEFENSE OF FORUM
NON CONVENIENS; AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY
SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN
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RECEIPT REQUESTED, TO THE APPLICABLE CREDIT PARTY AT ITS ADDRESS PROVIDED IN
ACCORDANCE WITH SECTION 10.1; AGREES THAT SERVICE AS PROVIDED IN CLAUSE (c)
ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLE CREDIT
PARTY IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND AGREES SUCH LENDERS RETAIN
THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING
PROCEEDINGS AGAINST ANY CREDIT PARTY IN THE COURTS OF ANY OTHER JURISDICTION.
WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING HEREUNDER OR UNDER ANY OF THE OTHER CREDIT DOCUMENTS OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER
IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN
ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED
ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO
RELY ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER
WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL
AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SECTION 10.16 AND EXECUTED BY EACH OF THE
PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO OR ANY OF THE OTHER CREDIT
DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE
HEREUNDER. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.
Confidentiality. Each Lender shall hold all non-public information
obtained pursuant to the requirements hereof which is in written, printed or
other tangible form and consists of projections or which has been identified as
confidential by Company in accordance with such Lender's customary procedures
for handling confidential information of this nature and in
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accordance with prudent lending or investing practices, it being understood and
agreed by Company that in any event a Lender may make disclosures to Affiliates
of such Lender or disclosures reasonably required by any bona fide or potential
assignee, transferee or participant in connection with the contemplated
assignment, transfer or participation by such Lender of any Loans or any
participations therein (including, without limitation, to agents or other
Persons authorized by a Lender or an Agent in connection with the organization,
presentation or dissemination of information to potential assignees, transferees
or participants) or by any direct or indirect contractual counterparties (or the
professional advisors thereto) in Hedge Agreements (provided, such
counterparties and advisors are advised of and agree to be bound by the
provisions of this Section 10.17) or disclosures required or requested by any
governmental agency or representative thereof or by NAIC or pursuant to legal
process; provided, unless specifically prohibited by applicable law or court
--------
order, each Lender shall make reasonable efforts to notify Company of any
request by any governmental agency or representative thereof (other than any
such request in connection with any examination of the financial condition or
other routine examination of such Lender by such governmental agency) for
disclosure of any such non-public information prior to disclosure of such
information.
Usury Savings Clause. Notwithstanding any other provision herein, the
aggregate interest rate charged with respect to any of the Obligations,
including all charges or fees in connection therewith deemed in the nature of
interest under applicable law shall not exceed the Highest Lawful Rate. If the
rate of interest (determined without regard to the preceding sentence) under
this Agreement at any time exceeds the Highest Lawful Rate, the outstanding
amount of the Loans made hereunder shall bear interest at the Highest Lawful
Rate until the total amount of interest due hereunder equals the amount of
interest which would have been due hereunder if the stated rates of interest set
forth in this Agreement had at all times been in effect. In addition, if when
the Loans made hereunder are repaid in full the total interest due hereunder
(taking into account the increase provided for above) is less than the total
amount of interest which would have been due hereunder if the stated rates of
interest set forth in this Agreement had at all times been in effect, then to
the extent permitted by law, Company shall pay to Administrative Agent an amount
equal to the difference between the amount of interest paid and the amount of
interest which would have been paid if the Highest Lawful Rate had at all times
been in effect. Notwithstanding the foregoing, it is the intention of Lenders
and Company to conform strictly to any applicable usury laws. Accordingly, if
any Lender contracts for, charges, or receives any consideration which
constitutes interest in excess of the Highest Lawful Rate, then any such excess
shall be cancelled automatically and, if previously paid, shall at such Lender's
option be applied to the outstanding amount of the Loans made hereunder or be
refunded to Company.
Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument.
130
<PAGE>
Effectiveness. This Agreement shall become effective upon the execution of
a counterpart hereof by each of the parties hereto and receipt by Company and
Administrative Agent of written or telephonic notification of such execution and
authorization of delivery thereof.
[Remainder of page intentionally left blank]
131
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
NORTHPOINT COMMUNICATIONS, INC.,
as Company
By: ___________________________________
Name:
Title:
NORTHPOINT COMMUNICATIONS GROUP, INC.,
as Parent Guarantor
By: ___________________________________
Name:
Title:
NORTHPOINT COMMUNICATIONS OF VIRGINIA, INC.,
as a Subsidiary Guarantor
By: ___________________________________
Name:
Title:
S-1
<PAGE>
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as Lead Arranger, Syndication Agent and a Lender
By: ____________________________________
Authorized Signatory
S-2
<PAGE>
CANADIAN IMPERIAL BANK OF COMMERCE, as
Administrative Agent, Swing Line Lender and
Issuing Bank
By: ___________________________________
Name:
Title:
CIBC INC., as a Lender
By: ___________________________________
Name:
Title:
S-3
<PAGE>
CAPITAL SYNDICATION CORPORATION,
as Documentation Agent
By: ___________________________________
Name:
Title:
NEWCOURT COMMERCIAL FINANCE CORPORATION,
as a Lender
By: ___________________________________
Name:
Title:
S-4
<PAGE>
BANKBOSTON, NA, as a Lender
By: ___________________________________
Name:
Title:
S-5
<PAGE>
BANK OF MONTREAL, as a Lender
By: ___________________________________
Name:
Title:
S-6
<PAGE>
BARCLAYS BANK PLC, as a Lender
By: ___________________________________
Name:
Title:
S-7
<PAGE>
COAST BUSINESS CREDIT A DIVISION OF SOUTHERN
PACIFIC BANK, as a Lender
By: ___________________________________
Name:
Title:
S-8
<PAGE>
CREDIT SUISSE FIRST BOSTON, as a Lender
By: ___________________________________
Name:
Title:
By: ___________________________________
Name:
Title:
S-9
<PAGE>
FIRST UNION NATIONAL BANK, as a Lender
By: ___________________________________
Name:
Title:
S-10
<PAGE>
PNC BANK, as a Lender
By: ___________________________________
Name:
Title:
S-11
<PAGE>
FINOVA CAPITAL CORPORATION, as a Lender
By: ___________________________________
Name:
Title:
S-12
<PAGE>
UNION BANK OF CALIFORNIA, N.A., as a Lender
By: ___________________________________
Name:
Title:
S-13
<PAGE>
FRANKLIN FLOATING RATE TRUST, as a Lender
By: ___________________________________
Name:
Title:
S-14
<PAGE>
APPENDIX A-1
TO CREDIT AND GUARANTY AGREEMENT
Revolving Credit Commitments
<TABLE>
<CAPTION>
=================================================================================================
Revolving Credit Pro
Lender Commitment Rata Share
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Goldman Sachs Credit Partners L.P. $ 5,000,000 9.09090%
- -------------------------------------------------------------------------------------------------
CIBC Inc. $ 5,000,000 9.09090%
- -------------------------------------------------------------------------------------------------
Newcourt Commercial Finance Corporation $ 5,000,000 9.09090%
- -------------------------------------------------------------------------------------------------
BankBoston, NA $ 4,250,000 7.72727%
- -------------------------------------------------------------------------------------------------
Bank of Montreal $ 4,250,000 7.72727%
- -------------------------------------------------------------------------------------------------
Barclays Bank PLC $ 4,250,000 7.72727%
- -------------------------------------------------------------------------------------------------
Coast Business Credit, a division of Southern
Pacific Bank $ 4,250,000 7.72727%
- -------------------------------------------------------------------------------------------------
Credit Suisse First Boston $ 4,250,000 7.72727%
- -------------------------------------------------------------------------------------------------
First Union National Bank $ 4,250,000 7.72727%
- -------------------------------------------------------------------------------------------------
PNC Bank $ 4,250,000 7.72727%
- -------------------------------------------------------------------------------------------------
Finova Capital Corporation $ 3,750,000 6.81818%
- -------------------------------------------------------------------------------------------------
Union Bank of California, N.A. $ 3,750,000 6.81818%
- -------------------------------------------------------------------------------------------------
Franklin Floating Rate Trust $ 2,750,000 5.00000%
- -------------------------------------------------------------------------------------------------
Total $55,000,000 100%
================================================================================================
</TABLE>
APPENDIX A-1-1
<PAGE>
APPENDIX A-2
TO CREDIT AND GUARANTY AGREEMENT
Delayed Draw Term Loan Commitments
<TABLE>
<CAPTION>
================================================================================================
Delayed Draw Pro
Lender Term Loan Commitment Rata Share
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Goldman Sachs Credit Partners L.P. $ 10,000,000 9.09090%
- -------------------------------------------------------------------------------------------------
CIBC Inc. $ 10,000,000 9.09090%
- -------------------------------------------------------------------------------------------------
Newcourt Commercial Finance Corporation $ 10,000,000 9.09090%
- -------------------------------------------------------------------------------------------------
BankBoston, NA $ 8,500,000 7.72727%
- -------------------------------------------------------------------------------------------------
Bank of Montreal $ 8,500,000 7.72727%
- -------------------------------------------------------------------------------------------------
Barclays Bank PLC $ 8,500,000 7.72727%
- -------------------------------------------------------------------------------------------------
Coast Business Credit, a division of Southern
Pacific Bank $ 8,500,000 7.72727%
- -------------------------------------------------------------------------------------------------
Credit Suisse First Boston $ 8,500,000 7.72727%
- -------------------------------------------------------------------------------------------------
First Union National Bank $ 8,500,000 7.72727%
- -------------------------------------------------------------------------------------------------
PNC Bank $ 8,500,000 7.72727%
- -------------------------------------------------------------------------------------------------
Finova Capital Corporation $ 7,500,000 6.81818%
- -------------------------------------------------------------------------------------------------
Union Bank of California, N.A. $ 7,500,000 6.81818%
- -------------------------------------------------------------------------------------------------
Franklin Floating Rate Trust $ 5,500,000 5.00000%
- -------------------------------------------------------------------------------------------------
Total $110,000,000 100%
================================================================================================
</TABLE>
APPENDIX A-2-1
<PAGE>
APPENDIX A-3
TO CREDIT AND GUARANTY AGREEMENT
Term Loan Commitments
<TABLE>
<CAPTION>
=============================================================================================
Pro Rata
Lender Term Loan Commitment Share
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Goldman Sachs Credit Partners L.P. $35,000,000 41.17647%
- ---------------------------------------------------------------------------------------------
CIBC Inc. $ 5,000,000 9.09090%
- ---------------------------------------------------------------------------------------------
Newcourt Commercial Finance Corporation $ 5,000,000 9.09090%
- ---------------------------------------------------------------------------------------------
BankBoston, NA $ 4,250,000 7.72727%
- ---------------------------------------------------------------------------------------------
Bank of Montreal $ 4,250,000 7.72727%
- ---------------------------------------------------------------------------------------------
Barclays Bank PLC $ 4,250,000 7.72727%
- ---------------------------------------------------------------------------------------------
Coast Business Credit, a division of Southern
Pacific Bank $ 4,250,000 7.72727%
- ---------------------------------------------------------------------------------------------
Credit Suisse First Boston $ 4,250,000 7.72727%
- ---------------------------------------------------------------------------------------------
First Union National Bank $ 4,250,000 7.72727%
- ---------------------------------------------------------------------------------------------
PNC Bank $ 4,250,000 7.72727%
- ---------------------------------------------------------------------------------------------
Finova Capital Corporation $ 3,750,000 6.81818%
- ---------------------------------------------------------------------------------------------
Union Bank of California, N.A. $ 3,750,000 6.81818%
- ---------------------------------------------------------------------------------------------
Franklin Floating Rate Trust $ 2,750,000 5.00000%
- ---------------------------------------------------------------------------------------------
Total $85,000,000 100%
================================================================================================
</TABLE>
APPENDIX A-3-1
<PAGE>
EXHIBIT B-1 TO
CREDIT AND GUARANTY AGREEMENT
REVOLVING LOAN NOTE
$[1] [___,___,___] [1][date]
FOR VALUE RECEIVED, NORTHPOINT COMMUNICATIONS, INC., a Delaware corporation
("Company"), promises to pay [NAME OF LENDER] ("Payee") or its registered
assigns, on or before December 9, 2005, the lesser of (a) [1][DOLLARS]
($[1][___,___,___]) and (b) the unpaid principal amount of all advances made by
Payee to Company as Revolving Loans under the Credit Agreement referred to
below.
Company also promises to pay interest on the unpaid principal amount
hereof, from the date hereof until paid in full, at the rates and at the times
which shall be determined in accordance with the provisions of that certain
Credit and Guaranty Agreement, dated as of December 9, 1999 (as it may be
amended, supplemented or otherwise modified, the "Credit Agreement"; the terms
defined therein and not otherwise defined herein being used herein as therein
defined), by and among NORTHPOINT COMMUNICATIONS, INC., NORTHPOINT
COMMUNICATIONS GROUP INC., certain Subsidiaries of Company, as Guarantors, the
Lenders party thereto from time to time, GOLDMAN SACHS CREDIT PARTNERS L.P., as
Lead Arranger and Syndication Agent, CANADIAN IMPERIAL BANK OF COMMERCE, as
Administrative Agent, and CAPITAL SYNDICATION CORPORATION, as Documentation
Agent.
This Note is one of the "Revolving Loan Notes" in the aggregate principal
amount of $55,000,000 and is issued pursuant to and entitled to the benefits of
the Credit Agreement, to which reference is hereby made for a more complete
statement of the terms and conditions under which the Loans evidenced hereby
were made and are to be repaid.
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
Principal Office of Administrative Agent or at such other place as shall be
designated in writing for such purpose in accordance with the terms of the
Credit Agreement. Unless and until an Assignment Agreement effecting the
assignment or transfer of this Note shall have been accepted by Administrative
Agent and recorded in the Register, Company, each Agent and Lenders shall be
entitled to deem
____________________________________________
[1] Lender's Revolving Credit Commitment
[2] Date of Issuance
EXHIBIT B-1-3
<PAGE>
and treat Payee as the owner and holder of this Note and the Loans evidenced
hereby. Payee hereby agrees, by its acceptance hereof, that before disposing of
this Note or any part hereof it will make a notation hereon of all principal
payments previously made hereunder and of the date to which interest hereon has
been paid; provided, the failure to make a notation of any payment made on this
Note shall not limit or otherwise affect the obligations of Company hereunder
with respect to payments of principal of or interest on this Note.
This Note is subject to mandatory prepayment and to prepayment at the
option of Company, each as provided in the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION
SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
The terms of this Note are subject to amendment only in the manner provided
in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment as provided
in the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this Note
or the Credit Agreement shall alter or impair the obligations of Company, which
are absolute and unconditional, to pay the principal of and interest on this
Note at the place, at the respective times, and in the currency herein
prescribed.
Company promises to pay all costs and expenses, including reasonable
attorneys' fees, all as provided in the Credit Agreement, incurred in the
collection and enforcement of this Note. Company and any endorsers of this Note
hereby consent to renewals and extensions of time at or after the maturity
hereof, without notice, and hereby waive diligence, presentment, protest, demand
notice of every kind and, to the full extent permitted by law, the right to
plead any statute of limitations as a defense to any demand hereunder.
[Remainder of page intentionally left blank]
EXHIBIT B-1-4
<PAGE>
IN WITNESS WHEREOF, Company has caused this Note to be duly executed and
delivered by its officer thereunto duly authorized as of the date and at the
place first written above.
NORTHPOINT COMMUNICATIONS, INC.
By: _____________________________
Title:
EXHIBIT B-1-5
<PAGE>
TRANSACTIONS
ON
REVOLVING LOAN NOTE
<TABLE>
<CAPTION>
Outstanding
Type of Amount of Amount of Principal
Loan Made Loan Made Principal Paid Balance Notation
Date This Date This Date This Date This Date Made By
<S> <C> <C> <C> <C> <C>
</TABLE>
EXHIBIT B-1-6
<PAGE>
EXHIBIT B-2 TO
CREDIT AND GUARANTY AGREEMENT
DELAYED DRAW TERM LOAN NOTE
$[1][___,___,___] [2][date]
FOR VALUE RECEIVED, NORTHPOINT COMMUNICATIONS, INC., a Delaware corporation
("Company"), promises to pay [NAME OF LENDER] ("Payee") or its registered
assigns the principal amount of [1][DOLLARS] ($[___,___,___][1]) in the
installments referred to below.
Company also promises to pay interest on the unpaid principal amount
hereof, from the date hereof until paid in full, at the rates and at the times
which shall be determined in accordance with the provisions of that certain
Credit and Guaranty Agreement, dated as of December 9, 1999 (as it may be
amended, supplemented or otherwise modified, the "Credit Agreement"; the terms
defined therein and not otherwise defined herein being used herein as therein
defined), by and among NORTHPOINT COMMUNICATIONS, INC., NORTHPOINT
COMMUNICATIONS GROUP INC., certain Subsidiaries of Company, as Guarantors, the
Lenders party thereto from time to time, GOLDMAN SACHS CREDIT PARTNERS L.P., as
Lead Arranger and Syndication Agent, CANADIAN IMPERIAL BANK OF COMMERCE , as
Administrative Agent, and CAPITAL SYNDICATION CORPORATION, as Documentation
Agent.
Company shall make principal payments on this Note as set forth in
Section 2.12 of the Credit Agreement.
This Note is one of the "Delayed Draw Term Notes" in the aggregate
principal amount of $110,000,000 and is issued pursuant to and entitled to the
benefits of the Credit Agreement, to which reference is hereby made for a more
complete statement of the terms and conditions under which the Term Loan
evidenced hereby was made and is to be repaid.
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
Principal Office of Administrative Agent or at such other place as shall be
designated in writing for such purpose in accordance with the terms of the
Credit Agreement. Unless and until an Assignment Agreement
_____________________________
[1] Lender's Delayed Draw Term Loan Commitment
[2] Date of Issuance
EXHIBIT B-2-1
<PAGE>
effecting the assignment or transfer of this Note shall have been accepted by
Administrative Agent and recorded in the Register, Company, each Agent and
Lenders shall be entitled to deem and treat Payee as the owner and holder of
this Note and the Loan evidenced hereby. Payee hereby agrees, by its acceptance
hereof, that before disposing of this Note or any part hereof it will make a
notation hereon of all principal payments previously made hereunder and of the
date to which interest hereon has been paid; provided, the failure to make a
notation of any payment made on this Note shall not limit or otherwise affect
the obligations of Company hereunder with respect to payments of principal of or
interest on this Note.
This Note is subject to mandatory prepayment and to prepayment at the
option of Company, each as provided in the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICT OF LAWS PRINCIPLES THEREOF.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
The terms of this Note are subject to amendment only in the manner provided
in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment as provided
in the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this Note
or the Credit Agreement shall alter or impair the obligations of Company, which
are absolute and unconditional, to pay the principal of and interest on this
Note at the place, at the respective times, and in the currency herein
prescribed.
Company promises to pay all costs and expenses, including reasonable
attorneys' fees, all as provided in the Credit Agreement, incurred in the
collection and enforcement of this Note. Company and any endorsers of this Note
hereby consent to renewals and extensions of time at or after the maturity
hereof, without notice, and hereby waive diligence, presentment, protest, demand
notice of every kind and, to the full extent permitted by law, the right to
plead any statute of limitations as a defense to any demand hereunder.
EXHIBIT B-2-2
<PAGE>
[Remainder of page intentionally left blank]
EXHIBIT B-2-3
<PAGE>
IN WITNESS WHEREOF, Company has caused this Note to be duly executed and
delivered by its officer thereunto duly authorized as of the date and at the
place first written above.
NORTHPOINT COMMUNICATIONS, INC.
By: _____________________________
Title:
EXHIBIT B-2-4
<PAGE>
EXHIBIT B-3 TO
CREDIT AND GUARANTY AGREEMENT
TERM LOAN NOTE
$[1][___,___,___] [2][date]
FOR VALUE RECEIVED, NORTHPOINT COMMUNICATIONS, INC., a Delaware corporation
("Company"), promises to pay [NAME OF LENDER] ("Payee") or its registered
assigns the principal amount of [1][DOLLARS] ($[1][___,___,___]) in the
installments referred to below.
Company also promises to pay interest on the unpaid principal amount
hereof, from the date hereof until paid in full, at the rates and at the times
which shall be determined in accordance with the provisions of that certain
Credit and Guaranty Agreement, dated as of December 9, 1999 (as it may be
amended, supplemented or otherwise modified, the "Credit Agreement"; the terms
defined therein and not otherwise defined herein being used herein as therein
defined), by and among NORTHPOINT COMMUNICATIONS, INC., NORTHPOINT
COMMUNICATIONS GROUP INC., certain Subsidiaries of Company, as Guarantors, the
Lenders party thereto from time to time, GOLDMAN SACHS CREDIT PARTNERS L.P., as
Lead Arranger and Syndication Agent, CANADIAN IMPERIAL BANK OF COMMERCE , as
Administrative Agent, and CAPITAL SYNDICATION CORPORATION, as Documentation
Agent.
Company shall make principal payments on this Note as set forth in Section
2.12 of the Credit Agreement.
This Note is one of the "Term Notes" in the aggregate principal amount of
$85,000,000 and is issued pursuant to and entitled to the benefits of the Credit
Agreement, to which reference is hereby made for a more complete statement of
the terms and conditions under which the Term Loan evidenced hereby was made and
is to be repaid.
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
Principal Office of Administrative Agent or at such other place as shall be
designated in writing for such purpose in accordance with the terms of the
Credit Agreement. Unless and until an Assignment Agreement
______________________________________
[1] Lender's Term Loan Commitment
[2] Date of Issuance
EXHIBIT B-3-1
<PAGE>
effecting the assignment or transfer of this Note shall have been accepted by
Administrative Agent and recorded in the Register, Company, each Agent and
Lenders shall be entitled to deem and treat Payee as the owner and holder of
this Note and the Loan evidenced hereby. Payee hereby agrees, by its acceptance
hereof, that before disposing of this Note or any part hereof it will make a
notation hereon of all principal payments previously made hereunder and of the
date to which interest hereon has been paid; provided, the failure to make a
notation of any payment made on this Note shall not limit or otherwise affect
the obligations of Company hereunder with respect to payments of principal of or
interest on this Note.
This Note is subject to mandatory prepayment and to prepayment at the
option of Company, each as provided in the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICT OF LAWS PRINCIPLES THEREOF.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
The terms of this Note are subject to amendment only in the manner provided
in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment as provided
in the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this Note
or the Credit Agreement shall alter or impair the obligations of Company, which
are absolute and unconditional, to pay the principal of and interest on this
Note at the place, at the respective times, and in the currency herein
prescribed.
Company promises to pay all costs and expenses, including reasonable
attorneys' fees, all as provided in the Credit Agreement, incurred in the
collection and enforcement of this Note. Company and any endorsers of this Note
hereby consent to renewals and extensions of time at or after the maturity
hereof, without notice, and hereby waive diligence, presentment, protest, demand
notice of every kind and, to the full extent permitted by law, the right to
plead any statute of limitations as a defense to any demand hereunder.
EXHIBIT B-3-2
<PAGE>
[Remainder of page intentionally left blank]
EXHIBIT B-3-3
<PAGE>
IN WITNESS WHEREOF, Company has caused this Note to be duly executed and
delivered by its officer thereunto duly authorized as of the date and at the
place first written above.
NORTHPOINT COMMUNICATIONS, INC.
By: ______________________________
Title:
EXHIBIT B-3-4
<PAGE>
EXHIBIT B-4 TO
CREDIT AND GUARANTY AGREEMENT
SWING LINE NOTE
$5,000,000 [1][mm/D.d./yy]
FOR VALUE RECEIVED, NORTHPOINT COMMUNICATIONS, INC., a Delaware corporation
("Company"), promises to pay to CANADIAN IMPERIAL BANK OF COMMERCE , as Swing
Line Lender ("Payee"), on or before December 9, 2005, the lesser of (a) FIVE
MILLION DOLLARS ($5,000,000) and (b) the unpaid principal amount of all advances
made by Payee to Company as Swing Line Loans under the Credit Agreement referred
to below.
Company also promises to pay interest on the unpaid principal amount
hereof, from the date hereof until paid in full, at the rates and at the times
which shall be determined in accordance with the provisions of that certain
Credit and Guaranty Agreement, dated as of December 9, 1999 (as it may be
amended, supplemented or otherwise modified, the "Credit Agreement"; the terms
defined therein and not otherwise defined herein being used herein as therein
defined), by and among NORTHPOINT COMMUNICATIONS, INC., NORTHPOINT
COMMUNICATIONS GROUP INC., certain Subsidiaries of Company, as Guarantors, the
Lenders party thereto from time to time, GOLDMAN SACHS CREDIT PARTNERS L.P., as
Lead Arranger and Syndication Agent, CANADIAN IMPERIAL BANK OF COMMERCE , as
Administrative Agent, and CAPITAL SYNDICATION CORPORATION, as Documentation
Agent.
This Note is the "Swing Line Note" and is issued pursuant to and entitled
to the benefits of the Credit Agreement, to which reference is hereby made for a
more complete statement of the terms and conditions under which the Swing Line
Loans evidenced hereby were made and are to be repaid.
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
Principal Office of Swing Line Lender or at such other place as shall be
designated in writing for such purpose in accordance with the terms of the
Credit Agreement.
This Note is subject to mandatory prepayment and to prepayment at the
option of Company, each as provided in the Credit Agreement.
__________________________
[1] Date of Issuance
EXHIBIT B-4-1
<PAGE>
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION
SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
The terms of this Note are subject to amendment only in the manner provided
in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment as provided
in the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this Note
or the Credit Agreement shall alter or impair the obligations of Company, which
are absolute and unconditional, to pay the principal of and interest on this
Note at the place, at the respective times, and in the currency herein
prescribed.
Company promises to pay all costs and expenses, including reasonable
attorneys' fees, all as provided in the Credit Agreement, incurred in the
collection and enforcement of this Note. Company and any endorsers of this Note
hereby consent to renewals and extensions of time at or after the maturity
hereof, without notice, and hereby waive diligence, presentment, protest, demand
notice of every kind and, to the full extent permitted by law, the right to
plead any statute of limitations as a defense to any demand hereunder.
[Remainder of page intentionally left blank]
EXHIBIT B-4-2
<PAGE>
IN WITNESS WHEREOF, Company has caused this Note to be duly executed and
delivered by its officer thereunto duly authorized as of the date and at the
place first written above.
NORTHPOINT COMMUNICATIONS, INC.
By:_______________________________
Title:
EXHIBIT B-4-3
<PAGE>
TRANSACTIONS
ON
SWING LINE NOTE
<TABLE>
<CAPTION>
Outstanding
Amount of Amount of Principal
Loan Made Principal Paid Balance Notation
Date This Date This Date This Date Made By
<S> <C> <C> <C> <C>
</TABLE>
EXHIBIT J-2-1
<PAGE>
Exhibit 10.26
PLEDGE AND SECURITY AGREEMENT
This PLEDGE AND SECURITY AGREEMENT, dated as of December 9, 1999 (this
"Agreement"), between EACH OF THE UNDERSIGNED, whether as an original signatory
hereto or as an Additional Grantor (as herein defined) (each, a "Grantor"), and
CANADIAN IMPERIAL BANK OF COMMERCE, as Administrative Agent for Lenders and
Lender Counterparties (in such capacity as agent, "Secured Party").
