Item 1.01 Entry into a Material Definitive Agreement.
DIP Facility
On March 19, 2020, Internap Corporation, as debtor and debtor-in-possession
("INAP"), and certain of its subsidiaries, as debtors and debtors-in-possession
(collectively with INAP, the "Company"), entered into a Senior Secured
Super-Priority Debtor-In-Possession Credit Agreement (the "DIP Facility") with
Jefferies Finance LLC ("Jefferies"), as administrative agent and collateral
agent, and the lenders party thereto (the "DIP Lenders"). As previously
reported by INAP on March 16, 2020, the Company filed voluntary petitions for
relief (collectively, the "Chapter 11 Cases") under Title 11 of the United
States Code with the United States Bankruptcy Court for the Southern District of
New York, White Plains Division (the "Bankruptcy Court") to effect a prepackaged
Chapter 11 plan of reorganization (the "Plan"). On March 19, 2020, the
Bankruptcy Court entered an interim order (the "Interim Order") to approve the
DIP Facility and the parties entered into such DIP Facility on the terms
approved by the Bankruptcy Court.
The DIP Facility provides for, among other things, term loans in an aggregate
principal amount of up to $75 million, (including the roll up of $5 million of
new incremental loans made on March 13, 2020 pursuant to the credit agreement
dated April 6, 2017 by and among the Company, Jefferies and the lenders party
thereto (as amended, the "Credit Agreement")). All loans under the DIP Facility
bear interest at a rate of either: (i) an applicable base rate plus 9% per annum
or (ii) LIBOR (with a floor of 1%) plus 10% per annum.
Use of Proceeds. The Company anticipates using the proceeds of the DIP Facility
to, among other things: (i) pay certain fees, interest, payments and expenses
related to the Chapter 11 Cases; (ii) fund the working capital needs and
expenditures of the Company during the Chapter 11 Cases; (iii) fund the
Carve-Out (as defined below); and (iv) pay other related fees and expenses in
accordance with budgets provided to the DIP Lenders.
Priority and Collateral. The DIP Lenders (subject to the Carve-Out as discussed
below): (i) are entitled to joint and several super-priority administrative
expense claim status in the Chapter 11 Cases; (ii) have a first priority lien on
substantially all unencumbered assets of the Company; and (iii) have a priming
first priority lien on any assets encumbered by the Credit Agreement. The
Company's obligations to the DIP Lenders and the liens and super-priority claims
are subject in each case to a carve out (the "Carve-Out") that accounts for
certain administrative, court and legal fees payable in connection with the
Chapter 11 Cases.
Affirmative and Negative Covenants. The DIP Facility contains certain
affirmative and negative covenants, including requiring the Company to provide
to the DIP Lenders a budget for the use of the Company's funds and the
achievement of certain milestones for the Chapter 11 Cases, among other
covenants customary in debtor-in-possession financings.
Events of Default. The DIP Facility contains certain events of default customary
in debtor-in-possession financings, including: (i) the failure to pay loans made
under the DIP Facility when due; (ii) appointment of a trustee, examiner or
receiver in the Chapter 11 Cases; (iii) certain violations of the Restructuring
Support Agreement dated March 13, 2020, between the Company and the lenders
party thereto; and (iv) the failure of the Company to use the proceeds of the
loans under the DIP Facility as set forth in the budget (subject to any approved
variances).
Maturity. The DIP Facility will mature on the earliest of (i) September 16,
2020; (ii) the date on which the loans under the DIP Facility become due and
payable, whether by acceleration or otherwise; (iii) the effective date of the
Plan; (iv) the sale of substantially all of the assets of the Company; (v) the
first business day on which the order approving the DIP Facility by the
Bankruptcy Court expires by its terms, unless a final order has been entered and
become effective prior thereto; (vi) the conversion or dismissal of the Chapter
11 Cases; (vii) dismissal of any of the Chapter 11 Cases unless consented to by
the DIP Lenders or (viii) the final order approving the DIP Facility by the
Bankruptcy Court is vacated, terminated, rescinded, revoked, declared null and
void or otherwise ceases to be in full force and effect.
The foregoing description of the DIP Facility does not purport to be complete
and is qualified in its entirety by reference to the full text of the DIP
Facility, a copy of which is filed as Exhibit 10.1 to this Current Report on
Form 8-K and is incorporated by reference in this Item 1.01.
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Item 2.03 Creation of a Direct Financial Obligation or an Obligation under
an Off-Balance Sheet Arrangement of a Registrant.
The information set forth in Item 1.01 above is incorporated by reference into
this Item 2.03.
Item 3.01 Notice of Delisting or Failure to Satisfy Continued Listing Rule or
Standard; Transfer of Listing.
On March 17, 2020, INAP received a letter (the "Nasdaq Letter") from the staff
of the Nasdaq Listing Qualifications Department (the "Staff") notifying INAP
that, as a result of the Chapter 11 Cases and in accordance with Nasdaq Listing
Rules 5101, 5110(b) and IM-5101-1, INAP's common stock (the "Common Stock") will
be delisted from The Nasdaq Stock Market ("Nasdaq"). The Nasdaq Letter stated
that the Staff's determination was based on: (i) the filing of the Chapter 11
Cases and associated public interest concerns raised by such Chapter 11 Cases;
(ii) concerns regarding the residual equity interest of the existing listed
securities holders; and (iii) concerns about INAP's ability to sustain
compliance with all requirements of continued listing on Nasdaq.
