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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-29-092
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 54-1708481
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1700 Old Meadow Road Suite 300 22102
McLean, VA (Zip Code)
(Address of principal executive offices)
(703) 902-2800
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
None N/A
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
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 the registrants' 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]
Non-affiliates of Primus Telecommunications Group, Incorporated held
28,434,120 shares of Common Stock as of February 29, 2000. The fair market value
of the stock held by non-affiliates is $1,247,547,015 based on the sale price of
the shares on February 29, 2000.
As of February 29, 2000, 37,221,085 shares of Common Stock, par value
$.01, were outstanding.
Documents Incorporated by Reference:
Portions of the definitive Proxy Statement to be delivered to Stockholders
Stockholders in connection with the Annual Meeting of Stockholders are
incorporated by reference into Part III.
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PART I
ITEM 1. BUSINESS
General
We are a facilities-based global total service provider offering bundled
international and domestic Internet, data and voice services to business and
residential retail customers and other carriers located in the United States,
Canada, Brazil, the United Kingdom, continental Europe, Australia and Japan. We
seek to capitalize on the increasing demand for high-quality international
communications services which is being driven by the globalization of the
world's economies, the worldwide trend toward telecommunications deregulation
and the growth of data and Internet traffic.
We primarily target customers with significant international long distance
usage, including small- and medium-sized enterprises (SMEs), multinational
corporations, ethnic residential customers and other telecommunications carriers
and resellers. We also intend to target Internet-based businesses as we deploy
our global ATM+IP network. As of December 31, 1999, we had approximately 1.9
million customers. We provide our customers with a portfolio of competitively
priced services, including:
. International and domestic long distance services and private networks;
. Prepaid and calling cards, toll-free services and reorigination
services; and
. Local services in Australia, Canada, Puerto Rico and the United States
Virgin Islands.
Through our subsidiary iPRIMUS.com, we target SMEs and residential customers for
data and Internet services, including dial-up, dedicated and high-speed Internet
access, virtual private networks, Web hosting, data center co-location,
voice-over IP services, e-commerce services and other data services.
By constructing and expanding our network, we have reduced costs, improved
service reliability and increased flexibility to introduce new products and
services. We believe that, as the volume of telecommunications traffic carried
on our network increases, we should continue to improve profitability as we more
fully utilize our network capacity and realize economies of scale. Currently, 29
countries are connected directly to our network. We expect to continue to expand
our network through additional investment in undersea and domestic fiber optic
cable systems, international gateway and domestic switching facilities and
international satellite earth stations as customer demand justifies the capital
investment.
We are a Delaware corporation that was formed in 1994.
Strategy
Our objective is to become a leading global provider of international and
domestic Internet, data, e-commerce and voice services. Key elements of our
strategy to achieve this objective include:
. Provide One-Stop Shopping for Internet, Data and Voice Services: We
offer in selected markets, and intend to offer our customers in each
of the markets we serve, a portfolio of bundled Internet, data and
voice services. We typically enter international markets in the early
stages of deregulation by initially offering international long
distance voice services and subsequently expanding our portfolio of
offerings to include Internet access and data services. For example,
through our recent acquisitions in Canada, we now offer our business
and residential customers a comprehensive array of voice services,
including international and domestic long distance, as well as
Internet access and enhanced services, including Internet roaming and
Web hosting. By bundling our traditional voice services with data and
Internet services, we believe that we will attract and retain a strong
base of retail customers, which are traditionally the highest margin
communications customers.
. Expand the Reach and Data Capabilities of Our Global Network: Through
the geographic expansion of our global network, we expect to be able
to increase the amount of our on-net traffic and thereby continue to
reduce transmission costs and operating costs as a percentage of
revenue, improve gross margins, reduce reliance on other carriers, and
improve service reliability. In addition, we are leveraging our
existing network to provide a full range of asynchronous transfer mode
(ATM), frame relay and Internet protocol-based data and voice
communications over a global broadband ATM+IP network. Our commitment
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and ability to provide reliable, carrier-grade voice, data and
Internet communications over our global network on a standard platform
recently enabled us to qualify as a Cisco powered network. We also
expect to offer Web hosting services at various locations in our core
markets, beginning in the second quarter of 2000 when we intend to
offer Web hosting services co-located at some of our major switch
sites. In addition, through our satellite earth station in London, we
currently offer Internet and data transmission services in the Indian
Ocean/Southeast Asia region. Our target satellite customers are PTTs,
other communications carriers, ISPs and multinational corporations in
developing countries. We plan to replicate this strategy by offering
Internet and data services in Latin America and the Pacific Rim
through the addition of four satellite earth stations, two on each of
the east and west coasts of the United States.
. Build Base of Retail Customers with Significant International
Communications Usage: We are focused on building a retail customer
base with significant demand for international Internet, data and
voice services. These customers typically include small- and medium-
sized enterprises, multinational corporations, Internet-based
businesses and ethnic residential customers. We are particularly
targeting SME customers worldwide by focusing on the need SMEs have
for secure Internet and data services and e-commerce services and
solutions. Our strategic focus on retail customers reflects that we
generally realize a higher gross margin as a percentage of net revenue
from these customers compared to carrier customers. By offering high
quality services at competitive prices through experienced sales and
service representatives and bundling a comprehensive portfolio of
communications services, we intend to further broaden our retail base.
. Pursue Early Entry Into Selected Deregulating Markets: We seek to be
an early entrant into selected deregulating communications markets
worldwide where we believe there is significant demand for voice, data
and Internet services as well as substantial growth and profit
potential. We believe that early entry into deregulating markets
provides us with competitive advantages as we develop sales channels,
establish a customer base, hire personnel experienced in the local
communications industry and achieve name recognition prior to a large
number of competitors entering these markets. We intend to concentrate
our immediate expansion plans in those markets that are more
economically stable and are experiencing more rapid deregulation, such
as continental Europe and Canada. Subsequently, we plan to expand in
additional markets, including Japan, other parts of the Asia-Pacific
region and Latin America.
. Grow Through Selected Acquisitions, Joint Ventures and Strategic
Investments: As part of our business strategy, we frequently evaluate
potential acquisitions, joint ventures and strategic investments, some
of which may be material, with companies in the voice, data and
Internet businesses. We view acquisitions, joint ventures and
strategic investments as a means to enter additional markets, add new
products and market segments (e.g., DSL and Web hosting), expand our
operations within existing markets, and generally accelerate the
growth of our customer and revenue base. We target voice and data
service providers, ISPs and Web hosting companies with an established
customer base, complementary operations, telecommunications licenses,
experienced management or network facilities in our target markets. In
particular, we anticipate that we will make additional investments in
or acquisitions of ISPs and other Internet-related and data service
businesses worldwide.
RECENT DEVELOPMENTS, INVESTMENTS AND ACQUISITIONS
Acquisition of Shore.Net
In March 2000, we acquired Eco Software, Inc. (Shore.Net), a U.S. based,
business-focused ISP for $43.1 million, comprised of $21.6 million in cash and
489,163 shares of our common stock.
Hewlett-Packard Alliance and Investment
In March 2000, we entered into a strategic business alliance agreement with
Hewlett-Packard Company pursuant to which Hewlett-Packard will provide us
products and services to enable us to develop data centers in Europe, Australia,
Japan and Brazil. These data centers will allow us to deliver our customers'
e-commerce, Web hosting and other data/Internet services. Hewlett-Packard also
agreed to purchase up to $50 million in convertible debt. Such debt will bear
interest at a rate of 9.25% per annum and is convertible into our common stock
at a price of $60 per share. We have the right under certain circumstances to
require Hewlett-Packard to convert the debt to equity. To date, Hewlett-Packard
has invested $25 million. Until converted, the debt will be secured by equipment
purchased from Hewlett-Packard with the proceeds of the investment.
Acquisition of Citrus
In February 2000, we acquired 51% of CS Communications System GmbH and CS
Network GmbH (Citrus), a reseller of voice traffic and seller of
telecommunication equipment and accessories for $0.4 million, comprised of
$0.3 million in cash and 2,092 shares of our common stock.
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Acquisition of LCR Telecom
In February 2000, we acquired over 96% of the common stock of LCR Telecom Group,
Plc in exchange for 2,100,920 shares of our common stock valued at $85.9
million. The purchase price is subject to adjustment and could be increased to
a total of 2,463,000 shares.
LCR Telecom operates principally in European
markets and is an international telecommunications company providing least cost
routing, international callback and other value added services, primarily to
small-and medium-sized enterprises (SMEs). Least cost routing involves the
selection, on a call-by-call basis, of the most cost-effective carrier for each
call and enables customers to benefit from volume purchasing, giving them
substantial cost savings previously only available to larger organizations with
extensive telecommunications volume. LCR Telecom has grown from about 1,000
customers at the beginning of 1997 to approximately 10,000 customers currently,
primarily in the United Kingdom, France, Spain and Belgium.
Issuance of Convertible Subordinated Debentures
In February and March 2000, we completed the sale of $300 million in aggregate
principal amount of 5 3/4% convertible subordinated debentures due 2007. The
debentures are convertible into approximately 6,025,170 shares of our common
stock at a conversion price of $49.7913.
Strategic Partnership with Sitara Networks
In February 2000, we entered into a multi-year product and service agreement
with, and made a $3 million equity investment in, Sitara Networks. Sitara's
quality-of-service (QoS) technology permits users to monitor and manage
bandwidth consumption remotely to ensure mission critical applications are
adequately supported. Pursuant to the arrangement, we will use Sitara Networks'
QoS appliances as a complement to our global ATM+IP network and Sitara will
provide installation and service support.
Acquisition of Infinity Online
In January 2000, we acquired Infinity Online Systems, an Internet service
provider based in Ontario, Canada, for $2.2 million, comprised of $1.1 million
in cash and 29,919 shares of our common stock. The acquisition increases our
total Internet subscribers in Canada by over 10,000 to nearly 80,000, gives us
an established Internet protocol infrastructure to deliver Web hosting and Web
design to the SME market and also gives us two Internet content sites,
"filedudes.com" and "gamedudes.com." These sites are part of a series of content
sites known as "thedudes.net," an Internet-based distribution network for free
software and down-loadable files on a variety of topics.
U.S. Broadband Backbone
In December 1999, we expanded our existing fiber capacity agreement with Qwest.
Pursuant to this expansion, we have agreed to purchase approximately $23.2
million of fiber capacity which will provide us with an ATM+IP based nationwide
broadband backbone of nearly 11,000 route miles of fiber optic cable in the U.S.
and will provide us with private Internet peering at select sites in the U.S.
and overseas. The agreement initially provides us with access to OC-3 and OC-12
expandable to OC-48 capacity between our six existing U.S. gateway switches and
up to at least nine future points of presence (POPs) in 12 U.S. cities including
New York, Los Angeles, San Francisco, Chicago, Boston and Washington, DC. Under
the agreement, we also may choose to expand to OC-48 capacity as our bandwidth
requirements increase.
Pilot Investment
In December 1999, we entered into a strategic agreement with Pilot Network
Services, a provider of secure, subscription-based e-business services. Pilot
has agreed to configure our network operations centers, hosting centers and data
centers around the world with Pilot's proprietary Heuristic Defense
Infrastructure(TM) (HDI) and to provide real time security on our global
network. HDI technology provides us with advanced Internet security that will
enable our customer base to transmit secure data to conduct business-to-business
e-commerce on a global basis. In addition, Pilot will utilize our network to
provide secure access Web hosting, Application Service Provider (ASP) hosting
and e-business services to its corporate clients.
In connection with the strategic business arrangement, in January 2000, we made
a $15 million strategic investment in Pilot pursuant to which we purchased
919,540 shares, or 6.3%, of Pilot's common stock at a price of $16.3125 per
share. We also received a warrant to purchase an additional 200,000 shares at
$25.00 per share. K. Paul Singh, our Chairman and Chief Executive Officer, has
been elected to Pilot's Board of Directors.
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Acquisition of DigitalSelect
In November 1999, we purchased substantially all of the assets of DigitalSelect,
LLC, a provider of digital subscriber line (DSL) high-speed Internet access and
Web content services to over 2,000 small and medium-sized enterprises located
primarily in the Eastern seaboard region of the U.S. DSL technology allows for
secure high-speed Internet access using the existing copper phone wires found in
nearly every home and business today. Once installed, the high-speed DSL
connection is secure and is "always on," removing the need to dial-in each time
a user wants to connect to the Internet.
We paid the $7.5 million purchase price with $5.3 million in cash, the issuance
of a $0.7 million short-term promissory note and 69,023 shares of our common
stock valued based on a 20 day trailing average of the last sale price of our
common stock.
Acquisition of 1492 Technologies
In November 1999, we purchased substantially all of the assets of 1492
Technologies, LLC, an Internet Web site development, consulting and service
firm. With the acquisition of this company, we hope to help Primus clients
develop Internet operations, network management and hosting services and also
work with customers to evolve their web presence as new technologies become
available.
The purchase price of $0.5 million was paid for with $0.2 million in cash and
15,500 shares of our common stock valued based on a 20 day trailing average of
the last sale price of our common stock.
Acquisition of Matrix Internet
In November 1999, we invested $11.4 million in cash in exchange for 51% of
Matrix Internet, S.A., Brazil's fifth largest ISP. Matrix currently has a
subscriber base of about 54,000 active corporate, governmental and consumer
users. Matrix's network consists of nearly 50 POPs in most major Brazilian
cities which are connected by Matrix's own fiber backbone. We also have options
to acquire the remaining 49% ownership interests in Matrix not currently owned
by us.
Acquisition of Telegroup Retail Assets
On June 30, 1999 and effective as of June 1, 1999, we acquired the global retail
business of Telegroup, including the acquisition of selected Telegroup foreign
subsidiaries, which includes:
. Approximately 372,000 retail customers located primarily in the United
States, Europe and Canada;
. Two carrier grade switches, one located in the New York City area and
one located in London;
. Approximately 20 programmable switching platforms and POPs located in
the United States, Europe and Japan;
. Telegroup's global network of sales agents;
. A Web-based order-entry and provisioning system for agents; and
. A global network operations center and call center.
We paid the $71.9 million purchase price, plus $23.3 million for certain current
assets, by issuing $45.5 million in aggregate principal amount of our 11 1/4%
senior notes due 2009 and by issuing a $4.6 million short-term promissory note
and paying the remainder in cash. The acquisition had an effective date of
June 1, 1999 such that the financial results of the acquired business have
been included in the Company's results beginning June 1, 1999.
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Acquisition of AT&T Canada Consumer Business
On May 31, 1999, we purchased the residential long distance customer base and
customer support assets and residential Internet customers and network of AT&T
Canada and ACC Telenterprises for a purchase price of $36.7 million ($27.1
million in cash and $9.6 million in debt). We also entered into a strategic
alliance pursuant to which AT&T Canada agreed to:
. provide us with underlying network services in Canada for five years;
. provide Canadian domestic termination for our global customers;
. provide customer support services to the customer base transferred to
us for up to twelve months after the purchase; and
. license to us its bill face for six months after the purchase.
With this transaction, we acquired approximately 428,000 retail voice customers,
including 28,000 residential Internet customers, customer support assets, and
related POPs.
Internet and Data Services
In May 1999, we organized our Internet and data services business to be operated
by our subsidiary, iPRIMUS.com, which provides services in some of the markets
where we operate. We are leveraging our existing global network infrastructure
to deploy a global broadband ATM+IP network optimized for e-commerce and
Internet Protocol-based data and voice services. In December 1999, we entered
into an agreement with Qwest to purchase a nationwide broadband OC-48 fiber
optic backbone ring, which will constitute the U.S. portion of our global ATM+IP
network. We expect deployment of this ring to be completed in the second quarter
of 2000. In February 1999, we acquired Globalserve Communications, a leading ISP
in Canada, and we acquired the remaining 40% interest in Hotkey Internet
Services that we did not previously own. We also recently acquired two German
ISPs, TCP/IP, which operates an Internet backbone in Germany with over 20 POPs
nationwide, and TouchNet. As a result of these acquisitions, we are now
providing Internet services to business and residential customers in Australia,
Canada and Germany. With our satellite earth station in London, we offer
Internet transmission services in the Indian Ocean/Southeast Asia region. We
intend to deploy additional satellite earth stations to service Latin America
and the Pacific Rim. Our commitment and ability to provide voice, data and
Internet communications over our global integrated communications network
enabled us to qualify as a Cisco-powered network.
Global Crossing Capacity Purchase Agreements
On May 24, 1999, we entered into capacity purchase agreements with Global
Crossing Holdings Ltd. We agreed to purchase up to $50 million of fiber capacity
from Global Crossing and Global Crossing agreed to purchase up to $25 million of
services on our global satellite network, subject to certain conditions.
Acquisition of London Telecom
On March 31, 1999, we acquired London Telecom, a provider of domestic and
international long distance services to approximately 162,000 residential and
business customers in Canada and substantially all of the operating assets of
Wintel CNC Communications, Inc. and Wintel CNT Communications, Inc., which are
Canadian-based long distance telecommunications providers affiliated with the
London Telecom companies, for $50 million in cash. As part of this acquisition,
we acquired network assets as well as call centers located in Toronto and
Vancouver. We intend to continue marketing the London Telecom services under the
London Telecom brand names.
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Description of Operating Markets
The following is a description of our operations in each of our primary service
regions:
United States. In the United States, we provide long distance services to small-
and medium-sized businesses, residential customers, multinational corporations
and other telecommunication carriers. We operate international gateway telephone
switches in the New York City area, Washington, Fort Lauderdale and Los Angeles
which are connected with countries in Europe, Latin America and the Asia-Pacific
region through owned and leased international fiber cable systems. We maintain a
direct sales organization in New York and Virginia to sell to business customers
and have a telemarketing center for small business sales in Tampa. To reach
residential customers, we advertise nationally in ethnic newspapers and other
publications, offering discounted rates for international calls to targeted
countries. We also utilize independent agents to reach and enhance sales to both
business and residential customers and have established a direct sales force for
marketing international services to other long distance carriers. Additionally,
as a result of the TresCom merger, we have expanded our marketing activities to
customers in the United States seeking to transmit international calls to Latin
America, consisting principally of businesses with sales or operations in Latin
America, as well as the growing Hispanic population in the United States. We
maintain a national customer service center in Florida staffed with
multi-lingual representatives and operate a 24-hour global network management
control center in Virginia that monitors our network. We also operate network
management control centers in London, Sydney and, following the Telegroup
acquisition, in Cedar Rapids, Iowa. In addition to international long distance
services, we provide local service in Puerto Rico and the United States Virgin
Islands.
In the United States, we also offer DSL Internet access services to business and
residential customers through our agreements with NorthPoint Communications and
Covad Communications as well as through the assets acquired from DigitalSelect
in November 1999. In addition, we provide Web site development and services
through our acquisition of 1492 Technologies in November 1999.
Canada. In Canada, we provide long distance services to small- and medium-sized
businesses, residential customers and other telecommunication carriers and have
sales and customer service offices in Vancouver, Toronto and Montreal. We
operate international gateway switches in Toronto and Vancouver, maintain
points-of-presence in Ottawa, Montreal and Calgary and lease interexchange
circuits in Canada. In Canada, we offer Internet access services through our
February 1999 acquisition of GlobalServe Communications, Inc. In March 1999, we
acquired London Telecom Network, Inc. and related entities which provide long
distance telecommunications services in Canada. In May 1999, we purchased
customer bases and assets of AT&T Canada. In June 1999, we acquired Telephone
Savings Network, Ltd., a reseller of local services to small- and medium-sized
business customers in Canada.
As of December 31, 1999, we had approximately 167,023 business customers and
964,572 residential customers in North America.
Europe. We are a fully-licensed carrier in the United Kingdom and provide
domestic and international long distance services to residential customers,
small businesses, and other telecommunications carriers. We operate an Ericsson
AXE-10 international gateway telephone switch in London, which is directly
connected to the United States and is directly connected to continental Europe
via our international gateway switch in Frankfurt, Germany. In addition, we have
completed the construction in London of an Intelsat earth station and lease
capacity on the Intelsat-62 satellite. This new earth station is operational and
is able to carry voice, data and Internet traffic to and from countries in the
Indian Ocean/Southeast Asia region. Our European operations are headquartered in
London, where we maintain both a 24-hour customer service call center and a
24-hour network management control center which monitors our network in the
United Kingdom. We market our services in the United Kingdom using a combination
of direct sales, agents, and direct media advertising primarily to ethnic
customers who make a higher-than-average percentage of international calls.
We are in the process of expanding our services and network to continental
Europe which has recently begun the process of deregulation of its
telecommunications markets. We currently hold a Class-4 switched voice telephone
license in Germany, an L34.1 switched voice license in France and a voice
services license in Switzerland. Our international gateway switch in Paris
recently became operational, and by the end of the second quarter of 2000, our
network in Europe is expected to include the Frankfurt international gateway
switch which is currently operational, and up
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to 11 additional switches in various countries. Through the TelePassport/USFI
acquisition, we acquired a base of small business customers in Germany to whom
we provide reorigination services, establishing a platform for our expansion
into that market. Additionally, we have opened our first continental European
sales office in Frankfurt and are in the process of building a direct sales
force and engaging independent sales agents to market our services. We have
recently acquired two German ISPs, TCP/IP, which operates an Internet backbone
in Germany with over 20 POPs nationwide, and TouchNet. With these acquisitions
we can now begin to offer bundled voice, data and Internet services to existing
and new customers in Germany.
As of December 31, 1999, we had approximately 2,698 business customers and
86,032 residential customers in the United Kingdom.
Asia-Pacific. We are a licensed carrier permitted to own and operate
transmission facilities in Australia. We are the fourth largest long distance
company in Australia based on revenues, providing domestic and international
long distance services, data and Internet access services, as well as local and
cellular service on a resale basis, to small- and medium-sized business
customers and ethnic residential customers. We have invested substantial
resources over the past three years to build a domestic and international long
distance network to transform our Australian operations into a facilities-based
telecommunications carrier. During 1997, we installed and began operating a
five-city switched network using Northern Telecom switches in Sydney, Melbourne,
Perth, Adelaide, and Brisbane. We purchased international fiber cable capacity
during 1997 and linked the Australian network to the United States via the
TPC-5, APCN, and Jasaurus cable systems, as well as to New Zealand. We became a
fully licensed facilities-based telecommunications carrier on July 1, 1997. In
August 1997, equal access was introduced in Australia, and we began the process
of migrating and connecting customers directly onto our own network. We maintain
both a 24-hour customer service center and a network management control center
in Australia.
In March 1998, we purchased a controlling interest in Hotkey, an Australia-based
ISP, and in April 1998, we acquired all of the outstanding stock of Eclipse, an
Australia-based data communications service provider. In February 1999, we
purchased the remaining stock in Hotkey. The Hotkey and Eclipse acquisitions
positioned us to offer a complete range of telecommunications services for
corporate customers in Australia, including fully integrated voice and data
networks, as well as Internet access. We market our services through a
combination of direct sales to small- and medium-sized business customers,
independent agents which market to business and residential customers, and media
advertising aimed at ethnic residential customers living in Australia who make a
high volume of international calls.
We entered the Japanese market in late 1997 through the TelePassport/USFI
acquisition. According to the International Telecommunications Union, in 1998,
the total telecommunications market in Japan accounted for approximately $84.0
billion in revenues. We maintain an office in downtown Tokyo and operate an
international gateway switch to provide international calling services to
resellers and small businesses. We interconnected our Tokyo switch to Los
Angeles via the TPC-5 fiber cable system. We have a Type I carrier license,
which permits us to provide selected telecommunications services using our own
facilities in Japan. We plan to market our services in Japan through direct
sales and relationships that we are establishing with business partners.
As of December 31, 1999, we had approximately 30,047 business customers and
387,471 residential customers in the Asia-Pacific region.
Services
We offer a broad array of communications services through our network and
through interconnection with the networks of other carriers. Our decision to
offer certain services in a market is based on competitive factors and
regulatory restraints within the market. Below is a summary of services we
offer:
. International and Domestic Long Distance. We provide international
long distance voice services terminating in approximately 230
countries, and provide domestic long distance voice services within
selected countries within our principal service regions.
. Private Network Services. For business customers, we design and
implement international private network services that may be used for
voice, data and video applications.
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. Data and Internet Services. In Australia, we offer data transfer
services over ATM and frame relay networks in addition to Internet
access services. In Canada, we offer Internet access services through
our February 1999 acquisition of GlobalServe, our May 1999 acquisition
of ACC Telenterprises and our January 2000 acquisition of Infinity
Online. In Germany, we offer Internet access services through our
acquisitions of TCP/IP and TouchNet. In Brazil, we offer Internet
access services through our November 1999 acquisition of 51% of Matrix
Internet, which also maintains an Internet portal. We also offer Web
design, Web hosting, co-location and e-commerce services in selected
regions and we recently acquired 1492 Technologies, an Internet Web
site development and service firm. We also recently acquired
substantially all of the assets of DigitalSelect, a provider of DSL
Internet access. Our satellite earth station in London enables us to
offer Internet and data transmission services in the Indian
Ocean/Southeast Asian region. We plan to replicate this strategy to
offer such services in Latin America and the Pacific Rim by adding
four additional satellite earth stations, two each on the east and
west coasts of the United States.
. Reorigination Services. In selected countries, we provide call
reorigination services which allow non-United States country to
country calling to originate from the United States, thereby taking
advantage of lower United States accounting rates.
. Local Switched Services. We intend to provide local service on a
resale basis as part of our "multi-service" marketing approach,
subject to commercial feasibility and regulatory limitations. We
currently provide local service in Australia, Canada, Puerto Rico and
the United States Virgin Islands.
. Toll-free Services. We offer domestic and international toll-free
services within selected countries within our principal service
regions.
. Cellular Services. We resell Telstra analog and digital cellular
services in Australia.
. Prepaid and Calling Cards. We offer prepaid and calling cards that may
be used by customers for domestic and international telephone calls
both within and outside of their home country.
Network
General. Since our inception in 1994, we have been deploying a global
intelligent communications network consisting of international and domestic
switches, related peripheral equipment, undersea fiber optic cable systems and
leased satellite and cable capacity. We believe that our network allows us to
control both the quality and cost of the on-net communications services we
provide to our customers. To ensure high-quality communications services, our
network employs digital switching and fiber optic technologies, uses SS7
signaling and is supported by comprehensive monitoring and technical services.
Our network consists of:
. a global backbone network connecting intelligent gateway switches in
our principal service regions:
. a domestic long distance network presence within certain countries
within our principal service regions; and
. a combination of owned and leased transmission facilities, resale
arrangements and foreign carrier agreements.
Each of our international gateway switches is connected to our domestic and
international networks as well as those of other carriers in a particular
market, allowing us to:
. provide seamless service;
. package and market the voice and data services purchased from other
carriers under the "Primus" brand name; and
. maintain a substantial portion of each market's United States-bound
return traffic through our integrated communications network to
maintain quality of service and cost efficiencies and increase gross
margins.
We have targeted North America, the United Kingdom, continental Europe and
Australia for the immediate development of our network due to their economic
stability and the more rapid pace of deregulation as
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compared to other areas of the world. We expect to expand our network into
additional markets within our principal service regions, including in Japan and
other parts of the Asia-Pacific region and Latin America. We are using our
United Kingdom operations to coordinate efforts to enter other major markets in
Europe in conjunction with the deregulation of the telecommunications industry
in certain EU countries which began in 1998. This expansion commenced with our
installation of an international gateway switch in Frankfurt, and is continuing
with our international gateway switch in Paris, which has recently become
operational, and with our acquisition of an international gateway switch in
London from a European subsidiary of Telegroup.
Switches and Points of Presence. Our network consists of 19 carrier-grade
switches, including 15 international gateway switches and four domestic switches
in Australia. We currently operate more than 150 POPs and Internet access nodes
within our principal service regions.
Here is further information about the location and type of our switches:
<TABLE>
<CAPTION>
Location Type of Switch
-------- --------------
<S> <C>
New York City(3)........................................ International Gateway
Los Angeles............................................. International Gateway
Washington.............................................. International Gateway
Fort Lauderdale......................................... International Gateway
Toronto................................................. International Gateway
Vancouver............................................... International Gateway
London(2)............................................... International Gateway
Paris................................................... International Gateway
Frankfurt............................................... International Gateway
Sydney.................................................. International Gateway
Tokyo................................................... International Gateway
Puerto Rico............................................. International Gateway
Adelaide................................................ Domestic
Brisbane................................................ Domestic
Melbourne............................................... Domestic
Perth................................................... Domestic
</TABLE>
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Fiber Optic Cable Systems. Where our customer base has developed sufficient
traffic, we have purchased and leased undersea and land-based fiber optic cable
transmission capacity to connect to our various switches. Where traffic is light
or moderate, we obtain capacity to transmit traffic on a per-minute variable
cost basis. When traffic volume increases and such commitments are cost
effective, we either purchase lines or lease lines on a monthly or longer term
basis at a fixed cost and acquire economic interests in transmission capacity
through minimum assignable ownership units and indefeasible rights of use to
international traffic destinations. The following chart sets forth a listing of
the undersea fiber optic cable systems in which we have capacity (which includes
both minimum assignable ownership units and indefeasible rights of use):
<TABLE>
<CAPTION>
Cable System Countries Served Status
------------- ---------------- ------
<S> <C> <C>
TAT 12/13 United States--United Kingdom Existing
Gemini United States--United Kingdom Existing
CANTAT United States--Germany Existing
United States--Canada Existing
CANUS United States--Canada Existing
FLAG United Kingdom--Italy Existing
United Kingdom--Israel Existing
UK--France 5 United Kingdom--France Existing
Arianne France--Greece Existing
CIOS United Kingdom--Israel Existing
Aphrodite United Kingdom--Cyprus Existing
TPC 5 United States--Japan Existing
APCN Japan--Indonesia Existing
Jasaurus Indonesia--Australia Existing
Atlantic Crossing-1 United States--United Kingdom Existing
Columbus II United States--Mexico Existing
Americas I United States--Brazil Existing
United States--United States Virgin Islands Existing
United States Virgin Islands--Trinidad Existing
PTAT-1 United States--United States Virgin Islands Existing
CARAC United States--United States Virgin Islands Existing
Taino--Carib United States Virgin Islands--Puerto Rico Existing
Bahamas I United States--Bahamas Existing
ECMS United States Virgin Islands--Antigua--St. Martin--St. Kitts
-- Martinique--Guyana
CANTAT 3 United States--Denmark Existing
ODIN Netherlands--Denmark Existing
RIOJA Netherlands--Belgium Existing
Southern Cross United States--Australia Under Construction
JPN--US United States--Japan Under Construction
Americas II United States--Argentina Under Construction
Columbus III United States--Spain Under Construction
Pan American United States Virgin Islands--Aruba--Venezuela--Panama Under Construction
--Colombia--Ecuador--Peru--Chile--Panama
Bahamas 2 United States--Bahamas Under Construction
MONA Puerto Rico--Dominican Republic Under Construction
Antillas 1 Puerto Rico--Dominican Republic Under Construction
</TABLE>
In December 1999, we expanded our existing fiber capacity agreement with Qwest.
Pursuant to this expansion, we have agreed to purchase approximately $23.2
million of fiber capacity which will provide us with a nationwide broadband
backbone of nearly 11,000 route miles of fiber optic cable in the U.S. and will
provide us with access to OC-3 and OC-12 capacity between our six existing U.S.
gateway switches and up to at least nine future POPs in 12 U.S. cities including
New York, Los Angeles, San Francisco, Chicago, Boston and Washington, DC. Under
the agreement, we also may choose to expand to OC-48 capacity as our bandwidth
requirements increase. On May 24, 1999 through a capacity purchase agreement
with Global Crossing Holdings Ltd., we agreed to purchase up to $50 million of
fiber capacity on Global Crossing's undersea fiber network.
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Satellite Earth Stations and Capacity. We are constructing international
satellite earth stations and purchasing capacity on international satellites in
order to provide data and Internet transmission services, in addition to voice
services, principally to and from post, telephone and telegraph operators, other
telecommunications carriers and Internet service providers, in developing
countries. We have completed the construction in London of an Intelsat earth
station and lease capacity on the Intelsat-62 satellite. This earth station now
is operational and is able to carry voice, data and Internet traffic to and from
countries in the Indian Ocean/Southeast Asia region. Pursuant to our purchase
agreement with Global Crossing, Global Crossing has agreed to purchase up to $25
million of capacity on our global satellite network.
Foreign Carrier Agreements. In selected countries where competition with the
traditional incumbent post, telephone and telegraph operators is limited or is
not currently permitted, we have entered into foreign carrier agreements with
post, telephone and telegraph operators or other service providers which permit
us to provide traffic into and receive return traffic from these countries. We
have existing foreign carrier agreements with post, telephone and telegraph and
other licensed operators in Cyprus, Greece, India, Iran, Italy, New Zealand, the
Philippines, Belgium, Denmark, Israel, Ireland, Singapore, Malaysia, Japan,
Australia, France, Switzerland, Argentina, the Bahamas and the Dominican
Republic and maintain additional agreements with other foreign carriers in other
countries.
Network Management and Control. We own and operate network management control
centers in McLean, Virginia, London, Sydney and, with the Telegroup acquisition,
in Cedar Rapids, Iowa, which are used to monitor and control a majority of the
switches and other transmission equipment used in our network. These network
management control centers operate seven days a week, 24 hours per day, 365 days
a year. In Canada, Tokyo and Frankfurt, we currently monitor and control each
switch locally. We are continually upgrading the existing network management
control centers so that they can monitor all of our switching and other
transmission equipment throughout the entire network.
Planned Expansion of Network. We recently installed and commenced operating an
international gateway switch in Paris. By the end of 2000, we intend to add up
to 11 additional switches in Europe, one switch in North America and one switch
in Japan. Additionally, we intend to continue to invest in additional switches
and points of presence in major metropolitan areas of our principal service
regions as the traffic usage warrants the expenditure. We also intend to acquire
capacity in terrestrial and undersea fiber optic cable systems in our principal
service regions, particularly in North America and Europe.
Planned Enhancement of Network for Data and Internet Services. Pursuant to our
agreement with Qwest, we have invested in a U.S. Internet backbone network and
an overlay to our existing network architecture that will enable our existing
global network to carry Internet and data traffic for our business, residential,
carrier and ISP customers. This network will use packet switched technology,
including Internet protocol and ATM, in addition to traditional circuit switched
voice traffic. Packet switched technology will enable us to transport voice and
data traffic compressed as "packets" over circuits shared simultaneously by
several users. This network investment will allow us to offer to existing and
new customers a full range of data and voice communications services, including,
in selected geographic areas, dial-up and dedicated Internet access, Web
hosting, e-commerce, managed virtual private network services, and ATM and frame
relay data services. In addition, through our strategic business relationship
with Pilot, we will be able to offer these services over a secure network. We
are also able to provide customers with enhanced access to these services
through our relationship with Akamai Technologies, Inc. which provides
proprietary content delivery and intelligent network services.
Customers
As of December 31, 1999, Primus had approximately 1.9 million business and
residential customers. Set forth below is a description of our customer base:
.Businesses. Historically, our business sales and marketing efforts
targeted small- and medium-sized businesses with significant
international long distance traffic. More recently, we also have
targeted larger multi-national businesses. In an effort to attract
these larger business customers in multiple markets, we intend to offer
a broad array of bundled services (including long distance voice,
Internet, data and cellular services) in approximately 10 major
markets, including the United States, Canada, Australia, the United
Kingdom, Germany, France, Japan and Italy. We believe that these
businesses are and will continue to be attracted to us primarily due to
price savings compared to traditional
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carriers and, secondarily, due to our personalized approach to customer
service and support, including customized billing and bundled service
offerings.
.Residential Customers. Our residential sales and marketing strategy
targets ethnic residential customers who generate high international
long-distance traffic volumes and, increasingly, call-through and
reorigination customers in Europe and other markets which have not
fully deregulated. We believe that such customers are attracted to us
because of price savings as compared to traditional carriers,
simplified pricing structure, and multilingual customer service and
support. We are now offering Internet access to our residential
customers in select markets and intend to expand our Internet and data
offerings to additional markets and bundle them with traditional voice
services.
.Telecommunications Carriers, Resellers and ISPs. We compete for the
business of other telecommunications carriers and resellers primarily
on the basis of price and service quality. Sales to other carriers and
resellers help us maximize the utilization of our network and thereby
reduce our fixed costs per minute of use. We are also carrying
international ISP traffic over our global satellite network and plan to
increase the ISP traffic on our terrestrial and undersea fiber network
once we have completed the enhancement of our network for data and
Internet services.
We strive to provide personalized customer service and believe that the quality
of our customer service is one of our competitive advantages. Our larger
customers are covered actively by dedicated account and service representatives
who seek to identify, prevent and solve problems. We provide toll-free, 24-hour
a day customer service in the United States, Canada, the United Kingdom and
Australia which can be accessed to complete collect, third party,
person-to-person, station-to-station and credit card validation calls. We also
provide a multi-lingual "Trouble Reporting Center" for our residential
customers. As of December 31, 1999, we employed 572 full-time customer service
employees, many of whom are multi-lingual.
Sales and Marketing
We market our services through a variety of sales channels, as summarized below:
.Direct Sales Force. As of December 31, 1999, our direct sales force
was comprised of 398 full-time employees who focus on business
customers with substantial international traffic, including
multinational businesses and international governmental organizations.
We intend to use our direct sales force in the future to offer bundled
voice, Internet and data services to existing and new multinational
business customers. As of December 31, 1999, we employed approximately
245 full-time direct sales representatives focused on ethnic
residential consumers and direct sales representatives who exclusively
sell wholesale services to other long-distance carriers and resellers.
Direct sales personnel are compensated with a base salary plus
commissions. We currently have offices in New York City, Virginia,
Tampa, Puerto Rico, St. Thomas, Montreal, Toronto, Vancouver, Mexico
City, London, Frankfurt, Adelaide, Brisbane, Melbourne, Perth, Sydney
and Tokyo.
.Independent Sales Agents. We also sell our services through
independent sales agents and representatives, who typically focus on
residential consumers and small- and medium-sized businesses. In June
1999, we significantly expanded our independent sales agent program
through the acquisition of Telegroup's global network of agents and its
agent support systems. These support systems include RepLink, a World
Wide Web interface that allows agents to send customer information
directly to us via the Internet for fully automated provisioning.
Through RepLink, agents also receive monthly usage reports, commission
reports, reports on new products and updates about the agent program.
An agent receives commissions based on revenue generated by customers
obtained for us by the agent. We also provide additional incentives in
the form of restricted stock to those agents that meet certain revenue
growth targets. We usually grant only nonexclusive sales rights and
require our agents and representatives to maintain minimum revenues. We
also market our services through representatives of network marketing
companies.
.Telemarketing. We employ full-time telemarketing sales personnel in
our Tampa call center to supplement sales efforts to ethnic residential
consumers and small- and medium-sized business customers.
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<PAGE>
.Media and Direct Mail. We use a variety of print, television and radio
advertising to increase name recognition and generate new customers. We
reach ethnic residential customers by print advertising campaigns in
ethnic newspapers, and by advertising on select radio and television
programs.
Management Information and Billing Systems
We have various management information, network and customer billing systems in
our different operating subsidiaries to support the functions of network and
traffic management, customer service and customer billing. For financial
reporting, we consolidate information from each of our markets into a single
database. For our billing requirements in the United States, we use a customer
billing system developed by Electronic Data Systems Inc. (EDS) which supplies,
operates and maintains this system and is responsible for providing backup
facilities and disaster recovery. The EDS system is widely used in the
telecommunications industry and has been customized to meet our specific needs.
Elsewhere, we use other third party systems or systems developed in-house to
handle our billing requirements. We bill all of our business, reseller and
residential customers directly in all of our principal service regions. We have
also recently chosen Portal Software, Inc.'s customer management and billing
software to provide a business infrastructure for our worldwide Internet and
data service offerings. This software allows real-time access to service and
billing information.
We believe that our financial reporting and billing systems are generally
adequate to meet our needs in the near term. However, as we continue to grow, we
will need to invest additional capital to purchase hardware and software,
license more specialized software, increase capacity and link our systems among
different countries.
Competition
The international communications industry is highly competitive and
significantly affected by regulatory changes, marketing and pricing decisions of
the larger industry participants and the introduction of new services made
possible by technological advances. We believe that long distance service
providers compete on the basis of price, customer service, product quality and
breadth of services offered. In each country of operation, we have numerous
competitors. We believe that as the international communications markets
continue to deregulate, competition in these markets will increase, similar to
the competitive environment that has developed in the United States following
the AT&T divestiture in 1984. Prices for long-distance voice calls in the
markets in which we compete have declined historically and are likely to
continue to decrease. In addition, many of our competitors are significantly
larger, have substantially greater financial, technical and marketing resources
and larger networks.
Privatization and deregulation have had, and are expected to continue to have,
significant effects on competition in the industry. For example, as a result of
legislation enacted in the United States, regional Bell operating companies will
be allowed to enter the long distance market, AT&T, MCI/WorldCom and other long
distance carriers will be allowed to enter the local telephone services market,
and cable television companies and utilities will be allowed to enter both the
local and long distance telecommunications markets. In addition, competition has
begun to increase in the European Union communications markets in connection
with the deregulation of the telecommunications industry in most EU countries,
which began in January 1998. This increase in competition could adversely affect
net revenue per minute and gross margin as a percentage of net revenue.
The following is a brief summary of the competitive environment in selected
countries within each of its principal service regions:
North America.
.The United States. In the United States, which is the most competitive
and among the most deregulated long distance markets in the world,
competition primarily is based upon pricing, customer service, network
quality, and the ability to provide value-added services. AT&T is the
largest supplier of long distance services, with MCI/WorldCom and
Sprint being the next largest providers. In the future, under
provisions of recently enacted federal legislation, we anticipate that
we will also compete with regional Bell operating companies, local
exchange carriers and ISPs in providing domestic and international
long-distance services.
.Canada. The Canadian communications market is highly competitive and
is dominated by a few established carriers whose marketing and pricing
decisions have a significant impact on the other
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industry participants including us. We compete with facilities-based
carriers, other resellers and rebillers, primarily on the basis of
price. The principal facilities-based competitors include the former
Stentor member companies, in particular, Bell Canada, the dominant
supplier of local and long-distance services in Canada, and TELUS
Communications, the next largest Stentor company, as well as non-
Stentor companies, Teleglobe Canada and Call-Net Enterprises (Sprint
Canada). The former Stentor member companies discontinued their
alliance on January 1, 1999 and now Bell Canada and TELUS compete
against one another for the first time. In a significant development,
Bell Canada's parent, BCE Inc., announced a C$9.6 billion stock bid for
Teleglobe in February 2000.
Europe.
.United Kingdom. Our principal competitors in the United Kingdom are
British Telecom, the dominant supplier of telecommunications services
in the United Kingdom, and Cable & Wireless Communications. Other
competitors in the United Kingdom include Colt, Energis, GTS/Esprit and
RSL Communications. We compete in the United Kingdom and continental
Europe, and expect to compete in other European countries, by offering
competitively-priced bundled and stand-alone services, personalized
customer service and value-added services.
.Germany. Our principal competitor in Germany is Deutsche Telekom, the
dominant carrier. We also compete with Mannesmann ARCOR/O.tel.o
Communications, VIAG Interkom, MobilCom, Talkline, NTS/Colt,
MCI/WorldCom and RSL Communications. Additionally, we also face
competition from other licensed public telephone operators that are
constructing their own facilities-based networks, cable companies and
switch-based resellers, including the emerging German local exchange
carriers known as "City Carriers."
Asia-Pacific.
.Australia. Australia is one of the most deregulated and competitive
communications markets in the Asia-Pacific region. Our principal
competitors in Australia are Telstra, the dominant carrier, Cable &
Wireless Optus and AAPT and a number of other switchless resellers. We
compete in Australia by offering a comprehensive menu of
competitively-priced products and services, including value-added
services, and by providing superior customer service and support. We
believe that competition in Australia will increase as more companies
are awarded carrier licenses in the future.
.Japan. Our principal competitor in Japan is KDD, the dominant carrier,
as well as Japan Telecom, IDC and a number of second tier carriers,
including Cable & Wireless, MCI/WorldCom and ATNet.
The market for data services and Internet services is extremely competitive. We
anticipate that competition will continue to intensify. Our current and
prospective competitors offering these services include national, regional and
local Internet service providers, Web hosting companies, other long distance and
international long distance telecommunications companies, including AT&T,
MCI/WorldCom and Sprint, local exchange telecommunications companies, cable
television, direct broadcast satellite, wireless communications providers and
on-line service providers. Some of these competitors have a significantly
greater market presence and brand recognition than we. Many of our competitors
also have greater financial, technological and marketing resources than those
available to us.
Government Regulation
As a global communications company, we are subject to varying degrees of
regulation in each of the jurisdictions in which we provide services. Local laws
and regulations, and the interpretation of such laws and regulations, differ
significantly among the jurisdictions in which we operate. There can be no
assurance that future regulatory, judicial and legislative changes will not have
a material adverse effect on us, that domestic or international regulators or
third parties will not raise material issues with regard to our compliance or
noncompliance with applicable regulations or that regulatory activities will not
have a material adverse effect on us.
Regulation of the telecommunications industry is changing rapidly both
domestically and globally. The Federal Communications Commission is considering
a number of international service issues in the context of several policy
rulemaking proceedings in response to specific petitions and applications filed
by other international carriers. We are unable to predict how the FCC will
resolve the pending international policy issues or how such
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<PAGE>
resolution will effect its international business. In addition, the World Trade
Organization Agreement, which reflects efforts to dismantle government-owned
telecommunications monopolies throughout Europe and Asia may affect us. Although
we believe that these deregulation efforts will create opportunities for new
entrants in the telecommunications service industry, there can be no assurance
that they will be implemented in a manner that would benefit us.
The regulatory framework in certain jurisdictions in which we provide services
is described below:
United States
In the United States, our services are subject to the provisions of the
Communications Act of 1934, FCC regulations thereunder, as well as the
applicable laws and regulations of the various states and state regulatory
commissions.
As a carrier offering services to the public, we must comply with the
requirements of common carriage under the Communications Act, including the
offering of service on a non-discriminatory basis at just and reasonable rates,
and obtaining FCC approval prior to any assignment of authorizations or any
transfer of de jure or de facto control of the company. We are classified as a
non-dominant common carrier for domestic service and are not required to obtain
specific prior FCC approval to initiate or expand domestic interstate services.
International Service Regulation. International common carriers like us are
required to obtain authority under Section 214 of the Communications Act and
file a tariff containing the rates, terms, and conditions applicable to their
services prior to initiating their international telecommunications services. We
have obtained all required authorizations from the FCC to use, on a facilities
and resale basis, various transmission media for the provision of international
switched services and international private line services and have filed a
tariff.
In addition to the general common carrier principles, we must conduct our
international business in compliance with the FCC's International Settlements
Policy, the rules that establish the permissible boundaries for U.S.-based
carriers and their foreign correspondents to settle the cost of terminating each
others' traffic over their respective networks.
Domestic Service Regulation. We are considered a non-dominant domestic
interstate carrier subject to minimal regulation by the FCC. We are not required
to obtain FCC authority to expand our domestic interstate operations, but we are
required to maintain a tariff on file at the FCC, file various reports and pay
various fees and assessments. Among other things, interstate common carriers
must offer service on a nondiscriminatory basis at just and reasonable rates. As
a nondominant carrier, we are subject to the FCC's complaint jurisdiction. In
particular, we may be subject to complaint proceedings in conjunction with
alleged noncompliance such as unauthorized changes in a customer's preferred
carrier. The Telecommunications Act of 1996 also addresses a wide range of other
telecommunications issues that may potentially impact our operations.
Our costs of providing long distance services will be affected by changes in the
access charge rates imposed by incumbent local exchange carriers for origination
and termination of calls over local facilities. The FCC has significantly
revised its access charge rules in recent years to permit incumbent local
exchange carriers greater pricing flexibility and relaxed regulation of new
switched access services in those markets where there are other providers of
access services. The FCC recently granted local exchange carriers pricing
flexibility. As such, the carriers may offer volume discounts that may benefit
larger long distance carriers.
The FCC has also significantly revised the universal service subsidy regime to
be funded by interstate carriers, such as us, and certain other entities. The
FCC recently established new universal service funds to support qualifying
schools, libraries, and rural health care providers and expanded subsidies for
low income consumers. Recently the U.S. Court of Appeals for the Fifth Circuit
reversed and remanded for reconsideration portions of the FCC's universal
service subsidy plan. The FCC has requested certiorari from the U.S. Supreme
Court. The outcome of these proceedings or their effect cannot be predicted.
State Regulation. Our intrastate long distance operations are subject to various
state laws and regulations, including, in most jurisdictions, certification and
tariff filing requirements. Some states also require the filing of periodic
reports, the payment of various fees and surcharges and compliance with service
standards and consumer protection rules. States often require pricing approval
or notification for certain stock or asset transfers or, in several states, for
the issuance of securities, debt or for name changes. We have received the
necessary certificate and tariff approvals to provide intrastate long distance
service in 48 states. Certificates of
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authority can generally be conditioned, modified, canceled, terminated, or
revoked by state regulatory authorities for failure to comply with state law
and/or the rules, regulations, and policies of the state regulatory authorities.
Fines and other penalties also may be imposed for such violations. Public
service commissions also regulate access charges and other pricing for
telecommunications services within each state. The regional Bell operating
companies and other local exchange carriers have been seeking reduction of state
regulatory requirements, including greater pricing flexibility which, if
granted, could subject us to increased price competition. We may also be
required to contribute to universal service funds in some states.
Wireless Service Regulations. Through TresCom, we hold a variety of wireless
licenses issued by the FCC. As a licensee authorized to provide microwave and
satellite earth station services, we are subject to Title III of the
Communications Act of 1934, as amended by the 1996 Telecommunications Act, and
FCC regulations promulgated thereunder. Pursuant to Title III, foreign entities
may not directly hold more than 20% of the stock or other ownership interests in
an entity, including Primus, that holds certain types of FCC licenses, such as
the wireless licenses held by TresCom and referred to above. In addition,
subject to FCC waiver, citizens and corporations of WTO non-member nations may
not indirectly hold more than 25% of the stock or other ownership interest in
such entities. Citizens and corporations of WTO member nations are not subject
to indirect ownership limitations.
Canada
The operations of telecommunications carriers are regulated by the Canadian
Radio-television and Telecommunications Commission (CRTC), which has recently
established a new competitive regulatory framework governing the international
segment of the long-distance market, eliminating certain barriers to
competition, consistent with Canada's commitments in the World Trade
Organization Agreement. As a result, full facilities-based and resale
competition has been introduced in the provision of international services in
Canada, effective October 1, 1998, coincident with the elimination of traffic
routing limitations on switched hubbing through the United States. In addition,
foreign ownership rules for facilities-based carriers have now been waived in
relation to ownership of international submarine cables landed in Canada and
satellite earth stations used for telecommunications purposes. Effective January
1, 1999, all international service providers must be licensed by the CRTC under
the Telecommunications Act of 1993, and we received our international license as
of December 23, 1998. Our international operations will remain subject to
conditions of our CRTC license, which address matters such as competitive
conduct and consumer safeguards, and to a regime of contribution charges
(roughly the equivalent of access charges in the U.S.). The CRTC recently
adjusted its international services contribution regime and is preparing to
conduct a review of its domestic services contribution regime in light of its
recent decision to move from a per circuit to a per minute contribution charge
arrangement.
Primus, as a reseller of domestic Canadian telecommunications, virtually is
unregulated by the CRTC. In particular, because we do not own or operate
transmission facilities in Canada, we are not subject to the Canadian
Telecommunications Act or the regulatory authority of the CRTC, except to the
extent that our provision of international telecommunications services is
subject to CRTC licensing and other regulations. Therefore we may provide resold
Canadian domestic long distance service without rate, price or tariff
regulation, ownership limitations, or other regulatory requirements.
Competition. Long distance competition has been in place in Canada since 1990
for long distance resellers and since 1992 for facilities-based carriers. Since
1994, the incumbent local exchange carriers have been required to provide "equal
access" which eliminated the need for customers of competitive long distance
providers to dial additional digits when placing long distance calls. In June
1992, the CRTC issued its ground-breaking Telecom Decision CRTC 92-12 requiring
the incumbent local exchange carriers to interconnect their networks with their
facilities-based as well as resale competitors. However, these companies have
now disbanded the Stentor alliance effective January 1, 1999, and former Stentor
companies, Bell Canada and TELUS Communications, the two largest carriers in
Canada, have begun to compete against one another. Other nationwide providers
are AT&T Canada Corp., and Sprint Canada. Additional long distance services
competition is provided by a substantial resale long distance industry in
Canada.
Foreign Ownership Restrictions. Under Canada's Telecommunications Act and
certain regulations promulgated pursuant to such Act, foreign ownership
restrictions are applicable to facilities-based carriers (known as "Canadian
carriers"), but not resellers, which may be wholly foreign-owned and controlled.
These restrictions limit the amount of direct foreign investment in Canadian
carriers to no more than 20% of the voting equity of a Canadian carrier
operating company and no more than 33 1/3% of the voting equity of a
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Canadian carrier holding company. The restrictions also limit the number of
seats which may be occupied by non-Canadians on the board of directors of a
Canadian carrier operating company to 20%. In addition, under Canadian law, a
majority of Canadians must occupy the seats on the board of directors of a
Canadian carrier holding company. Although it is possible for foreign investors
to also hold non-voting equity in a Canadian carrier, the law requires that the
Canadian carrier not be "controlled in fact" by non-Canadians.
Australia
The provision of our services is subject to federal regulation. The two primary
instruments of regulation are the Australian Telecommunications Act of 1997 and
federal regulation of anti-competitive practices pursuant to the Australian
Trade Practices Act of 1974. The current regulatory framework came into effect
in July 1997.
We are licensed under the Telecommunications Act of 1997 to own and operate
transmission facilities in Australia. Under the regulatory framework, we are not
required to maintain a carriage license in order to supply carriage services to
the public using network facilities owned by another carrier. Instead, with
respect to carriage services, we must comply with legislated "service provider"
rules contained in the Telecommunications Act of 1997 covering matters such as
compliance with the Telecommunications Act of 1997, operator services,
regulation of access, directory assistance, provision of information to allow
maintenance of an integrated public number database, and itemized billing.
Two federal regulatory authorities exercise control over a broad range of issues
affecting the operation of the Australian telecommunications industry. The
Australian Communications Authority (ACA) is the authority regulating matters
including the licensing of carriers and technical matters, and the Australian
Competition and Consumer Commission (ACCC) has the role of promotion of
competition and consumer protection. We are required to comply with the terms of
our own license, are subject to the greater controls applicable to licensed
facilities-based carriers and are under the regulatory control of the ACA and
the ACCC. In addition, other federal legislation, various regulations pursuant
to delegated authority and legislation, ministerial declarations, codes,
directions, licenses, statements of Australian government policy and court
decisions affecting telecommunications carriers also apply to us.
There is no limit to the number of carriers who may be licensed. Any company
that meets the relevant financial and technical standards and complies with the
license application process can become a licensed carrier permitted to own and
operate transmission facilities in Australia. Carriers are licensed
individually, are subject to charges that are intended to cover the costs of
regulating the telecommunications industry, and are obliged to comply with
license conditions (including obligations to comply with the Telecommunications
Act of 1997, with certain commitments made in their industry development plan
and with the telecommunications access regime and related facilities access
obligations). Carriers also must meet the universal service obligation, to
assist in providing all Australians, particularly in remote areas, with
reasonable access to standard telephone services. The levy required to be paid
by in connection with this obligation has been set previously at a level that is
not material. The levy is currently under review. The outcome from the
Australian Communications Authority's assessment and the Australian Government's
policy considerations is expected to result in a levy that will not be material
for us. However, there can be no guarantee that the Australian Communications
Authority will not make an assessment of a universal service levy that would be
material or that the Australian Government will not legislate for an outcome
that would be material.
Fair Trading Practices. The ACCC enforces legislation for the promotion of
competition and consumer protection, particularly rights of access (including
pricing for access) and interconnection. The ACCC can issue a competition notice
to a carrier which has engaged in anti-competitive conduct. Where a competition
notice has been issued, the ACCC can seek pecuniary penalties, and other
carriers can seek damages, if the carrier continues to engage in the specified
conduct.
The Telecommunications Act of 1997 package of legislation includes a
telecommunications access regime that provides a framework for regulating access
rights for specific carriage services and related services through the
declaration of services by the ACCC. The regime establishes mechanisms within
which the terms and conditions of access can be determined. The Australian
government intends the access regime to reduce the power of Telstra and Cable &
Wireless Optus (as the former protected fixed line carriers) and other carriers
who may come to own or control important infrastructure or services necessary
for competition.
17
<PAGE>
The access regime establishes a mechanism for the industry to develop an access
code containing model terms and conditions for access to particular declared
services. Once approved by the ACCC, those model terms and conditions may be
adopted in an undertaking by individual carriers who are under an access
obligation.
Since July 1997, the ACCC has mandated progressively that Telstra provide access
to a range of its facilities at specified rates to other service providers
including us. We have negotiated access arrangements with Telstra in
substitution for certain mandated arrangements. In July 1999, the ACCC mandated
access to Telstra's local call network. We expect that access to Telstra's local
call network will provide us with new opportunities.
Foreign Ownership Limitations. Foreign investment in Australia is regulated by
the Foreign Acquisitions and Takeovers Act 1975. We notified the Australian
government of our proposed acquisition of Axicorp in 1996 and were informed at
that time that there were no objections to the investment in terms of
Australia's foreign investment policy. There can be no assurance, however, that
additional foreign ownership restrictions will not be imposed on the
telecommunications industry or other foreign investors, including us, in the
future.
Japan
Our services in Japan are subject to regulation by the Japanese Ministry of Post
and Telecommunications under the Japanese Telecommunications Business Law. We
have obtained licenses as a Type I business, and as a Special Type II business,
and also as a General Type II business through the Telegroup acquisition. Our
licenses allow us to provide selected international telecommunications services
using our own facilities, as well as leased facilities, and domestic
telecommunications services using leased facilities. There can be no guarantee
that the Japanese regulatory environment will allow us to provide service in
Japan at competitive rates.
European Union
In Europe, the regulation of the telecommunications industry is governed at a
supra national level by the European Commission, consisting of members from the
following countries: Austria, Belgium, Denmark, Finland, France, Germany,
Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden and
the United Kingdom, which is responsible for creating pan-European policies and,
through legislation, developing a regulatory framework to ensure an open,
competitive telecommunications market.
In March 1996, the EU adopted the Full Competition Directive containing two
provisions which required EU member states to allow the creation of alternative
telecommunications infrastructures by July 1, 1996, and which reaffirmed the
obligations of EU member states to abolish the post, telephone and telegraph
operators' monopolies in voice telephony by 1998. Certain EU countries were
allowed to delay the abolition of the voice telephony monopoly based on
derogations established in the Full Competition Directive. These countries
include Luxembourg (July 1, 1998), Spain and Ireland (which were liberalized on
December 1, 1998), Portugal (January 1, 2000) and Greece (December 31, 2000).
Each EU member state in which we currently conduct or plan to conduct our
business has a different regulatory regime and such differences have continued
beyond January 1998. The requirements for us to obtain necessary approvals vary
considerably from country to country and are likely to change as competition is
permitted in new service sectors. Most EU member states require companies to
obtain a license in order to provide voice telephony services or construct and
operate telecommunications networks. However, the EU generally does not permit
its member states to require individual licenses for other types of services. In
addition, we have obtained and will continue to seek to obtain interconnection
agreements with other carriers within the EU. While EU directives require that
dominant carriers offer cost-based and nondiscriminatory interconnection to
competitors, individual EU member states have implemented and may implement this
requirement differently. As a result, we may be delayed in obtaining or may not
be able to obtain interconnection in certain countries that would allow us to
compete effectively. Moreover, there can be no guarantee that long distance
providers like us will be able to afford customers "equal access" to their
networks, and the absence of such equal access could put such long distance
companies at a disadvantage with respect to existing post, telephone and
telegraph operators.
United Kingdom
Our services are subject to the provisions of the United Kingdom
Telecommunications Act. The Secretary of State for Trade and Industry, acting on
the advice of the United Kingdom Department of Trade and Industry, is
responsible for granting UK telecommunications licenses, while the Director
General of Telecommunications
18
<PAGE>
and Oftel are responsible for enforcing the terms of such licenses. Oftel
attempts to promote effective competition both in networks and in services to
redress anti-competitive behavior.
In 1991, the British government established a "multi-operator" policy to replace
the duopoly that had existed between British Telecom and Cable and Wireless
Communications. Under the multi-operator policy, the Department of Trade and
Industry recommends the grant of a license to operate a telecommunications
network to any applicant that it believes has a reasonable business plan and
where there are no other overriding considerations not to grant such license.
All public telecommunications operators and international simple voice resellers
operate under individual licenses granted by the Secretary of State for Trade
and Industry pursuant to the United Kingdom Telecommunications Act. Any
telecommunications system with compatible equipment that is authorized to be run
under an individual license is permitted to interconnect to British Telecom's
network. As of June 30, 1999, only those systems providing bearer services will
be entitled to interconnection, providing the operator has been registered in
Annex II. Under the terms of British Telecom's license, it is required to allow
any such licensed operator to interconnect its system to British Telecom's
system, unless it is not reasonably practicable to do so (e.g., due to
incompatible equipment).
Our subsidiary, Primus Telecommunications Limited, holds a license that
authorizes it to provide switched voice services over leased private lines to
all international points. In addition, Primus Telecommunications Limited has
received a license from the United Kingdom's Secretary for Trade and Industry to
provide international and United Kingdom domestic facilities-based voice
services. This license also allows the holder to acquire ownership interests in
or construct the United Kingdom half circuit of any IRU as well as backhaul and
other United Kingdom domestic facilities provision. The international
facilities-based license, as amended, together with the international simple
resale license authorize the provision of every voice and data service, except
the provision of broadcasting and mobile services. While the international
facilities-based license authorizes us to acquire ownership interests in the
United Kingdom half-circuit of satellite space segment in order to provide
satellite-based services, it is also necessary to apply for a Wireless
Telegraphy Act 1949 License which authorizes the use of the spectrum.
Telegroup Network Services Ltd. holds an ISVR license granted on December 31,
1997 and Telegroup UK Ltd. holds an international facilities-based license
granted on December 30, 1997, amended effective as of September 27, 1999 to
cover United Kingdom domestic facilities provision.
Tariffs. Telecommunications tariffs on operators in the United Kingdom
(excluding British Telecom) are generally not subject to prior review or
approval by regulatory authorities, although Oftel has historically imposed
price caps on British Telecom. British Telecom has advocated and will likely
continue to advocate for greater pricing flexibility, including flexibility for
pricing toll free and other services. Greater pricing flexibility could allow
British Telecom to charge us higher prices for certain services or to charge end
user customers prices that are lower than we are able to charge.
Interconnection and Indirect Access. We must interconnect our U.K. network to
networks of other service providers in the United Kingdom and allow our end user
customers to obtain access to our services in order to compete effectively in
the United Kingdom. In the United Kingdom, licensed long distance carriers like
us can obtain interconnection to British Telecom at cost-based rates. However,
while customers of British Telecom's long distance service can access that
service automatically (i.e., without dialing additional digits), customers of
other long distance carriers generally must dial additional digits to access
their chosen carrier's services.
Fair Trading Practices. Oftel is the principal regulator of the competitive
aspects of the United Kingdom telecommunications industry. There are no foreign
ownership restrictions that apply to telecommunications company licensing in the
United Kingdom although the Department of Trade and Industry does have a
discretion as to whether to award licenses on a case by case basis. We also are
subject to general European law, which, among other things, prohibits certain
anti-competitive agreements and abuses of dominant market positions through
Articles 81 and 82 of the Treaty of Rome.
Germany
The German Telecommunications Act of 1996 liberalized all telecommunications
activities as of January 1, 1998. The German Telecom Act has been complemented
by several ordinances. Under the German regulatory scheme, licenses are required
for the operation of infrastructure and the provision of voice telephony
services. Licenses required for the operation of infrastructure are divided into
3 license classes: mobile telecommunications (license class 1); satellite
(license class 2); and other telecommunications services for the
19
<PAGE>
general public (license class 3). In addition to the infrastructure licenses, a
separate license is required for provision of voice telephony services to the
general public on the basis of self-operated telecommunications networks
(license class 4). A class 4 license does not include the right to operate
transmission infrastructure. All other telecommunications services (e.g. valued-
added, data, etc.) are only subject to a notification requirement. We operate
under a license class 4 which has been extended to a Germany-wide area license
under a change of regulatory policy that requires Germany-wide area licenses for
the Germany-wide offer of public switched voice telephony. License fees caused
by this license extension are high, but have been challenged by a German court
and have therefore not yet been imposed.
Under the German Telecom Act, companies that desire to connect with Deutsche
Telekom's network must enter into an interconnection agreement with the
regulated interconnection tariffs. We entered into an interconnection agreement
with Deutsche Telekom on February 27, 1998 at the regulated standard
interconnection rates presently under court review. The interconnection
agreement may be terminated by commencing a six month notice period at the end
of the calendar year. After the public announcement on December 15, 1998,
Deutsche Telekom, by letter of December 23, 1998, informed us that, as a matter
of precaution, it terminated the interconnection agreements with us and all
other carriers as of December 31, 1999 and it asked that renegotiations be
opened.