RECITALS:
WHEREAS, reference is made to that certain Credit and Guaranty Agreement,
dated as of December 9, 1999 (as it may be amended, supplemented or otherwise
modified, the "Credit Agreement"; the terms defined therein and not otherwise
defined herein being used herein as therein defined), by and among NORTHPOINT
COMMUNICATIONS, INC., NORTHPOINT COMMUNICATIONS GROUP INC., certain Subsidiaries
of Company, as Guarantors, the Lenders party thereto from time to time, GOLDMAN
SACHS CREDIT PARTNERS L.P., as Lead Arranger and Syndication Agent, CANADIAN
IMPERIAL BANK OF COMMERCE, as Administrative Agent, and CAPITAL SYNDICATION
CORPORATION, as Documentation Agent;
WHEREAS, subject to the terms and conditions of the Credit Agreement,
certain Grantors may enter into one or more Hedge Agreements with one or more
Lender Counterparties;
WHEREAS, in consideration of the extensions of credit and other
accommodations of Lenders and Lender Counterparties as set forth in the Credit
Agreement and the Hedge Agreements, respectively, each Grantor has agreed,
subject to the terms and conditions hereof, each other Credit Document and each
of the Hedge Agreements, to secure such Grantor's obligations under the Credit
Documents and the Hedge Agreements as set forth herein; and
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, each Grantor and Secured Party agree
as follows:
SECTION 1. GRANT OF SECURITY; DEFINITIONS
1.1. Grant of Security. Each Grantor hereby grants to Secured Party a
security interest in all of Grantor's right, title and interest in and to the
following, in each case whether now or hereafter existing or in which Grantor
now has or hereafter acquires an interest and wherever the same may be located
(collectively, the "Collateral"):
(a) all "Investment Property", which term means:
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(i) all right, title and interest of such Grantor, whether now
owned or hereafter acquired, in all shares of capital stock owned by such
Grantor, including
EXHIBIT I-1
<PAGE>
without limitation, all shares of capital stock described on Schedule
1.1(a), and the certificates representing such shares and any interest of
such Grantor in the entries on the books of any securities intermediary
pertaining to such shares, and all dividends, cash, warrants, options,
rights, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange
for any or all of such shares (all of the foregoing being referred to
herein collectively as the "Pledged Stock");
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(ii) all right, title and interest of such Grantor, whether now
owned or hereafter acquired, of all Indebtedness owed to such Grantor,
including, without limitation, all Indebtedness described on Schedule
1.1(a), issued by the obligors named therein, the instruments evidencing
such Indebtedness, and all interest, cash, instruments and other property
or proceeds from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of such Indebtedness (all of
the foregoing being referred to herein collectively as the "Pledged Debt");
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(iii) all of such Grantor's right, title and interest as a
limited and/or general partner in all partnerships, including, without
limitation, the partnerships described on Schedule 1.1(a) (the
"Partnerships"), whether now owned or hereafter acquired, including,
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without limitation, all of such Grantor's right, title and interest in, to
and under the partnership agreements described on Schedule 1.1(a) (as such
agreements have heretofore been and may hereafter be amended, restated,
supplemented or otherwise modified from time to time, collectively, the
"Partnership Agreements") to which it is a party (including, if such
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Grantor is a general partner of any Partnership, the right to vote with
respect to and to manage and administer the business of such Partnership)
together with all other rights, interests, claims and other property of
such Grantor in any manner arising out of or relating to its limited and/or
general partnership interest in the Partnerships, whatever their respective
kind or character, whether they are tangible or intangible property, and
wheresoever they may exist or be located, and further including, without
limitation, (1) all of the rights of such Grantor as a limited and/or
general partner: (A)(I) to receive money due and to become due (including
without limitation profits, dividends, distributions, interest, income from
partnership properties and operations, proceeds of sale of partnership
assets and returns of capital) under or pursuant to the Partnership
Agreements, (II) to receive payments upon termination of the Partnership
Agreements, and (III) to receive any other payments or distributions,
whether cash or noncash, in respect of such Grantor's limited and/or
general partnership interest; (B) in and with respect to claims and causes
of action rising out of or relating to the Partnerships; and (C) to have
access to the Partnerships' books and records and to other information
concerning or affecting the Partnerships; and (2) any "certificate of
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interest" or "certificates of interest" (or other certificates or
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instruments however designated or titled) issued by the Partnerships and
evidencing such Grantor's interest as a limited and/or general partner in
the Partnerships (collectively, the "Certificates" and any interest of such
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Grantor in the entries on the books of any securities intermediary
pertaining to such Grantor's interest as a limited and/or general partner
in the Partnerships
EXHIBIT I-2
<PAGE>
(all of the foregoing being referred to herein collectively as the
"Partnership Interests");
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(iv) all of such Grantor's right, title and interest as a member
of all limited liability companies (the "LLCs"), including, without
----
limitation, all of such Grantor's right, title and interest in, to and
under the limited liability company interests set forth on Schedule 1.1(a),
whether now owned or hereafter acquired, including, without limitation, all
of such Grantor's right, title and interest in, to and under the operating
agreements with respect to any such LLC (as such agreements have heretofore
been and may hereafter be amended, restated, supplemented or otherwise
modified from time to time, collectively, each, an "LLC Agreement") to
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which it is a party, regardless of whether such right, title and interest
arises under such LLC Agreement, including (1) all rights of such Grantor
to receive distributions of any kind, in cash or otherwise, due or to
become due under or pursuant to each such LLC Agreement or otherwise in
respect of such Person, (2) all rights of such Grantor to receive proceeds
of any insurance, indemnity, warranty or guaranty with respect to each such
Person, (3) all claims of such Grantor for damages arising out of, or for
the breach of, or for a default under, each such LLC Agreement, (4) any
certificated or uncertificated security evidencing any of the foregoing
issued by such Person to such Grantor and (5) to the extent not included in
the foregoing, all proceeds of any and all of the foregoing (all of the
foregoing being referred to herein collectively as the "LLC Interests" with
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the Pledged Stock, the Pledged Debt, the Partnership Interests and the LLC
Interests being herein collectively referred to as the "Pledged
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Interests");
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(v) all additional shares of, limited and/or general partnership
interests in and limited liability company interests in, and all securities
(or other equity interests) convertible into and warrants, options and
other rights to purchase or otherwise acquire, stock of any issuer of the
Pledged Stock, limited and/or general partnership interests in the
Partnerships, and limited liability company interests in the LLCs, from
time to time acquired by such Grantor in any manner (which shares or
interests shall be deemed to be part of the Pledged Interests), the
certificates or other instruments representing such additional shares or
interests, securities, warrants, options or other rights and any interest
of such Grantor in the entries on the books of any securities intermediary
pertaining to such additional shares or interests, and all additional
indebtedness from time to time owed to such Grantor by any obligor on the
Pledged Debt and the instruments evidencing such indebtedness, and all
interest, cash, instruments and other property or proceeds from time to
time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such indebtedness; (all of the foregoing being
referred to herein collectively as the "Additional Pledged Interests"), and
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all dividends, distributions, cash, warrants, options, rights, instruments,
payments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or
all of such Additional Pledged Interests; and
EXHIBIT I-3
<PAGE>
(vi) all shares of, limited and/or general partnership interests
in, and limited liability company interests in, and all securities (or
other equity interests) convertible into and warrants, options and other
rights to purchase or otherwise acquire, stock of, limited and/or general
partnership interests in, or limited liability company interests in any
Person that, after the date of this Agreement, becomes, as a result of any
occurrence, a direct Subsidiary of such Grantor (which shares or interests
shall be deemed to be part of the Pledged Interests), the certificates or
other instruments representing such shares, interests, securities,
warrants, options or other rights and any interest of such Grantor in the
entries on the books of any securities intermediary pertaining to such
shares or interests and all dividends, distributions, cash, warrants,
rights, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange
for any or all of such shares, interests, securities, warrants, options or
other rights, and all Indebtedness from time to time owed to such Grantor
by any Person that, after the date of this Agreement, becomes, as a result
of any occurrence, a Subsidiary of such Grantor, and the instruments
evidencing such Indebtedness, and all interest, cash, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
Indebtedness;
(b) all "Intellectual Property", which term means:
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(i) all trademarks, service marks, designs, logos, indicia, trade
names, corporate names, company names, business names, fictitious business
names, trade styles and/or other source and/or business identifiers, and
all trademark or service mark registration in the United States, any state
thereof or in foreign countries (except for U.S. "intent to use"
applications for trademark or service mark registrations filed pursuant to
Section 1(b) of the Lanham Act, unless and until an Amendment to Allege Use
or a Statement of Use under Sections 1(c) and 1(d) of said Act has been
filed), owned or used by the Grantor in its business, or hereafter adopted
and used by Grantor, together with the goodwill of the Grantor's business
connected with the use of, and symbolized by each such mark including,
without limitation, the trademarks specifically identified in Schedule
1.1(b), (all of the foregoing collectively, the "Trademarks").
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(ii) all patents and patent applications and rights and interests
in patents and patent applications under any domestic law that are
presently, or in the future may be, owned by such Grantor and all patents
and patent applications and rights and interests in patents and patent
applications under any domestic law that are presently, or in the future
may be, held or used by such Grantor in whole or in part, including,
without limitation, the patents and patent applications listed in Schedule
1.1(b), all rights (but not obligations corresponding thereto), including,
without limitation, the right (but not the obligation, and exercisable only
upon the occurrence and continuation of an Event of Default) to sue for
past, present and future infringements in the name of such Grantor or in
the name of Secured Party in each case, at the option of Secured Party, and
all re-issues, divisions, continuations, renewals, extensions and
continuations-in-part thereof
EXHIBIT I-4
<PAGE>
(all of the foregoing being collectively referred to as the "Patents"); it
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being understood that the rights and interest included herein hereby shall
include, without limitation, all rights and interests pursuant to licensing
or other contracts in favor of such Grantor pertaining to patent
applications and patents presently or in the future owned or used by third
parties but, in the case of third parties which are not Affiliates of
Grantor, only to the extent permitted by such licensing or other contracts
and, if not so permitted, only with the consent of such third parties; and
(iii) all published and unpublished works of authorship
including, without limitation, computer programs, computer data bases,
other computer software, including without limitation, object code and
source code, mask works, semiconductor chips, masks, cell libraries,
layouts, trade secrets, trade secret rights, trade dress rights, ideas,
drawings, designs, schematics, algorithms, writings, techniques, processes
and formulas, including, without limitation, the works listed on Schedule
2.1(b), all copyright registrations issued to such Grantor in the United
States and any state thereof and in foreign countries, including, without
limitation, the registrations listed on Schedule 2.1(b), all copyright
licenses (but with respect to such copyright licenses, only to the extent
permitted by such licensing arrangements and, if not so permitted, only
with the consent of the other party thereto) (all of the foregoing being
referred to herein collectively as the "Copyrights"), including, without
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limitation, each of the Copyrights, rights, titles and interests in and to
the Copyrights and works protectable by copyright, which are presently, or
in the future may be, owned, created (as a work for hire for the benefit of
such Grantor or otherwise), authored (as a work for hire for the benefit of
such Grantor or otherwise), acquired or used (whether pursuant to a license
or otherwise but only to the extent permitted by agreements governing such
license or other use and, if not so permitted, only with the consent of the
other party thereto) by such Grantor, in whole or in part, and all
Copyrights with respect thereto and all registrations therefor, heretofore
or hereafter granted or applied for, and all renewals and extensions
thereof, throughout the world, including all proceeds thereof (such as, by
way of example and not by limitation, license royalties and proceeds of
infringement suits), the right (but not the obligation) to renew and extend
such Copyrights and to register works protectable by copyright and the
right (but not the obligation and exercisable only upon the occurrence and
continuation of an Event of Default) to sue or bring opposition or
cancellation proceedings in the name of such Grantor or in the name of
Secured Party in each case, at the option of Secured Party, for past,
present and future infringements of the Copyrights;
(c) the Collateral Account, together with all amounts on deposit from
time to time in any Deposit Accounts, all Securities Accounts, and all interest,
cash, instruments, securities, Financial Assets and other property from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of the foregoing;
(d) all of such Grantor's right, title and interest in, to and under
any equipment in all of its forms, all accessions or additions thereto, all
parts thereof, whether or not at any time of determination incorporated or
installed therein or attached thereto, and all replacements
EXHIBIT I-5
<PAGE>
therefor, wherever located, now or hereafter existing (all of the foregoing
being referred to herein collectively as the "Equipment");
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(e) all of such Grantor's right, title and interest in, to and under
any inventory in all of its forms, including, but not limited to, (i) all goods
held by such Grantor for sale or lease or to be furnished under contracts of
service or so leased or furnished, (ii) all raw materials, work in process,
finished goods, and materials used or consumed in the manufacture, packing,
shipping, advertising, selling, leasing, furnishing or production of such
inventory or otherwise used or consumed in such Grantor's business, (iii) all
goods in which such Grantor has an interest in mass or a joint or other interest
or right of any kind, (iv) all goods which are returned to or repossessed by
such Grantor, and all accessions thereto and products thereof (all of the
foregoing being referred to herein collectively as the "Inventory"), and (v) all
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negotiable and non-negotiable documents of title, including, without limitation,
warehouse receipts, dock receipts and bills of lading issued by any Person
covering any Inventory;
(f) all of such Grantor's right, title and interest in, to and under
any accounts, contract rights, chattel paper, documents, instruments, general
intangibles, payment intangibles and other rights and obligations of any kind
(all of the foregoing being referred to herein collectively as the "Accounts")
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and all of such Grantor's rights in, to and under all security agreements,
leases and other contracts securing or otherwise relating to any Accounts (all
of the foregoing being referred to herein collectively as the "Related
-------
Contracts");
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(g) all of such Grantor's right, title and interest in, to and under
all agreements and contracts to which such Grantor is a party as of the date
hereof, or to which such Grantor becomes a party after the date hereof, as each
such agreement may be amended, supplemented or otherwise modified from time to
time (all of the foregoing being referred to herein collectively as the
"Assigned Agreements"), including (i) all rights of such Grantor to receive
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moneys due or to become due under or pursuant to the Assigned Agreements, (ii)
all rights of such Grantor to receive proceeds of any insurance, indemnity,
warranty or guaranty with respect to the Assigned Agreements, (iii) all claims
of such Grantor for damages arising out of any breach of or default under the
Assigned Agreements, and (iv) all rights of such Grantor to terminate, amend,
supplement, modify or exercise rights or options under the Assigned Agreements,
to perform thereunder and to compel performance and otherwise exercise all
remedies thereunder;
(h) to the extent not otherwise included in any other paragraph of
this Section 1, all other general intangibles, including tax refunds, rights to
payment or performance, chooses in action and judgments taken on any rights or
claims included in the Collateral;
(i) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks and related data processing software that at any time
evidence or contain information relating to any of the Collateral or are
otherwise necessary or helpful in the collection thereof or realization
thereupon; and
EXHIBIT I-6
<PAGE>
(j) to the extent not covered by Sections 2.1(a) through 2.1(i), all
other personal property of such Grantor, all proceeds, products, rents and
profits of or from any and all of the foregoing Collateral and, to the extent
not otherwise included, all payments under insurance (whether or not Secured
Party 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. For purposes of this Agreement, the term "proceeds" means
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all proceeds as such term is defined in the UCC, and shall include, without
limitation, whatever is receivable or received when Collateral or proceeds are
sold, exchanged, collected or otherwise disposed of, whether such disposition is
voluntary or involuntary.
1.2. Certain Limited Exclusions. Notwithstanding anything herein to the
contrary, (a) in no event shall the Collateral include, and no Grantor shall be
deemed to have granted a security interest in, any of such Grantor's rights or
interests in any license, contract or agreement to which such Grantor is a party
or any of its rights or interests thereunder, including, without limitation,
with respect to any LLC Interest or any Partnership Interest, to the extent,
but only to the extent, that such a grant would, under the terms of such
license, contract or agreement or otherwise, result in a breach of the terms of,
or constitute a default under any license, contract or agreement to which such
Grantor is a party, including, without limitation, with respect to any LLC
Interest or any Partnership Interest (other than to the extent that any such
term would be rendered ineffective pursuant to Section 9-318(4) of the Uniform
Commercial Code of any relevant jurisdiction or any other applicable law
(including the United States Bankruptcy Code) or principles of equity) unless
the consent of the other party thereto has been obtained to such grant of a
security interest; provided, immediately upon the ineffectiveness, lapse or
termination of any such provision, the Collateral shall include, and such
Grantor shall be deemed to have granted a security interest in, all such rights
and interests, including, without limitation, with respect to any LLC Interest
or any Partnership Interest, as if such provision had never been in effect and
(b) only the outstanding capital stock of a controlled foreign corporation
possessing up to but not exceeding 65% of the voting power of all classes of
capital stock of such controlled foreign corporation entitled to vote shall be
deemed to be pledged hereunder.
1.3. Definitions; Interpretation. Capitalized terms used herein (including
the preamble and recitals hereto) and not otherwise defined herein shall have
the meanings ascribed thereto in the Credit Agreement or, if not defined
therein, in the Uniform Commercial Code as in effect from time to time in the
State of New York (the "UCC"). References to "Sections", "Exhibits" and
"Schedules" shall be to Sections, Exhibits and Schedules, as the case may be, of
this Agreement unless otherwise specifically provided. Section headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect. The rules of construction set forth in Section 1.3 of the
Credit Agreement shall be applicable to this Agreement mutatis mutandis. If any
conflict or inconsistency exists between this Agreement and the Credit
Agreement, the Credit Agreement shall govern.
EXHIBIT I-7
<PAGE>
2. SECURITY FOR OBLIGATIONS; GRANTORS REMAIN LIABLE
2.1. Security for Obligations. This Agreement secures, and the Collateral
is collateral security for, the prompt payment or performance in full when due,
whether at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise (including the payment of amounts that would become due but
for the operation of the United States Bankruptcy Code), of all Obligations (as
such term is defined in the Credit Agreement) with respect to each Grantor (the
"Secured Obligations").
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2.2. Grantors Remain Liable. Anything contained herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under any Partnership
Agreement, LLC Agreement or any other 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 Secured Party of any of its rights hereunder shall
not release any Grantor from any of its duties or obligations under the
contracts and agreements included in the Collateral; and (c) Secured Party shall
not have any obligation or liability under any Partnership Agreement, LLC
Agreement or any other contracts and agreements included in the Collateral by
reason of this Agreement, nor shall Secured Party be obligated to perform any of
the obligations or duties of any Grantor thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder. Notwithstanding
any of the foregoing, this Agreement shall not in any way be deemed to obligate
Secured Party, any other Agent, any Lender or any purchaser at a foreclosure
sale under this Agreement to assume any of any Grantor's obligations, duties,
expenses or liabilities under any LLC Agreement or Partnership Agreement
(including any Grantor's obligations as a general partner for the debts and
obligations of a Partnership) and to manage the business and affairs of any
Partnership or any of such Grantor's obligations for the debts and obligations
of an LLC, or under any and all other agreements now existing or hereafter
drafted or executed (collectively, the "Grantor Obligations") unless Secured
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Party, any other Agent, any Lender or any such purchaser otherwise expressly
agrees in writing to assume any or all of said Grantor Obligations. In the
event of foreclosure by Secured Party, each Grantor shall remain bound and
obligated to perform its Grantor Obligations arising during or otherwise related
to its ownership of the Collateral, and neither Secured Party, nor any other
Agent nor any Lender shall be deemed to have assumed any of such Grantor
Obligations except as provided in the preceding sentence. Without limiting the
generality of the foregoing, neither the grant of the security interest in the
Collateral in favor of Secured Party as provided herein nor the exercise by
Secured Party of any of its rights hereunder nor any action in connection with a
foreclosure on the Collateral shall be deemed to constitute Secured Party, any
other Agent, or any Lender a partner of any Partnership or a member of any LLC;
provided, in the event Secured Party or any purchaser of Collateral at a
foreclosure sale elects to become a substituted general partner of any
Partnership or manager of any LLC in place of any Grantor, Secured Party or such
purchaser, as the case may, shall adopt in writing the applicable Partnership
Agreement or LLC Agreement, as the case may be, and agree to be bound by the
terms and provisions thereof.
EXHIBIT I-8
<PAGE>
3. REPRESENTATIONS AND WARRANTIES
3.1. Generally. Each Grantor represents and warrants that each of the
representations and warranties set forth in Section 3.9 of the Credit Agreement
is true and correct with respect to each item of Collateral applicable thereto
owned by such Grantor as if fully set forth herein. In addition to the
foregoing, except with respect to any Permitted Lien and such as may have been
filed in favor of Secured Party as set forth on Schedule 3.1 hereof, no
effective UCC financing statement, fixture filing or other instrument similar in
effect covering all or any part of the Collateral is on file in any filing or
recording office (other than filings for which UCC-3 termination statements or
other documents as reasonably requested by Secured Party have been executed and
delivered to Secured Party on or prior to the date hereof).
3.2. Investment Property. In addition to any other representation made
thereby in any other Credit Document, each Grantor represents and warrants that
(a) with respect to Subsidiaries of a Grantor, all of the Pledged Stock has been
duly authorized and validly issued and are fully paid and non-assessable; (b)
the Pledged Interests constitute all (or such lesser percentage owned by such
Grantor as permitted under the Credit Agreement) of the issued and outstanding
equity Securities of each issuer thereof that are owned by such Grantor and with
respect to Subsidiaries of a Grantor, there are no outstanding warrants, options
or other rights to purchase, or other agreements outstanding with respect to, or
property that is now or hereafter convertible into, or that requires the
issuance or sale of, any of the Pledged Interests that would result in the
Grantor owning less than the minimum percentage of the issued and outstanding
equity Securities of such issuer as permitted by the Credit Agreement; (c) with
respect to Subsidiaries of a Grantor, all of the Pledged Debt has been duly
authorized, authenticated or issued, and delivered and is the legal, valid and
binding obligation of the issuers thereof and is not in default and constitutes
all of the issued and outstanding inter company Indebtedness evidenced by a
promissory note of the respective issuers thereof owing to such Grantor; (d)
the Secured Party has been registered as the registered owner on the books and
records of any issuer of Uncertificated Securities included in the Collateral or
the Secured Party otherwise has "control" thereof (as defined in the UCC); (e)
no Partnership Interest or LCC Interest constitutes Uncertificated Securities;
(f) with respect to any Partnership Interests or LLC Interests that constitute
"securities" (as such term is defined in the UCC), such Partnership Interests or
LLC Interests, as the case may be, are evidenced by certificates and such
certificates have been delivered to the Secured Party in accordance with Section
5.2 hereof; and (g) with respect to Subsidiaries of a Grantor, with respect to
any Investment Property, no consent of any Person, including any other limited
or general partner of the Partnerships, any other member of any LLC, or any
creditor of any Grantor, and no authorization, approval or other action by, and
no notice to or filing with, any governmental authority or regulatory body is
required for either (i) the grant by any Grantor of the security interests
granted hereby, (ii) the execution, delivery or performance of this Agreement by
any Grantor, or (iii) the perfection of or the exercise by Secured Party of its
rights and remedies hereunder (except as may have been taken by or at the
direction of any Grantor).
3.3. Intellectual Property Collateral. In addition to any other
representation made thereby in any other Credit Document, each Grantor
represents and warrants that (a) a true and
EXHIBIT I-9
<PAGE>
complete list of all Trademark Registrations and applications owned, held
(whether pursuant to a license or otherwise) or used by such Grantor, in whole
or in part, as of the date of this Agreement is set forth in Schedule 1.1(b);
(b) a true and complete list of all Patents owned, held (whether pursuant to a
license or otherwise) or used by such Grantor, in whole or in part, as of the
date of this Agreement is set forth in Schedule 1.1(b); (c) a true and complete
list of all Copyright registrations held (whether pursuant to a license or
otherwise) or used by such Grantor, in whole or in part, as of the date of this
Agreement is set forth in Schedule 1.1(b); (d) there are not any pending or, to
the best of such Grantor's knowledge, any threatened claims by any third party
that any of the Intellectual Property owned, held or used by such Grantor is
invalid or unenforceable and, if adversely determined, would reasonably be
expected to have a Material Adverse Effect; and (e) except as set forth on
Schedule 3.3, no security interest or other Lien covering all or any part of the
Intellectual Property is on file in the United States Patent and Trademark
Office or the United States Copyright Office.
3.4. Location of Equipment and Inventory. In addition to the
representations and warranties made thereby in any other Credit Document, each
Grantor represents and warrants that all of the Equipment and Inventory is, as
of the date hereof, located at the addresses specified in Schedule 3.4.
3.5. Office Locations; Other Names. In addition to the representations
and warranties made thereby in any other Credit Document, each Grantor
represents and warrants that as of the date hereof the chief place of business,
the chief executive office and the office where such Grantor keeps its records
regarding the Accounts and all originals of all chattel paper that evidence
Accounts is, and has been for the four month period preceding the date hereof,
located at the places indicated on Schedule 3.5, and no Grantor has in the past
twelve months, and does not now do, business under any other name (including any
trade-name or fictitious business name) except for those names set forth on
Schedule 3.5.
4. FURTHER ASSURANCES; ADDITIONAL GRANTORS
4.1. Generally. Each Grantor agrees that from time to time, at the
expense of Grantor, each Grantor will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that Secured Party may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted hereby or to
enable Secured Party to exercise and enforce its rights and remedies hereunder
with respect to any Collateral. Without limiting the generality of the
foregoing, each Grantor will (a) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or notices, as may
be necessary, or as Secured Party may reasonably request, in order to perfect
and preserve the security interests granted or purported to be granted hereby;
(b) at any reasonable time, upon request by Secured Party, exhibit the
Collateral to and allow inspection of the Collateral by Secured Party, or
persons designated by Secured Party; and (c) at Secured Party's request, appear
in and defend any action or proceeding that may affect Grantor's title to or
Secured Party's security interest in all or any part of the Collateral. Each
Grantor
EXHIBIT I-10
<PAGE>
hereby authorizes Secured Party to file one or more financing or
continuation statements, and amendments thereto, relative to all or any part of
the Collateral without the signature of Grantor. Each Grantor agrees that a
carbon, photographic or other reproduction of this Agreement or of a financing
statement signed by Grantor shall be sufficient as a financing statement and may
be filed as a financing statement in any and all jurisdictions. Each Grantor
will furnish to Secured Party from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as Secured Party may reasonably request, all in reasonable
detail.
4.2. Investment Property. (a) Each Grantor agrees that it will, upon
obtaining any additional shares of stock or other securities required to be
pledged hereunder, promptly (and in any event within five Business Days) deliver
to Secured Party a Pledge Supplement, duly executed by Grantor, in substantially
the form of Exhibit A (a "Pledge Supplement"), in respect of the additional
-----------------
pledged shares to be pledged pursuant to this Agreement. Each Grantor hereby
authorizes Secured Party to attach each Pledge Supplement to this Agreement and
agrees that all Pledged Stock of Grantor listed on any Pledge Supplement shall
for all purposes hereunder be considered Collateral of Grantor; provided, the
failure of any Grantor to execute a Pledge Supplement with respect to any
additional Pledged Stock pledged pursuant to this Agreement shall not impair the
security interest of Secured Party therein or otherwise adversely affect the
rights and remedies of Secured Party hereunder with respect thereto.
(b) Upon the request of the Secured Party, each Grantor shall cause
each Person which is an issuer of an uncertificated security included in the
Collateral to execute and deliver all instruments and documents, and take all
further action Secured Party may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted in such
uncertificated securities, to establish "control" (as such term is defined in
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the UCC) by Secured Party over such Collateral or to enable Secured Party to
exercise and enforce its rights and remedies hereunder with respect to such
Collateral, including, and as applicable, (i) register the Secured Party as the
registered owner of such uncertificated securities upon the books of such Person
in accordance with Article 8 of the UCC, and (ii) deliver to Secured Party an
Acknowledgment of Pledge, duly executed by such issuer of the applicable
uncertificated security, in substantially the form of Exhibit B (an
"Acknowledgment of Pledge").
------------------------
4.3. Intellectual Property Collateral. If any Grantor shall hereafter
obtain rights to any new Intellectual Property or become entitled to the benefit
of (a) any patent application or patent or any reissue, division, continuation,
renewal, extension or continuation-in-part of any Patent or any improvement of
any Patent; or (b) any Copyright registration or renewals or extension of any
Copyright, then in any such case, the provisions of this Agreement shall
automatically apply thereto. Each Grantor shall promptly notify Secured Party
in writing of any of the foregoing rights acquired by Grantor after the date
hereof and of (i) any Trademark registrations issued or applications for
Trademark registration or applications for Patents made, and (ii) any Copyright
registrations issued or applications for Copyright registration made, in any
such case, after the date hereof. Promptly after the filing of an application
for any (1) Trademark registration; (2) Patent; and (3) Copyright registration,
each Grantor shall execute and deliver to Secured
EXHIBIT I-11
<PAGE>
Party and record in all places where this Agreement is recorded a Pledge
Supplement, pursuant to which Grantor shall grant to Secured Party a security
interest to the extent of its interest in such Intellectual Property; provided,
if, in the reasonable judgment of Grantor, after due inquiry, granting such
interest would result in the grant of a Trademark registration or Copyright
registration in the name of Secured Party, in which event Grantor shall give
written notice to Secured Party as soon as reasonably practicable and the filing
shall instead be undertaken as soon as practicable following the grant of the
applicable Trademark registration or Copyright registration, as the case may be.
In addition to the foregoing, each Grantor hereby authorizes Secured Party to
modify this Agreement without obtaining Grantor's approval of or signature to
such modification by amending Schedule 1.1(b), as applicable, to include
reference to any right, title or interest in any existing Intellectual Property
or any Intellectual Property acquired or developed by Grantor after the
execution hereof or to delete any reference to any right, title or interest in
any Intellectual Property in which Grantor no longer has or claims any right,
title or interest.
4.4. Accounts. Each Grantor shall (a) mark conspicuously each item of
chattel paper included in the Accounts, each Related Contract and, at the
reasonable request of Secured Party, each of its records pertaining to the
Collateral, with a legend, in form and substance reasonably satisfactory to
Secured Party, indicating that such Collateral is subject to the security
interest granted hereby, and (b) at the reasonable request of Secured Party,
deliver to Secured Party hereunder all promissory notes and other instruments
(excluding checks) and all original counterparts of chattel paper constituting
Collateral in excess of $25,000, duly endorsed and accompanied by duly executed
instruments of transfer or assignment, all in form and substance reasonably
satisfactory to Secured Party.
4.5. Equipment. Each Grantor shall (a) promptly after the acquisition by
such Grantor of any material item of Equipment which is covered by a certificate
of title under a statute of any jurisdiction under the law of which indication
of a security interest on such certificate is required as a condition of
perfection thereof, upon the reasonable request of Secured Party, execute and
file with the registrar of motor vehicles or other appropriate authority in such
jurisdiction an application or other document requesting the notation or other
indication of the security interest created hereunder on such certificate of
title, and (b) upon the reasonable request of Secured Party, deliver to Secured
Party copies of all such applications or other documents filed during such
calendar quarter and copies of all such certificates of title issued during such
calendar quarter indicating the security interest created hereunder in the items
of Equipment covered thereby.
4.6. Additional Grantors. From time to time subsequent to the date
hereof, additional Persons may become parties hereto as additional Grantors
(each, an "Additional Grantor"), by executing a Counterpart Agreement. Upon
------------------
delivery of any such Counterpart Agreement to Secured Party, notice of which is
hereby waived by Grantors, each Additional Grantor shall be a Grantor and shall
be as fully a party hereto as if Additional Grantor were an original signatory
hereto. Each Grantor expressly agrees that its obligations arising hereunder
shall not be affected or diminished by the addition or release of any other
Grantor hereunder, nor by any election of
EXHIBIT I-12
<PAGE>
Secured Party not to cause any Subsidiary of Borrower to become an Additional
Grantor hereunder. This Agreement shall be fully effective as to any Grantor
that is or becomes a party hereto regardless of whether any other Person becomes
or fails to become or ceases to be a Grantor hereunder.
5. COVENANTS OF GRANTORS
5.1. Generally. Each Grantor shall (a) except for the security interest
created by this Agreement, not create or suffer to exist any Lien upon or with
respect to any of the Collateral, except Permitted Liens; (b) not use or permit
any Collateral to be used unlawfully or in violation of any provision of this
Agreement or any applicable statute, regulation or ordinance or any policy of
insurance covering the Collateral; (c) notify Secured Party of any change in
Grantor's name, identity or corporate structure within 15 days of such change;
(d) diligently keep reasonable records respecting the Intellectual Property
Collateral and at all times keep at least one complete set of its records
concerning such Collateral at its chief executive office or principal place of
business; (e) 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, the Collateral, except to the
extent the validity thereof is being contested in good faith; provided, Grantor
shall in any event pay such taxes, assessments, charges, levies or claims not
later than five days prior to the date of any proposed sale under any judgment,
writ or warrant of attachment entered or filed against Grantor or any of the
Collateral as a result of the failure to make such payment; and (f) upon any
executive officer of such Grantor obtaining knowledge thereof, promptly notify
Secured Party in writing of any event that may materially and adversely affect
the ability of Grantor or Secured Party to dispose of the Collateral or any
portion thereof, or the rights and remedies of Secured Party in relation
thereto, including, without limitation, the levy of any legal process against
the Collateral or any portion thereof. No Grantor shall sell, transfer or
assign (by operation of law or otherwise) any Collateral except as permitted by
Section 6.9 of the Credit Agreement (a "Permitted Sale"). So long as (i) no
--------------
Event of Default shall have occurred and is then continuing or would occur after
giving effect to a Permitted Sale, and (ii) the Net Asset Sale Proceeds with
respect to such Permitted Sale are delivered to Secured Party contemporaneously
with such Permitted Sale to the extent required by Section 2.14(a) of the Credit
Agreement, Secured Party shall release the Lien hereof encumbering the
Collateral that is the subject of such Permitted Sale. Secured Party shall
execute each and every appropriate filing statement and/or recording document
reasonably requested by any Grantor is connection with the foregoing. Any
reasonable expense or cost incurred by Secured Party in connection with any such
release shall be for the account of the applicable Grantor.