Based on the Nasdaq Letter, unless INAP requests an appeal of this determination
to a Nasdaq Hearings Panel, trading of the Common Stock will be suspended at the
opening of business on March 26, 2020, and a Form 25-NSE will be filed with the
Securities and Exchange Commission (the "SEC"), which will remove the Common
Stock from listing and registration on Nasdaq.
INAP does not intend to appeal Nasdaq's determination and, therefore, it is
expected that the Common Stock will be delisted. The transition does not affect
the Company's operations and does not change reporting requirements under SEC
rules. Upon delisting, INAP expects that its Common Stock will be quoted on the
OTC under the symbol "INAP" on March 26, 2020.
Item 8.01 Other Events.
Trading in INAP's Securities
INAP cautions that trading in INAP's securities (including, without limitation,
the Common Stock) during the pendency of the Chapter 11 Cases is highly
speculative and poses substantial risks. Trading prices for INAP's securities
may bear little or no relationship to the actual recovery, if any, by holders of
INAP's securities in the Chapter 11 Cases. INAP expects that its equity holders
will experience a significant or complete loss on their investment, depending on
the outcome of the Chapter 11 Cases.
Forward-Looking Statements
Certain statements in this Form 8-K contain "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include statements regarding the Company's ability to
obtain approval by the Bankruptcy Court of the Plan or any other plan of
reorganization, including the treatment of the claims of the Company's lenders,
vendors, trade creditors and equity holders, among others under the Plan; the
Company's ability to obtain approval with respect to motions in the Chapter 11
Cases and the Bankruptcy Court's rulings in the Chapter 11 Cases and the outcome
of the Chapter 11 Cases in general; the length of time the Company will operate
under the Chapter 11 Cases and the continued availability of operating capital
during the pendency of the Chapter 11 Cases or difficulty in forecasting the
liquidity requirements of the operations of the Company's business; the
potential adverse effects of the Chapter 11 Cases on the Company's business,
liquidity, results of operations or business prospects; the unpredictability of
the Company's financial results while in Chapter 11 proceedings; the ability to
execute the Company's business and restructuring plan, including the Company's
ability to continue to serve customers, suppliers and other business partners;
increased legal and advisor costs related to the Chapter 11 Cases and other
litigation and the inherent risks involved in a bankruptcy process; the risk
that the Chapter 11 Cases may be converted to cases under Chapter 7 of the
Bankruptcy Code; the risks related to the delisting of INAP's Common Stock from
Nasdaq and whether any market will develop for the trading of Common Stock
whether on the OTC or otherwise; the covenants and terms and conditions
contained by the DIP Facility being subject to multiple conditions, which
conditions may not be satisfied for various reasons, including for reasons
outside of the Company's control and any statements or assumptions underlying
any of the foregoing. These statements are often identified by words such as
"may," "will," "seeks," "anticipates," "believes," "estimates," "expects,"
"projects," "forecasts," "plans," "intends," "continue," "could" or "should,"
that an "opportunity" exists, that the Company is "positioned" for a particular
result, statements regarding the Company's vision or similar expressions or
variations. These statements are based on the beliefs and expectations of the
Company's management team based on information available at the time such
statements are made. Such forward-looking statements are not guarantees of
future performance and are subject to risks and uncertainties that could cause
actual results to differ materially from those contemplated by such
forward-looking statements.
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Therefore, actual future results and trends may differ materially from what is
forecast in such forward-looking statements due to a variety of factors,
including, without limitation: the decisions of the Bankruptcy Court;
negotiations with the Company's lenders, creditors and equity holders; the
Company's ability to meet the requirements, and compliance with the terms,
including various covenants, of the DIP Facility and any other financial
arrangement during the pendency of the Chapter 11 Cases; changes in the
Company's cash needs as compared to its historical operations or its planned
reductions in operating expense; adverse litigation; changes in domestic and
international demand for the Company's products; the Company's ability to
control operating costs and other expenses; that general economic conditions,
including as a result of the outbreak of COVID-19, may be worse than expected;
that competition may increase significantly; changes in laws or government
regulations or policies affecting the Company's current business operations.
These risks and other important factors discussed under the caption "Risk
Factors" in the Company's most recent Annual Report on Form 10-K filed with the
SEC and the Company's other reports filed with the SEC could cause actual
results to differ materially from those expressed or implied by forward-looking
statements made in this Form 8-K.
Given these risks and uncertainties, investors should not place undue reliance
on forward-looking statements as a prediction of actual results. All
forward-looking statements attributable to the Company or persons acting on the
Company's behalf are expressly qualified in their entirety by the foregoing
forward-looking statements. All such statements speak only as of the date made,
and the Company undertakes no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
10.1 Senior Secured Super-Priority Debtor-In-Possession Credit Agreement
dated as of March 19, 2020 among Internap Corporation, the guarantors
party thereto, Jefferies Finance LLC as administrative agent and
collateral agent and the lenders party thereto.
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