EXECUTION COPY
EXHIBIT 10.2
SUBORDINATED NOTES WAIVER AND AGREEMENT
SUBORDINATED NOTES WAIVER AND AGREEMENT, dated as of July 30, 2004
(this "AGREEMENT"), among CHOICE ONE COMMUNICATIONS INC., a Delaware corporation
(the "COMPANY"), and each of the banks, financial institutions and other
institutional lenders listed on the signature pages hereto (each a "WAIVER
LENDER and collectively, the "WAIVER LENDERS").
PRELIMINARY STATEMENTS
1. The Company is a party to that certain Bridge Financing Agreement,
dated as of August 1, 2000, as amended by an Amendment Relating to Loans to
Employees Basket, dated as of June 30, 2001, a Second Amendment to Bridge
Financing Agreement, dated as of August 24, 2001, and a Third Amendment to
Bridge Financing Agreement, dated as of September 13, 2002 (as so amended, the
"BRIDGE FINANCING AGREEMENT"), among the Company, the banks, financial
institutions and other institutional lenders parties to the Bridge Financing
Agreement, including the Waiver Lenders (collectively, the "BRIDGE FINANCING
LENDERS"), and Xxxxxx Xxxxxxx Senior Funding, Inc., as administrative agent (in
such capacity, the "BRIDGE FINANCING ADMINISTRATIVE AGENT") for the Bridge
Financing Lenders (as defined herein). Unless otherwise defined herein, terms
defined in the Bridge Financing Agreement and used herein shall have the
meanings given to them in the Bridge Financing Agreement.
2. The Company is also a party to that certain Third Amended and
Restated Credit Agreement, dated as of September 13, 2002, as amended by a
Letter Amendment and Waiver dated as of November 12, 2002, a Second Amendment
dated as of May 5, 2004, a Third Amendment dated as of May 12, 2004, a Fourth
Amendment dated as of May 25, 2004, and a Standstill Agreement and Conditional
Amendment to the Credit Agreement (the "FIRST STANDSTILL AGREEMENT"), dated as
of June 30, 2004 (as so amended, the "CREDIT AGREEMENT"), among the Company, the
subsidiaries of the Company listed on the signature pages thereto (each a
"BORROWER" and collectively the "BORROWERS"), the banks, financial institutions
and other institutional lenders parties to the Credit Agreement (collectively,
the "SENIOR FACILITY LENDERS"), General Electric Capital Corporation, as
administrative agent (in such capacity, the "SENIOR FACILITY ADMINISTRATIVE
AGENT"), collateral agent and syndication agent for the Senior Facility Lenders,
and the other agents signatories hereto.
3. Pursuant to the Bridge Financing Agreement, the Bridge Financing
Lenders have agreed to make, and have made, certain Loans and other extensions
of credit to the Company.
4. Pursuant to the Credit Agreement, the Senior Facility Lenders have
agreed to make, and have made, certain loans and other extensions of credit
(collectively, the "SENIOR FACILITY LOANS") to the Borrowers.
5. Pursuant to Section 2.6 of the Credit Agreement (including after
giving effect to the First Standstill Agreement), on July 30, 2004, the
Borrowers are obligated to pay to the Revolving Credit Lenders (as defined
therein) outstanding Revolving Credit Loans (as defined therein) in the
principal amount listed on Schedule I to the Senior Facility Agreements (as
defined below) (the "REQUIRED REVOLVING LOAN PAYMENT").
6. Pursuant to Section 4.3 of the Credit Agreement (including after
giving effect to the First Standstill Agreement), on July 30, 2004, the
Borrowers are obligated to pay to the Term A Lenders, the Term B Lenders, and
the Term D Lenders (each as defined therein) outstanding Term A Loans, Term B
Loans and Term D Loans (each as defined therein) respectively, in the principal
amounts listed on Schedule I to the Senior Facility Agreements (collectively,
the "REQUIRED TERM LOAN PAYMENTS", and together with the Required Revolving Loan
Payments, the "REQUIRED PRINCIPAL PAYMENTS."