Several complaints, the outcome of which may affect our business, currently are
pending before the Regulierungsbehorde fur Telekommunikation und Post (RegTP) or
German courts concerning interconnection with Deutsche Telekom. The RegTP issued
a decision in January 2000 on Primus' application. Aspects of the RegTP's
decision are being disputed in German courts. It is possible that the final
resolution of these disputes and the interconnection agreement with Deutsche
Telekom will include terms that are adverse to Primus, including minimum traffic
requirements and restrictions on sharing points of interconnection. We cannot
predict the results of the new interconnection regulation, but the results may
severely affect our business in Germany.
The RegTP established provisional interconnection tariffs in September 1997
which Deutsche Telekom has since challenged in court. These rates have been part
of the standard offer of Deutsche Telekom and were valid for all interconnected
and licensed carriers until the end of 1999. On December 23, 1999, RegTP adopted
regulations requiring new, substantially lower interconnection rates, effective
as of January 1, 2000, which may again be attacked by Deutsche Telekom in court.
Other pending complaints concern the costs of billing services provided by
Deutsche Telekom to other carriers and rates for direct access to the end-user
lines of Deutsche Telekom. It is expected that a final resolution to these
matters will take several years.
The first new interconnection agreement signed with Mannesmann Arcor, the major
market player besides Deutsche Telekom, however, introduced a reduction of
interconnection tariffs by extending off-peak times to comply with end-user
off-peak times. These new lower rates were undercut by the RegTP decision as of
December 23, 1999 described above. Non-discrimination with regard to all other
terms of this agreement between large and smaller carriers such as Primus will
become an important regulatory issue in the market once this new agreement comes
into force. Discrimination would severely affect our business.
Further, the general price depression in the end-customer market along with the
fact that the RegTP has authorized Deutsche Telekom's price cuts in the
end-customer market (announced to be effective as of January 1, April 1 and July
1, 1999) may adversely affect us. Other large operators also have reduced their
prices which may adversely affect our business. These price cuts have come under
attack before the European Commission and the courts. The outcome of these
proceedings is, however, difficult to predict; decision-making may take years.
Finally, RegTP has auctioned off the first round of wireless local loop
licenses. This has attracted additional competitors to enter the German market,
which may also affect our business even though we are not active in the local
exchange market.
We are or may become subject to certain other requirements as a licensed
telecommunications provider in Germany. For example, licensed providers are
under an obligation to present their standard terms and conditions to the RegTP.
The RegTP may, based upon certain criteria, decide not to accept these terms and
conditions. We also may become subject to universal service financing
obligations. Currently, it is unlikely that the universal service financing
system will be implemented in Germany in the foreseeable future. However, in the
event that the system is implemented, we could be subject to such universal
service requirements and financing schemes if we at that time should have a
market share in Germany of at least 4%.
20
<PAGE>
France
The French Telecommunications Act of 26 July 1996 further developed the new
legal framework for the development of a competitive telecommunications market
in France.
As a result, the French Regulator (Autorite de Regulation des
Telecommunications) was created on January 1, 1997 with the task of overseeing
the development of a competitive telecommunications sector which would provide
benefits to the user. In addition, the monopoly on the provision of voice
telephony services to the public was abolished as of January 1, 1998.
Under the French regulatory regime, an L33.1 licence is required for the
establishment and running by the operator of a telecommunications network open
to the public (an infrastructure licence) and the provision of public voice
telephony services requires an L34.1 licence. An infrastructure licence is
required by those operators who wish to install or purchase dark fiber for the
running of a network. As with the L34.1 voice licence, L33.1 infrastructure
licences are granted on a regional or nation-wide basis and it is possible to be
granted a licence just for the region of Paris and its suburbs. We (via our
French subsidiary) were awarded the first L34.1 only license on May 29, 1998.
Call back operators and least cost routing operators not using their own leased
lines as defined by the French Regulator, do not need to apply and obtain an
L34.1 licence. Certain competitors obtained a joint L34.1 & L33.1 licence and we
are considering applying for an L33.1 licence in addition to our L34.1 license
so that we can benefit from the lower interconnection tariffs afforded to L33.1
infrastructure license holders.
Because we hold a nation-wide class L34.1 licence, we have the authority to
originate and terminate calls throughout France.
Companies that desire to interconnect with France Telecom's network must enter
into an interconnection agreement which applies certain fixed interconnection
tariffs set out in an interconnection catalog. In order to obtain the lowest
available interconnection tariffs throughout France, we would need to obtain a
nation-wide infrastructure licence and install dark fiber and points of
interconnection in all the different French regions (a minimum of 18 regions)
where we are to be originating and terminating traffic.
We have entered into an interconnection agreement with France Telecom at the
regulated standard interconnection rates applicable to L34.1 voice licence
holders set out in the interconnection catalog. In order to interconnect with
France Telecom, we are required to install, in addition to our principal switch
in the city of Paris, a second point of presence to be interconnected with
France Telecom in the outer zone of the Parisian region as defined for
telecommunications purposes. We have located a site for our principal Ericsson
AXE-10 switch and have ordered the leased lines from France Telecom to
interconnect our switch with the most convenient France Telecom points of
interconnection. France Telecom estimates and sets out in the interconnection
agreement that leased lines so requested will be provided within a period of 6
to 18 months.
It is possible that the licence fees currently paid could be further increased.
In addition, the interconnection fees payable to France Telecom include an
element relating to the funding of France Telecom's universal service financing
obligations, and it is possible that the levels of such contributions will be
raised in the foreseeable future.
We have been granted the 1656 four digit indirect access code; however, there
have been seven one digit indirect access numbers granted to other
telecommunications providers in France. Those operators with a one digit access
number will have a competitive advantage. It is highly unlikely that we will be
able to obtain a one digit access number.
The Telegroup French subsidiary holds a mixed voice and infrastructure license
and has been allocated the 1633 carrier selection code. We understand that this
Telegroup subsidiary employs over 10 employees and has entered into a number of
contracts with other telecom operators in France. It has also contracted with
France Telecom for the use of two "3PBQ" numbers which are the equivalent of
four digit freephone access numbers for use in regions where the carrier
selection code is not operational due to the lack of a point of interconnection.
Primus is in the process of determining whether to maintain its separate license
and carrier selection code, in light of those held by Telegroup.
Latin America
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<PAGE>
Various countries in Latin America have taken initial steps towards deregulating
their telecommunications markets. Each Latin American country has a different
national regulatory regime and each country is in a different stage of
liberalization. Historically, Latin American countries have reserved the
provision of voice services to the state-owned post, telegraph and telephone
operators. In the last few years, several Latin American countries have
privatized completely or partially their national carriers, including Argentina,
Chile, Mexico, Peru and Venezuela. In addition, certain countries have opened
partially or completely their local and/or long distance markets, most notably
Chile, which has competitive operators in all sectors. Argentina has liberalized
certain telecommunications services, such as value-added, paging, data
transmission, and personal communications services. Brazil currently is in the
process of opening its telecommunications market to competition. Brazil intends
to privatize Telecomunicas Brasileras S.A. (Telebras), which, through its 28
regional subsidiaries, holds a monopoly over the provision of local telephone
services, as well as Empresa Brasiliera de Telecomunicacoes S.A., the monopoly
provider of long distance and international telephone services. Moreover,
Colombia recently has opened national and international long distance services
to competition, and has awarded two new concessions for the provision of these
services to two major local exchange carriers in Colombia--Empresa Brasiliera de
Telecomunicaciones S.A. de Bogota and Orbitel, S.A. In Colombia the provision of
value-added services and voice services to closed-user groups is open to
competition. Mexico initiated competition in the domestic and international long
distance services market on January 1, 1996, which are subject to a concession
requirement. In addition, the Mexican government has opened recently basic
telephony, and currently is auctioning radio-electric spectrum frequencies for
the provision of personal communications services and Local Multipoint
Distribution System Services. Value-added services are also fully open to
competition in Mexico. Finally, in the Central American region, Guatemala and El
Salvador recently have opened their telecommunications market to competition,
abolishing all restrictions on foreign investment in this sector. Other
countries in Central America, such as Nicaragua and Honduras, are in the process
of privatizing their state-owned carriers, and have not opened fully their
markets to competition.
Employees
The following table summarizes the number of our full-time employees as of
December 31, 1999, by region and classification:
<TABLE>
<CAPTION>
North Asia-
America Pacific Europe Total
------- ------- ------ -----
<S> <C> <C> <C> <C>
Management and Administrative 401 44 49 494
Sales and Marketing 408 151 84 643
Customer Service and Support 439 58 75 572
Technical 376 91 78 545
----- --- --- -----
Total 1,624 344 286 2,254
===== === === =====
</TABLE>
We have never experienced a work stoppage, and none of our employees is
represented by a labor union or covered by a collective bargaining agreement. We
consider our employee relations to be excellent.
22
<PAGE>
ITEM 2. PROPERTIES
We currently lease our corporate headquarters which is located in McLean,
Virginia. Additionally, we also lease administrative, technical and sales office
space, as well as space for our switches, in various locations in the countries
in which we operate, including the United States, Canada, Australia, the United
Kingdom, Japan, Germany, France, Switzerland and Italy. Total leased space
approximates 579,000 square feet and the total annual lease costs are
approximately $11.4 million. The operating leases expire at various times
through 2009. Certain communications equipment which includes network switches
and transmission lines is leased through operating and capital leases. We
believe that our present administrative and sales office facilities are adequate
for our anticipated operations and that similar space can be obtained readily as
needed. We further believe that the current leased facilities are adequate to
house existing communications equipment. However, as our network grows, we
expect to lease additional locations to house the new equipment.
ITEM 3. LEGAL PROCEEDINGS
On December 9, 1999, Empresa Hondurena de Telecommunicaciones, S.A., based in
Honduras, filed suit in Florida State Court in Broward County against TresCom
and one of TresCom's wholly-owned subsidiaries, St. Thomas and San Juan
Telephone Company, alleging that such entities failed to pay amounts due to
plaintiff pursuant to contracts for the exchange of telecommunications traffic
during the period from December 1996 through September 1998. We acquired TresCom
in June 1998 and TresCom is currently our subsidiary. Plaintiff is seeking
approximately $14 million in damages, plus legal fees and costs. We filed our
answer on January 25, 2000 and discovery has recently commenced. Because it is
only in the early stages of discovery, our ultimate legal and financial
liability with respect to such legal proceeding cannot be estimated with any
certainty at this time. We intend to defend the case vigorously.
We are also involved from time to time in litigation incidental to the conduct
of our business. We believe the outcome of such pending legal proceedings to
which we are a party will not have a material adverse effect on our business,
financial condition, results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Common Stock
Primus Telecommunications Group, Incorporated ("Primus" or the "Company") Common
Stock trades on the Nasdaq Stock Market under the symbol "PRTL". The following
table sets forth, for the period indicated, the high and low sales prices of the
Company's Common Stock.
<TABLE>
<CAPTION>
Period High Low
- ------ ---- ---
<S> <C> <C>
1999
1st Quarter $18 1/4 $ 9 7/8
2nd Quarter $23 3/8 $ 8 7/8
3rd Quarter $25 1/8 $15 3/4
4th Quarter $39 $17 7/16
1998
1st Quarter $31 1/4 $14 3/4
2nd Quarter $30 7/8 $14 5/8
3rd Quarter $28 $5 3/8
4th Quarter $16 3/4 $5 1/4
</TABLE>
Dividend Policy
The Company has not paid any cash dividends on its Common Stock to date. The
payment of dividends, if any, in the future is within the discretion of the
Board of Directors and will depend on the Company's earnings, its capital
requirements and financial condition. Dividends are currently restricted by the
senior note indentures, and may be restricted by other credit arrangements
entered into in the future by the Company. It is the present intention of the
Board of Directors to retain all earnings, if any, for use in the Company's
business operations, and accordingly, the Board of Directors does not expect to
declare or pay any dividends in the foreseeable future.
Holders
As of February 29, 2000, the Company had approximately 221 holders of record of
its Common Stock. The Company believes that it has in excess of 400 beneficial
owners.
Recent Sales of Unregistered Securities
In November 1999, the Company purchased substantially all of the assets of
DigitalSelect, LLC, a provider of digital subscriber line high-speed Internet
access and Web content services. The purchase price of $7.5 million was paid
with $5.3 million in cash, the issuance of a $0.7 million short-term promissory
note and 69,023 shares of the Company's common stock valued based on a 20 day
trailing average of the last sale price of the Company's common stock.
In November 1999, the Company purchased substantially all of the assets of 1492
Technologies, LLC, an Internet Web site development and service firm. The
purchase price of $0.5 million was paid for with $0.2 million in cash and
15,500 shares of the Company's common stock valued based on a 20 day trailing
average of the last sale price of the Company's common stock.
In June 1999, the Company acquired Telephone Savings Network Limited, a Canadian
reseller of local services to small- and medium-sized business customers, for a
purchase price of $5.1 million comprised of $2.4 million in cash and 152,235
shares of the Company's common stock. In October 1999 and February 2000,
pursuant to an earn-out provision of the purchase agreement, the Company issued
an additional 57,391 shares of the Company's common stock.
In February 1999 the Company acquired GlobalServe Communications, Inc., a
privately held ISP based in Toronto, Canada. The purchase price of approximately
$4.4 million was comprised of $2.2 million in cash and 142,806 shares of the
Company's common stock.
In February 1999, the Company purchased the remaining 40% of Hotkey Internet
Services Pty., Ltd. ("Hotkey"), a Melborne, Australia-based ISP for
approximately $1.1 million, comprised of $0.3 million in cash and 57,025 shares
of the Company's common stock.
The issuances listed above were made in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as amended.
Each corporation that was acquired or from which the Company acquired assets was
a privately-held company with a very limited number of holders, each of whom
represented that they were acquiring the Company's shares for investment without
an intent or view to resell.
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<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following sets forth selected consolidated financial data of the Company for
the years ended December 31, 1999, 1998, 1997, 1996, and 1995 as derived from
the historical financial statements of the Company:
<TABLE>
<CAPTION>
Statement of Operations Data: For the Period Ended December 31,
-----------------------------------------------------------------------
1999 1998 1997 1996 1995
--------------- -------------- ------------- ------------ -------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net revenue $ 832,739 $ 421,628 $ 280,197 $172,972 $ 1,167
Gross margin (deficit) $ 208,140 $ 68,612 $ 27,466 $ 14,127 $ (217)
Selling, general, administrative expenses $ 199,581 $ 79,532 $ 50,622 $ 20,114 $ 2,024
Loss from operations $ (46,398) $ (35,105) $ (29,889) $ (8,151) $(2,401)
Net loss $ (112,736) $ (63,648) $ (36,239) $ (8,764) $(2,425)
Basic and diluted net loss per share $ (3.72) $ (2.61) $ (1.99) $ (0.75) $ (0.48)
<CAPTION>
Balance Sheet Data: As of December 31,
-----------------------------------------------------------------------
1999 1998 1997 1996 1995
--------------- -------------- ------------- ------------ -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Total assets $1,451,373 $673,963 $355,393 $135,609 $ 5,042
Total long term obligations $ 929,944 $420,174 $231,211 $ 17,248 $ 528
Total stockholders' equity (deficit) $ 191,486 $114,917 $ 42,526 $ 76,440 $ 2,562
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OVERVIEW
Overview
Primus is a facilities-based total service provider offering bundled
international and domestic Internet, data and voice services to business,
residential and carrier customers. Primus's customers are primarily in North
America, Europe and selected markets within the Asia-Pacific region. It seeks to
capitalize on the increasing demand for high-quality international
communications services. The Company provides services over its network, which
consists of:
. 19 carrier-grade switches, including 15 international gateway
switches in the United States, Australia, Canada, France, Germany,
Japan, Puerto Rico and the United Kingdom, and four domestic switches
in Australia;
. more than 150 POPs and Internet access nodes in additional markets
within its principal service regions;
. both owned and leased transmission capacity on undersea and land-
based fiber optic cable systems; and
. an international satellite earth station located in London, together
with the capacity the Company leased on an Intelsat satellite.
Utilizing this network, along with resale arrangements and foreign carrier
agreements, Primus offers quality service to approximately 1.9 million customers
as of December 31, 1999.
Primus was founded in February 1994, and through the first half of 1995 the
Company was a development stage enterprise involved in various start-up
activities. It began generating revenue during March 1995. On March 1, 1996 it
acquired Axicorp Pty. Ltd., the fourth largest telecommunications provider in
Australia. Primus then entered the Japanese and German markets with its October
1997 acquisition of TelePassport/USFI and expanded its service offerings in
Australia with the March 1998 acquisition of a controlling interest in Hotkey
Internet Services Pty. Ltd., an Australia-based ISP, and the April 1998
acquisition of Eclipse Telecommunications Pty. Ltd., an Australia-based data
communications service provider.
25
<PAGE>
On June 9, 1998, Primus acquired the operations of TresCom. The TresCom merger
expanded the scope and coverage of the Company's communications network, thereby
providing additional opportunities to migrate traffic onto the network,
resulting in better utilization of the network and reduced variable costs.
In 1999, among other things, Primus:
. acquired London Telecom, a Canadian long distance provider, and
certain related companies;
. purchased a residential long distance customer base, customer support
assets and residential Internet customers and network from AT&T
Canada and ACC Telenterprises;
. purchased Telegroup's global retail customer businesses, which
include retail customers primarily in North America and Europe;
. organized its Internet and data services business into a new
subsidiary, iPRIMUS.com, acquired GlobalServe, a Canadian ISP, Matrix
Internet, a Brazilian ISP, TCP/IP and TouchNet, two independent
German ISPs, and the remaining interest in Hotkey Internet Services,
entered into agreements with Covad Communications and NorthPoint
Communications to offer DSL services, acquired DigitalSelect, a
provider of DSL Internet access and Web content, and 1492
Technologies, a Web site development, consulting and service firm,
and began to build an Internet Protocol-based network platform in
Australia.
Net revenue is earned based on the number of minutes billable and is recorded
upon completion of a call, adjusted for sales allowance. The Company generally
prices its services at a savings compared to the major carriers operating in
Primus's principal service regions. Net revenue is derived from carrying a mix
of business, residential and carrier long distance traffic, data and Internet
traffic in the United States, Australia, Canada, Brazil and Germany, and, in
Australia, also from the provision of local and cellular services. Primus
expects to continue to generate net revenue from internal growth through sales
and marketing efforts focused on customers with significant international
long-distance usage, including small- and medium-sized businesses, multinational
corporations, ethnic residential customers and other telecommunications carriers
and resellers.
Prices in the long distance industry in the United States and the United Kingdom
have declined in recent years and, as competition continues to increase, the
Company believes that prices are likely to continue to decrease. Additionally,
Primus believes that because deregulatory influences only recently have begun to
affect non-United States and non-United Kingdom telecommunications markets,
including Australia, the deregulatory trend in such markets will result in
greater competition which could adversely affect Primus's net revenue per minute
and gross margin as a percentage of net revenue. However, the Company believes
that such decreases in prices will be offset by increased communications usage
and decreased costs.
Cost of revenue is comprised primarily of costs incurred from other domestic and
foreign telecommunications carriers to originate, transport and terminate calls.
The majority of Primus's cost of revenue is variable, based upon the number of
minutes of use, with transmission and termination costs being the most
significant expense. As the portion of traffic transmitted over leased or owned
facilities increases, cost of revenue increasingly will be comprised of fixed
costs. In order to manage such costs, Primus pursues a flexible approach with
respect to the expansion of its network. In most instances, Primus initially
obtains transmission capacity on a variable-cost, per-minute leased basis, next
acquires additional capacity on a fixed-cost basis when traffic volume makes
such a commitment cost-effective, and ultimately purchases and operates its own
facilities when traffic levels justify such investment. The Company also seeks
to lower the cost of revenue through:
. optimizing the routing of calls over the least cost route;
. increasing volumes on the fixed cost leased and owned lines, thereby
spreading the allocation of fixed costs over a larger number of
minutes;
. negotiating lower variable usage based costs with domestic and
foreign service providers and negotiating additional and lower cost
foreign carrier agreements with the foreign incumbent carriers and
others; and
. continuing to expand the network when traffic volumes justify such
investment.
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The Company generally realizes a higher gross margin as a percentage of net
revenue on its international as compared to its domestic long distance services
and a higher gross margin as a percentage of net revenue on its services to both
business and residential customers compared to those realized on its services to
other telecommunications carriers. In addition, Primus generally realizes a
higher gross margin as a percentage of net revenue on long distance services as
compared to those realized on local switched and cellular services. Carrier
services, which generate a lower gross margin as a percentage of net revenue
than retail services, are an important part of net revenue because the
additional traffic volume of such carrier customers improves the utilization of
the network and allows the Company to obtain greater volume discounts from its
suppliers than it otherwise would realize. Primus's overall gross margin as a
percentage of net revenue may fluctuate based on the relative volumes of
international versus domestic long distance services, carrier services versus
business and residential long distance services, and the proportion of traffic
carried on Primus's network versus resale of other carriers' services.
Selling, general and administrative expenses are comprised primarily of salaries
and benefits, commissions, occupancy costs, sales and marketing expenses,
advertising and administrative costs. These expenses have been increasing
consistently with the expansion of operations. Primus expects this trend to
continue and believes that it will incur additional selling, general and
administrative expenses to support the expansion of sales and marketing efforts
and operations in current markets as well as new markets in the principal
service regions.
Although the Company's functional currency is the United States dollar, a
significant portion of net revenue is derived from sales and operations outside
the United States. In the future, Primus expects to continue to derive the
majority of net revenue and incur a significant portion of its operating costs
from outside the United States, and therefore changes in exchange rates may have
a significant effect on Primus's results of operations. Primus historically has
not engaged in hedging transactions and does not currently contemplate engaging
in hedging transactions to mitigate foreign exchange risks.
Other Operating Data
The following information for the year ended December 31, 1999 is provided for
informational purposes and should be read in conjunction with the Consolidated
Financial Statements and Notes.
<TABLE>
<CAPTION>
Minutes of Long Distance Use
Net -----------------------------------------------------------
Revenue International Domestic Total
--------------- ----------------- ----------------- -----------------
(in thousands)
<S> <C> <C> <C> <C>
North America $406,083 1,219,997 1,314,528 2,534,525
Europe 195,477 600,317 300,578 900,895
Asia-Pacific 231,179 150,981 450,143 601,124
--------------- ----------------- ----------------- -----------------
Total $832,739 1,971,295 2,065,249 4,036,544
=============== ================= ================= =================
</TABLE>
Results of operations for the year ended December 31, 1999 as compared to the
year ended December 31, 1998
Net revenue increased $411.1 million or 97.5% to $832.7 million for the year
ended December 31, 1999, from $421.6 million for the year ended December 31,
1998. Of the net revenue increase, $218.1 million was associated with the
Company's North American operations, which represents a growth rate of
approximately 116.0%. The growth reflects increased traffic volumes in business
and ethnic residential retail operations and in carrier operations, and a full
year's results of the acquired TresCom operations, as compared to approximately
7 months' Trescom operations in 1998. The 1999 results also include operations
of Telegroup (since the June 1, 1999 effective date of the acquisition), AT&T
Canada (since the May 31, 1999 customer base acquisition), and the LTN and
Wintel Companies (since the March 31, 1999 acquisition). The total of these
acquisitions contributed $124.7 million or 57% of the total North American
increase. The European net revenue increased from $60.9 million for the year
ended December 31, 1998 to $195.5 million for the year ended December 31, 1999,
resulting from the acquisition of Telegroup, increased retail business and
residential traffic and a full year of carrier services, in the United Kingdom
and Germany. The Company's Asia-Pacific net
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revenue increased by $58.4 million or 33.8% to $231.2 million for the year ended
December 31, 1999 from $172.8 million for the year ended December 31, 1998.
Cost of revenue increased $271.6 million, from $353.0 million, or 83.7% of net
revenue, for the year ended December 31, 1998 to $624.6 million, or 75.0% of net
revenue, for the year ended December 31, 1999. The increase in the cost of
revenue is primarily attributable to the increased traffic volumes and
associated net revenue growth. The cost of revenue as a percentage of net
revenue decreased by 870 basis points as a result of expansion of the Company's
global Network, the continuing migration of existing and newly generated
customer traffic onto the Company's Network, and the increase and introduction
of new higher margin product offerings such as data and Internet services.
Selling, general and administrative expenses increased $120.1 million to $199.6
million for the year ended December 31, 1999 from $79.5 million for the year
ended December 31, 1998. The increase is attributable to the impact of increased
advertising, marketing and sales expenses focused on retail revenue growth.
Also, the increase is primarily attributable to the addition of expenses from
acquired operations including GlobalServe, London Telecom, the retail customer
base of AT&T Canada, Telegroup, TelSN, DigitalSelect, and Matrix Internet.
Depreciation and amortization increased from $24.2 million for the year ended
December 31, 1998 to $55.0 million for the year ended December 31, 1999. The
increase is associated with increased amortization expense related to intangible
assets arising from the Company's acquisitions and with increased depreciation
expense related to capital expenditures for fiber optic cable, switching and
other network equipment being placed into service.
Interest expense increased to $79.6 million for the year ended December 31, 1999
from $40.0 million for the year ended December 31, 1998. The increase is
primarily attributable to the interest expense associated with five additional
months of interest expense associated with the Company's May 1998 $150 million
9 7/8% Senior Notes Offering, due 2008 ("1998 Senior Notes"), the January 1999
$245.5 million 11 1/4% Senior Notes Offering, due 2009, ("January 1999 Senior
Notes") and the Company's October 1999 $250 million 12 3/4% Senior Notes
Offering, due 2009, ("October 1999 Senior Notes") and, to a lesser extent, the
Company's capital lease financing.
Interest and other income increased from $11.5 million for the year ended
December 31, 1998 to $13.3 million for the year ended December 31, 1999. The
increase is a result of the investment of the net proceeds of the Company's 1999
and 1998 Senior Notes offerings, and the secondary equity offering.
Results of operations for the year ended December 31, 1998 as compared to the
year ended December 31, 1997
Net revenue increased $141.4 million or 51% to $421.6 million for the year ended
December 31, 1998, from $280.2 million for the year ended December 31, 1997. Of
the net revenue increase, $113.7 million was associated with the Company's North
American operations, which represents a growth rate of approximately 153%. The
growth reflects increased traffic volumes in business and ethnic residential
retail operations and in carrier operations, and includes operations of TresCom
(since the June 9, 1998 acquisition), and a full year's results of the acquired
Canadian operations and the acquired operations of TelePassport L.L.C./USFI,
Inc. The European net revenue increased from $22.7 million for the year ended
December 31, 1997 to $60.9 million for the year ended December 31, 1998,
resulting from increased retail business and residential traffic and the
addition of carrier services, both in the United Kingdom and Germany. The
Company's Asia-Pacific net revenue decreased by $10.3 million or 5.7% to $172.8
million for the year ended December 31, 1998 from $183.1 million for the year
ended December 31, 1997 primarily resulting from a 13% decrease in the
Australian dollar average exchange rate. Net revenue of the Australian
operations, in Australian dollar terms, grew 7% to Australian $259.5 million as
a result of increased retail business and residential traffic growth and the
addition of data and Internet services.
Cost of revenue increased $100.3 million, from $252.7 million, or 90.2% of net
revenue, for the year ended December 31, 1997 to $353.0 million, or 83.7% of net
revenue, for the year ended December 31, 1998. The increase in the cost of
revenue is primarily attributable to the increased traffic volumes and
associated net revenue growth. The cost of revenue as a percentage of net
revenue decreased by 650 percentage points as a result of expansion of the
Company's global Network, the continuing migration of existing and newly
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<PAGE>
generated customer traffic onto the Company's Network, and new higher margin
product offerings such as data and Internet services.
Selling, general and administrative expenses increased $28.9 million to $79.5
million for the year ended December 31, 1998 from $50.6 million for the year
ended December 31, 1997. The increase is attributable to the addition of
expenses from acquired operations including TresCom, Hotkey, Eclipse and the
Canadian operations, the hiring of additional sales and marketing staff and
network operations personnel and increased advertising and promotional expenses
associated with the Company's residential marketing campaigns.
Depreciation and amortization increased from $6.7 million for the year ended
December 31, 1997 to $24.2 million for the year ended December 31, 1998. The
increase is associated with increased amortization expense related to intangible
assets arising from the Company's acquisitions and with increased depreciation
expense related to capital expenditures for fiber optic cable, switching and
other network equipment being placed into service.
Interest expense increased to $40.0 million for the year ended December 31, 1998
from $12.9 million for the year ended December 31, 1997. The increase is
primarily attributable to the interest expense associated with the Company's
July 1997 $225 million 11 3/4 % Senior Notes Offering, due 2004, ("1997 Senior
Notes") and the Company's May 1998 $150 million 9 7/8 % Senior Notes Offering,
due 2008, ("1998 Senior Notes") and, to a lesser extent, the Company's Bank
Revolving Credit Facility and additional capital lease financing.
Interest income increased from $6.2 million for the year ended December 31, 1997
to $11.5 million for the year ended December 31, 1998. The increase is a result
of the investment of the net proceeds of the Company's 1998 and 1997 Senior
Notes offerings.
Liquidity and Capital Resources
The Company's liquidity requirements arise from cash used in operating
activities, purchases of network equipment including switches, related
transmission equipment and international and domestic fiber optic cable
transmission capacity, satellite earth stations and satellite transmission
capacity, interest and principal payments on outstanding indebtedness, and
acquisitions of and strategic investments in businesses. The Company has
financed its growth to date through public offerings and private placements of
debt and equity securities, bank debt, equipment financing and capital lease
financing.
Net cash used in operating activities was $55.6 million for the year ended
December 31, 1999 as compared to net cash used in operating activities of
$71.3 million for the year ended December 31, 1998. The increase in the net loss
from 1998 to 1999's net loss of $112.7 million was offset by greater non-cash
operating expenses of $83.6 million. The decrease in operating cash used is
primarily comprised of an increase in accounts payable of $56.2 million caused
by higher expenses in 1999, and an increase in accrued interest payable due to
the interest due on the January 1999 Senior Notes and the October 1999 Senior
Notes. These increases to operating cash flow are offset by an increase in
accounts receivable of $64.8 million due to higher revenue in 1999, and an
increase in prepaid expenses and other current assets partly due to the increase
in the deferral of direct marketing expenses that are amortized over a 12 month
period.
Net cash used in investing activities was $200.2 million for the year ended
December 31, 1999 compared to net cash used in investing activities of $54.2
million for the year ended December 31, 1998. Net cash used in investing
activities for the year ended December 31, 1999 includes $114.3 million used to
acquire Telegroup, the LTN and Wintel Companies, AT&T Canada, GlobalServe,
TelSN, Hotkey, TCP/IP, TouchNet, Cards & Parts, DigitalSelect, 1492 Technologies
and 51% of Matrix Internet. Additionally, $110.6 million of cash was used for
capital expenditures primarily for the expansion of the Company's global
Network, partially offset by $24.7 million of cash provided by the sale of
restricted investments used to fund interest payments on the 1997 Senior Notes.
During the year ended December 31, 1999 the Company funded additional equipment
and fiber purchases of $24.4 million through equipment financing agreements.
Net cash provided by financing activities was $591.0 million for the year ended
December 31, 1999 as compared to net cash provided by financing activities of
$146.8 million during the year ended December 31, 1998. Cash provided by
financing activities for the year ended December 31, 1999 resulted primarily
from $192.5 million of net proceeds from the January 1999 Senior Notes offering,
$242.4 million of net proceeds from the October 1999 Senior Notes offering, and
the sale of 8,000,000 shares of the Company's common stock at a price of $22.50
per share, netting $169.3 million. $4.5 million was also received from the 49%
minority shareholder of Matrix Internet to fund the operations of Matrix
Internet. Offsetting the cash provided
29
<PAGE>
by the offerings of debt and equity securities was the $17.8 million repayment
of the Revolving Credit Agreement and $5.4 million of payments on capital
leases.
In March 2000, the Hewlett-Packard Company agreed to purchase up to $50
million in convertible debt. Such debt will bear interest at a rate of 9.25% per
annum and is convertible into the Company's common stock at a price of $60 per
share. The Company has the right under certain circumstances to require
Hewlett-Packard to convert the debt to equity. To date, Hewlett-Packard has
invested $25 million. Until converted, the debt will be secured by equipment
purchased from Hewlett-Packard with the proceeds of the investment.
The Company anticipates aggregate capital expenditures of approximately $210
million during 2000. Such capital expenditures will be primarily to expand and
enhance Primus' existing communications network, to deploy the Company's
global broadband ATM+IP network, and to purchase international and domestic
switches, POPs and data centers for voice, data and Internet services, other
transmission equipment and support systems.
In February and March 2000, Primus completed an offering of $300,000,000 in
aggregate principal amount of 5.75% convertible subordinated debentures due
February 15, 2007 ("2000 Convertible Debt") in a private placement. The
debentures are convertible into PRIMUS common stock at a price of $49.7913 per
share. The purpose of the offering was to fund capital expenditures to expand
and enhance the Company's communications network and for other permitted
corporate purposes, including possible acquisitions.
The Company believes that the net proceeds from the 2000 Convertible Debt,
together with its existing cash and available capital lease financing (subject
to the limitations in the Indentures related to the Company's senior notes) will
be sufficient to fund the Company's operating losses, debt service requirements,
capital expenditures, possible acquisitions and other cash needs for our
operations, including iPRIMUS.com, until at least June 30, 2001. The semi-annual
interest payments due under the 1997 Senior Notes through August 1, 2000 have
been pre-funded and will be paid from restricted investments. The Company is
continually evaluating the expansion of its service offerings and plans to make
further investments in and enhancements to its switches and distribution
channels in order to expand its service offerings. In order to fund these
additional cash requirements, the Company anticipates that it will be required
to raise additional financing from public or private equity or debt sources.
Additionally, if the Company's plans or assumptions change, including those with
respect to the development of the network and the level of Primus' operations
and operating cash flow, if its assumptions prove inaccurate, if it consummates
additional investments or acquisitions, if it experiences unexpected costs or
competitive pressures, or if existing cash and any other borrowings prove to be
insufficient, the Company may be required to seek additional capital sooner than
expected. Except as described herein, Primus presently has no binding commitment
or binding agreement with respect to any material acquisition, joint venture or
strategic investment. However, from time to time, the Company may be party to
one or more non-binding letters of intent regarding material acquisitions which,
if consummated, may be paid for with cash or through the issuance of a
significant number of shares of the Company's common stock.
Year 2000
The Company's Year 2000 review involved (a) an assessment of the Year 2000
problems that may affect the Company, (b) the development of remedies to address
the problems discovered in the assessment phase to the extent practical or
feasible, (c) the testing of such remedies, and (d) the preparation of
contingency plans to deal with worst case scenarios. As of the date of this
report, the Company has not encountered any material business interruptions or
adverse financial consequences related to the Year 2000 issue.
The Company currently estimates that the total historical and anticipated
remaining costs related to the Year 2000 issue will be immaterial to the
Company's financial condition.
30
<PAGE>
Special Note Regarding Forward Looking Statements
Statements in this Annual Report on Form 10-K, including those concerning the
Company's expectations of future sales, net revenue, gross profit, net income,
network development, traffic development, capital expenditures, selling, general
and administrative expenses, service introductions and cash requirements include
certain forward-looking statements. As such, actual results may vary materially
from such expectations. Factors, which could cause results to differ from
expectations, include risks associated with:
Limited Operating History; Entry into Developing Markets. The Company was
founded in February 1994, began generating revenue in March 1995. The Company
intends to enter additional markets or businesses, including establishing an
Internet business, where Primus has limited or no operating experience.
Accordingly, the Company cannot provide assurance that its future operations
will generate operating or net income, and the Company's prospects must be
considered in light of the risks, expenses, problems and delays inherent in
establishing a new business in a rapidly changing industry.
Limited Operating History; Entry into Internet and data business. Primus has
recently begun targeting businesses and residential customers for Internet and
data services through its subsidiary iPRIMUS.com and other recently acquired
ISPs. The Company has been expanding and intends to continue to expand, its
offering of data and Internet services worldwide. Primus anticipates offering a
full-range of Internet protocol-based data and voice communications over the
global broadband ATM+IP network which the Company is beginning to deploy over
its existing network infrastructure. Primus has limited experience in the
Internet business and cannot provide assurance that it will successfully
establish or expand the business. Currently, the Company provides Internet
services to business and residential customers in the United States, Australia,
Canada, Brazil and Germany, and offers Internet transmission services in the
Indian Ocean/Southeast Asia regions through its satellite earth station in
London.
The market for Internet connectivity and related services is extremely
competitive. Primus's primary competitors include other ISPs that have a
significant national or international presence. Many of these carriers have
substantially greater resources, capital and operational experience than Primus
does. The Company also expects it will experience increased competition from
traditional telecommunications carriers that expand into the market for Internet
services. In addition, Primus will require substantial additional capital to
make investments in its Internet operations, and it may not be able to obtain
that capital on favorable terms or at all. The amount of such capital
expenditures may exceed the amount of capital expenditures spent on the voice
portion of its business going forward.
Further, even if Primus is able to establish and expand its Internet business,
the Company will face numerous risks that may adversely affect the operations of
its Internet business. These risks include:
. competition in the market for Internet services;
. Primus's limited operating history as an ISP;
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<PAGE>
. Primus's reliance on third parties to provide maintenance and support
services for the Company's ATM+IP network;
. Primus's reliance on third-party proprietary technology, including
Pilot's HDI security protocol, to provide certain services to Primus's
customers;
. the Company's ability to recruit and retain qualified technical,
engineering and other personnel in a highly competitive market;
. Primus's ability to adapt and react to rapid changes in technology
related to the Internet business;
. uncertainty relating to the continuation of the adoption of the
Internet as a medium of commerce and communications;
. vulnerability to unauthorized access, computer viruses and other
disruptive problems due to the accidental or intentional actions of
others;
. adverse regulatory developments;
. the potential liability for information disseminated over Primus's
network; and
. the Company's need to manage the growth of its Internet business,
including the need to enter into agreements with other providers of
infrastructure capacity and equipment and to acquire other ISPs and
Internet-related businesses on acceptable terms.
Finally, Primus expects to incur operating losses and negative cash flow from
its Internet and data business as the Company expands, builds out and upgrades
this part of the business. Any such losses and negative cash flow are expected
to partially offset the expected positive cash flow generated by the voice
business and effectively reduce the overall cash flow of Primus as a whole.
Managing Rapid Growth. The Company's strategy of rapid growth has placed, and is
expected to continue to place, a significant strain on the Company. In order to
manage its growth effectively, the Company must continue to implement and
improve its operational and financial systems and controls, purchase and utilize
additional transmission facilities, and expand, train and manage its employees,
all within a rapidly-changing regulatory environment. Inaccuracies in the
Company's forecast of traffic could result in insufficient or excessive
transmission facilities and disproportionate fixed expenses.
Substantial Indebtedness; Liquidity. The Company currently has substantial
indebtedness and anticipates that it and its subsidiaries will incur additional
indebtedness in the future. The level of the Company's indebtedness (i) could
make it more difficult for it to make payments of interest on its outstanding
debt; (ii) could limit the ability of the Company to obtain any necessary
financing in the future for working capital, capital expenditures, debt service
requirements or other purposes; (iii) requires that a substantial portion of the
Company's cash flow from operations, if any, be dedicated to the payment of
principal and interest on its indebtedness and other obligations and,
accordingly, will not be available for use in its business; (iv) could limit its
flexibility in planning for, or reacting to, changes in its business; (v)
results in the Company being more highly leveraged than some of its competitors,
which may place it at a competitive disadvantage; and (vi) will make it more
vulnerable in the event of a downturn in its business.
Historical and Future Operating Losses; Negative EBITDA; Net Losses. Since
inception, Primus had cumulative negative cash flow from operating activities
and cumulative negative EBITDA. In addition, Primus incurred net losses since
inception and has an accumulated deficit of approximately $224 million as of
December 31, 1999. The Company expects to continue to incur additional operating
losses and negative cash flow as it expands its operations and continues to
build-out and upgrade its network. There can be no assurance that the Company's
revenue will grow or be sustained in future periods or that it will be able to
achieve or sustain profitability or positive cash flow from operations in any
future period.
Acquisition and Strategic Investment Risks. Acquisitions, a key element in the
Company's growth strategy, involve operational risks, including the possibility
that an acquisition does not ultimately provide the benefits originally
anticipated by management, while the Company continues to incur operating
expenses to provide the
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services formerly provided by the acquired company, and financial risks
including the incurrence of indebtedness by the Company in order to affect the
acquisition and the consequent need to service that indebtedness.
Integration of Acquired Businesses. There can be no assurance that the Company
will be successful in identifying attractive acquisition candidates, completing
and financing additional acquisitions on favorable terms, or integrating the
acquired business or assets into its own. There may be difficulty in integrating
the service offerings, distribution channels and networks gained through
acquisitions with the Company's own. Successful integration of operations and
technologies requires the dedication of management and other personnel which may
distract their attention from the day-to-day business, the development or
acquisition of new technologies, and the pursuit of other business acquisition
opportunities.
Intense Competition. The long distance telecommunications industry is intensely
competitive and is significantly influenced by the marketing and pricing
decisions of the larger industry participants. Competition in all of the
Company's markets is likely to increase and, as deregulatory influences are
experienced in markets outside the United States, competition in non-United
States markets is likely to become similar to the intense competition in the
United States. Many of the Company's competitors are significantly larger and
have substantially greater financial, technical and marketing resources and
larger networks than the Company, a broader portfolio of service offerings,
greater control over transmission lines, stronger name recognition and customer
loyalty, as well as long-standing relationships with the Company's target
customers. In addition, many of the Company's competitors enjoy economies of
scale that result in a lower cost structure for transmission and related costs
which could cause significant pricing pressures within the industry.
Dependence on Transmission Facilities-Based Carriers. The Company's ability to
maintain and expand its business is dependent upon whether the Company continues
to maintain favorable relationships with the transmission facilities-based
carriers to carry the Company's traffic.
International Operations. In many international markets, the existing carrier
will control access to the local networks, enjoy better brand recognition and
brand and customer loyalty, and have significant operational economies,
including a larger backbone network and correspondent agreements. Moreover, the
existing carrier may take many months to allow competitors, including the
Company, to interconnect to its switches within its territory. There can be no
assurance that the Company will be able to obtain the permits and operating
licenses required for it to operate, obtain access to local transmission
facilities or to market services in international markets. In addition,
operating in international markets generally involves additional risks,
including: unexpected changes in regulatory requirements, tariffs, customs,
duties and other trade barriers; difficulties in staffing and managing foreign
operations; problems in collecting accounts receivable; political risks;
fluctuations in currency exchange rates; foreign exchange controls which
restrict repatriation of funds; technology export and import restrictions;
seasonal reductions in business activity.
Dependence on Effective Information Systems. The Company's management
information systems must grow as the Company's business expands and are expected
to change as new technological developments occur. There can be no assurance
that the Company will not encounter delays or cost-overruns or suffer adverse
consequences in implementing new systems when required.
Industry Changes. The international telecommunications industry is changing
rapidly due to deregulation, privatization, technological improvements,
expansion of infrastructure and the globalization of the world's economies. In
order to compete effectively, the Company must adjust its contemplated plan of
development to meet changing market conditions. The telecommunications industry
is marked by the introduction of new product and service offerings and
technological improvements. The Company's profitability will depend on its
ability to anticipate, assess and adapt to rapid technological changes and its
ability to offer, on a timely and cost-effective basis, services that meet
evolving industry standards.
Network Development; Migration of Traffic. The long-term success of the Company
is dependent upon its ability to design, implement, operate, manage and maintain
the Network. The Company could experience delays or cost overruns in the
implementation of the Network, or its ability to migrate traffic onto its
Network, which could have a material adverse effect on the Company.
Dependence on Key Personnel. The loss of the services of K. Paul Singh, the
Company's Chairman and Chief Executive Officer, or the services of its other key
personnel, or the inability of the Company to attract and retain additional key
management, technical and sales personnel (for which competition is intense in
the telecommunications industry), could have a material adverse effect upon the
Company.
Government Regulation. The Company's operations are subject to constantly
changing regulation. There can be no assurance that future regulatory changes
will not have a material adverse effect on the Company, or that regulators or
third parties will not raise material issues with regard to the Company's
compliance or non-compliance with applicable regulations, any of which could
have a material adverse effect upon the company.
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Natural Disasters. Many of the geographic areas where the Company conducts its
business may be affected by natural disasters, including hurricanes and tropical
storms. Hurricanes, tropical storms and other natural disasters could have
material adverse effect on the business by damaging the network facilities or
curtailing telephone traffic as a result of the effects of such events, such as
destruction of homes and businesses.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposures relate to changes in foreign
currency exchange rates and to changes in interest rates.
Foreign currency - As noted above, although the Company's functional currency is
the United States dollar, a significant portion of the Company's net revenue is
derived from its sales and operations outside the United States. In the future,
the Company expects to continue to derive a significant portion of its net
revenue and incur a significant portion of its operating costs outside the
United States, and changes in foreign currency exchange rates may have a
significant effect on the Company's results of operations. The operations of
affiliates and subsidiaries in foreign countries have been funded with
investments and other advances. Due to the long-term nature of such investments
and advances, the Company accounts for any adjustments resulting from
translation as a charge or credit to "accumulated other comprehensive loss"
within the stockholders' equity section of the consolidated balance sheet. The
Company historically has not engaged in hedging transactions.
Interest rates - The Company is currently not exposed to material future
earnings or cash flow exposures from changes in interest rates on long-term debt
obligations since the majority of the Company's long-term debt obligations are
at fixed rates. The Company is exposed to interest rate risk, as additional
financing may be required due to operating losses and expansion of the Company's
global Network. The interest rate that the Company will be able to obtain on
additional financing will depend on market conditions at that time and may
differ from the rates the Company has secured on its current debt. The
estimated fair value of the Company's 1999, 1998 and 1997 Senior Notes (carrying
value of $869 million), based on quoted market prices, at December 31, 1999 was
$852 million.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report F-2
Consolidated Financial Statements
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998 and 1997 F-3
Consolidated Balance Sheets as of December 31, 1999 and 1998 F-4
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1999, 1998 and 1997 F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 F-6
Consolidated Statements of Comprehensive Loss for the
years ended December 31, 1999, 1998 and 1997 F-7
Notes to the Consolidated Financial Statements F-8
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
34
<PAGE>
AND FINANCIAL DISCLOSURE
None.
PART III
The information required by Part III will be provided in the Company's
definitive proxy statement for the Company's 2000 annual meeting of stockholders
(involving the election of directors), which definitive proxy statement will be
filed pursuant to Regulation 14A not later than April 30, 2000 ("1999 Proxy
Statement"), and is incorporated herein by this reference.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to directors of the Company is set forth under the caption
entitled "Election of Directors" in the Company's 2000 Proxy Statement and is
incorporated herein by reference. Information relating to the executive officers
of the Company is set forth in the Company's 2000 Proxy Statement under the
caption "Executive Officers, Directors and Key Employees" and is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information regarding compensation of officers and directors of the Company
is set forth under the caption entitled "Executive Compensation" in the
Company's 2000 Proxy Statement and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information regarding ownership of certain of the Company's securities is set
forth under the captions entitled "Security Ownership of Certain Beneficial
Owners" and "Security Ownership of Management" in the Company's 2000 Proxy
Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions with the
Company is set forth under the caption entitled "Certain Relationships and
Related Transactions" in the Company's 2000 Proxy Statement and is incorporated
herein by reference.
35
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
a) Financial Statements and Schedules
The financial statements as set forth under Item 8 of this report on
Form 10-K are included herein.
Financial Statement Schedules: Page
----
(II) Valuation and Qualifying Accounts S-1
All other financial statement schedules have been omitted since they
are either not required, not applicable, or the information is
otherwise included.
b) Reports on 8-K
Form 8-K dated October 13, 1999, was filed to announce the private sale
of $250 million in principal amount of 12 3/4% Senior Notes due 2009
(the "12 3/4% Senior Notes due 2009").
Form 8-K dated October 15, 1999, was filed to announce the consummation
of the sale to the public of 8,000,000 shares of common stock at a
price of $22.50 per share, as well as to announce the consummation of
the private sale of the 12 3/4% Senior Notes due 2009.
Form 8-K dated October 20, 1999, was filed to disclose the Company's
unaudited pro forma financial results for the six months ended June 30,
1999.
c) Exhibit listing
Exhibit
Number Description
------- -----------
3.1 Amended and Restated Certificate of Incorporation of
Primus; Incorporated by reference to Exhibit 3.1 of
the Registration Statement on Form S-8, No. 333-56557
(the "S-8 Registration Statement").
3.2 Amended and Restated Bylaws of Primus; Incorporated
by reference to Exhibit 3.2 of the Registration
Statement on Form S-1, No. 333-10875 (the "IPO
Registration Statement").
4.1 Specimen Certificate of Primus Common Stock;
Incorporated by reference to Exhibit 4.1 of the IPO
Registration Statement.
4.2 Form of Indenture; Incorporated by reference to
Exhibit 4.1 of the Registration Statement on Form
S-1, No 333-30195 (the "1997 Senior Note Registration
Statement").
36
<PAGE>
4.3 Form of Indenture of Primus, as amended and restated
on January 20, 1999, between Primus and First Union
National Bank; Incorporated by reference to Exhibit
4.3 of the 1998 Form 10-K.
4.4 Form of Warrant Agreement of Primus; Incorporated by
reference to Exhibit 4.2 of the 1997 Senior Note
Registration Statement.
4.5 Indenture, dated May 19, 1998, between Primus and
First Union National Bank; Incorporated by reference
to Exhibit 4.4 of the Registration Statement on Form
S-4, No 333-58547 (the "1998 Senior Note Registration
Statement").
4.6 Specimen 9 7/8% Senior Note due 2008; Incorporated by
reference to Exhibit A included in Exhibit 4.4 of the
1998 Senior Note Registration Statement.
4.7 Indenture, dated January 29, 1999, between Primus and
First Union National Bank; Incorporated by reference
to Exhibit 4.3 of the 1998 Form 10-K.
4.8 Specimen 11 1/4% Senior Note due 2009; Incorporated
by reference to Exhibit A included in Exhibit 4.7.
4.9 Rights Agreement, dated as of December 23, 1998,
between Primus and StockTrans, Inc., including the
Form of Rights Certificate (Exhibit A), the
Certificate of Designation (Exhibit B) and the Form
of Summary of Rights (Exhibit C); Incorporated by
reference to Exhibit 4.1 to the Company's
Registration Statement on Form 8-A, No 000-29092
filed with the Commission on December 30, 1998.
4.10 Form of legend on certificates representing shares of
Common Stock regarding Series B Junior Participating
Preferred Stock Purchase Rights; Incorporated by
reference to Exhibit 4.2 to the Company's
Registration Statement on Form 8-A, No 000-29092
filed with the Commission on December 30, 1998.
4.11 Supplemental Indenture between Primus and First Union
National Bank dated January 20, 1999; Incorporated by
reference to Exhibit 4.3 to Amendment No. 1 to the
Company's Registration Statement on Form S-4, No.
333-76965, filed with the Commission on May 6, 1999.
4.12 Amendment 1999-1 to the Primus Telecommunications
Group, Incorporated Stock Option Plan; Incorporated
by reference to Exhibit 10.14 to Post-Effective
Amendment No. 1 to the Company's Registration
Statement on Form S-4, No. 333-76965, filed with the
Commission on August 2, 1999.
4.13 Specimen 11 3/4% Senior Note Due 2004; Incorporated
by reference to Exhibit 4.3 to the Company's
Registration Statement on Form S-4, No. 333-90179,
filed with the Commission on November 2, 1999 (the
"November S-4").
4.14 Indenture, dated October 15, 1999, between the
Company and first Union National Bank; Incorporated
by reference to the November S-4.
4.15 Specimen 12 3/4% Senior Note due 2009; Incorporated
by reference to Exhibit A to Exhibit 4.14 hereto.
4.16 Indenture, dated February 24, 2000, between the
Company and First Union National Bank.*
4.17 Specimen 5 3/4% convertible subordinated debenture
due 2007; Incorporated by reference to Exhibit A to
Exhibit 4.16 hereto.
37
<PAGE>
10.1 Amendment No. 1 to Stockholder Agreement among Warburg, Pincus, K. Paul
Singh, Primus, and TresCom, dated as of April 16, 1998; Incorporated by
reference to Exhibit 10.1 of the Form 8-K for Amendments.
10.2 Switched Transit Agreement, dated June 5, 1995, between Teleglobe USA,
Inc. and Primus for the provision of services to India; Incorporated by
reference to Exhibit 10.2 of the IPO Registration Statement.
10.3 Hardpatch Transit Agreement, dated February 29, 1996, between Teleglobe
USA, Inc. and Primus for the provision of services to Iran;
Incorporated by reference to Exhibit 10.3 of the IPO Registration
Statement.
10.4 Employment Agreement, dated June 1, 1994, between Primus and K. Paul
Singh; Incorporated by reference to Exhibit 10.5 of the IPO
Registration Statement. **
10.5 Primus 1995 Stock Option Plan; Incorporated by reference to Exhibit
10.6 of the IPO Registration Statement. **
10.6 Primus 1995 Director Stock Option Plan; Incorporated by reference to
Exhibit 10.7 of the IPO Registration Statement. **
10.7 Registration Rights Agreement, dated July 31, 1996, among Primus,
Quantum Industrial Partners LDC, S-C Phoenix Holdings, L.L.C., Winston
Partners II LDC and Winston Partners LLC; Incorporated by reference to
Exhibit 10.11 of the IPO Registration Statement.
10.8 Service Provider Agreement between Telstra Corporation Limited and
Axicorp Pty., Ltd., dated May 3, 1995; Incorporated by reference to
Exhibit 10.12 of the IPO Registration Statement.
10.9 Dealer Agreement between Telstra Corporation Limited and Axicorp Pty.,
Ltd. dated January 8, 1996; Incorporated by reference to Exhibit 10.13
of the IPO Registration Statement.
10.10 Hardpatch Transit Agreement dated October 5, 1995 between Teleglobe
USA, Inc. and Primus regarding the provision of services to India;
Incorporated by reference to Exhibit 10.14 of the IPO Registration
Statement.
10.11 Master Lease Agreement dated as of November 21, 1997 between NTFC
Capital Corporation and Primus Telecommunications, Inc.; Incorporated
by reference to Exhibit 10.17 of Primus's Annual Report on Form 10-K
for the year ended December 31, 1997 (the "1997 10-K"), as amended on
Form 10-K/A dated April 30, 1998.
10.12 Primus Employee Stock Purchase Plan; Incorporated by reference to
Exhibit 10.15 of the 1997 Senior Note Registration Statement. **
10.13 Primus 401(k) Plan; Incorporated by reference to Exhibit 4.4 of the
Primus Registration Statement on Form S-8 (No. 333-35005).
10.14 Registration Rights Agreement, dated May 19, 1998, among Primus
Telecommunications Group, Incorporated, Primus Telecommunications,
Incorporated, Primus Telecommunications Pty. Ltd. and Lehman Brothers,
Inc.; Incorporated by reference to Exhibit 10.23 of the 1998 Senior
Note Registration Statement.
38
<PAGE>
10.15 Primus Telecommunications Group, Incorporated-TresCom
International Stock Option Plan Incorporated by reference to
Exhibit 4.1 of the S-8 Registration Statement. **
10.16 Warrant Agreement between the Company and Warburg, Pincus
Investors, L.P.; Incorporated by reference to Exhibit 10.6
to the TresCom For S-1.
10.17 Form of Indemnification Agreement between the Company and
its directors and executive officers Incorporated by
reference to Exhibit 10.23 to the TresCom Form S-1.
10.18 The Company's 1998 Restricted Stock Plan; Incorporated by
reference to Exhibit 10.33 to Amendment No. 1 to the
Company's Registration Statement on Form S-3, No. 333-86839,
filed with the Commission on September 17, 1999.
10.19 Agreement for the Reciprocal Purchase of Capacity On the
Systems of Each of the Company and Global Crossing Holdings
Ltd. Effective as of May 24, 1999. *
10.20 Indefeasible Right of Use Agreement between Primus
Telecommunications, Inc. and Qwest Communications
Corporation dated December 30, 1999. ***
10.21 Common Stock Purchase Agreement between the Company and
Pilot Network Services, Inc. dated December 28, 1999. *
10.22 Warrant to purchase up to 200,000 shares of common stock of
Pilot Network Services, Inc. dated December 28, 1999. *
10.23 Loan Agreement between Primus Telecommunications, Inc. and
NTFC Capital Corporation dated November 22, 1999. *
10.24 Resale Registration Rights Agreement among the Company,
certain of its subsidiaries, Lehman Brothers Inc., Merrill
Lynch, Pierce, Fenner & Smith, Incorporated and Morgan
Stanley & Co. Incorporated dated February 24, 2000.*
10.25 Multi-Currency Credit Facility Agreement between Primus
Telecommunication Limited and Ericsson I.F.S. *
21.1 Subsidiaries of the Registrant. *
23.1 Independent Auditors' Consent. *
27.1 Financial Data Schedule for the Company for the year ended
December 31, 1999. *
------------------------------------------------------------------------
* Filed herewith
** Compensatory benefit plan
*** Confidential treatment has been requested. The copy filed as an exhibit
omits the information subject to the confidential treatment request.
39
<PAGE>
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
behalf by the undersigned, thereunto duly authorized.
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
By: /s/ K. Paul Singh Chairman of the Board, President and
-----------------
K. Paul Singh Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints K. Paul Singh and Neil L. Hazard, and each of them, his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities to sign any and all amendments to this Form 10-K of the Securities
and Exchange Commission for the fiscal year of Primus Telecommunications Group,
Incorporated ended December 31, 1999, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
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 date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ K. Paul Singh Chairman, President and Chief Executive March 30, 2000
- ---------------------------------------
K. Paul Singh Officer (Principal Executive Officer) and
Director
/s/ Neil L. Hazard Executive Vice President and Chief Financial March 30, 2000
- ---------------------------------------
Neil L. Hazard Officer (Principal Financial Officer and
Principal Accounting Officer)
/s/ John F. DePodesta Executive Vice President and Director March 30, 2000
- ---------------------------------------
John F. DePodesta
/s/ Herman Fialkov Director March 30, 2000
- ---------------------------------------
Herman Fialkov
Director March 30, 2000
- ---------------------------------------
David E. Hershberg
Director March 30, 2000
- ---------------------------------------
Douglas M. Karp
/s/ John Puente Director March 30, 2000
- ---------------------------------------
John Puente
</TABLE>
40
<PAGE>
INDEX TO FINANCIAL STATEMENTS, SCHEDULE AND
EXHIBITS
Page
----
Independent Auditors' Report F-2
Consolidated Financial Statements:
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998, and 1997 F-3
Consolidated Balance Sheets as of December 31, 1999 and 1998 F-4
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1999, 1998, and 1997 F-5
Consolidated Statements of Cash Flows for the
years ended December 31, 1999, 1998, and 1997 F-6
Consolidated Statements of Comprehensive Loss for the
years ended December 31, 1999, 1998 and 1997 F-7
Notes to Consolidated Financial Statements F-8
Consolidated Financial Statement Schedules:
Schedule II. Valuation and Qualifying Accounts Financial
Statement Schedule S-1
Exhibits:
Exhibit 27.1 - Financial Data Schedule E-1
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Primus Telecommunications Group, Incorporated
We have audited the accompanying consolidated balance sheets of Primus
Telecommunications Group, Incorporated and subsidiaries (the "Company") as of
December 31, 1999 and 1998, and the related consolidated statements of
operations, stockholders' equity, comprehensive loss and cash flows for each of
the three years in the period ended December 31, 1999. Our audits also included
the financial statement schedule on page S-1. These financial statements and
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Primus Telecommunications Group,
Incorporated and subsidiaries as of December 31, 1999 and 1998, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1999, in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
McLean, Virginia
February 10, 2000, except for Note 17
as to which the date is March 13, 2000
F-2
<PAGE>
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Year Ended
December 31,
------------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
NET REVENUE $ 832,739 $ 421,628 $ 280,197
COST OF REVENUE 624,599 353,016 252,731
--------- --------- ---------
GROSS MARGIN 208,140 68,612 27,466
--------- --------- ---------
OPERATING EXPENSES
Selling, general and administrative 199,581 79,532 50,622
Depreciation and amortization 54,957 24,185 6,733
--------- --------- ---------
Total operating expenses 254,538 103,717 57,355
--------- --------- ---------
LOSS FROM OPERATIONS (46,398) (35,105) (29,889)
INTEREST EXPENSE (79,629) (40,047) (12,914)
INTEREST AND OTHER INCOME 13,291 11,504 6,645
--------- --------- ---------
LOSS BEFORE INCOME TAXES (112,736) (63,648) (36,158)
INCOME TAXES - - (81)
--------- --------- ---------
NET LOSS $(112,736) $ (63,648) $ (36,239)
========= ========= =========
BASIC AND DILUTED NET
LOSS PER COMMON SHARE $ (3.72) $ (2.61) $ (1.99)
========= ========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 30,323 24,432 18,250
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 471,542 $ 136,196
Restricted investments 25,932 25,729
Accounts receivable (net of allowance for
doubtful accounts of $36,453 and $14,976) 165,384 92,531
Prepaid expenses and other current assets 56,994 13,505
----------- -----------
Total current assets 719,852 267,961
RESTRICTED INVESTMENTS - 24,894
PROPERTY AND EQUIPMENT - Net 285,390 158,873
GOODWILL AND OTHER INTANGIBLE ASSETS - Net 402,030 205,039
OTHER ASSETS 44,101 17,196
----------- -----------
TOTAL ASSETS $ 1,451,373 $ 673,963
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 169,527 $ 82,520
Accrued expenses and other current liabilities 123,453 42,958
Accrued interest 32,420 12,867
Current portion of long-term obligations 16,438 22,423
----------- -----------
Total current liabilities 341,838 160,768
LONG TERM OBLIGATIONS 913,506 397,751
OTHER LIABILITIES 4,543 527
----------- -----------
Total liabilities 1,259,887 559,046
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value - authorized 2,455,000 shares;
none issued and outstanding - -
Common stock, $.01 par value - authorized 80,000,000
shares; issued and outstanding,
37,101,464 and 28,059,063 shares 371 281
Additional paid-in capital 417,060 234,549
Accumulated deficit (224,389) (111,653)
Accumulated other comprehensive loss (1,556) (8,260)
----------- -----------
Total stockholders' equity 191,486 114,917
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,451,373 $ 673,963
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Other
------------------ Paid-In Accumulated Comprehensive Stockholders'
Shares Amount Capital Deficit Loss Equity
------- -------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 17,779 $ 178 $ 88,106 $ (11,766) $ (78) $ 76,440
Common shares issued upon
exercise of warrants 1,843 19 1,453 - - 1,472
Common shares issued for
401(k) Plan 5 - 45 - - 45
Common shares issued upon
exercise of stock options 35 - 42 - - 42
Senior note offering - warrants - - 2,535 - - 2,535
Foreign currency translation
adjustment - - - - (1,769) (1,769)
Net loss - - - (36,239) - (36,239)
------- -------- -------------- -------------- -------------- --------------
BALANCE, DECEMBER 31, 1997 19,662 197 92,181 (48,005) (1,847) 42,526
Common shares issued for
business acquisitions 7,864 79 137,547 - - 137,626
Common shares issued for
401(k) Plan 9 - 119 - - 119
Common shares issued upon
exercise of stock options 489 5 4,334 - - 4,339
Common shares issued for
employee stock purchase plan 24 - 263 - - 263
Common shares issued upon
exercise of warrants 11 - 105 - - 105
Foreign currency translation
adjustment - - - - (6,413) (6,413)
Net loss - - - (63,648) - (63,648)
------- -------- -------------- -------------- -------------- --------------
BALANCE, DECEMBER 31, 1998 28,059 281 234,549 (111,653) (8,260) 114,917
Common shares issued for
secondary equity offering, net 8,000 80 169,230 - - 169,310
Common shares issued for
business acquisitions 457 5 7,845 - - 7,850
Common shares issued for
401(k) Plan 20 - 372 - - 372
Common shares issued upon
exercise of stock options 355 4 3,277 - - 3,281
Common shares issued for
employee stock purchase plan 39 - 494 - - 494
Common shares issued upon
exercise of warrants 41 - 376 - - 376
Common shares issued for
Restricted Stock Plan 130 1 917 - - 918
Foreign currency translation
adjustment - - - - 6,704 6,704
Net loss - - - (112,736) - (112,736)
------- -------- -------------- -------------- -------------- --------------
BALANCE, DECEMBER 31, 1999 37,101 $ 371 $ 417,060 $ (224,389) $ (1,556) $ 191,486
======= ======== ============== ============== ============== ==============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the Year Ended
December 31,
--------------------------------------
1999 1998 1997
---------- ---------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (112,736) $ (63,648) $ (36,239)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation, amortization and accretion 55,319 24,547 6,733
Sales allowance 27,908 9,431 6,185
Foreign currency transaction (gain) loss - - (407)
Stock issuance - 401(k) Plan 328 119 45
Minority interest share of loss (291) - -
Changes in assets and liabilities:
Increase in accounts receivable (64,835) (20,765) (34,240)
Increase in prepaid expenses and
other current assets (34,049) (7,027) (4,080)
(Increase) decrease in other assets (11,749) 735 1,147
Increase (decrease) in accounts payable 56,167 (8,196) 30,247
Increase (decrease) in accrued expenses,
other current liabilities and other liabilities 9,145 (8,073) 5,000
Increase in accrued interest payable 19,223 1,581 10,852
---------- --------- ---------
Net cash used in operating activities (55,570) (71,296) (14,757)
---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (110,582) (75,983) (39,465)
Sale of short-term investments - - 25,125
Sale (purchase) of restricted investments 24,691 22,927 (73,550)
Cash used for business acquisitions, net of cash acquired (114,282) (1,165) (16,349)
---------- --------- ---------
Net cash used in investing activities (200,173) (54,221) (104,239)
---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital leases and other
long-term obligations (21,927) (2,373) (16,881)
Proceeds from sale of common stock and exercise of
stock options 173,587 4,707 1,514
Proceeds from issuance of long-term obligations 450,000 150,000 225,000
Cash received from minority interest holder 4,479 - -
Deferred financing costs (15,125) (5,500) (9,500)
---------- --------- ---------
Net cash provided by financing activities 591,014 146,834 200,133
---------- --------- ---------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS 75 (353) (1,379)
---------- --------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS 335,346 20,964 79,758
CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR 136,196 115,232 35,474
---------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 471,542 $ 136,196 $ 115,232
========== ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ 60,076 $ 38,466 $ 2,745
Non-cash investing and financing activities:
Capital leases for acquisition of equipment $ 1,987 $ 10,958 $ 8,228
Equipment financing for acquisition of equipment $ 24,394 $ 6,000 $ -
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------------
1999 1998 1997
---------- -------- ---------
<S> <C> <C> <C>
NET LOSS $ (112,736) $ (63,648) $ (36,239)
OTHER COMPREHENSIVE GAIN (LOSS) -
Foreign currency translation adjustment 6,704 (6,413) (1,769)
---------- --------- ---------
COMPREHENSIVE LOSS $ (106,032) $ (70,061) $ (38,008)
========== ========= =========
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Primus Telecommunications Group, Incorporated ("Primus" or the "Company")
is a facilities-based total service provider offering bundled international and
domestic Internet, data and voice services to business and residential retail
customers and other carriers located in the United States, Canada, Brazil,
Mexico, Puerto Rico, the United Kingdom, continental Europe, Australia and
Japan. The Company is incorporated in the state of Delaware and operates as a
holding company of operating subsidiaries in North America, Europe and the Asia-
Pacific region.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation--The consolidated financial statements include
the accounts of the Company and its wholly-owned and majority-owned
subsidiaries. All material intercompany profits, transactions, and balances have
been eliminated in consolidation. There are minority shareholders representing
outside ownership of 49% of the common stock of Matrix Internet, S.A.