EXHIBIT I-13
<PAGE>
5.2. Investment Property.
(a) Delivery.
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(i) All certificates or instruments representing or
evidencing the Investment Property shall be delivered to and held by or on
behalf of Secured Party pursuant hereto and shall be in suitable form for
transfer by delivery or, as applicable, shall be accompanied by Grantor's
endorsement, where necessary, or duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to Secured
Party. Upon the occurrence and during the continuation of an Event of
Default, Secured Party shall have the right, without notice to any Grantor,
to transfer to or to register in the name of Secured Party or any of its
nominees any or all of the Investment Property, subject only to the
revocable rights specified herein. In addition, Secured Party shall have
the right at any time to exchange certificates or instruments representing
or evidencing Investment Property for certificates or instruments of
smaller or larger denominations.
(ii) Each Grantor hereby consents to the pledge of the
Partnership Interests by each other Grantor in each Partnership pursuant to
the terms hereof, and, subject to Section 8, to the transfer of such
Partnership Interests to Secured Party or its nominee and to the
substitution of Secured Party or its nominee as a substituted Partner of
each such Partnership with all the rights, powers and duties of a general
partner or a limited partner, as the case may be.
(iii) Each Grantor hereby consents to the pledge of the LLC
Interests by each other Grantor in each LLC pursuant to the terms hereof,
and, subject to Section 7, to the transfer of such LLC Interests to Secured
Party or its nominee and to the substitution of Secured Party or its
nominee as a substituted member of the LLC with all the rights, powers and
duties of a member of the LLC in question.
(b) Covenants. Each Grantor shall (i) not permit any issuer of
---------
Pledged Stock to merge or consolidate unless all (or such lesser percentage
owned by such Grantor prior to such merger or consolidation) the outstanding
capital stock of the surviving or resulting corporation is, upon such merger or
consolidation, pledged hereunder and no cash, securities or other property is
distributed in respect of the outstanding shares of any other constituent
corporation; provided, if the surviving or resulting corporation upon any such
merger or consolidation involving an issuer of Pledged Stock which is a
controlled foreign corporation is a controlled foreign corporation, then such
Grantor shall only be required to pledge outstanding capital stock of such
surviving or resulting corporation possessing up to but not exceeding 65% of the
voting power of all classes of capital stock of such issuer entitled to vote;
(ii) cause each issuer of Pledged Stock that is a Subsidiary of a Grantor not to
issue any stock or other securities in addition to or in substitution for the
Pledged Stock issued by such issuer, except to Grantor; (iii) promptly deliver
to Secured Party notice of the conversion of any partnership interests in a
Partnership any membership interests in a LLC to certificated form; (iv) not (1)
cancel or terminate any of the Partnership
EXHIBIT I-14
<PAGE>
Agreements or LLC Agreements or consent to or accept any cancellation or
termination thereof, (2) except as permitted pursuant to Section 6.10 of the
Credit Agreement, sell, assign (by operation of law or otherwise) or otherwise
dispose of any part of its limited or general partnership interest in any of the
Partnerships or its membership interest in any of the LLCs, (3) amend,
supplement or otherwise modify any of the Partnership Agreements or any of the
LLC Agreements (as in effect on the date hereof), (4) waive any default under or
breach of any of the Partnership Agreements or any of the LLC Agreements or
waive, fail to enforce, forgive or release any right, interest or entitlement of
any kind, howsoever arising, under or in respect of any of the Partnership
Agreements or any of the LLC Agreements or vary or agree to the variation in any
respect of any of the provisions of any of the Partnership Agreements or any of
the LLC Agreements or the performance of any other Person under any of the
Partnership Agreements or any of the LLC Agreements, or (5) petition, request or
take any other legal or administrative action which seeks, or may reasonably be
expected, to rescind, to terminate or to suspend any of the Partnership
Agreements or any of the LLC Agreements or to amend or modify any of the
Partnership Agreements or any of the LLC Agreements; (v) at its expense (1)
perform and comply in all material respects with all terms and provisions of the
Partnership Agreements and the LLC Agreements required to be performed or
complied with by it, (2) maintain the Partnership Agreements and the LLC
Agreements to which it is a party in full force and effect, and (3) enforce each
of the Partnership Agreements and each of the LLC Agreements to which it is a
party in accordance with its terms; and (vi) not vote to permit the Partnerships
or the LLCs that are Subsidiaries to enter into any transaction of merger or
consolidation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution).
(c) Voting and Distributions.
------------------------
(i) So long as no Event of Default shall have occurred and be
continuing, (1) each Grantor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Investment Property or
any part thereof for any purpose not inconsistent with the terms of this
Agreement or any Credit Document; provided, no Grantor shall exercise or
refrain from exercising any such right if Secured Party shall have notified
Grantor that, in Secured Party's reasonable judgment, such action would
violate the terms and conditions of the Credit Agreement; provided further,
it is understood, however, that neither (A) the voting by Grantor of any
Pledged Stock for or Grantor's consent to the election of directors at a
regularly scheduled annual or other meeting of stockholders or with respect
to incidental matters at any such meeting, nor (B) Grantor's consent to or
approval of any action otherwise permitted under this Agreement or any
Credit Document shall be deemed inconsistent with the terms of this
Agreement or any Credit Document within the meaning of this Section, and no
notice of any such voting or consent need be given to Secured Party; (2)
Grantor shall be entitled to receive and retain, and to utilize free and
clear of the lien of this Agreement, any and all dividends and interest
paid in respect of the Investment Property; provided, any and all (A)
dividends and interest 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, any Investment Property, (B)
dividends and other distributions paid or
EXHIBIT I-15
<PAGE>
payable in cash in respect of any Investment Property 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 or in
redemption of or in exchange for any Investment Property, shall be, and
shall forthwith be delivered to Secured Party to hold as Investment
Property and shall, if received by Grantor, be received in trust for the
benefit of Secured Party, be segregated from the other property or funds of
Grantor and be forthwith delivered to Secured Party as Investment Property
in the same form as so received (with all necessary endorsements); and (3)
Secured Party shall promptly execute and deliver (or cause to be executed
and delivered) to Grantor all such proxies, dividend payment orders and
other instruments as Grantor may from time to time reasonably request for
the purpose of enabling Grantor to exercise the voting and other consensual
rights when and to the extent which it is entitled to exercise the same
pursuant to clause (1) above and to receive the dividends, principal or
interest payments which it is authorized to receive and retain pursuant to
clause (2) above.
(ii) Upon the occurrence and during the continuation of an Event
of Default, (1) upon written notice from Secured Party to any Grantor, all
rights of Grantor to exercise the voting and other consensual rights which
it would otherwise be entitled to exercise pursuant hereto shall cease, and
all such rights shall thereupon become vested in Secured Party who shall
thereupon have the sole right to exercise such voting and other consensual
rights; (2) all rights of Grantor to receive the dividends and interest
payments which it would otherwise be authorized to receive and retain
pursuant hereto shall cease, and all such rights shall thereupon become
vested in Secured Party who shall thereupon have the sole right to receive
and hold as Investment Property such dividends and interest payments; and
(3) all payments which are received by Grantor contrary to the provisions
of clause (2) above shall be received in trust for the benefit of Secured
Party, shall be segregated from other funds of Grantor and shall forthwith
be paid over to Secured Party as Investment Property in the same form as so
received (with any necessary endorsements); and (4) all rights of such
Grantor to receive any and all payments under or in connection with the
Partnership Agreements and/or the LLC Agreements, including but not limited
to the profits, dividends, and other distributions which it would otherwise
be authorized to receive and retain pursuant hereto, shall cease, and all
such rights shall thereupon become vested in Secured Party who shall
thereupon have the sole right to receive and hold such payments as
collateral.
(iii) IN ORDER TO PERMIT SECURED PARTY TO EXERCISE THE VOTING
AND OTHER CONSENSUAL RIGHTS WHICH IT MAY BE ENTITLED TO EXERCISE PURSUANT
HERETO AND TO RECEIVE ALL DIVIDENDS AND OTHER DISTRIBUTIONS WHICH IT MAY BE
ENTITLED TO RECEIVE HEREUNDER, (1) GRANTOR SHALL PROMPTLY EXECUTE AND
DELIVER (OR CAUSE TO BE EXECUTED AND DELIVERED) TO SECURED PARTY ALL SUCH
PROXIES, DIVIDEND PAYMENT ORDERS AND OTHER INSTRUMENTS AS SECURED PARTY MAY
FROM TIME TO TIME REASONABLY REQUEST, AND
EXHIBIT I-16
<PAGE>
(2) WITHOUT LIMITING THE EFFECT OF CLAUSE (1) ABOVE, GRANTOR HEREBY GRANTS
TO SECURED PARTY AN IRREVOCABLE PROXY (BEING COUPLED WITH AN INTEREST) TO
VOTE THE PLEDGED STOCK AND TO EXERCISE ALL OTHER RIGHTS, POWERS, PRIVILEGES
AND REMEDIES TO WHICH A HOLDER OF THE PLEDGED STOCK WOULD BE ENTITLED
(INCLUDING GIVING OR WITHHOLDING WRITTEN CONSENTS OF SHAREHOLDERS, CALLING
SPECIAL MEETINGS OF SHAREHOLDERS AND VOTING AT SUCH MEETINGS), WHICH PROXY
SHALL BE EFFECTIVE, AUTOMATICALLY AND WITHOUT THE NECESSITY OF ANY ACTION
(INCLUDING ANY TRANSFER OF ANY PLEDGED STOCK ON THE RECORD BOOKS OF THE
ISSUER THEREOF) BY ANY OTHER PERSON (INCLUDING THE ISSUER OF THE PLEDGED
STOCK OR ANY OFFICER OR AGENT THEREOF), UPON THE OCCURRENCE AND DURING THE
CONTINUATION OF AN EVENT OF DEFAULT, AND WHICH PROXY SHALL ONLY TERMINATE
UPON THE PAYMENT IN FULL OF THE SECURED OBLIGATIONS.
5.3. Intellectual Property Collateral.
(a) Covenants. Each Grantor shall (i) hereafter use best efforts
---------
so as not to permit the inclusion in any contract to which it hereafter becomes
a party of any provision that could or might in any way materially impair or
prevent the creation of a security interest in, or the assignment of, Grantor's
rights and interests in any property included within the definitions of any
Intellectual Property Collateral acquired under such contracts; (ii) take all
steps reasonably necessary to protect the secrecy of all trade secrets relating
to the products and services sold or delivered under or in connection with the
Intellectual Property Collateral, including, without limitation, entering into
confidentiality agreements with employees and labeling and restricting access to
secret information and documents; (iii) use proper statutory notice in
connection with its use of any of the Intellectual Property Collateral; (iv) use
consistent standards of high quality (which may be consistent with Grantor's
past practices) in the manufacture, sale and delivery of products and services
sold or delivered under or in connection with the Intellectual Property
Collateral; and (v) furnish to Secured Party from time to time statements and
schedules further identifying and describing any Intellectual Property
Collateral and such other reports in connection with such Collateral as Secured
Party may reasonably request, all in reasonable detail.
(b) Collections. Except as otherwise provided in this Section
-----------
5.3, each Grantor shall continue to collect, at its own expense, all amounts due
or to become due to Grantor in respect of the Intellectual Property or any
portion thereof. In connection with such collections, each Grantor may take
(and, at Secured Party's reasonable direction, shall take) such action as
Grantor or Secured Party may deem reasonably necessary or advisable to enforce
collection of such amounts; provided, Secured Party shall have the right at any
time, upon the occurrence and during the continuation of an Event of Default and
upon written notice to Grantor of its intention to do so, to notify the obligors
with respect to any such amounts of the existence of the security interest
created hereby and to direct such obligors to make payment of all such
EXHIBIT I-17
<PAGE>
amounts directly to Secured Party, and, upon such notification and at the
expense of Grantor, to enforce collection of any such amounts and to adjust,
settle or compromise the amount or payment thereof, in the same manner and to
the same extent as Grantor might have done. After receipt by any Grantor of the
notice from Secured Party referred to in the proviso to the preceding sentence
and during the continuation of any Event of Default, (i) all amounts and
proceeds (including checks and other instruments) received by Grantor in respect
of amounts due to Grantor in respect of the Collateral or any portion thereof
shall be received in trust for the benefit of Secured Party hereunder, shall be
segregated from other funds of Grantor and shall be forthwith paid over or
delivered to Secured Party in the same form as so received (with any necessary
endorsement) to be held as cash Collateral, and (ii) Grantor shall not adjust,
settle or compromise the amount or payment of any such amount or release wholly
or partly any obligor with respect thereto or allow any credit or discount
thereon.
(c) Applications and Registrations. Each Grantor shall have the duty
------------------------------
diligently, through counsel reasonably acceptable to Secured Party, to
prosecute, file and/or make, unless and until Grantor, in its commercially
reasonable judgment, decides otherwise, (i) any application relating to any of
the Intellectual Property owned by Grantor and identified on Schedule 1.1(b),
that is pending as of the date of this Agreement, (ii) any registration on any
existing or future unregistered but copyrightable works, (iii) application on
any existing patent or future patentable but unpatented invention comprising
Intellectual Property, and (iv) any Trademark opposition and cancellation
proceedings, renew Trademark registrations and Copyright registrations and do
any and all acts which are necessary or desirable, as determined in such
Grantor's commercially reasonable judgment, to preserve and maintain all rights
in all Intellectual Property. Any expenses incurred in connection therewith
shall be borne solely by Grantor. Subject to the foregoing, Grantor shall give
Secured Party prior written notice of any abandonment of any Intellectual
Property or any right to file a patent application or any pending patent
application or any Patent.
(d) Litigation. Except as provided herein, each Grantor shall have
----------
the right to commence and prosecute in its own name, as real party in interest,
for its own benefit and at its own expense, such suits, proceedings or other
actions for infringement, unfair competition, dilution, misappropriation or
other damage, or reexamination or reissue proceedings as are in its commercially
reasonable judgment necessary to protect the Intellectual Property Collateral.
Secured Party shall provide, at Grantor's expense, all reasonable and necessary
cooperation in connection with any such suit, proceeding or action including,
without limitation, joining as a necessary party. Each Grantor shall promptly,
following its becoming aware thereof, notify Secured Party of the institution
of, or of any adverse determination in, any proceeding (whether in the United
States Patent and Trademark Office, the United States Copyright Office or any
federal, state, local or foreign court) or regarding Grantor's ownership, right
to use, or interest in any Intellectual Property Collateral. Grantor shall
provide to Secured Party any information with respect thereto requested by
Secured Party.
(e) Certain Rights of Secured Party. In addition to, and not by way
-------------------------------
of limitation of, the granting of a security interest in the Collateral pursuant
hereto, each Grantor,
EXHIBIT I-18
<PAGE>
effective upon the occurrence and during the continuation of an Event of Default
and upon written notice from Secured Party, shall grant, sell, convey, transfer,
assign and set over to Secured Party, for its benefit and the ratable benefit of
Lenders and Lender Counterparties, all of Grantor's right, title and interest in
and to the Intellectual Property Collateral to the extent necessary to enable
Secured Party to use, possess and realize on the Collateral and to enable any
successor or assign to enjoy the benefits of the Collateral. This right and
license shall inure to the benefit of Secured Party and its successors, assigns
and transferees, whether by voluntary conveyance, operation of law, assignment,
transfer, foreclosure, deed in lieu of foreclosure or otherwise. Such right and
license shall be granted free of charge, without requirement that any monetary
payment whatsoever be made to such Grantor. In addition, each Grantor hereby
grants to Secured Party and its employees, representatives and agents the right
to visit Grantor's and any of its Affiliate's or subcontractor's plants,
facilities and other places of business that are utilized in connection with the
manufacture, production, inspection, storage or sale of products and services
sold or delivered under any of the Intellectual Property Collateral (or which
were so utilized during the prior six month period), and to inspect the quality
control and all other records relating thereto upon reasonable advance written
notice to Grantor and at reasonable dates and times and as often as may be
reasonably requested. If and to the extent that any Grantor is permitted to
license the Intellectual Property Collateral, Secured Party shall promptly enter
into a non-disturbance agreement or other similar arrangement, at Grantor's
request and expense, with Grantor and any licensee of any Intellectual Property
Collateral permitted hereunder in form and substance reasonably satisfactory to
Secured Party pursuant to which (i) Secured Party shall agree not to disturb or
interfere with such licensee's rights under its license agreement with Grantor
so long as such licensee is not in default thereunder, and (ii) such licensee
shall acknowledge and agree that the Intellectual Property Collateral licensed
to it is subject to the security interest created in favor of Secured Party and
the other terms of this Agreement.
5.4. Equipment and Inventory. Each Grantor shall:
(a) keep the Equipment and Inventory in the jurisdictions
specified on Schedule 5.4 or, upon 30 days' written notice to Secured Party, in
such other jurisdictions where all action that Secured Party may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby, or to enable Secured Party to exercise and
enforce its rights and remedies hereunder, with respect to such Equipment and
Inventory shall have been taken but no Grantor shall be required to obtain a
Lessor Waiver and Consent Agreement except to the extent required under Section
5.8 of the Credit Agreement;
(b) provide information as to the kind, type and quantity of
Inventory, such Grantor's cost therefor and (where applicable) the current list
prices for the Inventory, in each case, in reasonable detail; and
(c) if any Inventory is in possession or control of any of such
Grantor's agents or processors, upon the occurrence and during the continuance
of an Event of Default, instruct such agent or processor to hold all such
Inventory for the account of Secured Party and subject to the instructions of
Secured Party.
EXHIBIT I-19
<PAGE>
5.5. Accounts and Related Contracts. Each Grantor shall:
(a) keep its chief place of business and chief executive office
and the office where it keeps its records concerning the Accounts and Related
Contracts, and all originals of all chattel paper that evidence Accounts, at the
location therefor specified on Schedule 5.5 or, upon 30 days' written notice to
Secured Party following any change in location, at such other location in a
jurisdiction where all action that Secured Party may request, in order to
perfect and protect any security interest granted or purported to be granted
hereby, or to enable Secured Party to exercise and enforce its rights and
remedies hereunder, with respect to such Accounts and Related Contracts shall
have been taken. Promptly upon the reasonable request of Secured Party, such
Grantor shall deliver to Secured Party complete and correct copies of each
Related Contract;
(b) maintain (i) complete and accurate records of all Accounts,
including records of all payments received, credits granted and merchandise
returned, and (ii) all documentation relating thereto in accordance with prudent
business practices;
(c) except as otherwise provided in this subsection (c),
continue to collect, at its own expense, all amounts due or to become due to
such Grantor under the Accounts and Related Contracts, and in connection with
such collections, such Grantor shall take such action (unless the Grantor has
determined in the exercise of its commercially reasonable judgment that it shall
not do so) as such Grantor or Secured Party may deem necessary or advisable to
enforce collection of amounts due or to become due under the Accounts; provided,
Secured Party shall have the right at any time, upon the occurrence and during
the continuation of an Event of Default and upon written notice to such Grantor
of its intention to do so, to notify the account debtors or obligors under any
Accounts of the assignment of such Accounts to Secured Party and to direct such
account debtors or obligors to make payment of all amounts due or to become due
to such Grantor thereunder directly to Secured Party, to notify each Person
maintaining a lockbox or similar arrangement to which account debtors or
obligors under any Accounts have been directed to make payment to remit all
amounts representing collections on checks and other payment items from time to
time sent to or deposited in such lockbox or other arrangement directly to
Secured Party and, upon such notification and at the expense of such Grantor, to
enforce collection of any such Accounts 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 any Grantor of the notice from Secured
Party referred to in the proviso to the preceding sentence, (i) any payments of
Accounts, received by such Grantor shall be forthwith (and in any event within
two Business Days) deposited by such Grantor in the exact form received, duly
indorsed by such Grantor to the Secured Party if required, in a collateral
account maintained under the sole dominion and control of the Secured Party (the
"Collateral Account"), (ii) until so turned over in accordance with the
preceding subsection (i) all amounts and proceeds (including checks and other
instruments) received by such Grantor in respect of the Accounts and the Related
Contracts shall be received in trust for the benefit of Secured Party hereunder
and shall be segregated from other funds of such Grantor and (iii) such Grantor
shall not adjust,
EXHIBIT I-20
<PAGE>
settle or compromise the amount or payment of any Account, or release wholly or
partly any account debtor or obligor thereof, or allow any credit or discount
thereon.
6. SECURED PARTY APPOINTED ATTORNEY-IN-FACT
Each Grantor hereby irrevocably appoints Secured Party (such
appointment being coupled with an interest) as Grantor's attorney-in-fact, with
full authority in the place and stead of Grantor and in the name of Grantor,
Secured Party or otherwise, from time to time in Secured Party's discretion to
take any action and to execute any instrument that Secured Party may deem
reasonably necessary or advisable to accomplish the purposes of this Agreement,
including (a) to obtain and adjust insurance required to be maintained by
Grantor or paid to Secured Party pursuant to the Credit Agreement; (b) upon the
occurrence and during the continuation of any Event of Default, to ask for,
demand, collect, sue for, recover, compound, receive and give acquittance and
receipts for moneys due and to become due under or in respect of any of the
Collateral; (c) upon the occurrence and during the continuation of any Event of
Default, to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clause (b) above; (d) upon the
occurrence and during the continuation of any Event of Default, to file any
claims or take any action or institute any proceedings that Secured Party may
deem necessary or desirable for the collection of any of the Collateral or
otherwise to enforce the rights of Secured Party with respect to any of the
Collateral; (e) to pay or discharge taxes or Liens (other than Liens permitted
under this Agreement or the Credit Agreement) levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Secured Party in its
sole discretion, any such payments made by Secured Party to become Secured
Obligations of Grantor to Secured Party, due and payable immediately without
demand; and (f) upon the occurrence and during the continuation of an Event of
Default, generally to sell, transfer, pledge, make any agreement with respect to
or otherwise deal with any of the Collateral as fully and completely as though
Secured Party were the absolute owner thereof for all purposes, and to do, at
Secured Party's option and Grantor's expense, at any time or from time to time,
all acts and things that Secured Party deems reasonably necessary to protect,
preserve or realize upon the Collateral and Secured Party's security interest
therein in order to effect the intent of this Agreement, all as fully and
effectively as Grantor might do.
7. REMEDIES
7.1. Generally. If any Event of Default shall have occurred and be
continuing, Secured Party may exercise in respect of the Collateral, in addition
to all other rights and remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party on default under the UCC
(whether or not the UCC applies to the affected Collateral), and also may (a)
require any Grantor to, and each Grantor hereby agrees that it will at its
expense and promptly upon request of Secured Party forthwith, assemble all or
part of the Collateral as directed by Secured Party and make it available to
Secured Party at a place to be designated by
EXHIBIT I-21
<PAGE>
Secured Party that is reasonably convenient to both parties; (b) enter onto the
property where any Collateral is located and take possession thereof with or
without judicial process; (c) prior to the disposition of the Collateral, store,
process, repair or recondition the Collateral or otherwise prepare the
Collateral for disposition in any manner to the extent Secured Party deems
appropriate; (d) 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
Secured Party's offices or elsewhere, for cash, on credit or for future
delivery, at such time or times and at such price or prices and upon such other
terms as Secured Party may deem commercially reasonable; and (e) exercise
dominion and control over, and refuse to permit further withdrawals (whether of
money, securities, instruments or other property) from any deposit account
maintained with Secured Party constituting part of the Collateral. Secured Party
or any Lender may be the purchaser of any or all of the Collateral at any such
sale and Secured Party, as agent for and representative of Lenders and Lender
Counterparties (but not any Lender or Lenders in its or their respective
individual capacities unless Requisite Lenders shall otherwise agree in
writing), shall be entitled, for the purpose of bidding and making settlement or
payment of the purchase price for all or any portion of the Collateral sold at
any such public sale, to use and apply any of the Secured Obligations as a
credit on account of the purchase price for any Collateral payable by Secured
Party at such sale. Each purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of any Grantor, and each
Grantor hereby waives (to the extent permitted by applicable law) all rights of
redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
Each Grantor agrees that, to the extent notice of sale shall be required by law,
at least ten days' notice to 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. Secured Party shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. Secured Party 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. Each Grantor hereby waives any
claims against Secured Party arising by reason of the fact that the price at
which any Collateral may have been sold at such a private sale was less than the
price which might have been obtained at a public sale, even if Secured Party
accepts the first offer received and does not offer such Collateral to more than
one offeree. If the proceeds of any sale or other disposition of the Collateral
are insufficient to pay all the Secured Obligations, Grantors shall be liable
for the deficiency and the fees of any attorneys employed by Secured Party to
collect such deficiency. Each Grantor further agrees that a breach of any of the
covenants contained in this Section will cause irreparable injury to Secured
Party, that Secured Party has no adequate remedy at law in respect of such
breach and, as a consequence, that each and every covenant contained in this
Section shall be specifically enforceable against Grantor, and Grantor hereby
waives and agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that no default has occurred
giving rise to the Secured Obligations becoming due and payable prior to their
stated maturities. Nothing in this Section shall in any way alter the rights of
Secured Party hereunder.
EXHIBIT I-22
<PAGE>
7.2. Investment Property. Each Grantor recognizes that, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws, Secured Party may be compelled, with respect to any sale of all
or any part of the Investment Property conducted without prior registration or
qualification of such Investment Property under the Securities Act and/or such
state securities laws, to limit purchasers to those who will agree, among other
things, to acquire the Investment Property for their own account, for investment
and not with a view to the distribution or resale thereof. Each Grantor
acknowledges that any such private sales may be at prices and on terms less
favorable than those obtainable through a public sale without such restrictions
(including a public offering made pursuant to a registration statement under the
Securities Act) and, notwithstanding such circumstances each Grantor agrees that
any such private sale shall be deemed to have been made in a commercially
reasonable manner and that Secured Party shall have no obligation to engage in
public sales and no obligation to delay the sale of any Investment Property for
the period of time necessary to permit the issuer thereof to register it for a
form of public sale requiring registration under the Securities Act or under
applicable state securities laws, even if such issuer would, or should, agree to
so register it. If Secured Party determines to exercise its right to sell any or
all of the Investment Property, upon written request, each Grantor shall and
shall cause each issuer of any Pledged Stock to be sold hereunder, each
Partnership and each LLC from time to time to furnish to Secured Party all such
information as Secured Party may request in order to determine the number and
nature of interest, shares or other instruments included in the Investment
Property which may be sold by Secured Party in exempt transactions under the
Securities Act and the rules and regulations of the Securities and Exchange
Commission thereunder, as the same are from time to time in effect.
7.3. Intellectual Property Collateral.
EXHIBIT I-23
<PAGE>
(a) Anything contained herein to the contrary notwithstanding, upon
the occurrence and during the continuation of an Event of Default, (i) Secured
Party shall have the right (but not the obligation) to bring suit, in the name
of any Grantor, Secured Party or otherwise, in Secured Party's sole discretion,
to enforce any Intellectual Property, in which event Grantor shall, at the
request of Secured Party, do any and all lawful acts and execute any and all
documents required by Secured Party in aid of such enforcement and Grantor shall
promptly, upon demand, reimburse and indemnify Secured Party as provided in
Section 11 hereof in connection with the exercise of its rights under this
Section, and, to the extent that Secured Party shall elect not to bring suit to
enforce any Intellectual Property as provided in this Section, each Grantor
agrees to use all reasonable measures, whether by action, suit, proceeding or
otherwise, to prevent the infringement of any of the Intellectual Property by
others and for that purpose agrees (based on its reasonable business judgment)
to diligently maintain any action, suit or proceeding against any Person so
infringing necessary to prevent such infringement; (ii) upon written demand from
Secured Party, each Grantor shall execute and deliver to Secured Party an
assignment or assignments of the Intellectual Property and such other documents
as are necessary or appropriate to carry out the intent and purposes of this
Agreement; (iii) each Grantor agrees that such an assignment and/or recording
shall be applied to reduce the Secured Obligations outstanding only to the
extent that Secured Party (or any Lender) receives cash proceeds in respect of
the sale of, or other realization upon, the Intellectual Property; and (iv)
within five Business Days after written notice from Secured Party, each Grantor
shall make available to Secured Party, to the extent within such Grantor's power
and authority, such personnel in each Grantor's employ on the date of such Event
of Default as Secured Party may reasonably designate, by name, title or job
responsibility, to permit such Grantor to continue, directly or indirectly, to
produce, advertise and sell the products and services sold or delivered by such
Grantor under or in connection with the Trademarks, such persons to be available
to perform their prior functions on Secured Party's behalf and to be compensated
by Secured Party at such Grantor's expense on a per diem, pro-rata basis
consistent with the salary and benefit structure applicable to each as of the
date of such Event of Default.
(b) If (i) an Event of Default shall have occurred and, by reason of
cure, waiver, modification, amendment or otherwise, no longer be continuing,
(ii) no other Event of Default shall have occurred and be continuing, (iii) an
assignment to Secured Party of any rights, title and interests in and to the
Intellectual Property shall have been previously made and shall have become
absolute and effective, and (iv) the Secured Obligations shall not have become
immediately due and payable, upon the written request of Grantor, Secured Party
shall promptly execute and deliver to Grantor, at Grantor's sole cost and
expense, such assignments as may be necessary to reassign to Grantor any such
rights, title and interests as may have been assigned to Secured Party as
aforesaid, subject to any disposition thereof that may have been made by Secured
Party; provided, after giving effect to such reassignment, Secured Party's
security interest granted pursuant hereto, as well as all other rights and
remedies of Secured Party granted hereunder, shall continue to be in full force
and effect; and provided further, the rights, title and interests so reassigned
shall be free and clear of all Liens other than Permitted Liens.