7. Pursuant to Section 5.1(e) of the Credit Agreement (including after
giving effect to the First Standstill Amendment), on July 30, 2004, the
Borrowers are obligated to pay to the Senior Facility Lenders interest on the
outstanding LIBOR Rate Loans (as defined therein) in such amounts listed on
Schedule II to the Senior Facility Agreements (collectively, the "REQUIRED
INTEREST PAYMENTS", and together with the Required Principal Payments, the
"REQUIRED PAYMENTS").
8. In order to permit the Borrowers, the Company, the Senior Facility
Lenders and the Bridge Financing Lenders time to attempt to implement a possible
restructuring of the Senior Facility Loans and the Loans, the Borrowers and the
Company have requested that (i) the requisite Senior Facility Lenders under the
Credit Agreement agree to forebear from exercising any rights or remedies they
may have under the Credit Agreement or the other Loan Documents (as defined in
the Credit Agreement) that may arise as a result of the Borrowers not making the
Required Payments on July 30, 2004 (the "REQUIRED PAYMENT DATE"), until August
30, 2004, on and subject to the terms and conditions set forth in the Senior
Facility Agreements (as defined below); and (ii) the Required Lenders waive any
and all of their rights to take any action with respect to the rights and
remedies under the Bridge Financing Agreement that may arise as a result of the
Borrowers not making the Required Payments on the Required Payment Date.
9. The Waiver Lenders are members of an informal committee (the
"INFORMAL COMMITTEE") composed of Bridge Financing Lenders.
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration the sufficiency and receipt of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Waiver.
(a) Upon and subject to the occurrence of the Waiver Effective Date (as
defined in Section 3 below) and subject to the other terms and conditions set
forth below, each of the Waiver Lenders agrees that, notwithstanding a failure
by the Borrowers to make the Required Payments on the Required Payment Date,
from and after July 30, 2004 until the first to occur of (i) August 30, 2004
(the "WAIVER PERIOD") or (ii) the date on which a Waiver Termination Event
2
(as defined below) shall have occurred (the first such date to occur, the
"WAIVER TERMINATION DATE"), such Waiver Lender waives any Default or Event of
Default under the Loan Documents that may arise as a result of (and only as a
result of) the Required Payments not being made on or before the Required
Payment Date.
(b) Notwithstanding anything to the contrary contained in Section 1(a)
hereof, on the Waiver Termination Date (i) the waiver set forth in Section 1(a)
hereof shall automatically terminate and be of no further force or effect, (ii)
any Default or Event of Default that was the subject of or was waived under
Section 1(a) hereof (including the failure of the Borrowers to make any of the
Required Payments on the Required Payment Date) is, without further action,
reinstated and shall have the same force and effect as if the waiver had not
been granted pursuant hereto and (iii) subject to the terms of the Loan
Documents and applicable law, any Bridge Financing Lender may thereafter,
without limitation, xxx, ask for or demand from the Company, payment of all
principal, interest and other amounts due and payable under the Loan Documents
to such Bridge Financing Lender, in whole or in part, and otherwise enforce any
of its rights and remedies (including rights of acceleration and foreclosure)
provided for under the Loan Documents against any party. In furtherance of the
foregoing and notwithstanding the occurrence of the Waiver Effective Date, the
Company agrees that, subject to the agreement of the Waiver Lenders to waive the
Default and Event of Default under the Loan Documents, as and to the extent
expressly set forth in this Agreement, all rights and remedies of the Bridge
Financing Lenders under the Loan Documents with respect to the Company shall
continue to be available to the Bridge Financing Lenders from and after the
Waiver Effective Date.
(c) It is understood and agreed that interest shall continue to accrue
on and after the Waiver Effective Date on the outstanding Loans at the
applicable non-default rates provided for pursuant to the Loan Documents;
provided that it is also understood and agreed that from and after the date
hereof all subsequent Interest Periods will not exceed one month in duration.