("Matrix") and 49% of Cards & Parts Telecom GmbH ("Cards & Parts").
Revenue Recognition and Deferred Revenue--The Company records revenue from
the sale of telecommunications services at the time of customer usage primarily
based upon minutes of use. The Company records payments received in advance for
prepaid calling card services and services to be provided under contractual
agreements, such as Internet broadband and dial-up access, as deferred revenue
in accrued expenses and other current liabilities until such related services
are provided. Net revenue represents gross revenue net of estimated
uncollectible amounts.
Cost of Revenue--Cost of revenue includes network costs that consist of
access, transport, and termination costs. The majority of the Company's cost of
revenue is variable, primarily based upon minutes of use, with transmission and
termination costs being the most significant expense. Such costs are recognized
when incurred in connection with the provision of telecommunications services.
Foreign Currency Translation--The assets and liabilities of the Company's
foreign subsidiaries are translated at the exchange rates in effect on the
reporting date, and income and expenses are translated at the average exchange
rate during the period. The net effect of such translation gains and losses are
reflected within accumulated other comprehensive loss in the stockholders'
equity section of the balance sheet.
Cash and Cash Equivalents--Cash and cash equivalents are comprised
principally of amounts in money market accounts, operating accounts,
certificates of deposit, and overnight repurchase agreements, stated at cost
which approximates market value, with original maturities of three months or
less.
Restricted Investments -- Restricted investments consist of United States
Federal Government-backed obligations which are recorded at amortized cost.
These securities are classified as held-to-maturity and are restricted to
satisfy certain interest obligations on the Company's 1997 Senior Notes.
Advertising Costs -- In accordance with Statement of Position 93-7,
Reporting on Advertising Costs, costs for advertising are expensed as incurred
except for direct response advertising costs, which are capitalized and
amortized over the expected period of future benefits.
Property and Equipment--Property and equipment is recorded at cost less
accumulated depreciation, which is provided on the straight-line method over the
estimated useful lives of the assets. Cost includes major expenditures for
improvements and replacements which extend useful lives or increase capacity of
the assets as well as expenditures necessary to place assets into readiness for
use. Expenditures for maintenance and repairs are expensed as incurred. The
estimated useful lives of property and equipment are as follows: network
equipment, including fiber optic and submarine cable--5 to 25 years, furniture
and
F-8
<PAGE>
equipment--5 years, leasehold improvements and leased equipment--shorter of
lease or useful life. In accordance with Statement of Position 98-1, Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use, costs
for internal use software that are incurred in the preliminary project stage and
in the post-implementation stage are expensed as incurred. Costs incurred during
the application development stage are capitalized and amortized over the
estimated useful life of the software.
Fiber Optic and Submarine Cable Arrangements--The Company obtains capacity
on certain fiber optic and submarine cables under two types of arrangements. The
Indefeasible Right of Use Agreement ("IRU Agreement") basis provides the Company
the right to use a cable for the estimated economic life of the asset according
to the terms of the IRU Agreement with most of the rights and duties of
ownership. The Company accounts for such agreements under Network Equipment and
depreciates the recorded asset over the term of the IRU Agreement. The Company
also enters into shorter-term arrangements with other carriers which provides
the Company the right to use capacity on a cable but without any rights and
duties of ownership. The Company accounts for such arrangements as operating
leases.
Goodwill and Other Intangible Assets--Goodwill is amortized over 7 to
30 years on a straight-line basis, and customer lists over the estimated run-off
of the customer bases not to exceed five years. The Company periodically
evaluates the realizability of intangible and other long-lived assets. In making
such evaluations, the Company compares certain financial indicators such as
expected undiscounted future revenues and cash flows to the carrying amount of
the assets. The Company believes that no impairments exist as of December 31,
1999.
Deferred Financing Costs--Deferred financing costs incurred in connection
with the October 1999 Senior Notes, the January 1999 Senior Notes, the 1998
Senior Notes and the 1997 Senior Notes are reflected within other assets and are
being amortized over the life of the respective Senior Notes using the
straight-line method which does not differ materially from the effective
interest method.
Stock-Based Compensation--The Company adopted Statement of Financial
Accounting Standards No. 123 ("SFAS 123"), Accounting for Stock-Based
Compensation. Under the provisions of SFAS 123, the Company continues to measure
compensation expense for its stock-based employee compensation plans using the
intrinsic value method prescribed by Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and has provided in Note 12 pro forma
disclosures of the effect on net loss and loss per share as if the fair value-
based method prescribed by SFAS 123 had been applied in measuring compensation
expense.
Use of Estimates--The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions. These estimates and assumptions affect the
reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the consolidated financial statements and the
reported amounts of net revenue and expenses during the reporting period. Actual
results may differ from these estimates.
Concentration of Credit Risk--Financial instruments that potentially
subject the Company to concentration of credit risk principally consist of trade
accounts receivable. The Company performs ongoing credit evaluations of its
customers but generally does not require collateral to support customer
receivables. The Company maintains its cash with high quality credit
institutions, and its cash equivalents are in high quality securities.
F-9
<PAGE>
Income Taxes--The Company recognizes income tax expense for financial
reporting purposes following the asset and liability approach for computing
deferred income taxes. Under this method, the deferred tax assets and
liabilities are determined based on the difference between financial reporting
and tax bases of assets and liabilities based on enacted tax rates. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized.
Net Loss Per Share--The Company has computed basic and diluted net loss per
share using the weighted average number of shares of common stock outstanding
during the period. Potential common stock, for purposes of determining diluted
net loss per share, would include, where applicable, the effects of dilutive
stock options, warrants, and convertible securities, and the effect of such
potential common stock would be computed using the treasury stock method or the
if-converted method. None of the Company's outstanding options and warrants are
considered to be dilutive.
New Accounting Pronouncements--In June 1998, Statement of Financial
Accounting Standards No. 133 ("SFAS 133"), Accounting for Derivative Instruments
and Hedging Activities was issued. SFAS 133 established standards for the
accounting and reporting of derivative instruments and hedging activities and
requires that all derivative financial instruments, including certain derivative
instruments embedded in other contracts, be measured at fair value and
recognized as assets or liabilities in the financial statements. SFAS 133 will
be adopted by the Company during fiscal 2001, and the Company is currently
evaluating the impact of such adoption. However, the Company does not believe
the adoption of SFAS 133 will have a material effect on the Company's
consolidated financial position or results of operations in fiscal year 2000.
Costs of Start-Up Activities--The Company expenses the costs of start-up
activities and organization costs as incurred. The effect of adopting Statement
of Position 98-5, Reporting on the Costs of Start-Up Activities, during fiscal
year 1999 did not have a material effect on the financial position, results of
operation or liquidity of the Company.
Reclassifications--Certain previous year amounts have been reclassified to
conform with current year presentation.
3. ACQUISITIONS
In November 1999, the Company purchased substantially all of the assets of
Digital Select, LLC ("Digital Select"), a provider of digital subscriber line
("DSL") high-speed Internet access and Web content services. The purchase price
of $7.8 million was paid with $5.6 million in cash, the issuance of a $0.7
million short-term promissory note and 69,023 shares of the Company's common
stock valued based on a 20 day trailing average of the last sale price of the
Company's common stock.
In November 1999, the Company purchased substantially all of the assets of 1492
Technologies, LLC ("1492 Technologies"), an Internet Web site development and
service firm. The purchase price of $0.6 million was paid for with $0.3 million
in cash and 15,500 shares of the Company's common stock valued based on a 20 day
trailing average of the last sale price of the Company's common stock.
In November 1999, the Company invested $12.1 million in cash in exchange for 51%
of Matrix, Brazil's largest independent and fifth largest overall Internet
service provider ("ISP").
In September 1999, the Company acquired TouchNet GmbH ("TouchNet"), a German ISP
with a Point of Presence ("POP") in Munich, Germany, for a cash purchase price
of $2.2 million. Through this acquisition, the Company acquired approximately
3,000 business customers in Germany.
In September 1999, the Company purchased 51% of Cards & Parts, a German wireless
reseller for a cash purchase price of $4.3 million.
F-10
<PAGE>
In June 1999, the Company acquired the global retail customer business of
Telegroup, Inc. including the acquisition of selected Telegroup, Inc. foreign
subsidiaries ("Telegroup"). The Company paid the $73.2 million purchase price
for Telegroup, plus $23.3 million for certain current assets including accounts
receivable, by issuing $45.5 million in aggregate principal of 11 1/4% senior
notes due 2009 ("Telegroup Notes"), by issuing a $4.6 million short-term
promissory note ("Telegroup Promissory Note") and paying $46.4 million in cash.
In June 1999, the Company acquired Telephone Savings Network Limited ("TelSN"),
a Canadian reseller of local services to small- and medium-sized business
customers, for a purchase price of $5.3 million comprised of $2.6 million in
cash and 152,235 shares of the Company's common stock. In October 1999 and
February 2000, pursuant to an earn-out provision of the purchase agreement, the
Company issued an additional 57,391 shares of the Company's common stock. There
are two other potential earn-out distributions through January 15, 2001.
In May 1999, the Company purchased the residential long distance customer base,
customer support assets and residential Internet customer base and network of
AT&T Canada and ACC Telenterprises ("AT&T Canada") for a purchase price of $37.5
million comprised of $27.9 million in cash and a $9.6 million, 8.5% promissory
note due November 30, 2000 ("AT&T Promissory Note").
In May 1999, the Company acquired all of the outstanding shares of Tele-
Communications Products/Internet Provider (TCP/IP) GmbH ("TCP/IP"), an
independent German ISP with over 20 POPs in Germany, for a purchase price of
$0.4 million in cash.
On March 31, 1999 the Company purchased the common stock of London Telecom
Network, Inc. and certain related entities that provide long distance
telecommunications services in Canada (the "LTN Companies"), for approximately
$36.3 million in cash (including payments made in exchange for certain non-
competition agreements). In addition, on March 31, 1999, the Company entered
into an agreement to purchase for $14.6 million in cash substantially all of the
operating assets of Wintel CNC Communications, Inc. and Wintel CNT
Communications, Inc. (the "Wintel Companies"), which are Canada-based long
distance telecommunications providers affiliated with the LTN Companies. The
purchase price may be increased by up to $4.6 million in cash pursuant to an
earn-out provision in the event the acquired company achieves certain levels of
future operating results. Such amount will be recorded as additional cost of the
acquired company when the amount to be paid, if any, becomes probable. At
December 31, 1999, no amount has been accrued since the final outcome of the
earn-out provision was not determinable.
In February 1999 the Company acquired GlobalServe Communications, Inc.,
("GlobalServe") a privately held ISP based in Toronto, Canada. The purchase
price of approximately $4.5 million was comprised of $2.3 million in cash and
142,806 shares of the Company's common stock. As a result of the acquisition,
the Company now serves approximately 30,000 Internet customers in Canada.
On June 9, 1998 the Company acquired TresCom International, Inc. ("TresCom"), a
long distance telecommunications carrier focused on international long distance
traffic originating in the United States and terminating in the Caribbean and
Central and South America regions. As a result of the acquisition, all of the
approximately 12.7 million TresCom common shares outstanding were exchanged for
approximately 7.8 million shares of the Company's common stock valued at
approximately $138 million. An additional $11.7 million cash purchase obligation
associated with a subsidiary of TresCom was paid during 1999.
In March 1998 the Company purchased a 60% controlling interest in Hotkey
Internet Services Pty., Ltd. ("Hotkey"), a Melbourne, Australia-based ISP for
approximately $1.4 million in cash. In February 1999, the Company purchased the
remaining 40% for approximately $1.2 million, comprised of $0.4 million in cash
and 57,025 shares of the Company's common stock.
Effective March 1, 1998 the Company acquired all of the outstanding stock of
Eclipse Telecommunications Pty., Ltd. ("Eclipse"), a data communications
provider in Australia. The Company paid approximately $1.8 million in cash and
27,500 shares of the Company's common stock for Eclipse.
F-11
<PAGE>
The Company has accounted for all of these acquisitions using the purchase
method of accounting and, accordingly the net assets and results of operations
of the acquired companies have been included in the Company's financial
statements since the acquisition dates. The purchase price, including direct
costs, of the Company's acquisitions was allocated to assets acquired, including
intangible assets and liabilities assumed, based on their respective fair values
at the acquisition dates. The valuation of the Company's acquired assets and
liabilities for the 1999 acquisitions are preliminary, and as a result, the
allocation of the acquisition costs among tangible and intangible assets may
change.
The following reflects the December 31, 1999 gross balances of goodwill and
customer lists as of the acquisition date for the acquisitions that were
completed in 1999 and 1998 (in thousands):
1999 Acquisitions Goodwill Customer List
- ----------------- --------------- ---------------
Telegroup $ 53,667 $ 17,876
LTN and Wintel Companies 45,006 11,840
AT&T Canada 23,022 23,556
DigitalSelect 8,000 -
Matrix Internet 4,504 3,468
TelSN 5,131 1,032
GlobalServe 4,467 1,385
Cards & Parts 4,016 -
Other acquisitions 5,704 -
--------------- ---------------
Total $ 153,517 $ 59,157
=============== ===============
1998 Acquisitions
- -----------------
Trescom $ 155,700 $ 25,000
Other acquisitions 3,111 459
--------------- ---------------
Total $ 158,811 $ 25,459
=============== ===============
The following represents the unaudited pro forma results of operations of the
Company for 1999 and 1998 as if the acquisitions were consummated on January 1,
1998 and January 1, 1999. The unaudited pro forma results of operations include
certain pro forma adjustments, including the amortization of intangible assets
relating to the acquisitions. The unaudited pro forma results of operations do
not necessarily reflect the results that would have occurred had the
acquisitions occurred at January 1, 1998 and January 1, 1999 or the results that
may occur in the future.
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1999 December 31, 1998
------------------- -------------------
(in thousands, except per share amounts)
<S> <C> <C>
Net revenue $1,001,823 $ 889,020
Net loss $ (120,098) $ (126,633)
Basic and diluted net loss per common share $ (3.93) $ (4.47)
</TABLE>
F-12
<PAGE>
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
-------------------------------
1999 1998
--------------- --------------
<S> <C> <C>
Network equipment $ 292,324 $ 148,413
Furniture and equipment 30,051 11,987
Leasehold improvements 5,962 2,907
Construction in progress 7,125 16,157
-------------- -------------
335,462 179,464
Less: Accumulated depreciation and amortization (50,072) (20,591)
-------------- -------------
$ 285,390 $ 158,873
============== =============
</TABLE>
Depreciation and amortization expense for Property and Equipment for the years
ended December 31, 1999, 1998, and 1997 was $30.4 million, $16.0 million and
$4.9 million, respectively.
Equipment under capital leases totaled $29.1 million and $27.0 million with
accumulated depreciation of $8.3 million and $4.3 million at December 31, 1999
and 1998, respectively.
5. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets consist of the following (in
thousands):
<TABLE>
<CAPTION>
December 31,
-------------------------------
1999 1998
--------------- --------------
<S> <C> <C>
Goodwill $ 340,272 $ 184,604
Customer lists 95,192 30,997
Other 1,914 -
------------- -------------
Subtotal 437,378 215,601
Less: Accumulated amortization (35,348) (10,562)
------------- -------------
Total goodwill and other intangible assets, net $ 402,030 $ 205,039
============= =============
</TABLE>
Amortization expense for Goodwill and Other Intangible Assets for the years
ended December 31, 1999, 1998 and 1997 was $24.6 million, $8.2 million and
$1.8 million, respectively.
6. LONG-TERM OBLIGATIONS
Long-term obligations consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
-------------------------------
1999 1998
--------------- --------------
<S> <C> <C>
Obligations under capital leases $ 21,072 $ 28,268
Revolving Credit Agreement - 17,819
Senior Notes 868,807 372,978
Equipment Financing 29,406 -
Other long-term obligations 10,659 1,109
-------------- -------------
Subtotal 929,944 420,174
Less: Current portion of long-term obligations (16,438) (22,423)
-------------- -------------
$ 913,506 $ 397,751
============== =============
</TABLE>
In October 1999, the Company completed the sale of $250 million in aggregate
principal amount of 12 3/4% senior notes due 2009 ("October 1999 Senior Notes").
The October 1999 Senior Notes are due October 15, 2009. In addition, prior to
October 15, 2002, the Company may redeem up to 35% of the original principal
amount of the October 1999 Senior Notes at 112.750% of the principal amount
thereof, plus accrued and unpaid interest through the redemption date. Interest
is payable each October 15th and April 15th.
F-13
<PAGE>
In June 1999, in connection with the Telegroup acquisition, the Company issued
the Telegroup Notes, $45.5 million in aggregate principal amount of the
Company's 11 1/4% senior notes due 2009 pursuant to the January 1999 Senior
Notes indenture.
In January 1999, the Company completed the sale of $200 million aggregate
principal amount of 11 1/4% senior notes due 2009 ("January 1999 Senior Notes").
The January 1999 Senior Notes are due January 15, 2009 with early redemption at
the option of the Company at any time after January 15, 2004. In addition,
prior to January 15, 2002, the Company may redeem up to 35% of the original
principal amount of the January 1999 Senior Notes at 111.25% of the principal
amount thereof, plus accrued and unpaid interest through the redemption date.
Interest is payable each January 15th and July 15th.
During the year ended December 31, 1999, NTFC Capital Corporation and Ericsson
Financing Plc has provided to the Company $30.0 million and $34.3 million,
respectively, in financing to fund the purchase of network equipment, secured
by the equipment purchased. At December 31, 1999, approximately $24.4
million was utilized through NTFC Capital Corporation. Borrowings under these
credit facilities accrue interest at rates ranging from 10.93% to LIBOR plus
5.8% and are payable over a 5-year term.
Other long-term obligations include the $9.6 million, 8.5% AT&T Promissory Note
due November 30, 2000.
As a result of the acquisition of TresCom, the Company had a $25 million
revolving credit and security agreement (the "Revolving Credit Agreement") with
a commercial bank secured by certain of the Company's accounts receivable. In
January 1999, the Company voluntarily repaid in full and terminated the
Revolving Credit Agreement.
On May 19, 1998 the Company completed the sale of $150 million 9 7/8% senior
notes ("1998 Senior Notes") due 2008 with semi-annual interest payments due on
May 15th and November 15th.
On August 4, 1997, the Company completed the sale of $225 million 11 3/4% senior
notes ("1997 Senior Notes") due 2004 and warrants to purchase 392,654 shares of
the Company's common stock. Interest payments are due semi-annually on February
1st and August 1st.
7. INCOME TAXES
The differences between the tax provision calculated at the statutory
federal income tax rate and the actual tax provision for each period is shown in
the table below (in thousands):
<TABLE>
<CAPTION>
For the Year Ended
December 31,
-----------------------------------------------
1999 1998 1997
------------- -------------- --------------
<S> <C> <C> <C>
Tax benefit at federal statutory rate $(39,458) $(22,277) $(12,294)
State income tax, net of federal benefit (3,996) (1,387) (2,100)
Foreign taxes - - 81
Unrecognized benefit of net operating losses 36,767 21,506 14,394
Other 6,687 2,158 -
------------- -------------- --------------
Income taxes $ - $ - $ 81
============= ============== ==============
</TABLE>
The significant components of the Company's deferred tax assets and
liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
-------------------------
1999 1998
----------- -----------
<S> <C> <C>
Deferred tax assets:
Cash to accrual basis adjustments (U.S.) $ 275 $ 269
Accrued expenses 11,774 5,393
Net operating loss carryforwards 90,159 32,606
Valuation allowance (90,523) (38,268)
----------- -----------
$ 11,685 $ -
----------- -----------
</TABLE>
F-14
<PAGE>
Deferred tax liabilities:
Depreciation $ 11,685 $ 361
---------- ----------
$ 11,685 $ 361
---------- ----------
Net deferred taxes $ - $ 361
========== ==========
During the year ended December 31, 1999, the valuation allowance increased by
approximately $52.3 million primarily due to additional net operating loss
carryforwards which are not more likely than not to be realized.
At December 31, 1999, the Company had operating loss carryforwards available to
reduce future federal taxable income which expire as follows (in millions):
Year Primus TresCom
-------------- -------------- --------------
2009 $ 0.3 $ 5.8
2010 1.7 5.4
2011 5.9 1.9
2012 28.0 11.6
2018 62.6 33.6
2019 102.5 -
-------------- --------------
$201.0 $ 58.3
============== ==============
Approximately $58.3 million of operating loss carryforwards relate to the
acquisition of TresCom. Utilization of these operating losses is limited to the
offset of future TresCom operating income. The Company's net operating loss
carryforwards for state purposes are not significant and, therefore, have not
been recorded as deferred tax assets.
No provision was made in 1999 for U.S. income taxes on the undistributed
earnings of the foreign subsidiaries as it is the Company's intention to utilize
those earnings in the foreign operations for an indefinite period of time or to
repatriate such earnings only when tax effective to do so. It is not practicable
to determine the amount of income or withholding tax that would be payable upon
the remittance of those earnings.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the consolidated balance sheet for cash and
cash equivalents, restricted investments, accounts receivable and accounts
payable approximate fair value. The estimated fair value of the Company's 1999,
1998 and 1997 Senior Notes (carrying value of $869 million), based on quoted
market prices, at December 31, 1999 was $852 million. The estimated fair value
of the Company's 1998 and 1997 Senior Notes (carrying value of $373 million),
based on quoted market prices, at December 31, 1998 was $375 million.
9. ADVERTISING
The Company expenses advertising costs as incurred except for direct-response
advertising costs, which are capitalized and amortized over the expected period
of future benefits. Direct response advertising consists primarily of direct-
mail advertisements, newspaper and television advertising. These costs are
amortized over the lesser of the life of the customers obtained from these
efforts or twelve months following the provisioning of the customer. At December
31, 1999 and 1998, $16.8 million and $4.2 million were included in prepaid
expenses and other current assets. Advertising expense for the years ended
December 31, 1999, 1998 and 1997 was $24.8 million, $11.7 million, and $10.4
million, respectively.
F-15
<PAGE>
10. COMMITMENTS AND CONTINGENCIES
Future minimum lease payments under capital lease obligations and non-cancelable
operating leases as of December 31, 1999 are as follows (in thousands):
Capital Operating
Year Ending December 31, Leases Leases
- ------------------------ ------------- -------------
2000 8,668 11,356
2001 8,968 8,910
2002 8,138 7,346
2003 5,117 5,466
2004 1,554 4,405
Thereafter - 3,481
------------- -------------
Total minimum lease payments 32,445 40,964
=============
Less: Amount representing interest (5,326)
-------------
27,119
=============
Rent expense under operating leases was $9.2 million, $4.8 million, and
$2.6 million for the years ended December 31, 1999, 1998 and 1997, respectively.
In December 1999, the Company agreed to purchase approximately $23.2 million of
fiber capacity from Qwest Communications which will provide the Company with an
ATM+IP based nationwide broadband backbone of nearly 11,000 route miles of fiber
optic cable in the U.S. as well as private Internet peering at select sites in
the U.S. and overseas. As of December 31, 1999, the Company has made no
purchases under this agreement.
On December 9, 1999, Empresa Hondurena de Telecommunicaciones, S.A., based in
Honduras, filed suit in Florida State Court in Broward County against TresCom
and one of TresCom's wholly-owned subsidiaries, St. Thomas and San Juan
Telephone Company, alleging that such entities failed to pay amounts due to
plaintiff pursuant to contracts for the exchange of telecommunications traffic
during the period from December 1996 through September 1998. The Company
acquired TresCom in June 1998 and TresCom is currently the Company's subsidiary.
Plaintiff is seeking approximately $14 million in damages, plus legal fees and
costs. The Company filed an answer on January 25, 2000 and discovery has
recently commenced. Because it is only in the early stages of discovery, the
Company's ultimate legal and financial liability with respect to such legal
proceeding cannot be estimated with any certainty at this time. The Company
intends to defend the case vigorously. Management believes the ultimate
resolution of this matter will not have an adverse effect on the Company's
consolidated financial position or results of operations.
The Company is subject to certain other claims and legal proceedings that arise
in the ordinary course of its business activities. Each of these matters is
subject to various uncertainties, and it is possible that some of these matters
may be decided unfavorably to the Company. Management believes that any
liability that may ultimately result from the resolution of these matters will
not have material adverse effect on the financial condition or results of
operations or cash flows of the Company.
11. STOCKHOLDERS' EQUITY
In October 1999, the Company sold 8.0 million shares of the Company's common
stock at a price of $22.50 per share. The net proceeds from the sale were
approximately $169.3 million.
In December 1998, the Company adopted a Stockholders' Rights Plan (the "Rights
Plan") under which preferred stock purchase rights have been granted to the
Company's common stockholders of record at the close of business on December 31,
1998. The rights will become exercisable if a person or group becomes the
beneficial owner of more than 20% of the outstanding common stock of the Company
or announces an offer to become the beneficial owner of more than 20% of the
outstanding common stock of the Company.
In June 1998, the Company issued 7,836,324 shares of its common stock, valued at
$137.6 million, in exchange for all of the outstanding common shares of TresCom.
Additionally, the Board amended the Company's Amended and Restated Certificate
of Incorporation (the "Certificate") to increase the authorized Common Stock to
80,000,000 shares.
In October 1997, the Company issued 1,842,941 shares of its common stock
pursuant to the exercise of certain warrants, which had been issued in
connection with the Company's $16 million July 1996 private equity sale. In
connection with such exercise, the Company received approximately $1.5 million.
In August 1997, the Company completed a Senior Notes and Warrants Offering.
Warrants valued at $2,535,000 to purchase 392,654 shares of the Company's common
stock at a price of $ 9.075 per share were issued.
12. STOCK-BASED COMPENSATION
In December 1998, the Company established the 1998 Restricted Stock Plan (the
"Restricted Plan") to facilitate the grant of restricted stock to selected
individuals who contribute to the development and success of the Company. The
total number of shares of common stock that may be granted under the Restricted
Plan is 750,000.
F-16
<PAGE>
The Company sponsors an Employee Stock Option Plan (the "Employee Plan"). The
total number of shares of common stock authorized for issuance under the
Employee Plan is 5,500,000. Under the Employee Plan, awards may be granted to
key employees of the Company and its subsidiaries in the form of Incentive Stock
Options or Nonqualified Stock Options. The Employee Plan allows the granting of
options at an exercise price of not less than 100% of the stock's fair value at
the date of grant. The options vest over a period of up to three years, and no
option will be exercisable more than ten years from the date it is granted.
The Company sponsors a Director Stock Option Plan (the "Director Plan") for
non-employee directors. Under the Director Plan, an option is granted to each
qualifying non-employee director to purchase 15,000 shares of common stock,
which vests over a two-year period. The option price per share is the fair
market value of a share of common stock on the date the option is granted. No
option will be exercisable more than ten years from the date of grant. An
aggregate of 338,100 shares of common stock was reserved for issuance under the
Director Plan.
A summary of stock option activity during the three years ended December 31,
1999 is as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
1999 1998 1997
---------------------- ------------------------ -----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
---------------------- ------------------------ -----------------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding-
Beginning of year 3,128,566 $ 9.87 2,555,360 $ 6.95 1,587,894 $ 3.02
Granted 1,651,200 16.39 1,298,937 16.07 1,063,750 12.59
Exercised (354,327) 9.22 (488,835) 7.42 (35,724) 1.19
Forfeitures (542,080) 14.25 (236,896) 17.52 (60,560) 6.27
---------------------- ------------------------ -----------------------
Outstanding - end of year 3,883,359 $12.07 3,128,566 $ 9.87 2,555,360 $ 6.95
====================== ======================== =======================
Eligible for exercise-end of year 1,789,865 $ 7.69 1,427,041 $ 6.93 899,170 $ 3.00
====================== ======================== =======================
</TABLE>
The following table summarizes information about stock options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------ ----------------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Total Life Exercise Total Exercise
Range of Option Prices Outstanding in years Price Exercisable Price
- --------------------------------------------------------------------------- --------------------------------
<S> <C> <C> <C>
$ 0.01 to $ 3.55 1,003,097 1.10 $ 3.19 1,003,097 $ 3.19
$ 3.56 to $ 14.00 1,756,154 5.56 $12.77 690,013 $12.58
$ 14.01 to $ 34.13 1,124,108 8.63 $18.91 96,755 $19.50
--------------- --------------
3,883,359 1,789,865
=============== ==============
</TABLE>
The weighted average fair value at date of grant for options granted during
1999, 1998 and 1997 was $7.99, $7.38 and $5.45 per option, respectively. The
fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions:
1999 1998 1997
---- ---- ----
Expected dividend yield 0% 0% 0%
Expected stock price volatility 85% 97% 80%
Risk-free interest rate 6.3% 4.6% 5.7%
Expected option term 4 years 4 years 4 years
F-17
<PAGE>
If compensation cost for the Company's grants for stock-based compensation had
been recorded consistent with the fair value-based method of accounting per SFAS
123, the Company's pro forma net loss, and pro forma basic and diluted net loss
per share for the years ending December 31, would be as follows:
1999 1998 1997
---------- ---------- ----------
Net loss (amounts in thousands)
As reported $(112,736) $(63,648) $ (36,239)
Pro forma $(119,241) $(67,621) $ (37,111)
Basic and diluted net loss per share
As reported $(3.72) $(2.61) $ (1.99)
Pro forma $(3.93) $(2.77) $ (2.03)
13. EMPLOYEE BENEFIT PLANS
The Company sponsors a 401(k) employee benefit plan (the "401(k) Plan") that
covers substantially all United States based employees. Employees may contribute
amounts to the 401(k) Plan not to exceed statutory limitations. The 401(k) plan
provides an employer matching contribution of 50% of the first 6% of employee
annual salary contributions. The employer match is made in common stock of the
Company and is subject to 3-year cliff vesting. The Company contributed Primus
common stock valued at approximately $328,000, $119,000, and $45,000 during
1999, 1998, and 1997, respectively.
Effective January 1, 1998, the Company adopted an Employee Stock Purchase Plan
("ESPP"). The ESPP allows employees to contribute up to 15% of their
compensation to be used toward purchasing the Company's common stock at 85% of
the fair market value. An aggregate of 2,000,000 shares of common stock were
reserved for issuance under the ESPP.
14. RELATED PARTIES
In June 1998, a subsidiary of the Company entered into a $2.1 million agreement
for the design, manufacture, installation and the provision of training with
respect to a satellite earth station in London. A Director of the Company is the
Chairman and a stockholder of the company providing such services. During 1998,
$1.2 million was paid for the above services. Pursuant to this agreement, in
June 1999 the Company also contracted with this company to provide two satellite
earth stations in Australia and to provide, operate and maintain a satellite
link between the Company's router in Los Angeles, California and the two earth
stations. An approximately $200,000 one-time charge is to be paid by the
Company in addition to a monthly charge of $144,000.
15. OPERATING SEGMENT AND RELATED INFORMATION
The Company has three reportable operating segments based on management's
organization of the enterprise into geographic areas - North America, Asia-
Pacific and Europe. The Company evaluates the performance of its segments and
allocates resources to them based upon net revenue and operating income/(loss).
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. Net revenue by reportable segment is
reported on the basis of where services are provided. The Company has no single
customer representing greater than 10% of its revenues. Operations and assets of
the North America segment include shared corporate functions and assets, which
the Company does not allocate to its other geographic segments for management
reporting purposes.
F-18
<PAGE>
Summary information with respect to the Company's segments is as follows (in
thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1999 1998 1997
--------------- --------------- ----------------
<S> <C> <C> <C>
Net Revenue
North America $ 406,083 $ 188,008 $ 74,359
Asia-Pacific 231,179 172,757 183,126
Europe 195,477 60,863 22,712
-------------- -------------- ----------------
Total $ 832,739 $ 421,628 $ 280,197
============== ============== ================
Operating Income/(Loss)
North America $ (32,656) $ (29,028) $ (17,036)
Asia-Pacific (6,964) (5,336) (9,463)
Europe (6,778) (741) (3,390)
-------------- -------------- ----------------
Total $ (46,398) $ (35,105) $ (29,889)
============== ============== ================
Capital Expenditures
North America $ 34,171 $ 33,431 $ 12,441
Asia-Pacific 17,872 24,589 16,506
Europe 58,539 17,963 10,518
-------------- -------------- ----------------
Total $ 110,582 $ 75,983 $ 39,465
============== ============== ================
December 31,
-------------------------------------------------------
1999 1998 1997
--------------- --------------- ----------------
Assets
North America $1,069,716 $ 507,356 $ 249,109
Asia-Pacific 182,748 109,290 83,476
Europe 198,909 57,317 22,808
-------------- -------------- ----------------
Total $1,451,373 $ 673,963 $ 355,393
============== ============== ================
</TABLE>
The above capital expenditures exclude assets acquired in business combinations
and under terms of capital leases.
16. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a tabulation of the unaudited quarterly results of operations
for the two years ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
For the quarter ended
------------------------------------------------------------------------------------
March 31, 1999 June 30, 1999 September 30, 1999 December 31, 1999
----------------- ----------------- --------------------- ----------------------
(in thousands)
<S> <C> <C> <C> <C>
Net Revenue $ 131,228 $ 185,626 $ 250,320 $ 265,565
Gross Margin $ 26,632 $ 42,766 $ 65,558 $ 73,184
Net Loss $ (25,155) $ ( 26,068) $ (28,274) $ (33,239)
<CAPTION>
------------------------------------------------------------------------------------
For the quarter ended
------------------------------------------------------------------------------------
March 31, 1998 June 30, 1998 September 30, 1998 December 31, 1998
----------------- ----------------- --------------------- ----------------------
(in thousands)
<S> <C> <C> <C> <C>
Net Revenue $ 80,051 $ 99,475 $ 116,047 $ 126,055
Gross Margin $ 11,329 $ 15,349 $ 19,490 $ 22,444
Net Loss $ (12,317) $ (14,793) $ (19,035) $ (17,503)
</TABLE>
F-19
<PAGE>
17. SUBSEQUENT EVENTS
In February 2000, the Company completed the sale of $250 million in aggregate
principal amount of 5 3/4% Convertible Subordinated Debentures due 2007
("February 2000 Debentures") with semi-annual interest payments. On March 13,
2000, the Company announced that the initial purchasers of the February 2000
Debentures had exercised their $50 million over-allotment option granted
pursuant to a purchase agreement dated February 17, 2000. The debentures are
convertible into the Company's common stock at a price of $49.7913 per share.
In February 2000, the Company acquired 51% of each of CS Communications Systems
GmbH and CS Network GmbH ("Citrus"), a reseller of voice traffic and seller of
telecommunications equipment and accessories for $0.4 million, comprised of
$0.3 million in cash and 2,092 shares of the Company's common stock.
In February 2000, the Company acquired over 96% of the common stock of LCR
Telecom Group, Plc ("LCR Telecom"), in exchange for 2,100,920 shares of the
Company's common stock valued at $85.9 million. The purchase price is subject to
adjustment and may be increased to a total of 2,463,000 shares. LCR Telecom
operates principally in European markets and is an international
telecommunications company providing least cost routing, international callback
and other value added services, primarily to small- and medium-sized
enterprises.
In January 2000, the Company acquired Infinity Online Systems ("Infinity"), an
ISP based in Ontario, Canada, for $2.2 million, comprised of $1.1 million in
cash and 29,919 shares of the Company's common stock.
In January 2000, in connection with a strategic business arrangement, the
Company made a $15 million strategic investment in Pilot Network Services, Inc.
("Pilot") pursuant to which the Company purchased 919,540 shares, or 6.3%, of
Pilot's common stock at a price of $16.3125 per share. The Company also received
a warrant to purchase an additional 200,000 shares at $25.00 per share. K. Paul
Singh, the Company's Chairman and Chief Executive Officer, has been elected to
Pilot's Board of Directors. Pilot has agreed to configure the Company's network
operations centers, hosting centers and data centers around the world with
Pilot's proprietary Heuristic Defense Infrastructure(TM) (HDI) and to provide
real time security on the Company's global network. In addition, Pilot will
utilize the Company's network to provide secure access Web hosting, Application
Service Provider (ASP) hosting and e-business services to its corporate clients.
F-20
<PAGE>
SCHEDULE II
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
VALUATION AND QUALIFYING ACCOUNTS
Activity in the Company's allowance accounts for the years ended December 31,
1999, 1998 and 1997 was as follows (in thousands):
<TABLE>
<CAPTION>
Doubtful Accounts
- -----------------------------------------------------------------------------------------------------------
Balance at Charged to Balance at
Year Beginning of Year Costs and Expenses Deductions Other(1) End of Year
------ ------------------- ------------------ ---------- ------- -------------
<S> <C> <C> <C> <C> <C>
1997 $ 2,585 $ 6,185 $ (4,309) $ 583 $ 5,044
1998 $ 5,044 $ 9,431 $(12,772) $13,273 $14,976
1999 $14,976 $27,908 $(19,843) $13,412 $36,453
<CAPTION>
Deferred Tax Asset Valuation
- -----------------------------------------------------------------------------------------------------------
Balance at Charged to Balance at
Year Beginning of Year Costs and Expenses Deductions Other(1) End of Year
------ ------------------- ------------------ ---------- ------- -------------
<S> <C> <C> <C> <C> <C>
1997 $ 2,728 $ 14,034 $ - $ - $ 16,762
1998 $16,762 $ 21,506 $ - $ - $ 38,268
1999 $38,268 $ 52,255 $ - $ - $ 90,523
</TABLE>
(1) Other additions represent the allowances for doubtful accounts, which were
recorded in connection with business acquisitions.
S-1
<PAGE>
EXHIBIT 4.16
================================================================================
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED,
as Issuer
$250,000,000
5-3/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2007
__________________
INDENTURE
Dated as of February 24, 2000
__________________
FIRST UNION NATIONAL BANK,
as Trustee
================================================================================
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- ---------------
<S> <C>
310 (a)(1)................................................................ 5.11
(a)(2)................................................................ 5.11
(a)(3)................................................................ n/a
(a)(4)................................................................ n/a
(a)(5)................................................................ 5.11
(b)................................................................... 5.3; 5.11
(c)................................................................... n/a
311 (a)................................................................... 5.12
(b)................................................................... 5.12
(c)................................................................... n/a
312 (a)................................................................... 2.10
(b)................................................................... 14.3
(c)................................................................... 14.3
313 (a)................................................................... 5.7
(b)(1)................................................................ n/a
(b)(2)................................................................ 5.7
(c)................................................................... 5.7; 14.2
(d)................................................................... 5.7
314 (a)(1), (2), (3)...................................................... 9.6; 14.6
(a)(4)................................................................ 9.6; 9.7; 14.6
(b)................................................................... n/a
(c)(1)................................................................ 14.5
(c)(2)................................................................ 14.5
(c)(3)................................................................ n/a
(d)................................................................... n/a
(e)................................................................... 14.6
(f)................................................................... n/a
315 (a)................................................................... 5.1(a)
(b)................................................................... 5.6; 14.2
(c)................................................................... 5.1(b)
(d)................................................................... 5.1(c)
(e)................................................................... 4.14
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
3.16(a)(last sentence).................................................... 2.13
(a)(1)(A)............................................................. 4.5
(a)(1)(B)............................................................. 4.4
(a)(2)................................................................ n/a
(b)................................................................... 4.7
(c)................................................................... 7.4
317 (a)(1)................................................................ 4.8
(a)(2)................................................................ 4.9
(b)................................................................... 2.5
318 (a)................................................................... 14.1
(b)................................................................... n/a
(c)................................................................... 14.1
</TABLE>
__________________
"n/a" means not applicable.
*This Cross-Reference Table shall not, for any purpose, be deemed to be a part
of the Indenture.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Article 1 DEFINITIONS AND INCORPORATION BY REFERENCE....................................... 1
Section 1.1 Definitions............................................................... 1
Section 1.2 Incorporation by Reference of Trust Indenture Act......................... 15
Section 1.3 Rules of Construction..................................................... 16
Article 2 THE DEBENTURES................................................................... 16
Section 2.1 Title and Terms........................................................... 16
Section 2.2 Form of Debentures........................................................ 18
Section 2.3 Legends................................................................... 19
Section 2.4 Execution, Authentication, Delivery and Dating............................ 24
Section 2.5 Registrar and Paying Agent................................................ 24
Section 2.6 Paying Agent to Hold Assets in Trust...................................... 25
Section 2.7 General Provisions Relating to Transfer and Exchange...................... 26
Section 2.8 Book-Entry Provisions for the Global Debentures........................... 27
Section 2.9 Special Transfer Provisions............................................... 28
Section 2.10 Holder Lists.............................................................. 36
Section 2.11 Persons Deemed Owners..................................................... 36
Section 2.12 Mutilated, Destroyed, Lost or Stolen Debentures........................... 36
Section 2.13 Treasury Debentures....................................................... 37
Section 2.14 Temporary Debentures...................................................... 38
Section 2.15 Cancellation.............................................................. 38
Section 2.16 CUSIP Numbers............................................................. 38
Section 2.17 Defaulted Interest........................................................ 39
Article 3 SATISFACTION AND DISCHARGE....................................................... 39
Section 3.1 Satisfaction and Discharge of Indenture................................... 39
Section 3.2 Deposited Monies to be Held in Trust...................................... 41
Section 3.3 Return of Unclaimed Monies................................................ 41
Article 4 DEFAULTS AND REMEDIES............................................................ 41
Section 4.1 Events of Default......................................................... 41
Section 4.2 Acceleration of Maturity; Rescission and Annulment........................ 43
Section 4.3 Other Remedies............................................................ 44
Section 4.4 Waiver of Past Defaults................................................... 44
Section 4.5 Control by Majority....................................................... 45
</TABLE>
iii
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
Section 4.6 Limitation on Suit........................................................ 45
Section 4.7 Unconditional Rights of Holders to Receive Payment and to Convert......... 46
Section 4.8 Collection of Indebtedness and Suits for Enforcement by the Trustee....... 46
Section 4.9 Trustee May File Proofs of Claim.......................................... 47
Section 4.10 Restoration of Rights and Remedies........................................ 48
Section 4.11 Rights and Remedies Cumulative............................................ 48
Section 4.12 Delay or Omission Not Waiver.............................................. 48
Section 4.13 Application of Money Collected............................................ 48
Section 4.14 Undertaking for Costs..................................................... 49
Section 4.15 Waiver of Stay or Extension Laws.......................................... 49
Article 5 THE TRUSTEE...................................................................... 50
Section 5.1 Certain Duties and Responsibilities....................................... 50
Section 5.2 Certain Rights of Trustee................................................. 51
Section 5.3 Individual Rights of Trustee.............................................. 52
Section 5.4 Money Held in Trust....................................................... 53
Section 5.5 Trustee's Disclaimer...................................................... 53
Section 5.6 Notice of Defaults........................................................ 53
Section 5.7 Reports by Trustee to Holders............................................. 53
Section 5.8 Compensation and Indemnification.......................................... 53
Section 5.9 Replacement of Trustee.................................................... 54
Section 5.10 Successor Trustee by Merger, Etc.......................................... 55
Section 5.11 Corporate Trustee Required; Eligibility................................... 55
Section 5.12 Collection of Claims Against the Company.................................. 56
Article 6 CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE............................. 56
Section 6.1 Company May Consolidate, Etc., Only on Certain Terms...................... 56
Section 6.2 Successor Corporation Substituted......................................... 57
Article 7 AMENDMENTS, SUPPLEMENTS AND WAIVERS.............................................. 57
Section 7.1 Without Consent of Holders of Debentures.................................. 57
Section 7.2 With Consent of Holders of Debentures..................................... 58
</TABLE>
iv
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
Section 7.3 Compliance with Trust Indenture Act....................................... 59
Section 7.4 Revocation of Consents and Effect of Consents or Votes.................... 60
Section 7.5 Notation on or Exchange of Debentures..................................... 60
Section 7.6 Trustee to Sign Amendment, Etc............................................ 60
Article 8 MEETING OF HOLDERS OF DEBENTURES................................................. 61
Section 8.1 Purposes for Which Meetings May Be Called................................. 61
Section 8.2 Call Notice and Place of Meetings......................................... 61
Section 8.3 Persons Entitled to Vote at Meetings...................................... 61
Section 8.4 Quorum; Action............................................................ 62
Section 8.5 Determination of Voting Rights; Conduct and Adjournment of Meetings....... 62
Section 8.6 Counting Votes and Recording Action of Meetings........................... 63
Article 9 COVENANTS........................................................................ 64
Section 9.1 Payment of Principal, Premium and Interest................................ 64
Section 9.2 Maintenance of Offices or Agencies........................................ 64
Section 9.3 Corporate Existence....................................................... 65
Section 9.4 Maintenance of Properties................................................. 65
Section 9.5 Payment of Taxes and Other Claims......................................... 65
Section 9.6 Reports................................................................... 66
Section 9.7 Compliance Certificate; Notice of Registration Default.................... 66
Section 9.8 Resale of Certain Debentures.............................................. 67
Section 9.9 Insurance................................................................. 67
Article 10 REDEMPTION OF DEBENTURES......................................................... 67
Section 10.1 Optional Redemption....................................................... 67
Section 10.2 Notice to Trustee......................................................... 68
Section 10.3 Selection of Debentures to Be Redeemed.................................... 69
Section 10.4 Notice of Redemption...................................................... 69
Section 10.5 Effect of Notice of Redemption............................................ 70
Section 10.6 Deposit of Redemption Price............................................... 71
Section 10.7 Debentures Redeemed in Part............................................... 71
Article 11 REPURCHASE AT THE OPTION OF A HOLDER UPON A CHANGE OF CONTROL.................... 71
</TABLE>
v
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
Section 11.1 Repurchase Right.......................................................... 71
Section 11.2 Conditions to the Company's Election to Pay the Repurchase Price in Common
Stock..................................................................... 72
Section 11.3 Notices; Method of Exercising Repurchase Right, Etc....................... 73
Article 12 CONVERSION OF DEBENTURES......................................................... 76
Section 12.1 Conversion Right and Conversion Price..................................... 76
Section 12.2 Exercise of Conversion Right.............................................. 77
Section 12.3 Fractions of Shares....................................................... 78
Section 12.4 Adjustment of Conversion Price............................................ 78
Section 12.5 Notice of Adjustments of Conversion Price................................. 89
Section 12.6 Notice Prior to Certain Actions........................................... 89
Section 12.7 Company to Reserve Common Stock........................................... 90
Section 12.8 Taxes on Conversions...................................................... 91
Section 12.9 Covenant as to Common Stock............................................... 91
Section 12.10 Cancellation of Converted Debentures...................................... 91
Section 12.11 Effect of Reclassification, Consolidation, Merger or Sale................. 91
Section 12.12 Responsibility of Trustee for Conversion Provisions....................... 93
Article 13 SUBORDINATION.................................................................... 93
Section 13.1 Debentures Subordinated to Senior Debt.................................... 93
Section 13.2 Subrogation............................................................... 96
Section 13.3 Obligation of the Company is Absolute and Unconditional................... 96
Section 13.4 Maturity of or Default on Senior Debt..................................... 96
Section 13.5 Payments on Debentures Permitted.......................................... 97
Section 13.6 Effectuation of Subordination by Trustee.................................. 97
Section 13.7 Knowledge of Trustee...................................................... 97
Section 13.8 Trustee's Relation to Senior Debt......................................... 98
Section 13.9 Rights of Holders of Senior Debt Not Impaired............................. 98
Section 13.10 Modification of Terms of Senior Debt...................................... 98
Section 13.11 Certain Conversions Not Deemed Payment.................................... 99
Article 14 OTHER PROVISIONS OF GENERAL APPLICATION.......................................... 99
Section 14.1 Trust Indenture Act Controls.............................................. 99
Section 14.2 Notices................................................................... 100
</TABLE>
vi
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
Section 14.3 Communication by Holders with Other Holders............................... 101
Section 14.4 Acts of Holders of Debentures............................................. 101
Section 14.5 Certificate and Opinion as to Conditions Precedent........................ 102
Section 14.6 Statements Required in Certificate or Opinion............................. 102
Section 14.7 Effect of Headings and Table of Contents.................................. 103
Section 14.8 Successors and Assigns.................................................... 103
Section 14.9 Separability Clause....................................................... 103
Section 14.10 Benefits of Indenture..................................................... 103
Section 14.11 Governing Law............................................................. 103
Section 14.12 Counterparts.............................................................. 104
Section 14.13 Legal Holidays............................................................ 104
Section 14.14 Recourse Against Others................................................... 104
EXHIBITS
EXHIBIT A: Form of Debenture............................................................... A-1
EXHIBIT B: Regulation S Certificate........................................................ B-1
EXHIBIT C: Rule 144A Certificate........................................................... C-1
</TABLE>
vii
<PAGE>
INDENTURE, dated as of February 24, 2000 between PRIMUS
TELECOMMUNICATIONS GROUP, INCORPORATED, a corporation duly organized and
existing under the laws of the State of Delaware, having its principal office at
1700 Old Meadow Road, McLean, VA 22102 (the "Company"), and FIRST UNION NATIONAL
BANK, a national banking association, as Trustee (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of
its 5-3/4% Convertible Subordinated Debentures due 2007 (the "Debentures") 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.
All things necessary to make the Debentures, when the
Debentures are 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 Debentures by the Holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Debentures, as
follows.
ARTICLE 1
DEFINITIONS AND
INCORPORATION BY REFERENCE
Section 1.1 Definitions.
For all purposes of this Indenture and the Debentures, the
following terms are defined as follows:
"Act", when used with respect to any Holder of a Debenture, has
the meaning specified in Section 14.4(a) hereof.
"Adjusted Interest Rate" means, with respect to any Reset
Transaction, the rate per annum that is the arithmetic average of the
rates quoted by two Reference Dealers selected by the Company or its
successor as the rate at which interest on the Debentures should
accrue so that the fair market value, expressed in dollars, of a
Debenture immediately after the later of:
(1) the public announcement of such Reset Transaction; or
(2) the public announcement of a change in dividend policy
in connection with such Reset Transaction,
<PAGE>
will equal the average Trading Price of a Debenture for the 20 Trading
Days preceding the date of public announcement of such Reset
Transaction; provided that the Adjusted Interest Rate shall not be less
--------
than 5-3/4% per annum.
"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 the purposes of
this definition, "control", when used with respect to any specified
Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agent Member" has the meaning specified in Section 2.9.
"Bankruptcy Law" means Title 11 of the U.S. Code or any similar
federal or state law for the relief of debtors.
"Board of Directors" means either the board of directors of the
Company or any committee of that board empowered to act for it with
respect to this Indenture.
"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", when used with respect to any Place of Payment or
Place of Conversion, means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in that
Place of Payment or Place of Conversion, as the case may be, are
authorized or obligated by law to close.
"Capitalized Lease" means, as applied to any Person, any lease of
any property (whether real, personal or mixed) of which the discounted
present value of the rental obligations of such Person as lessee, in
conformity with GAAP, is required to be capitalized on the balance
sheet of such Person.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however
designated, whether voting or non-voting) in equity of such Person,
whether now outstanding or issued after the date of this Indenture,
including, without limitation, all common stock and preferred stock.
"Cedel" means Cedel Bank Societe Anonyme.
"Change of Control" means the occurrence of any of the
following after the original issuance of the Debentures:
2
<PAGE>
(1) a "person" or "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Exchange Act) becomes the ultimate
"beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act) of more than 50% of the total voting power of the then
outstanding Voting Stock of the Company on a fully diluted basis;
(2) individuals who at the beginning of any period of two
consecutive calendar years constituted the Board of Directors
(together with any directors who are members of the Board of
Directors on the date hereof and any new directors whose election
by the Board of Directors or whose nomination for election by the
Company's stockholders was approved by a vote of at least two-
thirds of the members of the Board of Directors then still in
office who either were members of the Board of Directors at the
beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to
constitute a majority of the members of such board of directors
then in office;
(3) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in
one or a series of related transactions, of all or substantially
all of the assets of the Company and its Subsidiaries taken as a
whole to any such "person" or "group" (other than to the Company
or a Subsidiary);
(4) the merger or consolidation of the Company with or into
another corporation or the merger of another corporation with or
into the Company with the effect that immediately after such
transaction any such "person" or "group" of persons or entities
shall have become the beneficial owner of securities of the
surviving corporation of such merger or consolidation
representing a majority of the total voting power of the then
outstanding Voting Stock of the surviving corporation; or
(5) the adoption of a plan relating to the liquidation or
dissolution of the Company.
provided, however, that a Change of Control shall not be deemed to
-------- -------
have occurred if the closing sales price per share of the Common Stock
for any five Trading Days within the period of 10 consecutive Trading
Days ending immediately after the later of the Change of Control or
the public announcement of the Change of Control, in the case of a
Change of Control under clause (1) above, or the period of 10
consecutive Trading Days ending immediately before the Change of
Control, in the case of a Change of Control under clause (2), (3), (4)
or (5) above, shall equal or exceed 110% of the Conversion Price of
the Debentures in effect on each such Trading Day.
"Closing Date" means February 24, 2000, or such later date on
which the Debentures may be delivered pursuant to the Purchase
Agreement.
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"Closing Price" of any security on any date of determination
means:
(1) the closing sale price (or, if no closing sale price is
reported, the last reported sale price) of such security on the
New York Stock Exchange on such date;
(2) if such security is not listed for trading on the New
York Stock Exchange on any such date, the closing sale price as
reported in the composite transactions for the principal U.S.
securities exchange on which such security is so listed;
(3) if such security is not so listed on a U.S. national or
regional securities exchange, the closing sale price as reported
by the Nasdaq National Market;
(4) if such security is not so reported, the last quoted
bid price for such security in the over-the-counter market as
reported by the National Quotation Bureau or similar
organization; or
(5) if such bid price is not available, the average of the
mid-point of the last bid and ask prices of such security on such
date from at least three nationally recognized independent
investment banking firms retained for this purpose by the
Company.
"Common Stock" means any stock of any class of the Company which
has no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company and which is not subject to redemption by
the Company. However, subject to the provisions of Section 12.11
hereof, shares issuable on conversion of Debentures shall include only
shares of the class designated as Common Stock, par value $.01 per
share, of the Company at the date of execution of this Indenture or
shares of any class or classes resulting from any reclassification or
reclassifications thereof and which have no preference in respect of
dividends or of amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company and
which are not subject to redemption by the Company, provided that if
at any time there shall be more than one such resulting class, the
shares of each such class then so issuable shall be substantially in
the proportion which the total number of shares of such class
resulting from all such reclassifications bears to the total number of
shares of all such classes resulting from all such reclassifications.
"Company" means the corporation named as the "Company" in the
first paragraph of this instrument until a successor corporation shall
have become such pursuant to the applicable provisions of this
Indenture, and thereafter "Company" shall mean such successor
corporation.
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"Company Notice" has the meaning specified in Section 11.3
hereof.
"Company Order" means a written request or order signed in the
name of the Company by its Chairman, its President, any Vice
President, its Treasurer or an Assistant Treasurer, and delivered to
the Trustee.
"Conversion Agent" means any Person authorized by the Company to
convert Debentures in accordance with Article 12 hereof.
"Conversion Price" has the meaning specified in Section 12.1
hereof.
"Corporate Trust Office" means for purposes of presentation or
surrender of Debentures for payment, registration, transfer, exchange
or conversion or for service of notices or demands upon the Company,
the office of the Trustee located in The City of New York at which at
any particular time its corporate trust business shall be administered
(which at the date of execution of this Indenture is located at 40
Broad Street, Fifth Floor, Suite 550, New York, New York 10004), and
for all other purposes, the office of the Trustee located in the City
of Richmond, Virginia (which at the date of this Indenture is located
at 800 East Main Street, Richmond, Virginia 23219, Attention:
Corporate Trust).
"corporation" means corporations, associations, limited liability
companies, companies and business trusts.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement and any other arrangement and agreement
designed to provide protection against fluctuations in currency
values.
"Current Market Price" has the meaning set forth in Section
12.4(g).
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Debentures" has the meaning ascribed to it in the first
paragraph under the caption "Recitals of the Company".
"Default" means an event which is, or after notice or lapse of
time or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 2.17
hereof.
"Depositary" means The Depository Trust Company, its nominees
and their respective successors.
"Designated Senior Debt" means Senior Debt of the Company which,
at the date of determination, has an aggregate amount outstanding of,
or under which, at the date of determination, the holders thereof are
committed to lend up
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<PAGE>
to, at least $15 million and is specifically designated in the
instrument, agreement or other document evidencing or governing that
Senior Debt as "Designated Senior Debt" for purposes of this Indenture
(provided that such instrument, agreement or other document may place
--------
limitations and conditions on the right of such Senior Debt to
exercise the rights of Designated Senior Debt).
"Dividend Yield" on any security for any period means the
dividends paid or proposed to be paid pursuant to an announced
dividend policy on such security for such period divided by, if with
respect to dividends paid on such security, the average Closing Price
of such security during such period and, if with respect to dividends
proposed to be paid on such security, the Closing Price of such
security on the effective date of the related Reset Transaction.
"Dollar," "U.S. Dollar" or "U.S. $" means a dollar or other
equivalent unit in such coin or currency of the United States as at
the time shall be legal tender for the payment of public and private
debts.
"DTC Participants" has the meaning specified in Section 2.8
hereof.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear System.
"Event of Default" has the meaning specified in Section 4.1
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Expiration Time" has the meaning specified in Section 12.4(f)
hereof.
"fair market value" has the meaning set forth in Section 12.4(g)
hereof.
"Global Debenture" has the meaning specified in Section 2.2
hereof.
"guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and, without limiting the generality of
the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or other
obligation of such other Person (whether arising by virtue of
partnership arrangements, or by agreements to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for
purposes of assuring in any other manner the obligee of such
Indebtedness or other obligation of the payment thereof or to protect
such obligee against loss in respect thereof (in whole or in part);
provided that the term "guarantee" shall not include endorsements for
--------
collection or deposit in the ordinary course of business. The term
"guarantee" used as a verb has a corresponding meaning.
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<PAGE>
provided, however, that the term "guarantee" will not include
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endorsements for collection or deposit in the ordinary course of
business. The term "guarantee" used as a verb has a corresponding
meaning.
"Holder", when used with respect to any Debenture, means the
Person in whose name the Debenture is registered in the Register.
"Indebtedness" means, with respect to any Person at any date
of determination (without duplication):
(1) all indebtedness of such Person for borrowed money;
(2) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments;
(3) all obligations of such Person in respect of letters of
credit or other similar instruments (including reimbursement
obligations with respect thereto);
(4) all obligations of such Person as lessee under
Capitalized Leases;
(5) all Indebtedness of other Persons secured by a lien on
any asset of such Person, whether or not such Indebtedness is
assumed by such Person; provided that the amount of such
--------
Indebtedness shall be the lesser of (A) the fair market value of
such asset at such date of determination and (B) the amount of
such Indebtedness,
(6) all Indebtedness of other Persons guaranteed by such
Person to the extent such Indebtedness is guaranteed by such
Person; and
(7) to the extent not otherwise included in this
definition, obligations under Currency Agreements and Interest
Rate Protection Agreements.
The amount of Indebtedness of any Person at any date shall
be the outstanding balance at such date of all unconditional
obligations as described above and, with respect to contingent
obligations, the maximum liability upon the occurrence of the
contingency giving rise to the obligation, provided (i) that the
--------
amount outstanding at any time of any Indebtedness issued with
original issue discount is the face amount of such Indebtedness
less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as determined in
conformity with GAAP and (ii) that Indebtedness shall not include
any liability for federal, state, local or other taxes.
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<PAGE>
"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.
"Initial Purchasers" mean Lehman Brothers Inc., Morgan Stanley &
Co. Incorporated and Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
"Interest Payment Date" means each of August 15 and February 15,
beginning August 15, 2000
"Interest Rate" means, (a) if a Reset Transaction has not
occurred, 5-3/4% per annum, or (b) if a Reset Transaction occurs, the
Adjusted Interest Rate related to such Reset Transaction from the
effective date of such Reset Transaction to, but not including, the
effective date of any succeeding Reset Transaction.
"Interest Rate Protection Agreement" means interest rate swap
agreements, interest rate cap agreements, interest rate insurance, and
other arrangements and agreements designed to provide protection
against fluctuations in interest rates.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended.
"Liquidated Damages" means all liquidated damages, if any,
payable pursuant to Section 3 of the Registration Rights Agreement.
"Make-Whole Amount" means the sum of:
(1) the present value of the aggregate amount of the
interest that would otherwise have accrued from the Redemption
Date through February 15, 2003 (the "interest make-whole
period"); and
(2) Liquidated Damages, if any, to the Redemption Date.
Present value shall be calculated by using the bond equivalent yield
on U.S. Treasury notes or bills having a term nearest in length to
that of the interest make-whole period, as of the date the notice of
the redemption is mailed pursuant to this Indenture.
"Maturity" means the date on which the principal of such
Debentures becomes due and payable as therein or herein provided,
whether at the Stated Maturity or by acceleration, conversion, call
for redemption, exercise of a Repurchase Right or otherwise.
"Nasdaq National Market" means the National Association of
Securities Dealers Automated Quotation National Market or any
successor national
8
<PAGE>
securities exchange or automated over-the-counter trading market in
the United States.
"Non-Electing Share" has the meaning specified in Section
12.11 hereof.
"Officer" of the Company means the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Financial Officer,
the Treasurer, any Vice President or the Secretary of the Company.
"Officer's Certificate" means a certificate signed by the
Chairman, the President, a Vice President, the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of the Company, and
delivered to the Trustee.
"Offshore Global Debenture" has the meaning set forth in Section
2.2.
"Offshore Physical Debenture" has the meaning set forth in
Section 2.2.
"Offshore Restriction Date" has the meaning specified in Section
2.3(a)(iii).
"Opinion of Counsel" means a written opinion of counsel, who may
be counsel to the Company (and may include directors or employees of
the Company) and which opinion is acceptable to the Trustee.
"Outstanding", when used with respect to Debentures, means, as of
the date of determination, all Debentures theretofore authenticated
and delivered under this Indenture, except Debentures:
(1) previously canceled by the Trustee or delivered to the
Trustee for cancellation;
(2) for the payment or redemption of which money in the
necessary amount has been previously 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
Debentures, provided that if such Debentures are to be redeemed,
notice of such redemption has been duly given pursuant to this
Indenture; and
(3) which have been paid, in exchange for or in lieu of
which other Debentures have been authenticated and delivered
pursuant to this Indenture, other than any such Debentures in
respect of which there shall have been presented to the Trustee
proof satisfactory to it that such Debentures are held by a bona
fide purchaser in whose hands such Debentures are valid
obligations of the Company.
"Paying Agent" has the meaning specified in Section 2.5 hereof.
9
<PAGE>
"Payment Blockage Notice" has the meaning specified in Section
13.1(d) hereof.
"Permitted Junior Securities" means securities that are
subordinated to Senior Debt, and any securities issued in exchange for
Senior Debt, at least to the same extent as the Debentures.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company,
trust, estate, unincorporated organization or government or any agency
or political subdivision thereof.
"Physical Debentures" has the meaning specified in Section 2.2
hereof.
"Place of Conversion" means any city in which any Conversion
Agent is located.
"Place of Payment" means any city in which any Paying Agent is
located.