EXHIBIT I-24
<PAGE>
7.4. Accounts. In addition to the rights of the Secured Party
specified in Section 5.5 hereof with respect to payments of Accounts, if an
Event of Default shall occur and be continuing, upon request of the Secured
Party, all proceeds received by any Grantor consisting of cash, checks and other
near-cash items shall be held by such Grantor in trust for the Secured Party,
segregated from other funds of such Grantor, and shall, forthwith upon receipt
by such Grantor, be turned over to the Secured Party in the exact form received
by such Grantor (duly indorsed by such Grantor to Secured Party, if required)
and held by the Secured Party in the Collateral Account. All proceeds while held
by the Secured Party in trust for the Secured Party shall continue to be held as
collateral security for all the Obligations and shall not constitute payment
thereof until applied as provided in Section 7.5.
7.5. Application of Proceeds. Except as expressly provided elsewhere
in this Agreement, all proceeds received by Secured Party in respect of any sale
of, collection from, or other realization upon all or any part of the Collateral
shall be applied as provided in Section 2.15 of the Credit Agreement.
8. AGENT
Secured Party has been appointed to act as agent hereunder by and on
behalf of Lenders and Lender Counterparties. Secured Party shall be obligated,
and shall have the right hereunder, to make demands, to give notices, to
exercise or refrain from exercising any rights, and to take or refrain from
taking any action (including, without limitation, the release or substitution of
Collateral), solely in accordance with this Agreement and the other Credit
Documents.
9. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS
This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the payment in
full of the Secured Obligations and the cancellation or termination of the
Commitments, (b) be binding upon each Grantor, its successors and assigns, and
(c) inure, together with the rights and remedies of Secured Party hereunder, to
the benefit of Secured Party and its successors, transferees and assigns.
Without limiting the generality of the foregoing clause (c), but subject to the
terms of the Credit Agreement, any Lender may assign or otherwise transfer any
Loans held by it to any other Person, and such other Person shall thereupon
become vested with all the benefits in respect thereof granted to Lenders herein
or otherwise. Upon the payment in full of all Secured Obligations then owing
and the cancellation or termination of the Commitments, the security interest
granted hereby shall terminate hereunder and of record and all rights to the
Collateral shall revert to Grantor. Upon any such termination Secured Party
will, at Grantors' expense, execute and deliver to Grantors such documents as
Grantors shall reasonably request to evidence such termination.
EXHIBIT I-25
<PAGE>
10. STANDARD OF CARE; SECURED PARTY MAY PERFORM.
The powers conferred on Secured Party hereunder are solely to protect
its interest in the Collateral and shall not impose any duty upon it to exercise
any such powers. Except for the exercise of reasonable care in the custody of
any Collateral in its possession and the accounting for moneys actually received
by it hereunder, Secured Party shall have no duty as to any Collateral or as to
the taking of any necessary steps to preserve rights against prior parties or
any other rights pertaining to any Collateral. Secured Party shall be deemed to
have exercised reasonable care in the custody and preservation of Collateral in
its possession if such Collateral is accorded treatment substantially equal to
that which Secured Party accords its own property. If any Grantor fails to
perform any agreement contained herein, Secured Party may itself perform, or
cause performance of, such agreement, and the expenses of Secured Party incurred
in connection therewith shall be payable by each Grantor under Section 11 of
this Agreement.
11. INDEMNITY AND EXPENSES
Each Grantor agrees:
(a) to indemnify, defend and hold harmless Secured Party, its
affiliates and its affiliates' respective directors, officers, employees, agents
and representatives from and against any and all claims, losses and liabilities
in any way relating to, growing out of or resulting from this Agreement and the
transactions contemplated hereby (including without limitation enforcement of
this Agreement), except to the extent such claims, losses or liabilities result
from Secured Party's gross negligence, bad faith, or willful misconduct as
determined by a court of competent jurisdiction in a final, non-appealable
judgment or order; and
(b) to pay to Secured Party promptly following written demand
(together with appropriate supporting documentation) the amount of any and all
reasonable costs and reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents in accordance with the
terms and conditions of the Credit Agreement.
The obligations of each Grantor in this Section 11 shall survive the termination
of this Agreement and the discharge of such Grantor's other obligations under
this Agreement, the Credit Agreement and any other Credit Documents.
12. REGULATORY APPROVALS
(a) Any provision contained herein to the contrary
notwithstanding, except for the security interests expressly granted herein or
therein or upon the exercise by the Secured Party of rights and remedies in
accordance herewith or therewith and pursuant to clause (b) below, upon the
occurrence and continuation of an Event of Default, this Agreement and the
Credit Agreement and the transactions contemplated hereby and thereby (i) do not
and will not
EXHIBIT I-26
<PAGE>
constitute, create, or have the effect of constituting or creating, directly or
indirectly, actual or practical ownership of any Subsidiary of Company by the
Lenders, or control, affirmative or negative, direct or indirect, by the Lenders
over the management or any other aspect of the operation of any Subsidiary,
which ownership and control remain exclusively and at all times in such
Subsidiary, and (ii) do not and will not constitute the transfer, assignment, or
disposition in any manner, voluntarily or involuntarily, directly or indirectly
of any license, permit, certificate or authorization at any time issued to any
Subsidiary of Company by the FCC, any other federal, state or local regulatory
or governmental bodies applicable to or having jurisdiction over Company or any
Governmental Authority, or the transfer of control of any such Subsidiary within
the meaning of the Federal Communications Act of 1934, as amended and the
respective rules and regulations thereunder and thereof, any other federal or
state laws, rules and regulations of other operating municipality regulatory or
governmental bodies applicable to or having jurisdiction over the Company as
well as pursuant to the terms of any franchise, license or similar operating
right held by Company.
(b) Any provision contained herein to the contrary
notwithstanding, no action, including any foreclosure on, sale, transfer or
other disposition of, or the exercise of any right to vote or consent, shall be
taken hereunder by the Secured Party with respect to any item of the Collateral
unless and until all applicable requirements (if any) of the FCC under the
Federal Communications Act of 1934, as amended, and the respective rules and
regulations thereunder and thereof, as well as any other federal or state laws,
rules and regulations of other operating municipality regulatory or governmental
bodies applicable to or having jurisdiction over Company, have been satisfied
with respect to such action and there have been obtained such consents,
approvals and authorizations (if any) as may be required to be obtained from the
FCC, any operating municipality and any other Governmental Authority under the
terms of any franchise, license or similar operating right held by Company. It
is the intention of the parties hereto that the Liens in favor of the Secured
Party on the Collateral shall in all relevant aspects be subject to and governed
by said statutes, rules and regulations as well as the terms of any franchise,
license or similar operating right held by Company and that nothing in this
Agreement shall be construed to diminish the control exercised by Company except
in accordance with the provisions of such statutory requirements and license or
similar operating right held by Company and the obtaining in advance of any
necessary consents, approvals or authorizations pursuant thereto. Company agrees
that upon request by the Secured Party from time to time after the occurrence
and during the continuance of an Event of Default it will use its reasonable
best efforts to obtain any governmental, regulatory or third party consents,
approvals or authorizations referred to in this Section 12.
13. MISCELLANEOUS
Any notice required or permitted to be given under this Agreement
shall be given in accordance with Section 10.1 of the Credit Agreement. No
failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder or under any other Credit Document shall impair
such power, right or privilege or be construed to be a waiver of
EXHIBIT I-27
<PAGE>
any default or acquiescence therein, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other power, right or privilege. All rights and remedies existing under
this Agreement and the other Credit Documents are cumulative to, and not
exclusive of, any rights or remedies otherwise available. In case any provision
in or obligation under this Agreement shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby. All
covenants hereunder shall be given independent effect so that if a particular
action or condition is not permitted by any of such covenants, the fact that it
would be permitted by an exception to, or would otherwise be within the
limitations of, another covenant shall not avoid the occurrence of a Default or
an Event of Default if such action is taken or condition exists. This Agreement
shall be binding upon each Grantor, its successors and assigns and inure to the
benefit of and enforceable by Secured Party and its successors and assigns. No
Grantor shall, without the prior written consent of Secured Party, assign any
right, duty or obligation hereunder. This Agreement, the Credit Agreement and
the other Credit Documents embody the entire agreement and understanding between
Grantors and Secured Party and supersede all prior agreements and understandings
between such parties relating to the subject matter hereof and thereof.
Accordingly, this Agreement, the Credit Agreement and the other Credit Documents
may not be contradicted by evidence of prior, contemporaneous or subsequent oral
agreements of the parties. There are no unwritten oral agreements between the
parties. This Agreement may be executed in one or more counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
THE PROVISIONS OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAWS
PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF
THE STATE OF NEW YORK AND THE MANDATORY CHOICE OF LAW PROVISIONS IN THE UCC
GOVERNING THE PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF A
SECURITY INTEREST).
[Remainder of page intentionally left blank]
EXHIBIT I-28
<PAGE>
IN WITNESS WHEREOF, each Grantor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
NORTHPOINT COMMUNICATIONS, INC.
By_______________________________________
Name:
Title:
NORTHPOINT COMMUNICATIONS GROUP, INC.
By:______________________________________
Name
Title:
NORTHPOINT COMMUNICATIONS OF VIRGINIA, INC.
By_______________________________________
Name:
Title:
CANADIAN IMPERIAL BANK OF COMMERCE,
as Secured Party
By_______________________________________
Name:
Title:
EXHIBIT I-29
<PAGE>
SCHEDULE 1.1(a) TO
PLEDGE AND SECURITY AGREEMENT
Pledged Interests
Pledged Stock:
<TABLE>
<CAPTION>
% and
Total Type of
# of Shares Issued Interest Stock Par
Grantor Issuer Pledged Shares Pledged Certificate No. Value
- --------------- ----------------- ----------- ------ -------- --------------- ------
<S> <C> <C> <C> <C> <C> <C>
NorthPoint NorthPoint 100 100 100% 1 $0.001
Communications, Communications of Common
Inc. Virginia, Inc. Stock
NorthPoint NorthPoint 1 1 100% 1 $0.001
Communications Communications, Common
Group, Inc. Inc. Stock
</TABLE>
Pledged Debt:
None.
Partnership Interests:
None.
LLC Interests:
None.
EXHIBIT I-1
<PAGE>
Exhibit 10.27
AMENDMENT NO. 1
TO
CREDIT AND GUARANTY AGREEMENT
This AMENDMENT NO. 1, dated as of February 2, 2000 (this "Amendment"), to
the Credit and Guaranty Agreement, dated as of December 9, 1999 (the "Existing
Credit Agreement''), by and among NORTHPOINT COMMUNICATIONS, INC., a Delaware
corporation ("Company"), NORTHPOINT COMMUNICATIONS GROUP, INC., a Delaware
corporation ("Parent Guarantor"), CERTAIN SUBSIDIARIES OF COMPANY, as
Guarantors, the Lenders party hereto from time to time, GOLDMAN SACHS CREDIT
PARTNERS L.P., as Lead Arranger, and as Syndication Agent, CANADIAN IMPERIAL
BANK OF COMMERCE, as Administrative Agent, and NEWCOURT COMMERCIAL FINANCE
CORPORATION, an affiliate of The CIT Group, Inc., as Documentation Agent.
RECITALS:
WHEREAS, the terms used herein, including in the preamble and recitals
hereto, not otherwise defined herein or otherwise amended hereby shall have the
meanings ascribed thereto in the Existing Credit Agreement; and
WHEREAS, Company has requested, and Requisite Lenders have agreed, in each
case on the terms and conditions set forth herein, that the Existing Credit
Agreement be amended (i) to permit Parent Guarantor to issue up to $400,000,000
of Permitted Parent Guarantor Indebtedness, (ii) to amend certain of the
financial covenants set forth therein, and (iii) to permit Company to make
Investments in certain Joint Ventures.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Company, each Guarantor, Requisite
Lenders and Agents hereby agree as follows:
SECTION 1. AMENDMENT
As of the Amendment Effective Date (as defined in Section 2 hereof), the
Existing Credit Agreement shall be amended as set forth in this Section 1.
(a) The definition of "Permitted Parent Guarantor Indebtedness"
contained in Section 1.1 of the Existing Credit Agreement is hereby amended to
-----------
read in its entirety as follows:
""Permitted Parent Guarantor Indebtedness" means Indebtedness of
Parent Guarantor that (i) is not secured by any real, mixed or
personal property of
<PAGE>
Parent Guarantor or any of its Subsidiaries, including Company; (ii)
is not guaranteed by Company or any other Subsidiary of Parent
Guarantor; (iii) does not require cash payments of principal or any
mandatory redemption or other repayments with respect thereto, other
than (x) in the case of a change of control or a sale of assets so
long as no such repayment is required with respect to asset sales if
the net proceeds thereof are applied pursuant to Section 2.14(a), (y)
at maturity or (z) as a result of accelera tion after an event of
default; (iv) does not have a scheduled maturity earlier than six
months after the scheduled Term Loan Maturity Date; and (v) is not in
the form of a Security the interest obligation of which is pre-funded
(other than from the proceeds of the issuance thereof) for any period
of time."
(b) Section 2.14(c) of the Existing Credit Agreement is hereby
---------------
amended to read in its entirety as follows:
"(c) Intentionally Omitted."
---------------------
(c) Section 6.1(c) of the Existing Credit Agreement is hereby amended
--------------
to read in its entirety as follows:
"(c) Permitted Parent Guarantor Indebtedness, the aggregate
outstanding principal amount of which, together with the initial
accreted value thereof with respect to any such Indebtedness issued at
a discount, does not at any time exceed $400,000,000; provided, that
--------
Parent Guarantor shall contribute as equity to Company all of the net
proceeds of all Permitted Parent Guarantor Indebtedness;"
(d) Section 6.6(g) of the Existing Credit Agreement is hereby amended
--------------
to read in its entirety as follows:
"(g) Permitted Investments in an aggregate amount not to exceed
at any time (x) $25,000,000 less (y) the aggregate amount of
Investments, if any, made in Joint Ventures pursuant to clause (ii) of
Section 6.6(k);"
--------------
(e) Section 6.6(i) of the Existing Credit Agreement is hereby amended
--------------
by deleting the "and" at the end thereof and Section 6.6(j) of the Existing
--------------
Credit Agreement is hereby amended by deleting the "." at the end thereof and
inserting "; and" therefor, and by further inserting the following:
"(k) Investments in Joint Ventures not to exceed at any time the
sum of (i) $60,000,000, plus (ii) an amount equal to (x) $25,000,000,
less (y) the amount of Permitted Investments, if any, made pursuant to
Section 6.6(g), plus (iii) 50% of (x) the aggregate amount of the net
--------------
cash proceeds of equity offerings of Parent Guarantor, less (y) the
aggregate amount of such net cash proceeds used by Parent
<PAGE>
Guarantor to redeem Permitted Parent Guarantor Indebtedness in
accordance with Section 6.4(c)."
(f) Each of Section 6.7(a)(i) and Section 6.7(a)(ii) of the Existing
----------------- ------------------
Credit Agreement is hereby amended to read in its entirety as follows:
"(i) Consolidated Senior Debt to Consolidated Capitalization.
Parent Guarantor shall not permit the ratio of Consolidated Senior
Debt to Consolidated Capitalization as of the last day of any fiscal
quarter, beginning with the fiscal quarter ending December 31, 1999,
to exceed 0.30:1.00; and
(ii) Consolidated Total Debt to Consolidated Capitalization.
Parent Guarantor shall not permit the ratio of Consolidated Total Debt
to Consolidated Capitalization as of the last day of any fiscal
quarter, beginning with the fiscal quarter ending December 31, 1999,
to exceed 0.60:1.00;
provided, as of any date of determination of each of the foregoing
--------
ratios, the amount of Consolidated Capitalization for purposes thereof
shall be reduced by an amount equal to the aggregate amount of all
Investments outstanding as of such date made pursuant to Section
6.6(k)(iii)."
SECTION 2. CONDITIONS PRECEDENT
The amendments to the Existing Credit Agreement set forth at Section 1
hereof shall be effective as of the date hereof (the "Amendment Effective Date")
so long as each of the following conditions shall have been satisfied (or waived
in accordance with Section 10.5 of the Existing Credit Agreement):
(a) Administrative Agent shall have received sufficient copies of
this Amendment, originally executed and delivered by each applicable Credit
Party and the Requisite Lenders.
(b) As of the Amendment Effective Date, the representations and
warranties contained herein and in the other Credit Documents shall be true,
correct and complete in all respects on and as of the Amendment Effective Date
to the same extent as though made on and as of that date, except to the extent
such representations and warranties specifically relate to an earlier date, in
which case such representations and warranties shall have been true, correct and
complete in all respects on and as of such earlier date.
(c) As of the Amendment Effective Date, no event shall have occurred
and be continuing that would constitute an Event of Default or a Default.
(d) As of the Amendment Effective Date, Company shall have paid all
the
<PAGE>
reasonable costs and expenses of counsel to Agents and Lenders in connection
with the negotiation, preparation and execution of this Amendment.
Upon the occurrence of the Amendment Effective Date, the Existing Credit
Agreement as amended by Section 1 hereof and all references in any other Credit
Document to the Existing Credit Agreement shall be a reference to such Agreement
as amended pursuant to Section 1.
SECTION 3. REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment, each Credit Party
represents and warrants to each Lender, that as of the Amendment Effective Date,
the representations and warranties contained in each of the Credit Documents is
true, correct and complete in all respects on and as of the Amendment Effective
Date to the same extent as though made on and as of that date, except to the
extent such representations and warranties specifically relate to an earlier
date, in which case such representations and warranties shall have been true,
correct and complete in all respects on and as of such earlier date.
SECTION 4. MISCELLANEOUS
4.1. This Amendment shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Lenders. No Credit Party's rights or
obligations hereunder or any interest therein may be assigned or delegated by
any Credit Party without the prior written consent of all Lenders.
4.2. In case any provision in or obligation hereunder shall be invalid,
illegal or un-enforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.
4.3. Section headings herein are included herein for convenience of
reference only and shall not constitute a part hereof for any other purpose or
be given any substantive effect.
4.4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
4.5. This Amendment may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument. As set
forth herein, this Amendment shall become effective upon the execution of a
counterpart hereof by each of the parties hereto and receipt by Company and
Administrative Agent of written or telephonic notification of such
<PAGE>
execution and authorization of delivery thereof.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
NORTHPOINT COMMUNICATIONS, INC., as Company
By:
Name:
Title:
NORTHPOINT COMMUNICATIONS GROUP, INC., as Parent
Guarantor
By:
Name:
Title:
NORTHPOINT COMMUNICATIONS OF VIRGINIA, INC., as a
Subsidiary Guarantor
By:
Name:
Title:
<PAGE>
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as Lead Arranger, Syndication Agent
and a Lender
By:
Authorized Signatory
CANADIAN IMPERIAL BANK OF COMMERCE,
as Administrative Agent, Swing Line
Lender and Issuing Bank
By:
Name:
Title:
CIBC INC., as a Lender
By:
Name:
Title:
NEWCOURT COMMERCIAL FINANCE CORPORATION,
an affiliate of THE CIT GROUP, INC.,
as Documentation Agent and as a Lender
By:
Name:
Title:
FLEET NATIONAL BANK, as a Lender
<PAGE>
By:
Name:
Title:
BANK OF MONTREAL, as a Lender
By:
Name:
Title:
BARCLAYS BANK PLC, as a Lender
By:
Name:
Title:
COAST BUSINESS CREDIT A DIVISION OF
SOUTHERN PACIFIC BANK, as a Lender
By:
Name:
Title:
CREDIT SUISSE FIRST BOSTON, as a Lender
By:
Name:
Title:
By:
Name:
Title:
FIRST UNION NATIONAL BANK, as a Lender
By:
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION,
as a Lender
By:
Name:
Title:
FINOVA CAPITAL CORPORATION, as a Lender
By:
Name:
Title:
UNION BANK OF CALIFORNIA, as a Lender
By:
Name:
Title:
FRANKLIN FLOATING RATE TRUST, as a Lender
By:
Name:
Title:
<PAGE>
================================================================================
EXHIBIT 10.28
NorthPoint Communications Group, Inc.
Notice of Grant of Stock Options ID: 52-214-7716
and Stock Option Agreement 303 2nd St.
San Francisco, CA 94107
================================================================================
Name of Optionee Option Number:
Plan: 1999
ID:
================================================================================
Effective _________, you have been granted a(n) Incentive Stock Option to buy
_________ shares of NorthPoint Communications Group, Inc. (the "Company") common
stock at $ __________ per share. Your Vesting Commencement date is ___________.
The total option price of the shares granted is $ ___________.
The shares subject to this Option shall vest according to the following
schedule:
1/4th of the Shares subject to this Option shall vest on the 12 month
anniversary of the Vesting Commencement Date and 1/48th of the total number of
Shares subject to the Option shall vest on each monthly anniversary thereafter.
Shares in each period will become fully vested on the date shown.
Shares Vest Type Full Vest Expiration
------ --------- --------- ----------
================================================================================
Optionee acknowledges and agrees that the vesting of shares pursuant to the
option hereof is earned only by continuing consultancy or employment at the will
of the Company (not through the act of being hired, being granted this option or
acquiring shares hereunder). Optionee further acknowledges and agrees that
nothing in this agreement, nor in the Company's 1999 Stock Plan (the "Plan")
which is incorporated herein by reference, shall confer upon Optionee any right
with respect to continuation of employment or consultancy by the Company, nor
shall it interfere in any way with Optionee's right or the Company's right to
terminate Optionee's employment or consultancy at any time, with or without
cause.
Optionee acknowledges receipt of a copy of the Plan and represents that he is
familiar with the terms and provisions thereof. Optionee hereby accepts this
Option subject to all of the terms and provisions hereof. Optionee has reviewed
the Plan and this Option in their entirety, has had an opportunity to obtain the
advice of counsel prior to executing this Option and fully understands all
provisions of the Option. Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Administrator upon
any questions arising under the Plan or this Option. Optionee further agrees to
notify the Company upon any change in the residence address indicated above.
The options granted hereunder are governed by the terms and conditions of the
Stock Option Agreement attached hereto. By your signature and the Company's
signature below, you agree to be bound by the terms and conditions of the
Company's 1999 Stock Plan and the Stock Option Agreement attached hereto.
================================================================================
____________________________________________ ____________________
NorthPoint Communications Group, Inc. Date
By: Henry P. Huff, Chief Financial Officer
____________________________________________ ____________________
Date
Page 1 of 3
<PAGE>
NORTHPOINT COMMUNICATIONS GROUP, INC.
1999 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the NorthPoint
Communications Group, Inc. 1999 Stock Plan (the "Plan") shall have the same
defined meanings in this Stock Option Agreement.
1. Grant of Option. The Company hereby grants to the Optionee an Option
---------------
to purchase the Common Stock (the "Shares") set forth in the Notice of Grant, at
the exercise price per Share set forth in the Notice of Grant (the "Exercise
Price"). Notwithstanding anything to the contrary anywhere else in this Option
Agreement, this grant of an Option is subject to the terms, definitions and
provisions of the Plan adopted by the Company, which is incorporated herein by
reference.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an ISO as defined in Section 422
of the Internal Revenue Code.
2. Exercise of Option. This Option is exercisable as follows:
------------------
(a) Right to Exercise. For purposes of this Stock Option Agreement,
-----------------
Shares subject to this Option shall vest based on continued employment of
or consulting services by Optionee with the Company. In no event may this
Option be exercised after the date of expiration of the term of this Option
as set forth in the Notice of Grant.
(b) Method of Exercise. This Option shall be exercisable by delivery
------------------
of a written Exercise Notice. The Exercise Notice must state the number of
Shares for which the Option is being exercised. The Exercise Notice must be
signed by the Optionee and shall be delivered in person or by certified
mail to the Company's Stock Plan Administrator. The Exercise Notice must be
accompanied by payment of the Exercise Price, including payment of any
applicable withholding tax. This Option shall be deemed to be exercised
upon receipt by the Company of such written Exercise Notice accompanied by
the Exercise Price and payment of any applicable withholding tax.
No Shares shall be issued pursuant to the exercise of an Option unless
such issuance and such exercise comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be listed.
Assuming such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.
3. Termination of Relationship. If an Optionee ceases to be a Service
---------------------------
Provider, Optionee may exercise this Option during the thirty (30) day period
after such termination to the extent the Option was vested at the date of such
termination (the "Termination Date"). To the extent that Optionee was not vested
in this Option at the date of such termination, or if Optionee does not exercise
this Option within the time specified herein, the Option shall terminate. In the
event that Optionee's employment relationship or consulting relationship with
the Company terminates within two years after a Change of Control, and such
termination is an Involuntary Termination (as defined below), or a termination
without Cause (as defined below), then all remaining unvested Shares subject to
the Option shall vest and become exercisable on the termination date.
For purposes of this Section 3, the term "Involuntary Termination"
shall mean Optionee's voluntary termination of employment with the Company
following (i) a material reduction in compensation; (ii) a complete exclusion of
benefits; (iii) a material reduction in job responsibilities inconsistent with
Optionee's position with the Company and responsibilities prior to the Change of
Control, taking into account the change in ownership of the Company or
membership of Board of Directors of the Company resulting in the Change of
Control, or (iv) relocation to a facility or location more than 35 miles from
the Company's location prior to the Change of Control.
For purposes of this Section 3, the term "Cause" shall mean shall mean
(i) material breach of any material terms of this Agreement, (ii) conviction of
a felony, (iii) fraud, (iv) repeated unexplained or unjustified absence, (v)
willful breach of fiduciary duty or (vi) gross negligence or willful misconduct
where such gross negligence or willful misconduct has resulted or is likely to
result in substantial and material damage to the
Page 2 of 3
<PAGE>
Company or its subsidiaries, if any. Anything contained in this Section 3 to the
contrary notwithstanding, the Optionee shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to the
Optionee a copy of a resolution duly adopted by the affirmative vote of not less
than two-thirds of the entire membership of the Board of Directors of the
Company (excluding the Optionee, if the Optionee is a director), after
reasonable notice to the Optionee and an opportunity for the Optionee, together
with his counsel, to be heard before the Board of Directors, finding that in the
good faith opinion of the Board of Directors, the Optionee has engaged in the
conduct described in this Section 3.
For purposes of this Section 3, the term "Change of Control" shall
mean the occurrence of any of the following events:
(a) Ownership. Any "person" (as such term is used in Sections 13(d)
---------
and 14(d) of the Securities Exchange Act of 1934 is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing 50% or more of the
total voting power represented by the Company's then outstanding voting
securities; or
(b) Merger/Sale of Assets. The stockholders of the Company approve a
---------------------
merger or consolidation of the Company with any other corporation, other
than a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) at least 50% of the total voting
power represented by the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets.
4. Governing Law. The validity and enforceability of this Agreement
-------------
shall be governed by and construed in accordance with the laws of the State of
California without regard to otherwise governing principles of conflicts of law.
5. Successors and Assigns. The terms of this Option shall be binding
----------------------
upon the executors, administrators, heirs, successors and assigns of the
Optionee.
Page 3 of 3
<PAGE>
EXHIBIT 10.29
NORTHPOINT CANADA RESELLER
INVESTMENT AGREEMENT
February 15, 2000
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
ARTICLE 1 DEFINITIONS.......................................................................................... 1
1.1 Definitions.................................................................................. 1
ARTICLE 2 Purchase and Sale of Shares.......................................................................... 9
2.1 Purchase of Shares........................................................................... 9
2.2 Closing...................................................................................... 10
2.3 Legends...................................................................................... 10
ARTICLE 3 Representations and Warranties....................................................................... 10
3.1 Representations and Warranties of the Company................................................ 10
3.2 Representations and Warranties of the Call-Net Group and the NorthPoint Group................ 11
ARTICLE 4 TRANSFERS OF SHARES; NEW ISSUANCES................................................................... 12
4.1 Stapling of Interests; No Transfers During Start-Up Phase.................................... 12
4.2 Initial Notice of Sale....................................................................... 13
4.3 Right of First Refusal....................................................................... 13
4.4 Transfers to Affiliates...................................................................... 16
4.5 Co-Sale Rights............................................................................... 16
4.6 Buy-Sell Right............................................................................... 17
4.7 Right of First Refusal on Issuance by Company................................................ 18
4.8 Bankruptcy................................................................................... 19
4.9 Right of First Refusal on Company Indebtedness............................................... 20
4.10 Shareholder Loans............................................................................ 20
ARTICLE 5 BOARD OF DIRECTORS AND MANAGEMENT.................................................................... 21
5.1 Number of Directors.......................................................................... 21
5.2 Designation of Directors..................................................................... 21
5.3 Appointment of Senior Management............................................................. 21
5.4 Supermajority Requirements................................................................... 22
ARTICLE 6 OPERATING AND PRECLOSING COVENANTS................................................................... 23
6.1 Initial Equity Funding Commitments........................................................... 23
6.2 AOPB and Business Plan....................................................................... 25
6.3 Budget Approval.............................................................................. 25
6.4 Procedures in the Event of a Dispute......................................................... 26
6.5 Noncompetition............................................................................... 26
6.6 Financial Statements......................................................................... 28
6.7 Initial Public Offering...................................................................... 29
6.8 Cooperation of NorthPoint Group and Call-Net Group........................................... 29
6.9 Pre-Closing Covenants........................................................................ 29
ARTICLE 7 CONDITIONS TO CLOSING................................................................................ 31
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
7.1 Conditions to Each Party's Obligations....................................................... 31
7.2 Conditions to Call-Net's Obligations......................................................... 31
7.3 Conditions to NorthPoint's Obligations....................................................... 32
ARTICLE 8 MISCELLANEOUS........................................................................................ 32
8.1 Termination.................................................................................. 32
8.2 Notices...................................................................................... 33
8.3 Applicable Law; Waiver of Jury Trials; Consent to Jurisdiction............................... 34
8.4 Severability................................................................................. 34
8.5 Amendments................................................................................... 34
8.6 Waiver....................................................................................... 34
8.7 Counterparts................................................................................. 34
8.8 Entire Agreement............................................................................. 35
8.9 Assignment................................................................................... 35
8.10 Survival of Agreement........................................................................ 35
8.11 No Third-Party Beneficiaries................................................................. 35
8.12 Expenses..................................................................................... 35
8.13 Specific Performance......................................................................... 35
8.14 Construction................................................................................. 35
</TABLE>
-ii-
<PAGE>
EXHIBIT 10.29
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT, made as of March 7, 2000 (the "Effective
Date"), is entered into by and between NorthPoint Communications, Inc. (the
"Company") and Elizabeth Fetter (the "Executive").
WHEREAS, the Company and Executive wish to enter into a formal
employment agreement that shall govern the terms and conditions of Executive's
employment with the Company and shall provide certain severance, stock option
and other benefits for Executive in the event that her employment should
terminate.