SECTION 2. Waiver Events. If any of the following events (each a
"WAIVER EVENT") shall occur and be continuing:
(a) The Company shall (i) fail to pay all principal or interest on any
Loans, or any other amount payable hereunder or under any Loan Document, when
due in accordance with the terms of this Agreement or the Loan Documents, as the
case may be, or (ii) fail to comply with or breach any provisions of this
Agreement or of any Loan Document, other than the breach resulting from the
failure to make the Required Payments during the Waiver Period, subject (in the
case of clauses (i) and (ii) above) to applicable notice and grace periods, if
any; or
(b) Any representation or warranty made or deemed made by the Company
herein or any representation or warranty made or deemed made hereafter by the
Company in any Loan Document or which is contained in any certificate, document
or financial or other statement furnished by it at any time under or in
connection with any such Loan Document shall prove to have been incorrect or
misleading in any material respect on or as of the date made or deemed made; or
(c) Any of the Loan Documents to which the Company is a party shall
cease, for any reason (other than any termination in accordance with its terms),
to be in full force and
3
effect, or the Company shall so assert, or any Lien created by any of such Loan
Documents shall (except to the extent released in accordance with the terms of
such Loan Documents) cease to be enforceable in accordance with its terms; or
(d) The commencement by or against any Borrower or the Company of (i)
any foreclosure, bankruptcy or similar proceeding, (ii) any proceeding that
threatens or contests the Liens in favor of the Bridge Financing Administrative
Agent or the obligations of the Company under the Loan Documents, (iii) any
proceeding by any Senior Facility Lender seeking to enforce any remedy with
respect to any Senior Facility Loans or related obligations other than for the
payment of the Required Payments by any Senior Facility Lender which is not a
party to the Senior Facility Agreements, or (iv) any other proceeding that could
have a Material Adverse Effect, or the commencement of a proceeding by or on
behalf of the Company against any Bridge Financing Lender, the Bridge Financing
Administrative Agent, any Senior Facility Lender or the Senior Facility
Administrative Agent; or
(e) a Standstill Termination Event shall occur under the terms of the
Senior Facility Agreements (as defined herein),
then, upon the affirmative vote of the Required Lenders, such Waiver Event shall
constitute a "WAIVER TERMINATION EVENT". The occurrence of a Waiver Termination
Event shall cause the waiver granted under Section 1(a) of this Agreement to
immediately and automatically terminate and shall constitute an Event of Default
under the Bridge Financing Agreement and entitle the Bridge Financing Lenders to
exercise all of the rights and remedies exercisable upon an Event of Default
pursuant to the Bridge Financing Agreement, unless the Event of Default waived
hereunder shall have been cured or shall otherwise no longer be continuing.
SECTION 3. Conditions to Effectiveness of Waiver and Agreement. This
Agreement shall be effective as of the date first above written when, and only
when, on or before July 30, 2004, all of the following conditions precedent have
been fulfilled in a manner satisfactory to the Waiver Lenders (the "WAIVER
EFFECTIVE DATE"):
(a) the Required Lenders shall have signed this Agreement and the
Waiver Lenders shall have received counterparts of this Agreement executed by
the Company; and
(b) the Waiver Lenders shall have received evidence of agreements (the
"SENIOR FACILITY AGREEMENTS"), in form and substance satisfactory to the Waiver
Lenders, that the requisite lenders under the Credit Agreement have agreed,
subject to the effectiveness of this Agreement to forebear from exercising any
rights or remedies that they may have under the Credit Agreement and the other
loan documents relating thereto as a result of the Borrowers not making the
Required Payments on the Required Payment Date, until to the earlier of August
30, 2004 or the occurrence of a Standstill Termination Event (as defined
therein); and
(c) the Waiver Lenders shall have received evidence, in form and
substance satisfactory to the Waiver Lenders, that, subject to the effectiveness
of this Agreement, the conditions precedent set forth in Section 5 of the Senior
Facility Agreements have been satisfied; and
4
(d) the Waiver Lenders shall have received duly certified resolutions
or other satisfactory evidence of the authority of the Company to enter into and
perform this Agreement; and
(e) payment by the Company of all billed and unpaid fees and expenses
of the legal counsel and financial advisors to the Informal Committee in
connection with all matters relating to this Agreement and the Loan Documents
and the restructuring of the Borrowers and the Company.