"Predecessor Debenture" of any particular Debenture means every
previous Debenture evidencing all or a portion of the same debt as
that evidenced by such particular Debenture; and, for the purposes of
this definition, any Debenture authenticated and delivered under
Section 2.12 hereof in exchange for or in lieu of a mutilated,
destroyed, lost or stolen Debenture shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Debenture.
"Provisional Redemption Price" means 102.88% of the principal
amount of the Debentures to be redeemed plus the Make-Whole Amount.
"Purchase Agreement" means the Purchase Agreement, dated February
17, 2000, among the Company, Primus Telecommunications Inc., Primus
Telecommunications (Australia) Pty. Ltd., Primus Telecommunications
Pty. Ltd. and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Record Date" means either a Regular Record Date or a Special
Record Date, as the case may be, provided that, for purposes of
Section 12.4 hereof, Record Date has the meaning specified in 12.4(g)
hereof.
"Redemption Date", when used with respect to any Debenture to be
redeemed, means the date fixed for such redemption by or pursuant to
this Indenture.
"Redemption Price", when used with respect to any Debenture to be
redeemed pursuant to Section 10.1(a) or 10.1(b), means the price at
which such Debenture is to be redeemed pursuant to this Indenture.
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<PAGE>
"Reference Dealer" means a dealer engaged in the trading of
convertible securities.
"Reference Period" has the meaning set forth in Section 12.4(d)
hereof.
"Register" has the meaning specified in Section 2.5 hereof.
"Registrar" has the meaning specified in Section 2.5 hereof.
"Registration Rights Agreement" means the Resale Registration
Rights Agreement dated as of February 24, 2000 between the Company and
the Initial Purchasers.
"Regular Record Date" for the interest on the Debentures
(including Liquidated Damages, if any) payable means the August 1 or
February 1 (whether or not a Business Day), as the case may be, next
preceding an Interest Payment Date.
"Repurchase Date" has the meaning specified in Section 11.1
hereof.
"Repurchase Price" has the meaning specified in Section 11.1
hereof.
"Repurchase Right" has the meaning specified in Section 11.1
hereof.
"Reset Transaction" means a merger, consolidation or statutory
share exchange to which the entity that is the issuer of the shares of
common stock into which the Debentures are then convertible into is a
party, a sale of all or substantially all the assets of that entity, a
recapitalization of those shares of common stock or a distribution
described in Section 12.4(d) hereof, after the effective date of which
transaction or distribution the Debentures would be convertible into:
(1) shares of an entity the common stock of which had a
Dividend Yield for the four fiscal quarters of such entity
immediately preceding the public announcement of such transaction
or distribution that was more than 2.5% higher then the Dividend
Yield on the Common Stock (or other common stock then issuable
upon conversion of the Debentures) for the four fiscal quarters
preceding the public announcement of such transaction or
distribution, or
(2) shares of an entity that announces a dividend policy
prior to the effective date of such transaction or distribution
which policy, if implemented, would result in a Dividend Yield on
such entity's common stock for the next four fiscal quarters that
would result in such a 2.5% basis point increase.
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<PAGE>
"Responsible Officer", when used with respect to the Trustee,
means any officer of the Trustee, including any vice president,
assistant vice president, secretary, assistant secretary, the
treasurer, any assistant treasurer, the managing director or any other
officer of the Trustee customarily performing functions similar to
those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject.
"Restricted Securities" means the Debentures defined as such in
Section 2.3 hereof.
"Restricted Securities Legend" has the meaning set forth in
Section 2.3(a) hereof.
"Restricted Subsidiary" means a Subsidiary of the Company that
is a "Restricted Subsidiary" as defined in any of the indentures
governing the 11-3/4% Senior Notes due 2004, the 9-7/8% Senior Notes
due 2008, the 11-1/4% Senior Notes due 2009 or the 12-3/4% Senior
Notes due 2009 of the Company.
"Rule 144" means Rule 144 as promulgated under the Securities Act
(including any successor rule thereof), as the same may be amended
from time to time.
"Rule 144A" means Rule 144A as promulgated under the Securities
Act (including any successor rule thereof), as the same may be amended
from time to time.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means the principal of, and the premium, if any,
interest (including all interest accruing subsequent to the
commencement of any bankruptcy or similar proceeding, whether or not a
claim for post-petition interest is allowable as a claim in any such
proceeding) and all fees, costs, expenses and other amounts accrued or
due on or in connection with, Indebtedness of the Company, whether
outstanding on the date of execution of this Indenture or thereafter
created, incurred, assumed, guaranteed or in effect guaranteed by the
Company (including all deferrals, renewals, extensions or refundings
of, or amendments, modifications or supplements to, the foregoing),
unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or the assumption or guarantee thereof
expressly provides that such Indebtedness shall not be senior in right
of payment to the Debentures or expressly provides that such
Indebtedness is pari passu or junior to the Debentures.
Notwithstanding the foregoing, the term "Senior Debt" shall include,
without limitation, all
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Designated Senior Debt and shall not include Indebtedness of the
Company to any Subsidiary.
"Shelf Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Significant Subsidiary" means, at any date of determination, any
Subsidiary of the Company that, together with its Subsidiaries, (i)
for the most recent fiscal year of the Company, accounted for more
than 10% of the consolidated revenues of the Company or (ii) as of the
end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Company, all as set forth on the most
recently available consolidated financial statements of the Company
for such fiscal year.
"Special Record Date" for the payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 2.17 hereof.
"Stated Maturity" means, (i) with respect to any debt security,
the date specified in such debt security as the fixed date on which
the final installment of principal of such debt security is due and
payable and (ii) with respect to any scheduled installment of
principal of or interest on any debt security, the date specified in
such debt security as the fixed date on which such installment is due
and payable.
"Subsidiary" means a corporation more than 50% of the outstanding
Voting Stock of which is owned, directly or indirectly, by the Company
or by one or more other Subsidiaries, or by the Company and one or
more other Subsidiaries.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Section
77aaa-77bbbb), as in effect on the date of execution of this
Indenture; provided, however, that in the event the TIA is amended
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after such date, "TIA" means, to the extent required by such
amendment, the Trust Indenture Act of 1939, as so amended, or any
successor statute.
"Trading Day" means:
(1) if the applicable security is listed or admitted for
trading on the New York Stock Exchange or another national
security exchange, a day on which the New York Stock Exchange or
such other national security is open for business;
(2) if the applicable security is quoted on the Nasdaq
National Market, a day on which trades may be made thereon; or
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(3) if the applicable security is not so listed, admitted
for trading or quoted, any day other than a Saturday or Sunday or
a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"Trading Price" of a security on any date of determination
means:
(1) the closing sale price (or, if no closing sale price is
reported, the last reported sale price) of such security (regular
way) on the New York Stock Exchange on such date;
(2) if such security is not listed for trading on the New
York Stock Exchange on any such date, the closing sale price as
reported in the composite transactions for the principal U.S.
securities exchange on which such security is so listed;
(3) if such security is not so listed on a U.S. national or
regional securities exchange, the closing sale price as reported
by the Nasdaq National Market;
(4) if such security is not so reported, the last price
quoted by Interactive Data Corporation for such security or, if
Interactive Data Corporation is not quoting such price, a similar
quotation service selected by the Company;
(5) if such security is not so quoted, the average of the
mid-point of the last bid and ask prices for such security from
at least two dealers recognized as market-makers for such
security; or
(6) if such security is not so quoted, the average of the
last bid and ask prices for such security from a Reference
Dealer.
"Transfer Agent" means any Person, which may be the Company,
authorized by the Company to exchange or register the transfer of
Debentures.
"Trigger Event" has the meaning specified in Section 12.4(d)
hereof.
"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.
"U.S. Global Debenture" has the meaning specified in Section 2.2.
"U.S. Government Obligations" means: (1) direct obligations of
the United States of America for the payment of which the full faith
and credit of the United States of America is pledged or (2)
obligations of a person controlled or
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supervised by and acting as an agency or instrumentality of the United
States of America, the payment of which is unconditionally guaranteed
as a full faith and credit obligation by the United States of America
and which in either case, are non-callable at the option of the issuer
thereof.
"U.S. Physical Debenture" has the meaning specified in Section
2.2.
"Vice President", when used with respect to the Company, means
any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
"Voting Stock" means with respect to any Person, Capital Stock of
any class or kind ordinarily having the power to vote for the election
of directors, managers or other voting members of the governing body
of such Person.
Section 1.2 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the
following meanings:
"indenture securities" means the Debentures;
"indenture security holder" means a Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
and
"obligor" on the Debentures means the Company and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.
Section 1.3 Rules of Construction.
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;
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(2) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with accounting principles
generally accepted in the United States prevailing at the time of any
relevant computation hereunder; and
(3) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
ARTICLE 2
THE DEBENTURES
Section 2.1 Title and Terms.
The Debentures shall be known and designated as the "5-3/4%
Convertible Subordinated Debentures due 2007" of the Company. The aggregate
principal amount of Debentures which may be authenticated and delivered under
this Indenture is limited to $250,000,000 ($300,000,000 if the over-allotment
option set forth in Section 2(c) of the Purchase Agreement is exercised in
full), except for Debentures authenticated and delivered upon registration of,
transfer of, or in exchange for, or in lieu of other Debentures pursuant to
Section 2.7, 2.8, 2.9, 2.12, 7.5, 10.7, 11.1 or 12.2 hereof. The Debentures
shall be issuable in denominations of $1,000 or integral multiples thereof.
The Debentures shall mature on February 15, 2007.
Interest shall accrue from February 24, 2000 at the Interest Rate
until the principal thereof is paid or made available for payment. Interest
shall be payable semiannually in arrears on August 15 and February 15 in each
year, commencing August 15, 2000.
Interest on the Debentures shall be computed (i) for any full
semiannual period for which a particular Interest Rate is applicable on the
basis of a 360-day year of twelve 30-day months and (ii) for any period for
which a particular Interest Rate is applicable shorter than a full semiannual
period for which interest is calculated, on the basis of a 30-day month and, for
such periods of less than a month, the actual number of days elapsed over a
30-day month. For purposes of determining the Interest Rate, the Trustee may
assume that a Reset Transaction has not occurred unless the Trustee has received
an Officers' Certificate stating that a Reset Transaction has occurred and
specifying the Adjusted Interest Rate then in effect.
A Holder of any Debenture at the close of business on a Regular
Record Date shall be entitled to receive interest (including Liquidated Damages,
if any) on such Debenture on the corresponding Interest Payment Date. A Holder
of any Debenture which is converted after the close of business on a Regular
Record Date and prior to the corresponding Interest Payment Date shall be
entitled to receive interest (including
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Liquidated Damages, if any) on the principal amount of such Debenture,
notwithstanding the conversion of such Debenture prior to such Interest Payment
Date. However, any such Holder which surrenders any such Debenture for
conversion (other than any Debenture whose Maturity is prior to such Interest
Payment Date) during the period between the close of business on such Regular
Record Date and ending with the opening of business on the corresponding
Interest Payment Date shall be required to pay the Company an amount equal to
the interest (including Liquidated Damages, if any) on the principal amount of
such Debenture so converted, which is payable by the Company to such Holder on
such Interest Payment Date, at the time such Holder surrenders such Debenture
for conversion. Notwithstanding the foregoing, any such Holder which surrenders
for conversion any Debenture which has been called for redemption by the Company
in a notice of redemption given by the Company pursuant to Section 10.4 hereof
shall be entitled to receive (and retain) such interest (including Liquidated
Damages, if any) and need not pay the Company an amount equal to the interest
(including Liquidated Damages, if any) on the principal amount of such Debenture
so converted at the time such Holder surrenders such Debenture for conversion.
Principal of, and premium, if any, and interest on, Global
Debentures shall be payable to the Depositary in immediately available funds.
Principal and premium, if any, and interest on Maturity, on
Physical Debentures shall be payable at the office or agency of the Company
maintained for such purpose, initially the Corporate Trust Office of the
Trustee. Interest on Physical Debentures (other than at Maturity) will be
payable by (i) U.S. Dollar check drawn on a bank in The City of New York mailed
to the address of the Person entitled thereto as such address shall appear in
the Register, or (ii) upon application to the Registrar not later than the
relevant Record Date by a Holder of an aggregate principal amount in excess of
$5,000,000, wire transfer in immediately available funds.
The Debentures shall be redeemable at the option of the Company
as provided in Article 10 hereof.
The Debentures shall have a Repurchase Right exercisable at the
option of Holders as provided in Article 11 hereof.
The Debentures shall be convertible as provided in Article 12
hereof.
The Debentures shall be subordinated in right of payment to
Senior Debt of the Company as provided in Article 13 hereof.
Section 2.2 Form of Debentures.
The Debentures and the Trustee's certificate of authentication
to be borne by such Debentures shall be substantially in the form annexed hereto
as Exhibit A, which is incorporated in and made a part of this Indenture. The
terms and provisions contained in the form of Debenture shall constitute, and
are hereby expressly made, a part of this
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Indenture, and to the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Any of the Debentures may have such letters, numbers or other
marks of identification and such notations, legends and endorsements as the
officers executing the same may approve (execution thereof to be conclusive
evidence of such approval) and as are not inconsistent with the provisions of
this Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
securities exchange or automated quotation system on which the Debentures may be
listed or designated for issuance, or to conform to usage.
Debentures offered and sold to QIBs in reliance on Rule 144A
shall be issued initially only in the form of one or more permanent global
Debentures (each, a "U.S. Global Debenture") in registered form without interest
coupons, in substantially the form set forth in Exhibit A and, except as
otherwise provided in Section 2.3(a)(iii), shall contain the Restrictive
Securities Legend as set forth in Section 2.3(a)(i).
Debentures offered and sold in offshore transactions in reliance
on Regulation S shall be issued initially only in the form of one or more
permanent global Debentures (each, an "Offshore Global Debenture" and, together
with the U.S. Global Debenture, the "Global Debentures") in registered form
without interest coupons in substantially the form set forth in Exhibit A and,
except as otherwise provided in Section 2.3(a)(iii), shall contain the
Restrictive Securities Legend as set forth in Section 2.3(a)(i). Debentures
issued pursuant to Section 2.8(d) in exchange for or upon transfer of beneficial
interests in the U.S. Global Debenture shall be in the form of permanent
certificated Debentures substantially in the form set forth in Exhibit A (the
"U.S. Physical Debentures"), and Debentures issued pursuant to Section 2.8(d) in
exchange for or upon transfer of beneficial interests in the Offshore Global
Debenture shall be in the form of permanent certificated Debentures
substantially in the form set forth in Exhibit A (the "Offshore Physical
Debentures").
The Offshore Physical Debentures and U.S. Physical Debentures are
sometimes collectively herein referred to as the "Physical Debentures".
The Global Debentures shall be:
(1) duly executed by the Company and authenticated by the
Trustee as hereinafter provided;
(2) registered in the name of the Depositary (or its nominee)
for credit to the respective accounts of the Holders at the
Depositary; and
(3) deposited with the Trustee, as custodian for the Depositary.
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The Global Debentures shall be substantially in the form of
Debenture set forth in Exhibit A annexed hereto (including the text and schedule
called for by footnote 1 and 2 thereto). The aggregate principal amount of the
Global Debentures may from time to time be increased or decreased by adjustments
made on the records of the Trustee, as custodian for the Depositary (or its
nominee), in accordance with the instructions given by the Holder thereof, as
hereinafter provided.
The Debentures shall be typed, printed, lithographed or engraved
or produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which the Debentures
may be listed, all as determined by the Officers executing such Debentures, as
evidenced by their execution of such Debentures.
Section 2.3 Legends.
(a) Restricted Securities Legends.
Each Debenture issued hereunder shall, upon issuance, bear the
legend set forth in Section 2.3(a)(i) or Section 2.3(a)(ii) (each, a "Restricted
Securities Legend"), as the case may be, and such legend shall not be removed
except as provided in Section 2.3(a)(iii). Each Debenture that bears or is
required to bear the Restricted Securities Legend set forth in Section 2.3(a)(i)
(together with any Common Stock issued upon conversion of the Debentures and
required to bear the Restricted Securities Legend set forth in Section
2.3(a)(ii), collectively, the "Restricted Securities") shall be subject to the
restrictions on transfer set forth in this Section 2.3(a) (including the
Restricted Securities Legend set forth below), and the Holder of each such
Restricted Security, by such Holder's acceptance thereof, shall be deemed to
have agreed to be bound by all such restrictions on transfer.
As used in Section 2.3(a), the term "transfer" encompasses any
sale, pledge, transfer or other disposition whatsoever of any Restricted
Security.
(i) Restricted Securities Legend for Debentures.
Except as provided in Section 2.3(a)(iii), until two years
after the original issuance date of any Debenture, any certificate evidencing
such Debenture (and all securities issued in exchange therefor or substitution
thereof, other than Common Stock, if any, issued upon conversion thereof which
shall bear the legend set forth in Section 2.3(a)(ii), if applicable) shall bear
a Restricted Securities Legend in substantially the following form:
The Debenture evidenced by this certificate has not been registered
under the Securities Act of 1933, as amended (the "Securities Act"),
or any state securities laws, and may not be offered or sold within
the United States or to, or for the account or benefit of, U.S.
persons except as set forth in the following sentence. By acquisition
hereof, the holder (1) represents that (a) it is a "qualified
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institutional buyer" as defined in Rule 144A under the Securities Act
or (b) it is a non-U.S. Person outside the United States acquiring the
Debenture in compliance with Regulation S under the Securities Act;
(2) agrees that it will not within two years after the original
issuance of this Debenture resell or otherwise transfer the Debenture
evidenced hereby or the common stock issuable upon conversion of such
Debenture except (a) to Primus Telecommunications Group, Incorporated
or any subsidiary of Primus Telecommunications Group, Incorporated,
(b) to a qualified institutional buyer in compliance with Rule 144A
under the Securities Act, (c) to a non-U.S. Person outside the United
States in compliance with Regulation S under the Securities Act, (d)
pursuant to the exemption from registration provided by Rule 144 under
the Securities Act (if available) or (e) pursuant to a registration
statement which has been declared effective under the Securities Act
and which continues to be effective at the time of such transfer; and
(3) agrees that it will deliver to each person to whom the Debenture
evidenced hereby is transferred (other than a transfer pursuant to
clause 2(e) above) a notice substantially to the effect of this
legend. In connection with any transfer of the Debenture evidenced
hereby within two years after the original issuance of such Debenture
(other than a transfer pursuant to clause (2)(e) above), the holder
must check the appropriate box set forth on the reverse hereof
relating to the manner of such transfer and submit this certificate to
the Trustee (or any successor Trustee, as applicable). If the proposed
transfer is pursuant to clause 2(d) above, the holder must, prior to
such transfer, furnish to the Trustee (or any successor Trustee, as
applicable), such certifications, legal opinions or other information
as Primus Telecommunications Group, Incorporated may reasonably
require to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act. This legend will be removed upon
the earlier of the transfer of the Debenture evidenced hereby pursuant
to clause (2)(e) above or the expiration of two years from the
original issuance of the Debenture evidenced hereby. As used herein,
the terms "United States" and "U.S. Person" have the meanings given to
them by Regulation S under the Securities Act.
(ii) Restricted Securities Legend for Common Stock Issued Upon
Conversion of Debentures.
Except as provided in Section 2(a)(iii), until two years after
the original issuance date of any Debenture any stock certificate representing
Common Stock issued upon conversion of such Debenture shall bear a Restricted
Securities Legend in substantially the following form:
The security evidenced hereby has not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or any state
securities laws, and may not be offered or sold within the United States or to,
or for the account or benefit of, U.S. persons except as set forth in the
following sentence. The holder hereof agrees that until the expiration of two
years after the original issuance of the security upon the conversion of which
the common stock evidenced hereby was issued, (1) it will not resell
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or otherwise transfer the security except (a) to Primus Telecommunications
Group, Incorporated or any subsidiary of Primus Telecommunications Group,
Incorporated, (b) to a non-U.S. Person outside the United States in compliance
with Regulation S under the Securities Act, (c) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if available) or (d)
pursuant to a registration statement which has been declared effective under the
Securities Act and which continues to be effective at the time of such transfer;
(2) prior to any such transfer other than a transfer pursuant to clause 1(d)
above, it will furnish to StockTrans, Inc. (or any successor transfer agent, as
applicable), such certifications, legal opinions or other information as the
company may reasonably require to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act; and (3) it will deliver to each
person to whom the common stock evidenced hereby is transferred (other than a
transfer pursuant to a clause (1)(d) above) a notice substantially to the effect
of this legend. This legend will be removed upon the earlier of the transfer of
the common stock evidenced hereby pursuant to clause (1)(d) above or the
expiration of two years from the original issuance of the security upon the
conversion of which the common stock evidenced hereby was issued. As used
herein, the terms "United States" and "U.S. person" have the meanings given to
them by Regulation S under the Securities Act.
(iii) Removal of the Restricted Securities Legends.
Each Debenture or share of Common Stock issued upon conversion of
such Debenture shall bear the Restricted Securities Legend set forth in Section
2.3(a)(i) or 2.3(a)(ii), as the case may be, until the earlier of:
(A) two years after the original issuance date of such
Debenture, in the case of each U.S. Global Debenture and each U.S.
Physical Debenture, and one year after the original issue date of each
Debenture, in the case of each Offshore Global Debenture and each
Offshore Physical Debenture (such date being referred to as the
"Offshore Restriction Date");
(B) such Debenture or Common Stock has been sold pursuant
to a registration statement that has been declared effective under the
Securities Act (and which continues to be effective at the time of
such sale); or
(C) such Common Stock has been issued upon conversion of
Debentures that have been sold pursuant to a registration statement
that has been declared effective under the Securities Act (and which
continues to be effective at the time of such sale).
The Holder must give notice thereof to the Trustee and any transfer agent for
the Common Stock, as applicable.
Notwithstanding the foregoing, the Restricted Securities
Legend may be removed if there is delivered to the Company such satisfactory
evidence, which may
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include an opinion of independent counsel, as may be reasonably required by the
Company that neither such legend nor the restrictions on transfer set forth
therein are required to ensure that transfers of such Debenture or Common Stock
will not violate the registration requirements of the Securities Act. Upon
provision of such satisfactory evidence, the Trustee, at the written direction
of the Company, shall authenticate and deliver in exchange for such Debentures
another Debenture or Debentures having an equal aggregate principal amount that
does not bear such legend. If the Restricted Securities Legend has been removed
from a Debenture as provided above, no other Debenture issued in exchange for
all or any part of such Debenture shall bear such legend, unless the Company has
reasonable cause to believe that such other Debenture is a "restricted security"
within the meaning of Rule 144 and instructs the Trustee in writing to cause a
Restricted Securities Legend to appear thereon.
Any Debenture (or security issued in exchange or substitution
thereof) as to which such restrictions on transfer shall have expired in
accordance with their terms or as to which the conditions for removal of the
Restricted Securities Legend set forth in Section 2.3(a)(i) as set forth therein
have been satisfied may, upon surrender of such Debenture for exchange to the
Registrar in accordance with the provisions of Section 2.7 hereof, be exchanged
for a new Debenture or Debentures, of like tenor and aggregate principal amount,
which shall not bear the Restricted Securities Legend required by Section
2.3(a)(i).
Any such Common Stock as to which such restrictions on transfer
shall have expired in accordance with their terms or as to which the conditions
for removal of the Restricted Securities Legend set forth in Section 2.3(a)(ii)
as set forth therein have been satisfied may, upon surrender of the certificates
representing such shares of Common Stock for exchange in accordance with the
procedures of the transfer agent for the Common Stock, be exchanged for a new
certificate or certificates for a like aggregate number of shares of Common
Stock, which shall not bear the Restricted Securities Legend required by Section
2.3(a)(ii).
(b) Global Debenture Legend.
Each Global Debenture shall also bear the following legend on the
face thereof:
Unless this certificate is presented by an authorized representative
of The Depository Trust Company ("DTC") to Primus Telecommunications
Group, Incorporated (or its successor) or its agent for registration
of transfer, exchange, conversion or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other entity
as is requested by an authorized representative of DTC (and any
payment hereon 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 or to any person
is wrongful since the registered owner hereof, Cede & Co., has an
interest herein.
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Section 2.4 Execution, Authentication, Delivery and Dating.
Two Officers shall execute the Debentures on behalf of the
Company by manual or facsimile signature. If an Officer whose signature is on a
Debenture no longer holds that office at the time the Debenture is
authenticated, the Debenture shall be valid nevertheless.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Debentures executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Debentures, and the Trustee in accordance
with such Company Order shall authenticate and deliver such Debentures as in
this Indenture provided and not otherwise.
Each Debenture shall be dated the date of its authentication.
No Debenture shall be entitled to any benefit under this
Indenture, or be valid or obligatory for any purpose, unless there appears on
such Debenture a certificate of authentication substantially in the form
provided for herein executed by or on behalf of the Trustee by manual signature,
and such certificate upon any Debenture shall be conclusive evidence, and the
only evidence, that such Debenture has been duly authenticated and delivered
hereunder.
The Trustee may appoint an authenticating agent or agents
reasonably acceptable to the Company with respect to the Debentures. Unless
limited by the terms of such appointment, an authenticating agent may
authenticate Debentures whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent.
Section 2.5 Registrar and Paying Agent.
The Company shall maintain an office or agency where Debentures
may be presented for registration of transfer or for exchange (the "Registrar")
and an office or agency where Debentures may be presented for payment (the
"Paying Agent"). The Registrar shall keep a register of the Debentures (the
"Register") and of their transfer and exchange. The Company may appoint one or
more co-Registrars and one or more additional Paying Agents for the Debentures.
The term "Paying Agent" includes any additional paying agent and the term
"Registrar" includes any additional registrar. The Company may change any Paying
Agent or Registrar without prior notice to any Holder.
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 (including Liquidated Damages, if
any) on Debentures
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in trust for the benefit of the Persons entitled thereto until such
sums shall be paid to such Persons or otherwise disposed of as
provided in this Indenture;
(2) give the Trustee notice of any Default by the Company in the
making of any payment of principal and premium, if any, or interest
(including Liquidated Damages, if any); and
(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.
The Company shall give prompt written notice to the Trustee of
the name and address of any Agent who is not a party to this Indenture. If the
Company fails to appoint or maintain another entity as Registrar or Paying
Agent, the Trustee shall act as such. The Company or any Affiliate of the
Company may act as Paying Agent or Registrar; provided, however, that none of
the Company, its subsidiaries or the Affiliates of the foregoing shall act:
(i) as Paying Agent in connection with redemptions, offers to
purchase and discharges, as otherwise specified in this Indenture, and
(ii) as Paying Agent or Registrar if a Default or Event of
Default has occurred and is continuing.
The Company hereby initially appoints the Trustee as Registrar
and Paying Agent for the Debentures.
Section 2.6 Paying Agent to Hold Assets in Trust.
Not later than 11:00 a.m. (New York City time) on each due date
of the principal, premium, if any, and interest (including Liquidated Damages,
if any) on any Debentures, the Company shall deposit with one or more Paying
Agents money in immediately available funds sufficient to pay such principal,
premium, if any, and interest (including Liquidated Damages, if any) so becoming
due. The Company at any time may require a Paying Agent to pay all money held by
it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other
than the Company) shall have no further liability for the money so paid over to
the Trustee.
If the Company shall act as a Paying Agent, it shall, prior to
or on each due date of the principal of and premium, if any, or interest
(including Liquidated Damages, if any) on any of the Debentures, segregate and
hold in trust for the benefit of the Holders a sum sufficient with monies held
by all other Paying Agents, to pay the principal and premium, if any, or
interest (including Liquidated Damages, if any) so becoming due until such sums
shall be paid to such Persons or otherwise disposed of as provided in this
Indenture, and shall promptly notify the Trustee of its action or failure to
act.
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Section 2.7 General Provisions Relating to Transfer and
Exchange.
The Debentures are issuable only in registered form. A Holder
may transfer a Debenture only by written application to the Registrar stating
the name of the proposed transferee and otherwise complying with the terms of
this Indenture. No such transfer shall be effected until, and such transferee
shall succeed to the rights of a Holder only upon, final acceptance and
registration of the transfer by the Registrar in the Register. Furthermore, any
Holder of a Global Debenture shall, by acceptance of such Global Debenture,
agree that transfers of beneficial interests in such Global Debenture may be
effected only through a book-entry system maintained by the Holder of such
Global Debenture (or its agent) and that ownership of a beneficial interest in
the Debenture shall be required to be reflected in a book-entry.
When Debentures are presented to the Registrar with a request to
register the transfer or to exchange them for an equal aggregate principal
amount of Debentures of other authorized denominations, the Registrar shall
register the transfer or make the exchange as requested if its requirements for
such transactions are met (including that such Debentures are duly endorsed or
accompanied by a written instrument of transfer duly executed by the Holder
thereof or by an attorney who is authorized in writing to act on behalf of the
Holder). Subject to Section 2.4 hereof, to permit registrations of transfers and
exchanges, the Company shall execute and the Trustee shall authenticate
Debentures at the Registrar's request. No service charge shall be made for any
registration of transfer or exchange or redemption of the Debentures, but the
Company may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than any such
transfer taxes or other similar governmental charge payable upon exchanges
pursuant to Section 2.14, 7.5 or 10.7 hereof).
Neither the Company nor the Registrar shall be required to
exchange or register a transfer of any Debentures:
(1) for a period of 15 Business Days prior to the day of any
selection of Debentures for redemption under Article 10 hereof;
(2) so selected for redemption or, if a portion of any Debenture
is selected for redemption, such portion thereof selected for
redemption; or
(3) surrendered for conversion or, if a portion of any Debenture
is surrendered for conversion, such portion thereof surrendered for
conversion.
Section 2.8 Book-Entry Provisions for the Global Debentures.
(a) The Global Debentures initially shall:
(i) be registered in the name of the Depositary (or a
nominee thereof);
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(ii) be delivered to the Trustee as custodian for such
Depositary; and
(iii) bear the Restricted Securities Legend as set forth in
Section 2.3(a)(i) hereof.
Members of, or participants in, the Depositary ("DTC
Participants") shall have no rights under this Indenture with respect to any
Global Debenture held on their behalf by the Depositary, or the Trustee as its
custodian, or under such Global Debenture, and the Depositary may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Debenture for all purposes whatsoever.
Notwithstanding the foregoing, nothing contained herein shall prevent the
Company, the Trustee or any agent of the Company or Trustee from giving effect
to any written certification, proxy or other authorization furnished by the
Depositary or impair, as between the Depositary and the DTC Participants, the
operation of customary practices governing the exercise of the rights of a
Holder of any Debenture.
(b) The registered Holder of a Global Debenture may grant
proxies and otherwise authorize any Person, including DTC Participants and
Persons that may hold interests through DTC Participants, to take any action
which a Holder is entitled to take under this Indenture or the Debentures.
(c) A Global Debenture may not be transferred, in whole or in
part, to any Person other than the Depositary (or a nominee thereof), and no
such transfer to any such other Person may be registered. Beneficial interests
in a Global Debenture may be transferred in accordance with the rules and
procedures of the Depositary and the provisions of Section 2.9 hereof.
(d) If at any time:
(i) the Depositary notifies the Company in writing that
it is no longer willing or able to continue to act as Depositary
for the Global Debentures, or the Depositary ceases to be a
"clearing agency" registered under the Exchange Act and a
successor depositary for the Global Debentures is not appointed
by the Company within 90 days of such notice or cessation;
(ii) the Company, at its option, notifies the Trustee in
writing that it elects to cause the issuance of the Debentures in
definitive form under this Indenture in exchange for all or any
part of the Debentures represented by a Global Debenture or
Global Debentures; or
(iii) an Event of Default has occurred and is continuing
and the Registrar has received a request from the Depositary for
the issuance of Physical Debentures in exchange for such Global
Debenture or Global Debentures,
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the Depositary shall surrender such Global Debenture or Global Debentures to the
Trustee for cancellation and the Company shall execute, and the Trustee, upon
receipt of an Officers' Certificate and Company Order for the authentication and
delivery of Debentures, shall authenticate and deliver in exchange for such
Global Debenture or Global Debentures, Physical Debentures in an aggregate
principal amount equal to the aggregate principal amount of such Global
Debenture or Global Debentures. Such Physical Debentures shall be registered in
such names as the Depositary (or any nominee thereof) shall identify in writing
as the beneficial owners of the Debentures represented by such Global Debenture
or Global Debentures.
(e) Notwithstanding the foregoing, in connection with any
transfer of beneficial interests in a Global Debenture to beneficial owners
pursuant to Section 2.8(d) hereof, the Registrar shall reflect on its books and
records the date and a decrease in the principal amount of such Global Debenture
in an amount equal to the principal amount of the beneficial interest in such
Global Debenture to be transferred.
Section 2.9 Special Transfer Provisions.
(a) General. The provisions of this Section 2.9 shall apply to
-------
all transfers involving any Physical Debenture and any beneficial interest in
any Global Debenture.
(b) Certain Definitions. As used in this Section 2.9 only,
-------------------
"delivery" of a certificate by a transferee or transferor means the delivery to
the Registrar by such transferee or transferor of the applicable certificate
duly completed; "holding" includes both possession of a Physical Debenture and
ownership of a beneficial interest in a Global Debenture, as the context
requires; "transferring" a Global Debenture means transferring that portion of
the principal amount of the transferor's beneficial interest therein that the
transferor has notified the Registrar that it has agreed to transfer; and
"transferring" a Physical Debenture means transferring that portion of the
principal amount thereof that the transferor has notified the Registrar that it
has agreed to transfer.
As used in this Indenture, "Regulation S Certificate" means a
certificate substantially in the form set forth in Exhibit B; "Rule 144A
Certificate" means a certificate substantially in the form set forth in Exhibit
C; and "Rule 144 Non-Registration and Supporting Evidence" means a written
opinion of counsel reasonably acceptable to the Company to the effect that, and
such other certification or information as the Company may reasonably require to
confirm that, the proposed transfer is being made pursuant to the exemption from
the registration requirements of the Securities Act provided by Rule 144.
(c) [Intentionally Omitted]
(d) Deemed Delivery of a Rule 144A Certificate in Certain
-----------------------------------------------------
Circumstances. A Rule 144A Certificate, if not actually delivered, will be
- -------------
deemed delivered if (A) (i) the transferor advises the Company and the Trustee
in writing that the
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relevant offer and sale were made in accordance with the provisions of Rule 144A
(or, in the case of a transfer of a Physical Debenture, the transferor checks
the box provided on the Physical Debenture to that effect) and (ii) the
transferee advises the Company and the Trustee in writing that (x) it and, if
applicable, each account for which it is acting in connection with the relevant
transfer, is a qualified institutional buyer within the meaning of Rule 144A,
(y) it is aware that the transfer of Debentures to it is being made in reliance
on the exemption from the provisions of Section 5 of the Securities Act provided
by Rule 144A, and (z) if at any time the Company is not subject to Section 13 or
15(d) of the Exchange Act, prior to the proposed date of transfer the transferee
has been given the opportunity to obtain from the Company the information
referred to in Rule 144A(d)(4), and has either declined such opportunity or has
received such information (or, in the case of a transfer of a Physical
Debenture, the transferee signs the certification provided on the Physical
Debenture to that effect); or (B) the transferor holds the U.S. Global Debenture
and is transferring to a transferee that will take delivery in the form of the
U.S. Global Debenture.
(e) Procedures and Requirements.
---------------------------
(1) if the proposed transfer occurs prior to the Offshore
Restriction Date, and the proposed transferor holds:
(A) a U.S. Physical Debenture which is surrendered to the
Registrar, and the proposed transferee or transferor, as applicable:
(i) delivers (or is deemed to have delivered pursuant to
clause (d) above) a Rule 144A Certificate and the proposed
transferee requests delivery in the form of a U.S. Physical
Debenture, then the Registrar shall (x) register such transfer in
the name of such transferee and record the date thereof in its
books and records, (y) cancel such surrendered U.S. Physical
Debenture and (z) deliver a new U.S. Physical Debenture to such
transferee duly registered in the name of such transferee in
principal amount equal to the principal amount being transferred
of such surrendered U.S. Physical Debenture;
(ii) delivers (or is deemed to have delivered pursuant to
clause (d) above) a Rule 144A Certificate and the proposed
transferee is or is acting through a member of, or participant
in, the Depository (an "Agent Member") and requests that the
proposed transferee receive a beneficial interest in the U.S.
Global Debenture, then the Registrar shall (x) cancel such
surrendered U.S. Physical Debenture, (y) record an increase in
the principal amount of the U.S. Global Debenture equal to the
principal amount being transferred of such surrendered U.S.
Physical Debenture and (z) notify the Depositary in accordance
with the procedures of the Depositary that it approves of such
transfer; or
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(iii) delivers a Regulation S Certificate and the proposed
transferee is or is acting through an Agent Member and requests
that the proposed transferee receive a beneficial interest in the
Offshore Global Debenture, then the Registrar shall (x) cancel
such surrendered U.S. Physical Debenture, (y) record an increase
in the principal amount of the Offshore Global Debenture equal to
the principal amount being transferred of such surrendered U.S.
Physical Debenture and (z) notify the Depositary in accordance
with the procedures of the Depositary that it approves of such
transfer.
In any of the cases described in this Section 2.9(e)(1)(A), the
Registrar shall deliver to the transferor a new U.S. Physical
Debenture in principal amount equal to the principal amount not being
transferred of such surrendered U.S. Physical Debenture, as
applicable.
(B) an interest in the U.S. Global Debenture, and the
proposed transferee or transferor, as applicable:
(i) delivers (or is deemed to have delivered pursuant to
clause (d) above) a Rule 144A Certificate and the proposed
transferee is or is acting through an Agent Member and requests
that the proposed transferee receive a beneficial interest in the
U.S. Global Debenture, then the transfer shall be effected in
accordance with the procedures of the Depositary therefor; or
(ii) delivers a Regulation S Certificate and the proposed
transferee is or is acting through an Agent Member and requests
that the proposed transferee receive a beneficial interest in the
Offshore Global Debenture, then the Registrar shall (w) register
such transfer in the name of such transferee and record the date
thereof in its books and records, (x) record a decrease in the
principal amount of the U.S. Global Debenture in an amount equal
to the beneficial interest therein being transferred, (y) record
an increase in the principal amount of the Offshore Global
Debenture equal to the amount of such decrease and (z) notify the
Depositary in accordance with the procedures of the Depositary
that it approves of such transfer.
(C) an interest in the Offshore Global Debenture, and the
proposed transferee or transferor, as applicable:
(i) delivers (or is deemed to have delivered pursuant to
clause (d) above) a Rule 144A Certificate and the proposed
transferee is or is acting through an Agent Member and requests
that the proposed transferee receive a beneficial interest in the
U.S. Global Debenture, then the Registrar shall (x) record a
decrease in the principal amount of the Offshore Global Debenture
in an amount equal to the beneficial interest
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therein being transferred, (y) record an increase in the
principal amount of the U.S. Global Debenture equal to the amount
of such decrease and (z) notify the Depositary in accordance with
the procedures of the Depositary that it approves of such
transfer; or
(ii) delivers a Regulation S Certificate and the proposed
transferee is or is acting through an Agent Member and requests
that the proposed transferee receive a beneficial interest in the
Offshore Global Debenture, then the transfer shall be effected in
accordance with the procedures of the Depositary therefor;
provided, however, that until one year after the original
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issuance of any Debenture, beneficial interests in the Offshore
Global Debenture may be held only in or through accounts
maintained at the Depositary by Euroclear or Cedel (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.
(2) If the proposed transfer occurs on or after the Offshore
Restriction Date, and the proposed transferor holds:
(A) a U.S. Physical Debenture which is surrendered to the
Registrar, and the proposed transferee or transferor, as applicable:
(i) delivers (or is deemed to have delivered pursuant to
clause (d) above) a Rule 144A Certificate and the proposed
transferee requests delivery in the form of a U.S. Physical
Debenture, then the procedures set forth in Section
2.9(e)(1)(A)(i) shall apply.
(ii) delivers (or is deemed to have delivered pursuant to
clause (d) above) a Rule 144A Certificate and the proposed
transferee is or is acting through an Agent Member and requests
that the proposed transferee receive a beneficial interest in the
Offshore Global Debenture, then the procedures set forth in
Section 2.9(e)(1)(A)(ii) shall apply; or
(iii) delivers a Regulation S Certificate, then the
Registrar shall cancel such surrendered U.S. Physical Debenture
and at the direction of the transferee, either:
(x) register such transfer in the name of such
transferee, record the date thereof in its books and
records and deliver a new Offshore Physical Debenture
to such transferee in principal amount equal to the
principal amount being transferred of such surrendered
U.S. Physical Debenture, or
(y) if the proposed transferee is or is acting
through an Agent Member, record an increase in the
principal
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amount of the Offshore Global Debenture equal to the
principal amount being transferred of such surrendered
U.S. Physical Debenture and notify the Depositary in
accordance with the procedures of the Depositary that
it approves of such transfer.
In any of the cases described in this Section 2.9(e)(2)(A)(i),
(ii) or (iii)(x), the Registrar shall deliver to the transferor a new
U.S. Physical Debenture in principal amount equal to the principal
amount not being transferred of such surrendered U.S. Physical
Debenture, as applicable.
(B) an interest in the U.S. Global Debenture, and the
proposed transferee or transferor, as applicable:
(i) delivers (or is deemed to have delivered pursuant to
clause (d) above) a Rule 144A Certificate and the proposed
transferee is or is acting through an Agent Member and requests
that the proposed transferee receive a beneficial interest in the
U.S. Global Debenture, then the procedures set forth in Section
2.9(e)(1)(B)(i) shall apply; or
(ii) delivers a Regulation S Certificate, then the
Registrar shall (x) record a decrease in the principal amount of
the U.S. Global Debenture in an amount equal to the beneficial
interest therein being transferred, (y) notify the Depositary in
accordance with the procedures of the Depositary that it approves
of such transfer and (z) at the direction of the transferee, if
the proposed transferee is or is acting through an Agent Member,
record an increase in the principal amount of the Offshore Global
Debenture equal to the amount of such decrease.
(C) an Offshore Physical Debenture which is surrendered to
the Registrar, and the proposed transferee or transferor, as
applicable:
(i) delivers (or is deemed to have delivered pursuant to
clause (d) above) a Rule 144A Certificate and the proposed
transferee is or is acting through an Agent Member and requests
delivery in the form of the U.S. Global Debenture, then the
Registrar shall (x) cancel such surrendered Offshore Physical
Debenture, (y) record an increase in the principal amount of the
U.S. Global Debenture equal to the principal amount being
transferred of such surrendered Offshore Physical Debenture and
(z) notify the Depositary in accordance with the procedures of
the Depositary that it approves of such transfer;
(ii) where the proposed transferee is or is acting through
an Agent Member, requests that the proposed transferee receive a
beneficial interest in the Offshore Global Debenture, then the
Registrar shall (x) cancel such surrendered Offshore Physical
Debenture, (y) record an
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increase in the principal amount of the Offshore Global Debenture
equal to the principal amount being transferred of such
surrendered Offshore Physical Debenture and (z) notify the
Depositary in accordance with the procedures of the Depositary
that it approves of such transfer; or
(iii) does not make a request covered by Section
2.9(e)(2)(C)(i) or Section 2.9(e)(2)(C)(ii), then the Registrar
shall (x) register such transfer in the name of such transferee
and record the date thereof in its books and records, (y) cancel
such surrendered Offshore Physical Debenture and (z) deliver a
new Offshore Physical Debenture to such transferee duly
registered in the name of such transferee in principal amount
equal to the principal amount being transferred of such
surrendered Offshore Physical Debenture.
In any of the cases described in this Section 2.9(e)(2)(C), the
Registrar shall deliver to the transferor a new U.S. Physical
Debenture in principal amount equal to the principal amount not being
transferred of such surrendered U.S. Physical Debenture, as
applicable.
(D) an interest in the Offshore Global Debenture, and the
proposed transferee or transferor, as applicable:
(i) delivers (or is deemed to have delivered pursuant to
clause (d) above) a Rule 144A Certificate and the proposed
transferee is or is acting through an Agent Member and requests
delivery in the form of the U.S. Global Debenture, then the
Registrar shall (x) record a decrease in the principal amount of
the Offshore Global Debenture in an amount equal to the
beneficial interest therein being transferred, (y) record an
increase in the principal amount of the U.S. Global Debenture
equal to the amount of such decrease and (z) notify the
Depositary in accordance with the procedures of the Depositary
that it approves of such transfer; or
(ii) where the proposed transferee is or is acting through
an Agent Member, requests that the proposed transferee receive a
beneficial interest in the Offshore Global Debenture, then the
transfer shall be effected in accordance with the procedures of
the Depositary therefor.
(f) Execution, Authentication and Delivery of Physical
--------------------------------------------------
Debentures. In any case in which the Registrar is required to deliver a Physical
- ----------
Debenture to a transferee or transferor, the Company shall execute, and the
Trustee shall authenticate and make available for delivery, such Physical
Debenture.
(g) Certain Additional Terms Applicable to Physical Debentures.
----------------------------------------------------------
Any transferee entitled to receive a Physical Debenture may request that the
principal amount thereof be evidenced by one or more Physical Debentures in any
authorized denomination
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or denominations the Registrar shall comply with such request if all other
transfer restrictions are satisfied.
(h) Transfers Not Covered by Section 2.9(e). The Registrar shall
---------------------------------------
effect and record, upon receipt of a written request from the Company so to do,
a transfer not otherwise permitted by Section 2.9(e), such recording to be done
in accordance with the otherwise applicable provisions of Section 2.9(e), upon
the furnishing by the proposed transferor or transferee of a Rule 144 Non-
Registration Opinion and Supporting Evidence.
(i) General. By its acceptance of any Debenture or shares of
-------
Common Stock issuable upon conversion of the Debentures bearing the Restricted
Securities Legend, each Holder of such Debenture or shares of Common Stock
issuable upon conversion of the Debentures acknowledges the restrictions on
transfer of such Debenture and such Common Stock set forth in this Indenture and
in the Restricted Securities Legend and agrees that it will transfer such
Debenture and such Common Stock only as provided in the Indenture. The Registrar
shall not register a transfer of any Debenture unless such transfer complies
with the restrictions with respect thereto set forth in this Indenture. The
Registrar shall not be required to determine (but may rely upon a determination
made by the Company) the sufficiency or accuracy of any such certifications,
legal opinions, other information or document.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.8 hereof or this
Section 2.9. The Company shall have the right to inspect and make copies of all
such letters, notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Registrar.
Section 2.10 Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders and shall otherwise comply with Section 312(a) of the TIA. If the
Trustee is not the Registrar, the Company shall furnish to the Trustee prior to
or on each Interest Payment Date and at such other times as the Trustee may
request in writing a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of Holders relating to such
Interest Payment Date or request, as the case may be.
Section 2.11 Persons Deemed Owners.
The Company, the Trustee and any agent of the Company or the
Trustee may treat the registered Holder of a Global Debenture as the absolute
owner of such Global Debenture for the purpose of receiving payment thereof or
on account thereof and for all other purposes whatsoever, whether or not such
Debenture be overdue, and notwithstanding any notice of ownership or writing
thereon, or any notice of previous loss or theft or other interest therein. The
Company, the Trustee and any agent of the
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Company or the Trustee may treat the Person in whose name any Debenture is
registered as the owner of such Debenture for the purpose of receiving payment
of principal of and premium, if any, and interest (including Liquidated Damages,
if any) on such Debenture and for all other purposes whatsoever, whether or not
such Debenture be overdue, and notwithstanding any notice of ownership or
writing thereon, or any notice of previous loss or theft or other interest
therein.
Section 2.12 Mutilated, Destroyed, Lost or Stolen Debentures.
If any mutilated Debenture is surrendered to the Trustee, the
Company shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Debenture of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there is delivered to the Company and the Trustee
(1) evidence to their satisfaction of the destruction, loss or
theft of any Debenture, and
(2) such Debenture 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
Debenture has been acquired by a bona fide purchaser, the Company
shall execute and, upon request, the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Debenture, a
new Debenture of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Debenture
has become or is about to become due and payable, the Company in its discretion,
but subject to any conversion rights, may, instead of issuing a new Debenture,
pay such Debenture, upon satisfaction of the condition set forth in the
preceding paragraph.
Upon the issuance of any new Debenture 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 Debenture issued pursuant to this Section in lieu of
any destroyed, lost or stolen Debenture shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Debenture shall be at any time enforceable by anyone, and such new
Debenture shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Debentures duly issued hereunder.
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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 Debentures.
Section 2.13 Treasury Debentures.
In determining whether the Holders of the requisite principal
amount of Outstanding Debentures are present at a meeting of Holders for quorum
purposes or have given any request, demand, authorization, direction, notice,
consent or waiver hereunder, Debentures owned by the Company or any Affiliate of
the Company shall be disregarded and deemed not to be Outstanding, except that,
in determining whether the Trustee shall be protected in relying upon any such
determination as to the presence of a quorum or upon any such request, demand,
authorization, direction, notice, consent or waiver, only such Debentures of
which the Trustee has received written notice and are so owned shall be so
disregarded.
Section 2.14 Temporary Debentures.
Pending the preparation of Debentures in definitive form, the
Company may execute and the Trustee shall, upon written request of the Company,
authenticate and deliver temporary Debentures (printed or lithographed).
Temporary Debentures shall be issuable in any authorized denomination, and
substantially in the form of the Debentures in definitive form but with such
omissions, insertions and variations as may be appropriate for temporary
Debentures, all as may be determined by the Company. Every such temporary
Debenture shall be executed by the Company and authenticated by the Trustee upon
the same conditions and in substantially the same manner, and with the same
effect, as the Debentures in definitive form. Without unreasonable delay, the
Company will execute and deliver to the Trustee Debentures in definitive form
(other than in the case of Debentures in global form) and thereupon any or all
temporary Debentures (other than any such Debentures in global form) may be
surrendered in exchange therefor, at each office or agency maintained by the
Company pursuant to Section 9.2 and the Trustee shall authenticate and deliver
in exchange for such temporary Debentures an equal aggregate principal amount of
Debentures in definitive form. Such exchange shall be made by the Company at its
own expense and without any charge therefor. Until so exchanged, the temporary
Debentures shall in all respects be entitled to the same benefits and subject to
the same limitations under this Indenture as Debentures in definitive form
authenticated and delivered hereunder.
Section 2.15 Cancellation.
All Debentures surrendered for payment, redemption,
repurchase, conversion, registration of transfer or exchange shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee.
All Debentures so delivered shall be canceled promptly by the Trustee, and no
Debentures shall be issued in lieu thereof except as expressly permitted by any
of the provisions of this Indenture. Upon written instructions of the Company,
the Trustee shall destroy canceled Debentures and, after
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such destruction, shall deliver a certificate of such destruction to the
Company. If the Company shall acquire any of the Debentures, such acquisition
shall not operate as a redemption or satisfaction of the indebtedness
represented by such Debentures unless the same are delivered to the Trustee for
cancellation.
Section 2.16 CUSIP Numbers.
The Company in issuing the Debentures may use "CUSIP" numbers
(if then generally in use), and the Trustee shall use CUSIP numbers in notices
of redemption or exchange as a convenience to Holders; provided that any such
notice shall state that no representation is made as to the correctness of such
numbers either as printed on the Debentures or as contained in any such notice
and that reliance may be placed only on the other identification numbers printed
on the Debentures, and any such redemption shall not be affected by any defect
in or omission of such numbers. The Company shall promptly notify the Trustee of
any change in the CUSIP numbers.
Section 2.17 Defaulted Interest.
If the Company fails to make a payment of interest (including
Liquidated Damages, if any) on any Debenture when due and payable ("Defaulted
Interest"), it shall pay such Defaulted Interest plus (to the extent lawful) any
interest payable on the Defaulted Interest (calculated using the Interest Rate),
in any lawful manner. It may elect to pay such Defaulted Interest, plus any such
interest payable on it, to the Persons who are Holders of such Debentures on
which the interest is due on a subsequent Special Record Date. The Company shall
notify the Trustee in writing of the amount of Defaulted Interest proposed to be
paid on each such Debenture. The Company shall fix any such Special Record Date
and payment date for such payment. At least 15 days before any such Special
Record Date, the Company shall mail to Holders affected thereby a notice that
states the Special Record Date, the Interest Payment Date, and amount of such
interest (and such Liquidated Damages, if any) to be paid.
ARTICLE 3
SATISFACTION AND DISCHARGE
Section 3.1 Satisfaction and Discharge of Indenture.
When:
(1) the Company shall deliver to the Trustee for cancellation
all Debentures previously authenticated (other than any Debentures
which have been destroyed, lost or stolen and in lieu of, or in
substitution for which, other Debentures shall have been authenticated
and delivered) and not previously canceled, or
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(2) (A) all the Debentures not previously canceled or delivered
to the Trustee for cancellation shall have become due and payable, or
are by their terms to become due and payable within one year or are to
be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption,
(B) the Company shall deposit with the Trustee, in trust,
cash in U.S. dollars and/or U.S. Government Obligations which through
the payment of interest and principal in respect thereof, in accordance
with their terms, will provide (and without reinvestment and assuming
no tax liability will be imposed on such Trustee), not later than one
day before the due date of any payment of money, an amount in cash,
sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay principal of, premium, if any,
or interest (including Liquidated Damages, if any) on all of the
Debentures (other than any Debentures which shall have been mutilated,
destroyed, lost or stolen and in lieu of or in substitution for which
other Debentures shall have been authenticated and delivered) not
previously canceled or delivered to the Trustee for cancellation, on
the dates such payments of principal, premium, if any, or interest
(including Liquidated Damages, if any) are due to such date of maturity
or redemption, as the case may be, and
(C) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel to the effect 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 execution of
this Indenture, there has been a change in the applicable federal
income tax law, in the case of either clause (x) or (y) to the effect
that, and based thereon such Opinion of Counsel shall confirm that, the
Holders will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit and discharge and will be subject
to federal income tax on the same amount and in the same manner and at
the same times as would have been the case if such deposit and
discharge had not occurred, and
if, in the case of either clause (1) or (2), the Company shall also pay or cause
to be paid all other sums payable hereunder by the Company, then this Indenture
shall cease to be of further effect (except as to:
(i) remaining rights of registration of transfer,
substitution and exchange and conversion of Debentures,
(ii) rights hereunder of Holders to receive payments of
principal of and premium, if any, and interest (including Liquidated
Damages, if any) on, the Debentures and the other rights, duties and
obligations of Holders, as beneficiaries hereof with respect to the
amounts, if any, so deposited with the Trustee, and
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(iii) the rights, obligations and immunities of the
Trustee hereunder),
and the Trustee, on demand of the Company accompanied by an Officers'
Certificate and an Opinion of Counsel (each stating that all conditions
precedent herein relating to the satisfaction and discharge of this Indenture
have been complied with) and at the cost and expense of the Company, shall
execute proper instruments acknowledging satisfaction of and discharging this
Indenture; provided, however, the Company shall reimburse the Trustee for all
amounts due the Trustee under Section 5.8 hereof and for any costs or expenses
thereafter reasonably and properly incurred by the Trustee and to compensate the
Trustee for any services thereafter reasonably and properly rendered by the
Trustee in connection with this Indenture or the Debentures.
Section 3.2 Deposited Monies to be Held in Trust.
Subject to Section 3.3 hereof, all monies deposited with the
Trustee pursuant to Section 3.1 hereof shall be held in trust and applied by it
to the payment, notwithstanding the provisions of Article 13 hereof, either
directly or through any Paying Agent (including the Company if acting as its own
Paying Agent), to the Holders of the particular Debentures for the payment or
redemption of which such monies have been deposited with the Trustee, of all
sums due and to become due thereon for principal, premium, if any, and interest
(including Liquidated Damages, if any). All monies deposited with the Trustee
pursuant to Section 3.1 hereof (and held by it or any Paying Agent) for the
payment of Debentures subsequently converted shall be returned to the Company
upon request of the Company.
Section 3.3 Return of Unclaimed Monies.
The Trustee and the Paying Agent shall pay to the Company any
money held by them for the payment of principal or premium, if any, or interest
(including Liquidated Damages, if any) that remains unclaimed for two years
after the date upon which such payment shall have become due. After payment to
the Company, Holders entitled to the money must look to the Company for payment
as general creditors unless an applicable abandoned property law designates
another Person, and all liability of the Trustee and such Paying Agent with
respect to such money shall cease.
ARTICLE 4
DEFAULTS AND REMEDIES
Section 4.1 Events of Default.
An "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,
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decree or order of any court or any order, rule or regulation of any or
governmental body):
(a) default in the payment of interest or Liquidated Damages,
if any, on any Debenture when due and payable and continuance of such
default for a period of 30 days;
(b) default in the payment of principal of (or premium, if any,
on) any Debenture at its Stated Maturity, upon acceleration,
redemption or otherwise;
(c) default in the payment of principal, interest or Liquidated
Damages, if any, on any Debenture required to be purchased pursuant
to a Repurchase Right as set forth in Section 11.1;
(d) default in the performance or breach of any covenant or
agreement of the Company in this Indenture or under the Debentures
(other than a default in the performance, or breach, of a covenant or
agreement specified in clause (a), (b) or (c) of this Section 4.1),
and continuance of such default or breach for a period of 30
consecutive 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 principal amount of the
Outstanding Debentures 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;
(e) there occurs with respect to any issue or issues of
Indebtedness of the Company or any Restricted Subsidiary having an
outstanding principal amount of $10.0 million or more in the
aggregate for all such issues of all such Persons, whether such
Indebtedness now exists or shall hereafter be created, (I) an event
of default that has caused the holder thereof to declare such
Indebtedness to be due and payable prior to its Stated Maturity and
such Indebtedness has not been discharged in full or such
acceleration has not been rescinded or annulled by the earlier of (x)
the expiration of any applicable grace period or (y) the thirtieth
day after such default; and/or (II) the failure to make a principal
payment at the final (but not any interim) fixed maturity and such
defaulted payment shall not have been made, waived or extended by the
earlier of (x) the expiration of any applicable grace period or (y)
the thirtieth day after such default;
(f) any final judgment or order (not covered by insurance) for
the payment of money in excess of $10.0 million in the aggregate for
all such final judgments or orders (treating any deductibles, self-
insurance or retention as not so covered) shall be rendered against
the Company or any Restricted Subsidiary and shall not be paid or
discharged, and there shall be any period of 30 consecutive days
following entry of the final judgment or order that causes the
aggregate amount for all such final judgments or orders outstanding
and not paid or discharged against all such Persons to exceed $10.0
million during which a stay of
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enforcement of such final judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect;
(g) a court having jurisdiction in the premises enters a decree
or order for (A) relief in respect of the Company or any Significant
Subsidiary in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (B)
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant
Subsidiary or for all or substantially all of the property and assets
of the Company or of any Significant Subsidiary or (C) the winding up
or liquidation of the affairs of the Company or any Significant
Subsidiary and, in each case, such decree or order shall remain
unstayed and in effect for a period of 30 consecutive days; or
(h) the Company or any Significant Subsidiary (A) commences a
voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of
an order for relief in an involuntary case under any such law, (B)
consents to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Company or any Significant Subsidiary or for all or
substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) effects any general assignment for the
benefit of creditors.
Section 4.2 Acceleration of Maturity; Rescission and Annulment.
(a) If an Event of Default with respect to Outstanding
Debentures (other than an Event of Default specified in Section 4.1(g) or 4.1(h)
hereof) occurs and is continuing, the Trustee or the Holders of at least 25% in
aggregate principal amount of the Outstanding Debentures, by written notice to
the Company, may declare due and payable 100% of the principal amount of all
Outstanding Debentures plus any accrued and unpaid interest to the date of
payment. Upon a declaration of acceleration, such principal and accrued and
unpaid interest to the date of payment shall be immediately due and payable.
(b) If an Event of Default specified in Section 4.1(g) or 4.1(h)
hereof occurs, all unpaid principal and accrued and unpaid interest (including
Liquidated Damages, if any) on the Outstanding Debentures shall become and be
immediately due and payable, without any declaration or other act on the part of
the Trustee or any Holder.
(c) The Holders of a majority in aggregate principal amount of
the Outstanding Debentures by written notice to the Trustee may rescind and
annul an acceleration and its consequences if:
(1) all existing Events of Default, other than the nonpayment of
principal of or interest on the Debentures which have become due solely
because of the acceleration, have been remedied, cured or waived, and
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(2) the rescission would not conflict with any judgment or
decree of a court of competent jurisdiction;
provided, however, that in the event of a declaration of acceleration in respect
- -------- -------
of the Debentures because of an Event of Default specified in Section 4.1(e)
shall have occurred and be continuing, such declaration of acceleration shall be
automatically rescinded and annulled if the Indebtedness that is the subject of
such Event of Default has been discharged or the holders thereof have rescinded
their declaration of acceleration in respect of such Indebtedness, and written
notice of such discharge or rescission, as the case may be, shall have been
given to the Trustee by the Company and countersigned by the holders of such
Indebtedness or a trustee, fiduciary or agent for such holders, within 60 days
after such declaration of acceleration in respect of the Debentures and no other
Event of Default has occurred during such 60-day period which has not been cured
or waived during such period.
Section 4.3 Other Remedies.
If an Event of Default with respect to Outstanding Debentures
occurs and is continuing, the Trustee may pursue any available remedy by
proceeding at law or in equity to collect the payment of principal of or
interest on the Debentures or to enforce the performance of any provision of the
Debentures.
The Trustee may maintain a proceeding in which it may
prosecute and enforce all rights of action and claims under this Indenture or
the Debentures, even if it does not possess any of the Debentures or does not
produce any of them in the proceeding.
Section 4.4 Waiver of Past Defaults.
The Holders, either (a) through the written consent of not
less than a majority in aggregate principal amount of the Outstanding
Debentures, or (b) by the adoption of a resolution, at a meeting of Holders of
the Outstanding Debentures at which a quorum (as prescribed in Section 8.4) is
present, by the Holders of at least a majority in aggregate principal amount of
the Outstanding Debentures represented at such meeting, may, on behalf of the
Holders of all of the Debentures, waive an existing Default or Event of Default,
except a Default or Event of Default:
(1) in the payment of the principal of or premium, if any, or
interest (including Liquidated Damages, if any) on any Debenture
(provided, however, that subject to Section 4.7 hereof, the Holders of
a majority in aggregate principal amount of the Outstanding Debentures
may rescind an acceleration and its consequences, including any related
payment default that resulted from such acceleration); or
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(2) in respect of a covenant or provision hereof which, under
Section 7.2 hereof, cannot be modified or amended without the consent
of the Holders of each Outstanding Debenture 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; provided, however, that no such waiver shall
extend to any subsequent or other Default or impair any right consequent
thereon.
Section 4.5 Control by Majority.
The Holders of a majority in aggregate principal amount of the
Outstanding Debentures (or such lesser amount as shall have acted at a meeting
pursuant to the provisions of this Indenture) 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. However,
the Trustee may refuse to follow any direction that:
(1) conflicts with any law or with this Indenture;
(2) the Trustee determines may be unduly prejudicial to the
rights of the Holders not joining therein, or
(3) may expose the Trustee to personal liability.
The Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.
Section 4.6 Limitation on Suit.
No Holder of any Debenture shall have any right to pursue any
remedy with respect to this Indenture or the Debentures (including, instituting
any proceeding, judicial or otherwise, with respect to this Indenture or for the
appointment of a receiver or trustee) unless:
(1) such Holder has previously given written notice to the
Trustee of an Event of Default that is continuing;
(2) the Holders of at least 25% in aggregate principal
amount of the Outstanding Debentures shall have made written request
to the Trustee to pursue the remedy;
(3) such Holder or Holders have offered to the Trustee
indemnity satisfactory to it against any costs, expenses and
liabilities incurred in complying with such request;
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(4) the Trustee has failed to comply with the request for 60
days after its receipt of such notice, request and offer of indemnity;
and
(5) during such 60-day period, no direction inconsistent
with such written request has been given to the Trustee by the Holders
of a majority in aggregate principal amount of the Outstanding
Debentures (or such amount as shall have acted at a meeting pursuant
to the provisions of this Indenture);
provided, however, that no one or more of such Holders may use this Indenture to
- -------- -------
prejudice the rights of another Holder or to obtain preference or priority over
another Holder.
Section 4.7 Unconditional Rights of Holders to Receive
Payment and to Convert.
Notwithstanding any other provision in this Indenture, the
Holder of any Debenture shall have the right, which is absolute and
unconditional, to receive payment of the principal of and premium, if any, and
interest (including Liquidated Damages, if any) on such Debenture on the Stated
Maturity expressed in such Debenture (or, in the case of redemption, on the
Redemption Date, or in the case of the exercise of a Repurchase Right, on the
Repurchase Date) and to convert such Debenture in accordance with Article 12,
and to bring suit for the enforcement of any such payment on or after such
respective dates and right to convert, and such rights shall not be impaired or
affected without the consent of such Holder.
Section 4.8 Collection of Indebtedness and Suits for
Enforcement by the Trustee.