WHEREAS, the Executive is agreeing to abide by the restrictive
covenants contained herein and is foregoing other career opportunities in
reliance on this Employment Agreement,
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, the parties agree as follows:
1. Definitions
A. Target Bonus. "Target Bonus" means the target annual bonus for
------------
Executive during in any year or, if Executive is entitled to a bonus under
an individual written agreement with the Company, the annual bonus to which
Executive is entitled thereunder.
B. Base Salary. "Base Salary" means the greater of the annual rate of base
-----------
salary in effect for Executive at the time of Executive's Qualifying
Termination or the annual rate of base salary in effect for Executive
immediately before the Change in Control.
C. Cause. Termination for "Cause" means the following: (i) Executive's
------
conviction of a felony or any crime of dishonesty; (ii) Executive's
commission of any act of fraud with respect to the Company; (iii) any
intentional misconduct by Executive intended to have a materially adverse
effect upon the Company's business; (iv) Executive's repeated failure to
satisfactorily perform her job duties; (v) an intentional breach by
Executive of any of Executive's fiduciary obligations as an officer or
director of the Company or a breach of this Employment Agreement or any
other agreement with the Company that has a materially adverse effect upon
the Company; or (vi) Executive's death or Permanent Disability.
D. Change in Control. "Change in Control" shall have the meaning set forth
-----------------
in the Option Agreement attached as Exhibit A hereto.
---------
E. Change of Employment Circumstances. "Change of Employment
----------------------------------
Circumstances" means (i) a material reduction in Executive's level of
duties or responsibilities or the nature or scope of Executive's functions,
or (ii) a reduction in Executive's base salary or a reduction in
Executive's total cash compensation (consisting of base salary and target
bonus), or (iii) the failure to provide Executive with employee benefits
(including
<PAGE>
medical/dental, disability and life insurance) that are substantially
equivalent to the benefits provided to Executive immediately before a
Change in Control, or (iv) a relocation of Executive's principal place of
employment by more than thirty-five miles away (or any requirement that
Executive spend more than two days a week at any location more than thirty-
five miles away), or (v) the breach of the terms of any compensation
agreement or arrangement between the Company and Executive, or (vi) the
repudiation or failure by the Company or its successor to acknowledge (upon
Executive's written request) or to comply with any of its obligations under
this Employment Agreement.
F. Comparable Position. A "Comparable Position" means a position with a
-------------------
successor to part or all of the business of the Company, if the terms of
such position do not differ from Executive's prior position with the
Company in any manner that would constitute a Change of Employment
Circumstances, assuming that the terms of such new position with the
successor remained materially the same as the terms of Executive's
employment with the Company.
G. Final Determination. "Final Determination" means an audit adjustment
-------------------
by the Internal Revenue Service that is either (i) agreed to by both
Executive (or her estate) and the Company (such agreement by the Company to
be not unreasonably withheld) or (ii) sustained by a court of competent
jurisdiction in a decision with which Executive and the Company concur
(such concurrence by the Company to be not unreasonably withheld) or with
respect to which the period within which an appeal may be filed has lapsed
without a notice of appeal being filed.
H. Period of Coverage. The "Period of Coverage" means the period
------------------
commencing on the Effective Date and ending upon the date of termination of
this Employment Agreement.
I. Permanent Disability. "Permanent Disability" shall mean the inability
--------------------
of Executive to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that is expected to
result in death or has lasted or can be expected to last for a continuous
period of twelve (12) months or more.
J. Qualifying Termination. "Qualifying Termination" shall mean a
----------------------
termination of Executive's employment with the Company either (i) by the
Company for any reason other than for Cause, or (ii) by Executive,
following the occurrence of a Change in Control that occurs during the
Period of Coverage which results in a Change of Employment Circumstances,
provided that Executive properly executes, and does not revoke or attempt
to revoke, a Release of claims against the Company, its affiliates and
their employees and agents in the form attached as Exhibit B (the
---------
"Release"). A Qualifying Termination shall be deemed not to have occurred
where Executive is offered a Comparable Position with the new corporate
entity subsequent to a Change in Control, whether or not Executive accepts
such position. If Executive is offered a position which is not a Comparable
Position and accepts such position, then Executive will be treated as
2
<PAGE>
if she had been offered and accepted a Comparable Position.
2. Job Duties. Executive shall serve as the President and Chief Operating
Officer of the Company and shall, in such capacity, report directly to the Chief
Executive Officer. In her capacity as President and Chief Operating Officer of
the Company, Executive shall devote substantially all of her time and attention
to the business and affairs of the Company.
3. Current Stock Options and Benefits.
A. Initial Grant. Pursuant to the Amended and Restated NorthPoint
-------------
Communications Group, Inc. 1999 Stock Option Plan (the "Option Plan"),
Executive received a grant of stock options on March 22, 1999 (the
"Initial Grant"). The Option Agreement between the Company and
Executive Agreement that underlies the Initial Grant (the "Option
Agreement") is attached hereto as Exhibit A.
---------
B. Cash Compensation. Executive is paid a base salary at the annual
-----------------
rate of Two Hundred Fifty Thousand Dollars ($250,000.00), to be paid
in accordance with the Company's standard payroll policy. Such base
salary may be increased by the Board of Directors in its sole
discretion.
C. Bonus. Executive shall be eligible to receive an annual target
-----
bonus of up to a maximum of one hundred percent (100%) of her annual
base salary. Payment of the bonus shall be at the discretion of the
Compensation Committee of the Company's Board of Directors and shall
be based on the achievement of objectives agreed to by the
Compensation Committee of the Board of Directors. In future years,
payment of the bonus shall be at the discretion of the Compensation
Committee of the Company's Board of Directors and shall be based on
the achievement of objectives as determined by such Committee.
D. Other Employee Benefits. Executive shall, throughout the Period
-----------------------
of Coverage, be eligible to participate in all group term life
insurance plans, group health plans, accidental death and
dismemberment plans and short-term and long-term disability programs,
sick leave, vacation leave and other executive perquisites which are
made available to the Company's executive and/or other Company
employees.
4. Additional Compensation. In addition to the compensation enumerated above,
-----------------------
and in return for the consideration contained herein, the Company has agreed to
provide the Executive with the compensation set forth in subsections A, B and C
below.
A. Supplemental Life Insurance. The Company will provide Executive
---------------------------
with supplemental group term life insurance coverage of $500,000
during the Period of Coverage.
B. Financial Counseling Assistance. The Company will provide
-------------------------------
Executive with annual financial counseling during the Period of
Coverage by a provider selected by the Executive. In no event,
however, shall the Company provide Executive with financial
3
<PAGE>
counseling in an amount in excess of $10,000 per year.
C. Change in Control.
-----------------
(1) Change in Control Protection. Notwithstanding anything to
----------------------------
the contrary in the Initial Grant or Option Agreement, upon (i)
a Change in Control of the Company, and (ii) a Qualifying
---
Termination of the Executive, the Executive shall be entitled
to the following benefits:
a) Acceleration. Executive's Initial Grant, to the
------------
extent not otherwise exercisable for all the shares of
Company common stock underlying the Initial Grant, will
immediately become exercisable for all the shares of
Company common stock underlying the Initial Grant, and
may be exercised for any or all of those shares as fully
vested shares. All options must be exercised within
ninety (90) days of the date of the Qualifying
Termination.
b) Installment Sum Payment of Salary and Bonus.
-------------------------------------------
Beginning within ten (10) business days after a
Qualifying Termination (or, if later, the last day of
any period during which the Release may be revoked by
Executive), the Company shall make twelve (12) equal
monthly cash payments to Executive, subject to any
mandatory tax withholding, equal to one-twelfth (1/12)
times the sum of Executive's Annual Base Salary and
Executive's Target Bonus.
c) Continuing Benefit Coverage. The Company will, at
---------------------------
normal employee rates, provide Executive and, to the
extent available before the Qualifying Termination,
Executive's eligible dependents with coverage under the
Company's medical/dental plan, life insurance and
accident plan and disability plan until the earlier of
(i) one (1) year after the date of Executive's
Qualifying Termination or (ii) the first date that
Executive is covered under another employer's program
which provides substantially the same level of benefit
coverage without exclusion for pre-existing conditions.
After this period of coverage, Executive (and, if
applicable, Executive's eligible dependents) may elect
to continue coverage under the Company's group
medical/dental plan at Executive's own expense in
accordance with the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA") and,
for purposes of determining the maximum period of COBRA
coverage, such maximum period will begin immediately
following the end of Company-subsidized coverage.
d) Excess Tax Gross-Up Payment. If any compensation
---------------------------
payable hereunder, either alone or when aggregated with
other compensation payable to Executive, would
constitute a parachute payment that would subject
Executive to an excise tax under Section 4999 of the
Internal Revenue Code, Executive shall be entitled to
receive an additional lump
4
<PAGE>
sum cash payment, subject to mandatory tax withholding,
which, when added to all compensation payable to
Executive that constitutes a parachute payment, provides
Executive with the same after tax-compensation that she
would have received from such parachute payments had
none of such compensation constituted a parachute
payment (a "Tax Gross-Up"). The procedures for making
such payment are set forth in Section 6.
(2) Limitation on Acceleration. Notwithstanding anything else
--------------------------
set forth in this Section 4, if it is reasonably determined by
the Company's Board of Directors in good faith, upon consultation
with Company management and the Company's independent auditors,
that the acceleration of vesting of stock options or restricted
stock or the acceleration and cash-out of affiliate options upon
a Change in Control (to the extent that those Sections provide
for acceleration or cash-out that would not otherwise occur under
the terms of the instruments evidencing such options or
restricted stock) would preclude accounting for any proposed
business combination of the Company as a pooling of interests,
and the Board of Directors otherwise desires to approve such a
proposed business transaction which requires as a condition to
the closing of such transaction that it be accounted for as a
pooling of interests, then, solely to the extent necessary to
permit such accounting, such acceleration or cash-out shall not
occur. The previous sentence shall not limit any acceleration of
vesting or cash-out of any option or restricted stock that would
occur, in absence of this Employment Agreement, under the terms
of the Option Agreement or Option Plan.
(3) Offset of Benefits. The compensation and benefits payable
------------------
hereunder shall not be reduced or offset by any amounts that
Executive earns or could earn from any other sources following
Executive's Qualifying Termination. However, except to the extent
the Company expressly agrees otherwise in writing, if the Company
becomes obligated to pay Executive any severance pay or severance
benefits under a separate employment or severance agreement or
arrangement, the benefits payable hereunder shall be reduced by
the amount of benefits payable under such other agreement or
arrangement.
5. Restrictive Covenants.
A. In return for the consideration contained herein, Executive has agreed
to certain restrictive covenants set forth below. During the Period of
Coverage, Executive agrees that she shall:
(1) devote substantially all of her time and energy to the
performance of Executive's duties described herein, except during
periods of illness or vacation.
(2) not directly or indirectly provide services to or through any
person, firm or other entity except the Company, unless otherwise
authorized by the Company in writing.
5
<PAGE>
(3) not render any services of any kind or character for Executive's
own account or for any other person, firm or entity without first
obtaining the Company's written consent.
B. Notwithstanding the foregoing, Executive shall have the right to perform
such incidental services as are necessary in connection with (i) her
private, passive investments, but only if Executive is not obligated or
required to (and shall not in fact) devote any managerial efforts which
interfere with the services required to be performed by him hereunder, (ii)
her charitable or community activities or (iii) participation in trade or
professional organizations, but only if such incidental services do not
significantly interfere with the performance of Executive's services
hereunder.
6. Excise Tax Gross-Up Procedures.
A. The amount of any such Tax Gross-Up to which Executive becomes entitled
under Section 4.C(1)(d), will be determined pursuant to the following:
X = Y / (1 - (A + B + C)), where
X is the total dollar amount of the Tax Gross-Up payable to
Executive;
Y is the total Excise Tax (as defined in Internal revenue Code
Section 4999) imposed on Executive;
A is the Excise Tax rate in effect at the time;
B is the highest combined marginal federal income and applicable
state income tax rate in effect for Executive, after taking into
account the deductibility of state income taxes against federal
income taxes to the extent allowable, for the calendar year in
which the Tax Gross-Up is paid; and
C is the applicable Hospital Insurance (Medicare) Tax Rate in
effect for Executive for the calendar year in which the Tax
Gross-Up is paid;
provided if there is a change in the tax laws after the date hereof that would
render the amount determined above insufficient to fully reimburse Executive on
an after-tax basis for the amount of any Excise Tax, Executive shall be entitled
to such additional amount as may be necessary to provide him with such
reimbursement
B. Within ninety (90) days after a determination is made by the Internal
Revenue Service or Executive's tax advisor that an item of compensation or
benefit payable hereunder constitutes a parachute payment under Code
Section 280G for which
6
<PAGE>
Executive is liable for an Excise Tax, Executive shall identify the nature
of the payment to the Company and submit to the Company the calculation of
the Excise Tax attributable to that payment and the Tax Gross-Up to which
Executive is entitled with respect to such tax liability. The Company will
pay such Tax Gross-Up to Executive (net of all applicable withholding
taxes, including any taxes required to be withheld under Code Section 4999)
within ten (10) business days after Executive's submission of the
calculation of such Excise Tax and the resulting Tax Gross-Up, provided
such calculations represent a reasonable interpretation of the applicable
law and regulations.
C. In the event that Executive's actual Excise Tax liability is determined
by a Final Determination to be greater than the Excise Tax liability
previously taken into account for purposes of the Tax Gross-Up paid to
Executive pursuant to this Section 6, then within ninety (90) days
following the Final Determination, Executive shall submit to the Company a
new Excise Tax calculation based upon the Final Determination. Within ten
(10) business days after receipt of such calculation, the Company shall pay
Executive the additional Tax Gross-Up attributable to such excess Excise
Tax liability.
D. In the event that Executive's actual Excise Tax liability is determined
by a Final Determination to be less than the Excise Tax liability
previously taken into account for purposes of the Tax Gross-Up paid to
Executive pursuant to this Section 6, then Executive shall refund to the
Company, promptly upon receipt, any federal or state tax refund
attributable to the Excise Tax overpayment.
7. Termination of Employment.
A. By Company. The Company may terminate Executive's employment under this
----------
Employment Agreement at any time for any reason, with or without Cause.
B. By Executive. Executive may terminate her employment under this
------------
Employment Agreement at any time, for any reason, with or without Cause, by
giving the Company at least thirty (30) days prior written notice of such
termination. However, such thirty (30) day notice requirement shall not
apply if Executive terminates her employment due to a Change in Control.
8. Release of Claims. All compensation and benefits under Section 4 above are
in consideration for Executive's execution of the Release, which Release
Executive does not subsequently revoke or attempt to revoke. If Executive does
not execute such a Release or if Executive attempts to revoke such Release,
Executive will not be entitled to any of the benefits provided under this
Employment Agreement.
9. Successors and Assigns. The provisions of this Employment Agreement shall
inure to the benefit of, and shall be binding upon, the Company, its successors
and assigns, and the Executive, the personal representative of her estate and
her heirs and legatees; provided, however, Executive may not assign, transfer or
delegate her rights or obligations hereunder and any attempt to do so shall be
void.
7
<PAGE>
10. Notices.
A. Any and all notices, demands or other communications required or
desired to be given hereunder by any party shall be in writing and shall be
validly given or made to another party if served either personally or, if
deposited in the United States mail, certified or registered, postage
prepaid, return receipt requested. If such notice, demand or other
communication shall be served personally, service shall be conclusively
deemed made at the time of such personal service. If such notice, demand or
other communication is given by mail, service shall be conclusively deemed
made at the time of the receipt by the party to whom such notice, demand or
other communication is sent. Any and all notices, demands or other
communications shall be delivered to the following address:
To the Company: NorthPoint Communications
303 2/nd/ Street
San Francisco, CA 94107
Fax: (415) 403-4004
To Executive: Elizabeth Fetter
2855 Jackson St. #202
San Francisco, CA 94115
B. Any party hereto may change its address for the purpose of receiving
notices, demands and other communications as herein provided by a written
notice given in the manner aforesaid to the other party hereto.
11. Waivers. No waiver of any term or provision of this Employment Agreement
shall be valid unless such waiver is in writing signed by the party against whom
enforcement of the waiver is sought. In the case of the Company, such waiver
shall be signed by at least one (1) member of the Company's Board. The waiver
of any term or provision of this Employment Agreement shall not apply to any
subsequent breach of this Employment Agreement.
12. Governing Document. This Employment Agreement, the Option Agreement, the
Option Plan, and all other exhibits and attachments hereto constitute the entire
agreement and understanding of the Company and Executive with respect to the
terms and conditions of Executive's employment with the Company and the payment
of severance and other benefits, and supersedes all prior and contemporaneous
written or verbal agreements and understandings between Executive and the
Company relating to such subject matter. Where the terms of the Option
Agreement or Option Plan conflict with the terms of this Employment Agreement,
the terms of this Employment Agreement shall control. Any and all prior
agreements, understandings or representations relating to Executive's employment
with the Company are hereby terminated and cancelled in their entirety and are
of no further force or effect.
13. Governing Law. The provisions of this Employment Agreement shall be
construed and interpreted under the laws of the State of California applicable
to agreements executed and to be
8
<PAGE>
wholly performed within the State of California. If any provision of this
Employment Agreement as applied to any party or to any circumstance should be
adjudged by a court of competent jurisdiction to be void or unenforceable for
any reason, the invalidity of that provision shall in no way affect (to the
maximum extent permitted by law) the application of such provision under
circumstances different from those adjudicated by the court, the application of
any other provision of this Employment Agreement, or the enforceability or
invalidity of this Employment Agreement as a whole. Should any provision of this
Employment Agreement become or be deemed invalid, illegal or unenforceable in
any jurisdiction by reason of the scope, extent or duration of its coverage,
then such provision shall be deemed amended to the extent necessary to conform
to applicable law so as to be valid and enforceable or, if such provision cannot
be so amended without materially altering the intention of the parties, then
such provision shall be stricken and the remainder of this Employment Agreement
shall continue in full force and effect.
14. Deductions. All amounts paid to Executive hereunder are subject to all
withholdings and deductions required by law.
15. Amendment and Termination. This Employment Agreement may be modified,
amended or terminated only by a written agreement signed by Executive and an
authorized member of the Company's Board.
16. Remedies. All rights and remedies provided pursuant to this Employment
Agreement or by law shall be cumulative, and no such right or remedy shall be
exclusive of any other. A party may pursue any one or more rights or remedies
hereunder or may seek damages or specific performance in the event of another
party's breach hereunder or may pursue any other remedy by law or equity,
whether or not stated in this Employment Agreement.
17. Arbitration. Executive agrees that any and all disputes that she has with
the Company, or any of its employees, which arise out of her employment or under
the terms of her employment, shall be resolved through final and binding
arbitration, as specified herein. This shall include, without limitation,
disputes relating to this Employment Agreement, her employment by the Company or
the termination thereof, claims for breach of contract or breach of the covenant
of good faith and fair dealing, and any claims of discrimination or other claims
under Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Americans with Disabilities Act, the California Fair
Employment and Housing Act, the Employee Retirement Income Securities Act, the
Racketeer Influenced and Corrupt Organizations Act, or any other federal, state
or local law or regulation now in existence or hereinafter enacted and as
amended from time to time concerning in any way the subject of her employment
with the Company or its termination. The only disputes not covered by this
Employment Agreement are the following: (i) claims for benefits under the
unemployment insurance or workers' compensation laws, and (ii) claims concerning
the validity, infringement or enforceability of any trade secret, patent right,
copyright, trademark or any other intellectual property held or sought by the
Company or which the Company could otherwise seek; in each of these instances
such disputes or claims shall not be subject to arbitration, but rather, shall
be resolved pursuant to applicable law. Binding arbitration shall be conducted
in the county in which the Company's principal place of business is then located
in accordance with the rules and regulations of the American Arbitration
9
<PAGE>
Association (AAA). One arbitrator shall be chosen by mutual agreement of the
Company and Executive from the AAA Employment Advisory Panel. Each side shall
bear its own attorneys' fees; that is, the arbitrator shall not have authority
to award attorneys' fees unless a statutory section at issue in the dispute
------
authorizes the award of attorneys' fees to the prevailing party, in which case
the arbitrator has authority to make such award as permitted by the statute in
question. Executive understands and agrees that the arbitration shall be
instead of any jury trial and that the arbitrator's decision shall be final and
binding to the fullest extent permitted by law and enforceable by any court
having jurisdiction thereof.
18. Counterparts. This Employment Agreement may be executed in more than one
counterpart, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the day and year first above written.
NORTH POINT COMMUNICATIONS, INC.
By ____________________________________
Name:
Title:
EXECUTIVE:
_______________________________________
(Signature)
_______________________________________
(Print Name)
10
<PAGE>
EXHIBIT A
11
<PAGE>
EXHIBIT B
Dear Ms. Fetter:
This letter is provided to confirm the agreement we have reached
regarding your separation from employment with NorthPoint Communications, Inc.,
(the "Company"). We have agreed that your employment with the Company will
terminate effective _________________, 200__.
In consideration of the benefits to be provided to you pursuant to
that certain in Employment Agreement between you and the Company dated March 7,
2000, you agree to the following:
A. You fully and forever release and promise not to institute or
participate in any legal proceeding against the Company or any of its directors,
officers, or employees with respect to any and all claims and causes of action
of any nature or kind, which are or may be claimed to exist, through and
including the date on which this Agreement is executed by you, including but not
limited to, any proceeding arising out of or relating in any way to your
employment with the Company or your separation from employment. You should
understand that you are forever waiving any rights you may have to pursue any
remedies available to you against the Company, including, but not limited to,
any employment-related cause of action, any tort or contract claims, any claim
for violation of any state, federal or local statute, ordinance or regulation
relating to employment or employment discrimination.
B. You have agreed to maintain in confidence all information you have
regarding the Company, its clients, the circumstances leading to your separation
from the Company and the terms of this Agreement, except to the extent you are
required by law to make any such disclosure.
C. This Agreement between us shall be deemed to have been entered into in
the State of California and shall be construed and interpreted in accordance
with the laws of this State. It supersedes any and all prior agreements between
you and the Company and contains the entire agreement between us.
D. You and the Company hereby expressly waive any and all rights and
benefits conferred by the provisions of Section 1542 of the Civil Code of the
State of California, which states as follows:
A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him
must have materially affected his settlement with the
debtor.
You may have up to ____________ (___) days in which to consider this
Agreement and you should review it with an attorney if you so desire. By your
signature below, you acknowledge that you have read and understand the terms of
this Agreement, and that you are signing it voluntarily and without coercion.
You further acknowledge that the waivers you
12
<PAGE>
have made in this Agreement are knowing, conscious and made with full
appreciation that you are forever foreclosed from pursuing any of the rights so
waived.
Very truly yours,
__________________________
Dated:____________________ By:________________________________
(Name, Title)
I hereby accept and agree to the terms and conditions set forth in the
above agreement.
Dated:___________________ ___________________________________
(Executive Name)
13
<PAGE>
EXHIBIT 10.30 to
NORTHPOINT 10-K
NORTHPOINT CANADA CLEC
INVESTMENT AGREEMENT
February 15, 2000
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 DEFINITIONS...................................................................... 1
1.1 Definitions..................................................................... 1
ARTICLE 2 Purchase and Sale of Shares...................................................... 9
2.1 Purchase of Shares.............................................................. 9
2.2 Closing......................................................................... 9
2.3 Legends......................................................................... 9
ARTICLE 3 Representations and Warranties................................................... 10
3.1 Representations and Warranties of the Company................................... 10
3.2 Representations and Warranties of the Call-Net Group and the NorthPoint Group... 11
ARTICLE 4 TRANSFERS OF SHARES; NEW ISSUANCES............................................... 12
4.1 No Transfers Start-Up Period.................................................... 12
4.2 Initial Notice of Sale.......................................................... 12
4.3 Right of First Refusal.......................................................... 12
4.4 Transfers to Affiliates......................................................... 15
4.5 Co-Sale Rights.................................................................. 16
4.6 Buy-Sell Right.................................................................. 17
4.7 Right of First Refusal on Issuance by Company................................... 18
4.8 Bankruptcy...................................................................... 19
4.9 NorthPoint Ownership Structure.................................................. 19
4.10 Right of First Refusal on Company Indebtedness.................................. 20
4.11 Shareholder Loans............................................................... 20
ARTICLE 5 BOARD OF DIRECTORS AND MANAGEMENT................................................ 20
5.1 Number of Directors............................................................. 20
5.2 Designation of Directors........................................................ 21
5.3 Adjustment of NorthPoint's Rights............................................... 21
5.4 Supermajority Requirements...................................................... 21
ARTICLE 6 OPERATING COVENANTS and pre-closing covenants.................................... 22
6.1 Application for CLEC Status..................................................... 22
6.2 Procedures in the Event of a Dispute............................................ 23
6.3 Financial Statements............................................................ 23
6.4 Initial Public Offering......................................................... 24
6.5 Cooperation of NorthPoint Group and Call-Net Group.............................. 24
6.6 Pre-Closing Covenants........................................................... 25
ARTICLE 7 CONDITIONS to closing ........................................................... 25
7.1 Conditions to Each Party's Obligations.......................................... 25
7.2 Conditions to Call-Net's Obligations............................................ 26
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
7.3 Conditions to NorthPoint's Obligations......................................... 26
ARTICLE 8 MISCELLANEOUS................................................................ 27
8.1 Termination.................................................................... 27
8.2 Notices........................................................................ 27
8.3 Applicable Law; Waiver of Jury Trials; Consent to Jurisdiction................. 28
8.4 Severability................................................................... 29
8.5 Amendments..................................................................... 29
8.6 Waiver......................................................................... 29
8.7 Counterparts................................................................... 29
8.8 Entire Agreement............................................................... 29
8.9 Assignment..................................................................... 29
8.10 Survival of Agreement.......................................................... 29
8.11 No Third-Party Beneficiaries................................................... 29
8.12 Expenses....................................................................... 30
8.13 Specific Performance........................................................... 30
8.14 Construction................................................................... 30
</TABLE>
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<PAGE>
EXHIBIT 10.30
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT, made as of March 7, 2000 (the "Effective
Date"), is entered into by and between NorthPoint Communications, Inc. (the
"Company") and Herman W. Bluestein (the "Executive").
WHEREAS, the Company and Executive wish to enter into a formal
employment agreement that shall govern the terms and conditions of Executive's
employment with the Company and shall provide certain severance, stock option
and other benefits for Executive in the event that his employment should
terminate.
WHEREAS, the Executive is agreeing to abide by the restrictive
covenants contained herein and is foregoing other career opportunities in
reliance on this Employment Agreement,
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, the parties agree as follows:
1. Definitions
A. Target Bonus. "Target Bonus" means the target annual bonus for
------------
Executive during in any year or, if Executive is entitled to a bonus under
an individual written agreement with the Company, the annual bonus to which
Executive is entitled thereunder.
B. Base Salary. "Base Salary" means the greater of the annual rate of base
-----------
salary in effect for Executive at the time of Executive's Qualifying
Termination or the annual rate of base salary in effect for Executive
immediately before the Change in Control.
C. Cause. Termination for "Cause" means the following: (i) Executive's
-----
conviction of a felony or any crime of dishonesty; (ii) Executive's
commission of any act of fraud with respect to the Company; (iii) any
intentional misconduct by Executive intended to have a materially adverse
effect upon the Company's business; (iv) Executive's repeated failure to
satisfactorily perform his job duties; (v) an intentional breach by
Executive of any of Executive's fiduciary obligations as an officer or
director of the Company or a breach of this Employment Agreement or any
other agreement with the Company that has a materially adverse effect upon
the Company; or (vi) Executive's death or Permanent Disability.
D. Change in Control. "Change in Control" shall have the meaning set forth
-----------------
in the Option Agreement attached as Exhibit A hereto.
---------
E. Change of Employment Circumstances. "Change of Employment
----------------------------------
Circumstances" means (i) a material reduction in Executive's level of
duties or responsibilities or the nature or scope of Executive's functions,
or (ii) a reduction in Executive's base salary or a reduction in
Executive's total cash compensation (consisting of base salary and target
bonus), or (iii) the failure to provide Executive with employee benefits
(including
<PAGE>
medical/dental, disability and life insurance) that are substantially
equivalent to the benefits provided to Executive immediately before a
Change in Control, or (iv) a relocation of Executive's principal place of
employment by more than thirty-five miles away (or any requirement that
Executive spend more than two days a week at any location more than thirty-
five miles away), or (v) the breach of the terms of any compensation
agreement or arrangement between the Company and Executive, or (vi) the
repudiation or failure by the Company or its successor to acknowledge (upon
Executive's written request) or to comply with any of its obligations under
this Employment Agreement.
F. Comparable Position. A "Comparable Position" means a position with a
-------------------
successor to part or all of the business of the Company, if the terms of
such position do not differ from Executive's prior position with the
Company in any manner that would constitute a Change of Employment
Circumstances, assuming that the terms of such new position with the
successor remained materially the same as the terms of Executive's
employment with the Company.
G. Final Determination. "Final Determination" means an audit adjustment by
-------------------
the Internal Revenue Service that is either (i) agreed to by both Executive
(or his estate) and the Company (such agreement by the Company to be not
unreasonably withheld) or (ii) sustained by a court of competent
jurisdiction in a decision with which Executive and the Company concur
(such concurrence by the Company to be not unreasonably withheld) or with
respect to which the period within which an appeal may be filed has lapsed
without a notice of appeal being filed.
H. Period of Coverage. The "Period of Coverage" means the period
------------------
commencing on the Effective Date and ending upon the date of termination of
this Employment Agreement.
I. Permanent Disability. "Permanent Disability" shall mean the inability
--------------------
of Executive to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that is expected to
result in death or has lasted or can be expected to last for a continuous
period of twelve (12) months or more.
J. Qualifying Termination. "Qualifying Termination" shall mean a
----------------------
termination of Executive's employment with the Company either (i) by the
Company for any reason other than for Cause, or (ii) by Executive,
following the occurrence of a Change in Control that occurs during the
Period of Coverage which results in a Change of Employment Circumstances,
provided that Executive properly executes, and does not revoke or attempt
to revoke, a Release of claims against the Company, its affiliates and
their employees and agents in the form attached as Exhibit B (the
---------
"Release"). A Qualifying Termination shall be deemed not to have occurred
where Executive is offered a Comparable Position with the new corporate
entity subsequent to a Change in Control, whether or not Executive accepts
such position. If Executive is offered a position which is not a Comparable
Position and accepts such position, then Executive will be treated as
2
<PAGE>
if he had been offered and accepted a Comparable Position.