SECTION 4. Representations and Warranties of the Company. To induce the
Waiver Lenders to enter into this Agreement, the Company hereby represents and
warrants to the Waiver Lenders party hereto the following:
(a) The execution, delivery and performance by the Company of this
Agreement are within the Company's corporate powers, have been duly authorized
by all necessary corporate action, and do not (i) contravene the Company's
constituent documents, (ii) violate any law (including, without limitation, the
Securities Exchange Act of 1934), rule, regulation (including, without
limitation, Regulation X of the Board of Governors of the Federal Reserve
System), order, writ, judgment, injunction, decree, determination or award
applicable to the Company, or (iii) conflict with or result in the breach of, or
constitute a default under, any contractual obligation, subject to Section 3(c)
hereof. As of the Waiver Effective Date, neither the Company nor any Borrower is
in violation of any such law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award or, subject to the execution and
delivery of this Agreement by the Waiver Lenders, in breach of any such
contract, loan agreement, indenture, mortgage, deed of trust, lease or other
instrument, the violation or breach of which could reasonably be expected to
have a Material Adverse Effect.
(b) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body or, subject to the
execution and delivery of this Agreement by the Waiver Lenders, any other third
party is required to be obtained by the Company in connection with the execution
and delivery, or performance by the Company of any of its obligations under,
this Agreement.
(c) This Agreement has been duly executed and delivered by the Company
and is the legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
laws relating to or limiting creditors' rights or by equitable principles
generally.
(d) Other than as expressly contemplated herein, (i) the
representations and warranties made by the Company in the Loan Documents, except
as may have been disclosed in the Company's public filings to date and other
than as provided in Section 3.16 of the Bridge Financing Agreement, are true and
correct in all material respects on and as of the date hereof, after giving
effect to the effectiveness of this Agreement, as if made on and as of the date
hereof (unless stated to relate solely to an earlier date, in which case such
representations and warranties were true and correct in all material respects as
of such earlier date) and (ii) no Default or Event
5
of Default has occurred and is continuing, other than the Default and Event of
Default arising as a result of the Borrowers not making the Required Payments on
the Required Payment Date.
(e) If the Senior Facility Agreements are executed by such number of
Secured Facility Lenders that are required to consent to the granting of any
forbearance with respect to the rights and remedies of the Senior Facility
Lenders under the Credit Agreement, but not by all Senior Facility Lenders, no
default has occurred and is continuing under or in connection with the Credit
Agreement, other than any default arising as a result of the Borrowers not
making the Required Payments on the Required Payment Date.
SECTION 5. Representations and Warranties of the Waiver Lenders. To
induce the Company to enter into this Agreement, each Waiver Lender, severally,
but not jointly, represents and warrants to the Company that such Waiver Lender
is the beneficial owner of the Notes in the principal amount set forth opposite
its signature to this Agreement.
SECTION 6. Reference to and Effect on the Loan Documents.
(a) The Bridge Financing Agreement and each of the other Loan Documents
are and shall continue to be in full force and effect and are hereby in all
respects ratified and confirmed.
(b) The execution, delivery and effectiveness of this Agreement shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of any Bridge Financing Lender or the Bridge Financing
Administrative Agent under any of the Loan Documents, nor constitute a waiver of
any provision of any of the Loan Documents.
SECTION 7. Amendments. This Agreement may not be amended, supplemented
or modified except in accordance with the provisions of this Section 7. The
Required Lenders and the Company may, or (with the written consent of the
Required Lenders) the Bridge Financing Administrative Agent and the Company may,
subject to the requirements of Section 9.02 of the Bridge Financing Agreement,
from time to time, (a) enter into written amendments, supplements or
modifications hereto for the purpose of adding any provisions to this Agreement
or changing in any manner the rights or obligations of the Waiver Lenders or of
the Company hereunder or (b) waive, on such terms and conditions as the Required
Lenders, or the Bridge Financing Administrative Agent, as the case may be, may
specify in such instrument, any of the requirements of this Agreement or any
Waiver Event and its consequences; provided, that, no such waiver and no such
amendment, supplement or modification shall amend, modify or waive any provision
of this Section 7 without the consent of each Bridge Financing Lender party
hereto. Any such waiver and any such amendment, supplement or modification shall
apply equally to each of the relevant Waiver Lenders and shall be binding upon
the Company, the Waiver Lenders, the Bridge Financing Administrative Agent and
all future Waiver Lenders.