The Company covenants that if:
(1) a Default or Event of Default is made in the payment of
any interest (including Liquidated Damages, if any) on any Debenture
when such interest (including Liquidated Damages, if any) becomes due
and payable and such Default or Event of Default continues for a
period of 30 days, or
(2) a Default or Event of Default is made in the payment of
the principal of or premium, if any, on any Debenture at the Maturity
thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Debentures, the whole amount then due and payable (as expressed
therein or as a result of any acceleration effected pursuant to Section 4.2
hereof) on such Debentures for principal and premium, if any, and interest
(including Liquidated Damages, if any) 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 (including Liquidated Damages, if
any), calculated using the Interest Rate, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the
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reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
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 and collect the moneys adjudged or decreed
to be payable in the manner provided by law out of the property of the Company,
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 of Debentures by such appropriate judicial proceedings as the
Trustee shall deem most effectual 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 4.9 Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to the Company or the property of the Company
or its creditors, the Trustee (irrespective of whether the principal of the
Debentures shall then be due and payable as therein expressed or by declaration
or otherwise and irrespective of whether the Trustee shall have made any demand
on the Company for the payment of overdue principal or interest (including
Liquidated Damages, if any)) shall be entitled and empowered, by intervention in
such proceeding or otherwise,
(1) to file and prove a claim for the whole amount of
principal and premium, if any, and interest (including Liquidated
Damages, if any) owing and unpaid in respect of the Debentures and to
file such other papers or documents as may be necessary or advisable in
order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Holders of Debentures
allowed in such judicial proceeding, and
(2) to collect and receive any moneys or other property
payable or deliverable on any such claim and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceedings is hereby authorized by
each Holder of Debentures 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 of Debentures, to pay to the Trustee any amount due to 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 5.8.
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Nothing contained herein shall be deemed to authorize the
Trustee to authorize or consent to or accept, or adopt on behalf of any Holder
of a Debenture, any plan of reorganization, arrangement, adjustment or
composition affecting the Debentures or the rights of any Holder thereof or to
authorize the Trustee to vote in respect of the claim of any Holder of a
Debenture in any such proceeding.
Section 4.10 Restoration of Rights and Remedies.
If the Trustee or any Holder of a Debenture 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 of Debentures shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.
Section 4.11 Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Debentures in the last
paragraph of Section 2.12, no right or remedy conferred in this Indenture upon
or reserved to the Trustee or to the Holders of Debentures 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 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 4.12 Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Debenture 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 any acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders of Debentures may be
exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders of Debentures, as the case may be.
Section 4.13 Application of Money Collected.
Subject to Article 13, 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 (including Liquidated
Damages, if any), upon presentation of the Debentures and the notation thereon
of the payment if only partially paid and upon surrender thereof if fully paid:
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FIRST: To the payment of all amounts due the Trustee;
SECOND: To the payment of the amounts then due and unpaid for
principal of and premium, if any, and interest (including Liquidated
Damages, if any) on the Debentures 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 Debentures for principal and premium, if any, and
interest (including Liquidated Damages, if any), respectively; and
THIRD: Any remaining amounts shall be repaid to the Company.
Section 4.14 Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any
Debenture by such Holder's acceptance thereof shall be deemed to have agreed,
that any court may in its discretion require, 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, suffered or omitted by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section shall not apply to any suit instituted by the
Company, to any suit instituted by the Trustee, to any suit instituted by any
Holder, or group of Holders, holding in the aggregate more than 10% in aggregate
principal amount of the Outstanding Debentures, or to any suit instituted by any
Holder of any Debenture for the enforcement of the payment of the principal of
or premium, if any, or interest (including Liquidated Damages, if any) on any
Debenture on or after the Stated Maturity expressed in such Debenture (or, in
the case of redemption or exercise of a Repurchase Right, on or after the
Redemption Date) or for the enforcement of the right to convert any Debenture in
accordance with Article 12.
Section 4.15 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 to 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.
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ARTICLE 5
THE TRUSTEE
Section 5.1 Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default,
(1) The Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture or the TIA,
and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture; provided, however, that in the case of any such
certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall examine the
certificates or opinions to determine whether or not, on their face,
they conform to the requirements to this Indenture (but need not
investigate or confirm the accuracy of any facts stated therein).
(b) In case an Event of Default actually known to a
Responsible Officer of the Trustee has occurred and is 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 skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of such person's
own affairs.
(c) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(1) This paragraph (c) shall not be construed to limit the
effect of paragraph (a) of this Section 5.1;
(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it shall be proved
that the Trustee was negligent in ascertaining the pertinent facts; and
(3) The Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with a direction received by it of the Holders of a majority in
principal amount of the Outstanding Debentures (or such lesser amount
as shall have acted at a meeting pursuant to the provisions of this
Indenture) relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any
trust or power conferred upon the Trustee, under this Indenture.
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(d) Whether or not herein 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 5.1.
(e) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers. The Trustee may refuse to perform any duty or exercise any
right or power unless it receives indemnity satisfactory to it against any loss,
liability, cost or expense (including, without limitation, reasonable fees of
counsel).
(f) The Trustee shall not be obligated to pay interest on any
money or other assets received by it unless otherwise agreed in writing with the
Company. Assets held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
(g) 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, coupon, 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 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 at the sole cost of the Company and shall incur no
liability or additional liability of any kind by reason of such inquiry or
investigation.
(h) The Trustee shall not be deemed to have notice or actual
knowledge of any Event of Default unless a Responsible Officer of the Trustee
has actual knowledge thereof or unless written notice of any event which is in
fact a Default is received by the Trustee pursuant to Section 14.2 hereof, and
such notice references the Debentures and this Indenture.
(i) The rights, privileges, protections, immunities and
benefits given to the Trustee hereunder, 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 each Paying Agent,
authenticating agent, Conversion Agent or Registrar acting hereunder.
Section 5.2 Certain Rights of Trustee.
Subject to the provisions of Section 5.1 hereof and subject to
Section 315(a) through (d) of the TIA:
(1) The Trustee may rely on any document believed by it to
be genuine and to have been signed or presented by the proper person.
The Trustee need not investigate any fact or matter stated in the
document.
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(2) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel, or both. The
Trustee shall not be liable for any action it takes or omits to take in
good faith in reliance on the Officers' Certificate or Opinion of
Counsel
(3) The Trustee may act through attorneys and agents and
shall not be responsible for the misconduct or negligence of any
attorney or agent appointed with due care.
(4) The Trustee shall not be liable for any action taken or
omitted to be taken by it in good faith which it believed to be
authorized or within the discretion or rights or powers conferred upon
it by this Indenture, unless the Trustee's conduct constitutes
negligence.
(5) The Trustee may consult with counsel of its selection
and the advice of such counsel as to matters of law shall be full and
complete authorization and protection in respect of any action taken,
omitted or suffered by it hereunder in good faith and in accordance
with the advice or opinion of such counsel.
(6) Unless otherwise specifically provided in this
Indenture, any demand, request, direction or notice from the Company
shall be sufficient if signed by an Officer of the Company.
(7) The permissive rights of the Trustee to do things
enumerated in this Indenture shall not be construed as a duty unless so
specified herein.
Section 5.3 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Debentures and may otherwise deal with the Company or
any Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest (as such term is defined in Section 310(b) of the TIA), it must
eliminate such conflict within 90 days, apply to the SEC for permission to
continue as trustee (to the extent permitted under Section 310(b) of the TIA) or
resign. Any agent may do the same with like rights and duties. The Trustee is
also subject to Sections 5.11 and 5.12 hereof.
Section 5.4 Money Held in Trust.
Money held by the Trustee in trust hereunder shall be
segregated from other funds. The Trustee shall be under no liability for
interest on any money received by it hereunder except as otherwise expressly
agreed with the Company.
Section 5.5 Trustee's Disclaimer.
The recitals contained herein and in the Debentures (except
for those in the certificate of authentication) shall be taken as the statements
of the Company, and the
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Trustee assumes no responsibility for their correctness. The Trustee makes no
representations as to the validity, sufficiency or priority of this Indenture or
of the Debentures. The Trustee shall not be accountable for the use or
application by the Company of Debentures or the proceeds thereof.
Section 5.6 Notice of Defaults.
Within 90 days after the occurrence of any Default or Event of
Default hereunder of which the Trustee has received written notice, the Trustee
shall give notice to Holders pursuant to Section 14.2 hereof, unless such
Default or Event of Default shall have been cured or waived; provided, however,
that, except in the case of a Default or Event of Default in the payment of the
principal of or premium, if any, or interest (including Liquidated Damages, if
any), or in the payment of any redemption or repurchase obligation on any
Debenture, the Trustee shall be protected in withholding such notice if and so
long as Responsible Officers of the Trustee in good faith determine that the
withholding of such notice is in the interest of the Holders.
Section 5.7 Reports by Trustee to Holders.
The Trustee shall transmit to Holders such reports concerning
the Trustee and its actions under this Indenture as may be required by Section
313 of the TIA at the times and in the manner provided by the TIA.
A copy of each report at the time of its mailing to Holders
shall be filed with the SEC, if required, and each stock exchange, if any, on
which the Debentures are listed. The Company shall promptly notify the Trustee
when the Debentures become listed on any stock exchange.
Section 5.8 Compensation and Indemnification.
The Company covenants and agrees to pay to the Trustee from
time to time, and the Trustee shall be entitled to, reasonable compensation
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) and the Company covenants and
agrees to pay or reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by or on behalf of it in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all agents and other persons not regularly in its employ), except to the extent
that any such expense, disbursement or advance is due to its negligence or bad
faith. When the Trustee incurs expenses or renders services in connection with
an Event of Default specified in Section 4.1 hereof, the expenses (including the
reasonable charges and expenses of its counsel) and the compensation for the
services are intended to constitute expenses of administration under any
bankruptcy law. The Company also covenants to indemnify the Trustee and its
officers, directors, employees and agents for, and to hold such Persons harmless
against, any loss, liability or expense incurred by them, arising out of or in
connection with the acceptance or administration of this Indenture or the trusts
hereunder
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or the performance of their duties hereunder, including the costs and expenses
of defending themselves against or investigating any claim of liability in the
premises, except to the extent that any such loss, liability or expense was due
to the negligence or willful misconduct of such Persons. The obligations of the
Company under this Section 5.8 to compensate and indemnify the Trustee and its
officers, directors, employees and agents and to pay or reimburse such Persons
for expenses, disbursements and advances shall constitute additional
indebtedness hereunder and shall survive the satisfaction and discharge of this
Indenture or the earlier resignation or removal of the Trustee. Such additional
indebtedness shall be a senior claim to that of the Debentures upon all property
and funds held or collected by the Trustee as such, except funds held in trust
for the benefit of the Holders of particular Debentures, and the Debentures are
hereby subordinated to such senior claim. "Trustee" for purposes of this Section
5.8 shall include any predecessor Trustee, but the negligence or willful
misconduct of any Trustee shall not affect the indemnification of any other
Trustee.
Section 5.9 Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section 5.9.
The Trustee may resign and be discharged from the trust hereby
created by so notifying the Company in writing. The Holders of at least a
majority in aggregate principal amount of Outstanding Debentures may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company must
remove the Trustee if:
(i) the Trustee fails to comply with Section 5.11 hereof
or Section 310 of the TIA;
(ii) the Trustee becomes incapable of acting.
(iii) the Trustee is adjudged a bankrupt or an insolvent or
an order for relief is entered with respect to the Trustee under any
Bankruptcy Law; or
(iv) a Custodian or public officer takes charge of the
Trustee or its property.
If the Trustee resigns or is removed or if a vacancy exists in
the office of the Trustee for any reason, the Company shall promptly appoint a
successor Trustee. The Trustee shall be entitled to payment of its fees and
reimbursement of its expenses while acting as Trustee. Within one year after the
successor Trustee takes office, the Holders of at least a majority in aggregate
principal amount of Outstanding Debentures may appoint a successor Trustee to
replace the successor Trustee appointed by the Company.
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Any Holder may petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor Trustee if the
Trustee fails to comply with Section 5.11 hereof.
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 or removal, the resigning or removed Trustee, as the case
may be, may petition, at the expense of the Company, any court of competent
jurisdiction for the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The Company shall mail a notice of the successor Trustee's
succession to the Holders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee. Notwithstanding
replacement of the Trustee pursuant to this Section 5.9, the Company's
obligations under Section 5.8 hereof shall continue for the benefit of the
retiring Trustee with respect to expenses, losses and liabilities incurred by it
prior to such replacement.
Section 5.10 Successor Trustee by Merger, Etc.
Subject to Section 5.11 hereof, if the Trustee consolidates
with, merges or converts into, or transfers all or substantially all of its
corporate trust business to, another corporation or national banking
association, the successor entity without any further act shall be the successor
Trustee as to the Debentures.
Section 5.11 Corporate Trustee Required; Eligibility.
The Trustee shall at all times satisfy the requirements of
Section 310(a)(1), (2) and (5) of the TIA. The Trustee shall at all times have
(or, in the case of a corporation included in a bank holding company system, the
related bank holding company shall at all times have), a combined capital and
surplus of at least $100 million as set forth in its (or its related bank
holding company's) most recent published annual report of condition. The Trustee
is subject to Section 310(b) of the TIA.
Section 5.12 Collection of Claims Against the Company.
The Trustee is subject to Section 311(a) of the TIA, excluding
any creditor relationship listed in Section 311(b) of the TIA. A Trustee who has
resigned or been removed shall be subject to Section 311(a) of the TIA to the
extent indicated therein.
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ARTICLE 6
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 6.1 Company May Consolidate, Etc., Only on Certain
Terms.
The Company shall not consolidate with, merge with or into, or
sell, convey, transfer, lease or otherwise dispose of all or substantially all
of its property and assets (as an entirety or substantially an entirety in one
transaction or a series of related transactions) to, any Person or permit any
Person to merge with or into the Company, unless:
(1) either (A) the Company shall be the continuing Person, or
(B) the Person (if other than the Company) formed by such consolidation
or into which the Company is merged or the Person which acquires by
conveyance or transfer, or which leases, the properties and assets of
the Company substantially as an entirety (i) shall be a corporation,
and validly existing under the laws of the United States of America or
any jurisdiction thereof and (ii) shall expressly assume, by a
supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the Company's obligation for the due
and punctual payment of the principal of (and premium and Liquidated
Damages, if any) and interest on all Debentures and the performance and
observance of every covenant of the Indenture on the part of the
Company to be performed or observed and shall have provided for
conversion rights in accordance with section 12.11 hereof;
(2) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing; and
(3) the Company or such Person shall have delivered to the
Trustee an Officer's Certificate and an Opinion of Counsel, each
stating that such consolidation, merger, conveyance, transfer or lease
and, if a supplemental indenture is required in connection with such
transaction, such supplemental indenture complies with this Article and
that all conditions precedent provided for herein relating to such
transaction have been complied with.
Section 6.2 Successor Corporation Substituted.
Upon any consolidation of the Company with or merger of the
Company with or into any other corporation or any conveyance, transfer or lease
of the properties and assets of the Company substantially as an entirety to any
Person in accordance with Section 6.1, the successor Person formed by such
consolidation or into which the Company is merged or to which such conveyance,
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 in the event of any such conveyance or transfer, the Company
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(which term shall for this purpose mean the Person named as the "Company" in the
first paragraph of this Indenture or any successor Person which shall
theretofore become such in the manner described in Section 6.1), except in the
case of a lease to another Person, shall be discharged of all obligations and
covenants under this Indenture and the Debentures and may be dissolved and
liquidated.
ARTICLE 7
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 7.1 Without Consent of Holders of Debentures.
Without the consent of any Holders of Debentures, the Company,
when authorized by a Board Resolution, and the Trustee, at any time and from
time to time, may amend this Indenture and the Debentures to:
(a) add to the covenants of the Company for the benefit of
the Holders of Debentures;
(b) surrender any right or power herein conferred upon the
Company;
(c) make provision with respect to the conversion rights of
Holders of Debentures pursuant to Section 12.11 hereof;
(d) provide for the assumption of the Company's obligations
to the Holders of Debentures in the case of a merger, consolidation,
conveyance, transfer or lease pursuant to Article 6 hereof;
(e) reduce the Conversion Price; provided, that such
reduction in the Conversion Price shall not adversely affect the
interest of the Holders of Debentures in any material respect;
(f) comply with the requirements of the SEC in order to
effect or maintain the qualification of this Indenture under the TIA;
(g) make any changes or modifications to this Indenture
necessary in connection with the registration of any Debentures under
the Securities Act as contemplated in the Registration Rights
Agreement, provided, that such action pursuant to this clause (g) does
not, in the good faith opinion of the Board of Directors and the
Trustee, adversely affect the interests of the Holders of Debentures in
any material respect;
(h) cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein or which is otherwise defective, or to make any other provisions
with respect to matters or questions arising under this Indenture which
the Company and the Trustee may deem necessary or desirable and which
shall not be inconsistent with the provisions of
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this Indenture, provided, that such action pursuant to this clause (h)
does not, in the good faith opinion of the Board of Directors and the
Trustee, adversely affect the interests of the Holders of Debentures in
any material respect; or
(i) add or modify any other provisions with respect to
matters or questions arising under this Indenture which the Company and
the Trustee may deem necessary or desirable and which shall not be
inconsistent with the provisions of this Indenture, provided, that such
action pursuant to this clause (i) does not adversely affect the
interests of the Holders of Debentures in any material respect.
Section 7.2 With Consent of Holders of Debentures.
Except as provided below in this Section 7.2, this Indenture
or the Debentures may be amended, modified or supplemented, and noncompliance in
any particular instance with any provision of this Indenture or the Debentures
may be waived, in each case (i) with the written consent of the Holders of at
least a majority in aggregate principal amount of the Outstanding Debentures or
(ii) by the adoption of a resolution, at a meeting of Holders of the Outstanding
Debentures at which a quorum is present, by the Holders of a majority in
aggregate principal amount of the Outstanding Debentures represented at such
meeting.
Without the written consent or the affirmative vote of each
Holder of Debentures so affected, an amendment, modification or waiver under
this Section 7.2 may not:
(a) change the Stated Maturity of the principal of, or any
installment of interest (including Liquidated Damages, if any) on, any
Debenture;
(b) reduce the principal amount of, or premium, if any, on
any Debenture;
(c) reduce the interest (including Liquidated Damages, if
any) on any Debenture;
(d) change the currency of payment of principal of,
premium, if any, or interest (including Liquidated Damages, if any) on
any Debenture;
(e) impair the right of any Holder to institute suit for
the enforcement of any payment in or with respect to any Debenture;
(f) modify the obligation of the Company to maintain an
office or agency in The City of New York pursuant to Section 9.2
hereof;
(g) except as permitted by Section 12.11 hereof, adversely
affect the Repurchase Right or the right to convert any Debenture as
provided in Article 12 hereof;
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(h) modify the subordination provisions of the Debentures
in a manner adverse to the Holders of Debentures,
(i) modify the redemption payment provisions of the
Indenture in a manner adverse to the Holders of the Debentures;
(j) modify any of the provisions of this Section, or reduce
the percentage of voting interests required to waive a default, except
to provide that certain other provisions of this Indenture cannot be
modified or waived without the consent of the Holder of each
Outstanding Debenture affected thereby; or
(k) reduce the requirements of Section 8.4 hereof for
quorum or voting, or reduce the percentage in aggregate principal
amount of the Outstanding Debentures the consent of whose Holders is
required for any such supplemental indenture or the consent of whose
Holders is required for any waiver provided for in this Indenture.
It shall not be necessary for any Act of Holders of Debentures
under this Section to approve the particular form of any proposal supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
Section 7.3 Compliance with Trust Indenture Act.
Every amendment to this Indenture or the Debentures shall be
set forth in a supplemental indenture that complies with the TIA as then in
effect.
Section 7.4 Revocation of Consents and Effect of Consents or
Votes.
Until an amendment, supplement or waiver becomes effective, a
written consent to it by a Holder is a continuing consent by the Holder and
every subsequent Holder of a Debenture or portion of a Debenture that evidences
the same debt as the consenting Holder's Debenture, even if notation of the
consent is not made on any Debenture; provided, however, that unless a record
date shall have been established, any such Holder or subsequent Holder may
revoke the consent as to its Debenture or portion of a Debenture if the Trustee
receives written notice of revocation before the date the amendment, supplement
or waiver becomes effective.
An amendment, supplement or waiver becomes effective on
receipt by the Trustee of written consents from or affirmative votes by, as the
case may be, the Holders of the requisite percentage of aggregate principal
amount of the Outstanding Debentures, and thereafter shall bind every Holder of
Debentures; provided, however, if the amendment, supplement or waiver makes a
change described in any of the clauses (a) through (j) of Section 7.2 hereof,
the amendment, supplement or waiver shall bind only each Holder of a Debenture
which has consented to it or voted for it, as the case may be, and every
subsequent Holder of a Debenture or portion of a Debenture that evidences the
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same indebtedness as the Debenture of the consenting or affirmatively voting, as
the case may be, Holder.
Section 7.5 Notation on or Exchange of Debentures.
If an amendment, supplement or waiver changes the terms of a
Debenture:
(a) the Trustee may require the Holder of a Debenture to
deliver such Debentures to the Trustee, the Trustee may place an
appropriate notation on the Debenture about the changed terms and
return it to the Holder and the Trustee may place an appropriate
notation on any Debenture thereafter authenticated; or
(b) if the Company or the Trustee so determines, the Company
in exchange for the Debenture shall issue and the Trustee shall
authenticate a new Debenture that reflects the changed terms.
Failure to make the appropriate notation or issue a new
Debenture shall not affect the validity and effect of such amendment, supplement
or waiver.
Section 7.6 Trustee to Sign Amendment, Etc.
The Trustee shall sign any amendment authorized pursuant to
this Article 7 if the amendment does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. If the amendment does adversely affect
the rights, duties, liabilities or immunities of the Trustee, the Trustee may
but need not sign it. In signing or refusing to sign such amendment, the Trustee
shall be entitled to receive and shall be fully protected in relying upon an
Officers' Certificate and an Opinion of Counsel as conclusive evidence that such
amendment is authorized or permitted by this Indenture.
ARTICLE 8
MEETING OF HOLDERS OF DEBENTURES
Section 8.1 Purposes for Which Meetings May Be Called.
A meeting of Holders of Debentures may be called at any time
and from time to time pursuant to this Article to make, give or take any
request, demand, authorization, direction, notice, consent, waiver or other
action provided by this Indenture to be made, given or taken by Holders of
Debentures.
Section 8.2 Call Notice and Place of Meetings.
(a) The Trustee may at any time call a meeting of Holders of
Debentures for any purpose specified in Section 8.1 hereof, to be held at such
time and at such place in The City of New York as the Trustee may determine.
Notice of every meeting of Holders of Debentures, setting forth the time and the
place of such meeting and in general terms the action proposed to be taken at
such meeting, shall be given, in
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the manner provided in Section 14.2 hereof, not less than 21 nor more than 180
days prior to the date fixed for the meeting.
(b) In case at any time the Company, pursuant to a Board
Resolution, or the Holders of at least 10% in principal amount of the
Outstanding Debentures shall have requested the Trustee to call a meeting of the
Holders of Debentures for any purpose specified in Section 8.1 hereof, by
written request setting forth in reasonable detail the action proposed to be
taken at the meeting, and the Trustee shall not have made the first publication
of the notice of such meeting within 21 days after receipt of such request or
shall not thereafter proceed to cause the meeting to be held as provided herein,
then the Company or the Holders of Debentures in the amount specified, as the
case may be, may determine the time and the place in The City of New York for
such meeting and may call such meeting for such purposes by giving notice
thereof as provided in paragraph (a) of this Section.
Section 8.3 Persons Entitled to Vote at Meetings.
To be entitled to vote at any meeting of Holders of
Debentures, a Person shall be (a) a Holder of one or more Outstanding
Debentures, or (b) a Person appointed by an instrument in writing as proxy for a
Holder or Holders of one or more Outstanding Debentures by such Holder or
Holders. The only Persons who shall be entitled to be present or to speak at any
meeting of Holders shall be the Persons entitled to vote at such meeting and
their counsel, any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.
Section 8.4 Quorum; Action.
The Persons entitled to vote a majority in principal amount of
the Outstanding Debentures shall constitute a quorum. In the absence of a quorum
within 30 minutes of the time appointed for any such meeting, the meeting shall,
if convened at the request of Holders of Debentures, be dissolved. In any other
case, the meeting may be adjourned for a period of not less than 10 days as
determined by the chairman of the meeting prior to the adjournment of such
meeting. In the absence of a quorum at any such adjourned meeting, such
adjourned meeting may be further adjourned for a period of not less than 10 days
as determined by the chairman of the meeting prior to the adjournment of such
adjourned meeting. Notice of the reconvening of any adjourned meeting shall be
given as provided in Section 8.2(a) hereof, except that such notice need be
given only once and not less than five days prior to the date on which the
meeting is scheduled to be reconvened. Notice of the reconvening of an adjourned
meeting shall state expressly the percentage of the principal amount of the
Outstanding Debentures which shall constitute a quorum.
Subject to the foregoing, at the reconvening of any meeting
adjourned for a lack of a quorum, the Persons entitled to vote 25% in principal
amount of the Outstanding Debentures at the time shall constitute a quorum for
the taking of any action set forth in the notice of the original meeting.
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At a meeting or an adjourned meeting duly reconvened and at
which a quorum is present as aforesaid, any resolution and all matters (except
as limited by the proviso to Section 7.2 hereof) shall be effectively passed and
decided if passed or decided by the Persons entitled to vote not less than a
majority in principal amount of Outstanding Debentures represented and voting at
such meeting.
Any resolution passed or decisions taken at any meeting of
Holders of Debentures duly held in accordance with this Section shall be binding
on all the Holders of Debentures, whether or not present or represented at the
meeting.
Section 8.5 Determination of Voting Rights; Conduct and
Adjournment of Meetings.
(a) Notwithstanding any other provisions of this Indenture,
the Trustee may make such reasonable regulations as it may deem advisable for
any meeting of Holders of Debentures in regard to proof of the holding of
Debentures and of the appointment of proxies and in regard to the appointment
and duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall deem appropriate. Except as
otherwise permitted or required by any such regulations, the holding of
Debentures shall be proved in the manner specified in Section 1.3 hereof and the
appointment of any proxy shall be proved in the manner specified in Section 1.3
hereof. Such regulations may provide that written instruments appointing
proxies, regular on their face, may be presumed valid and genuine without the
proof specified in Section 1.3 hereof or other proof.
(b) The Trustee shall, by an instrument in writing, appoint a
temporary chairman (which may be the Trustee) of the meeting, unless the meeting
shall have been called by the Company or by Holders of Debentures as provided in
Section 8.2(b) hereof, in which case the Company or the Holders of Debentures
calling the meeting, as the case may be, shall in like manner appoint a
temporary chairman. A permanent chairman and a permanent secretary of the
meeting shall be elected by vote of the Persons entitled to vote a majority in
principal amount of the Outstanding Debentures represented at the meeting.
(c) At any meeting each Holder of a Debenture or proxy shall
be entitled to one vote for each $1,000 principal amount of Debentures held or
represented by him; provided, however, that no vote shall be cast or counted at
any meeting in respect of any Debenture challenged as not Outstanding and ruled
by the chairman of the meeting to be not Outstanding. The chairman of the
meeting shall have no right to vote, except as a Holder of a Debenture or proxy.
(d) Any meeting of Holders of Debentures duly called pursuant
to Section 8.2 hereof at which a quorum is present may be adjourned from time to
time by Persons entitled to vote a majority in principal amount of the
Outstanding Debentures represented at the meeting, and the meeting may be held
as so adjourned without further notice.
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Section 8.6 Counting Votes and Recording Action of Meetings.
The vote upon any resolution submitted to any meeting of
Holders of Debentures shall be by written ballots on which shall be subscribed
the signatures of the Holders of Debentures or of their representatives by proxy
and the principal amounts and serial numbers of the Outstanding Debentures held
or represented by them. The permanent chairman of the meeting shall appoint two
inspectors of votes who shall count all votes cast at the meeting for or against
any resolution and who shall make and file with the secretary of the meeting
their verified written reports in duplicate of all votes cast at the meeting. A
record, at least in duplicate, of the proceedings of each meeting of Holders of
Debentures shall be prepared by the secretary of the meeting and there shall be
attached to said record the original reports of the inspectors of votes on any
vote by ballot taken thereat and affidavits by one or more Persons having
knowledge of the facts setting forth a copy of the notice of the meeting and
showing that said notice was given as provided in Section 8.2 hereof and, if
applicable, Section 8.4 hereof. Each copy shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one such
copy shall be delivered to the Company and another to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the ballots voted
at the meeting. Any record so signed and verified shall be conclusive evidence
of the matters therein stated.
ARTICLE 9
COVENANTS
Section 9.1 Payment of Principal, Premium and Interest.
The Company will duly and punctually pay the principal of and
premium, if any, and interest (including Liquidated Damages, if any) in respect
of the Debentures in accordance with the terms of the Debentures and this
Indenture. The Company will deposit or cause to be deposited with the Trustee as
directed by the Trustee, no later than the day prior to the Stated Maturity of
any Debenture or installment of interest (including Liquidated Damages, if any),
all payments so due.
Section 9.2 Maintenance of Offices or Agencies.
The Company hereby appoints the Trustee's Corporate Trust
Office as its office in The City of New York, where Debentures may be:
(i) presented or surrendered for payment;
(ii) surrendered for registration of transfer or exchange;
(iii) surrendered for conversion;
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and where notices and demands to or upon the Company in respect of the
Debentures and this Indenture maybe served.
The Company may at any time and from time to time vary or
terminate the appointment of any such office or appoint any additional offices
for any or all of such purposes; provided, however, that until all of the
Debentures have been delivered to the Trustee for cancellation, or moneys
sufficient to pay the principal of and premium, if any, and interest (including
Liquidated Damages, if any) on the Debentures have been made available for
payment and either paid or returned to the Company pursuant to the provisions of
Section 4.13 hereof, the Company will maintain in The City of New York, an
office or agency where Debentures may be presented or surrendered for payment,
where Debentures may be surrendered for registration of transfer or exchange,
where Debentures may be surrendered for conversion and where notices and demands
to or upon the Company in respect of the Debentures and this Indenture may be
served. The Company will give prompt written notice to the Trustee, and notice
to the Holders in accordance with Section 14.2 hereof, of the appointment or
termination of any such agents and of the location and any change in the
location of any such office or agency.
If at any time the Company shall fail to maintain any such
required office or agency in The City of New York, or shall fail to furnish the
Trustee with the address thereof, presentations and surrenders may be made at,
and notices and demands may be served on, the Corporate Trust Office of the
Trustee.
Section 9.3 Corporate Existence.
Subject to Article 6 hereof, the Company will do or cause to
be done all things necessary to preserve and keep in full force and effect its
corporate existence, rights (charter and statutory) and franchises of the
Company and each Subsidiary; 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 as a whole and that the loss
thereof is not disadvantageous in any material respect to the Holders.
Section 9.4 Maintenance of Properties.
The Company will cause all properties owned by the Company or
any Subsidiary or used or held for use 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 maintenance of any of such properties
if such discontinuance is, in the judgment of the Company,
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desirable in the conduct of its business or the business of any Subsidiary and
not disadvantageous in any material respect to the Holders.
Section 9.5 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, (a) all taxes, assessments
and governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary and (b)
all lawful claims for labor, materials and supplies, which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary; provided,
--------
however, that the Company shall not be required to pay or discharge or cause to
- -------
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
Section 9.6 Reports.
(a) The Company shall deliver to the Trustee within 15 days
after it files them with the SEC copies of the annual reports and of the
information, documents, and other reports (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe) which the
Company is required to file with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act; provided, however, the Company shall not be required to deliver to
the Trustee any materials for which the Company has sought and received
confidential treatment by the SEC. The Company also shall comply with the other
provisions of Section 314(a) of the TIA.
(b) If at any time the Company is not subject to Section 13
or 15(d) of the Exchange Act, upon the request of a Holder of a Debenture, the
Company will promptly furnish or cause to be furnished to such Holder or to a
prospective purchaser of such Debenture designated by such Holder, as the case
may be, the information, if any, required to be delivered by it pursuant to Rule
144A(d)(4) under the Securities Act to permit compliance with Rule 144A in
connection with the resale of such Debenture; provided, however, that the
Company shall not be required to furnish such information in connection with any
request made on or after the date which is two years from the later of the date
such Debenture was last acquired from the Company or an "affiliate" of the
Company.
Section 9.7 Compliance Certificate; Notice of Registration
Default.
(a) The Company shall deliver to the Trustee, within 90 days
after the end of each fiscal year of the Company, an Officer's Certificate
signed by two Officers of the Company stating that in the course of the
performance by the signers of their duties as Officers of the Company, they
would normally have knowledge of any failure by the Company to comply with all
conditions, or Default by the Company with respect to any covenants, under this
Indenture, and further stating whether or not they have knowledge of any such
failure or default and, if so, specifying each such failure or Default and the
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nature thereof. In the event an Officer of the Company comes to have actual
knowledge of a Default, regardless of the date, the Company shall deliver an
Officers' Certificate to the Trustee within five Business Days of obtaining such
actual knowledge specifying such Default and the nature and status thereof.
(b) When any Registration Default (as defined in the
Registration Rights Agreement) occurs, the Company shall promptly deliver to the
Trustee by registered or certified mail or by telegram, telex or facsimile
transmission an Officer's Certificate specifying the nature of such Registration
Default. In addition, the Company shall deliver to the Trustee on each Interest
Payment Date during the continuance of a Registration Default and on the
Interest Payment Date following the cure of a Registration Default, an Officer's
Certificate specifying the amount of Liquidated Damages which have accrued and
which are then owing under the Registration Rights Agreement.
Section 9.8 Resale of Certain Debentures.
During the period of two years after the last date of original
issuance of any Debentures, the Company shall not, and shall not permit any of
its "affiliates" (as defined under Rule 144 under the Securities Act) to, resell
any Debentures, or shares of Common Stock issuable upon conversion of the
Debentures, which constitute "restricted securities" under Rule 144, that are
acquired by any of them within the United States or to "U.S. persons" (as
defined in Regulation S) except pursuant to an effective registration statement
under the Securities Act or an applicable exemption therefrom. The Trustee shall
have no responsibility or liability in respect of the Company's performance of
its agreement in the preceding sentence.
Section 9.9 Insurance.
The Company will at all times keep all of its and its
Subsidiaries properties which are of an insurable nature insured with insurers,
believed by the Company to be responsible, against loss or damage to the extent
that property of similar character is usually so insured by corporations
similarly situated and owning like properties.
ARTICLE 10
REDEMPTION OF DEBENTURES
Section 10.1 Optional Redemption.
(a) (i) At any time prior to February 15, 2003, the Company
may, at its option, redeem the Debentures in whole at any time or in part from
time to time, upon notice as set forth in Section 10.4, at the Provisional
Redemption Price, if:
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(A) the Shelf Registration Statement covering resales of
Debentures and the Common Stock issuable upon
conversion of the Debentures is effective and
available for use and is expected to remain effective
and available for use for the 30 days following the
Redemption Date; and
(B) the Current Market Value of the Common Stock equals
or exceeds the following triggering percentages of
the Conversion Price then in effect for at least 20
Trading Days in any consecutive 30-day trading period
ending on the Trading Day prior to the date the
notice of the redemption pursuant to this Section
10.1(a) is mailed pursuant to Section 10.4. The
"Current Market Value" means the average of the high
and low sale prices of our common stock, as reported
on the Nasdaq National Market or any national
securities exchange on which the Common Stock is then
listed, on such Trading Day.
<TABLE>
<CAPTION>
Trigger
During the Twelve Months Commencing Percentage
----------------------------------- ----------
<S> <C>
February 15, 2000.................................... 170%
February 15, 2001.................................... 160%
February 15, 2002.................................... 150%
</TABLE>
(ii) On the Redemption Date, the Company shall pay the
Make-Whole Amount on all Debentures called for redemption pursuant to this
Section 10.1(a), including those Debentures which are converted into Common
Stock after the date the notice of the provisional redemption is mailed and
prior to the Redemption Date.
(b) On or after February 15, 2003, the Company may, at
its option, redeem the Debentures in whole at any time or in part from time to
time, on any date prior to maturity, upon notice as set forth in Section 10.4,
at the redemption price (expressed as percentages of the principal amount) set
forth below if redeemed during the 12-month period beginning on the dates
indicated (the "Optional Redemption Price"):
<TABLE>
<CAPTION>
Redemption Price
----------------
<S> <C>
February 15, 2003.................................. 102.88%
February 15, 2004.................................. 101.92%
February 15, 2005.................................. 100.96%
February 15, 2006.................................. 100.00%
</TABLE>
(c) The Company shall pay any interest on the Debentures called for redemption
pursuant to this Section 10.1 (including those Debentures which are
converted into Common Stock after the date the notice of the redemption is
mailed and prior to the Redemption Date) accrued but not paid to the
Redemption Date. Such interest shall be paid to the Holder entitled to the
Provisional Redemption Price or
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Optional Redemption Price, as applicable; provided that if the Redemption Date
is an Interest Payment Date, the Company shall pay the interest to the Holder of
the Debenture at the close of business on the corresponding Regular Record Date.
Section 10.2 Notice to Trustee.
If the Company elects to redeem Debentures pursuant to the
redemption provisions of Section 10.1(a) or (b) hereof (such election to be
evidenced by a resolution of the Company's board of directors), it shall notify
the Trustee at least 60 days prior to the Redemption Date (unless a shorter
notice shall be satisfactory to the Trustee) of such intended Redemption Date,
the principal amount of Debentures to be redeemed and the CUSIP numbers of the
Debentures to be redeemed.
Section 10.3 Selection of Debentures to Be Redeemed.
If fewer than all the Debentures are to be redeemed, the
Trustee shall select the particular Debentures to be redeemed from the
Outstanding Debentures by a method that complies with the requirements of any
exchange on which the Debentures are listed, or, if the Debentures are not
listed on an exchange, on a pro rata basis or by lot or in accordance with any
other method the Trustee considers fair and appropriate. Debentures and portions
thereof that the Trustee selects shall be in amounts equal to the minimum
authorized denominations for Debentures to be redeemed or any integral multiple
thereof.
If any Debenture selected for partial redemption is converted
in part before termination of the conversion right with respect to the portion
of the Debentures so selected, the converted portion of such Debenture shall be
deemed to be the portion selected for redemption (provided, however, that the
Holder of such Debenture so converted and deemed redeemed shall not be entitled
to any additional interest payment as a result of such deemed redemption than
such Holder would have otherwise been entitled to receive upon conversion of
such Debenture). Debentures which have been converted during a selection of
Debentures to be redeemed may be treated by the Trustee as Outstanding for the
purpose of such selection.
The Trustee shall promptly notify the Company and the
Registrar in writing of the Debentures selected for redemption and, in the case
of any Debentures selected for partial redemption, the principal amount thereof
to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of Debentures
shall relate, in the case of any Debentures redeemed or to be redeemed only in
part, to the portion of the principal amount of such Debentures which has been
or is to be redeemed.
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Section 10.4 Notice of Redemption.
Notice of redemption shall be given in the manner provided in
Section 14.2 hereof to the Holders of Debentures to be redeemed. Such notice
shall be given not less than 20 nor more than 60 days prior to the Redemption
Date.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price and interest accrued and unpaid
to the Redemption Date, if any;
(3) if fewer than all the Outstanding Debentures are to be
redeemed, the aggregate principal amount of Debentures to be redeemed
and the aggregate principal amount of Debentures which will be
outstanding after such partial redemption;
(4) that on the Redemption Date the Redemption Price and, as
provided in Section 10.1(c), interest accrued and unpaid to the
Redemption Date, and Liquidated Damages, if any, will become due and
payable upon each such Debenture to be redeemed, and that interest
thereon shall cease to accrue on and after such date;
(5) the Conversion Price, the date on which the right to
convert the principal of the Debentures to be redeemed will terminate
and the places where such Debentures may be surrendered for conversion;
(6) the place or places where such Debentures are to be
surrendered for payment of the Redemption Price and accrued and unpaid
interest, if any; and
(7) the CUSIP number of the Debentures.
The notice given shall specify the last date on which
exchanges or transfers of Debentures may be made pursuant to Section 2.7 hereof,
and shall specify the serial numbers of Debentures and the portions thereof
called for redemption.
Notice of redemption of Debentures to be redeemed at the
election of the Company shall be given by the Company or, at the Company's
request, by the Trustee in the name of and at the expense of the Company.
Section 10.5 Effect of Notice of Redemption.
Notice of redemption having been given as provided in Section
10.4 hereof, the Debentures so to be redeemed shall, on the Redemption Date,
become due and payable at the Redemption Price therein specified (and, as
provided in Section 10.1(c), accrued interest and Liquidated Damages, if any, to
the Redemption Date) and from and
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after such date (unless the Company shall default in the payment of the
Redemption Price and accrued and unpaid interest) such Debentures shall cease to
bear interest; provided that the Company may specify in such notice conditions
to the redemption of the Debentures that must be met on or prior to the
Redemption Date, including the receipt of proceeds from concurrent equity or
other financings, in which case the Redemption Date shall not occur, and the
Debentures to be redeemed shall not be due and payable at the Redemption Price,
until such conditions are satisfied. Upon surrender of any such Debenture for
redemption in accordance with such notice (including the satisfaction of all
applicable conditions), such Debenture shall be paid by the Company at the
Redemption Price (and, as provided in Section 10.1(c), Liquidated Damages and
accrued interest, if any, to the Redemption Date); provided, however, that the
installments of interest on Debentures whose Stated Maturity is prior to or on
the Redemption Date shall be payable to the Holders of such Debentures, or one
or more Predecessor Debentures, registered as such on the relevant Record Date
according to their terms and the provisions of Section 2.7 hereof.
If any Debenture called for redemption shall not be so paid
when due upon surrender thereof for redemption, the principal and premium, if
any, shall, until paid, bear interest from the Redemption Date at the Interest
Rate.
Section 10.6 Deposit of Redemption Price.
Prior to or 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) an amount of money sufficient to pay
(x) the Redemption Price of, and accrued and unpaid interest and Liquidated
Damages, if any, on, all the Debentures to be redeemed on that Redemption Date
other than any Debentures called for redemption on that date which have been
converted prior to the date of such deposit and (y) the Make-Whole Amount, if
any, payable on Debentures called for redemption on that date which have been
converted prior to the date of such deposit.
If any Debenture called for redemption is converted, any money
deposited with the Trustee or with a Paying Agent or so segregated and held in
trust for the redemption of such Debenture shall (subject to any right of the
Holder of such Debenture or any Predecessor Debenture to receive interest as
provided in the fourth paragraph of Section 2.1 hereof and to receive the
Make-Whole Amount as set forth in Section 10.1(a)(ii)) be paid to the Company on
Company Request or, if then held by the Company, shall be discharged from such
trust.
Section 10.7 Debentures Redeemed in Part.
Any Debenture 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 9.2 hereof (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 the Holder's
attorney duly authorized in writing), and the
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Company shall execute, and the Trustee shall authenticate and deliver to the
Holder of such Debenture without service charge, a new Debenture or Debentures
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 Debenture so surrendered.
ARTICLE 11
REPURCHASE AT THE OPTION OF A HOLDER
UPON A CHANGE OF CONTROL
Section 11.1 Repurchase Right.
In the event that a Change in Control shall occur, each Holder
shall have the right (the "Repurchase Right"), at the Holder's option, but
subject to the provisions of Section 11.2 hereof, to require the Company to
repurchase, and upon the exercise of such right the Company shall repurchase,
all of such Holder's Debentures not theretofore called for redemption, or any
portion of the principal amount thereof that is equal to $1,000 or an integral
multiple thereof (provided that no single Debenture may be repurchased in part
unless the portion of the principal amount of such Debenture to be Outstanding
after such repurchase is equal to $1,000 or an integral multiple thereof), on
the date (the "Repurchase Date") that is a Business Day no earlier than 30 days
nor later than 60 days after the date of the Company Notice at a purchase price
equal to 100% of the principal amount of the Debentures to be repurchased (the
"Repurchase Price"), plus interest accrued and unpaid to, but excluding, the
Repurchase Date; provided, however, that (i) installments of interest on
Debentures whose Stated Maturity is prior to or on the Repurchase Date shall be
payable to the Holders of such Debentures, or one or more Predecessor
Debentures, registered as such on the relevant Record Date according to their
terms and the provisions of Section 2.1 hereof and (ii) no Holder shall have a
Repurchase Right upon a Change of Control unless prior to any payment of the
Repurchase Price on the Repurchase Date the Company has made any applicable
change of control offers required by the Company's Senior Debt and has purchased
all Senior Debt validly tendered for payment in connection with such change of
control offers.
Subject to the fulfillment by the Company of the conditions
set forth in Section 11.2 hereof, the Company may elect to pay the Repurchase
Price by delivering the number of shares of Common Stock equal to (i) the
Repurchase Price divided by (ii) 95% of the average of the Closing Prices per
share of Common Stock for the five consecutive Trading Days immediately
preceding and including the third Trading Day prior to the Repurchase Date.
Section 11.2 Conditions to the Company's Election to Pay
the Repurchase Price in Common Stock.
(a) The shares of Common Stock to be issued upon repurchase
of Debentures hereunder:
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(i) shall not require registration under any federal
securities law before such shares may be freely transferable
without being subject to any transfer restrictions under the
Securities Act upon repurchase or, if such registration is
required, such registration shall be completed and shall
become effective prior to the Repurchase Date; and
(ii) shall not require registration with, or approval
of, any governmental authority under any state law or any
other federal law before shares may be validly issued or
delivered upon repurchase or if such registration is required
or such approval must be obtained, such registration shall be
completed or such approval shall be obtained prior to the
Repurchase Date.
(b) The shares of Common Stock to be listed upon repurchase of
Debentures hereunder are, or shall have been, approved for listing on the Nasdaq
National Market or the New York Stock Exchange or listed on another national
securities exchange, in any case, prior to the Repurchase Date.
(c) All shares of Common Stock which may be issued upon
repurchase of Debentures will be issued out of the Company's authorized but
unissued Common Stock and will, upon issue, be duly and validly issued and fully
paid and nonassessable and free of any preemptive or similar rights.
(d) If any of the conditions set forth in clauses (a) through
(c) of this Section 11.2 are not satisfied in accordance with the terms thereof,
the Repurchase Price shall be paid by the Company only in cash.
Section 11.3 Notices; Method of Exercising Repurchase Right,
Etc.
(a) Unless the Company shall have theretofore called for
redemption all of the Outstanding Debentures, prior to or on the 30th day after
the occurrence of a Change in Control, the Company, or, at the written request
and expense of the Company prior to or on the 30th day after such occurrence,
the Trustee, shall give to all Holders of Debentures notice, in the manner
provided in Section 14.2 hereof, of the occurrence of the Change of Control and
of the Repurchase Right set forth herein arising as a result thereof (the
"Company Notice"). The Company shall also deliver a copy of such notice of a
Repurchase Right to the Trustee. Each notice of a Repurchase Right shall state:
(1) the Repurchase Date;
(2) the date by which the Repurchase Right must be exercised;
(3) the Repurchase Price and accrued and unpaid interest, if
any, and whether the Repurchase Price shall be paid by the Company in
cash or by delivery of shares of Common Stock;
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(4) a description of the procedure which a Holder must follow
to exercise a Repurchase Right, and the place or places where such
Debentures are to be surrendered for payment of the Repurchase Price,
accrued and unpaid interest and Liquidated Damages, if any;
(5) that on the Repurchase Date the Repurchase Price, accrued
and unpaid interest and Liquidated Damages, if any, will become due and
payable upon each such Debenture designated by the Holder to be
repurchased, and that interest thereon shall cease to accrue on and
after said date;
(6) the Conversion Rate then in effect, the date on which the
right to convert the principal amount of the Debentures to be
repurchased will terminate and the place where such Debentures may be
surrendered for conversion,
(7) if applicable, that no Holder shall have a Repurchase
Right upon a Change of Control unless prior to any payment of the
Repurchase Price on the Repurchase Date the Company has made any
applicable change of control offers required by the Company's Senior
Debt and has purchased all Senior Debt validly tendered for payment in
connection with such change of control offers, and
(8) the place or places where such Debentures, together with
the Option to Elect Repayment Upon a Change of Control certificate
included in Exhibit A annexed hereto are to be delivered for payment of
the Repurchase Price and accrued and unpaid interest, if any.
No failure of the Company to give the foregoing notices or
defect therein shall limit any Holder's right to exercise a Repurchase Right or
affect the validity of the proceedings for the repurchase of Debentures.
If any of the foregoing provisions or other provisions of this
Article 11 are inconsistent with applicable law, such law shall govern.
(b) To exercise a Repurchase Right, a Holder shall deliver to
the Trustee prior to the close of business on the third Business Day immediately
preceding the Repurchase Date:
(1) written notice of the Holder's exercise of such right,
which notice shall set forth the name of the Holder, the principal
amount of the Debentures to be repurchased (and, if any Debenture is to
be repurchased in part, the serial number thereof, the portion of the
principal amount thereof to be repurchased) and a statement that an
election to exercise the Repurchase Right is being made thereby, and,
in the event that the Repurchase Price shall be paid in shares of
Common Stock, the name or names (with addresses) in which the
certificate or certificates for shares of Common Stock shall be issued,
and
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(2) the Debentures with respect to which the Repurchase Right is
being exercised.
Such written notice shall be irrevocable if not withdrawn prior to the close of
business on the third Business Day prior to the Repurchase Date by delivery to
the Trustee of a notice of withdrawal, except that the right of the Holder to
convert the Debentures with respect to which the Repurchase Right is being
exercised shall continue until the close of business on the Business Day
immediately preceding the Repurchase Date. The Company shall not pay accrued and
unpaid interest on any such Debentures so converted.
(c) In the event a Repurchase Right shall be exercised in accordance
with the terms hereof, the Company shall pay or cause to be paid to the Trustee
the Repurchase Price in cash or shares of Common Stock, as provided above, for
payment to the Holder on the Repurchase Date or, if shares of Common Stock are
to be paid, as promptly after the Repurchase Date as practicable, together with
Liquidated Damages, if any, and accrued and unpaid interest to the Repurchase
Date payable in cash with respect to the Debentures as to which the Repurchase
Right has been exercised; provided, however, that installments of interest that
mature prior to or on the Repurchase Date shall be payable in cash to the
Holders of such Debentures, or one or more Predecessor Debentures, registered as
such at the close of business on the relevant Regular Record Date.
(d) If any Debenture (or portion thereof) surrendered for repurchase
shall not be so paid on the Repurchase Date, the principal amount of such
Debenture (or portion thereof, as the case may be) shall, until paid, bear
interest to the extent permitted by applicable law from the Repurchase Date at
the Interest Rate, and each Debenture shall remain convertible into Common Stock
until the principal of such Debenture (or portion thereof, as the case may be)
shall have been paid or duly provided for.
(e) Any Debenture which is to be repurchased only in part shall be
surrendered to the Trustee (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 make available for delivery to the Holder of such Debenture
without service charge, a new Debenture or Debentures, containing identical
terms and conditions, each in an authorized denomination in aggregate principal
amount equal to and in exchange for the unrepurchased portion of the principal
of the Debenture so surrendered.
(f) Any issuance of shares of Common Stock in respect of the
Repurchase Price shall be deemed to have been effected immediately prior to the
close of business on the Repurchase Date and the Person or Persons in whose name
or names any certificate or certificates for shares of Common Stock shall be
issuable upon such repurchase shall be deemed to have become on the Repurchase
Date the holder or holders of record of the shares represented thereby;
provided, however, that any surrender for repurchase on a date when the stock
- -------- -------
transfer books of the Company shall be closed shall
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constitute the Person or Persons in whose name or names the certificate or
certificates for such shares are to be issued as the record holder or holders
thereof for all purposes at the opening of business on the next succeeding day
on which such stock transfer books are open. No payment or adjustment shall be
made for dividends or distributions on any Common Stock issued upon repurchase
of any Debenture declared prior to the Repurchase Date.
(g) No fractions of shares of Common Stock shall be issued upon
repurchase of any Debenture or Debentures. If more than one Debenture shall be
repurchased from the same Holder and the Repurchase Price shall be payable in
shares of Common Stock, the number of full shares which shall be issued upon
such repurchase shall be computed on the basis of the aggregate principal amount
of the Debentures (or specified portions thereof) to be so repurchased. Instead
of any fractional share of Common Stock which would otherwise be issued on the
repurchase of any Debenture or Debentures (or specified portions thereof), the
Company shall pay a cash adjustment in respect of such fraction (calculated to
the nearest one-100th of a share) in an amount equal to the same fraction of the
Quoted Price of the Common Stock as of the Trading Day preceding the Repurchase
Date.
(h) Any issuance and delivery of certificates for shares of Common
Stock on repurchase of Debentures shall be made without charge to the Holder of
Debentures being repurchased for such certificates or for any tax or duty in
respect of the issuance or delivery of such certificates or the Debentures
represented thereby; provided, however, that the Company shall not be required
to pay any tax or duty which may be payable in respect of (i) income of the
Holder or (ii) any transfer involved in the issuance or delivery of certificates
for shares of Common Stock in a name other than that of the Holder of the
Debentures being repurchased, and no such issuance or delivery shall be made
unless the Persons requesting such issuance or delivery has paid to the Company
the amount of any such tax or duty or has established, to the satisfaction of
the Company, that such tax or duty has been paid.
(i) All Debentures delivered for repurchase shall be delivered to the
Trustee to be canceled at the direction of the Trustee, which shall dispose of
the same as provided in Section 2.15 hereof.
ARTICLE 12
CONVERSION OF DEBENTURES
Section 12.1 Conversion Right and Conversion Price.
Subject to and upon compliance with the provisions of this Article, at
the option of the Holder thereof, any Outstanding Debenture or any portion of
the principal amount thereof which is $1,000 or an integral multiple of $1,000
may be converted into duly authorized, fully paid and nonassessable shares of
Common Stock, at the
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Conversion Price, determined as hereinafter provided, in effect at the time of
conversion. Such conversion right shall expire at the close of business on
February 15, 2007.
In case a Debenture or portion thereof is called for redemption, such
conversion right in respect of the Debenture or the portion so called, shall
expire at the close of business on the second Business Day preceding the
Redemption Date, unless the Company defaults in making the payment due upon
redemption. In the case of a Change of Control for which the Holder exercises
its Repurchase Right with respect to a Debenture or portion thereof, such
conversion right in respect of the Debenture or portion thereof shall expire at
the close of business on the Business Day immediately preceding the Repurchase
Date.
The price at which shares of Common Stock shall be delivered upon
conversion (the "Conversion Price") shall be initially equal to $49.7913 per
share of Common Stock. The Conversion Price shall be adjusted in certain
instances as provided in Section 12.4 hereof.
Section 12.2 Exercise of Conversion Right.
To exercise the conversion right, the Holder of any Debenture to be
converted shall surrender such Debenture duly endorsed or assigned to the
Company or in blank, at the office of any Conversion Agent, accompanied by a
duly signed conversion notice substantially in the form attached to the
Debenture to the Company stating that the Holder elects to convert such
Debenture or, if less than the entire principal amount thereof is to be
converted, the portion thereof to be converted.
To the extent provided in Section 2.1, Debentures surrendered for
conversion during the period from the close of business on any Regular Record
Date to the opening of business on the next succeeding Interest Payment Date
(except in the case of any Debenture whose Maturity is prior to such Interest
Payment Date) shall be accompanied by payment in New York Clearing House funds
or other funds acceptable to the Company of an amount equal to the interest and
Liquidated Damages, if any, to be received on such Interest Payment Date on the
principal amount of Debentures being surrendered for conversion. To the extent
provided in Section 2.1, Debentures which have been called for redemption by the
Company in a notice of redemption pursuant to Section 10.4, and are converted
prior to redemption, shall not require such concurrent payment to the Company
upon surrender for conversion, and if converted during time period set forth in
the preceding sentence, the Holders of such converted Debentures shall be
entitled to receive (and retain) any accrued interest on the principal of such
surrendered Debentures,and Liquidated Damages, if any.
Debentures shall be deemed to have been converted immediately prior to
the close of business on the day of surrender of such Debentures for conversion
in accordance with the foregoing provisions, and at such time the rights of the
Holders of such Debentures as Holders shall cease, and the Person or Persons
entitled to receive the Common Stock issuable upon conversion shall be treated
for all purposes as the record
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holder or holders of such Common Stock at such time. As promptly as practicable
on or after the conversion date, the Company shall cause to be issued and
delivered to such Conversion Agent a certificate or certificates for the number
of full shares of Common Stock issuable upon conversion, together with payment
in lieu of any fraction of a share as provided in Section 12.3 hereof.
In the case of any Debenture which is converted in part only, upon
such conversion the Company shall execute and the Trustee shall authenticate and
deliver to the Holder thereof, at the expense of the Company, a new Debenture or
Debentures of authorized denominations in aggregate principal amount equal to
the unconverted portion of the principal amount of such Debentures.
If shares of Common Stock to be issued upon conversion of a Restricted
Security, or Debentures to be issued upon conversion of a Restricted Security in
part only, are to be registered in a name other than that of the Holder of such
Restricted Security, such Holder must deliver to the Conversion Agent a
certificate in substantially the form set forth in the form of Debenture set
forth in Exhibit A annexed hereto, dated the date of surrender of such
Restricted Security and signed by such Holder, as to compliance with the
restrictions on transfer applicable to such Restricted Security. Neither the
Trustee nor any Conversion Agent, Registrar or Transfer Agent shall be required
to register in a name other than that of the Holder shares of Common Stock or
Debentures issued upon conversion of any such Restricted Security not so
accompanied by a properly completed certificate.
The Company hereby initially appoints the Trustee as the Conversion
Agent.
Section 12.3 Fractions of Shares.
No fractional shares of Common Stock shall be issued upon conversion
of any Debenture or Debentures. If more than one Debenture shall be surrendered
for conversion at one time by the same Holder, the number of full shares which
shall be issued upon conversion thereof shall be computed on the basis of the
aggregate principal amount of the Debentures (or specified portions thereof) so
surrendered. Instead of any fractional share of Common Stock which would
otherwise be issued upon conversion of any Debenture or Debentures (or specified
portions thereof), the Company shall pay a cash adjustment in respect of such
fraction (calculated to the nearest one-100th of a share) in an amount equal to
the same fraction of the Closing Price of the Common Stock as of the Trading Day
preceding the date of conversion.
Section 12.4 Adjustment of Conversion Price.
The Conversion Price shall be subject to adjustments, calculated by
the Company, from time to time as follows:
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(a) In case the Company shall hereafter pay a dividend or make
a distribution to all holders of the outstanding Common Stock in shares
of Common Stock, the Conversion Price in effect at the opening of
business on the date following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution
shall be reduced by multiplying such Conversion Price by a fraction:
(i) the numerator of which shall be the number of shares
of Common Stock outstanding at the close of business on the
Record Date (as defined in Section 12.4(g)) fixed for such
determination, and
(ii) the denominator of which shall be the sum of such
number of shares and the total number of shares constituting
such dividend or other distribution.
Such reduction shall become effective immediately after the opening of
business on the day following the Record Date. If any dividend or
distribution of the type described in this Section 12.4(a) is declared
but not so paid or made, the Conversion Price shall again be adjusted
to the Conversion Price which would then be in effect if such dividend
or distribution had not been declared.
(b) In case the outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
Conversion Price in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall
be proportionately reduced, and conversely, in case outstanding shares
of Common Stock shall be combined into a smaller number of shares of
Common Stock, the Conversion Price in effect at the opening of business
on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(c) In case the Company shall issue rights or warrants
(other than any rights or warrants referred to in Section 12.4(d)) to
all holders of its outstanding shares of Common Stock entitling them to
subscribe for or purchase shares of Common Stock (or securities
convertible into Common Stock) at a price per share (or having a
conversion price per share) less than the Current Market Price (as
defined in Section 12.4(g)) on the Record Date fixed for the
determination of stockholders entitled to receive such rights or
warrants, the Conversion Price shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Price in
effect at the opening of business on the date after such Record Date by
a fraction:
(i) the numerator of which shall be the number of
shares of Common Stock outstanding at the close of business on
the Record Date
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plus the number of shares which the aggregate offering price
of the total number of shares so offered for subscription or
purchase (or the aggregate conversion price of the convertible
securities so offered) would purchase at such Current Market
Price, and
(ii) the denominator of which shall be the number of
shares of Common Stock outstanding on the close of business on
the Record Date plus the total number of additional shares of
Common Stock so offered for subscription or purchase (or into
which the convertible securities so offered are convertible).
Such adjustment shall become effective immediately after the opening of
business on the day following the Record Date fixed for determination
of stockholders entitled to receive such rights or warrants. To the
extent that shares of Common Stock (or securities convertible into
Common Stock) are not delivered pursuant to such rights or warrants,
upon the expiration or termination of such rights or warrants the
Conversion Price shall be readjusted to the Conversion Price which
would then be in effect had the adjustments made upon the issuance of
such rights or warrants been made on the basis of the delivery of only
the number of shares of Common Stock (or securities convertible into
Common Stock) actually delivered. In the event that such rights or
warrants are not so issued, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if
such date fixed for the determination of stockholders entitled to
receive such rights or warrants had not been fixed. In determining
whether any rights or warrants entitle the holders to subscribe for or
purchase shares of Common Stock at less than such Current Market Price,
and in determining the aggregate offering price of such shares of
Common Stock, there shall be taken into account any consideration
received for such rights or warrants, the value of such consideration
if other than cash, to be determined by the Board of Directors.
(d) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock shares of any class of
capital stock of the Company (other than any dividends or distributions
to which Section 12.4(a) applies) or evidences of its indebtedness,
cash or other assets, including securities, but excluding (1) any
rights or warrants referred to in Section 12.4(c), (2) any stock,
securities or other property or assets (including cash) distributed as
dividends or distributions in connection with a reclassification,
change, merger, consolidation, statutory share exchange, combination,
sale or conveyance to which Section 12.11 hereof applies and (3) any
dividends or distributions paid exclusively in cash (the securities
described in foregoing are hereinafter in this Section 12.4(d) called
the "securities"), then, in each such case, subject to the second
succeeding paragraph of this Section 12.4(d), the Conversion Price
shall be reduced so that the same shall be equal to the price
determined by multiplying the Conversion Price in effect immediately
prior to the close of business on the Record Date (as defined in
Section 12.4(g)) with respect to such distribution by a fraction:
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(i) the numerator of which shall be the Current Market
Price (determined as provided in Section 12.4(g)) on such date
less the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and set forth
in a Board Resolution) on such date of the portion of the
securities so distributed applicable to one share of Common Stock
(determined on the basis of the number of shares of the Common
Stock outstanding on the Record Date), and
(ii) the denominator of which shall be such Current Market
Price.
Such reduction shall become effective immediately prior to the opening
of business on the day following the Record Date. However, in the event
that the then fair market value (as so determined) of the portion of
the securities so distributed applicable to one share of Common Stock
is equal to or greater than the Current Market Price on the Record
Date, in lieu of the foregoing adjustment, adequate provision shall be
made so that each Holder shall have the right to receive upon
conversion of a Debenture (or any portion thereof) the amount of
securities such Holder would have received had such Holder converted
such Debenture (or portion thereof) immediately prior to such Record
Date. In the event that such dividend or distribution is not so paid or
made, the Conversion Price shall again be adjusted to be the Conversion
Price which would then be in effect if such dividend or distribution
had not been declared.
If the Board of Directors determines the fair market value of any
distribution for purposes of this Section 12.4(d) by reference to the
actual or when issued trading market for any securities comprising all
or part of such distribution, it must in doing so consider the prices
in such market over the same period (the "Reference Period") used in
computing the Current Market Price pursuant to Section 12.4(g) to the
extent possible, unless the Board of Directors in a Board Resolution
determines in good faith that determining the fair market value during
the Reference Period would not be in the best interest of the Holder.
Rights or warrants distributed by the Company to all holders of
Common Stock entitling the holders thereof to subscribe for or purchase
shares of the Company's capital stock (either initially or under
certain circumstances), which rights or warrants, until the occurrence
of a specified event or events (a "Trigger Event"):
(i) are deemed to be transferred with such shares of Common
Stock;
(ii) are not exercisable; and
(iii) are also issued in respect of future issuances of
Common Stock,
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shall be deemed not to have been distributed for purposes of this
Section 12.4(d) (and no adjustment to the Conversion Price under this
Section 12.4(d) will be required) until the occurrence of the earliest
Trigger Event. If such right or warrant is subject to subsequent
events, upon the occurrence of which such right or warrant shall become
exercisable to purchase different securities, evidences of indebtedness
or other assets or entitle the holder to purchase a different number or
amount of the foregoing or to purchase any of the foregoing at a
different purchase price, then the occurrence of each such event shall
be deemed to be the date of issuance and record date with respect to a
new right or warrant (and a termination or expiration of the existing
right or warrant without exercise by the holder thereof). In addition,
in the event of any distribution (or deemed distribution) of rights or
warrants, or any Trigger Event or other event (of the type described in
the preceding sentence) with respect thereto, that resulted in an
adjustment to the Conversion Price under this Section 12.4(d):
(1) in the case of any such rights or warrants which
shall all have been redeemed or repurchased without exercise
by any holders thereof, the Conversion Price shall be
readjusted upon such final redemption or repurchase to give
effect to such distribution or Trigger Event, as the case may
be, as though it were a cash distribution, equal to the per
share redemption or repurchase price received by a holder of
Common Stock with respect to such rights or warrant (assuming
such holder had retained such rights or warrants), made to all
holders of Common Stock as of the date of such redemption or
repurchase, and
(2) in the case of such rights or warrants all of
which shall have expired or been terminated without exercise,
the Conversion Price shall be readjusted as if such rights and
warrants had never been issued.