2. Job Duties. Executive shall serve as the Chief Development Officer of the
Company and shall, in such capacity, report directly to the Chief Executive
Officer. In his capacity as Chief Development Officer of the Company, Executive
shall devote substantially all of his time and attention to the business and
affairs of the Company.
3. Current Stock Options and Benefits.
A. Initial Grant. Pursuant to the NorthPoint Communications, Inc.
-------------
1997 Stock Option Plan (the "Option Plan"), Executive received a grant of
stock options on September 14, 1998 (the "Initial Grant"). The Option
Agreement between the Company and Executive Agreement that underlies the
Initial Grant (the "Option Agreement") is attached hereto as Exhibit A.
---------
B. Cash Compensation. Executive is paid a base salary at the annual
-----------------
rate of Two Hundred Twenty Thousand Dollars ($220,000.00), to be paid in
accordance with the Company's standard payroll policy. Such base salary may
be increased by the Board of Directors in its sole discretion.
C. Bonus. Executive shall be eligible to receive an annual target
-----
bonus of up to a maximum of fifty percent (50%) of his annual base salary.
Payment of the bonus shall be at the discretion of the Compensation
Committee of the Company's Board of Directors and shall be based on the
achievement of objectives agreed to by the Compensation Committee of the
Board of Directors. In future years, payment of the bonus shall be at the
discretion of the Compensation Committee of the Company's Board of
Directors and shall be based on the achievement of objectives as determined
by such Committee.
D. Other Employee Benefits. Executive shall, throughout the Period of
-----------------------
Coverage, be eligible to participate in all group term life insurance
plans, group health plans, accidental death and dismemberment plans and
short-term and long-term disability programs, sick leave, vacation leave
and other executive perquisites which are made available to the Company's
executive and/or other Company employees.
4. Additional Compensation. In addition to the compensation enumerated above,
-----------------------
and in return for the consideration contained herein, the Company has agreed to
provide the Executive with the compensation set forth in subsections A, B and C
below.
A. Supplemental Life Insurance. The Company will provide Executive with
---------------------------
supplemental group term life insurance coverage of $500,000 during the
Period of Coverage.
B. Financial Counseling Assistance. The Company will provide Executive
-------------------------------
with annual financial counseling during the Period of Coverage by a
provider selected by the Executive. In no event, however, shall the Company
provide Executive with financial
3
<PAGE>
counseling in an amount in excess of $10,000 per year.
C. Change in Control.
-----------------
(1) Change in Control Protection. Notwithstanding anything to
----------------------------
the contrary in the Initial Grant or Option Agreement, upon (i) a
Change in Control of the Company, and (ii) a Qualifying
---
Termination of the Executive, the Executive shall be entitled to
the following benefits:
a) Acceleration. Executive's Initial Grant, to the
------------
extent not otherwise exercisable for all the shares of
Company common stock underlying the Initial Grant, will
immediately become exercisable for all the shares of
Company common stock underlying the Initial Grant, and
may be exercised for any or all of those shares as
fully vested shares. All options must be exercised
within ninety (90) days of the date of the Qualifying
Termination.
b) Installment Sum Payment of Salary and Bonus.
-------------------------------------------
Beginning within ten (10) business days after a
Qualifying Termination (or, if later, the last day of
any period during which the Release may be revoked by
Executive), the Company shall make twelve (12) equal
monthly cash payments to Executive, subject to any
mandatory tax withholding, equal to one-twelfth (1/12)
times the sum of Executive's Annual Base Salary and
Executive's Target Bonus.
c) Continuing Benefit Coverage. The Company will, at
---------------------------
normal employee rates, provide Executive and, to the
extent available before the Qualifying Termination,
Executive's eligible dependents with coverage under the
Company's medical/dental plan, life insurance and
accident plan and disability plan until the earlier of
(i) one (1) year after the date of Executive's
Qualifying Termination or (ii) the first date that
Executive is covered under another employer's program
which provides substantially the same level of benefit
coverage without exclusion for pre-existing conditions.
After this period of coverage, Executive (and, if
applicable, Executive's eligible dependents) may elect
to continue coverage under the Company's group
medical/dental plan at Executive's own expense in
accordance with the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA") and,
for purposes of determining the maximum period of COBRA
coverage, such maximum period will begin immediately
following the end of Company-subsidized coverage.
d) Excess Tax Gross-Up Payment. If any compensation
---------------------------
payable hereunder, either alone or when aggregated with
other compensation payable to Executive, would
constitute a parachute payment that would subject
Executive to an excise tax under Section 4999 of the
Internal Revenue Code, Executive shall be entitled to
receive an additional lump
4
<PAGE>
sum cash payment, subject to mandatory tax withholding,
which, when added to all compensation payable to
Executive that constitutes a parachute payment,
provides Executive with the same after tax-compensation
that he would have received from such parachute
payments had none of such compensation constituted a
parachute payment (a "Tax Gross-Up"). The procedures
for making such payment are set forth in Section 6.
(2) Limitation on Acceleration. Notwithstanding anything else
--------------------------
set forth in this Section 4, if it is reasonably determined by
the Company's Board of Directors in good faith, upon consultation
with Company management and the Company's independent auditors,
that the acceleration of vesting of stock options or restricted
stock or the acceleration and cash-out of affiliate options upon
a Change in Control (to the extent that those Sections provide
for acceleration or cash-out that would not otherwise occur under
the terms of the instruments evidencing such options or
restricted stock) would preclude accounting for any proposed
business combination of the Company as a pooling of interests,
and the Board of Directors otherwise desires to approve such a
proposed business transaction which requires as a condition to
the closing of such transaction that it be accounted for as a
pooling of interests, then, solely to the extent necessary to
permit such accounting, such acceleration or cash-out shall not
occur. The previous sentence shall not limit any acceleration of
vesting or cash-out of any option or restricted stock that would
occur, in absence of this Employment Agreement, under the terms
of the Option Agreement or Option Plan.
(3) Offset of Benefits. The compensation and benefits payable
------------------
hereunder shall not be reduced or offset by any amounts that
Executive earns or could earn from any other sources following
Executive's Qualifying Termination. However, except to the extent
the Company expressly agrees otherwise in writing, if the Company
becomes obligated to pay Executive any severance pay or severance
benefits under a separate employment or severance agreement or
arrangement, the benefits payable hereunder shall be reduced by
the amount of benefits payable under such other agreement or
arrangement.
5. Restrictive Covenants.
A. In return for the consideration contained herein, Executive has agreed
to certain restrictive covenants set forth below. During the Period of
Coverage, Executive agrees that he shall:
(1) devote substantially all of his time and energy to the
performance of Executive's duties described herein, except during
periods of illness or vacation.
(2) not directly or indirectly provide services to or through
any person, firm or other entity except the Company, unless
otherwise authorized by the Company in writing.
5
<PAGE>
(3) not render any services of any kind or character for
Executive's own account or for any other person, firm or entity
without first obtaining the Company's written consent.
B. Notwithstanding the foregoing, Executive shall have the right to
perform such incidental services as are necessary in connection with (i)
his private, passive investments, but only if Executive is not obligated or
required to (and shall not in fact) devote any managerial efforts which
interfere with the services required to be performed by him hereunder, (ii)
his charitable or community activities or (iii) participation in trade or
professional organizations, but only if such incidental services do not
significantly interfere with the performance of Executive's services
hereunder.
6. Excise Tax Gross-Up Procedures.
A. The amount of any such Tax Gross-Up to which Executive becomes entitled
under Section 4.C(1)(d), will be determined pursuant to the following:
X = Y / (1 - (A + B + C)), where
X is the total dollar amount of the Tax Gross-Up payable to
Executive;
Y is the total Excise Tax (as defined in Internal revenue Code
Section 4999) imposed on Executive;
A is the Excise Tax rate in effect at the time;
B is the highest combined marginal federal income and applicable
state income tax rate in effect for Executive, after taking into
account the deductibility of state income taxes against federal
income taxes to the extent allowable, for the calendar year in
which the Tax Gross-Up is paid; and
C is the applicable Hospital Insurance (Medicare) Tax Rate in
effect for Executive for the calendar year in which the Tax
Gross-Up is paid;
provided if there is a change in the tax laws after the date hereof that would
render the amount determined above insufficient to fully reimburse Executive on
an after-tax basis for the amount of any Excise Tax, Executive shall be entitled
to such additional amount as may be necessary to provide him with such
reimbursement
B. Within ninety (90) days after a determination is made by the Internal
Revenue Service or Executive's tax advisor that an item of compensation or
benefit payable hereunder constitutes a parachute payment under Code
Section 280G for which
6
<PAGE>
Executive is liable for an Excise Tax, Executive shall identify the nature
of the payment to the Company and submit to the Company the calculation of
the Excise Tax attributable to that payment and the Tax Gross-Up to which
Executive is entitled with respect to such tax liability. The Company will
pay such Tax Gross-Up to Executive (net of all applicable withholding
taxes, including any taxes required to be withheld under Code Section 4999)
within ten (10) business days after Executive's submission of the
calculation of such Excise Tax and the resulting Tax Gross-Up, provided
such calculations represent a reasonable interpretation of the applicable
law and regulations.
C. In the event that Executive's actual Excise Tax liability is
determined by a Final Determination to be greater than the Excise Tax
liability previously taken into account for purposes of the Tax Gross-Up
paid to Executive pursuant to this Section 6, then within ninety (90) days
following the Final Determination, Executive shall submit to the Company a
new Excise Tax calculation based upon the Final Determination. Within ten
(10) business days after receipt of such calculation, the Company shall pay
Executive the additional Tax Gross-Up attributable to such excess Excise
Tax liability.
D. In the event that Executive's actual Excise Tax liability is
determined by a Final Determination to be less than the Excise Tax
liability previously taken into account for purposes of the Tax Gross-Up
paid to Executive pursuant to this Section 6, then Executive shall refund
to the Company, promptly upon receipt, any federal or state tax refund
attributable to the Excise Tax overpayment.
7. Termination of Employment.
A. By Company. The Company may terminate Executive's employment under this
----------
Employment Agreement at any time for any reason, with or without Cause.
B. By Executive. Executive may terminate his employment under this
------------
Employment Agreement at any time, for any reason, with or without Cause, by
giving the Company at least thirty (30) days prior written notice of such
termination. However, such thirty (30) day notice requirement shall not
apply if Executive terminates his employment due to a Change in Control.
8. Release of Claims. All compensation and benefits under Section 4 above are
in consideration for Executive's execution of the Release, which Release
Executive does not subsequently revoke or attempt to revoke. If Executive does
not execute such a Release or if Executive attempts to revoke such Release,
Executive will not be entitled to any of the benefits provided under this
Employment Agreement.
9. Successors and Assigns. The provisions of this Employment Agreement shall
inure to the benefit of, and shall be binding upon, the Company, its successors
and assigns, and the Executive, the personal representative of his estate and
his heirs and legatees; provided, however, Executive may not assign, transfer or
delegate his rights or obligations hereunder and any attempt to do so shall be
void.
7
<PAGE>
10. Notices.
A. Any and all notices, demands or other communications required or
desired to be given hereunder by any party shall be in writing and shall
be validly given or made to another party if served either personally or,
if deposited in the United States mail, certified or registered, postage
prepaid, return receipt requested. If such notice, demand or other
communication shall be served personally, service shall be conclusively
deemed made at the time of such personal service. If such notice, demand
or other communication is given by mail, service shall be conclusively
deemed made at the time of the receipt by the party to whom such notice,
demand or other communication is sent. Any and all notices, demands or
other communications shall be delivered to the following address:
To the Company: NorthPoint Communications
303 2/nd/ Street
San Francisco, CA 94107
Fax: (415) 403-4004
To Executive: Herman W. Bluestein
219 Laurel Grove Ave.
Kentfield, CA 94904
B. Any party hereto may change its address for the purpose of receiving
notices, demands and other communications as herein provided by a written
notice given in the manner aforesaid to the other party hereto.
11. Waivers. No waiver of any term or provision of this Employment Agreement
shall be valid unless such waiver is in writing signed by the party against whom
enforcement of the waiver is sought. In the case of the Company, such waiver
shall be signed by at least one (1) member of the Company's Board. The waiver
of any term or provision of this Employment Agreement shall not apply to any
subsequent breach of this Employment Agreement.
12. Governing Document. This Employment Agreement, the Option Agreement, the
Option Plan, and all other exhibits and attachments hereto constitute the entire
agreement and understanding of the Company and Executive with respect to the
terms and conditions of Executive's employment with the Company and the payment
of severance and other benefits, and supersedes all prior and contemporaneous
written or verbal agreements and understandings between Executive and the
Company relating to such subject matter. Where the terms of the Option
Agreement or Option Plan conflict with the terms of this Employment Agreement,
the terms of this Employment Agreement shall control. Any and all prior
agreements, understandings or representations relating to Executive's employment
with the Company are hereby terminated and cancelled in their entirety and are
of no further force or effect.
13. Governing Law. The provisions of this Employment Agreement shall be
construed and interpreted under the laws of the State of California applicable
to agreements executed and to be
8
<PAGE>
wholly performed within the State of California. If any provision of this
Employment Agreement as applied to any party or to any circumstance should be
adjudged by a court of competent jurisdiction to be void or unenforceable for
any reason, the invalidity of that provision shall in no way affect (to the
maximum extent permitted by law) the application of such provision under
circumstances different from those adjudicated by the court, the application of
any other provision of this Employment Agreement, or the enforceability or
invalidity of this Employment Agreement as a whole. Should any provision of this
Employment Agreement become or be deemed invalid, illegal or unenforceable in
any jurisdiction by reason of the scope, extent or duration of its coverage,
then such provision shall be deemed amended to the extent necessary to conform
to applicable law so as to be valid and enforceable or, if such provision cannot
be so amended without materially altering the intention of the parties, then
such provision shall be stricken and the remainder of this Employment Agreement
shall continue in full force and effect.
14. Deductions. All amounts paid to Executive hereunder are subject to all
withholdings and deductions required by law.
15. Amendment and Termination. This Employment Agreement may be modified,
amended or terminated only by a written agreement signed by Executive and an
authorized member of the Company's Board.
16. Remedies. All rights and remedies provided pursuant to this Employment
Agreement or by law shall be cumulative, and no such right or remedy shall be
exclusive of any other. A party may pursue any one or more rights or remedies
hereunder or may seek damages or specific performance in the event of another
party's breach hereunder or may pursue any other remedy by law or equity,
whether or not stated in this Employment Agreement.
17. Arbitration. Executive agrees that any and all disputes that he has with
the Company, or any of its employees, which arise out of his employment or under
the terms of his employment, shall be resolved through final and binding
arbitration, as specified herein. This shall include, without limitation,
disputes relating to this Employment Agreement, his employment by the Company or
the termination thereof, claims for breach of contract or breach of the covenant
of good faith and fair dealing, and any claims of discrimination or other claims
under Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Americans with Disabilities Act, the California Fair
Employment and Housing Act, the Employee Retirement Income Securities Act, the
Racketeer Influenced and Corrupt Organizations Act, or any other federal, state
or local law or regulation now in existence or hereinafter enacted and as
amended from time to time concerning in any way the subject of his employment
with the Company or its termination. The only disputes not covered by this
Employment Agreement are the following: (i) claims for benefits under the
unemployment insurance or workers' compensation laws, and (ii) claims concerning
the validity, infringement or enforceability of any trade secret, patent right,
copyright, trademark or any other intellectual property held or sought by the
Company or which the Company could otherwise seek; in each of these instances
such disputes or claims shall not be subject to arbitration, but rather, shall
be resolved pursuant to applicable law. Binding arbitration shall be conducted
in the county in which the Company's principal place of business is then located
in accordance with the rules and regulations of the American Arbitration
9
<PAGE>
Association (AAA). One arbitrator shall be chosen by mutual agreement of the
Company and Executive from the AAA Employment Advisory Panel. Each side shall
bear its own attorneys' fees; that is, the arbitrator shall not have authority
to award attorneys' fees unless a statutory section at issue in the dispute
------
authorizes the award of attorneys' fees to the prevailing party, in which case
the arbitrator has authority to make such award as permitted by the statute in
question. Executive understands and agrees that the arbitration shall be
instead of any jury trial and that the arbitrator's decision shall be final and
binding to the fullest extent permitted by law and enforceable by any court
having jurisdiction thereof.
18. Counterparts. This Employment Agreement may be executed in more than one
counterpart, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the day and year first above written.
NORTH POINT COMMUNICATIONS, INC.
By ____________________________________
Name:
Title:
EXECUTIVE:
_______________________________________
(Signature)
_______________________________________
(Print Name)
10
<PAGE>
EXHIBIT A
11
<PAGE>
EXHIBIT B
Dear Mr. Bluestein:
This letter is provided to confirm the agreement we have reached
regarding your separation from employment with NorthPoint Communications, Inc.,
(the "Company"). We have agreed that your employment with the Company will
terminate effective _________________, 200__.
In consideration of the benefits to be provided to you pursuant to
that certain in Employment Agreement between you and the Company dated March 7,
2000, you agree to the following:
A. You fully and forever release and promise not to institute or
participate in any legal proceeding against the Company or any of its directors,
officers, or employees with respect to any and all claims and causes of action
of any nature or kind, which are or may be claimed to exist, through and
including the date on which this Agreement is executed by you, including but not
limited to, any proceeding arising out of or relating in any way to your
employment with the Company or your separation from employment. You should
understand that you are forever waiving any rights you may have to pursue any
remedies available to you against the Company, including, but not limited to,
any employment-related cause of action, any tort or contract claims, any claim
for violation of any state, federal or local statute, ordinance or regulation
relating to employment or employment discrimination.
B. You have agreed to maintain in confidence all information you have
regarding the Company, its clients, the circumstances leading to your separation
from the Company and the terms of this Agreement, except to the extent you are
required by law to make any such disclosure.
C. This Agreement between us shall be deemed to have been entered into in
the State of California and shall be construed and interpreted in accordance
with the laws of this State. It supersedes any and all prior agreements between
you and the Company and contains the entire agreement between us.
D. You and the Company hereby expressly waive any and all rights and
benefits conferred by the provisions of Section 1542 of the Civil Code of the
State of California, which states as follows:
A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him
must have materially affected his settlement with the
debtor.
You may have up to ____________ (___) days in which to consider this
Agreement and you should review it with an attorney if you so desire. By your
signature below, you acknowledge that you have read and understand the terms of
this Agreement, and that you
12
<PAGE>
are signing it voluntarily and without coercion. You further acknowledge that
the waivers you have made in this Agreement are knowing, conscious and made with
full appreciation that you are forever foreclosed from pursuing any of the
rights so waived.
Very truly yours,
__________________________
Dated:____________________ By:________________________________
(Name, Title)
I hereby accept and agree to the terms and conditions set forth in the
above agreement.
Dated:___________________ ___________________________________
(Executive Name)
13
<PAGE>
EXHIBIT 10.31
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT, made as of March 7, 2000 (the "Effective
Date"), is entered into by and between NorthPoint Communications, Inc. (the
"Company") and Steven Gorosh (the "Executive").
WHEREAS, the Company and Executive wish to enter into a formal
employment agreement that shall govern the terms and conditions of Executive's
employment with the Company and shall provide certain severance and other
benefits for Executive in the event that his employment should terminate.
WHEREAS, the Executive is agreeing to abide by the restrictive
covenants contained herein and is foregoing other career opportunities in
reliance on this Employment Agreement,
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, the parties agree as follows:
1. Definitions
A. Target Bonus. "Target Bonus" means the target annual bonus for Executive
------------
during in any year or, if Executive is entitled to a bonus under an
individual written agreement with the Company, the annual bonus to which
Executive is entitled thereunder.
B. Base Salary. "Base Salary" means the greater of the annual rate of base
-----------
salary in effect for Executive at the time of Executive's Qualifying
Termination or the annual rate of base salary in effect for Executive
immediately before the Change in Control.
C. Cause. Termination for "Cause" means the following: (i) Executive's
-----
conviction of a felony or any crime of dishonesty; (ii) Executive's
commission of any act of fraud with respect to the Company; (iii) any
intentional misconduct by Executive intended to have a materially adverse
effect upon the Company's business; (iv) Executive's repeated failure to
satisfactorily perform his job duties; (v) an intentional breach by
Executive of any of Executive's fiduciary obligations as an officer or
director of the Company or a breach of this Employment Agreement or any
other agreement with the Company that has a materially adverse effect upon
the Company; or (vi) Executive's death or Permanent Disability.
D. Change in Control. "Change in Control" shall have the meaning set forth
-----------------
in the Common Stock Purchase Agreement and Amendment to Common Stock
Purchase Agreement attached as Exhibit A hereto.
---------
E. Change of Employment Circumstances. "Change of Employment Circumstances"
----------------------------------
means (i) a material reduction in Executive's level of duties or
responsibilities or the nature or scope of Executive's functions, or (ii) a
reduction in Executive's base salary or a reduction in Executive's total
cash compensation (consisting of base salary and target
<PAGE>
bonus), or (iii) the failure to provide Executive with employee benefits
(including medical/dental, disability and life insurance) that are
substantially equivalent to the benefits provided to Executive immediately
before a Change in Control, or (iv) a relocation of Executive's principal
place of employment by more than thirty-five miles away (or any requirement
that Executive spend more than two days a week at any location more than
thirty-five miles away), or (v) the breach of the terms of any compensation
agreement or arrangement between the Company and Executive, or (vi) the
repudiation or failure by the Company or its successor to acknowledge (upon
Executive's written request) or to comply with any of its obligations under
this Employment Agreement.
F. Comparable Position. A "Comparable Position" means a position with a
-------------------
successor to part or all of the business of the Company, if the terms of
such position do not differ from Executive's prior position with the
Company in any manner that would constitute a Change of Employment
Circumstances, assuming that the terms of such new position with the
successor remained materially the same as the terms of Executive's
employment with the Company.
G. Final Determination. "Final Determination" means an audit adjustment by
-------------------
the Internal Revenue Service that is either (i) agreed to by both Executive
(or his estate) and the Company (such agreement by the Company to be not
unreasonably withheld) or (ii) sustained by a court of competent
jurisdiction in a decision with which Executive and the Company concur
(such concurrence by the Company to be not unreasonably withheld) or with
respect to which the period within which an appeal may be filed has lapsed
without a notice of appeal being filed.
H. Period of Coverage. The "Period of Coverage" means the period
------------------
commencing on the Effective Date and ending upon the date of termination of
this Employment Agreement.
I. Permanent Disability. "Permanent Disability" shall mean the inability
--------------------
of Executive to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that is expected to
result in death or has lasted or can be expected to last for a continuous
period of twelve (12) months or more.
J. Qualifying Termination. "Qualifying Termination" shall mean a
----------------------
termination of Executive's employment with the Company either (i) by the
Company for any reason other than for Cause, or (ii) by Executive,
following the occurrence of a Change in Control that occurs during the
Period of Coverage which results in a Change of Employment Circumstances,
provided that Executive properly executes, and does not revoke or attempt
to revoke, a Release of claims against the Company, its affiliates and
their employees and agents in the form attached as Exhibit B (the
---------
"Release"). A Qualifying Termination shall be deemed not to have occurred
where Executive is offered a Comparable Position with the new corporate
entity subsequent to a Change in Control, whether or not Executive accepts
such position. If Executive is offered a position which
2
<PAGE>
is not a Comparable Position and accepts such position, then Executive will
be treated as if he had been offered and accepted a Comparable Position.
2. Job Duties. Executive shall serve as the Vice President and General Counsel
of the Company and shall, in such capacity, report directly to the President and
Chief Operating Officer. In his capacity as Vice President and General Counsel
of the Company, Executive shall devote substantially all of his time and
attention to the business and affairs of the Company.
3. Current Stock and Benefits.
A. Founder's Stock. Executive purchased common stock of the Company
---------------
on June 4, 1997 (the "Initial Purchase"). The Common Stock Purchase
Agreement between the Company and Executive dated June 4, 1997 and the
Amendment to Common Stock Purchase Agreement between the Company and
Executive dated August 13, 1997 that underlie the Initial Purchase
(collectively, the "Purchase Agreement") are attached hereto as Exhibit A.
---------
B. Cash Compensation. Executive is paid a base salary at the annual
-----------------
rate of One Hundred Forty-Five Thousand Dollars ($145,000.00), to be paid
in accordance with the Company's standard payroll policy. Such base salary
may be increased by the Board of Directors in its sole discretion.
C. Bonus. Executive shall be eligible to receive an annual target
-----
bonus of up to a maximum of forty percent (40%) of his annual base salary.
Payment of the bonus shall be at the discretion of the Compensation
Committee of the Company's Board of Directors and shall be based on the
achievement of objectives agreed to by the Compensation Committee of the
Board of Directors. In future years, payment of the bonus shall be at the
discretion of the Compensation Committee of the Company's Board of
Directors and shall be based on the achievement of objectives as determined
by such Committee.
D. Other Employee Benefits. Executive shall, throughout the Period of
-----------------------
Coverage, be eligible to participate in all group term life insurance
plans, group health plans, accidental death and dismemberment plans and
short-term and long-term disability programs, sick leave, vacation leave
and other executive perquisites which are made available to the Company's
executive and/or other Company employees.
4. Additional Compensation. In addition to the compensation enumerated above,
-----------------------
and in return for the consideration contained herein, the Company has agreed to
provide the Executive with the compensation set forth in subsections A, B and C
below.
A. Supplemental Life Insurance. The Company will provide Executive with
---------------------------
supplemental group term life insurance coverage of $500,000 during the
Period of Coverage.
B. Financial Counseling Assistance. The Company will provide Executive with
-------------------------------
annual
3
<PAGE>
financial counseling during the Period of Coverage by a provider selected
by the Executive. In no event, however, shall the Company provide Executive
with financial counseling in an amount in excess of $10,000 per year.
C. Change in Control.
-----------------
(1) Change in Control Protection. Notwithstanding anything to the
----------------------------
contrary in the Initial Purchase or Purchase Agreement, upon (i) a
Change in Control of the Company, and (ii) a Qualifying Termination of
---
the Executive, the Executive shall be entitled to the following
benefits:
a) Release of Restrictions. The restrictions in Sections 3(a)
-----------------------
and 3(b) of the Purchase Agreement (the "Restrictions"), to the
extent not otherwise released for the shares of Company common
stock underlying the Initial Purchase, will immediately be
released for all the shares of Company common stock underlying
the Initial Purchase.
b) Installment Sum Payment of Salary and Bonus. Beginning within
-------------------------------------------
ten (10) business days after a Qualifying Termination (or, if
later, the last day of any period during which the Release may be
revoked by Executive), the Company shall make twelve (12) equal
monthly cash payments to Executive, subject to any mandatory tax
withholding, equal to one-twelfth (1/12) times the sum of
Executive's Annual Base Salary and Executive's Target Bonus.
c) Continuing Benefit Coverage. The Company will, at normal
---------------------------
employee rates, provide Executive and, to the extent available
before the Qualifying Termination, Executive's eligible
dependents with coverage under the Company's medical/dental plan,
life insurance and accident plan and disability plan until the
earlier of (i) one (1) year after the date of Executive's
Qualifying Termination or (ii) the first date that Executive is
covered under another employer's program which provides
substantially the same level of benefit coverage without
exclusion for pre-existing conditions. After this period of
coverage, Executive (and, if applicable, Executive's eligible
dependents) may elect to continue coverage under the Company's
group medical/dental plan at Executive's own expense in
accordance with the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended ("COBRA") and, for purposes of
determining the maximum period of COBRA coverage, such maximum
period will begin immediately following the end of Company-
subsidized coverage.
d) Excess Tax Gross-Up Payment. If any compensation payable
---------------------------
hereunder, either alone or when aggregated with other
compensation payable to Executive, would constitute a parachute
payment that would subject Executive to an excise tax under
Section 4999 of the Internal Revenue Code, Executive shall be
entitled to receive an additional lump
4
<PAGE>
sum cash payment, subject to mandatory tax withholding, which,
when added to all compensation payable to Executive that
constitutes a parachute payment, provides Executive with the same
after tax-compensation that he would have received from such
parachute payments had none of such compensation constituted a
parachute payment (a "Tax Gross-Up"). The procedures for making
such payment are set forth in Section 6.
(2) Limitation on Release of Restrictions. Notwithstanding anything
-------------------------------------
else set forth in this Section 4, if it is reasonably determined by
the Company's Board of Directors in good faith, upon consultation with
Company management and the Company's independent auditors, that the
release of Restrictions on unvested stock upon a Change in Control (to
the extent that those Sections provide for acceleration or cash-out
that would not otherwise occur under the terms of the instruments
evidencing such restricted stock) would preclude accounting for any
proposed business combination of the Company as a pooling of
interests, and the Board of Directors otherwise desires to approve
such a proposed business transaction which requires as a condition to
the closing of such transaction that it be accounted for as a pooling
of interests, then, solely to the extent necessary to permit such
accounting, such release of Restrictions shall not occur. The previous
sentence shall not limit any release of Restrictions of Company common
stock that would occur, in absence of this Employment Agreement, under
the terms of the Purchase Agreement.
(3) Offset of Benefits. The compensation and benefits payable
------------------
hereunder shall not be reduced or offset by any amounts that Executive
earns or could earn from any other sources following Executive's
Qualifying Termination. However, except to the extent the Company
expressly agrees otherwise in writing, if the Company becomes
obligated to pay Executive any severance pay or severance benefits
under a separate employment or severance agreement or arrangement, the
benefits payable hereunder shall be reduced by the amount of benefits
payable under such other agreement or arrangement.
5. Restrictive Covenants.
A. In return for the consideration contained herein, Executive has agreed
to certain restrictive covenants set forth below. During the Period of
Coverage, Executive agrees that he shall:
(1) devote substantially all of his time and energy to the performance
of Executive's duties described herein, except during periods of
illness or vacation.
(2) not directly or indirectly provide services to or through any
person, firm or other entity except the Company, unless otherwise
authorized by the Company in writing.
5
<PAGE>
(3) not render any services of any kind or character for Executive's
own account or for any other person, firm or entity without first
obtaining the Company's written consent.