SECTION 8. Costs and Expenses. The Company agrees to pay all reasonable
costs and expenses associated with the preparation, execution, delivery,
administration, and enforcement of this Agreement and all related matters during
the Waiver Period including, without limitation, the reasonable fees and
expenses of the Informal Committee's counsel and
6
financial advisor (in each case, whether incurred prior to or after the Waiver
Effective Date with respect to this Agreement).
SECTION 9. Tolling of Statute of Limitations. Each and every statute of
limitations or other applicable law, rule or regulation governing the time by
which any Waiver Lender must commence legal proceedings or otherwise take any
action with respect to exercising any of its respective rights, powers or
remedies directly or indirectly against the Company with respect to any breach
or default existing on or prior to the Waiver Termination Date, including,
without limitation, actions under or in respect of any of the Bridge Financing
Agreement or any other Loan Document, shall be tolled during the Waiver Period.
The Company agrees, to the fullest extent permitted by law, not to include such
period of time in any assertion by it at any time that a statute of limitations
or other applicable law, rule or regulation bars or otherwise acts as a defense
(whether equitable or legal) to any legal proceeding or other action by any
Bridge Financing Lender in exercise of its respective rights, powers or
remedies, directly or indirectly, with respect to any or all of the breaches or
defaults referred to in the immediately preceding sentence.
SECTION 10. Agreement Not a Defense. The Company agrees that, subject
to the agreement of the Waiver Lenders to waive the Default and Event of Default
under the Loan Documents, as and to the extent expressly set forth herein, the
agreements of the Waiver Lenders under this Agreement shall not constitute a
waiver by any of the Waiver Lenders of, or a defense by the Company to, the
exercise by any of the Waiver Lenders of any right, power or remedy which any of
the Waiver Lenders may have under or in respect of the Bridge Financing
Agreement or any other Loan Document or any other agreement or document relating
thereto (and including rights, powers and remedies at law, in equity or by
statute).
SECTION 11. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 12. Acknowledgments and Agreements.
(a) Liens and Security Interests. The Company ratifies and reaffirms
the validity and enforceability (without defense, counterclaim or offset of any
kind) of the Liens and other security interests granted to secure any of the
Loans to and for the benefit of the Bridge Financing Lenders, pursuant to the
Loan Documents, subject in all respects to the Intercreditor Agreement. The
Company acknowledges and agrees that all such Liens and security interests
granted by it shall continue to secure the Loans from and after the effective
date hereof, subject in all respects to the Intercreditor Agreement. The Company
further agrees, subject in all respects to the Intercreditor Agreement, to take
promptly any and all actions reasonably requested by the Bridge Financing
Administrative Agent with respect to the granting, perfection and second
priority of the Liens, purported to be granted by the Loan Documents.
(b) Validity of Obligations. The Company acknowledges and agrees that
it is truly and justly indebted to the Bridge Financing Lenders for the payment
of the principal, interest and other amounts payable by the Company under the
Loan Documents, without
7
defense, counterclaim or offset of any kind, and the Company ratifies and
reaffirms the validity, enforceability and binding nature of such indebtedness.
SECTION 13. WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND THE WAIVER
LENDERS IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF THE COMPANY OR ANY WAIVER LENDER IN
THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
SECTION 14. Execution in Counterparts. This Agreement may be executed
by one or more of the parties to this Agreement on any number of separate
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
[THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]
8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
CHOICE ONE COMMUNICATIONS INC.
By: /s/ Xxxx Xxxxxxxxx
----------------------------
Title: CFO
----------------------
Principal Amount QUANTUM PARTNERS LDC
of Notes: $133,164,308.07
By: /s/ Xxxxx X. Xxxxxxxxx
--------------------------
Authorized Signatory
Principal Amount CREDIT SUISSE FIRST BOSTON
of Notes: $54,853,607.00 INTERNATIONAL
By: /s/ Xxxxx Xxxxxxxxxxx
---------------------------
Authorized Signatory
/s/ Xxxxxx Xxxxxxxxx
---------------------------
Authorized Signatory