For purposes of this Section 12.4(d) and Sections 12.4(a),
12.4(b) and 12.4(c), any dividend or distribution to which this Section
12.4(d) is applicable that also includes shares of Common Stock, a
subdivision or combination of Common Stock to which Section 12.4(c)
applies, or rights or warrants to subscribe for or purchase shares of
Common Stock to which Section 12.4(c) applies (or any combination
thereof), shall be deemed instead to be:
(1) a dividend or distribution of the evidences of
indebtedness, assets, shares of capital stock, rights or
warrants other than such shares of Common Stock, such
subdivision or combination or such rights or warrants to which
Sections 12.4(a), 12.4(b) and 12.4(c) apply, respectively (and
any Conversion Price reduction required by this Section
12.4(d) with respect to such dividend or distribution shall
then be made), immediately followed by
(2) a dividend or distribution of such shares of
Common Stock, such subdivision or combination or such rights
or warrants (and any
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further Conversion Price reduction required by Sections
12.4(a), 12.4(b) and 12.4(c) with respect to such dividend or
distribution shall then be made), except:
(A) the Record Date of such dividend or
distribution shall be substituted as (x) "the date
fixed for the determination of stockholders entitled
to receive such dividend or other distribution",
"Record Date fixed for such determinations" and
"Record Date" within the meaning of Section 12.4(a),
(y) "the day upon which such subdivision becomes
effective" and "the day upon which such combination
becomes effective" within the meaning of Section
12.4(b), and (z) as "the date fixed for the
determination of stockholders entitled to receive
such rights or warrants", "the Record Date fixed for
the determination of the stockholders entitled to
receive such rights or warrants" and such "Record
Date" within the meaning of Section 12.4(c), and
(B) any shares of Common Stock included in
such dividend or distribution shall not be deemed
"outstanding at the close of business on the date
fixed for such determination" within the meaning of
Section 12.4(a) and any reduction or increase in the
number of shares of Common Stock resulting from such
subdivision or combination shall be disregarded in
connection with such dividend or distribution.
(e) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock cash (excluding any cash
that is distributed upon a reclassification, change, merger,
consolidation, statutory share exchange, combination, sale or
conveyance to which Section 12.11 hereof applies or as part of a
distribution referred to in Section 12.4(d) hereof), in an aggregate
amount that, combined together with:
(1) the aggregate amount of any other such
distributions to all holders of Common Stock made exclusively
in cash within the 12 months preceding the date of payment of
such distribution, and in respect of which no adjustment
pursuant to this Section 12.4(e) has been made, and
(2) the aggregate of any cash plus the fair market
value (as determined by the Board of Directors, whose
determination shall be conclusive and set forth in a Board
Resolution) of consideration payable in respect of any tender
offer by the Company or any of its subsidiaries for all or any
portion of the Common Stock concluded within the 12 months
preceding the date of such distribution, and in respect of
which no adjustment pursuant to Section 12.4(f) hereof has
been made,
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exceeds 10% of the product of the Current Market Price (determined as
provided in Section 12.4(g)) on the Record Date with respect to such
distribution times the number of shares of Common Stock outstanding on
such date, then and in each such case, immediately after the close of
business on such date, the Conversion Price shall be reduced so that
the same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the close of business on such
Record Date by a fraction:
(i) the numerator of which shall be equal to the
Current Market Price on the Record Date less an amount equal
to the quotient of (x) the excess of such combined amount over
such 10% and (y) the number of shares of Common Stock
outstanding on the Record Date, and
(ii) the denominator of which shall be equal to the
Current Market Price on such date.
However, in the event that the then fair market value (as so
determined) of the portion of the securities so distributed applicable
to one share of Common Stock is equal to or greater than the Current
Market Price on the Record Date, in lieu of the foregoing adjustment,
adequate provision shall be made so that each Holder shall have the
right to receive upon conversion of a Debenture (or any portion
thereof) the amount of cash such Holder would have received had such
Holder converted such Debenture (or portion thereof) immediately prior
to such Record Date. In the event that such dividend or distribution is
not so paid or made, the Conversion Price shall again be adjusted to be
the Conversion Price which would then be in effect if such dividend or
distribution had not been declared.
(f) In case a tender offer made by the Company or any of
its subsidiaries for all or any portion of the Common Stock shall
expire and such tender offer (as amended upon the expiration thereof)
shall require the payment to stockholders (based on the acceptance (up
to any maximum specified in the terms of the tender offer) of Purchased
Shares (as defined below)) of an aggregate consideration having a fair
market value (as determined by the Board of Directors, whose
determination shall be conclusive and set forth in a Board Resolution)
that combined together with:
(1) the aggregate of the cash plus the fair market
value (as determined by the Board of Directors, whose
determination shall be conclusive and set forth in a Board
Resolution), as of the expiration of such tender offer, of
consideration payable in respect of any other tender offers,
by the Company or any of its subsidiaries for all or any
portion of the Common Stock expiring within the 12 months
preceding the expiration of such tender offer and in respect
of which no adjustment pursuant to this Section 12.4(f) has
been made, and
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(2) the aggregate amount of any distributions to all
holders of the Company's Common Stock made exclusively in cash
within 12 months preceding the expiration of such tender offer
and in respect of which no adjustment pursuant to Section
12.4(e) has been made,
exceeds 10% of the product of the Current Market Price (determined as
provided in Section 12.4(g)) as of the last time (the "Expiration
Time") tenders could have been made pursuant to such tender offer (as
it may be amended) times the number of shares of Common Stock
outstanding (including any tendered shares) on the Expiration Time,
then, and in each such case, immediately prior to the opening of
business on the day after the date of the Expiration Time, the
Conversion Price shall be adjusted so that the same shall equal the
price determined by multiplying the Conversion Price in effect
immediately prior to close of business on the date of the Expiration
Time by a fraction:
(i) the numerator of which shall be the number of
shares of Common Stock outstanding (including any tendered
shares) at the Expiration Time multiplied by the Current
Market Price of the Common Stock on the Trading Day next
succeeding the Expiration Time, and
(ii) the denominator shall be the sum of (x) the fair
market value (determined as aforesaid) of the aggregate
consideration payable to stockholders based on the acceptance
(up to any maximum specified in the terms of the tender offer)
of all shares validly tendered and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such
maximum, being referred to as the "Purchased Shares") and (y)
the product of the number of shares of Common Stock
outstanding (less any Purchased Shares) on the Expiration Time
and the Current Market Price of the Common Stock on the
Trading Day next succeeding the Expiration Time.
Such reduction (if any) shall become effective immediately prior to the
opening of business on the day following the Expiration Time. In the
event that the Company is obligated to purchase shares pursuant to any
such tender offer, but the Company is permanently prevented by
applicable law from effecting any such purchases or all such purchases
are rescinded, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such tender offer had
not been made. If the application of this Section 12.4(f) to any tender
offer would result in an increase in the Conversion Price, no
adjustment shall be made for such tender offer under this Section
12.4(f).
(g) For purposes of this Section 12.4, the following terms
shall have the meanings indicated:
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(1) "Current Market Price" shall mean the average of
the daily Closing Prices per share of Common Stock for the ten
consecutive Trading Days immediately prior to the date in
question; provided, however, that if:
(i) the "ex" date (as hereinafter defined)
for any event (other than the issuance or
distribution requiring such computation) that
requires an adjustment to the Conversion Price
pursuant to Section 12.4(a), (b), (c), (d), (e) or
(f) occurs during such ten consecutive Trading Days,
the Closing Price for each Trading Day prior to the
"ex" date for such other event shall be adjusted by
multiplying such Closing Price by the same fraction
by which the Conversion Price is so required to be
adjusted as a result of such other event;
(ii) the "ex" date for any event (other than
the issuance or distribution requiring such
computation) that requires an adjustment to the
Conversion Price pursuant to Section 12.4(a), (b),
(c), (d), (e) or (f) occurs on or after the "ex" date
for the issuance or distribution requiring such
computation and prior to the day in question, the
Closing Price for each Trading Day on and after the
"ex" date for such other event shall be adjusted by
multiplying such Closing Price by the reciprocal of
the fraction by which the Conversion Price is so
required to be adjusted as a result of such other
event; and
(iii) the "ex" date for the issuance or
distribution requiring such computation is prior to
the day in question, after taking into account any
adjustment required pursuant to clause (i) or (ii) of
this proviso, the Closing Price for each Trading Day
on or after such "ex" date shall be adjusted by
adding thereto the amount of any cash and the fair
market value (as determined by the Board of Directors
in a manner consistent with any determination of such
value for purposes of Section 12.4(d) or (f), whose
determination shall be conclusive and set forth in a
Board Resolution) of the evidences of indebtedness,
shares of capital stock or assets being distributed
applicable to one share of Common Stock as of the
close of business on the day before such "ex" date.
For purposes of any computation under Section 12.4(f), the Current
Market Price of the Common Stock on any date shall be deemed to be the
average of the daily Closing Prices per share of Common Stock for such
day and the next two succeeding Trading Days; provided, however, that
-------- -------
if the "ex" date for any event (other than the tender offer requiring
such computation) that requires an adjustment to the Conversion Price
pursuant to Section 12.4(a), (b), (c), (d), (e) or (f) occurs on or
after the Expiration Time for the tender or exchange offer requiring
such computation and prior to the day in question, the Closing Price
for
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each Trading Day on and after the "ex" date for such other event
shall be adjusted by multiplying such Closing Price by the reciprocal
of the fraction by which the Conversion Price is so required to be
adjusted as a result of such other event. For purposes of this
paragraph, the term "ex" date, when used:
(A) with respect to any issuance or
distribution, means the first date on which the
Common Stock trades regular way on the relevant
exchange or in the relevant market from which the
Closing Price was obtained without the right to
receive such issuance or distribution;
(B) with respect to any subdivision or
combination of shares of Common Stock, means the
first date on which the Common Stock trades regular
way on such exchange or in such market after the time
at which such subdivision or combination becomes
effective, and
(C) with respect to any tender or exchange
offer, means the first date on which the Common Stock
trades regular way on such exchange or in such market
after the Expiration Time of such offer.
Notwithstanding the foregoing, whenever successive adjustments to the
Conversion Price are called for pursuant to this Section 12.4, such
adjustments shall be made to the Current Market Price as may be
necessary or appropriate to effectuate the intent of this Section 12.4
and to avoid unjust or inequitable results as determined in good faith
by the Board of Directors.
(2) "fair market value" shall mean the amount which a
willing buyer would pay a willing seller in an arm's length
transaction.
(3) "Record Date" shall mean, with respect to any
dividend, distribution or other transaction or event in which
the holders of Common Stock have the right to receive any
cash, securities or other property or in which the Common
Stock (or other applicable security) is exchanged for or
converted into any combination of cash, securities or other
property, the date fixed for determination of stockholders
entitled to receive such cash, securities or other property
(whether such date is fixed by the Board of Directors or by
statute, contract or otherwise).
(h) The Company may make such reductions in the Conversion
Price, in addition to those required by Sections 12.4(a), (b), (c),
(d), (e) or (f), as the Board of Directors considers to be advisable to
avoid or diminish any income tax to holders of Common Stock or rights
to purchase Common Stock resulting from any dividend or distribution of
stock (or rights to acquire stock) or from any event treated as such
for income tax purposes.
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To the extent permitted by applicable law, the Company from
time to time may reduce the Conversion Price by any amount for any
period of time if the period is at least 20 days and the reduction is
irrevocable during the period and the Board of Directors determines in
good faith that such reduction would be in the best interests of the
Company, which determination shall be conclusive and set forth in a
Board Resolution. Whenever the Conversion Price is reduced pursuant to
the preceding sentence, the Company shall mail to the Trustee and each
Holder at the address of such Holder as it appears in the Register a
notice of the reduction at least 15 days prior to the date the reduced
Conversion Price takes effect, and such notice shall state the reduced
Conversion Price and the period during which it will be in effect.
(i) No adjustment in the Conversion Price shall be
required unless such adjustment would require an increase or decrease
of at least 1% in such price; provided, however, that any adjustments
which by reason of this Section 12.4(i) are not required to be made
shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Article 12 shall be made by the
Company and shall be made to the nearest cent or to the nearest one
hundredth of a share, as the case may be. No adjustment need be made
for a change in the par value or no par value of the Common Stock.
(j) In any case in which this Section 12.4 provides that
an adjustment shall become effective immediately after a Record Date
for an event, the Company may defer until the occurrence of such event
(i) issuing to the Holder of any Debenture converted after such Record
Date and before the occurrence of such event the additional shares of
Common Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock issuable upon
such conversion before giving effect to such adjustment and (ii) paying
to such holder any amount in cash in lieu of any fraction pursuant to
Section 12.3 hereof.
(k) For purposes of this Section 12.4, the number of
shares of Common Stock at any time outstanding shall not include shares
held in the treasury of the Company but shall include shares issuable
in respect of scrip certificates issued in lieu of fractions of shares
of Common Stock. The Company will not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of the
Company.
(l) If the distribution date for the rights provided in
the Company's rights agreement, if any, occurs prior to the date a
Debenture is converted, the Holder of the Debenture who converts such
Debenture after the distribution date is not entitled to receive the
rights that would otherwise be attached (but for the date of
conversion) to the shares of Common Stock received upon such
conversion; provided, however, that an adjustment shall be made to the
Conversion Price pursuant to clause 12.4(b) as if the rights were being
distributed to the common stockholders of the Company immediately prior
to such
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conversion. If such an adjustment is made and the rights are later
redeemed, invalidated or terminated, then a corresponding reversing
adjustment shall be made to the Conversion Price, on an equitable basis, to
take account of such event.
Section 12.5 Notice of Adjustments of Conversion Price.
Whenever the Conversion Price is adjusted as herein provided (other
than in the case of an adjustment pursuant to the second paragraph of Section
12.4(h) for which the notice required by such paragraph has been provided), the
Company shall promptly file with the Trustee and any Conversion Agent other than
the Trustee an Officers' Certificate setting forth the adjusted Conversion Price
and showing in reasonable detail the facts upon which such adjustment is based.
Promptly after delivery of such Officers' Certificate, the Company shall prepare
a notice stating that the Conversion Price has been adjusted and setting forth
the adjusted Conversion Price and the date on which each adjustment becomes
effective, and shall mail such notice to each Holder at the address of such
Holder as it appears in the Register within 20 days of the effective date of
such adjustment. Failure to deliver such notice shall not effect the legality or
validity of any such adjustment.
Section 12.6 Notice Prior to Certain Actions.
In case at any time after the date hereof:
(1) the Company shall declare a dividend (or any other distribution)
on its Common Stock payable otherwise than in cash out of its capital
surplus or its consolidated retained earnings;
(2) the Company shall authorize the granting to the holders of its
Common Stock of rights or warrants to subscribe for or purchase any shares
of capital stock of any class (or of securities convertible into shares of
capital stock of any class) or of any other rights;
(3) there shall occur any reclassification of the Common Stock of the
Company (other than a subdivision or combination of its outstanding Common
Stock, a change in par value, a change from par value to no par value or a
change from no par value to par value), or any merger, consolidation,
statutory share exchange or combination to which the Company is a party and
for which approval of any shareholders of the Company is required, or the
sale, transfer or conveyance of all or substantially all of the assets of
the Company; or
(4) there shall occur the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of securities pursuant to Section 9.2 hereof, and
shall cause
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to be provided to the Trustee and all Holders in accordance with Section
14.2 hereof, at least 20 days (or 10 days in any case specified in clause
(1) or (2) above) prior to the applicable record or effective date
hereinafter specified, a notice stating:
(A) the date on which a record is to be taken for the purpose of
such dividend, distribution, rights or warrants, or, if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distribution, rights or warrants are to be
determined, or
(B) the date on which such reclassification, merger,
consolidation, statutory share exchange, combination, sale, transfer,
conveyance, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock
for securities, cash or other property deliverable upon such
reclassification, merger, consolidation, statutory share exchange, sale,
transfer, dissolution, liquidation or winding up.
Neither the failure to give such notice nor any defect therein shall
affect the legality or validity of the proceedings or actions described in
clauses (1) through (4) of this Section 12.6.
Section 12.7 Company to Reserve Common Stock.
The Company shall at all times use its best efforts to reserve and
keep available, free from preemptive rights, out of its authorized but unissued
Common Stock, for the purpose of effecting the conversion of Debentures, the
full number of shares of fully paid and nonassessable Common Stock then issuable
upon the conversion of all Outstanding Debentures.
Section 12.8 Taxes on Conversions.
Except as provided in the next sentence, the Company will pay any and
all taxes (other than taxes on income) and duties that may be payable in respect
of the issue or delivery of shares of Common Stock on conversion of Debentures
pursuant hereto. A Holder delivering a Debenture for conversion shall be liable
for and will be required to pay any tax or duty which may be payable in respect
of any transfer involved in the issue and delivery of shares of Common Stock in
a name other than that of the Holder of the Debenture or Debentures to be
converted, and no such issue or delivery shall be made unless the Person
requesting such issue has paid to the Company the amount of any such tax or
duty, or has established to the satisfaction of the Company that such tax or
duty has been paid.
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Section 12.9 Covenant as to Common Stock.
The Company covenants that all shares of Common Stock which may be
issued upon conversion of Debentures will upon issue be fully paid and
nonassessable and, except as provided in Section 12.8, the Company will pay all
taxes, liens and charges with respect to the issue thereof.
Section 12.10 Cancellation of Converted Debentures.
All Debentures delivered for conversion shall be delivered to the
Trustee to be canceled by or at the direction of the Trustee, which shall
dispose of the same as provided in Section 2.9.
Section 12.11 Effect of Reclassification, Consolidation, Merger or
Sale.
If any of following events occur, namely:
(i) any reclassification or change of the outstanding shares of
Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision
or combination), as a result of which holders of Common Stock shall be
entitled to receive stock, securities or other property or assets
(including cash) with respect to or in exchange for such Common Stock,
(ii) any merger, consolidation, statutory share exchange or
combination of the Company with another corporation as a result of which
holders of Common Stock shall be entitled to receive stock, securities or
other property or assets (including cash) with respect to or in exchange
for such Common Stock or
(iii) any sale or conveyance of the properties and assets of the
Company as, or substantially as, an entirety to any other corporation as a
result of which holders of Common Stock shall be entitled to receive stock,
securities or other property or assets (including cash) with respect to or
in exchange for such Common Stock,
the Company or the successor or purchasing corporation, as the case may be,
shall execute with the Trustee a supplemental indenture (which shall comply with
the TIA as in force at the date of execution of such supplemental indenture if
such supplemental indenture is then required to so comply) providing that such
Debenture shall be convertible into the kind and amount of shares of stock and
other securities or property or assets (including cash) which such Holder would
have been entitled to receive upon such reclassification, change, merger,
consolidation, statutory share exchange, combination, sale or conveyance had
such Debentures been converted into Common Stock immediately prior to such
reclassification, change, merger, consolidation, statutory share
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exchange, combination, sale or conveyance assuming such holder of Common Stock
did not exercise its rights of election, if any, as to the kind or amount of
securities, cash or other property receivable upon such merger, consolidation,
statutory share exchange, sale or conveyance (provided that, if the kind or
amount of securities, cash or other property receivable upon such merger,
consolidation, statutory share exchange, sale or conveyance is not the same for
each share of Common Stock in respect of which such rights of election shall not
have been exercised ("Non-Electing Share"), then for the purposes of this
Section 12.11 the kind and amount of securities, cash or other property
receivable upon such merger, consolidation, statutory share exchange, sale or
conveyance for each Non-Electing Share shall be deemed to be the kind and amount
so receivable per share by a plurality of the Non-Electing Shares). Such
supplemental indenture shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Article
12. If, in the case of any such reclassification, change, merger, consolidation,
statutory share exchange, combination, sale or conveyance, the stock or other
securities and assets receivable thereupon by a holder of shares of Common Stock
includes shares of stock or other securities and assets of a corporation other
than the successor or purchasing corporation, as the case may be, in such
reclassification, change, merger, consolidation, statutory share exchange,
combination, sale or conveyance, then such supplemental indenture shall also be
executed by such other corporation and shall contain such additional provisions
to protect the interests of the Holders of the Debentures as the Board of
Directors shall reasonably consider necessary by reason of the foregoing,
including to the extent practicable the provisions providing for the Repurchase
Rights set forth in Article 11 hereof.
The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each Holder, at the address of such Holder as it
appears on the Register, within 20 days after execution thereof. Failure to
deliver such notice shall not affect the legality or validity of such
supplemental indenture.
The above provisions of this Section shall similarly apply to
successive reclassifications, mergers, consolidations, statutory share
exchanges, combinations, sales and conveyances.
If this Section 12.11 applies to any event or occurrence, Section 12.4
hereof shall not apply.
Section 12.12 Responsibility of Trustee for Conversion Provisions.
The Trustee, subject to the provisions of Section 5.1 hereof, and any
Conversion Agent shall not at any time be under any duty or responsibility to
any Holder of Debentures to determine whether any facts exist which may require
any adjustment of the Conversion Price, or with respect to the nature or intent
of any such adjustments when made, or with respect to the method employed, or
herein or in any supplemental indenture provided to be employed, in making the
same. Neither the Trustee, subject to the provisions of Section 5.1 hereof, nor
any Conversion Agent shall be accountable with respect to the validity or value
(of the kind or amount) of any Common Stock, or of any
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other securities or property, which may at any time be issued or delivered upon
the conversion of any Debenture; and it or they do not make any representation
with respect thereto. Neither the Trustee, subject to the provisions of Section
5.1 hereof, nor any Conversion Agent shall be responsible for any failure of the
Company to make any cash payment or to issue, transfer or deliver any shares of
stock or share certificates or other securities or property upon the surrender
of any Debenture for the purpose of conversion; and the Trustee, subject to the
provisions of Section 5.1 hereof, and any Conversion Agent shall not be
responsible or liable for any failure of the Company to comply with any of the
covenants of the Company contained in this Article.
ARTICLE 13
SUBORDINATION
Section 13.1 Debentures Subordinated to Senior Debt.
The Company covenants and agrees, and each Holder of Debentures, by
such Holder's acceptance thereof, likewise covenants and agrees, that the
Indebtedness represented by the Debentures and the payment of the principal of
and premium, if any, and interest (including Liquidated Damages, if any) on each
and all of the Debentures is hereby expressly subordinated and junior, to the
extent and in the manner set forth and as set forth in this Section 13.1, in
right of payment to the prior payment in full of all Senior Debt.
(a) In the event of any distribution of assets of the Company upon
any dissolution, winding up, liquidation or reorganization of the Company,
whether in bankruptcy, insolvency, reorganization or receivership proceedings or
upon an assignment for the benefit of creditors or any other marshalling of the
assets and liabilities of the Company or otherwise, the holders of all Senior
Debt shall first be entitled to receive payment of the full amount due thereon
in respect of all such Senior Debt and all other amounts due or provision shall
be made for such amount in cash, or other payments satisfactory to the holders
of Senior Debt, before the Holders of any of the Debentures are entitled to
receive any payment or distribution of any character, whether in cash,
securities or other property, on account of the principal of or premium, if any,
or interest (including Liquidated Damages, if any) on the Indebtedness evidenced
by the Debentures, except that the Company may make payments on the Debentures
in Permitted Junior Securities.
(b) In the event of any acceleration of Maturity of the Debentures
because of an Event of Default, unless the full amount due in respect of all
Senior Debt is paid in cash or other form of payment satisfactory to the holders
of Senior Debt, no payment shall be made by the Company with respect to the
principal of, premium, if any, or interest (including Liquidated Damages, if
any) on the Debentures or to acquire any of the Debentures (including any
redemption, conversion or cash repurchase pursuant to the exercise of the
Repurchase Right), except that the Company may make payments on the
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Debentures in Permitted Junior Securities, and the Company shall give prompt
written notice of such acceleration to such holders of Senior Debt.
(c) In the event of and during the continuance of any default in
payment of the principal of or premium, if any, or interest on, or other payment
obligation in respect of, any Senior Debt, unless all such payments due in
respect of such Senior Debt have been paid in full in cash or other payments
satisfactory to the holders of Senior Debt, no payment shall be made by the
Company with respect to the principal of, premium, if any, or interest
(including Liquidated Damages, if any) on the Debentures or to acquire any of
the Debentures (including any redemption, conversion or cash repurchase pursuant
to the exercise of the Repurchase Right), except that the Company may make
payments on the Debentures in Permitted Junior Securities. The Company shall
give prompt written notice to the Trustee of any default under any Senior Debt
or under any agreement pursuant to which Senior Debt may have been issued.
(d) During the continuance of any event of default with respect to
any Designated Senior Debt, as such event of default is defined under any such
Designated Senior Debt or in any agreement pursuant to which any Designated
Senior Debt has been issued (other than a default in payment of the principal of
or premium, if any, or interest on, or other payment obligation in respect of
any Designated Senior Debt), permitting the holder or holders of such Designated
Senior Debt to accelerate the maturity thereof, no payment shall be made by the
Company, directly or indirectly, with respect to principal of, premium, if any,
or interest (including Liquidated Damages, if any) on the Debentures, other than
payments in Permitted Junior Securities, for 179 days following notice in
writing (a "Payment Blockage Notice") to the Company, from any holder or holders
of such Designated Senior Debt or their representative or representatives or the
trustee or trustees under any indenture or under which any instrument evidencing
any such Designated Senior Debt may have been issued, that such an event of
default has occurred and is continuing, unless such event of default has been
cured or waived or such Designated Senior Debt has been paid in full; provided,
--------
however, if the maturity of such Designated Senior Debt is accelerated, no
- -------
payment may be made on the Debentures, other than payments in Permitted Junior
Securities, until such Designated Senior Debt has been paid in full in cash or
other payment satisfactory to the holders of such Designated Senior Debt or such
acceleration has been cured or waived.
For purposes of this Section 13.1(d), such Payment Blockage Notice
shall be deemed to include notice of all other events of default under such
indenture or instrument which are continuing at the time of the event of default
specified in such Payment Blockage Notice. The provisions of this Section
13.1(d) shall apply only to one such Payment Blockage Notice given in any period
of 365 days with respect to any issue of Designated Senior Debt, and no such
continuing event of default that existed or was continuing on the date of
delivery of any Payment Blockage Notice shall be, or shall be made, the basis
for a subsequent Payment Blockage Notice.
(e) In the event that, notwithstanding the foregoing provisions of
Sections 13.1(a), 13.1(b), 13.1(c) and 13.1(d), any payment on account of
principal,
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premium, if any, or interest (including Liquidated Damages, if any) on the
Debentures shall be made by or on behalf of the Company and received by the
Trustee, by any Holder or by any Paying Agent (or, if the Company is acting as
its own Paying Agent, money for any such payment shall be segregated and held in
trust):
(i) after the occurrence of an event specified in Section 13.1(a) or
13.1(b), then, unless all Senior Debt is paid in full in cash, or provision
shall be made therefor,
(ii) after the happening of an event of default of the type specified
in Section 13.1(c) above, then, unless the amount of such Senior Debt then
due shall have been paid in full, or provision made therefor or such event
of default shall have been cured or waived, or
(iii) after the happening of an event of default of the type specified
in Section 13.1(d) above and delivery of a Payment Blockage Notice, then,
unless such event of default shall have been cured or waived or the 179-day
period specified in Section 13.1(d) shall have expired,
such payment (subject, in each case, to the provisions of Section 13.7 hereof)
shall be held in trust for the benefit of, and shall be immediately paid over
to, the holders of Designated Senior Debt (unless an event described in Section
13.1(a), (b) or (c) has occurred, in which case the payment shall be held in
trust for the benefit of, and shall be immediately paid over to all holders of
Senior Debt) or their representative or representatives or the trustee or
trustees under any indenture under which any instruments evidencing any of the
Designated Senior Debt or Senior Debt, as the case may be, may have been issued,
as their interests may appear.
Section 13.2 Subrogation.
Subject to the payment in full of all Senior Debt to which the
Indebtedness evidenced by the Debentures is in the circumstances subordinated as
provided in Section 13.1 hereof, the Holders of the Debentures shall be
subrogated to the rights of the holders of such Senior Debt to receive payments
or distributions of cash, property or securities of the Company applicable to
such Senior Debt until all amounts owing on the Debentures shall be paid in
full, and, as between the Company, its creditors other than holders of such
Senior Debt, and the Holders of the Debentures, no such payment or distribution
made to the holders of Senior Debt by virtue of this Article which otherwise
would have been made to the holders of the Debentures shall be deemed to be a
payment by the Company on account of such Senior Debt, provided that the
provisions of this Article are and are intended solely for the purpose of
defining the relative rights of the Holders of the Debentures, on the one hand,
and the holders of Senior Debt, on the other hand.
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Section 13.3 Obligation of the Company is Absolute and Unconditional.
Nothing contained in this Article or elsewhere in this Indenture or in
the Debentures is intended to or shall impair, as between the Company, its
creditors other than the holders of Senior Debt, and the Holders of the
Debentures, the obligation of the Company, which is absolute and unconditional,
to pay to the Holders of the Debentures the principal of and premium, if any,
and interest (including Liquidated Damages, if any) on the Debentures as and
when the same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the Holders of the Debentures
and creditors of the Company other than the holders of Senior Debt, nor shall
anything contained herein or therein prevent the Trustee or the Holder of any
Debenture from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article of the holders of Senior Debt in respect of cash, property or securities
of the Company received upon the exercise of any such remedy.
Section 13.4 Maturity of or Default on Senior Debt.
Upon the maturity of any Senior Debt by lapse of time, acceleration or
otherwise, all principal of or premium, if any, or interest on, or other payment
obligations in respect of all such matured Senior Debt shall first be paid in
full, or such payment shall have been duly provided for, before any payment on
account of principal, or premium, if any, or interest (including Liquidated
Damages, if any) is made upon the Debentures, except that the Company may make
payments on the Debentures in Permitted Junior Securities.
Section 13.5 Payments on Debentures Permitted.
Except as expressly provided in this Article, nothing contained in
this Article shall affect the obligation of the Company to make, or prevent the
Company from making, payments of the principal of, or premium, if any, or
interest (including Liquidated Damages, if any) on the Debentures in accordance
with the provisions hereof and thereof, or shall prevent the Trustee or any
Paying Agent from applying any moneys deposited with it hereunder to the payment
of the principal of, or premium, if any, or interest (including Liquidated
Damages, if any) on the Debentures.
Section 13.6 Effectuation of Subordination by Trustee.
Each Holder of Debentures, by such Holder's acceptance thereof,
authorizes and directs the Trustee on such Holder's behalf to take such action
as may be necessary or appropriate to effectuate the subordination provided in
this Article and appoints the Trustee such Holder's attorney-in-fact for any and
all such purposes.
Upon any payment or distribution of assets of the Company referred to
in this Article, the Trustee and the Holders of the Debentures shall be entitled
to rely upon
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any order or decree made by any court of competent jurisdiction in which any
such dissolution, winding up, liquidation or reorganization proceeding affecting
the affairs of the Company is pending or upon a certificate of the trustee in
bankruptcy, receiver, assignee for the benefit of creditors, liquidating trustee
or agent or other Person making any payment or distribution, delivered to the
Trustee or to the Holders of the Debentures, for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, and as to other
facts pertinent to the right of such Persons under this Article, and if such
evidence is not furnished, the Trustee may defer any payment to such Persons
pending judicial determination as to the right of such Persons to receive such
payment.
Section 13.7 Knowledge of Trustee.
Notwithstanding the provision of this Article or any other provisions
of this Indenture, the Trustee shall not be charged with knowledge of the
existence of any Senior Debt, of any default in payment of principal of,
premium, if any, or interest on, or other payment obligation in respect of any
Senior Debt, or of any facts which would prohibit the making of any payment of
moneys to or by the Trustee, or the taking of any other action by the Trustee,
unless a Responsible Officer of the Trustee having responsibility for the
administration of the trust established by this Indenture shall have received
written notice thereof from the Company, any Holder of Debentures, any Paying or
Conversion Agent of the Company or the holder or representative of any class of
Senior Debt, and, prior to the receipt of any such written notice, the Trustee
shall be entitled in all respects to assume that no such default or facts exist;
provided, however, that unless on the third Business Day prior to the date upon
which by the terms hereof any such moneys may become payable for any purpose the
Trustee shall have received the notice provided for in this Section 13.7, then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such moneys and apply the same to the
purpose for which they were received, and shall not be affected by any notice to
the contrary which may be received by it on or after such date.
Section 13.8 Trustee's Relation to Senior Debt.
The Trustee shall be entitled to all the rights set forth in this
Article with respect to any Senior Debt at the time held by it, to the same
extent as any other holder of Senior Debt and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder.
Nothing contained in this Article shall apply to claims of or payments
to the Trustee under or pursuant to Section 5.8 hereof.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article, and no implied covenants or obligations
with respect to the holders of Senior Debt shall be read into this Indenture
against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty
to the holders of Senior Debt and the Trustee shall not be liable to any holder
of Senior Debt if it shall pay over or deliver to Holders, the
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Company or any other Person moneys or assets to which any holder of Senior Debt
shall be entitled by virtue of this Article or otherwise.
Section 13.9 Rights of Holders of Senior Debt Not Impaired.
No right of any present or future holder of any Senior Debt to enforce
the subordination herein shall at any time or in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
Section 13.10 Modification of Terms of Senior Debt.
Any renewal or extension of the time of payment of any Senior Debt or
the exercise by the holders of Senior Debt of any of their rights under any
instrument creating or evidencing Senior Debt, including without limitation the
waiver of default thereunder, may be made or done all without notice to or
assent from the Holders of the Debentures or the Trustee.
No compromise, alteration, amendment, modification, extension, renewal
or other change of, or waiver, consent or other action in respect of, any
liability or obligation under or in respect of, or of any of the terms,
covenants or conditions of any indenture or other instrument under which any
Senior Debt is outstanding or of such Senior Debt, whether or not such release
is in accordance with the provisions or any applicable document, shall in any
way alter or affect any of the provisions of this Article or of the Debentures
relating to the subordination thereof.
Section 13.11 Certain Conversions Not Deemed Payment.
For the purposes of this Article 13 only:
(1) the issuance and delivery of junior securities upon conversion of
Debentures in accordance with Article 12 hereof shall not be deemed to
constitute a payment or distribution on account of the principal of,
premium, if any, or interest (including Liquidated Damages, if any) on
Debentures or on account of the purchase or other acquisition of
Debentures, and
(2) the payment, issuance or delivery of cash (except in satisfaction
of fractional shares pursuant to Section 12.3 hereof), property or
securities (other than junior securities) upon conversion of a Debenture
shall be deemed to constitute payment on account of the principal of,
premium, if any, or interest (including Liquidated Damages, if any) on such
Debenture.
For the purposes of this Section 13.11, the term "junior securities" means:
(a) shares of any common stock of the Company or
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(b) other securities of the Company that are subordinated in right of
payment to all Senior Debt that may be outstanding at the time of issuance
or delivery of such securities to substantially the same extent as, or to a
greater extent that, the Debentures are so subordinated as provided in this
Article.
Nothing contained in this Article 13 or elsewhere in this Indenture or in the
Debentures is intended to or shall impair, as among the Company, its creditors
(other than holders of Senior Debt) and the Holders of Debentures, the right,
which is absolute and unconditional, of the Holder of any Debenture to convert
such Debenture in accordance with Article 12 hereof.
Article 14
OTHER PROVISIONS OF GENERAL APPLICATION
Section 14.1 Trust Indenture Act Controls.
This Indenture is subject to the provisions of the TIA which are
required to be part of this Indenture, and shall, to the extent applicable, be
governed by such provisions.
Section 14.2 Notices.
Any notice or communication to the Company or the Trustee is duly
given if in writing and delivered in person or mailed by first-class mail to the
address set forth below:
(a) if to the Company:
Primus Telecommunications Group, Incorporated
1700 Old Meadow Road
McLean, VA 22102
Attention: David Slotkin, Esq.
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: Edward P. Tolley, III
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(b) if to the Trustee:
First Union National Bank
800 East Main Street, Lower Mezzanine
Richmond, Virginia 23219
Attention: Corporate Trust
The Company or the Trustee by notice to the other may designate additional or
different addresses for subsequent notices or communications.
Any notice or communication to a Holder shall be mailed by first-class
mail to his address shown on the Register kept by the Registrar. Failure to mail
a notice or communication to a Holder or any defect in such notice or
communication shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed or sent in the manner provided
above within the time prescribed, it is duly given as of the date it is mailed,
whether or not the addressee receives it, except that notice to the Trustee
shall only be effective upon receipt thereof by the Trustee.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee at the same time.
Section 14.3 Communication by Holders with Other Holders.
Holders may communicate pursuant to Section 312(b) of the TIA with
other Holders with respect to their rights under the Debentures or this
Indenture. The Company, the Trustee, the Registrar and anyone else shall have
the protection of Section 312(c) of the TIA.
Section 14.4 Acts of Holders of Debentures.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders of Debentures may be embodied in and evidenced by:
(1) one or more instruments of substantially similar tenor signed by
such Holders in person or by agent or proxy duly appointed in writing;
(2) the record of Holders of Debentures voting in favor thereof,
either in person or by proxies duly appointed in writing, at any meeting of
Holders of Debentures duly called and held in accordance with the
provisions of Article 8; or
(3) a combination of such instruments and any such record.
Except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments or record or both are delivered to
the Trustee and, where it
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is hereby expressly required, to the Company. Such instrument or instruments and
record (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders of Debentures signing such
instrument or instruments and so voting at such meeting. Proof of execution of
any such instrument or of a writing appointing any such agent or proxy, or of
the holding by any Person of a Debenture, shall be sufficient for any purpose of
this Indenture and (subject to Section 5.1 hereof) conclusive in favor of the
Trustee and the Company if made in the manner provided in this Section. The
record of any meeting of Holders of Debentures shall be proved in the manner
provided in Section 8.6 hereof.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be provided in any manner which the Trustee reasonably
deems sufficient.
(c) The principal amount and serial numbers of Debentures held by any
Person, and the date of such Person holding the same, shall be proved by the
Register.
(d) Any request, demand, authorization, direction, notice, consent,
election, waiver or other Act of the Holders of any Debenture shall bind every
future Holder of the same Debenture and the Holder of every Debenture 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 Debenture.
Section 14.5 Certificate and Opinion as to Conditions Precedent.
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.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon an Opinion of Counsel, unless such
officer knows, or in the exercise of reasonable care should know, that the
Opinion of Counsel with respect to the matters upon which such certificate or
opinion is based is erroneous. Any such Opinion of Counsel may be based, insofar
as it relates to factual matters, upon a certificate or representations by, an
officer or officers of the Company stating that the information with respect to
such factual matters is in the possession of the Company, unless such counsel
knows, or in the exercise of reasonable care should know, that the certificate
or representations with respect to such matters are erroneous.
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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.
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 an Officers' Certificate stating that all conditions precedent, if
any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
Counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Section 14.6 Statements Required in Certificate or Opinion.
Each 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 on behalf of the Company 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 14.7 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 14.8 Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
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Section 14.9 Separability Clause.
In case any provision in this Indenture or the Debentures 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 14.10 Benefits of Indenture.
Nothing contained in this Indenture or in the Debentures, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, the holders of Senior Debt and the Holders of Debentures,
any benefit or legal or equitable right, remedy or claim under this Indenture.
Section 14.11 Governing Law.
THIS INDENTURE AND THE DEBENTURES SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Section 14.12 Counterparts.
This instrument may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original but all such
counterparts shall together constitute but one and the same instrument.
Section 14.13 Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Debenture or the last day on which a Holder of a Debenture has a
right to convert such Debenture shall not be a Business Day at any Place of
Payment or Place of Conversion, then (notwithstanding any other provision of
this Indenture or of the Debentures) payment of interest (including Liquidated
Damages, if any) or principal or premium, if any, or conversion of the
Debentures, need not be made at such Place of Payment or Place of Conversion on
such day, but may be made on the next succeeding Business Day at such Place of
Payment or Place of Conversion with the same force and effect as if made on the
Interest Payment Date or Redemption Date or at the Stated Maturity or on such
last day for conversion, provided, that in the case that payment is made on such
succeeding Business Day, no interest shall accrue on the amount so payable for
the period from and after such Interest Payment Date, Redemption Date or Stated
Maturity, as the case may be.
Section 14.14 Recourse Against Others.
No recourse for the payment of the principal of or premium, if any, or
interest (including Liquidated Damages, if any) on any Debenture, or for any
claim based thereon or otherwise in respect thereof, shall be had against any
incorporator, shareholder, officer or director, as such, past, present or
future, of the Company or of any successor
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corporation, whether by virtue of any constitution, statute or rule of law or by
the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance thereof and as part of the consideration for the issue
thereof, expressly waived and released.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed all as of the day and year first above written.
PRIMUS TELECOMMUNICATIONS GROUP,
INCORPORATED
By: /s/ K. Paul Singh
-------------------------------
Name: K. Paul Singh
Title: President and Chief Executive Officer
FIRST UNION NATIONAL BANK
By: /s/ Sarah McMahon
---------------------------------------
Name: Sarah McMahon
Title:
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EXHIBIT A
FORM OF DEBENTURE
[FACE OF SECURITY]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY ("DTC") TO PRIMUS TELECOMMUNICATIONS GROUP,
INCORPORATED (OR ITS SUCCESSOR) OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE, CONVERSION OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON 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 OR TO ANY PERSON
IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN./1/
THE SECURITY EVIDENCED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT
IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT OR (B) IT IS A NON-U.S. PERSON OUTSIDE THE UNITED STATES
ACQUIRING THE SECURITY IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT;
(2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS
SECURITY RESELL OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY OR THE
COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH SECURITY EXCEPT (A) TO PRIMUS
TELECOMMUNICATIONS GROUP, INCORPORATED OR ANY SUBSIDIARY OF PRIMUS
TELECOMMUNICATIONS GROUP, INCORPORATED, (B) TO A QUALIFIED INSTITUTIONAL BUYER
IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) TO A NON-U.S. PERSON
OUTSIDE THE UNITED STATES IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES
ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT AND WHICH CONTINUES
TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER; AND
_____________________
/1/ This legend should be included only if the Security is issued in global
form.
A-1
<PAGE>
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE SECURITY EVIDENCED
HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(E) ABOVE) A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THE SECURITY EVIDENCED HEREBY WITHIN TWO YEARS AFTER THE ORIGINAL
ISSUANCE OF SUCH SECURITY (OTHER THAN A TRANSFER PURSUANT TO CLAUSE (2)(E)
ABOVE), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE
HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO
THE TRUSTEE (OR ANY SUCCESSOR TRUSTEE, AS APPLICABLE). IF THE PROPOSED TRANSFER
IS PURSUANT TO CLAUSE 2(D) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE TRUSTEE (OR ANY SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS PRIMUS TELECOMMUNICATIONS
GROUP, INCORPORATED MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS
BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED
UPON THE EARLIER OF THE TRANSFER OF THE SECURITY EVIDENCED HEREBY PURSUANT TO
CLAUSE (2)(E) ABOVE OR THE EXPIRATION OF TWO YEARS FROM THE ORIGINAL ISSUANCE OF
THE SECURITY EVIDENCED HEREBY. AS USED HEREIN, THE TERMS "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT
A-2
<PAGE>
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
5-3/4% Convertible Subordinated Debenture due 2007
CUSIP NO. ________
No._____________ $_________________
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED, a Delaware corporation
(the "Company", which term includes any successor corporation under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to _____________________, or its registered assigns, the principal sum of ______
U.S. Dollars ($______________ ) on February 15, 2007.
Interest Payment Dates: February 15 and August 15, commencing August
15, 2000
Regular Record Dates: February 1 and August 1
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.
A-3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Security to be duly
executed manually or by facsimile by its duly authorized officers.
Dated: February 24, 2000 PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
By:____________________________
Name:
Title:
By:____________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 5-3/4% Convertible
Subordinated Debentures due 2007 described
in the within-named Indenture.
First Union National Bank,
as Trustee
By:_________________________________
Authorized Signatory
Dated: February 24, 2000
A-4
<PAGE>
[REVERSE OF SECURITY]
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
5-3/4% Convertible Subordinated Debenture due 2007
Capitalized terms used herein but not defined shall have the meanings
assigned to them in the Indenture referred to below unless otherwise indicated.
1. Principal and Interest.
Primus Telecommunications Group, Incorporated, a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this
Security at the Interest Rate from the date of issuance until repayment at
Maturity, redemption or repurchase. The Company will pay interest on this
Security semiannually in arrears on February 15 and August 15 of each year (each
an "Interest Payment Date"), commencing August 15, 2000.
Interest on the 5-3/4% Convertible Subordinated Debentures due 2007
(the "Securities") shall be computed (i) for any full semiannual period for
which a particular Interest Rate is applicable on the basis of a 360-day year of
twelve 30-day months and (ii) for any period for which a particular Interest
Rate is applicable shorter than a full semiannual period for which interest is
calculated, on the basis of a 30-day month and, for such periods of less than a
month, the actual number of days elapsed over a 30-day month.
A Holder of any Security at the close of business on a Regular Record
Date shall be entitled to receive interest on such Security on the corresponding
Interest Payment Date. A Holder of any Security which is converted after the
close of business on a Regular Record Date and prior to the corresponding
Interest Payment Date (other than any Security whose Maturity is prior to such
Interest Payment Date) shall be entitled to receive interest on the principal
amount of such Security, notwithstanding the conversion of such Security prior
to such Interest Payment Date. However, any such Holder which surrenders any
such Security for conversion during the period between the close of business on
such Regular Record Date and ending with the opening of business on the
corresponding Interest Payment Date shall be required to pay the Company an
amount equal to the interest on the principal amount of such Security so
converted, which is payable by the Company to such Holder on such Interest
Payment Date, at the time such Holder surrenders such Security for conversion.
Notwithstanding the foregoing, any such Holder which surrenders for conversion
any Security which has been called for redemption by the Company in a notice of
redemption given by the Company pursuant to Section 10.4 of the Indenture shall
be entitled to receive (and retain) such interest and need not pay the Company
an amount equal to the interest on the principal amount of such Security so
converted at the time such Holder surrenders such Security for conversion.
A-5
<PAGE>
In accordance with the terms of the Resale Registration Rights
Agreement, dated February 24, 2000, between the Company, Primus
Telecommunications, Inc., Primus Telecommunications (Australia) Pty. Ltd.,
Primus Telecommunications Pty. Ltd., and Lehman Brothers Inc., Morgan Stanley &
Co. Incorporated and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the
"Initial Purchasers"), during the first 90 days following a Registration Default
(as defined in the Resale Registration Rights Agreement), the Interest Rate
borne by the Securities shall be increased by 0.25% on:
(A) August 23, 2000 (the "Effectiveness Target Date"), if the Shelf
Registration Statement is not declared effective by the Securities and
Exchange Commission prior to or on August 22, 2000;
(B) subject to the exceptions in the Resale Registration Rights
Agreement, the day after the fifth Business Day after the Shelf
Registration Statement, previously declared effective, ceases to be
effective or fails to be usable after the Effectiveness Target Date and
during the period required by the Resale Registration Rights Agreement for
the Shelf Registration Statement to be effective, if a post-effective
amendment (or report filed pursuant to the Exchange Act) that cures the
Shelf Registration Statement is not filed with the Securities and Exchange
Commission during such five Business Day period; or
(C) the day following the 45th or 75th day, as the case may be, of
any period that the prospectus contained in the Shelf Registration
Statement has been suspended, if such suspension has not been terminated.
From and after the 91st day following such Registration Default, the Interest
Rate borne by the Securities shall be increased by 0.50%. In no event shall the
Interest Rate borne by the Securities be increased by more than 0.50%.
Any amount of additional interest will be payable in cash
semiannually, in arrears, on each Interest Payment Date and will cease to accrue
on the date the Registration Default is cured. The Holder of this Security is
entitled to the benefits of the Resale Registration Rights Agreement.
2. Method of Payment.
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 registered
at the close of business on the Regular Record Date for such interest.
Principal of, and premium, if any, and interest on, Global Securities
will be payable to the Depositary in immediately available funds.
Principal and premium, if any, on Physical Securities will be payable
at the office or agency of the Company maintained for such purpose, initially
the Corporate
A-6
<PAGE>
Trust Office of the Trustee. Interest on Physical Securities will be payable by
(i) U.S. Dollar check drawn on a bank in The City of New York mailed to the
address of the Person entitled thereto as such address shall appear in the
Register, or (ii) upon application to the Registrar not later than the relevant
Record Date by a Holder of an aggregate principal amount in excess of
$5,000,000, wire transfer in immediately available funds.
3. Paying Agent and Registrar.
Initially, First Union National Bank, the Trustee under the Indenture,
will act as Paying Agent and Registrar. The Company may change the Paying Agent
or Registrar without notice to any Holder.
4. Indenture.
The Company issued this Security under an Indenture, dated as of
February 24, 2000 (the "Indenture"), between the Company and First Union
National Bank, as trustee (the "Trustee"). The terms of the Security include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939, as amended ("TIA"). This Security is subject
to all such terms, and Holders are referred to the Indenture and the TIA for a
statement of all such terms. To the extent permitted by applicable law, in the
event of any inconsistency between the terms of this Security and the terms of
the Indenture, the terms of the Indenture shall control.
5. Optional Redemption.
(a) (i) The Company may redeem this Security at any time prior to
February 15, 2003 in whole at any time or in part from time to time at the
Provisional Redemption Price, if:
(A) the Shelf Registration Statement covering resales of this
Security and the Common Stock issuable upon conversion of this
Security is effective and available for use and is expected to
remain effective and available for use for the 30 days following
the Redemption Date; and
(B) the Current Market Value of the Common Stock equals or exceeds
the following triggering percentages of the Conversion Price then
in effect for at least 20 Trading Days in any consecutive 30-day
trading period ending on the Trading Day prior to the date the
notice of the redemption is mailed.
A-7
<PAGE>
Trigger
During the Twelve Months Commencing Percentage
----------------------------------- ----------
February 15, 2000................... 170%
February 15, 2001................... 160%
February 15, 2002................... 150%
(ii) On the Redemption Date, the Company shall pay the Make-Whole
Amount on this Security if called for redemption pursuant to Section 10.1(a) of
the Indenture, whether or not converted into Common Stock after the date the
notice of the provisional redemption is mailed and prior to the Redemption Date.
(b) This Security may be redeemed in whole or in part, upon not less
than 20 nor more than 60 days' notice, at any time on or after February 15,
2003, at the option of the Company, at the Redemption Prices (expressed as
percentages of the principal amount) set forth below.
During the Twelve Months
Commencing Redemption Prices
---------- -----------------
February 15, 2003..................... 102.88%
February 15, 2004..................... 101.92%
February 15, 2005..................... 100.96%
February 15, 2006..................... 100.00%
(c) The Company shall pay any interest on the Securities called for
redemption accrued but not paid to the Redemption Date, pursuant to the terms of
the Indenture.
Securities in original denominations larger than $1,000 may be
redeemed in part. If any Security selected for partial redemption is converted
in part before termination of the conversion right with respect to the portion
of the Security so selected, the converted portion of such Security shall be
deemed to be the portion selected for redemption (provided, however, that the
Holder of such Security so converted and deemed redeemed shall not be entitled
to any additional interest payment as a result of such deemed redemption than
such Holder would have otherwise been entitled to receive upon conversion of
such Security). Securities which have been converted during a selection of
Securities to be redeemed may be treated by the Trustee as Outstanding for the
purpose of such selection.
On and after the Redemption Date, interest ceases to accrue on
Securities or portions of Securities called for redemption, unless the Company
defaults in the payment of the Redemption Price.
A-8
<PAGE>
Notice of redemption will be given by the Company to the Holders as
provided in the Indenture.
6. Repurchase Right Upon a Change of Control.
If a Change in Control occurs, the Holder of Securities, at the
Holder's option, shall have the right, subject to the conditions and in
accordance with the provisions of the Indenture, to require the Company to
repurchase the Securities (or any portion of the principal amount hereof that is
at least $1,000 or an integral multiple thereof, provided that the portion of
the principal amount of this Security to be Outstanding after such repurchase is
at least equal to $1,000) at the Repurchase Price in cash, plus any interest
accrued and unpaid to the Repurchase Date.
Subject to the conditions provided in the Indenture, the Company may
elect to pay the Repurchase Price by delivering a number of shares of Common
Stock equal to (i) the Repurchase Price divided by (ii) 95% of the average of
the Closing Prices per share for the five consecutive Trading Days immediately
preceding and including the third Trading Day prior to the Repurchase Date.
No fractional shares of Common Stock will be issued upon repurchase of
any Securities. Instead of any fractional share of Common Stock which would
otherwise be issued upon conversion of such Securities, the Company shall pay a
cash adjustment as provided in the Indenture.
A Company Notice will be given by the Company to the Holders as
provided in the Indenture. To exercise a Repurchase Right, a Holder must deliver
to the Trustee a written notice as provided in the Indenture.
7. Conversion Rights.
Subject to and upon compliance with the provisions of the Indenture,
the Holder of Securities is entitled, at such Holder's option, at any time
before the close of business on February 15, 2007, to convert the Holder's
Securities (or any portion of the principal amount hereof which is $1,000 or an
integral multiple thereof), at the principal amount thereof or of such portion,
into duly authorized, fully paid and nonassessable shares of Common Stock of the
Company at the Conversion Price in effect at the time of conversion.
In the case of a Security (or a portion thereof) called for
redemption, such conversion right in respect of the Security (or such portion
thereof) so called, shall expire at the close of business on the second Business
Day preceding the Redemption Date, unless the Company defaults in making the
payment due upon redemption. In the case of a Change of Control for which the
Holder exercises its Repurchase Right with respect to a Security (or a portion
thereof), such conversion right in respect of the Security (or portion thereof)
shall expire at the close of business on the Business Day preceding the
Repurchase Date.
A-9
<PAGE>
The Conversion Price shall be initially equal to $49.7913 per share of
Common Stock. The Conversion Price shall be adjusted under certain circumstances
as provided in the Indenture.
To exercise the conversion right, the Holder must surrender the
Security (or portion thereof) duly endorsed or assigned to the Company or in
blank, at the office of the Conversion Agent, accompanied by a duly signed
conversion notice to the Company. Any Security surrendered for conversion during
the period from the close of business on any Regular Record Date to the opening
of business on the corresponding Interest Payment Date (other than any Security
whose Maturity is prior to such Interest Payment Date), shall also be
accompanied by payment in New York Clearing House funds or other funds
acceptable to the Company of an amount equal to the interest payable on such
Interest Payment Date on the principal amount of the Securities being
surrendered for conversion.
No fractional shares of Common Stock will be issued upon conversion of
any Securities. Instead of any fractional share of Common Stock which would
otherwise be issued upon conversion of such Securities, the Company shall pay a
cash adjustment as provided in the Indenture.
8. Subordination.
The Indebtedness evidenced by this Security is, to the extent and in
the manner provided in the Indenture, subordinated and subject in right of
payment to the prior payment in full of all amounts then due on all Senior Debt
of the Company, and this Security is issued subject to such provisions of the
Indenture with respect thereto. Each Holder of this Security, by accepting the
same, (a) agrees to and shall be bound by such provisions, (b) authorizes and
directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination so provided and (c)
appoints the Trustee such Holder's attorney-in-fact for any and all such
purposes.
9. Denominations; Transfer; Exchange.
The Securities are issuable in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000 in excess thereof. A
Holder may register the transfer or exchange of Securities in accordance with
the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture.
In the event of a redemption in part, the Company will not be required
(a) to register the transfer of, or exchange, Securities for a period of 15 days
immediately preceding the date notice is given identifying the serial numbers of
the Securities called for such redemption, or (b) to register the transfer of,
or exchange, any such Securities, or portion thereof, called for redemption.
A-10
<PAGE>
In the event of redemption, conversion or repurchase of the Securities
in part only, a new Security or Securities for the unredeemed, unconverted or
unrepurchased portion thereof will be issued in the name of the Holder hereof.
10. Persons Deemed Owners.
The registered Holder of this Security shall be treated as its owner
for all purposes.
11. Unclaimed Money.
The Trustee and the Paying Agent shall pay to the Company any money
held by them for the payment of principal, premium, if any, or interest that
remains unclaimed for two years after the date upon which such payment shall
have become due. After payment to the Company, Holders entitled to the money
must look to the Company for payment as general creditors unless an applicable
abandoned property law designates another Person, and all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity.
Subject to certain conditions contained in the Indenture, the Company
may discharge its obligations under the Securities and the Indenture if (1) (a)
all of the Outstanding Securities shall become due and payable at their
scheduled Maturity within one year or (b) all of the Outstanding Securities are
scheduled for redemption within one year, and (2) the Company shall have
deposited with the Trustee money and/or U.S. Government Obligations sufficient
to pay the principal of, and premium, if any, and interest on, all of the
Outstanding Securities on the date of Maturity or redemption, as the case may
be.
13. Amendment; Supplement; Waiver.
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 Outstanding Securities (or such
lesser amount as shall have acted at a meeting pursuant to the provisions of the
Indenture). The Indenture also contains provisions permitting the Holders of
specified percentages in 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 this Security and of any Security issued upon
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 or
such other Security.
A-11
<PAGE>
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 (including Liquidated Damages, if any) on this Security at the times,
places and rate, and in the coin or currency, herein prescribed or to convert
this Security (or pay cash in lieu of conversion) as provided in the Indenture.
14. Defaults and Remedies.
The Indenture provides that an Event of Default with respect to the
Securities occurs when any of the following occurs:
(a) default in the payment of interest or Liquidated Damages, if any,
on any of the Securities when due and payable and continuance of such default
for a period of 30 days; or
(b) default in the payment of principal of (or premium, if any, on)
any of the Securities at its Stated Maturity, upon acceleration, redemption or
otherwise; or
(c) default in the payment of principal, interest or Liquidated
Damages, if any, on any of the Securities required to be purchased pursuant to a
Repurchase Right;
(d) default in the performance or breach of any covenant or agreement
of the Company in this Indenture or under the Securities (other than a default
in the performance, or breach, of a covenant or agreement specified in the
preceding clause (a), (b) or (c)), and continuance of such default or breach for
a period of 30 consecutive 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 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;
(e) there occurs with respect to any issue or issues of Indebtedness
of the Company or any Restricted Subsidiary having an outstanding principal
amount of $10.0 million or more in the aggregate for all such issues of all such
Persons, whether such Indebtedness now exists or shall hereafter be created, (I)
an event of default that has caused the holder thereof to declare such
Indebtedness to be due and payable prior to its Stated Maturity and such
Indebtedness has not been discharged in full or such acceleration has not been
rescinded or annulled by the earlier of (x) the expiration of any applicable
grace period or (y) the thirtieth day after such default; and/or (II) the
failure to make a principal payment at the final (but not any interim) fixed
maturity and such defaulted payment shall not have been made, waived or extended
by the earlier of (x) the expiration of any applicable grace period or (y) the
thirtieth day after such default;
A-12
<PAGE>
(f) any final judgment or order (not covered by insurance) for the
payment of money in excess of $10.0 million in the aggregate for all such final
judgments or orders (treating any deductibles, self-insurance or retention as
not so covered) shall be rendered against the Company or any Restricted
Subsidiary and shall not be paid or discharged, and there shall be any period of
30 consecutive days following entry of the final judgment or order that causes
the aggregate amount for all such final judgments or orders outstanding and not
paid or discharged against all such Persons to exceed $10.0 million during which
a stay of enforcement of such final judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect;
(g) there are certain events of bankruptcy, insolvency or
reorganization of the Company or any Significant Subsidiary.
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.
15. Authentication.
This Security shall not be valid until the Trustee (or authenticating
agent) executes the certificate of authentication on the other side of this
Security.
16. Abbreviations.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
17. Additional Rights of Holders of Transfer Restricted Securities.
In addition to the rights provided to Holders under the Indenture,
Holders of Transfer Restricted Securities shall have all the rights set forth in
the Resale Registration Rights Agreement.
18. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on this Security and the Trustee may use CUSIP numbers in notices of
redemption as a convenience to Holders. No representation is made as to the
accuracy of such numbers either as printed on this Security or as contained in
any notice of redemption and reliance may be placed only on the other
identification numbers placed thereon.
19. Governing Law.
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<PAGE>
The Indenture and this Security shall be governed by, and construed in
accordance with, the law of the State of New York.
20. Successor Corporation.
In the event a successor corporation assumes all the obligations of
the Company under this Security, pursuant to the terms hereof and of the
Indenture, the Company will be released from all such obligations.
A-14
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below and have your
signature guaranteed: (I) or (we) assign and transfer this Security to:
_______________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint________________________________________________________
to transfer this Security on the books of the Company. The agent may substitute
another to act for him.
Dated:_________________ Your Name:____________________________________
(Print your name exactly as it appears on the
face of this Security)
Your Signature:_______________________________
(Sign exactly as your name appears on the face
of this Security)
Signature Guarantee*:_________________________
________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A-15
<PAGE>
In connection with any transfer of this Security occurring prior to the date
which is the end of the period referred to in Rule 144(k) under the Securities
Act (other than a transfer pursuant to an effective registration statement under
the Securities Act) , the undersigned confirms that without utilizing any
general solicitation or general advertising that:
[Check One]
[_] (a) this Security is being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended,
provided by Rule 144A thereunder.
or
[_] (b) this Security is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Security and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Security in the name of any Person other than
the Holder hereof unless the conditions to any such transfer of registration set
forth herein and in Sections 2.7, 2.8 and 2.9 of the Indenture shall have been
satisfied.
Dated:_______________________ ________________________________________
NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the within-mentioned
instrument in every particular, without
alteration or any change whatsoever.
Signature Guarantee:
________________________________________
Signature must be guaranteed by a
participant in a recognized signature
guaranty medallion program or other
signature guarantor acceptable to the
Trustee.
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<PAGE>
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion, in each case for investment and not with a view to
distribution, and that it and any such account is a "Qualified Institutional
Buyer" within the meaning of Rule 144A under the Securities Act of 1933 and is
aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:_______________________ ____________________________________________
NOTICE: To be executed by an executive
officer.
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<PAGE>
CONVERSION NOTICE
TO: PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
1700 Old Meadow Road
McLean, Virginia 22102
The undersigned registered owner of this Security hereby irrevocably
exercises the option to convert this Security, or the portion hereof (which is
$1,000 principal amount or an integral multiple thereof) below designated, into
shares of Common Stock in accordance with the terms of the Indenture referred to
in this Security, and directs that the shares issuable and deliverable upon such
conversion, together with any check in payment for fractional shares and any
Securities representing any unconverted principal amount hereof, be issued and
delivered to the registered holder hereof unless a different name has been
indicated below. If shares or any portion of this Security not converted are to
be issued in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto. To the extent provided
in the Indenture, any amount required to be paid to the undersigned on account
of interest (including Liquidated Damages, if any), accompanies this Security.
Dated:_______________ Your Name:____________________________________
(Print your name exactly as it appears on the
face of this Security)
Your Signature:_______________________________
(Sign exactly as your name appears on the face
of this Security)
Signature Guarantee*:_________________________
Social Security or other Taxpayer
Identification Number:________________________
Principal amount to be converted (if less than all): $
________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
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<PAGE>
Fill in for registration of shares (if to be issued) and Securities (if to be
delivered) other than to and in the name of the registered holder:
______________________________________________________
(Name)
______________________________________________________
(Street Address)
______________________________________________________
(City, State and Zip Code)
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<PAGE>
NOTICE OF EXERCISE OF REPURCHASE RIGHT
TO: PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
1700 Old Meadow Road
McLean, Virginia 22102
The undersigned registered owner of this Security hereby irrevocably
acknowledges receipt of a notice from Primus Telecommunications Group, Inc. (the
"Company") as to the occurrence of a Change of Control with respect to the
Company and requests and instructs the Company to repay the entire principal
amount of this Security, or the portion thereof (which is $1,000 principal
amount or an integral multiple thereof) below designated, in accordance with the
terms of the Indenture referred to in this Security, together with interest and
Liquidated Damages, if any, accrued and unpaid to, but excluding, such date, to
the registered holder hereof.
Dated:______________ Your Name:___________________________________
(Print your name exactly as it appears on the
face of this Security)
Your Signature:_______________________________
(Sign exactly as your name appears on the face
of this Security)
Signature Guarantee*:_________________________
Social Security or other Taxpayer
Identification Number:________________________
Principal amount to be converted (if less than all): $
________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A-20
<PAGE>
SCHEDULE OF EXCHANGES FOR PHYSICAL SECURITIES/2/
The following exchanges of a part of this Global Security for Physical
Securities have been made:
<TABLE>
<CAPTION>
Principal Amount of
Amount of decrease in Amount of increase in this Global Security Signature of
Principal Amount of Principal Amount of following such decrease authorized officer
Date of Exchange this Global Security this Global Security (or increase) of Trustee
---------------- -------------------- -------------------- ------------- ---------
<S> <C> <C> <C> <C>
</TABLE>
_______________
/2/ This schedule should be included only if the Security is issued in global
form.
A-21
<PAGE>
EXHIBIT B
---------
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
------------------------
[Date]
First Union National Bank, as Trustee
Corporate Trust
800 East Main Street, 2/nd/ Floor
Richmond, Virginia 23219
Re: Primus Telecommunications Group, Incorporated (the "Company")
5 3/4% Convertible Subordinated Debentures due 2007 (the
"Debentures")
-------------------------------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $___________ aggregate
principal amount of Debentures, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S ("Regulation S") under the
Securities Act of 1933, as amended (the "Securities Act"), and accordingly,
we hereby certify as follows:
1. The offer of the Debentures was not made to a person in the
United States (unless such person or the account held by it for which
it is acting is excluded from the definition of "U.S. person" pursuant
to Rule 902(k)(1) of Regulation S under the circumstances described in
Rule 902(k)(2) of Regulation S) or specifically targeted at an
identifiable group of U.S. citizens abroad.