B. Notwithstanding the foregoing, Executive shall have the right to perform
such incidental services as are necessary in connection with (i) his
private, passive investments, but only if Executive is not obligated or
required to (and shall not in fact) devote any managerial efforts which
interfere with the services required to be performed by him hereunder, (ii)
his charitable or community activities or (iii) participation in trade or
professional organizations, but only if such incidental services do not
significantly interfere with the performance of Executive's services
hereunder.
6. Excise Tax Gross-Up Procedures.
A. The amount of any such Tax Gross-Up to which Executive becomes entitled
under Section 4.C(1)(d), will be determined pursuant to the following:
X = Y / (1 - (A + B + C)), where
X is the total dollar amount of the Tax Gross-Up payable to
Executive;
Y is the total Excise Tax (as defined in Internal revenue Code
Section 4999) imposed on Executive;
A is the Excise Tax rate in effect at the time;
B is the highest combined marginal federal income and applicable
state income tax rate in effect for Executive, after taking into
account the deductibility of state income taxes against federal
income taxes to the extent allowable, for the calendar year in
which the Tax Gross-Up is paid; and
C is the applicable Hospital Insurance (Medicare) Tax Rate in
effect for Executive for the calendar year in which the Tax
Gross-Up is paid;
provided if there is a change in the tax laws after the date hereof that would
render the amount determined above insufficient to fully reimburse Executive on
an after-tax basis for the amount of any Excise Tax, Executive shall be entitled
to such additional amount as may be necessary to provide him with such
reimbursement
B. Within ninety (90) days after a determination is made by the Internal
Revenue Service or Executive's tax advisor that an item of compensation or
benefit payable hereunder constitutes a parachute payment under Code
Section 280G for which
6
<PAGE>
Executive is liable for an Excise Tax, Executive shall identify the nature
of the payment to the Company and submit to the Company the calculation of
the Excise Tax attributable to that payment and the Tax Gross-Up to which
Executive is entitled with respect to such tax liability. The Company will
pay such Tax Gross-Up to Executive (net of all applicable withholding
taxes, including any taxes required to be withheld under Code Section 4999)
within ten (10) business days after Executive's submission of the
calculation of such Excise Tax and the resulting Tax Gross-Up, provided
such calculations represent a reasonable interpretation of the applicable
law and regulations.
C. In the event that Executive's actual Excise Tax liability is determined
by a Final Determination to be greater than the Excise Tax liability
previously taken into account for purposes of the Tax Gross-Up paid to
Executive pursuant to this Section 6, then within ninety (90) days
following the Final Determination, Executive shall submit to the Company a
new Excise Tax calculation based upon the Final Determination. Within ten
(10) business days after receipt of such calculation, the Company shall pay
Executive the additional Tax Gross-Up attributable to such excess Excise
Tax liability.
D. In the event that Executive's actual Excise Tax liability is determined
by a Final Determination to be less than the Excise Tax liability
previously taken into account for purposes of the Tax Gross-Up paid to
Executive pursuant to this Section 6, then Executive shall refund to the
Company, promptly upon receipt, any federal or state tax refund
attributable to the Excise Tax overpayment.
7. Termination of Employment.
A. By Company. The Company may terminate Executive's employment under this
----------
Employment Agreement at any time for any reason, with or without Cause.
B. By Executive. Executive may terminate his employment under this
------------
Employment Agreement at any time, for any reason, with or without Cause, by
giving the Company at least thirty (30) days prior written notice of such
termination. However, such thirty (30) day notice requirement shall not
apply if Executive terminates his employment due to a Change in Control.
8. Release of Claims. All compensation and benefits under Section 4 above are
in consideration for Executive's execution of the Release, which Release
Executive does not subsequently revoke or attempt to revoke. If Executive does
not execute such a Release or if Executive attempts to revoke such Release,
Executive will not be entitled to any of the benefits provided under this
Employment Agreement.
9. Successors and Assigns. The provisions of this Employment Agreement shall
inure to the benefit of, and shall be binding upon, the Company, its successors
and assigns, and the Executive, the personal representative of his estate and
his heirs and legatees; provided, however, Executive may not assign, transfer or
delegate his rights or obligations hereunder and any attempt to do so shall be
void.
7
<PAGE>
10. Notices.
A. Any and all notices, demands or other communications required or
desired to be given hereunder by any party shall be in writing and shall be
validly given or made to another party if served either personally or, if
deposited in the United States mail, certified or registered, postage
prepaid, return receipt requested. If such notice, demand or other
communication shall be served personally, service shall be conclusively
deemed made at the time of such personal service. If such notice, demand or
other communication is given by mail, service shall be conclusively deemed
made at the time of the receipt by the party to whom such notice, demand or
other communication is sent. Any and all notices, demands or other
communications shall be delivered to the following address:
To the Company: NorthPoint Communications
303 2/nd/ Street
San Francisco, CA 94107
Fax: (415) 403-4004
To Executive: Steven Gorosh
1009 Francisco St.
San Francisco CA 94109
B. Any party hereto may change its address for the purpose of receiving
notices, demands and other communications as herein provided by a written
notice given in the manner aforesaid to the other party hereto.
11. Waivers. No waiver of any term or provision of this Employment Agreement
shall be valid unless such waiver is in writing signed by the party against whom
enforcement of the waiver is sought. In the case of the Company, such waiver
shall be signed by at least one (1) member of the Company's Board. The waiver
of any term or provision of this Employment Agreement shall not apply to any
subsequent breach of this Employment Agreement.
12. Governing Document. This Employment Agreement and the Purchase Agreement,
and all other exhibits and attachments hereto constitute the entire agreement
and understanding of the Company and Executive with respect to the terms and
conditions of Executive's employment with the Company and the payment of
severance and other benefits, and supersedes all prior and contemporaneous
written or verbal agreements and understandings between Executive and the
Company relating to such subject matter. Where the terms of the Purchase
Agreement conflict with the terms of this Employment Agreement, the terms of
this Employment Agreement shall control. Any and all prior agreements,
understandings or representations relating to Executive's employment with the
Company are hereby terminated and cancelled in their entirety and are of no
further force or effect.
13. Governing Law. The provisions of this Employment Agreement shall be
construed and interpreted under the laws of the State of California applicable
to agreements executed and to be
8
<PAGE>
wholly performed within the State of California. If any provision of this
Employment Agreement as applied to any party or to any circumstance should be
adjudged by a court of competent jurisdiction to be void or unenforceable for
any reason, the invalidity of that provision shall in no way affect (to the
maximum extent permitted by law) the application of such provision under
circumstances different from those adjudicated by the court, the application of
any other provision of this Employment Agreement, or the enforceability or
invalidity of this Employment Agreement as a whole. Should any provision of this
Employment Agreement become or be deemed invalid, illegal or unenforceable in
any jurisdiction by reason of the scope, extent or duration of its coverage,
then such provision shall be deemed amended to the extent necessary to conform
to applicable law so as to be valid and enforceable or, if such provision cannot
be so amended without materially altering the intention of the parties, then
such provision shall be stricken and the remainder of this Employment Agreement
shall continue in full force and effect.
14. Deductions. All amounts paid to Executive hereunder are subject to all
withholdings and deductions required by law.
15. Amendment and Termination. This Employment Agreement may be modified,
amended or terminated only by a written agreement signed by Executive and an
authorized member of the Company's Board.
16. Remedies. All rights and remedies provided pursuant to this Employment
Agreement or by law shall be cumulative, and no such right or remedy shall be
exclusive of any other. A party may pursue any one or more rights or remedies
hereunder or may seek damages or specific performance in the event of another
party's breach hereunder or may pursue any other remedy by law or equity,
whether or not stated in this Employment Agreement.
17. Arbitration. Executive agrees that any and all disputes that he has with
the Company, or any of its employees, which arise out of his employment or under
the terms of his employment, shall be resolved through final and binding
arbitration, as specified herein. This shall include, without limitation,
disputes relating to this Employment Agreement, his employment by the Company or
the termination thereof, claims for breach of contract or breach of the covenant
of good faith and fair dealing, and any claims of discrimination or other claims
under Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Americans with Disabilities Act, the California Fair
Employment and Housing Act, the Employee Retirement Income Securities Act, the
Racketeer Influenced and Corrupt Organizations Act, or any other federal, state
or local law or regulation now in existence or hereinafter enacted and as
amended from time to time concerning in any way the subject of his employment
with the Company or its termination. The only disputes not covered by this
Employment Agreement are the following: (i) claims for benefits under the
unemployment insurance or workers' compensation laws, and (ii) claims concerning
the validity, infringement or enforceability of any trade secret, patent right,
copyright, trademark or any other intellectual property held or sought by the
Company or which the Company could otherwise seek; in each of these instances
such disputes or claims shall not be subject to arbitration, but rather, shall
be resolved pursuant to applicable law. Binding arbitration shall be conducted
in the county in which the Company's principal place of business is then located
in accordance with the rules and regulations of the American Arbitration
9
<PAGE>
Association (AAA). One arbitrator shall be chosen by mutual agreement of the
Company and Executive from the AAA Employment Advisory Panel. Each side shall
bear its own attorneys' fees; that is, the arbitrator shall not have authority
to award attorneys' fees unless a statutory section at issue in the dispute
------
authorizes the award of attorneys' fees to the prevailing party, in which case
the arbitrator has authority to make such award as permitted by the statute in
question. Executive understands and agrees that the arbitration shall be
instead of any jury trial and that the arbitrator's decision shall be final and
binding to the fullest extent permitted by law and enforceable by any court
having jurisdiction thereof.
18. Counterparts. This Employment Agreement may be executed in more than one
counterpart, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the day and year first above written.
NORTH POINT COMMUNICATIONS, INC.
By ____________________________________
Name:
Title:
EXECUTIVE:
_______________________________________
(Signature)
_______________________________________
(Print Name)
10
<PAGE>
EXHIBIT A
11
<PAGE>
EXHIBIT B
Dear Mr. Gorosh:
This letter is provided to confirm the agreement we have reached
regarding your separation from employment with NorthPoint Communications, Inc.,
(the "Company"). We have agreed that your employment with the Company will
terminate effective _________________, 200__.
In consideration of the benefits to be provided to you pursuant to
that certain in Employment Agreement between you and the Company dated March 7,
2000, you agree to the following:
A. You fully and forever release and promise not to institute or
participate in any legal proceeding against the Company or any of its directors,
officers, or employees with respect to any and all claims and causes of action
of any nature or kind, which are or may be claimed to exist, through and
including the date on which this Agreement is executed by you, including but not
limited to, any proceeding arising out of or relating in any way to your
employment with the Company or your separation from employment. You should
understand that you are forever waiving any rights you may have to pursue any
remedies available to you against the Company, including, but not limited to,
any employment-related cause of action, any tort or contract claims, any claim
for violation of any state, federal or local statute, ordinance or regulation
relating to employment or employment discrimination.
B. You have agreed to maintain in confidence all information you have
regarding the Company, its clients, the circumstances leading to your separation
from the Company and the terms of this Agreement, except to the extent you are
required by law to make any such disclosure.
C. This Agreement between us shall be deemed to have been entered into in
the State of California and shall be construed and interpreted in accordance
with the laws of this State. It supersedes any and all prior agreements between
you and the Company and contains the entire agreement between us.
D. You and the Company hereby expressly waive any and all rights and
benefits conferred by the provisions of Section 1542 of the Civil Code of the
State of California, which states as follows:
A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him
must have materially affected his settlement with the
debtor.
You may have up to ____________ (___) days in which to consider this
Agreement and you should review it with an attorney if you so desire. By your
signature below, you acknowledge that you have read and understand the terms of
this Agreement, and that you are signing it voluntarily and without coercion.
You further acknowledge that the waivers you
12
<PAGE>
have made in this Agreement are knowing, conscious and made with full
appreciation that you are forever foreclosed from pursuing any of the rights so
waived.
Very truly yours,
__________________________
Dated:____________________ By:________________________________
(Name, Title)
I hereby accept and agree to the terms and conditions set forth in the
above agreement.
Dated:___________________ ___________________________________
(Executive Name)
13
<PAGE>
EXHIBIT 10.32
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT, made as of March 7, 2000 (the "Effective
Date"), is entered into by and between NorthPoint Communications, Inc. (the
"Company") and Nancy Hemmenway (the "Executive").
WHEREAS, the Company and Executive wish to enter into a formal
employment agreement that shall govern the terms and conditions of Executive's
employment with the Company and shall provide certain severance, stock option
and other benefits for Executive in the event that her employment should
terminate.
WHEREAS, the Executive is agreeing to abide by the restrictive
covenants contained herein and is foregoing other career opportunities in
reliance on this Employment Agreement,
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, the parties agree as follows:
1. Definitions
A. Target Bonus. "Target Bonus" means the target annual bonus for Executive
------------
during in any year or, if Executive is entitled to a bonus under an
individual written agreement with the Company, the annual bonus to which
Executive is entitled thereunder.
B. Base Salary. "Base Salary" means the greater of the annual rate of base
-----------
salary in effect for Executive at the time of Executive's Qualifying
Termination or the annual rate of base salary in effect for Executive
immediately before the Change in Control.
C. Cause. Termination for "Cause" means the following: (i) Executive's
-----
conviction of a felony or any crime of dishonesty; (ii) Executive's
commission of any act of fraud with respect to the Company; (iii) any
intentional misconduct by Executive intended to have a materially adverse
effect upon the Company's business; (iv) Executive's repeated failure to
satisfactorily perform her job duties; (v) an intentional breach by
Executive of any of Executive's fiduciary obligations as an officer or
director of the Company or a breach of this Employment Agreement or any
other agreement with the Company that has a materially adverse effect upon
the Company; or (vi) Executive's death or Permanent Disability.
D. Change in Control. "Change in Control" shall have the meaning set forth
-----------------
in the Option Agreement attached as Exhibit A hereto.
---------
E. Change of Employment Circumstances. "Change of Employment Circumstances"
----------------------------------
means (i) a material reduction in Executive's level of duties or
responsibilities or the nature or scope of Executive's functions, or (ii) a
reduction in Executive's base salary or a reduction in Executive's total
cash compensation (consisting of base salary and target bonus), or (iii)
the failure to provide Executive with employee benefits (including
<PAGE>
medical/dental, disability and life insurance) that are substantially
equivalent to the benefits provided to Executive immediately before a
Change in Control, or (iv) a relocation of Executive's principal place of
employment by more than thirty-five miles away (or any requirement that
Executive spend more than two days a week at any location more than thirty-
five miles away), or (v) the breach of the terms of any compensation
agreement or arrangement between the Company and Executive, or (vi) the
repudiation or failure by the Company or its successor to acknowledge (upon
Executive's written request) or to comply with any of its obligations under
this Employment Agreement.
F. Comparable Position. A "Comparable Position" means a position with a
-------------------
successor to part or all of the business of the Company, if the terms of
such position do not differ from Executive's prior position with the
Company in any manner that would constitute a Change of Employment
Circumstances, assuming that the terms of such new position with the
successor remained materially the same as the terms of Executive's
employment with the Company.
G. Final Determination. "Final Determination" means an audit adjustment by
-------------------
the Internal Revenue Service that is either (i) agreed to by both Executive
(or her estate) and the Company (such agreement by the Company to be not
unreasonably withheld) or (ii) sustained by a court of competent
jurisdiction in a decision with which Executive and the Company concur
(such concurrence by the Company to be not unreasonably withheld) or with
respect to which the period within which an appeal may be filed has lapsed
without a notice of appeal being filed.
H. Period of Coverage. The "Period of Coverage" means the period
------------------
commencing on the Effective Date and ending upon the date of termination of
this Employment Agreement.
I. Permanent Disability. "Permanent Disability" shall mean the inability
--------------------
of Executive to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that is expected to
result in death or has lasted or can be expected to last for a continuous
period of twelve (12) months or more.
J. Qualifying Termination. "Qualifying Termination" shall mean a
----------------------
termination of Executive's employment with the Company either (i) by the
Company for any reason other than for Cause, or (ii) by Executive,
following the occurrence of a Change in Control that occurs during the
Period of Coverage which results in a Change of Employment Circumstances,
provided that Executive properly executes, and does not revoke or attempt
to revoke, a Release of claims against the Company, its affiliates and
their employees and agents in the form attached as Exhibit B (the
---------
"Release"). A Qualifying Termination shall be deemed not to have occurred
where Executive is offered a Comparable Position with the new corporate
entity subsequent to a Change in Control, whether or not Executive accepts
such position. If Executive is offered a position which is not a Comparable
Position and accepts such position, then Executive will be treated as
2
<PAGE>
if she had been offered and accepted a Comparable Position.
2. Job Duties. Executive shall serve as the Vice President, Human Resources
and Administration of the Company and shall, in such capacity, report directly
to the Company's President and Chief Operating Officer. In her capacity as Vice
President, Human Resources and Administration of the Company, Executive shall
devote substantially all of her time and attention to the business and affairs
of the Company.
3. Current Stock Options and Benefits.
A. Initial Grant. Pursuant to the Amended and Restated NorthPoint
-------------
Communications Group, Inc. 1999 Stock Option Plan (the "Option Plan"),
Executive received a grant of stock options on June 29, 1999 (the "Initial
Grant"). The Option Agreement between the Company and Executive Agreement
that underlies the Initial Grant (the "Option Agreement") is attached
hereto as Exhibit A.
---------
B. Cash Compensation. Executive is paid a base salary at the annual
-----------------
rate of One Hundred Sixty-Five Thousand Dollars ($165,000.00), to be paid
in accordance with the Company's standard payroll policy. Such base salary
may be increased by the Board of Directors in its sole discretion.
C. Bonus. Executive shall be eligible to receive an annual target
-----
bonus of up to a maximum of forty percent (40%) of her annual base salary.
Payment of the bonus shall be at the discretion of the Compensation
Committee of the Company's Board of Directors and shall be based on the
achievement of objectives agreed to by the Compensation Committee of the
Board of Directors. In future years, payment of the bonus shall be at the
discretion of the Compensation Committee of the Company's Board of
Directors and shall be based on the achievement of objectives as determined
by such Committee.
D. Other Employee Benefits. Executive shall, throughout the Period of
-----------------------
Coverage, be eligible to participate in all group term life insurance
plans, group health plans, accidental death and dismemberment plans and
short-term and long-term disability programs, sick leave, vacation leave
and other executive perquisites which are made available to the Company's
executive and/or other Company employees.
4. Additional Compensation. In addition to the compensation enumerated above,
-----------------------
and in return for the consideration contained herein, the Company has agreed to
provide the Executive with the compensation set forth in subsections A, B and C
below.
A. Supplemental Life Insurance. The Company will provide Executive with
---------------------------
supplemental group term life insurance coverage of $500,000 during the
Period of Coverage.
B. Financial Counseling Assistance. The Company will provide Executive with
-------------------------------
annual financial counseling during the Period of Coverage by a provider
selected by the
3
<PAGE>
Executive. In no event, however, shall the Company provide Executive with
financial counseling in an amount in excess of $10,000 per year.
C. Change in Control.
-----------------
(1) Change in Control Protection. Notwithstanding anything to the
----------------------------
contrary in the Initial Grant or Option Agreement, upon (i) a Change in
Control of the Company, and (ii) a Qualifying Termination of the
---
Executive, the Executive shall be entitled to the following benefits:
a) Acceleration. Executive's Initial Grant, to the extent not
------------
otherwise exercisable for all the shares of Company common stock
underlying the Initial Grant, will immediately become exercisable
for all the shares of Company common stock underlying the Initial
Grant, and may be exercised for any or all of those shares as
fully vested shares. All options must be exercised within ninety
(90) days of the date of the Qualifying Termination.
b) Installment Sum Payment of Salary and Bonus. Beginning within
-------------------------------------------
ten (10) business days after a Qualifying Termination (or, if
later, the last day of any period during which the Release may be
revoked by Executive), the Company shall make twelve (12) equal
monthly cash payments to Executive, subject to any mandatory tax
withholding, equal to one-twelfth (1/12) times the sum of
Executive's Annual Base Salary and Executive's Target Bonus.
c) Continuing Benefit Coverage. The Company will, at normal
---------------------------
employee rates, provide Executive and, to the extent available
before the Qualifying Termination, Executive's eligible
dependents with coverage under the Company's medical/dental plan,
life insurance and accident plan and disability plan until the
earlier of (i) one (1) year after the date of Executive's
Qualifying Termination or (ii) the first date that Executive is
covered under another employer's program which provides
substantially the same level of benefit coverage without
exclusion for pre-existing conditions. After this period of
coverage, Executive (and, if applicable, Executive's eligible
dependents) may elect to continue coverage under the Company's
group medical/dental plan at Executive's own expense in
accordance with the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended ("COBRA") and, for purposes of
determining the maximum period of COBRA coverage, such maximum
period will begin immediately following the end of Company-
subsidized coverage.
d) Excess Tax Gross-Up Payment. If any compensation payable
---------------------------
hereunder, either alone or when aggregated with other
compensation payable to Executive, would constitute a parachute
payment that would subject Executive to an excise tax under
Section 4999 of the Internal
4
<PAGE>
Revenue Code, Executive shall be entitled to receive an
additional lump sum cash payment, subject to mandatory tax
withholding, which, when added to all compensation payable to
Executive that constitutes a parachute payment, provides
Executive with the same after tax-compensation that she would
have received from such parachute payments had none of such
compensation constituted a parachute payment (a "Tax Gross-
Up"). The procedures for making such payment are set forth in
Section 6.
(2) Limitation on Acceleration. Notwithstanding anything else set
--------------------------
forth in this Section 4, if it is reasonably determined by the
Company's Board of Directors in good fatih, upon consultation with
Company management and the Company's independent auditors, that the
acceleration of vesting of stock options or restricted stock or the
acceleration and cash-out of affiliate options upon a Change in
Control (to the extent that those Sections provide for acceleration or
cash-out that would not otherwise occur under the terms of the
instruments evidencing such options or restricted stock) would
preclude accounting for any proposed business combination of the
Company as a pooling of interests, and the Board of Directors
otherwise desires to approve such a proposed business transaction
which requires as a condition to the closing of such transaction that
it be accounted for as a pooling of interests, then, solely to the
extent necessary to permit such accounting, such acceleration or cash-
out shall not occur. The previous sentence shall not limit any
acceleration of vesting or cash-out of any option or restricted stock
that would occur, in absence of this Employment Agreement, under the
terms of the Option Agreement or Option Plan.
(3) Offset of Benefits. The compensation and benefits payable
------------------
hereunder shall not be reduced or offset by any amounts that Executive
earns or could earn from any other sources following Executive's
Qualifying Termination. However, except to the extent the Company
expressly agrees otherwise in writing, if the Company becomes
obligated to pay Executive any severance pay or severance benefits
under a separate employment or severance agreement or arrangement, the
benefits payable hereunder shall be reduced by the amount of benefits
payable under such other agreement or arrangement.
5. Restrictive Covenants.
A. In return for the consideration contained herein, Executive has agreed
to certain restrictive covenants set forth below. During the Period of
Coverage, Executive agrees that she shall:
(1) devote substantially all of her time and energy to the
performance of Executive's duties described herein, except during
periods of illness or vacation.
(2) not directly or indirectly provide services to or through any
person, firm or other entity except the Company, unless otherwise
authorized by the Company in
5
<PAGE>
writing.
(3) not render any services of any kind or character for Executive's
own account or for any other person, firm or entity without first
obtaining the Company's written consent.
B. Notwithstanding the foregoing, Executive shall have the right to perform
such incidental services as are necessary in connection with (i) her
private, passive investments, but only if Executive is not obligated or
required to (and shall not in fact) devote any managerial efforts which
interfere with the services required to be performed by him hereunder, (ii)
her charitable or community activities or (iii) participation in trade or
professional organizations, but only if such incidental services do not
significantly interfere with the performance of Executive's services
hereunder.
6. Excise Tax Gross-Up Procedures.
A. The amount of any such Tax Gross-Up to which Executive becomes entitled
under Section 4.C(1)(d), will be determined pursuant to the following:
X = Y / (1 - (A + B + C)), where
X is the total dollar amount of the Tax Gross-Up payable to
Executive;
Y is the total Excise Tax (as defined in Internal revenue Code
Section 4999) imposed on Executive;
A is the Excise Tax rate in effect at the time;
B is the highest combined marginal federal income and applicable
state income tax rate in effect for Executive, after taking into
account the deductibility of state income taxes against federal
income taxes to the extent allowable, for the calendar year in
which the Tax Gross-Up is paid; and
C is the applicable Hospital Insurance (Medicare) Tax Rate in
effect for Executive for the calendar year in which the Tax
Gross-Up is paid;
provided if there is a change in the tax laws after the date hereof that would
render the amount determined above insufficient to fully reimburse Executive on
an after-tax basis for the amount of any Excise Tax, Executive shall be entitled
to such additional amount as may be necessary to provide him with such
reimbursement
B. Within ninety (90) days after a determination is made by the Internal
Revenue
6
<PAGE>
Service or Executive's tax advisor that an item of compensation or benefit
payable hereunder constitutes a parachute payment under Code Section 280G
for which Executive is liable for an Excise Tax, Executive shall identify
the nature of the payment to the Company and submit to the Company the
calculation of the Excise Tax attributable to that payment and the Tax
Gross-Up to which Executive is entitled with respect to such tax liability.
The Company will pay such Tax Gross-Up to Executive (net of all applicable
withholding taxes, including any taxes required to be withheld under Code
Section 4999) within ten (10) business days after Executive's submission of
the calculation of such Excise Tax and the resulting Tax Gross-Up, provided
such calculations represent a reasonable interpretation of the applicable
law and regulations.
C. In the event that Executive's actual Excise Tax liability is determined
by a Final Determination to be greater than the Excise Tax liability
previously taken into account for purposes of the Tax Gross-Up paid to
Executive pursuant to this Section 6, then within ninety (90) days
following the Final Determination, Executive shall submit to the Company a
new Excise Tax calculation based upon the Final Determination. Within ten
(10) business days after receipt of such calculation, the Company shall pay
Executive the additional Tax Gross-Up attributable to such excess Excise
Tax liability.
D. In the event that Executive's actual Excise Tax liability is determined
by a Final Determination to be less than the Excise Tax liability
previously taken into account for purposes of the Tax Gross-Up paid to
Executive pursuant to this Section 6, then Executive shall refund to the
Company, promptly upon receipt, any federal or state tax refund
attributable to the Excise Tax overpayment.
7. Termination of Employment.
A. By Company. The Company may terminate Executive's employment under this
----------
Employment Agreement at any time for any reason, with or without Cause.
B. By Executive. Executive may terminate her employment under this
------------
Employment Agreement at any time, for any reason, with or without Cause, by
giving the Company at least thirty (30) days prior written notice of such
termination. However, such thirty (30) day notice requirement shall not
apply if Executive terminates her employment due to a Change in Control.
8. Release of Claims. All compensation and benefits under Section 4 above are
in consideration for Executive's execution of the Release, which Release
Executive does not subsequently revoke or attempt to revoke. If Executive does
not execute such a Release or if Executive attempts to revoke such Release,
Executive will not be entitled to any of the benefits provided under this
Employment Agreement.
9. Successors and Assigns. The provisions of this Employment Agreement shall
inure to the benefit of, and shall be binding upon, the Company, its successors
and assigns, and the Executive, the personal representative of her estate and
her heirs and legatees; provided,
7
<PAGE>
however, Executive may not assign, transfer or delegate her rights or
obligations hereunder and any attempt to do so shall be void.
10. Notices.
A. Any and all notices, demands or other communications required or
desired to be given hereunder by any party shall be in writing and shall be
validly given or made to another party if served either personally or, if
deposited in the United States mail, certified or registered, postage
prepaid, return receipt requested. If such notice, demand or other
communication shall be served personally, service shall be conclusively
deemed made at the time of such personal service. If such notice, demand or
other communication is given by mail, service shall be conclusively deemed
made at the time of the receipt by the party to whom such notice, demand or
other communication is sent. Any and all notices, demands or other
communications shall be delivered to the following address:
To the Company: NorthPoint Communications
303 2/nd/ Street
San Francisco, CA 94107
Fax: (415) 403-4004
To Executive: Nancy Hemmenway
2169 Green St.
San Francisco, CA 94123
B. Any party hereto may change its address for the purpose of receiving
notices, demands and other communications as herein provided by a written
notice given in the manner aforesaid to the other party hereto.
11. Waivers. No waiver of any term or provision of this Employment Agreement
shall be valid unless such waiver is in writing signed by the party against whom
enforcement of the waiver is sought. In the case of the Company, such waiver
shall be signed by at least one (1) member of the Company's Board. The waiver
of any term or provision of this Employment Agreement shall not apply to any
subsequent breach of this Employment Agreement.
12. Governing Document. This Employment Agreement, the Option Agreement, the
Option Plan, and all other exhibits and attachments hereto constitute the entire
agreement and understanding of the Company and Executive with respect to the
terms and conditions of Executive's employment with the Company and the payment
of severance and other benefits, and supersedes all prior and contemporaneous
written or verbal agreements and understandings between Executive and the
Company relating to such subject matter. Where the terms of the Option
Agreement or Option Plan conflict with the terms of this Employment Agreement,
the terms of this Employment Agreement shall control. Any and all prior
agreements, understandings or representations relating to Executive's employment
with the Company are hereby terminated and cancelled in their entirety and are
of no further force or effect.
8
<PAGE>
13. Governing Law. The provisions of this Employment Agreement shall be
construed and interpreted under the laws of the State of California applicable
to agreements executed and to be wholly performed within the State of
California. If any provision of this Employment Agreement as applied to any
party or to any circumstance should be adjudged by a court of competent
jurisdiction to be void or unenforceable for any reason, the invalidity of that
provision shall in no way affect (to the maximum extent permitted by law) the
application of such provision under circumstances different from those
adjudicated by the court, the application of any other provision of this
Employment Agreement, or the enforceability or invalidity of this Employment
Agreement as a whole. Should any provision of this Employment Agreement become
or be deemed invalid, illegal or unenforceable in any jurisdiction by reason of
the scope, extent or duration of its coverage, then such provision shall be
deemed amended to the extent necessary to conform to applicable law so as to be
valid and enforceable or, if such provision cannot be so amended without
materially altering the intention of the parties, then such provision shall be
stricken and the remainder of this Employment Agreement shall continue in full
force and effect.
14. Deductions. All amounts paid to Executive hereunder are subject to all
withholdings and deductions required by law.
15. Amendment and Termination. This Employment Agreement may be modified,
amended or terminated only by a written agreement signed by Executive and an
authorized member of the Company's Board.