2. Either (a) at the time the buy order was originated, the
buyer was outside the United States or we and any person acting on our
behalf reasonably believed that the buyer was outside the United
States or (b) the transaction was executed in, on or through the
facilities of a designated offshore securities market, and neither we
nor any person acting on our behalf knows that the transaction was
pre-arranged with a buyer in the United States.
3. Neither we, any of our affiliates, nor any person acting on
our or their behalf has made any directed selling efforts in the
United States in contravention of the requirements of Rule 903(a) or
Rule 904(a) of Regulation S, as applicable.
4. The proposed transfer of Debentures is not part of a plan
or scheme to evade the registration requirements of the Securities
Act.
5. If we are a dealer or a person receiving a selling
concession or other fee or remuneration in respect of the Debentures,
and the proposed transfer takes place before the Offshore Restriction
Date referred to in the Indenture, dated as of February 24, 2000,
among the Company and the Trustee, or we are an officer or
B-1
<PAGE>
director of the Company or a distributor, we certify that the proposed
transfer is being made in accordance with the provisions of Rules 903
and 904(b) of Regulation S.
You and the Company are entitled to rely upon this Certificate
and are irrevocably authorized to produce this Certificate or a copy
hereof to any interested party in any administrative or legal
proceeding or official inquiry with respect to the matters covered
hereby. Terms used in this certificate have the meanings set forth in
Regulation S.
Very truly yours,
[Name of Transferor]
By:_________________________________
Authorized Signature
B-2
<PAGE>
EXHIBIT C
---------
Rule 144A Certificate
---------------------
To: First Union National Bank, as Trustee
Corporate Trust
800 East Main Street, 2/nd/ Floor
Richmond, Virginia 23219
Attention: Corporate Trust Office
Re: Primus Telecommunications Group, Incorporated (the
"Company") 5 3/4% Convertible Subordinated Debentures
due 2007 (the "Debentures")
-----------------------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $____________
aggregate principal amount of Debentures, we confirm that such sale has
been effected pursuant to and in accordance with Rule 144A ("Rule 144A")
under the Securities Act of 1933, as amended (the "Securities Act"). We are
aware that the transfer of Debentures to us is being made in reliance on
the exemption from the provisions of Section 5 of the Securities Act
provided by Rule 144A. If the Company is not subject to Section 13 or 15(d)
of the Exchange Act, prior to the date of this Certificate we have been
given the opportunity to obtain from the Company the information referred
to in Rule 144A(d)(4), and have either declined such opportunity or have
received such information.
You and the Company are entitled to rely upon this Certificate
and are irrevocably authorized to produce this Certificate or a copy hereof
to any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby.
Very truly yours,
[NAME OF PURCHASER]
By:_________________________________
Name:
Title:
Address:
Date of this Certificate: ________ __, ____
C-1
<PAGE>
- --------------------------------------------------------------------------------
RESALE REGISTRATION RIGHTS AGREEMENT
Dated as of February 24, 2000
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
PRIMUS TELECOMMUNICATIONS, INC.
PRIMUS TELECOMMUNICATIONS (AUSTRALIA) PTY. LTD.
PRIMUS TELECOMMUNICATIONS PTY. LTD.
and
LEHMAN BROTHERS INC.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
- --------------------------------------------------------------------------------
<PAGE>
RESALE REGISTRATION RIGHTS AGREEMENT, dated as of February 24, 2000,
among Primus Telecommunications Group, Incorporated, a Delaware corporation
(together with any successor entity, herein referred to as the "Issuer"), Primus
Telecommunications Incorporated, a Delaware corporation, Primus
Telecommunications (Australia) Pty. Ltd., an Australian corporation, Primus
Telecommunications Pty. Ltd., an Australian corporation, and Lehman Brothers
Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley &
Co. Incorporated (collectively, the "Initial Purchasers").
Pursuant to the Purchase Agreement, dated February 17, 2000, between
the Issuer, the Principal Subsidiaries (as defined below) and the Initial
Purchasers (the "Purchase Agreement"), the Initial Purchasers have agreed to
purchase from the Issuer up to $250,000,000 ($300,000,000 if the Initial
Purchasers exercise the over-allotment option in full) in aggregate principal
amount of 5 3/4% Convertible Subordinated Debentures due 2007 (the
"Debentures"). The Debentures will be convertible into fully paid, nonassessable
common stock, par value $.01 per share, of the Issuer (the "Common Stock") on
the terms, and subject to the conditions, set forth in the Indenture (as defined
herein). To induce the Initial Purchasers to purchase the Debentures, and in
satisfaction of a condition to the Initial Purchasers' obligations under the
Purchase Agreement, the Issuer has agreed to provide the registration rights set
forth in this Agreement.
The parties hereby agree as follows:
1. Definitions. As used in this Agreement, the following capitalized
terms shall have the following meanings:
Advice: As defined in Section 4(c)(ii) hereof.
Agreement: This Resale Registration Rights Agreement.
Blue Sky Application: As defined in Section 6(a) hereof.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Business Day: A day other than a Saturday or Sunday or any federal
holiday in the United States.
Closing Date: The date of this Agreement.
Commission: Securities and Exchange Commission.
Common Stock: As defined in the preamble hereto.
Damages Payment Date: Each Interest Payment Date. For purposes of
this Agreement, if no Debentures are outstanding, "Damages Payment Date"
shall mean each February 15 and August 15.
Debentures: As defined in the preamble hereto.
<PAGE>
Effectiveness Period: As defined in Section 2(a)(iii) hereof.
Effectiveness Target Date: As defined in Section 2(a)(ii) hereof.
Exchange Act: Securities Exchange Act of 1934, as amended.
Holder: A Person who owns, beneficially or otherwise, Transfer
Restricted Securities.
Indemnified Holder: As defined in Section 6(a) hereof.
Indenture: The Indenture, dated as of October 13, 1999, between the
Issuer and Chase Manhattan Bank and Trust Company, National Association, as
trustee (the "Trustee"), pursuant to which the Debentures are to be issued,
as such Indenture is amended, modified or supplemented from time to time in
accordance with the terms thereof.
Initial Purchasers: As defined in the preamble hereto.
Interest Payment Date: As defined in the Indenture.
Issuer: As defined in the preamble hereto.
Liquidated Damages: As defined in Section 3(a) hereof.
Majority of Holders: Holders holding over 50% of the aggregate
principal amount of Debentures outstanding; provided that, for purpose of
this definition, a holder of shares of Common Stock which constitute
Transfer Restricted Securities and issued upon conversion of the Debentures
shall be deemed to hold an aggregate principal amount of Debentures (in
addition to the principal amount of Debentures held by such holder) equal
to the product of (x) the number of such shares of Common Stock held by
such holder and (y) the prevailing conversion price, such prevailing
conversion price as determined in accordance with Section 12 of the
Indenture.
NASD: National Association of Securities Dealers, Inc.
Person: An individual, partnership, corporation, unincorporated
organization, trust, joint venture or a government or agency or political
subdivision thereof.
Prospectus: The prospectus included in a Shelf Registration
Statement, as amended or supplemented by any prospectus supplement and by
all other amendments thereto, including post-effective amendments, and all
material incorporated by reference into such Prospectus.
Questionnaire Deadline: As defined in Section 2(b) hereof.
2
<PAGE>
Record Holder: With respect to any Damages Payment Date, each Person
who is a Holder on the record date with respect to the Interest Payment
Date on which such Damages Payment Date shall occur. In the case of a
Holder of shares of Common Stock issued upon conversion of the Debentures,
"Record Holder" shall mean each Person who is a Holder of shares of Common
Stock which constitute Transfer Restricted Securities on the February 1 or
August 1 immediately preceding the Damages Payment Date.
Registration Default: As defined in Section 3(a) hereof.
Sale Notice: As defined in Section 4(e) hereof.
Securities Act: Securities Act of 1933, as amended.
Shelf Filing Deadline: As defined in Section 2(a)(i) hereof.
Shelf Registration Statement: As defined in Section 2(a)(i) hereof.
Suspension Period. As defined in Section 4(b)(i) hereof.
TIA: Trust Indenture Act of 1939, as in effect on the date the
Indenture is qualified under the TIA.
Transfer Restricted Securities: Each Debenture and each share of
Common Stock issued upon conversion of Debentures until the earlier of:
(i) the date on which such Debenture or such share of Common
Stock issued upon conversion has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement;
(ii) the date on which such Debenture or such share of Common
Stock issued upon conversion is transferred in compliance with Rule 144
under the Securities Act or may be sold or transferred pursuant to Rule 144
under the Securities Act (or any other similar provision then in force); or
(iii) the date on which such Debenture or such share of Common
Stock issued upon conversion ceases to be outstanding (whether as a result
of redemption, repurchase and cancellation, conversion or otherwise).
Underwritten Registration or Underwritten Offering: A registration in
which securities of the Issuer are sold to an underwriter for reoffering to
the public.
3
<PAGE>
2. Shelf Registration.
(a) The Issuer shall:
(i) not later than 90 days after the date hereof (the "Shelf
Filing Deadline"), cause to be filed a registration statement pursuant to
Rule 415 under the Securities Act (the "Shelf Registration Statement"),
which Shelf Registration Statement shall provide for resales of all
Transfer Restricted Securities held by Holders that have provided the
information required pursuant to the terms of Section 2(b) hereof;
(ii) use its reasonable best efforts to cause the Shelf
Registration Statement to be declared effective by the Commission as
promptly as practicable, but in no event later than 180 days after the date
hereof (the "Effectiveness Target Date"); and
(iii) use its reasonable best efforts to keep the Shelf
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 4(b) hereof to the extent necessary
to ensure that (A) it is available for resales by the Holders of Transfer
Restricted Securities entitled to the benefit of this Agreement and (B)
conforms with the requirements of this Agreement and the Securities Act and
the rules and regulations of the Commission promulgated thereunder as
announced from time to time for a period (the "Effectiveness Period") of:
(1) two years following the last date of original issuance
of Debentures; or
(2) such shorter period that will terminate when (x) all
of the Holders of Transfer Restricted Securities are able to sell all
Transfer Restricted Securities immediately without restriction
pursuant to Rule 144(k) under the Securities Act or any successor rule
thereto, (y) when all Transfer Restricted Securities have ceased to be
outstanding (whether as a result of redemption, repurchase and
cancellation, conversion or otherwise) or (z) all Transfer Restricted
Securities registered under the Shelf Registration Statement have been
sold.
(b) No Holder of Transfer Restricted Securities may include any of
its Transfer Restricted Securities in the Shelf Registration Statement pursuant
to this Agreement unless such Holder furnishes to the Issuer in writing, prior
to or on the 20th Business Days after receipt of a request therefor (the
"Questionnaire Deadline"), such information as the Issuer may reasonably request
for use in connection with the Shelf Registration Statement or Prospectus or
preliminary Prospectus included therein and in any application to be filed with
or under state securities laws. In connection with all such requests for
information from Holders of Transfer Restricted Securities, the Issuer shall
notify such Holders of the requirements set forth in the preceding sentence. No
Holder of Transfer Restricted Securities shall be entitled to Liquidated Damages
pursuant to
4
<PAGE>
Section 3 hereof unless such Holder shall have provided all such reasonably
requested information prior to or on the Questionnaire Deadline. Each Holder as
to which the Shelf Registration Statement is being effected agrees to furnish
promptly to the Issuer all information required to be disclosed in order to make
information previously furnished to the Issuer by such Holder not materially
misleading.
3. Liquidated Damages.
(a) If:
(i) the Shelf Registration Statement has not been declared
effective by the Commission prior to or on the Effectiveness Target Date;
(ii) subject to the provisions of Section 4(b)(i) hereof, the
Shelf Registration Statement is filed and declared effective but, during
the Effectiveness Period and after the Effectiveness Target Date, shall
thereafter cease to be effective or fail to be usable for its intended
purpose without being succeeded within five Business Days by a post-
effective amendment to the Shelf Registration Statement or a report filed
with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act that cures such failure and, in the case of a post-effective
amendment, is itself immediately declared effective; or
(iii) prior to or on the 45th or 75th day, as the case may be,
of any Suspension Period, such suspension has not been terminated,
(each such event referred to in foregoing clauses (i) through (iii), a
"Registration Default"), the Issuer hereby agrees to pay liquidated damages
("Liquidated Damages") with respect to the Transfer Restricted Securities from
and including the day following the Registration Default to but excluding the
day on which the Registration Default has been cured:
(A) in respect of the Debentures, to each holder of
Debentures, (x) with respect to the first 90-day period during which a
Registration Default shall have occurred and be continuing, in an
amount per year equal to an additional 0.25% of the principal amount
of the then outstanding and not converted Debentures, and (y) with
respect to the period commencing on the 91st day following the day the
Registration Default shall have occurred and be continuing, in an
amount per year equal to an additional 0.50% of the principal amount
of the then outstanding and not converted Debentures; provided that in
no event shall the aggregate Liquidated Damages pursuant to this
clause (A) and clause (B) accrue at a rate per year exceeding 0.50% of
the sum of the principal amount of the then outstanding and not
converted Debentures plus the principal amount of the converted
Debentures; and
(B) in respect of any shares of Common Stock, to each
holder of shares of Common Stock issued upon conversion of Debentures,
(x) with respect to the first 90-day period in which a Registration
Default
5
<PAGE>
shall have occurred and be continuing, in an amount per year equal to
0.25% of the principal amount of the converted Debentures, and (y)
with respect to the period commencing the 91st day following the day
the Registration Default shall have occurred and be continuing, in an
amount per year equal to 0.50% of the principal amount of the
converted Debentures; provided that in no event shall the aggregate
Liquidated Damages pursuant to this clause (B) and clause (A) above
accrue at a rate per year exceeding 0.50% of the sum of the principal
amount of the outstanding and not converted Debentures plus the
principal amount of the then converted Debentures.
(b) All accrued Liquidated Damages shall be paid in arrears to Record
Holders by the Issuer on each Damages Payment Date by wire transfer of
immediately available funds or by federal funds check. Following the cure of all
Registration Defaults relating to any particular Debenture or share of Common
Stock, the accrual of Liquidated Damages with respect to such Debenture or share
of Common Stock will cease.
All obligations of the Issuer set forth in this Section 3 that are
outstanding with respect to any Transfer Restricted Security at the time such
security ceases to be a Transfer Restricted Security shall survive until such
time as all such obligations with respect to such Transfer Restricted Security
shall have been satisfied in full.
The Liquidated Damages set forth above shall be the exclusive monetary
remedy available to the Holders of Transfer Restricted Securities for such
Registration Default.
4. Registration Procedures.
(a) In connection with the Shelf Registration Statement, the Issuer
shall comply with all the provisions of Section 4(b) hereof and shall, in
accordance with Section 2, prepare and file with the Commission a Shelf
Registration Statement relating to the registration on any appropriate form
under the Securities Act.
(b) In connection with the Shelf Registration Statement and any
Prospectus required by this Agreement to permit the sale or resale of Transfer
Restricted Securities, the Issuer shall:
(i) Subject to any notice by the Issuer in accordance with
this Section 4(b) of the existence of any fact or event of the kind
described in Section 4(b)(iii)(D), use its reasonable best efforts to keep
the Shelf Registration Statement continuously effective during the
Effectiveness Period; upon the occurrence of any event that would cause the
Shelf Registration Statement or the Prospectus contained therein (A) to
contain a material misstatement or omission or (B) not be effective and
usable for resale of Transfer Restricted Securities during the
Effectiveness Period, the Issuer shall file promptly an appropriate
amendment to the Shelf Registration Statement or a report filed with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act, in
6
<PAGE>
the case of clause (A), correcting any such misstatement or omission, and,
in the case of either clause (A) or (B), use its reasonable best efforts to
cause such amendment to be declared effective and the Shelf Registration
Statement and the related Prospectus to become usable for their intended
purposes as soon as practicable thereafter. Notwithstanding the foregoing,
the Issuer may suspend the effectiveness of the Shelf Registration
Statement by written notice to the Holders for a period not to exceed an
aggregate of 45 days in any 90-day period (each such period, a "Suspension
Period") if:
(x) an event occurs and is continuing as a result of which
the Shelf Registration Statement would, in the Issuer's reasonable
judgment, 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
(y) the Issuer reasonably determines that the disclosure
of such event at such time would have a material adverse effect on the
business of the Issuer (and its subsidiaries, if any, taken as a
whole);
provided that in the event the disclosure relates to a previously
undisclosed proposed or pending material business transaction, the
disclosure of which would impede the Issuer's ability to consummate such
transaction, the Issuer may extend a Suspension Period from 45 days to 75
days; provided, however, that the Suspension Periods shall not exceed an
aggregate of 90 days in any 360-day period. Each holder, by its acceptance
of a Debenture, agrees to hold any communication by us in response to a
notice of a proposed material business transaction in confidence.
(ii) Prepare and file with the Commission such amendments and
post-effective amendments to the Shelf Registration Statement as may be
necessary to keep the Shelf Registration Statement effective during the
Effectiveness Period; cause the Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant
to Rule 424 under the Securities Act, and to comply fully with the
applicable provisions of Rules 424 and 430A under the Securities Act in a
timely manner; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by the Shelf
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers thereof set forth
in the Shelf Registration Statement or supplement to the Prospectus.
(iii) Advise the underwriter(s), if any, and, in the case of
(A), (C) and (D) below, the selling Holders promptly and, if requested by
such Persons, to confirm such advice in writing:
(A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to the
Shelf
7
<PAGE>
Registration Statement or any post-effective amendment thereto, when
the same has become effective,
(B) of any request by the Commission for amendments to the
Shelf Registration Statement or amendments or supplements to the
Prospectus or for additional information relating thereto,
(C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Shelf Registration Statement under
the Securities Act or of the suspension by any state securities
commission of the qualification of the Transfer Restricted Securities
for offering or sale in any jurisdiction, or the initiation of any
proceeding for any of the preceding purposes, or
(D) of the existence of any fact or the happening of any
event, during the Effectiveness Period, that makes any statement of a
material fact made in the Shelf Registration Statement, the
Prospectus, any amendment or supplement thereto, or any document
incorporated by reference therein untrue, or that requires the making
of any additions to or changes in the Shelf Registration Statement or
the Prospectus in order to make the statements therein not misleading.
If at any time the Commission shall issue any stop order suspending the
effectiveness of the Shelf Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending
the qualification or exemption from qualification of the Transfer
Restricted Securities under state securities or Blue Sky laws, the Issuer
shall use its reasonable best efforts to obtain the withdrawal or lifting
of such order at the earliest possible time.
(iv) Furnish to each of the selling Holders and each of the
underwriter(s), if any, before filing with the Commission, a copy of the
Shelf Registration Statement and copies of any Prospectus included therein
or any amendments or supplements to any the Shelf Registration Statement or
Prospectus (other than documents incorporated by reference after the
initial filing of the Shelf Registration Statement), which documents will
be subject to the review of such holders and underwriter(s), if any, for a
period of two Business Days, and the Issuer will not file the Shelf
Registration Statement or Prospectus or any amendment or supplement to the
Shelf Registration Statement or Prospectus (other than documents
incorporated by reference) to which a selling Holder of Transfer Restricted
Securities covered by the Shelf Registration Statement or the
underwriter(s), if any, shall reasonably object within two Business Days
after the receipt thereof. A selling Holder or underwriter, if any, shall
be deemed to have reasonably objected to such filing if the Shelf
Registration Statement, amendment, Prospectus or supplement, as applicable,
as proposed to be filed, contains a material misstatement or omission.
8
<PAGE>
(v) Subject to the execution of a confidentiality agreement
reasonably acceptable to the Issuer, make available at reasonable times for
inspection by one or more representatives of the selling Holders,
designated in writing by a Majority of Holders whose Transfer Restricted
Securities are included in the Shelf Registration Statement, any
underwriter, if any, participating in any distribution pursuant to the
Shelf Registration Statement, and any attorney or accountant retained by
the Majority of Holders or any of the underwriter(s), all financial and
other records, pertinent corporate documents and properties of the Issuer
as shall be reasonably necessary to enable them to exercise any applicable
due diligence responsibilities, and cause the Issuer's officers, directors,
managers and employees to supply all information reasonably requested by
any such representative or representatives of the selling Holders,
underwriter, attorney or accountant in connection with the Shelf
Registration Statement after the filing thereof and before its
effectiveness; provided, however, that any information designated by the
Company as confidential at the time of delivery of such information shall
be kept confidential by the recipient thereof.
(vi) If requested by any selling Holders or the underwriter(s),
if any, promptly incorporate in the Shelf Registration Statement or
Prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such selling Holders and underwriter(s), if
any, may reasonably request to have included therein, including, without
limitation: (1) information relating to the "Plan of Distribution" of the
Transfer Restricted Securities, (2) information with respect to the
principal amount of Debentures or number of shares of Common Stock being
sold (3) the purchase price being paid therefor and (4) any other terms of
the offering of the Transfer Restricted Securities to be sold in such
offering; and make all required filings of such Prospectus supplement or
post-effective amendment as soon as reasonably practicable after the Issuer
is notified of the matters to be incorporated in such Prospectus supplement
or post-effective amendment.
(vii) Furnish to each selling Holder and each of the
underwriter(s), if any, without charge, at least one copy of the Shelf
Registration Statement, as first filed with the Commission, and of each
amendment thereto (and any documents incorporated by reference therein or
exhibits thereto (or exhibits incorporated in such exhibits by reference)
as such Person may request).
(viii) Deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement
thereto as such Persons reasonably may request; subject to any notice by
the Issuer in accordance with this Section 4(b) of the existence of any
fact or event of the kind described in Section 4(b)(iii)(D), the Issuer
hereby consents to the use of the Prospectus and any amendment or
supplement thereto by each of the selling Holders and each of the
underwriter(s), if any, in connection with the offering and the sale of the
Transfer Restricted Securities covered by the Prospectus or any amendment
or supplement thereto.
9
<PAGE>
(ix) If an underwriting agreement is entered into and the
registration is an Underwritten Registration, the Issuer shall:
(A) upon request, furnish to each selling Holder and each
underwriter, if any, in such substance and scope as they may
reasonably request and as are customarily made by issuers to
underwriters in primary underwritten offerings, upon the date of
closing of any sale of Transfer Restricted Securities in an
Underwritten Registration:
(1) a certificate, dated the date of such closing,
signed by (y) the Chairman of the Board, its President or a Vice
President and (z) the Chief Financial Officer of the Issuer
confirming, as of the date thereof, such matters as such parties
may reasonably request;
(2) opinions, each dated the date of such closing, of
counsel to the Issuer covering such matters as are customarily
covered in legal opinions to underwriters in connection with
primary underwritten offerings of securities; and
(3) customary comfort letters, dated the date of such
closing, from the Issuer's independent accountants (and from any
other accountants whose report is contained or incorporated by
reference in the Shelf Registration Statement), in the customary
form and covering matters of the type customarily covered in
comfort letters to underwriters in connection with primary
underwritten offerings of securities;
(B) set forth in full in the underwriting agreement, if
any, indemnification provisions and procedures which provide rights no
less protective than those set forth in Section 6 hereof with respect
to all parties to be indemnified; and
(C) deliver such other documents and certificates as may
be reasonably requested by such parties to evidence compliance with
clause (A) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the selling
Holders pursuant to this clause (ix).
(x) Before any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the underwriter(s), if any,
and their respective counsel in connection with the registration and
qualification of the Transfer Restricted Securities under the securities or
Blue Sky laws of such jurisdictions as the selling Holders or
underwriter(s), if any, may reasonably request and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the Shelf
Registration Statement; provided, however, that the Issuer shall not be
10
<PAGE>
required (A) to register or qualify as a foreign corporation or a dealer of
securities where it is not now so qualified or to take any action that
would subject it to the service of process in any jurisdiction where it is
not now so subject or (B) to subject themselves to taxation in any such
jurisdiction if they are not now so subject.
(xi) Cooperate with the selling Holders and the underwriter(s),
if any, to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends (unless required by applicable securities laws); and
enable such Transfer Restricted Securities to be in such denominations and
registered in such names as the Holders or the underwriter(s), if any, may
reasonably request at least two Business Days before any sale of Transfer
Restricted Securities made by such underwriter(s).
(xii) Use its reasonable best efforts to cause the Transfer
Restricted Securities covered by the Shelf Registration Statement to be
registered with or approved by such other U.S. governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof or
the underwriter(s), if any, to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso in clause (x) above.
(xiii) Subject to Section 4(b)(i) hereof, if any fact or event
contemplated by Section 4(b)(iii)(D) hereof shall exist or have occurred,
use its reasonable best efforts prepare a supplement or post-effective
amendment to the Shelf Registration Statement or related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
(xiv) Provide CUSIP numbers for all Transfer Restricted
Securities not later than the effective date of the Shelf Registration
Statement and provide the Trustee under the Indenture with certificates for
the Debentures that are in a form eligible for deposit with The Depository
Trust Company.
(xv) Cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation by
any underwriter that is required to be retained in accordance with the
rules and regulations of the NASD.
(xvi) Otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission and all reporting
requirements under the rules and regulations of the Exchange Act.
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(xvii) Cause the Indenture to be qualified under the TIA not
later than the effective date of the Shelf Registration Statement required
by this Agreement, and, in connection therewith, cooperate with the trustee
and the holders of Debentures to effect such changes to the Indenture as
may be required for such Indenture to be so qualified in accordance with
the terms of the TIA; and execute and use its reasonable best efforts to
cause the trustee thereunder to execute all documents that may be required
to effect such changes and all other forms and documents required to be
filed with the Commission to enable such Indenture to be so qualified in a
timely manner.
(xviii) Cause all Transfer Restricted Securities covered by the
Shelf Registration Statement to be listed or quoted, as the case may be, on
each securities exchange or automated quotation system on which similar
securities issued by the Issuer are then listed or quoted.
(xix) Provide promptly to each Holder upon written request each
document filed with the Commission pursuant to the requirements of Section
13 and Section 15 of the Exchange Act after the effective date of the Shelf
Registration Statement.
(xx) If requested by the underwriters in an Underwritten
Offering, make appropriate officers of the Issuer available to the
underwriters for meetings with prospective purchasers of the Transfer
Restricted Securities and prepare and present to potential investors
customary "road show" material in a manner consistent with other new
issuances of other securities similar to the Transfer Restricted
Securities.
(c) Each Holder agrees by acquisition of a Transfer Restricted
Security that, upon receipt of any notice from the Issuer of the existence of
any fact of the kind described in Section 4(b)(iii)(D) hereof, such Holder will,
and will use its reasonable best efforts to cause any underwriter(s) in an
Underwritten Offering to, forthwith discontinue disposition of Transfer
Restricted Securities pursuant to the Shelf Registration Statement until:
(i) such Holder has received copies of the supplemented or
amended Prospectus contemplated by Section 4(b)(xiii) hereof; or
(ii) such Holder is advised in writing (the "Advice") by the
Issuer that the use of the Prospectus may be resumed, and has received
copies of any additional or supplemental filings that are incorporated by
reference in the Prospectus.
If so directed by the Issuer, each Holder will deliver to the Issuer (at the
Issuer's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of such notice of suspension.
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(d) Each Holder who intends to be named as a selling Holder in the
Shelf Registration Statement shall furnish to the Issuer in writing, within 20
Business Days after receipt of a request therefor as set forth in a
questionnaire, such information regarding such Holder and the proposed
distribution by such Holder of its Transfer Restricted Securities as the Issuer
may reasonably request for use in connection with the Shelf Registration
Statement or Prospectus or preliminary Prospectus included therein. (The form of
the questionnaire is attached hereto as Exhibit A.) Holders that do not complete
the questionnaire and deliver it to the Issuer shall not be named as selling
securityholders in the Prospectus or preliminary Prospectus included in the
Shelf Registration Statement and therefore shall not be permitted to sell any
Transfer Restricted Securities pursuant to the Shelf Registration Statement.
Each Holder who intends to be named as a selling Holder in the Shelf
Registration Statement shall promptly furnish to the Issuer in writing such
other information as the Issuer may from time to time reasonably request in
writing.
(e) Upon the effectiveness of the Shelf Registration Statement, each
Holder shall notify the Issuer at least three Business Days prior to any
intended distribution of Transfer Restricted Securities pursuant to the Shelf
Registration Statement (a "Sale Notice"), which notice shall be effective for
five Business Days. Each Holder of this Security, by accepting the same, agrees
to hold any communication by the Company in response to a Sale Notice in
confidence.
5. Registration Expenses.
(a) All expenses incident to the Issuer's performance of or
compliance with this Agreement shall be borne by the Issuer regardless of
whether a Shelf Registration Statement becomes effective, including, without
limitation:
(i) all registration and filing fees and expenses (including
filings made by any Initial Purchasers or Holders with the NASD);
(ii) all fees and expenses of compliance with federal
securities and state Blue Sky or securities laws;
(iii) all expenses of printing (including printing of
Prospectuses and certificates for the Common Stock to be issued upon
conversion of the Debentures), messenger and delivery services and
telephone;
(iv) all fees and disbursements of counsel to the Issuer and,
subject to Section 5(b) below, the Holders of Transfer Restricted
Securities;
(v) all application and filing fees in connection with
listing (or authorizing for quotation) the Common Stock on a national
securities exchange or automated quotation system pursuant to the
requirements hereof; and
(vi) all fees and disbursements of independent certified
public accountants of the Issuer (including the expenses of any special
audit and comfort letters required by or incident to such performance).
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The Issuer shall bear its internal expenses (including, without
limitation, all salaries and expenses of their officers and employees performing
legal, accounting or other duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Issuer.
(b) In connection with the Shelf Registration Statement required by
this Agreement, the Issuer shall reimburse the Initial Purchasers and the
Holders of Transfer Restricted Securities being registered pursuant to the Shelf
Registration Statement, as applicable, for the reasonable fees and disbursements
of not more than one counsel, which shall be Weil, Gotshal & Manges LLP, or such
other counsel as may be chosen by a Majority of Holders for whose benefit the
Shelf Registration Statement is being prepared and which shall be reasonably
acceptable to the Issuer. The Issuer shall not be required to pay any
underwriter discount, commission or similar fees related to the sale of the
Securities.
6. Indemnification and Contribution.
(a) The Issuer and Primus Telecommunications, Inc., a Delaware
corporation, and Primus Telecommunications (Australia) Pty. Ltd., a company
organized under the laws of Australia, and Primus Telecommunications Pty. Ltd.,
a company organized under the laws of Australia (together, the "Principal
Subsidiaries"), jointly and severally, shall indemnify and hold harmless each
Holder, such Holder's directors, officers and employees and each person, if any,
who controls such Holder within the meaning of Section 15 of the Securities Act
(each, an "Indemnified Holder"), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof (including, but
not limited to, any loss, claim, damage, liability or action relating to resales
of the Transfer Restricted Securities), to which such Indemnified Holder may
become subject, under the Securities Act or otherwise, insofar as any such loss,
claim, damage, liability or action arises out of, or is based upon:
(i) any untrue statement or alleged untrue statement of a
material fact contained in (A) the Shelf Registration Statement or
Prospectus or any amendment or supplement thereto or (B) any blue sky
application or other document or any amendment or supplement thereto
prepared or executed by the Issuer (or based upon written information
furnished by or on behalf of the Issuer expressly for use in such blue sky
application or other document or amendment on supplement) filed in any
jurisdiction specifically for the purpose of qualifying any or all of the
Transfer Restricted Securities under the securities law of any state or
other jurisdiction (such application or document being hereinafter called a
"Blue Sky Application"); or
(ii) the omission or alleged omission to state therein any
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading,
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and shall reimburse each Indemnified Holder promptly upon demand for any legal
or other expenses reasonably incurred by such Indemnified Holder in connection
with investigating or defending or preparing to defend against any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
however, that the Issuer shall not be liable in any such case to the extent that
any such loss, claim, damage, liability or action arises out of, or is based
upon, any untrue statement or alleged untrue statement or omission or alleged
omission made in the Shelf Registration Statement or Prospectus or amendment or
supplement thereto or Blue Sky Application in reliance upon and in conformity
with written information furnished to the Issuer by or on behalf of any Holder
(or its related Indemnified Holder) specifically for use therein; provided
further that as to any preliminary Prospectus, this indemnity agreement shall
not inure to the benefit of any Indemnified Holder or any officer, employee,
director or controlling person of that Indemnified Holder on account of any
loss, claim, damage, liability or action arising from the sale of the Transfer
Restricted Securities sold pursuant to the Shelf Registration Statement to any
person by such Indemnified Holder if (i) that Indemnified Holder failed to send
or give a copy of the Prospectus, as the same may be amended or supplemented, to
that person within the time required by the Securities Act and (ii) the untrue
statement or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact in such preliminary Prospectus was corrected
in the Prospectus or a supplement or amendment thereto, as the case may be,
unless in each case, such failure resulted from noncompliance by the Issuer with
Section 4. The foregoing indemnity agreement is in addition to any liability
which the Issuer and the Principal Subsidiaries may otherwise have to any
Indemnified Holder.
(b) Each Holder, severally and not jointly, shall indemnify and hold
harmless the Issuer, its directors, officers and employees and each person, if
any, who controls the Issuer within the meaning of Section 15 of the Securities
Act, from and against any loss, claim, damage or liability, joint or several, or
any action in respect thereof, to which the Issuer or any such officer, employee
or controlling person may become subject, insofar as any such loss, claim,
damage or liability or action arises out of, or is based upon:
(i) any untrue statement or alleged untrue statement of any
material fact contained in the Shelf Registration Statement or Prospectus
or any amendment or supplement thereto or any Blue Sky Application; or
(ii) the omission or the alleged omission to state therein any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading,
but in each case 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 Issuer by or on behalf of
such Holder (or its related Indemnified Holder) specifically for use therein,
and shall reimburse the Issuer and any such director, officer, employee or
controlling person promptly upon demand for any legal or other expenses
reasonably incurred by the Issuer and the Principal Subsidiaries or
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any such officer, employee or controlling person in connection with
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action as such expenses are incurred. The foregoing
indemnity agreement is in addition to any liability which any Holder may
otherwise have to the Issuer and any such director, officer, employee or
controlling person.
(c) Promptly after receipt by an indemnified party under this Section
6 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 6, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 6 except to the extent it has
been materially prejudiced by such failure and, provided, further, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 6.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
the indemnified party shall have the right to employ counsel to represent
jointly the indemnified party and its respective directors, employees, officers
and controlling persons who may be subject to liability arising out of any claim
in respect of which indemnity may be sought by the indemnified party against the
indemnifying party under this Section 6 if such indemnified party shall have
been advised in writing that the representation of such indemnified party and
those directors, employees, officers and controlling persons by the same counsel
would be inappropriate under applicable standards of professional conduct due to
actual or potential differing interests between them, and in that event the fees
and expenses of such separate counsel shall be paid by the indemnifying party.
It is understood that the indemnifying party shall not be liable for the fees
and expenses of more than one separate firm (in addition to local counsel in
each jurisdiction) for all indemnified parties in connection with any proceeding
or related proceedings. Each indemnified party, as a condition of the indemnity
agreements contained in Sections 6(a) and 6(b), shall use its reasonable best
efforts to cooperate with the indemnifying party in the defense of any such
action or claim. No indemnifying party shall:
(i) without the prior written consent of the indemnified
parties (which consent shall not be unreasonably withheld) settle or
compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or
action) unless such settlement,
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compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action,
suit or proceeding, or
(ii) be liable for any settlement of any such action
effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if
there be a final judgment for the plaintiff in any such action, the
indemnifying party agrees to indemnify and hold harmless any
indemnified party from and against any loss of liability by reason of
such settlement or judgment in accordance with this Section 6.
(d) If the indemnification provided for in this Section 6 shall
for any reason be unavailable or insufficient to hold harmless an indemnified
party under Section 6(a) or 6(b) in respect of any loss, claim, damage or
liability (or action in respect thereof) referred to therein, each indemnifying
party shall, in lieu of indemnifying such indemnified party, contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability (or action in respect thereof, in such proportion as
is appropriate to reflect the relative fault of the Company and the Principal
Subsidiaries, on the one hand, and the Holders, on the other hand, with respect
to the statements or omissions which resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant equitable
considerations. The relative fault 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 the Company and the Principal Subsidiaries, on the one hand, or the
Holders, on the other hand, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
statement or omission. Each of the Company and the Principal Subsidiaries and
each Holder agrees that it would not be just and equitable if contributions
pursuant to this Section 6(d) were to be determined by pro rata allocation (even
if either the Holders or the Company and the Principal Subsidiaries, as the case
may be, were treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section 6(d) shall be deemed to include, subject to
the limitations set forth above, any legal or other 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 indemnify or contribute any amount in excess of the amount
by which the total price at which the Transfer Restricted Securities purchased
by it were resold exceeds the amount of any damages which such Holder has
otherwise paid or become liable to pay by reason of any 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 remedies provided for in this Section 6 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity. The Holders' obligations
to contribute as provided in this Section 6(d) are several and not joint.
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(e) The indemnity and contribution provisions contained in this
Section 6 shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of any Initial Purchaser, any Holder or any person controlling any Initial
Purchaser or any Holder, or by or on behalf of the Company, its officers or
directors or any person controlling the Company, and (iii) any sale of Transfer
Restricted Securities pursuant to a Shelf Registration Statement.
7. Rule 144A. In the event the Issuer is not subject to Section
13 or 15(d) of the Exchange Act, the Issuer hereby agrees with each Holder, for
so long as any Transfer Restricted Securities remain outstanding, to make
available to any Holder or beneficial owner of Transfer Restricted Securities in
connection with any sale thereof and any prospective purchaser of such Transfer
Restricted Securities from such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Securities Act in order to permit resales
of such Transfer Restricted Securities pursuant to Rule 144A.
8. Participation in Underwritten Registrations. No Holder may
participate in any Underwritten Registration hereunder unless such Holder:
(i) agrees to sell such Holder's Transfer Restricted
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 reasonable questionnaires,
powers of attorney, indemnities, underwriting agreements, lock-up
letters and other documents reasonably required under the terms of such
underwriting arrangements.
Selection of Underwriters. The Majority of Holders of Transfer
Restricted Securities covered by the Shelf Registration Statement who desire to
do so may sell such Transfer Restricted Securities in an Underwritten Offering.
In any such Underwritten Offering, the investment banker or investment bankers
and manager or managers that will administer the offering will be selected by a
Majority of Holders whose Transfer Restricted Securities are included in such
offering; provided, that such investment bankers and managers must be reasonably
satisfactory to the Issuer.
9. Miscellaneous.
(a) Remedies. The Issuer acknowledges and agrees that any failure
by the Issuer to comply with its obligations under Section 2 hereof may result
in material irreparable injury to the Initial Purchasers or the Holders for
which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Initial Purchasers or any Holder may obtain such relief as may be
required to specifically enforce the Issuer's obligations under Section 2
hereof. The Issuer further agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
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(b) No Inconsistent Agreements. The Issuer will not, on or after
the date of this Agreement, enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof. In addition, the
Issuer shall not grant to any of its security holders (other than the holders of
Transfer Restricted Securities in such capacity) the right to include any of its
securities in the Shelf Registration Statement provided for in this Agreement
other than the Transfer Restricted Securities. Other than as disclosed in the
Issuer's Offering Memorandum dated February 17, 2000, the Issuer has not
previously entered into any agreement (which has not expired or been terminated)
granting any registration rights with respect to its securities to any Person
which rights conflict with the provisions hereof.
(c) Adjustments Affecting Transfer Restricted Securities. The
Issuer shall not, directly or indirectly, take any action with respect to the
Transfer Restricted Securities as a class that would adversely affect the
ability of the Holders of Transfer Restricted Securities to include such
Transfer Restricted Securities in a registration undertaken pursuant to this
Agreement.
(d) Amendments and Waivers. This Agreement may not be amended,
modified or supplemented, and waivers or consents to or departures from the
provisions hereof may not be given, unless the Issuer has obtained the written
consent of a Majority of Holders; provided, however, that no amendment,
modification, supplement, waiver or consent to or departure from the provisions
of Section 6 that materially and adversely affects a Holder hereof shall be
effective as against any such Holder of Transfer Restricted Securities unless
consented to in writing by such Holder.
(e) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, first-class
mail (registered or certified, return receipt requested), telex, telecopier, or
air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the
records of the registrar under the Indenture or the transfer agent of
the Common Stock, as the case may be; and
(ii) if to the Issuer or any of the Principal Subsidiaries:
1700 Old Meadow Road
McLean, VA 22102
Attention: David Slotkin, Esq.
Facsimile: (703) 902-2814
With a copy to:
Simpson Thacher & Bartlett
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425 Lexington Avenue
New York, NY 10017
Attention: Edward P. Tolley, Esq.
Facsimile: (212) 455-2502
(iii) if to the Initial Purchasers:
c/o Lehman Brothers Inc.
Three World Financial Center
New York, NY 10285
Attention: Syndicate Department
Facsimile: (212) 528-6395.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt acknowledged, if telecopied; and on
the next Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee at
the address specified in the Indenture.
A document or notice shall be deemed to have been furnished to
the Holders of the Transfer Restricted Securities if it is provided to the
registered holders of the Transfer Restricted Securities at the address set
forth in clause (1) above.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; provided,
however, that (i) nothing contained herein shall be deemed to permit any
assignment, transfer or other disposition of Transfer Restricted Securities in
violation of the terms of the Purchase Agreement or the Indenture and (ii) this
Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities from such Holder. If any transferee of any Holder
shall acquire Transfer Restricted Securities, in any manner, whether by
operation of law or otherwise, such Transfer Restricted Securities shall be held
subject to all of the terms of this Agreement, and by taking and holding such
Transfer Restricted Securities such person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement and such Person shall be entitled to receive the benefits hereof. The
Initial Purchasers (in their capacity as Initial Purchasers) shall have no
liability or obligation to the Issuer with respect to any failure by a Holder to
comply with, or breach by any Holder of, any of the obligations of such Holder
under this Agreement.
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(g) Purchases and Sales of Debentures. The Company shall not, and
shall use its reasonable best efforts to cause its affiliates (as defined in
Rule 405 under the Securities Act) not to, purchase and then resell or otherwise
transfer any Debentures.
(h) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Issuer and Principal
Subsidiaries, on the one hand, and the Initial Purchasers, on the other hand,
and such Initial Purchasers shall have the right to enforce such agreements
directly to the extent they deem such enforcement necessary or advisable to
protect their rights or the rights of Holders hereunder.
(i) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(j) Securities Held by the Issuer or Their Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Transfer Restricted
Securities is required hereunder, Transfer Restricted Securities held by the
Issuer or its "affiliates" (as such term is defined in Rule 405 under the
Securities Act) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
(k) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(l) Governing Law. This Agreement shall be governed by, and construed
in accordance with, the law of the State of New York.
(m) Consent to Jusisdiction. Each party irrevocably agrees that any
legal suit, action or proceeding arising out of or based upon this Agreement or
the transactions contemplated hereby ("Related Proceedings") may be instituted
in the federal courts of the United States of America located in the City of New
York or the courts of the State of New York in each case located in the Borough
of Manhattan in the City of New York (collectively, the "Specified Courts"), and
irrevocably submits to the exclusive jurisdiction (except for proceedings
instituted in regard to the enforcement of a judgment of any such court (a
"Related Judgment"), as to which such Jurisdiction is non-exclusive) of such
courts in any such suit, action or proceeding. The parties further agree that
service of any process, summons, notice or document by mail to such party's
address set forth above shall be effective service of process for any lawsuit,
action or other proceeding brought in any such court. The parties hereby
irrevocably and unconditionally waive any objection to the laying of venue of
any lawsuit, action or other proceeding in the Specified Courts, and hereby
further irrevocably and unconditionally waive and agree not to plead or claim in
any such court that any such lawsuit, action or other proceeding brought in any
such court has been brought in an inconvenient forum. Each of Primus
Telecommunications (Australia) Pty. Ltd. and Primus Telecommunications Pty. Ltd.
hereby irrevocably appoints CT Corporation System, which currently maintains a
New
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York City office at 1633 Broadway, New York, New York 10019, United States
of America, as its agent to receive service of process or other legal summons
for purposes of any such action or proceeding that may be instituted in any
state or federal court in the City and State of New York.
(n) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
(o) Entire Agreement. This Agreement. together with the Purchase
Agreement and the Indenture, is intended by the parties as a final expression of
their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein with respect to
the registration rights granted by the Issuer with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
(p) Required Consents. Whenever the consent or approval of Holders of
a specified percentage of Transfer Restricted Securities is required hereunder,
Transfer Restricted Securities held by the Issuer or its affiliates (as such
term is defined in Rule 405 under the Securities Act) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.
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In Witness Whereof, the parties have executed this Agreement as of the
date first written above.
Primus Telecommunications
Group, Incorporated
By:______________________________
Name: K. Paul Singh
Title: President and Chief Executive
Officer
Primus Telecommunications,
Inc.
By:______________________________
Name: K. Paul Singh
Title: President
Primus Telecommunications
(Australia) Pty. Ltd.
By:______________________________
Name: K. Paul Singh
Title: Director
Primus Telecommunications
Pty. Ltd.
By:______________________________
Name: K. Paul Singh
Title: Director
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Lehman Brothers Inc.
Merrill Lynch, Pierce Fenner &
Smith Incorporated
Morgan Stanley & Co.
Incorporated
By: Lehman Brothers Inc.
By:___________________________
Authorized Representative
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Exhibit A
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
NOTICE OF REGISTRATION STATEMENT
AND
SELLING SECURITYHOLDER ELECTION AND QUESTIONNAIRE
__________________________
NOTICE
Primus Telecommunications Group, Incorporated (the "Company")
has filed, or intends shortly to file, with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 or such other
Form as may be available (the "Shelf 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 % Convertible Subordinated Debentures
due 2007 (CUSIP No.________) (the "Debentures"), and common stock, par value $
per share, issuable upon conversion thereof (the "Shares" and together with the
Debentures, the "Transfer Restricted Securities") in accordance with the terms
of the Registration Rights Agreement, dated as of ________ __, 2000 (the
"Registration Rights Agreement") between the Company and Lehman Brothers Inc.,
and ___________. A copy of the Registration Rights Agreement is available from
the Company. All capitalized terms not otherwise defined herein have the meaning
ascribed thereto in the Registration Rights Agreement.
To sell or otherwise dispose of any Transfer Restricted
Securities pursuant to the Shelf Registration Statement, a beneficial owner of
Transfer Restricted Securities generally will be required to be named as a
selling securityholder in the related Prospectus, deliver a Prospectus to
purchasers of Transfer Restricted Securities, be subject to certain civil
liability provisions of the Securities Act and be bound by those provisions of
the Registration Rights Agreement applicable to such beneficial owner (including
certain indemnification rights and obligations, as described below). To be
included in the Shelf Registration Statement, this Election and Questionnaire
must be completed, executed and delivered to the Company at the address set
forth herein for receipt PRIOR TO OR ON [insert date that is 20 business days
from the notice date] (the "Election and Questionnaire Deadline"). Beneficial
owners that do not complete and return this Election and Questionnaire prior to
the Election and Questionnaire Deadline and deliver it to the Company as
provided below will not be named as selling securityholders in the prospectus
and therefore will not be permitted to sell any Transfer Restricted Securities
pursuant to the Shelf Registration Statement.
A-1
<PAGE>
Certain legal consequences arise from being named as a selling
securityholder in the Shelf Registration Statement and the related Prospectus.
Accordingly, holders and beneficial owners of Transfer Restricted 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 Shelf
Registration Statement and the related Prospectus.
ELECTION
The undersigned holder (the "Selling Securityholder") of
Transfer Restricted Securities hereby elects to include in the Shelf
Registration Statement the Transfer Restricted Securities beneficially owned by
it and listed below in Item 3 (unless otherwise specified under Item 3). The
undersigned, by signing and returning this Election and Questionnaire,
understands that it will be bound with respect to such Transfer Restricted
Securities by the terms and conditions of this Election and Questionnaire and
the Registration Rights Agreement.
Pursuant to the Registration Rights Agreement, the Selling
Securityholder has agreed to indemnify and hold harmless the Company, the
Company's directors, the Company's officers who sign the Shelf Registration
Statement and each person, if any, who controls the Company within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act,
from and against certain losses arising in connection with statements concerning
the Selling Securityholder made in the Shelf Registration Statement or the
related Prospectus in reliance upon the information provided in this Election
and Questionnaire.
The Selling Securityholder hereby provides the following
information to the Company and represents and warrants that such information is
accurate and complete:
QUESTIONNAIRE
1. (a) Full legal name of Selling Securityholder:
(b) Full legal name of registered holder (if not the same as (a)
above) through which Transfer Restricted Securities listed in
(3) below are held:
(c) Full legal name of DTC participant (if applicable and if not
the same as (b) above) through which Transfer Restricted
Securities listed in (3) are held:
2. Address for notices to Selling Securityholders:
Telephone:
Fax:
Contact Person:
A-2
<PAGE>
3. Beneficial ownership of Transfer Restricted Securities:
(a) Type of Transfer Restricted Securities beneficially owned, and
principal amount of Debentures or number of shares of Common
Stock, as the case may be, beneficially owned:
(b) CUSIP No(s). of such Transfer Restricted Securities
beneficially owned:
4. Beneficial ownership of the Issuer's securities owned by the Selling
Securityholder:
Except as set forth below in this Item (4), the undersigned is not the
beneficial or registered owner of any securities of the Issuer other
than the Transfer Restricted Securities listed above in Item (3)
("Other Securities").
(a) Type and amount of Other Securities beneficially owned by the
Selling Securityholder:
(b) CUSIP No(s). of such Other Securities beneficially owned:
5. Relationship with the Issuer
Except as set forth below, neither the undersigned 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 Issuer (or their predecessors or affiliates)
during the past three years.
State any exceptions here:
6. Plan of Distribution
Except as set forth below, the undersigned (including its donees or
pledgees) intends to distribute the Transfer Restricted Securities
listed above in Item (3) pursuant to the Shelf Registration Statement
only as follows (if at all). Such Transfer Restricted Securities may be
sold from time to time directly by the undersigned or, alternatively,
through underwriters, broker-dealers or agents. If the Transfer
Restricted Securities are sold through underwriters or broker-dealers,
the Selling Securityholder will be responsible for underwriting
discounts or commissions or agent's commissions. Such Transfer
Restricted Securities may be
A-3
<PAGE>
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):
on any national securities exchange or quotation
service on which the Transfer Restricted Securities may be listed or
quoted at the time of sale;
in the over-the-counter market;
in transactions otherwise than on such exchanges or
services or in the over-the-counter market; or
through the writing of options.
In connection with sales of the Transfer Restricted Securities or
otherwise, the undersigned may enter into hedging transactions with
broker-dealers, which may in turn engage in short sales of the Transfer
Restricted Securities and deliver Transfer Restricted Securities to
close out such short positions, or loan or pledge Transfer Restricted
Securities to broker-dealers that in turn may sell such securities.
State any exceptions here:
Note: In no event will such method(s) of distribution take the form of
an underwritten offering of the Transfer Restricted Securities without the prior
agreement of the Issuer.
The undersigned acknowledges that it understands its obligation to
comply with the provisions of the Exchange Act and the rules and regulations
promulgated thereunder relating to stock manipulation, particularly Regulation M
thereunder (or any successor rules or regulations), in connection with any
offering of Transfer Restricted Securities pursuant to the Shelf Registration
Statement. The undersigned agrees that neither it nor any person acting on its
behalf will engage in any transaction in violation of such provisions.
The Selling Securityholder hereby acknowledges its obligations under
the Registration Rights Agreement to indemnify and hold harmless certain persons
as set forth therein.
Pursuant to the Registration Rights Agreement, the Issuer has agreed
under certain circumstances to indemnify the Selling Securityholders against
certain liabilities.
In accordance with the undersigned's obligation under the Registration
Rights Agreement to provide such information as may be required by law for
inclusion in the
A-4
<PAGE>
Shelf Registration Statement, the undersigned agrees to promptly notify the
Issuer of any inaccuracies or changes in the information provided herein that
may occur subsequent to the date hereof at any time while the Shelf Registration
Statement remains effective. All notices hereunder and pursuant to the
Registration Rights Agreement shall be made in writing at the address set forth
below.
By signing below, the undersigned 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 Shelf Registration Statement and the
related Prospectus. The undersigned understands that such information will be
relied upon by the Issuer in connection with the preparation or amendment of the
Shelf Registration Statement and the related Prospectus.
A-5
<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:
Beneficial Owner
By: _______________________________
Name:
Title:
Please return the completed and executed Notice and Questionnaire to Primus
Telecommunications Group, Incorporated at:
Primus Telecommunications Group, Incorporated
1700 Old Meadow Road
McLean, VA 22102
Attention: David Slotkin
A-6
<PAGE>
EXHIBIT 10.19
AGREEMENT FOR THE RECIPROCAL PURCHASE OF CAPACITY ON THE
SYSTEMS OF EACH OF PRIMUS TELECOMMUNICATIONS GROUP
INCORPORATED AND GLOBAL CROSSING HOLDINGS LTD. EFFECTIVE AS OF
THE 24TH DAY OF MAY, 1999 (THE "EFFECTIVE DATE").
Primus Telecommunication Group Incorporated ("Primus") and Global Crossing
Holdings Ltd. ("Global Crossing") desire to make a reciprocal purchase
commitment of facilities owned and/or operated by the other, on the terms and
conditions contained herein. As used herein, (i) the Global Crossing System
shall mean POP to POP (including backhaul) fiber connectivity on the Global
Crossing Network as depicted on the Global Crossing System Network Map attached
hereto as Annex A, and (ii) the PRIMUS Satellite System shall mean the earth
-------
station to earth station satellite network of PRIMUS as depicted on the PRIMUS
Satellite Network Map attached hereto as Annex B. The Ready for Service dates
-------
(the "RFS Dates") of each component of the Global Crossing System Network Map
and the PRIMUS Satellite Network Map are depicted on Annex A and Annex B,
------- -------
respectively.
1. PURCHASE AGREEMENT
(a) PRIMUS will endeavor to purchase MCUs on the Global Crossing System
in an aggregate amount of up to US $50,000,000 (the "Minimum Capacity
Commitment") during the period commencing on the Effective Date and ending
forty-eight (48) months later (the "Minimum Capacity Purchase Period"). In
order to fulfill the Minimum Capacity Commitment, PRIMUS shall endeavor to
purchase MCUs on the Global Crossing System in the average amount of $12,500,000
during each annual period (which shall mean, for the first such period, the
period beginning on the Effective Date and ending on December 31, 1999, and
thereafter each successive twelve (12) month period occurring during the term of
this Agreement). Such average amount shall be determined on a rolling two year
basis. For example, if during the first annual period PRIMUS purchases
$18,000,000 of capacity, then during the second annual period it need only
purchase $7,000,000 of capacity; however, if during the first annual period
-------
PRIMUS purchases only $7,000,000 of capacity, then during the second annual
period PRIMUS must purchase at least $18,000,000 of capacity. Notwithstanding
the foregoing and subject to capacity availability and Section 1(b) hereof,
PRIMUS hereby agrees to purchase:(i) a minimum of $9,375,000 of capacity in the
first eighteen (18) months after the Effective Date, $6,250,000 of capacity in
each of the following two years and $3,125,000 in the remaining six (6) months
of the Minimum Capacity Purchase Period; (ii) a minimum aggregate of $25,000,000
of capacity over the Minimum Capacity Purchase Period, and an OC-3 from New York
to Los Angeles at a purchase price of $6,332,000, together with a maintenance
fee of $9,842 per month, on or before May 31, 1999. PRIMUS may resell any
capacity purchased hereunder to other third parties, except that PRIMUS will not
be permitted to resell pure capacity at the STM-1 level except to its affiliates
or if such capacity is part of a bundled service offering, for example, Internet
or data services. Notwithstanding the foregoing, however, PRIMUS will be
permitted to resell capacity at the STM-1 level three (3) years after payment
for such capacity.
(b) The above commitment shall be subject to the following terms and
conditions:--
(i) if Global Crossing's RFS Dates (as depicted on Annex A) are
delayed by more than ninety (90) days and PRIMUS must acquire
fiver optic capacity during or after said ninety (90) days, the
Minimum Capacity Commitment will be reduced by the amount of
PRIMUS' capacity purchase. If this event should occur, and Global
Crossing shall have notified PRIMUS within one hundred and twenty
(120) days of the anticipated RFS date, Global Crossing will have
the right to obtain interim fiber optic capacity of equal
specifications on PRIMUS' behalf on a system acceptable to PRIMUS
in its sole but reasonable commercial discretion PRIMUS and
convert to Global Crossing's capacity on the RFS Date of the
Global Crossing System at no additional cost to PRIMUS and with
no interruption to PRIMUS' business; and
(ii) For PRIMUS' fiber optic capacity needs during the earlier of the
term of this Agreement or when the Primus Minimum Capacity
Commitment has been met, Global Crossing shall
<PAGE>
have the right to match any other offer received by PRIMUS. Until such
time as the Minimum Capacity Commitment is met, PRIMUS agrees to accept
Global Crossing's offer if such offer is equal to or below the price of
the competitive offer and Global Crossing makes its offer within five (5)
business days' after receiving written notice from PRIMUS of a competing
offer. In the event Global Crossing declines to provide a best and final
offer or provides an offer which is not equal to or below the price of
the competing offer, the Minimum Capacity Commitment will be reduced by
the amount of the capacity purchased by PRIMUS on the competing system.
Global Crossing shall provide all quotations for capacity on a city POP
to city POP basis, and shall offer PRIMUS lease financing on all capacity
purchases on substantially the same terms and conditions as contained in
that certain Atlantic Crossing/AC-1 Submarine Cable System Capacity
Purchase Agreement between PRIMUS and Atlantic Crossing Ltd. dated
December 17, 1998 (the "Original AC-1 Agreement"), except that the
interest rate shall be adjusted to reflect then current market rates.
(c) Global Crossing's pricing of MCUs of fiber optic capacity purchased by
PRIMUS under this Agreement shall be at the lower of (i) the best "Tier 3"
Published Prices available as at the date of this Agreement, (ii) the best
available "Tier 3" Published Prices thirty (30) days prior to activation of
the specific fiber optic cable, (iii) the best available "Tier 3" Published
Prices as of the date of purchase by PRIMUS, or (iv) the price of a
competitive offer pursuant to Section 1(b)(ii) above if Global Crossing
chooses to match such competitive offer. In the event Global Crossing
adopts a measure of pricing which is more preferential than the "Tier 3"
pricing stated above, such other measure shall be offered to PRIMUS
pursuant to this Section 1(c), but always subject to the capacity
commitment made by PRIMUS at that time. For the purposes of this Section
1(c), Published Prices shall mean the prices set forth on Annex C, as it
may be supplemented from time to time to include new Systems and to reflect
any price reductions.
(d) Global Crossing shall notify PRIMUS in writing when approximately one-half
of the capacity then available on any particular cable system is sold so
that PRIMUS will have the ability to purchase capacity prior to any
shortages.
(e) Purchases of capacity on any cable system pursuant to this Agreement shall
be effected by PRIMUS executing, delivering and complying with a Capacity
Purchase Agreement ("CPA") with the particular System Company, in a form
substantially similar to the Original AC-1 Agreement.
(f) Global Crossing will endeavor to purchase satellite capacity in the PRIMUS
Satellite System in an aggregate amount of up to US $25,000,000 (the
"Minimum Satellite Capacity Commitment") during the period commencing on
the Effective Date and ending forty-eight (48) months later ("Minimum
Satellite Capacity Purchase Period"). In order to fulfill the Minimum
Satellite Capacity Commitment, Global Crossing shall endeavor to purchase
satellite capacity in the average amount of $6,250,000 during each annual
period. Such average amount shall be determined on a rolling two-year basis
using the same formula as specified in Section 1(a) above. Notwithstanding
the foregoing and subject to capacity availability and the other terms and
conditions contained herein, Global Crossing hereby agrees to purchase (i)
a minimum of $2,500,000 of satellite capacity in each year, and (ii) a
minimum aggregate of $10,000,000 of satellite capacity over the Minimum
Satellite Capacity Purchase Period. Global Crossing may resell any
satellite capacity purchased hereunder to other third parties.
(g) The above commitment shall be subject to the following terms and
conditions:
(i) if PRIMUS' RFS Dates (as depicted in Annex B) are delayed by more than
ninety (90) days and Global Crossing must acquire satellite capacity
during or after said ninety (90) days, the Minimum Satellite Capacity
Commitment will be reduced by the amount of Global Crossing's satellite
capacity purchase. If this event should occur, and PRIMUS shall have
notified Global Crossing within one hundred and twenty (120) days of
the anticipated RFS Date, PRIMUS will have the right to obtain interim
satellite capacity on Global Crossing's behalf on a system acceptable
to Global Crossing in its sole but reasonable commercial discretion and
convert to PRIMUS' capacity at the RFS Date at no additional cost to
Global Crossing and with no interruption to Global Crossing's business;
and
<PAGE>
(ii) For Global Crossing's satellite capacity needs during the earlier
of the term of this Agreement or when the Global Crossing Minimum
Satellite Capacity Commitment has been met, PRIMUS shall have the
right to match any other offer received by Global Crossing. Until
such time as the Minimum Satellite Capacity Commitment has been
met, Global Crossing agrees to accept PRIMUS' offer if such offer
is equal to or below the price of the competitive offer and PRIMUS
makes its offer within five (5) business days' after receiving
written notice from Global Crossing of a competing offer. In the
event PRIMUS declines to provide a best and final offer or
provides an offer which is not equal to or below the price of the
competing offer, the Minimum Satellite Capacity Commitment will be
reduced by the amount of the capacity purchased by Global Crossing
on the competing system.
2. Representations
---------------
(a) Global Crossing hereby represents and warrants to PRIMUS that (i) Global
Crossing is a company duly organized and validly existing under the laws
of Bermuda; (ii) the execution, delivery and performance of this
Agreement by Global Crossing has been duly authorized by all necessary
corporate action on the part of Global Crossing and this Agreement is a
valid, binding and enforceable obligation of Global Crossing enforceable
with its terms and (iii) the execution, delivery and performance of this
Agreement by Global Crossing does not violate, conflict with or
constitute a breach of, the organizational documents or any order,
decree or judgment of any court, tribunal or governmental authority
binding on Global Crossing.
(b) PRIMUS hereby represents and warrants Global Crossing that (i) PRIMUS is
a corporation duly organized and validly existing under the laws of the
State of Delaware; (ii) the execution, delivery and performance of this
Agreement by PRIMUS has been duly authorized by all necessary corporate
action on the part of PRIMUS and this Agreement is a valid, binding and
enforceable obligation of PRIMUS enforceable in accordance with its
terms; and (iii) the execution, delivery and performance of this
Agreement by PRIMUS does not violate, conflict with or constitute a
breach of, the organizational documents or any order, decree or judgment
of any court, tribunal or governmental authority binding on PRIMUS.
3. SETTLEMENT OF DISPUTES
----------------------
(a) The Parties shall endeavor to settle amicably by mutual discussions any
disputes, differences, or claims whatsoever related to this Agreement.
(b) Failing such amicable settlement, any controversy, claim or dispute
arising under or relating to this Agreement, including the existence,
validity, interpretation, performance, termination or breach thereof,
shall finally be settled by arbitration in accordance with the
International Arbitration Rules of the American Arbitration Association
("AAA"). There shall be three (3) arbitrators (the "Arbitration
Tribunal"), the first of which shall be appointed by the claimant in its
notice of arbitration, the second of which shall be appointed by the
respondent within thirty (30) days of the appointment of the first
arbitrator and the third of which shall be jointly appointed by the
party-appointed arbitrators within thirty (30) days thereafter. The
language of the arbitration shall be English. The Arbitration Tribunal
shall issue a written opinion and will not have authority to award
punitive damages to either party. Each party shall bear its own
expenses, but the parties shall share equally the expenses of the
Arbitration Tribunal and the AAA. This Agreement shall be enforceable,
and any arbitration award shall be final, and judgment thereon may be
entered in any court of competent jurisdiction. The arbitration shall be
held in Washington, D.C., USA.
4. GOVERNING LAW
-------------
This Agreement shall be governed by and construed in accordance with the laws
of the State of New York, United States of America.
5. WAIVER OF IMMUNITY
------------------
<PAGE>
The parties acknowledge that this Agreement is commercial in nature, and
each party hereto expressly and irrevocably waives any claim or right which
it may have to immunity (whether sovereign immunity, act of state or
otherwise) for itself or with respect to any of its assets in connection
with an arbitration, arbitral award or other proceeding to enforce this
Agreement, including, without limitation, immunity from service of process,
immunity of any of its assets from pre- or post-judgment attachment or
execution and immunity from the jurisdiction of any court or arbitral
tribunal.
6. NO THIRD PARTY BENEFICIARIES.
----------------------------
This Agreement does not provide and is not intended to provide third
parties (including, but not limited to, customers of PRIMUS or Global
Crossing) with any remedy, claim, liability, reimbursement, cause of
action, or any other right.
7. ASSIGNMENT.
----------
(a) This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(b) Global Crossing shall solely be responsible for complying with all of
the terms binding on "Global Crossing" hereunder and shall not be
permitted to assign, transfer or otherwise dispose of any or all of
its right, title or interest hereunder or delegate any or all of its
obligations hereunder to any person or entity except that Global
------
Crossing shall be permitted to (i) effect a collateral assignment of
its rights hereunder to one or more lenders to Global Crossing or its
affiliates and (ii) assign, transfer or otherwise dispose of any or
all of its rights hereunder and delegate any or all of its obligations
hereunder to any present or future entity controlled by, under the
same control as, or controlling, Global Crossing. Global Crossing
shall give PRIMUS notice of any such assignment, transfer or other
disposition or any such delegation.