16. Remedies. All rights and remedies provided pursuant to this Employment
Agreement or by law shall be cumulative, and no such right or remedy shall be
exclusive of any other. A party may pursue any one or more rights or remedies
hereunder or may seek damages or specific performance in the event of another
party's breach hereunder or may pursue any other remedy by law or equity,
whether or not stated in this Employment Agreement.
17. Arbitration. Executive agrees that any and all disputes that she has with
the Company, or any of its employees, which arise out of her employment or under
the terms of her employment, shall be resolved through final and binding
arbitration, as specified herein. This shall include, without limitation,
disputes relating to this Employment Agreement, her employment by the Company or
the termination thereof, claims for breach of contract or breach of the covenant
of good faith and fair dealing, and any claims of discrimination or other claims
under Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Americans with Disabilities Act, the California Fair
Employment and Housing Act, the Employee Retirement Income Securities Act, the
Racketeer Influenced and Corrupt Organizations Act, or any other federal, state
or local law or regulation now in existence or hereinafter enacted and as
amended from time to time concerning in any way the subject of her employment
with the Company or its termination. The only disputes not covered by this
Employment Agreement are the following: (i) claims for benefits under the
unemployment insurance or workers' compensation laws, and (ii) claims concerning
the validity, infringement or enforceability of any trade secret, patent right,
copyright, trademark or any other intellectual property held or sought by the
Company or which the Company could otherwise seek; in each of these instances
such disputes or claims shall not be subject to arbitration, but rather, shall
be resolved pursuant to applicable law.
9
<PAGE>
Binding arbitration shall be conducted in the county in which the Company's
principal place of business is then located in accordance with the rules and
regulations of the American Arbitration Association (AAA). One arbitrator shall
be chosen by mutual agreement of the Company and Executive from the AAA
Employment Advisory Panel. Each side shall bear its own attorneys' fees; that
is, the arbitrator shall not have authority to award attorneys' fees unless a
------
statutory section at issue in the dispute authorizes the award of attorneys'
fees to the prevailing party, in which case the arbitrator has authority to make
such award as permitted by the statute in question. Executive understands and
agrees that the arbitration shall be instead of any jury trial and that the
arbitrator's decision shall be final and binding to the fullest extent permitted
by law and enforceable by any court having jurisdiction thereof.
18. Counterparts. This Employment Agreement may be executed in more than one
counterpart, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the day and year first above written.
NORTH POINT COMMUNICATIONS, INC.
By ____________________________________
Name:
Title:
EXECUTIVE:
_______________________________________
(Signature)
_______________________________________
(Print Name)
10
<PAGE>
EXHIBIT A
11
<PAGE>
EXHIBIT B
Dear Ms. Hemmenway:
This letter is provided to confirm the agreement we have reached
regarding your separation from employment with NorthPoint Communications, Inc.,
(the "Company"). We have agreed that your employment with the Company will
terminate effective _________________, 200__.
In consideration of the benefits to be provided to you pursuant to
that certain in Employment Agreement between you and the Company dated March 7,
2000, you agree to the following:
A. You fully and forever release and promise not to institute or
participate in any legal proceeding against the Company or any of its directors,
officers, or employees with respect to any and all claims and causes of action
of any nature or kind, which are or may be claimed to exist, through and
including the date on which this Agreement is executed by you, including but not
limited to, any proceeding arising out of or relating in any way to your
employment with the Company or your separation from employment. You should
understand that you are forever waiving any rights you may have to pursue any
remedies available to you against the Company, including, but not limited to,
any employment-related cause of action, any tort or contract claims, any claim
for violation of any state, federal or local statute, ordinance or regulation
relating to employment or employment discrimination.
B. You have agreed to maintain in confidence all information you have
regarding the Company, its clients, the circumstances leading to your separation
from the Company and the terms of this Agreement, except to the extent you are
required by law to make any such disclosure.
C. This Agreement between us shall be deemed to have been entered into in
the State of California and shall be construed and interpreted in accordance
with the laws of this State. It supersedes any and all prior agreements between
you and the Company and contains the entire agreement between us.
D. You and the Company hereby expressly waive any and all rights and
benefits conferred by the provisions of Section 1542 of the Civil Code of the
State of California, which states as follows:
A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him
must have materially affected his settlement with the
debtor.
You may have up to ____________ (___) days in which to consider this
Agreement and you should review it with an attorney if you so desire. By your
signature below, you acknowledge that you have read and understand the terms of
this Agreement, and that you are signing it voluntarily and without coercion.
You further acknowledge that the waivers you
12
<PAGE>
have made in this Agreement are knowing, conscious and made with full
appreciation that you are forever foreclosed from pursuing any of the rights so
waived.
Very truly yours,
__________________________
Dated:____________________ By:________________________________
(Name, Title)
I hereby accept and agree to the terms and conditions set forth in the
above agreement.
Dated:___________________ ___________________________________
(Executive Name)
13
<PAGE>
EXHIBIT 10.33
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT, made as of March 7, 2000 (the "Effective
Date"), is entered into by and between NorthPoint Communications, Inc. (the
"Company") and Michael Parks (the "Executive").
WHEREAS, the Company and Executive wish to enter into a formal
employment agreement that shall govern the terms and conditions of Executive's
employment with the Company and shall provide certain severance, stock option
and other benefits for Executive in the event that his employment should
terminate.
WHEREAS, the Executive is agreeing to abide by the restrictive
covenants contained herein and is foregoing other career opportunities in
reliance on this Employment Agreement,
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, the parties agree as follows:
1. Definitions
A. Target Bonus. "Target Bonus" means the target annual bonus for Executive
------------
during in any year or, if Executive is entitled to a bonus under an
individual written agreement with the Company, the annual bonus to which
Executive is entitled thereunder.
B. Base Salary. "Base Salary" means the greater of the annual rate of base
-----------
salary in effect for Executive at the time of Executive's Qualifying
Termination or the annual rate of base salary in effect for Executive
immediately before the Change in Control.
C. Cause. Termination for "Cause" means the following: (i) Executive's
------
conviction of a felony or any crime of dishonesty; (ii) Executive's
commission of any act of fraud with respect to the Company; (iii) any
intentional misconduct by Executive intended to have a materially adverse
effect upon the Company's business; (iv) Executive's repeated failure to
satisfactorily perform his job duties; (v) an intentional breach by
Executive of any of Executive's fiduciary obligations as an officer or
director of the Company or a breach of this Employment Agreement or any
other agreement with the Company that has a materially adverse effect upon
the Company; or (vi) Executive's death or Permanent Disability.
D. Change in Control. "Change in Control" shall have the meaning set forth
-----------------
in the Option Agreement attached as Exhibit A hereto.
---------
E. Change of Employment Circumstances. "Change of Employment Circumstances"
----------------------------------
means (i) a material reduction in Executive's level of duties or
responsibilities or the nature or scope of Executive's functions, or (ii) a
reduction in Executive's base salary or a reduction in Executive's total
cash compensation (consisting of base salary and target bonus), or (iii)
the failure to provide Executive with employee benefits (including
<PAGE>
medical/dental, disability and life insurance) that are substantially
equivalent to the benefits provided to Executive immediately before a
Change in Control, or (iv) a relocation of Executive's principal place of
employment by more than thirty-five miles away (or any requirement that
Executive spend more than two days a week at any location more than thirty-
five miles away), or (v) the breach of the terms of any compensation
agreement or arrangement between the Company and Executive, or (vi) the
repudiation or failure by the Company or its successor to acknowledge (upon
Executive's written request) or to comply with any of its obligations under
this Employment Agreement.
F. Comparable Position. A "Comparable Position" means a position with a
-------------------
successor to part or all of the business of the Company, if the terms of
such position do not differ from Executive's prior position with the
Company in any manner that would constitute a Change of Employment
Circumstances, assuming that the terms of such new position with the
successor remained materially the same as the terms of Executive's
employment with the Company.
G. Final Determination. "Final Determination" means an audit adjustment by
-------------------
the Internal Revenue Service that is either (i) agreed to by both Executive
(or his estate) and the Company (such agreement by the Company to be not
unreasonably withheld) or (ii) sustained by a court of competent
jurisdiction in a decision with which Executive and the Company concur
(such concurrence by the Company to be not unreasonably withheld) or with
respect to which the period within which an appeal may be filed has lapsed
without a notice of appeal being filed.
H. Period of Coverage. The "Period of Coverage" means the period commencing
------------------
on the Effective Date and ending upon the date of termination of this
Employment Agreement.
I. Permanent Disability. "Permanent Disability" shall mean the inability of
--------------------
Executive to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that is expected to
result in death or has lasted or can be expected to last for a continuous
period of twelve (12) months or more.
J. Qualifying Termination. "Qualifying Termination" shall mean a
----------------------
termination of Executive's employment with the Company either (i) by the
Company for any reason other than for Cause, or (ii) by Executive,
following the occurrence of a Change in Control that occurs during the
Period of Coverage which results in a Change of Employment Circumstances,
provided that Executive properly executes, and does not revoke or attempt
to revoke, a Release of claims against the Company, its affiliates and
their employees and agents in the form attached as Exhibit B (the
---------
"Release"). A Qualifying Termination shall be deemed not to have occurred
where Executive is offered a Comparable Position with the new corporate
entity subsequent to a Change in Control, whether or not Executive accepts
such position. If Executive is offered a position which is not a Comparable
Position and accepts such position, then Executive will be treated as
2
<PAGE>
if he had been offered and accepted a Comparable Position.
2. Job Duties. Executive shall serve as the Chief Information Officer of the
Company and shall, in such capacity, report directly to the Chief Executive
Officer. In his capacity as Chief Information Officer of the Company, Executive
shall devote substantially all of his time and attention to the business and
affairs of the Company.
3. Current Stock Options and Benefits.
A. Initial Grant. Pursuant to the Amended and Restated NorthPoint
-------------
Communications Group, Inc. 1999 Stock Option Plan (the "Option Plan"),
Executive received a grant of stock options on June 29, 1999 (the "Initial
Grant"). The Option Agreement between the Company and Executive Agreement
that underlies the Initial Grant (the "Option Agreement") is attached
hereto as Exhibit A.
---------
B. Cash Compensation. Executive is paid a base salary at the annual
-----------------
rate of Two Hundred Thousand Dollars ($200,000.00), to be paid in
accordance with the Company's standard payroll policy. Such base salary may
be increased by the Board of Directors in its sole discretion.
C. Bonus. Executive shall be eligible to receive an annual target
-----
bonus of up to a maximum of fifty percent (50%) of his annual base salary.
Payment of the bonus shall be at the discretion of the Compensation
Committee of the Company's Board of Directors and shall be based on the
achievement of objectives agreed to by the Compensation Committee of the
Board of Directors. In future years, payment of the bonus shall be at the
discretion of the Compensation Committee of the Company's Board of
Directors and shall be based on the achievement of objectives as determined
by such Committee.
D. Other Employee Benefits. Executive shall, throughout the Period of
-----------------------
Coverage, be eligible to participate in all group term life insurance
plans, group health plans, accidental death and dismemberment plans and
short-term and long-term disability programs, sick leave, vacation leave
and other executive perquisites which are made available to the Company's
executive and/or other Company employees.
4. Additional Compensation. In addition to the compensation enumerated above,
-----------------------
and in return for the consideration contained herein, the Company has agreed to
provide the Executive with the compensation set forth in subsections A, B and C
below.
A. Supplemental Life Insurance. The Company will provide Executive with
---------------------------
supplemental group term life insurance coverage of $500,000 during the
Period of Coverage.
B. Financial Counseling Assistance. The Company will provide Executive with
-------------------------------
annual financial counseling during the Period of Coverage by a provider
selected by the Executive. In no event, however, shall the Company provide
Executive with financial
3
<PAGE>
counseling in an amount in excess of $10,000 per year.
C. Change in Control.
-----------------
(1) Change in Control Protection. Notwithstanding anything to the
----------------------------
contrary in the Initial Grant or Option Agreement, upon (i) a Change
in Control of the Company, and (ii) a Qualifying Termination of the
---
Executive, the Executive shall be entitled to the following benefits:
a) Acceleration. Executive's Initial Grant, to the extent not
------------
otherwise exercisable for all the shares of Company common stock
underlying the Initial Grant, will immediately become exercisable
for all the shares of Company common stock underlying the Initial
Grant, and may be exercised for any or all of those shares as
fully vested shares. All options must be exercised within ninety
(90) days of the date of the Qualifying Termination.
b) Installment Sum Payment of Salary and Bonus. Beginning within
-------------------------------------------
business days after a Qualifying Termination (or, if later, the
last day of any ten (10) period during which the Release may be
revoked by Executive), the Company shall make twelve (12) equal
monthly cash payments to Executive, subject to any mandatory tax
withholding, equal to one-twelfth (1/12) times the sum of
Executive's Annual Base Salary and Executive's Target Bonus.
c) Continuing Benefit Coverage. The Company will, at normal
---------------------------
employee rates, provide Executive and, to the extent available
before the Qualifying Termination, Executive's eligible
dependents with coverage under the Company's medical/dental plan,
life insurance and accident plan and disability plan until the
earlier of (i) one (1) year after the date of Executive's
Qualifying Termination or (ii) the first date that Executive is
covered under another employer's program which provides
substantially the same level of benefit coverage without
exclusion for pre-existing conditions. After this period of
coverage, Executive (and, if applicable, Executive's eligible
dependents) may elect to continue coverage under the Company's
group medical/dental plan at Executive's own expense in
accordance with the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended ("COBRA") and, for purposes of
determining the maximum period of COBRA coverage, such maximum
period will begin immediately following the end of Company-
subsidized coverage.
d) Excess Tax Gross-Up Payment. If any compensation payable
---------------------------
hereunder, either alone or when aggregated with other
compensation payable to Executive, would constitute a parachute
payment that would subject Executive to an excise tax under
Section 4999 of the Internal Revenue Code, Executive shall be
entitled to receive an additional lump
4
<PAGE>
sum cash payment, subject to mandatory tax withholding, which,
when added to all compensation payable to Executive that
constitutes a parachute payment, provides Executive with the same
after tax-compensation that he would have received from such
parachute payments had none of such compensation constituted a
parachute payment (a "Tax Gross-Up"). The procedures for making
such payment are set forth in Section 6.
(2) Limitation on Acceleration. Notwithstanding anything else set
--------------------------
forth in this Section 4, if it is reasonably determined by the
Company's Board of Directors in good faith, upon consultation with
Company management and the Company's independent auditors, that the
acceleration of vesting of stock options or restricted stock or the
acceleration and cash-out of affiliate options upon a Change in
Control (to the extent that those Sections provide for acceleration or
cash-out that would not otherwise occur under the terms of the
instruments evidencing such options or restricted stock) would
preclude accounting for any proposed business combination of the
Company as a pooling of interests, and the Board of Directors
otherwise desires to approve such a proposed business transaction
which requires as a condition to the closing of such transaction that
it be accounted for as a pooling of interests, then, solely to the
extent necessary to permit such accounting, such acceleration or cash-
out shall not occur. The previous sentence shall not limit any
acceleration of vesting or cash-out of any option or restricted stock
that would occur, in absence of this Employment Agreement, under the
terms of the Option Agreement or Option Plan.
(3) Offset of Benefits. The compensation and benefits payable
------------------
hereunder shall not be reduced or offset by any amounts that Executive
earns or could earn from any other sources following Executive's
Qualifying Termination. However, except to the extent the Company
expressly agrees otherwise in writing, if the Company becomes
obligated to pay Executive any severance pay or severance benefits
under a separate employment or severance agreement or arrangement, the
benefits payable hereunder shall be reduced by the amount of benefits
payable under such other agreement or arrangement.
5. Restrictive Covenants.
A. In return for the consideration contained herein, Executive has agreed
to certain restrictive covenants set forth below. During the Period of
Coverage, Executive agrees that he shall:
(1) devote substantially all of his time and energy to the performance
of Executive's duties described herein, except during periods of
illness or vacation.
(2) not directly or indirectly provide services to or through any
person, firm or other entity except the Company, unless otherwise
authorized by the Company in writing.
5
<PAGE>
(3) not render any services of any kind or character for Executive's
own account or for any other person, firm or entity without first
obtaining the Company's written consent.
B. Notwithstanding the foregoing, Executive shall have the right to perform
such incidental services as are necessary in connection with (i) his
private, passive investments, but only if Executive is not obligated or
required to (and shall not in fact) devote any managerial efforts which
interfere with the services required to be performed by him hereunder, (ii)
his charitable or community activities or (iii) participation in trade or
professional organizations, but only if such incidental services do not
significantly interfere with the performance of Executive's services
hereunder.
6. Excise Tax Gross-Up Procedures.
A. The amount of any such Tax Gross-Up to which Executive becomes entitled
under Section 4.C(1)(d), will be determined pursuant to the following:
X = Y / (1 - (A + B + C)), where
X is the total dollar amount of the Tax Gross-Up payable to
Executive;
Y is the total Excise Tax (as defined in Internal revenue Code
Section 4999) imposed on Executive;
A is the Excise Tax rate in effect at the time;
B is the highest combined marginal federal income and applicable
state income tax rate in effect for Executive, after taking into
account the deductibility of state income taxes against federal
income taxes to the extent allowable, for the calendar year in
which the Tax Gross-Up is paid; and
C is the applicable Hospital Insurance (Medicare) Tax Rate in
effect for Executive for the calendar year in which the Tax
Gross-Up is paid;
provided if there is a change in the tax laws after the date hereof that would
render the amount determined above insufficient to fully reimburse Executive on
an after-tax basis for the amount of any Excise Tax, Executive shall be entitled
to such additional amount as may be necessary to provide him with such
reimbursement
B. Within ninety (90) days after a determination is made by the Internal
Revenue Service or Executive's tax advisor that an item of compensation or
benefit payable hereunder constitutes a parachute payment under Code
Section 280G for which
6
<PAGE>
Executive is liable for an Excise Tax, Executive shall identify the nature
of the payment to the Company and submit to the Company the calculation of
the Excise Tax attributable to that payment and the Tax Gross-Up to which
Executive is entitled with respect to such tax liability. The Company will
pay such Tax Gross-Up to Executive (net of all applicable withholding
taxes, including any taxes required to be withheld under Code Section 4999)
within ten (10) business days after Executive's submission of the
calculation of such Excise Tax and the resulting Tax Gross-Up, provided
such calculations represent a reasonable interpretation of the applicable
law and regulations.
C. In the event that Executive's actual Excise Tax liability is determined
by a Final Determination to be greater than the Excise Tax liability
previously taken into account for purposes of the Tax Gross-Up paid to
Executive pursuant to this Section 6, then within ninety (90) days
following the Final Determination, Executive shall submit to the Company a
new Excise Tax calculation based upon the Final Determination. Within ten
(10) business days after receipt of such calculation, the Company shall pay
Executive the additional Tax Gross-Up attributable to such excess Excise
Tax liability.
D. In the event that Executive's actual Excise Tax liability is determined
by a Final Determination to be less than the Excise Tax liability
previously taken into account for purposes of the Tax Gross-Up paid to
Executive pursuant to this Section 6, then Executive shall refund to the
Company, promptly upon receipt, any federal or state tax refund
attributable to the Excise Tax overpayment.
7. Termination of Employment.
A. By Company. The Company may terminate Executive's employment under this
----------
Employment Agreement at any time for any reason, with or without Cause.
B. By Executive. Executive may terminate his employment under this
------------
Employment Agreement at any time, for any reason, with or without Cause, by
giving the Company at least thirty (30) days prior written notice of such
termination. However, such thirty (30) day notice requirement shall not
apply if Executive terminates his employment due to a Change in Control.
8. Release of Claims. All compensation and benefits under Section 4 above are
in consideration for Executive's execution of the Release, which Release
Executive does not subsequently revoke or attempt to revoke. If Executive does
not execute such a Release or if Executive attempts to revoke such Release,
Executive will not be entitled to any of the benefits provided under this
Employment Agreement.
9. Successors and Assigns. The provisions of this Employment Agreement shall
inure to the benefit of, and shall be binding upon, the Company, its successors
and assigns, and the Executive, the personal representative of his estate and
his heirs and legatees; provided, however, Executive may not assign, transfer or
delegate his rights or obligations hereunder and any attempt to do so shall be
void.
7
<PAGE>
10. Notices.
A. Any and all notices, demands or other communications required or
desired to be given hereunder by any party shall be in writing and shall be
validly given or made to another party if served either personally or, if
deposited in the United States mail, certified or registered, postage
prepaid, return receipt requested. If such notice, demand or other
communication shall be served personally, service shall be conclusively
deemed made at the time of such personal service. If such notice, demand or
other communication is given by mail, service shall be conclusively deemed
made at the time of the receipt by the party to whom such notice, demand or
other communication is sent. Any and all notices, demands or other
communications shall be delivered to the following address:
To the Company: NorthPoint Communications
303 2/nd/ Street
San Francisco, CA 94107
Fax: (415) 403-4004
To Executive: Michael Parks
151 Maxwelton Rd.
Piedmont, CA 94618
B. Any party hereto may change its address for the purpose of receiving
notices, demands and other communications as herein provided by a written
notice given in the manner aforesaid to the other party hereto.
11. Waivers. No waiver of any term or provision of this Employment Agreement
shall be valid unless such waiver is in writing signed by the party against whom
enforcement of the waiver is sought. In the case of the Company, such waiver
shall be signed by at least one (1) member of the Company's Board. The waiver
of any term or provision of this Employment Agreement shall not apply to any
subsequent breach of this Employment Agreement.
12. Governing Document. This Employment Agreement, the Option Agreement, the
Option Plan, and all other exhibits and attachments hereto constitute the entire
agreement and understanding of the Company and Executive with respect to the
terms and conditions of Executive's employment with the Company and the payment
of severance and other benefits, and supersedes all prior and contemporaneous
written or verbal agreements and understandings between Executive and the
Company relating to such subject matter. Where the terms of the Option
Agreement or Option Plan conflict with the terms of this Employment Agreement,
the terms of this Employment Agreement shall control. Any and all prior
agreements, understandings or representations relating to Executive's employment
with the Company are hereby terminated and cancelled in their entirety and are
of no further force or effect.
13. Governing Law. The provisions of this Employment Agreement shall be
construed and interpreted under the laws of the State of California applicable
to agreements executed and to be
8
<PAGE>
wholly performed within the State of California. If any provision of this
Employment Agreement as applied to any party or to any circumstance should be
adjudged by a court of competent jurisdiction to be void or unenforceable for
any reason, the invalidity of that provision shall in no way affect (to the
maximum extent permitted by law) the application of such provision under
circumstances different from those adjudicated by the court, the application of
any other provision of this Employment Agreement, or the enforceability or
invalidity of this Employment Agreement as a whole. Should any provision of this
Employment Agreement become or be deemed invalid, illegal or unenforceable in
any jurisdiction by reason of the scope, extent or duration of its coverage,
then such provision shall be deemed amended to the extent necessary to conform
to applicable law so as to be valid and enforceable or, if such provision cannot
be so amended without materially altering the intention of the parties, then
such provision shall be stricken and the remainder of this Employment Agreement
shall continue in full force and effect.
14. Deductions. All amounts paid to Executive hereunder are subject to all
withholdings and deductions required by law.
15. Amendment and Termination. This Employment Agreement may be modified,
amended or terminated only by a written agreement signed by Executive and an
authorized member of the Company's Board.
16. Remedies. All rights and remedies provided pursuant to this Employment
Agreement or by law shall be cumulative, and no such right or remedy shall be
exclusive of any other. A party may pursue any one or more rights or remedies
hereunder or may seek damages or specific performance in the event of another
party's breach hereunder or may pursue any other remedy by law or equity,
whether or not stated in this Employment Agreement.
17. Arbitration. Executive agrees that any and all disputes that he has with
the Company, or any of its employees, which arise out of his employment or under
the terms of his employment, shall be resolved through final and binding
arbitration, as specified herein. This shall include, without limitation,
disputes relating to this Employment Agreement, his employment by the Company or
the termination thereof, claims for breach of contract or breach of the covenant
of good faith and fair dealing, and any claims of discrimination or other claims
under Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Americans with Disabilities Act, the California Fair
Employment and Housing Act, the Employee Retirement Income Securities Act, the
Racketeer Influenced and Corrupt Organizations Act, or any other federal, state
or local law or regulation now in existence or hereinafter enacted and as
amended from time to time concerning in any way the subject of his employment
with the Company or its termination. The only disputes not covered by this
Employment Agreement are the following: (i) claims for benefits under the
unemployment insurance or workers' compensation laws, and (ii) claims concerning
the validity, infringement or enforceability of any trade secret, patent right,
copyright, trademark or any other intellectual property held or sought by the
Company or which the Company could otherwise seek; in each of these instances
such disputes or claims shall not be subject to arbitration, but rather, shall
be resolved pursuant to applicable law. Binding arbitration shall be conducted
in the county in which the Company's principal place of business is then located
in accordance with the rules and regulations of the American Arbitration
9
<PAGE>
Association (AAA). One arbitrator shall be chosen by mutual agreement of the
Company and Executive from the AAA Employment Advisory Panel. Each side shall
bear its own attorneys' fees; that is, the arbitrator shall not have authority
to award attorneys' fees unless a statutory section at issue in the dispute
------
authorizes the award of attorneys' fees to the prevailing party, in which case
the arbitrator has authority to make such award as permitted by the statute in
question. Executive understands and agrees that the arbitration shall be
instead of any jury trial and that the arbitrator's decision shall be final and
binding to the fullest extent permitted by law and enforceable by any court
having jurisdiction thereof.
18. Counterparts. This Employment Agreement may be executed in more than one
counterpart, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the day and year first above written.
NORTH POINT COMMUNICATIONS, INC.
By ____________________________________
Name:
Title:
EXECUTIVE:
_______________________________________
(Signature)
_______________________________________
(Print Name)
10
<PAGE>
EXHIBIT A
11
<PAGE>
EXHIBIT B
Dear Mr. Parks:
This letter is provided to confirm the agreement we have reached
regarding your separation from employment with NorthPoint Communications, Inc.,
(the "Company"). We have agreed that your employment with the Company will
terminate effective _________________, 200__.
In consideration of the benefits to be provided to you pursuant to
that certain in Employment Agreement between you and the Company dated March 7,
2000, you agree to the following:
A. You fully and forever release and promise not to institute or
participate in any legal proceeding against the Company or any of its directors,
officers, or employees with respect to any and all claims and causes of action
of any nature or kind, which are or may be claimed to exist, through and
including the date on which this Agreement is executed by you, including but not
limited to, any proceeding arising out of or relating in any way to your
employment with the Company or your separation from employment. You should
understand that you are forever waiving any rights you may have to pursue any
remedies available to you against the Company, including, but not limited to,
any employment-related cause of action, any tort or contract claims, any claim
for violation of any state, federal or local statute, ordinance or regulation
relating to employment or employment discrimination.
B. You have agreed to maintain in confidence all information you have
regarding the Company, its clients, the circumstances leading to your separation
from the Company and the terms of this Agreement, except to the extent you are
required by law to make any such disclosure.
C. This Agreement between us shall be deemed to have been entered into in
the State of California and shall be construed and interpreted in accordance
with the laws of this State. It supersedes any and all prior agreements between
you and the Company and contains the entire agreement between us.
D. You and the Company hereby expressly waive any and all rights and
benefits conferred by the provisions of Section 1542 of the Civil Code of the
State of California, which states as follows:
A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him
must have materially affected his settlement with the
debtor.
You may have up to ____________ (___) days in which to consider this
Agreement and you should review it with an attorney if you so desire. By your
signature below, you acknowledge that you have read and understand the terms of
this Agreement, and that you are signing it voluntarily and without coercion.
You further acknowledge that the waivers you
12
<PAGE>
have made in this Agreement are knowing, conscious and made with full
appreciation that you are forever foreclosed from pursuing any of the rights so
waived.
Very truly yours,
__________________________
Dated:____________________ By:________________________________
(Name, Title)
I hereby accept and agree to the terms and conditions set forth in the
above agreement.
Dated:___________________ ___________________________________
(Executive Name)
13
<PAGE>
EXHIBIT 11.1
SCHEDULE REGARDING COMPUTATION OF PER SHARE EARNINGS
(amounts in 000's, except share and per share amounts)
<TABLE>
<CAPTION>
Twelve Months Inception to
Ended December 31, December 31,
------------------- ------------
1999 1998 1997
--------- -------- ------------
<S> <C> <C> <C>
Net income (loss)........................... $(183,698) $(28,847) $ (1,440)
========= ======== ========
Weighted average common shares.............. 90,765 24,379 21,734
Common equivalent shares:
Dilutive stock options.................... -- -- --
Dilutive warrants......................... -- -- --
--------- -------- --------
Common and common equivalent shares......... 90,765 24,379 21,734
========= ======== ========
Earnings (loss) per common and common
equivalent share........................... $ (2.02) $ (1.18) $ (0.07)
========= ======== ========
</TABLE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Name of Subsidiary Jurisdiction of Incorporation
- ------------------ -----------------------------
<S> <C>
NorthPoint Communications, Inc. Delaware
NorthPoint Communications of Virginia, Inc. Virginia
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-84605 and No. 333-77853) of NorthPoint
Communications Group, Inc. of our report dated March 6, 2000 relating to the
financial statements, which appears in this Annual Report on Form 10-K. We also
consent to the incorporation by reference of our report dated March 6, 2000
relating to the financial statement schedule, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
San Francisco, California
March 30, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DECEMBER 31,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 95,019
<SECURITIES> 115,034
<RECEIVABLES> 11,392
<ALLOWANCES> 834
<INVENTORY> 4,439
<CURRENT-ASSETS> 244,605
<PP&E> 244,369
<DEPRECIATION> 17,245
<TOTAL-ASSETS> 479,160
<CURRENT-LIABILITIES> 83,054
<BONDS> 0
0
0
<COMMON> 126
<OTHER-SE> 307,935
<TOTAL-LIABILITY-AND-EQUITY> 479,160
<SALES> 21,140
<TOTAL-REVENUES> 21,140
<CGS> 50,354
<TOTAL-COSTS> 50,354
<OTHER-EXPENSES> 139,212
<LOSS-PROVISION> 815
<INTEREST-EXPENSE> 27,582
<INCOME-PRETAX> (183,698)
<INCOME-TAX> 0
<INCOME-CONTINUING> (183,698)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (183,698)
<EPS-BASIC> (2.02)
<EPS-DILUTED> (2.02)
</TABLE>