(c) PRIMUS shall solely be responsible for complying with all of the terms
binding on "PRIMUS" hereunder and shall not be permitted to assign,
transfer or otherwise dispose of any or all of its right, title or
interest hereunder or delegate any or all of its obligations hereunder
to any person or entity; except that PRIMUS shall be permitted to (i)
effect a collateral assignment of its rights hereunder to one or more
lenders to PRIMUS or its affiliates and (ii) assign, transfer or
otherwise dispose of any or all of its rights hereunder and delegate
any or all of its obligations hereunder to any present or future
entity controlled by, under the same control as, or controlling,
PRIMUS. PRIMUS shall give Global Crossing notice of any such
assignment, transfer or other disposition or any such delegation.
(d) Any assignment, transfer or other disposition by either party which is
in violation of this Section 7 shall be void and of no force and
effect.
8. NOTICES.
-------
Each notice, demand, certification or other communication given or made
under this Agreement shall be in writing and shall be delivered by hand or
sent by registered mail or by facsimile transmission to the address of the
respective party as shown below (or such other address as may be designated
in writing to the other party hereto in accordance with the terms of this
Section 8):
If to the PRIMUS: PRIMUS Telecommunications Group, Incorporated
1700 Old Meadow Road
McLean, Virginia 22102, USA
Att: Neil L. Hazard, Executive VP.
Fax No.: 703-902-2814
If to the Global Crossing: Global Crossing Holdings Ltd.
Wessex House
45 Reid Street
<PAGE>
5
Hamilton HM12, Bermuda
Attn: President
Fax No.: 441-296-8606
Any change to the name, address and facsimile numbers may be made at any
time by giving prior written notice in accordance with this Section 8. Any
such notice, demand or other communication shall be deemed to have been
received, if delivered by hand, at the time of delivery or, if posted, at
the expiration of seven (7) days after the envelope containing the same
shall have been deposited in the post maintained for such purpose, postage
prepaid, or, if sent by facsimile at the date of transmission if confirmed
receipt is followed by postal notice.
9. SEVERABILITY.
------------
If any provision of this Agreement is found by an arbitral, judicial or
regulatory authority having jurisdiction to be void or unenforceable, such
provision shall be deemed to be deleted from this Agreement and the
remaining provisions shall continue in full force and effect.
10. HEADINGS.
--------
The Section headings of the Agreement are for convenience of reference only
and are not intended to restrict, affect or influence the interpretation or
construction of provisions of such Section.
11. COUNTERPARTS.
------------
This Agreement may be executed in counterparts, each of which when executed
and delivered shall be deemed an original. Such counterparts shall together
(as well as separately) constitute one and the same instrument.
12. ENTIRE AGREEMENT.
----------------
This Agreement supersedes all prior or written understandings between the
parties hereto and constitutes the entire agreement with respect to the
subject matter herein. This Agreement shall not be modified or amended
except by a writing signed by authorized representatives of the parties
hereto.
13. PUBLICITY AND CONFIDENTIALITY.
-----------------------------
(a) The provisions of this Agreement and any non-public information, written
or oral, with respect to this Agreement ("Confidential Information")
will be kept confidential and shall not be disclosed, in whole or in
part, to any person other than affiliates, officers, directors,
employees, agents or representatives of a party (collectively,
"Representatives") who need to know such Confidential Information for
the purpose of negotiating, executing and implementing this Agreement.
Each party agrees to inform each of its Representatives of the non-
public nature of the Confidential Information and to direct such persons
to treat such Confidential Information in accordance with the terms of
this Section. Nothing herein shall prevent a party from disclosing
Confidential Information (i) upon the order of any court or
administrative agency, (ii) upon the request or demand of, or pursuant
to any regulation of, any regulatory agency or authority, (iii) to the
extent reasonably required in connection with the exercise of any remedy
hereunder, (iv) to a party's legal counsel or independent auditors, (v)
to prospective lenders to the parties, and (vi) to any actual or
proposed assignee, transferee or lessee of all or part of its rights
hereunder provided that such actual or proposed assignee agrees in
writing to be bound by the provisions of this Agreement.
(b) The foregoing shall not restrict either party from publicity announcing
that it has entered into this Agreement, but without including any
details contained in this Agreement.
14. LIMITATION OF LIABILITY.
-----------------------
<PAGE>
In no event shall PRIMUS or Global Crossing be liable to the other for
consequential, incidental, indirect or special damages, including, but
not limited to, loss of revenue, loss of business opportunity, or the
costs associated therewith.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by a duly authorized officer as of the Effective Date.
GLOBAL CROSSING HOLDINGS LTD.
By: /s/ Doug Molyneux
Name: Doug Molyneux
Title:Secretary and Senior Counsel
Jurisdiction: Bermuda
PRIMUS TELECOMMUNICATIONS GROUP
INCORPORATED
By: /s/ K. Paul Singh
Name: K. Paul Singh
Title: CEO
Jurisdiction: U.S.A.
<PAGE>
EXHIBIT 10.20*
* Confidential treatment has been requested in connection with this document.
IRU AGREEMENT
THIS IRU AGREEMENT (the "Agreement") is made and entered into as of this
30th day of December, 1999 ("Effective Date"), by and between QWEST
COMMUNICATIONS CORPORATION, a Delaware corporation ("Qwest"), and PRIMUS
TELECOMMUNICATIONS, INC., a Delaware corporation ("Customer").
RECITALS:
WHEREAS, Qwest owns and operates a fiber optic telecommunications network
between various points in the United States; and
WHEREAS, Customer desires to obtain certain indefeasible rights of use to
certain telecommunications capacity to be provided by means of Qwest's domestic
fiber optic telecommunications network; and
WHEREAS, Qwest desires to hereby grant and Customer desires to be granted
certain indefeasible rights of use to such capacity as more fully set forth
herein; and
WHEREAS, the parties previously entered into a separate IRU Agreement dated as
of September 14, 1998, which was superceded by a separate IRU Agreement dated as
of September 30, 1999 (collectively, the "Prior Agreement") all of which will
terminate upon the Effective Date of this Agreement, as more fully described
herein.
NOW THEREFORE, in consideration of the mutual promises set forth below, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows.
1. DEFINITIONS
The following terms shall have the meanings set forth in this Article when used
in this Agreement, unless explicitly stated to the contrary:
1.1 "Affiliate" means any person, which directly or indirectly controls or is
controlled by, or is under common control with, a party hereto.
1.2 "Capacity" means the digital transmission capability of a given portion of
the Qwest Network designed to transmit digital signals at a stated rate and
otherwise perform in accordance with the specifications applicable to the
portion of the Qwest Network utilized to provide the Capacity. All Capacity
shall be provided by Qwest Network facilities inclusive of all electronics and
other equipment necessary for the intended operation of the Capacity; provided,
however, that interruptions, outages, or degradations in the actual transmission
capability of the Capacity may occur from time to time.
<PAGE>
1.3 "Gross-connect Panel" means the piece of equipment designated by Qwest in a
Qwest POP at which the IRU is terminated and at which location Customer may have
access to and interconnect with the IRU through use of Local Distribution
Facilities or other facilities acceptable to Qwest.
1.4 "Delivery" of an IRU means that the applicable IRU will be available for
use at the Cross-connect Panels designated by Qwest hereunder and will perform
in accordance with the Technical Specifications attached hereto.
1.5 "Impositions" means all taxes, fees, levies, imposts, duties, charges or
withholdings of any nature (including, without limitation, gross receipts taxes
and franchise, license and permit fees), together with any penalties, fines, or
interest thereon arising out of the transactions contemplated by this Agreement
and/or imposed upon either party hereto by any federal, state or local
government or other public taxing authority of any country.
1.6 "Indefeasible Right of Use" or "IRU" means an indefeasible right of use, "as
is and where is," for the purposes described herein, in the amount of Capacity
on the Qwest Network for each User Route set forth herein; provided, that the
applicable IRU(s) granted hereunder do not provide Customer with any ownership
interest in or other rights to physical access to, control of, modification of,
encumbrance in any manner of, or other use of the Qwest Network except as
expressly set forth herein.
1.7 "Local Distribution Facilities" means those telecommunications transmission
facilities which interconnect with the applicable IRU at a Cross-connect Panel
and extend each User Route of the applicable IRU to a location outside of the
Qwest POP. Unless otherwise specified herein, such Local Distribution Facilities
shall be separately acquired by Customer and may be provided by a local
telephone company or other third party, and must comply with Qwest's reasonable
applicable engineering and operations requirements. Local Distribution
Facilities are not part of the IRU(s) acquired by Customer hereunder, and
Customer's acceptance of each IRU granted hereunder may not be conditioned upon
the availability of such Local Distribution Facilities.
1.8 "OC-3" means a dedicated, point to point, high capacity, full duplex channel
along the Qwest Network with a line speed of approximately 155.52 million bits
per second synchronous serial data.
1.9 "OC-12" means a dedicated, point to point, high capacity, full duplex
channel along the Qwest Network with a line speed of approximately 622 million
bits per second synchronous serial data.
1.10 "OC-48" means a dedicated, point to point, high capacity, full duplex
channel along the Qwest Network with a line speed of approximately 2488 million
bits per second synchronous serial data.
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1.11 "POP" means the Qwest terminal facility (point of presence) where the
Capacity subject to an IRU is delivered to Customer.
1.12 "Qwest Network" means the fiber optic telecommunications network operated
by Qwest in the United States, including at the election of Qwest such
telecommunications capacity as Qwest may obtain from another network provider
and integrate into its own network for purposes of providing services or
Capacity to its customers. Although Qwest possesses telecommunications network
facilities and capacity in locations other than the United States, such network
facilities and capacity are not part of the Qwest Network for purposes of this
Agreement.
1.13 "User Route" means the route along which each digital private line circuit
is placed by Qwest on the Qwest Network, as more particularly described in
Exhibit A hereto. For operational and maintenance purposes only, Qwest reserves
the right to alter temporarily each applicable User Route, provided that such
alterations do not result in changes to the endpoints (POPs) of the applicable
User Route.
1.14 "V&H Miles" is a measurement of the length in miles between the termination
points of a User Route using airline miles and determined based on the vertical
and horizontal geographic coordinates of the locations of the termination
points.
2. GRANT OF IRU(S) IN QWEST NETWORK
2.1 For each of the User Routes set forth in Exhibit A hereto, Qwest hereby
grants to Customer an IRU to OC-3 or OC-12 Capacity (as specified on Exhibit A).
*2.2 The IRU(s) described above shall be delivered to Customer at a Cross-
connect Panel located in each of the Qwest POPs in the cities identified in
Exhibit A. On a "where available, preferred vendor" basis and for the purpose of
utilizing the IRUs granted hereunder, Customer shall be entitled to necessary
space of up to approximately five hundred (500) square feet at each of the
Qwest's POPs identified in Exhibit A to co-locate Customer's equipment. For each
co-location site requested by Customer hereunder, Customer agrees to execute a
co-location agreement substantially in the form appended hereto as Exhibit D. In
the event Qwest does not have available co-location space during the Waiver
Period to satisfy Customer's co-location requirements, then Qwest will
coordinate with Customer to provide alternative co-location space with a third
party provider. Qwest shall reimburse Customer for said alternative co-location
costs, up to an amount not to exceed Qwest's standard cost for comparable co-
location services, until the earlier of: (i) the date upon which Qwest can make
available the requested co-location space; or (ii) April 1, 2002. It shall be
the responsibility of Customer to obtain any required Local Distribution
Facilities to interconnect with each of the IRU(s) granted herein.
2.3 *
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2.4* In consideration of the purchase of the Capacity hereunder, Qwest also
agrees to exchange TCP/iP routing information and traffic with Customer (on a
private peering basis), at agreed upon interconnection points, excluding third
party transit services. For purposes hereof, "transit" shall mean the exchange
of routing information and traffic which has neither a source nor a destination
on the transit provider's Internet network. Any Customer interconnection or
other costs associated with said peering fights shall be borne by Customer.
2.5 Qwest agrees to make available for purchase by Customer, an additional IRU
grant in STM-4 Capacity on the AC-1 Cable with landing points at New York, N.Y.
and London, England. The purchase price for said additional Capacity shall be *,
plus mutually agreeable O&M fees. The Parties agree to execute a mutually
acceptable IRU agreement for the purchase of said additional Capacity within
ninety (90) days of the Effective Date of this Agreement.
3. CONSIDERATION FOR GRANT OF THE IRU(S)
3.1 In consideration of the grant of each IRU described in Section 2.1 above by
Qwest to Customer, Customer agrees to pay to Qwest each of the IRU fees set
forth in Exhibit A to this Agreement, subject to a credit of Five Million Five
Hundred Ninety Six Thousand Eight Hundred Nineteen and 20/1 00 Dollars
($5,596,819.20) which is due Customer for Qwest's repurchase of the IRU User
Routes identified in Exhibit A (provided however that this credit is due
Customer only after it pays in full, pursuant to the schedule therein, all
balances remaining due under the Prior Agreement, which payment obligation shall
expressly survive the termination of the Prior Agreement), said credit balances
to be applied to the final payment obligation set forth in this Agreement. Other
than as expressly provided for herein, there shall be no further liability on
the part of either party on account of the Prior Agreement. Notwithstanding
anything to the contrary contained herein, Customer shall have the option to pay
the applicable IRU fees as follows: *.
3.2 For the Term (as defined below) of the granted IRU(s), Customer shall also
pay to Qwest a monthly recurring operation and maintenance charge (the "O&M
Charge") calculated at the rate of * per DS-0 V&H Mile due beginning * following
the Acceptance Date of each such IRU and continuing each month thereafter for
the duration of the Term. *.
4. DELIVERY AND ACCEPTANCE TESTING OF CUSTOMER CAPACITY
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4.1. The IRUs identified in the Prior Agreement have been previously fully
provisioned to and accepted by Customer under the Prior Agreement. The
Acceptance Date for such IRUs shall remain the same as under the Prior
Agreement; however, the O&M charges shall be modified to reflect the terms of
this Agreement. As of the Effective Date, such IRUs shall be migrated to and
governed exclusively by the terms and conditions of this Agreement. With respect
to new IRU User Routes identified on Exhibit A, Qwest will use commercially
reasonable efforts to Deliver said User Routes within ninety (90) days following
the Effective Date.
4.2. At Delivery, all IRU(s) shall comply with the specifications set forth in
Exhibit B hereto (the "IRU Specifications and Acceptance Testing"). Qwest shall
test such IRU(s) in accordance with the procedures specified in Exhibit B to
verify that such IRU(s) are operating in accordance with the IRU Specifications
and Acceptance Testing. Qwest shall provide Customer with reasonable advance
notice of the date and time of any such IRU acceptance test (each of which shall
take place during normal business hours) such that Customer shall have the
right, but not the obligation, to have a person or persons present to observe
the tests.
4.3. In the event the results of any IRU acceptance test shows that the granted
IRU is not operating within the parameters of the applicable IRU Specifications
and Acceptance Testing, Qwest shall expeditiously take such action as shall be
commercially reasonably necessary, with respect to such portion of the IRU as
does not operate within the parameters of the applicable IRU Specifications and
Acceptance Testing, to bring the operating standards of such portion of the IRU
within such parameters. In no event shall the unavailability, incompatibility,
delay in installation, or other impairment of any of Customer's (including
Customer's suppliers (e.g., a local access telephone service provider))
interconnection facilities be used as a basis for rejecting any Capacity or IRU
provided hereunder.
4.4 If and when Qwest notifies Customer that the test results of an IRU
acceptance test are within the parameters of the IRU Specifications and
Acceptance Testing with respect to the tested IRU, Customer shall provide Qwest
with a written notice accepting the IRU. Such written notice shall specify the
Qwest "Circuit ID" number associated with the IRU granted hereunder. If Customer
fails to notify Qwest of its acceptance or rejection of the final test results
with respect to the tested IRU within ten (10) days after its receipt of notice
of such test results, Customer shall be deemed to have accepted the tested IRU.
The date of such notice of acceptance (or deemed acceptance) of the Capacity
shall be the "Acceptance Date" for such IRU.
5. TERM
5.1 The term of this Agreement (the "Term") shall begin on the Effective Date
(provided that the grant of each IRU hereunder shall not become effective until
the Acceptance Date for that particular IRU and each such IRU User Route granted
hereunder shall last for a period of no more than twenty (20) years from the
Acceptance Date of each such IRU User Route); and shall continue with respect to
each IRU purchased hereunder, unless expressly stated to the contrary herein,
until the earlier of:
(a) Twenty (20) years from the Acceptance Date of the last IRU granted
hereunder; or
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(b) the date on which Customer notifies Qwest in writing that the last
IRU subject to this Agreement has, in Customer's determination,
reached the end of its economically useful life and that Customer
desires to not retain its Indefeasible Right of Use in such IRU.
5.2 Subject to the option rights set forth in Section 5.3 below, upon the
expiration of the Term hereof, all of Customer's rights to the use of each of
the granted IRU(s) described herein shall revert to Qwest without reimbursement
by Qwest of any fees or other payments previously made with respect thereto, and
from and after such time Customer shall have no further rights or obligations
(excepting such obligations as shall have arisen prior to the date of expiration
of the Term) with respect to the granted IRU(s).
5.3 Upon written notice from Customer to Qwest given no later than thirty (30)
calendar days prior to the expiration of the applicable IRU Term, Customer may
elect to purchase, effective as of the expiration of the applicable IRU Term, an
undivided interest in the fiber associated with the Capacity granted hereunder
for One Dollar (US $1.00) per IRU User Route (the "Purchase Option"), provided
that: (i) the undivided ownership interest to such fiber shall be granted to
Customer on an "as-is, where-is" basis, without warranty, express or implied,
and (ii) Customer shall thereafter be subject to pay a monthly recurring
operation and maintenance charge ("O&M Charge") at the then fair market value
rate as determined by Qwest upon acceptance of the Purchase Option by the
Customer. If Customer exercises the Purchase Option and thereafter fails to pay
the O&M Charge when it is due on a monthly basis, then, upon written notice by
Qwest to Customer, Qwest shall have the immediate right to cease provisioning
without liability any and all O&M Services, equipment, and any other ancillary
services applicable to the fiber, regardless of the effect such discontinuation
may have on Customer's ability to continue using the purchased fiber thereafter.
The Purchase Option shall expire, if not exercised, at the expiration of the
applicable IRU Term for each IRU User Route. The Purchase Option shall not: (1)
include any rights to or interest in any conduit, real property (other than the
fiber component Purchase Option granted hereunder), equipment, tangible or other
physical assets used by Qwest in connection with or necessary to provision the
IRU(s) granted hereunder (the "Physical Assets"); (2) be construed as
encumbering in any way the Qwest Network or Qwest's ability to modify,
reconfigure, sell, or decommission any or all of the Physical Assets; and (3)
confer any rights or benefits upon Customer as a result of any changes or
improvements in technology, including without limitation any changes in
technology which would increase the capacity of the IRU that is subject to the
Purchase Option.
5.4 Upon mutual agreement of the parties, Customer may, upon thirty (30) days
written notice provided to Qwest, sell back on a one-time basis any IRU User
Route set forth in Exhibit A in exchange for Customer's purchase, upon similar
terms and conditions as those described herein (including term) of an IRU with
greater bandwith than the IRU sold and along the same User Route. In the event
Customer wants to sell back a circuit for purposes of upgrading, the Qwest
repurchase price will be for fair market value of the IRU User Route being
purchased by Qwest as of the repurchase date. This upgrade clause shall be
available during the Term of the Agreement and the IRU fee applicable to the
upgraded circuit shall be calculated using a * per DS-0 V&H mile rate.
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6. OPERATIONS AND MAINTENANCE OF CUSTOMER CAPACITY AND OUTAGE CREDITS
6.1 The granted IRU(s) do not provide Customer with any right to control any
network or service configuration or design, routing configuration, regrooming,
rearrangement or consolidation of channels or circuits or any similar or related
functions with regard to the Qwest Network. The granted IRU(s) are subject to
and shall be implemented in accordance with Qwest's network operations and
maintenance procedures and policies, as these may be modified from time to time
by Qwest.
6.2 Qwest will use reasonable commercial efforts to provide the maintenance
services described in this Article. All operating and maintenance charges are
set forth in Exhibit A, if not included in the applicable IRU Fee(s) set forth
in Article 3. Such maintenance, however, does not ensure that each IRU granted
hereunder will perform during the Term continuously in accordance with the IRU
Specifications and Acceptance Testing.
6.3 Customer acknowledges the possibility of an unscheduled, continuous and/or
interrupted period of time when any IRU, or a portion thereof, is "unavailable"
(as defined in the IRU Specifications and Acceptance Testing) (hereafter an
"Outage"). In the event of an Outage, Customer shall be entitled to a credit or
refund, as applicable (the "Outage Credit") against future charges with respect
to the applicable IRU determined in accordance with the following table:
Aggregate Duration of Outages
(In Minutes) Outage Credit
- ------------ -------------
0 - 5 Formula Below
6 - 30 *
31 - 60 *
61 - 120 *
121 - 180 *
181 - 240 *
240+ *
6.3.1 The Outage Credit shall apply only to an Outage on the Qwest Fiber
Network and excludes the Local Distribution Facilities to the Customer's
premise.
6.3.2 The aggregate total Outage Credit amount for any given month during
the Term for all affected IRU User Routes provisioned hereunder shall not exceed
* per month and for the Term the aggregate total Outage Credit amount shall not
exceed the total IRU Fee.
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6.3.3 The length of each Outage shall be calculated in minutes, rounded up
to the nearest minute. An Outage shall be deemed to have commenced upon
verifiable notification thereof by Customer to Qwest, or, when indicated by
network control information actually known to Qwest network personnel operating
the Network at the time of the Outage, whichever is earlier. Each Outage shall
be deemed to terminate upon restoration of the affected IRU User Route, as
evidenced by appropriate network tests by Qwest and provided the IRU User Route
substantially performs in accordance with IRU Specifications and Acceptance
Testing. Qwest shall give written or electronic notice to Customer of any
scheduled or planned maintenance that will result in an Outage as early as
possible and shall use reasonable efforts to minimize any disruption to
Customer's usage of the applicable IRU User Route. Notwithstanding the
foregoing, any such scheduled or planned maintenance which results in an outage
often (10) minutes or less and for which Customer received advance written or
electronic notice shall not be deemed an Outage pursuant to Section 6.3 above.
6.3.5 No Outage Credit shall be granted if the malfunction of any
end-to-end capacity or circuit is due to an Outage or other Defect occurring in
Customer's Local Distribution Facilities.
6.3.6 Subject to the terms and conditions in this Article 6 and upon
Customer's written request, all Outage Credits shall be credited towards any
future invoice from Qwest to Customer whether or not such invoice is made
pursuant to this Agreement, or in any other agreement between Customer and
Qwest. Notwithstanding the foregoing, however, in the event the Outage Credit
balance remaining due as of the last two months of the Term applicable to each
IRU User Route purchased hereunder exceeds any amounts owing to Qwest, Customer
shall be entitled to prompt receipt of a cash refund.
6.4 The Outage Credit described in this Article 6 is the sole and
exclusive remedy of Customer in the event of any Outage; provided, however, that
an Outage, or series of related Outages, that exceeds 24 hours shall be
considered a default under this Agreement and Customer's sole and exclusive
remedy in the event of such Qwest default shall be to receive a pro-rata refund
of any unused portion of the IRU Fee applicable to the terminated IRU User
Route(s).
7. ACCESS TO QWEST POPS
7.1 Customer and its designees (such as local telecommunications providers)
shall have access to each of the Qwest POPs specified in Exhibit A, and the
right to interconnect with each granted IRU, according to the access and
interconnection standards and procedures regularly established by Qwest, as
these may be modified by it from time to time.
8. USE OF CUSTOMER CAPACITY
8.1 Customer represents and warrants that its use of each IRU granted hereunder
shall comply with all applicable laws, ordinances, rules, regulations and
restrictions.
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8.2 Customer agrees and acknowledges that this Agreement grants no right to use
any element of the Qwest Network other than the IRU(s) granted herein. Customer
shall keep any and all of the Qwest Network, other than the IRU(s), free from
any liens, rights or claims of any third party attributable to Customer.
8.3 Customer shall be responsible for its own configuration and use of each IRU;
including the provisioning of all Local Distribution Facilities, interconnection
facilities, network equipment, testing equipment and procedures, maintenance,
and other facilities or actions necessary to utilize each IRU. Customer shall
conduct all such operations and use of the IRU(s) in manner which does not
interfere with the operations of the Qwest Network or the use thereof by any
other customer of Qwest. Customer shall comply at all times with the operating
procedures and interconnection requirements of Qwest.
8.4 Customer shall endeavor to include in each customer agreement or tariff
covering any service that utilizes any portion of the granted IRU(s) to any
third party, a provision which limits the liability of Customer thereunder for
interruptions, failures, or degradation of service to the charges received by
Customer for such service.
8.5 Customer and Qwest each agree to cooperate with and support the other in
complying with any requirements applicable to their respective rights and
obligations hereunder imposed by any governmental or regulatory agency or
authority.
9. INDEMNIFICATION
9.1 Customer hereby releases and agrees to indemnify, defend, protect and hold
harmless Qwest, its employees, officers, directors, agents, shareholders and
affiliates, from and against, and assumes liability for:
(a) Any injury, loss or damage to any person, tangible property or
facilities of any third person or entity (including reasonable attorneys'
fees and costs) to the extent arising out of or resulting from either: (i)
the willful acts or omissions of Customer, its officers, employees,
servants, affiliates, agents, contractors, licensees, invitees or vendors;
or (ii) other acts and omissions of Customer constituting a default under
this Agreement;
(b) Any claims, liabilities or damages arising out of any violation
by Customer of any regulation, rule, statute or court order of any local,
state or federal governmental agency, court or body in connection with its
use of the granted IRU(s) hereunder;
(c) Any claims, liabilities or damages arising out of any
interference with or infringement of the rights of any third party as a
result of Customer's use of any IRU granted hereunder not in accordance
with the provisions of this Agreement; and
(d) The use, resale, sharing or modification of the Capacity by
Customer and/or its users.
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9.2 Qwest hereby releases and agrees to indemnify, defend, protect and hold
harmless Customer, its employees, officers, directors, agents, shareholders and
affiliates, from and against, and assumes liability for:
(e) Any injury, loss or damage to any person, tangible property or
facilities of any third person or entity (including reasonable attorneys'
fees and costs) to the extent arising out of or resulting from either: (i)
the willful acts or omissions of Qwest, its officers, employees, servants,
affiliates, agents, contractors, licensees, invitees or vendors.
(f) Any claims, liabilities or damages arising out of any violation
by Qwest of any regulation, rule, statute or court order of any local,
state or federal governmental agency, court or body in connection with its
use of the granted IRU(s) hereunder;
9.2 Nothing contained herein shall operate as a limitation on Qwest to bring an
action for damages against any third party, including indirect, special or
consequential damages, based on any acts or omissions of such third party as
such acts or omissions may affect the construction, operation or use of the
granted IRU(s) or the Qwest Network; provided however, that Customer shall
assign such rights or claims, execute such documents and do whatever else may be
reasonably necessary to enable Qwest to pursue any such action against such
third party.
10. LIMITATION OF LIABILITY; DISCLAIMER OF WARRANTIES
10.1 Neither party shall be liable to the other party for any special,
incidental, indirect, punitive or consequential damages (whether or not such
damages were foreseeable or a party was notified of the possibility thereof)
arising out of, or in connection with such party's failure to perform its
respective obligations hereunder, including, but not limited to, damage or loss
of property or equipment, loss of profits or revenue (whether arising out of
Outages, transmission interruptions or problems, any interruption or degradation
of the functioning of the granted IRU(s) or otherwise), cost of capital, cost of
replacement services, or claims of customers, whether occasioned by any
construction, reconstruction, relocation, repair or maintenance performed by, or
failed to be performed by, the other party or any other cause whatsoever,
including, without limitation, breach of contract, breach of warranty,
negligence, or strict liability, all claims for which damages are hereby
specifically waived.
10.2 EXCEPT AS EXPRESSLY SET FORTH HEREIN, QWEST DISCLAIMS ANY AND ALL
WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE CUSTOMER CAPACITY AND THE
GRANTED IRU(s), INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE.
11. INSURANCE
11.1 During the Term of this Agreement, Customer shall obtain and maintain, at
its expense, an appropriate corporate general liability insurance policy with
terms equal to or greater than
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One Million U.S. Dollars (US$1,000,000) and provide Qwest with a copy of such
policy on request.
12. PAYMENT
12.1 Except as otherwise expressly provided for herein, all payments due
hereunder, if any, shall be due thirty (30) days after the date of Qwest's
invoice. If any amount due under this Agreement is not received by its
respective due date, in addition to its other available remedies, Qwest may in
its sole discretion impose a late payment charge pursuant to Section 12.2.
Notwithstanding anything in this Agreement to the contrary, no payment due
hereunder is subject to reduction, set-off or adjustment of any nature by
Customer. All disputes or requests for billing adjustments must be submitted in
writing by the due date and submitted with payment of undisputed amounts due.
Any amounts which are determined by Qwest to be in error or not in compliance
with Agreement shall be adjusted on the next month's invoice. Any disputed
amounts which are deemed by Qwest to be correct as billed and in compliance with
this Agreement, shall be due and payable by Customer, upon notification and
demand by Qwest, along with any late payment charges which Qwest may impose
pursuant to Section 12.2. Disputes shall not be cause for Customer to delay
payment of the undisputed balance to Qwest according to the terms outlined in
this Article. Invoices submitted to Customer by Qwest shall conform to Qwest's
standard billing format and content, as modified by Qwest from time to time.
12.2 In the event a party shall fail to make any payment under this Agreement
when due, such amounts shall accrue interest, from the date such payment is due
until paid, including accrued interest, at an annual rate equal to one hundred
fifty percent (150%) of the prime rate of interest published by The Wall Street
Journal or, if lower, the highest percentage allowed by law. In addition, Qwest
may offset any amounts not paid when due from any amounts that Qwest owes to
Customer under any other agreements between the parties.
13. CHARACTERIZATION OF TRANSACTION
13.1 The parties intend that each IRU granted in this Agreement does not provide
Customer with any ownership or other possessory interests in any real property,
conduit, fiber, or equipment in or on the Qwest Network or along the User Route
of the Qwest Network. Further, it is not the intention of the parties to create
a loan or other financing arrangement between the parties. However, in case the
express intent of the parties is not given legal effect and that any portion of
the transaction is deemed to constitute a loan or other financing arrangement,
or that any rights in the IRU(s) granted herein are deemed to be the property of
Customer, Customer hereby grants to Qwest, as security for the payment of all
amounts due from Customer and the performance of all other obligations of
Customer hereunder, a first-priority security interest in and continuing lien
upon all of Customer's right (including any right Customer may have to convey
title thereto), title and interest in (i) the granted IRU(s), (ii) all rights of
Customer under this Agreement, and (iii) any and all income, proceeds, products
and profits of any of the foregoing, all payment thereon, and any and all
additions thereto.
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13.2 Simultaneously with the execution of this Agreement, and at any subsequent
time during the Term of this Agreement upon request of Qwest, Customer will
execute and deliver to Qwest such financing statements and continuation
statements as Qwest may require for purposes of perfecting and continuing the
perfection of each security interest and continuing lien.
14. TAXES, FEES AND OTHER GOVERNMENTAL IMPOSITIONS
14.1 Customer shall be independently responsible for any Impositions properly
payable with respect to the granted IRU(s). The parties agree that they will
cooperate with each other and coordinate their mutual efforts concerning audits,
or other such inquiries, filings, reports, etc., as may relate solely to the
activities or transactions arising from or under this Agreement, which may be
required or initiated from or by any duly authorized governmental tax authority.
14.2 The parties agree that the payment(s) set forth in Article 3 will be
allocated to rental periods as detailed in the Payment Allocation Schedule,
Exhibit C, attached hereto. It is understood and agreed between Qwest and
Customer that the grant of the IRU in the Qwest Capacity hereunder shall be
treated for federal, state, and local tax purposes as the lease of the Qwest
Capacity hereto pursuant to ss.467 of the Internal Revenue Code of 1986 and
according to the schedule set forth on Exhibit C. The parties further agree to
file their respective income and other tax returns and reports on such basis
and, except as otherwise required by law, not to take any positions inconsistent
therewith.
15. NOTICE
14.1 Unless otherwise provided herein, all notices and communications concerning
this Agreement shall be in writing and addressed to the other party as follows:
If to Qwest: Qwest Communications Corporation
Attention: Senior Vice President -- Wholesale Markets
555 Seventeenth Street
Denver, Colorado 80202
Telephone No.: (303) 992-1400
Facsimile No.: (303) 992-1724
with a copy to: Qwest Communications Corporation
Attention: Executive Vice President & General Counsel
555 Seventeenth Sweet
Denver, Colorado 80202
Telephone No.: (303) 992-1400
Facsimile No.: (303) 992-1724
If to Customer: Primus Telecommunications, Inc.
Attention: COO North America
1700 Old Meadow Road, Third Floor
McLean, Virginia 22102
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Telephone No.: (703) 902-2800
Facsimile No.: (703) 902-2814
With a copy to: Primus Telecommunications, Inc.
Attention: General Counsel
1700 Old Meadow Road, Third Floor
McLean, Virginia 22102
Telephone No.: (703) 902-2800
Facsimile No.: (703) 902-2814
or at such other address as either party may designated from time to time in
writing to the other party.
15.2 Unless otherwise provided herein, notices shall be hand delivered, sent by
registered or certified U.S. mail, postage prepaid, or by commercial overnight
delivery service, or transmitted by facsimile, and shall be deemed served or
delivered to the addressee or its office when received at the address for notice
specified above when hand delivered, upon confirmation of sending when sent by
fax, on the day after being sent when sent by overnight delivery service, or
three (3) days after deposit in the mail when sent by U.S. mail.
16. CONFIDENTIALITY
16.1 Qwest and Customer hereby agree that if either party (the "Disclosing
Party") provides confidential or proprietary information to the other party
("Proprietary Information") to the other party (the "Recipient Party"), such
Proprietary Information shall be held in confidence, and the Recipient Party
shall afford such Proprietary Information the same care and protection as it
affords generally to its own confidential and proprietary information (which in
any case shall be not less than reasonable care) in order to avoid disclosure to
or unauthorized use by any third party. This Agreement, including its existence
and all of the terms, conditions and provisions hereof, constitutes Proprietary
Information, and all information disclosed by either party to the other in
connection with or pursuant to this Agreement shall be deemed to be Proprietary
Information, provided that written information is clearly marked in a
conspicuous place as confidential or proprietary, and verbal information is
indicated as being confidential or proprietary when given or promptly confirmed
in writing as such thereafter. All Proprietary Information, unless otherwise
specified in writing, shall remain the property of the Disclosing Party, shall
be used by the Recipient Party only for the intended purpose, and such written
Proprietary Information, including all copies thereof, shall be returned to the
Disclosing Party or destroyed after the Recipient Party's need for it has
expired or upon the request of the Disclosing Party. Proprietary Information
shall not be reproduced except to the extent necessary to accomplish the
purposes and intent of this Agreement, or as otherwise may be permitted in
writing by the Disclosing Party.
16.2 The foregoing provisions of Section 16.1 shall not apply to any Proprietary
Information which: (i) becomes publicly available other than through the
Recipient Party; (ii) is required to be disclosed by a governmental or judicial
law, order, rule or regulation; (iii) is independently developed by the
Recipient Party; (iv) becomes available to the Recipient Party without
13
<PAGE>
restriction from a third party; or (v) becomes relevant to the settlement of any
dispute or enforcement of either party's rights under this Agreement and in
accordance with its terms and conditions. If any Proprietary Information is
required to be disclosed pursuant to the foregoing clause, the party required to
make such disclosure shall promptly inform the other party of the requirements
of such disclosure and take all reasonable protective measures to preserve the
confidentiality of such Proprietary Information as fully as possible in the
context of such permitted disclosure.
16.3 Notwithstanding Sections 16.1 and 16.2, either party may disclose
Proprietary Information to its employees, agents, and legal, financial, and
accounting advisors and providers (including its lenders and other financiers)
to the extent necessary or appropriate in connection with the negotiation and/or
performance of this Agreement or its obtaining of financing, provided that each
such party is notified of the confidential and proprietary nature of such
Proprietary Information and is subject to or agrees to be bound by similar
restrictions on its use and disclosure.
16.4 The provisions of this Article 16 shall survive for a period of two (2)
years from the date of the expiration or termination of this Agreement.
17. DEFAULT
17.1 A party shall be in default under this Agreement thirty (30) days after the
non-defaulting party shall have given written notice of such default unless the
defaulting party shall have cured such default or such default is otherwise
waived by the non-defaulting party within such thirty (30) days; provided,
however, that where any such default other than the payment of money cannot
reasonably be cured within such 30-day period, if the defaulting party shall
proceed promptly to cure the same and prosecute such cure with due diligence,
the time for curing such default shall be extended for such period of time not
to exceed ninety (90) days as may be necessary to complete such cure.
17.2 Events of default also shall include, but not be limited to, the following:
(i) failure to make any payment when due hereunder; (ii) breach of any material
provision hereof not cured within thirty (30) days following written notice by
the non-defaulting party; (iii) the making by either party of a general
assignment for the benefit of its creditors; or (iv) the filing of a voluntary
petition in bankruptcy or the filing of a petition in bankruptcy or other
insolvency protection against either party which is not dismissed within ninety
(90) days thereafter, or the filing by either party of any petition or answer
seeking, consenting to, or acquiescing in reorganization, arrangement,
adjustment, composition, liquidation, dissolution, or similar relief.
17.3 In addition to the specific remedies provided hereunder, upon any
non-payment or other default by Customer, Qwest may: (i) take such action as it
determines, in its sole discretion, to be necessary to correct the default;
and/or (ii) pursue any other legal remedies it may have under applicable law or
principles of equity relating to such default, provided that appropriate notice
has been given under this Section.
18. TERMINATION
14
<PAGE>
18.1 Either party may terminate this Agreement upon the failure of the other
party to cure an event of default as required by Article 18. In the event
Customer terminates this Agreement or any User Route provided hereunder as a
result of a default by Qwest under Article 18, Customer's sole and exclusive
remedy shall be to receive a pro-rata refund of any unused portion of the IRU
Fee applicable to the terminated IRU User Route(s).
18.2 Notwithstanding the foregoing, no termination or expiration of this
Agreement shall affect the rights or obligations of any party hereto with
respect to any then existing defaults or the obligation to make any payment
hereunder for services rendered prior to the date of termination or expiration.
19. FORCE MAJEURE
19.1 Neither party shall be in default under this Agreement if and to the extent
that any delay in such party's performance of one or more of its obligations
hereunder is caused by any of the following conditions, and such party's
performance of such obligation or obligations shall be excused and extended for
and during the period of any such delay: act of God; fire; flood; fiber cut,
material shortages or unavailability or other delay in delivery not resulting
from the responsible party's failure to timely place orders therefor; lack of or
delay in transportation; government codes, ordinances, laws, rules, regulations
or restrictions (collectively, "Regulations"); war or civil disorder; failure of
a third party to grant a required right-of-way permit, easement, or other
required authorization for use of the intended right-of-way, or any other cause
beyond the commercially reasonable control of such party. The party claiming
relief under this Article shall notify the other in writing of the existence of
the event relied on and the cessation or termination of said event.
20. ARBITRATION
20.1 Any dispute or disagreement arising between Qwest and Customer in
connection with this Agreement which is not settled to the mutual satisfaction
of Qwest and Customer within thirty (30) days from the date that either party
informs the other in writing that such dispute or disagreement exists, shall be
settled by arbitration in Washington, D.C. in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in effect on the date
that such notice is given. If the parties are unable to agree on a single
arbitrator within fifteen (15) days from the commencement of any such
arbitration, each party shall select an arbitrator and the two (2) arbitrators
shall mutually select a third arbitrator, the three of whom shall serve as an
arbitration panel. The decision of the arbitrator(s) shall be final and binding
upon the parties and shall include written findings of law and fact, and
judgment may be obtained thereon by either party in a court of competent
jurisdiction. Each party shall bear the cost of preparing and presenting its own
case. The cost of the arbitration, including the fees and expenses of the
arbitrator(s), shall be shared equally by the parties hereto unless the award
otherwise provides.
20.2 The obligation herein to arbitrate shall not be binding upon any party with
respect to requests for preliminary injunctions, temporary restraining orders or
other similar temporary procedures in a court of competent jurisdiction to
obtain interim relief when deemed necessary
15
<PAGE>
by such court to preserve the status quo or prevent irreparable injury pending
resolution by arbitration of the actual dispute. It is not the intention of the
parties that such injunctive procedures shall be in lieu of, or cause
substantial delay to, any arbitration proceeding commenced under Section 20.1
above.
21. WAIVER
21.1 The failure of either party hereto to enforce any of the provisions of this
Agreement, or the waiver thereof in any instance, shall not be construed as a
general waiver or relinquishment on its part of any such provision, but the same
shall nevertheless be and remain in full force and effect.
22. GOVERNING LAW
22.1 This Agreement shall be governed by and construed in accordance with the
domestic laws of the State of New York, without reference to its choice of law
principles.
23. RULES OF CONSTRUCTION
23.1 The captions or headings in this Agreement are strictly for convenience and
shall not be considered in interpreting this Agreement or as amplifying or
limiting any of its content. Words in this Agreement which import the singular
connotation shall be interpreted as plural, and words which import the plural
connotation shall be interpreted as singular, as the identity of the parties or
objects referred to may require.
23.2 Unless expressly defined herein, words having well known technical or trade
meanings shall be so construed. All listing of items shall not be taken to be
exclusive, but shall include other items, whether similar or dissimilar to those
listed, as the context reasonably requires.
23.3 Except as set forth to the contrary herein, any right or remedy of Customer
or Qwest shall be cumulative and without prejudice to any other right or remedy,
whether contained herein or not.
23.4 This Agreement has been fully negotiated between and jointly drafted by the
parties.
23.5 In the event of a conflict between the provisions of this Agreement and
those of any Exhibit, the provisions of this Agreement shall prevail and such
Exhibit shall be corrected accordingly.
23.6 All actions, activities, consents, approvals and other undertakings of the
parties in this Agreement shall be performed in a reasonable and timely manner,
it being expressly acknowledged and understood that time is of the essence in
the performance of obligations required to be performed by a date expressly
specified herein. Except as specifically set forth herein, for the purpose of
this Article the normal standards of performance within the telecommunications
industry in the relevant market shall be the measure of whether a party's
performance is reasonable and timely.
16
<PAGE>
24. REPRESENTATIONS AND WARRANTIES
24.1 Each party represents and warrants that:
(a) It has the full right and authority to enter into, execute, deliver
and perform its obligations under this Agreement;
(b) It has taken all requisite corporate action to approve the
execution, delivery and performance of this Agreement;
(c) This Agreement constitutes a legal, valid and binding obligation
enforceable against such party in accordance with its terms, subject
to bankruptcy, insolvency, creditors' rights and general equitable
principles; and
(d) Its execution of and performance under this Agreement shall not
violate any applicable existing regulations, rules, statutes or
court orders of any local, state or federal government agency, court
or body of any country or any contract or other agreement the party
is subject to.
25. PUBLICITY
25.1 No publicity regarding the existence and/or terms of this Agreement may
occur without Qwest's prior express written consent. Notwithstanding the
foregoing, however, Qwest agrees to issue a mutually acceptable joint press
release with Customer by January 14, 2000 addressing (i) the purchase of the
OC-48 Capacity hereunder; (ii) the co-location agreement hereunder; (iii) the
private peering relationship resulting therefrom; and (iv) the recognition by
Qwest of Customer as a significant worldwide provider of VOIP services. Qwest
shall allow senior management acceptable to Customer and available from Qwest to
be quoted in such press release.
26. ASSIGNMENT
26.1 This Agreement shall be binding on Customer and its respective affiliates,
successors, and assigns. Customer shall not assign, sell or transfer this
Agreement or the right to receive the granted Capacity hereunder, whether by
operation of law or otherwise, without the prior written consent of Qwest, which
consent shall not be unreasonably withheld; provided however that Customer shall
be entitled to assign the right to receive the granted Capacity hereunder to an
Affiliate so long as Customer remains ultimately responsible for all Customer
obligations hereunder. Any attempted assignment other than to an Affiliate of
Customer shall be null and void.
27. NO PERSONAL LIABILITY
27.1 Each action or claim against any party arising under or relating to this
Agreement shall be made only against such party as a corporation, and any
liability relating thereto shall be enforceable only against the corporate
assets of such party. No party shall seek to pierce the
17
<PAGE>
corporate veil or otherwise seek to impose any liability relating to, or arising
from, this Agreement against any shareholder, employee, officer or director of
the other party. Each of such persons is an intended beneficiary of the mutual
promises set forth in this Article and shall be entitled to enforce the
obligations of this Article.
28. RELATIONSHIP OF THE PARTIES
28.1 The relationship between Customer and Qwest shall not be that of partners,
agents, or joint venturers for one another, and nothing contained in this
Agreement shall be deemed to constitute a partnership or agency agreement
between them for any purposes, including but not limited to federal income tax
purposes. Customer and Qwest, in performing any of their obligations hereunder,
shall be independent contractors or independent parties and shall discharge
their contractual obligations at their own risk.
29. SEVERABILITY
29.1 If any term, covenant or condition contained herein shall, to any extent,
be invalid or unenforceable in any respect under the laws governing this
Agreement, the remainder of this Agreement shall not be affected thereby, and
each term, covenant or condition of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
30. COUNTERPARTS
30.1 This Agreement may be executed in one or more counterparts, all of which
taken together shall constitute one and the same instrument.
31. ENTIRE AGREEMENT; AMENDMENT
31.1 This Agreement constitutes the entire and final agreement and understanding
between the parties with respect to the subject matter hereof and supersedes all
prior agreements relating to the subject matter hereof, which are of no further
force or effect. As of the Effective Date, the Prior Agreement shall terminate
without further liability to either party, and no obligations of either party
thereunder shall continue. The terms and conditions set forth in this Agreement
shall herewith control with respect to any IRU Capacity previously provisioned
under the Prior Agreement. The Appendices and Exhibits referred to herein are
integral parts hereof and are hereby made a part of this Agreement. This
Agreement may only be modified or supplemented by an instrument in writing
executed by a duly authorized representative of each party.
In confirmation of their consent and agreement to the terms and conditions
contained in this IRU Agreement and intending to be legally bound hereby, the
parties have executed this IRU Agreement as of the date first above written.
18
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QWEST COMMUNICATIONS CORPORATION
By: /s/ Greg Casey
Name: Greg Casey
Title: Senior VP of Wholesale Services
PRIMUS TELECOMMUNICATIONS, INC.
By: /s/ Yousef Javadi
Name: Yousef Javadi
Title: COO North America
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<PAGE>
EXHIBIT A:
DESCRIPTION OF CUSTOMER IRU USER ROUTES
AND LOCATION OF QWEST POPS
I. IRU User Routes Provisioned Pursuant to the Agreement:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
IRU QWEST QWEST Capacity V&H IRU FEE COLLOCATION
POP A POP B MILES
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
3 New York Ft. OC-3 1,068 * None
Lauderdale,
FL
<CAPTION>
- ----------------------------------------------------------------------------------------------------
4 Los Angeles, San Jose, OC-12 307 * None
California California
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
5 San Jose, Denver, OC-12 925 * San Jose, California
California Colorado
- ----------------------------------------------------------------------------------------------------
6 Denver, Chicago, OC-12 917 * Denver, Colorado
Colorado Illinois
- ----------------------------------------------------------------------------------------------------
7 Chicago, New York, OC-12 709 * Chicago, Illinois
Illinois New York
- ----------------------------------------------------------------------------------------------------
8 New York, Washington, OC-12 203 * None
New York D.C.
- ----------------------------------------------------------------------------------------------------
9 Washington, Dallas, OC-l2 1180 * None
D.C. Texas
- ----------------------------------------------------------------------------------------------------
10 Dallas, Texas Los OC-12 1239 * Dallas, Texas
Angeles,
California
- ----------------------------------------------------------------------------------------------------
11 San Diego, Los OC-3 110 * San Diego
California Angeles, California
California
- ----------------------------------------------------------------------------------------------------
12 San San Jose, OC-3 * ??
Francisco, California
California
- ----------------------------------------------------------------------------------------------------
13 Boston, Mass. New York, OC-3 188 * Boston, Mass.
New York
- ----------------------------------------------------------------------------------------------------
14 Seattle, San Jose, OC-3 715 * Seattle, Washington
Washington California
- ----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
II. IRU User Routes Previously Provisioned Under the Prior Agreement Being
Repurchased by Qwest Pursuant to the Agreement:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
IRU QWEST QWEST POP V&H CAPACITY IRU FEE
POP A B MILES
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 New York, Los Angeles, 2,441 OC-3 *
New York California
- ----------------------------------------------------------------------------------------------------
2 New York, Washington, 203 OC-3 *
New York D.C.
- ----------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
EXHIBIT B: TECHNICAL SPECIFICATIONS AND ACCEPTANCE TESTS
<PAGE>
* Confidential treatment has been requested in connection with this document.
2
<PAGE>
* Confidential treatment has been requested in connection with this document.
3
<PAGE>
* Confidential treatment has been requested in connection with this document.
4
<PAGE>
EXHIBIT C: PAYMENT ALLOCATION SCHEDULE
For tax purposes only, the IRU Fee paid hereunder shall be allocated one
twentieth (1/20) per annual period beginning with the Effective Date.
EXHIBIT D: FORM OF COLLOCATION AGREEMENT
COLLOCATION LICENSE AGREEMENT
This Collocation License Agreement ("License") is made and entered into as
of this __ day of ________, 1999, between Qwest Communications Corporation, a
Delaware corporation ("Licensor") and _____________________________________ a
_________ corporation ("Licensee").
RECITALS
A. Licensor is engaged in the business of providing customers with
networking and telecommunications services through its telecommunications
facility or facilities located at the addresses set forth in Exhibit A that is
attached hereto and incorporated herein by this reference (each of which is
referred to herein as a "Facility").
B. Licensor is entitled to license the use of the Facility to other
telecommunications companies.
C. Licensee desires to enter into a license agreement with Licensor for
the use of the Facility for the purpose of installing equipment and accessing
transmission capacity and operating its network, and Licensor desires to grant
to Licensee the right to use the Facility.
NOW THEREFORE, in consideration of the following mutual exchange of
promises and covenants, the parties agree as follows;
1. GRANT OF LICENSE:
(a) Subject to the terms and conditions contained herein, Licensor hereby
grants to Licensee, as of the Commencement Date, a nonexclusive license to
install, operate, and maintain certain communications equipment of
Licensee in the Facility. In addition, Licensee shall have the exclusive
use of the equipment space described in Exhibit A (the "Equipment Space").
(b) Licensor hereby reserves all rights not specifically granted to
Licensee, including, without limitation, the right to: (1) access to and
use of the Facility for its own use and for the use of its agents and
licensees; (2) grant additional licenses to other users; and (3) exercise
or grant other rights not inconsistent with the rights granted hereunder.
(c) This License is expressly made subject and subordinate to the terms
and conditions of any underlying ground or facilities lease or other
superior right by which Licensor has acquired its interest in the
Facility. Licensee agrees to comply with any terms and conditions of such
superior right. If the consent of the holder of such superior right is
required in order for the parties to enter into this License, then this
License shall not become effective until such consent is obtained.
(d) This License does not include the provision of local access. Licensee
must enter into separate agreements for local access, and for
interconnection with any other user of a Facility. All such access and
interconnections must be made through Licensor.
5
<PAGE>
(e) On not less than sixty (60) calendar days prior notice to Licensee,
Licensor may relocate the Facility or all or any portion of the Equipment
Space designated for Licensee's equipment. Following receipt of such
notice, Licensee shall cooperate with Licensor in relocating Licensee's
equipment, at Licensee's cost, to the new Facility or Equipment Space.
2. TERM: This License shall be effective as of the Commencement Date (as
defined below), and shall expire on the _________ anniversary of the
Commencement Date, unless terminated earlier as provided for in this
License. The foregoing notwithstanding, in no event shall the License be
construed to extend beyond the term of the underlying lease or other
superior interest in the Facility, or the termination date of the
telecommunications services agreement between Licensor and Licensee that
is applicable to Licensee's use of the Facility.
In addition, either party shall have the right to terminate this License
on not less than ninety (90) days advance notice to the other party.
If for any reason Licensor does not deliver possession of the Equipment
Space to Licensee on the Commencement Date, Licensor shall not be liable
to Licensee for any resultant loss or damage, and the Commencement Date
will be extended automatically one day for each day of delay before
delivery of possession. Licensor and Licensee will execute a certificate
of the Commencement Date promptly after delivery of possession.
3. LICENSE FEES AND OTHER CHARGES: Licensee shall pay to Licensor as a
license fee for use of the Equipment Space and the Facility a one-time
nonrecurring charge and a monthly recurring charge in the amounts set
forth in Exhibit A.
Dark Fiber IRU. The nonrecurring charge shall be payable on the date that
Licensee takes possession of the Equipment Space (the "Commencement
Date"). The monthly recurring charge shall be payable in advance on the
first day of each calendar month during the term of the License.
Capacity IRU. The nonrecurring charge shall be payable on the date that
any of the circuits that are dedicated to Licensee are turned up (the
"Commencement Date"). The monthly recurring charge shall be payable in
advance on the first day of each calendar month following the Commencement
Date.
If the term Commencement Date commences or ends on a day other than the
first day of a calendar month, then the license fee for the month in which
the term commences or ends shall be prorated (and paid at the beginning of
the month) in the proportion that the number of days this License is in
effect during such month bears to the total number of days in the month.
If the monthly license fee is not paid when due, the amount due and
payable shall bear interest at the rate of eighteen percent (18%) per
annum from the date due until paid.
In addition, Licensee shall pay to Licensor all costs incurred by Licensor
in making modifications or improvements to the Facility for Licensee, or
for fire suppression, energy sources or other utilities, and the costs of
any work or service performed for, or facilities furnished to, Licensee to
a greater extent or in a manner more favorable to Licensee than that
performed for or furnished to others within the Facility.
4. USE OF THE FACILITY: Licensee shall use the Facility solely for the
purpose of installing, maintaining and utilizing the communications
equipment and other personal property of Licensee installed in the
Facility pursuant to the terms of this License for interconnection with
the facilities of Licensor and the local exchange carriers that are
present in the Facility on the Commencement Date, and for no other
purpose. Licensee shall not use the Facility, or allow access thereto or
use thereof, except in accordance with the terms of this License. Licensee
shall not use the Facility for storage of equipment or for any
administrative function.
6
<PAGE>
In its use of the Facility Licensee shall not interfere, or allow the
operation of its equipment to interfere, with Licensor or any other
occupant of the Facility.
Except as otherwise provided herein, Licensee's equipment shall remain the
sole property of Licensee. Licensee expressly disclaims any right, title,
or interest in or to any of Licensor's equipment or property, or in that
of any of Licensor's affiliates, customers, agents or licensees, whether
located in the Facility or the Equipment Space, or elsewhere.
5. ACCESS TO FACILITY:
(a) Shared Access. Where access to a Facility is shared with other
users, or in the case of access to a cross-connect panel, Licensee
shall be provided access to the Facility only when accompanied by a
representative of Licensor. Licensee shall pay the following hourly
charges for such access for each Qwest representative, for each hour
or any part thereof:
(1) on business days, between the hours of 8:00 a.m. and 5:00 p.m.
local time, one hundred dollars ($100);
(2) on business days, between the hours of 5:00 p.m. and 8:00 am.,
and at any time on Saturdays, two hundred and twenty-five
dollars ($225); and
(3) on Sundays and legal holidays, three hundred dollars ($300).
Licensee shall be charged for Licensor's travel time as part of the
foregoing calculations. All individuals entering a Facility at the
direction of Licensor shall at all time have appropriate identification,
and shall display it to Licensor's representative on request.
OPTIONAL:
(a) Separate Access. Where access to a Facility is not shared with other
users, Licensee shall be responsible for security within its caged
Space, and within and about its separate space.
(b) Scheduling. Licensor shall schedule all access to a Facility by
telephone through Licensee's Access Control Center.
(c) Safety Training. All employees and contractors of Licensee who will
enter upon any railroad right of way must successfully complete
railroad safety training for the applicable railroad, at Licensee's
expense.
6. TAXES: Licensee shall be liable for and shall pay all taxes levied against
the property owned by it and located on or about the Facility.
7. ACCEPTANCE OF FACILITY: The installation of equipment by Licensee shall be
conclusive evidence that Licensee accepts the Facility "as is," and that
the Facility is suitable for the use intended by Licensee and is in
satisfactory condition at the time the equipment was installed.
8. MAINTENANCE OF PREMISES: Licensee at its own cost and expense, shall
protect, maintain and keep in good order the Equipment Space and any
equipment in the Equipment Space, and shall ensure that neither Licensee
nor its agents, contractors or invitees damage any part of the Facility,
the Equipment Space or any equipment located in or about the Facility, and
shall not allow any debris or supplies to be left in or about the
Facility. Licensee shall not maintain or permit any nuisances or
violations of governmental laws, rules, regulations or ordinances with
respect to the Facility. Licensee shall ensure that neither its employees,
agents nor invitees shall permit any explosive, flammable or combustible
material or any hazardous or toxic materials, as defined under state,
federal or local laws or regulations, to be located in or about the
Facility, except in compliance with all applicable laws and regulations.
7
<PAGE>
9. INSTALLATION AND ALTERATIONS:
(a) Licensee shall notify Licensor before commencing any installation,
interconnection, addition or alteration within or about the Facility, or
undertake any installation, upgrade or modification to Licensee's
equipment. Without the prior approval of Licensor, Licensee and shall not
(1) undertake any installation, interconnection, addition or
alteration within or about the Facility, or
(2) undertake any activity that would in any way result in an
increased cost to Licensor, or that might affect the use of
the Facility or other equipment by Licensor or any other user
of the Facility.
Whenever Licensor's approval of work is required, Licensee shall
deliver a written request to Licensor, specifying:
(1) the names and addresses of each proposed contractor and
subcontractor;
(2) a summary of the qualifications and experience of each
contractor and subcontractor;
(3) a description of the services to be performed; and
(4) the planned dates and times of such activities.
Licensor shall have the right to disapprove or require the removal
of any contractor or subcontractor selected for work in the Facility. All
such approvals shall be valid only if given by Qwest's Vice President of
Operations. If approval of any contractors or subcontractors is required
by the terms of an agreement with a lessor or other party holding a
superior interest in the Facility, Licensor shall also submit the written
request to such other party for approval, and Licensee's use of
contractors shall be subject to landlord's approval as set forth in the
underlying lease.
(b) All maintenance, installation, interconnection, addition, upgrade,
modification or other alteration within the Facility, shall comply with
all manufacturers' specifications, and shall meet all industry quality
assurance standards (e.g. NEBS, IEEE, Bellcore).
(c) Licensee shall pay or cause to be paid all costs and charges:
(1) for work done by Licensee or caused to be done by Licensee on
or about the Facility,
(2) for all materials furnished for or in connection with such
work;
(3) for alterations or additions to the Facility or equipment that
requires Licensor to incur costs; and
(4) all other costs or expenses incurred by Licensor arising out
of or related to that arise out of work done by or for the
benefit of Licensee.
(d) Licensee shall indemnify Licensor against and hold Licensor and the
Facility free and clear of and from all mechanics' liens and claims of
liens, and all other liabilities, liens, claims and demands on account of
such work done by or on behalf of Licensee. If any such lien is filed at
any time against the Facility, or any part thereof, Licensee shall cause
such lien to be discharged of record within ten (10) days after the filing
thereof, except that if Licensee desires to contest such lien, it will
furnish Licensor, within such ten-day period, security reasonably
satisfactory to Licensor of at least 150% of the amount of the claim, plus
estimated costs and interest. If a final judgment establishing the
validity or existence of a lien for any amount is entered, Licensee shall
pay and satisfy the same without delay. If Licensee fails to pay any
charge for which a mechanics' lien has been filed, and has not given
Licensor security as described above, Licensor may, at its option, pay
such charge and related costs and interest, and the amount so paid,
together with reasonable attorneys' fees incurred in connection with such
lien, will be immediately due
8
<PAGE>
from Licensee to Licensor. Nothing contained in this License shall be
deemed to constitute a consent or agreement of Licensor to subject the
Facility to liability under any mechanics' or other lien law. If Licensee
receives notice that a lien has been or is about to be filed against the
Facility, or any action affecting title to the Facility has been commenced
on account of work done by or on behalf of, or materials furnished to or
for Licensee, it will immediately give Licensor notice of such occurrence.
At least fifteen (15) days before commencement of any work (including but
not limited to any maintenance, repairs, alterations, additions,
improvements or installations) in or to the Facility or the Equipment
Space by or for Licensee, Licensee will give Licensor notice of the
proposed work and the names and addresses of the persons supplying labor
and materials for the proposed work. Licensor shall have the right to post
notices of nonresponsibility or similar notices on the Facility in order
to protect the Facility against any such liens.
10. RULES AND REGULATIONS: Licensee shall at Licensee's own cost and expense,
comply with all federal, state, and local laws, rules, regulations,
ordinances and requirements, whether now in force or hereinafter enacted,
relating to Licensee's use of the Facility. Licensee will obtain all
required permits and licenses pertaining to the installation, operation,
maintenance and repair of its equipment in the Facility. In addition,
Licensee agrees to comply with all rules and regulations of Licensor and
the holder of any superior lease or other superior right that pertains to
use of the Facility or the Equipment Space.
11. WAIVER OF LIABILITY; INDEMNIFICATION: Licensor and Licensee hereby agree
that:
(a) Except as provided in subsection 11(b), neither party shall be liable
to the other party, and each party hereby releases and waives all claims
against the other party, for any injury or damage arising from
interruption of service or power, except to the extent caused by the gross
negligence or intentional misconduct of the other party or its employees,
agents or contractors. NOTWITHSTANDING ANY PROVISION OF THIS AGREEMENT TO
THE CONTRARY, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY
SPECIAL, INCIDENTAL, INDIRECT, SPECIAL, EXEMPLARY OR PUNITIVE, LOSS OF
PROFITS OR CONSEQUENTIAL DAMAGES, WHETHER FORESEEABLE OR NOT, ARISING OUT
OF, OR IN CONNECTION WITH, SUCH PARTY'S FAILURE TO PERFORM ITS
OBLIGATIONS, OR A BREACH OF ITS REPRESENTATIONS HEREUNDER, INCLUDING, BUT
NOT LIMITED TO, LOSS OF PROFITS OR REVENUE, COST OF REPLACEMENT SERVICES
(WHETHER ARISING OUT OF TRANSMISSION INTERRUPTIONS OR PROBLEMS, ANY
INTERRUPTION OR DEGRADATION OF SERVICE OR OTHERWISE), OR CLAIMS OF
CUSTOMERS. ALL CLAIMS WITH RESPECT TO WHICH SUCH SPECIAL, INCIDENTAL,
INDIRECT, PUNITIVE OR CONSEQUENTIAL DAMAGES ARE HEREBY SPECIFICALLY
WAIVED.
LICENSEE EXPRESSLY ACKNOWLEDGES THAT LICENSOR INTENDS TO ALLOW OTHER
LICENSEES TO INSTALL EQUIPMENT IN THE FACILITY. LICENSEE EXPRESSLY AGREES
THAT LICENSOR SHALL HAVE NO LIABILITY FOR ANY DAMAGES, COSTS, OR LOSSES
INCURRED BY LICENSEE CAUSED BY SUCH OTHER LICENSEES' ACTS, EQUIPMENT, OR
FAILURE TO ACT.
(b) Licensee agrees to indemnify and hold harmless and defend Licensor,
its employees, contractors, and agents from and against any and all
demands, claims, causes of action, fines, penalties, damages (including
consequential damages), losses, liabilities, judgments, and expenses
(including without limitation attorneys fees and court costs) incurred in
connection with or arising from:
(1) the use or occupancy of the Facility by Licensee or any person
claiming under Licensee;
9
<PAGE>
(2) any activity, work, or thing done or permitted by Licensee in
or about the Facility;
(3) any acts, omissions, negligence or willful misconduct of
Licensee or any person claiming under Licensee, or the
employees, agents, contractors, invitees, licensees or
visitors of Licensee;
(4) any breach, violation, or nonperformance by Licensee or any
person claiming under Licensee or the employees, agents,
contractors, invitees, licensees or visitors of Licensee of
any term, covenant, or provision of this License, or any law,
statute, ordinance or governmental requirement of any kind; or
(5) except for loss that is proximately caused by or results
proximately from the negligence of Licensor, any injury or
damage to the person, property, or business of Licensee, its
employees, agents, contractors, invitees, licensees, visitors,
or any other person entering the Facility under the express or
implied invitation of Licensee.
If any action or proceeding is brought against Licensor, its
employees, contractors or agents by reason of any such claim,
Licensee shall, on notice from Licensor, defend the claim at
Licensee's expense with counsel reasonably satisfactory to Licensor.
The obligations of this section shall survive the expiration or
other termination of this License.
12. INSURANCE:
(a) During the term of this License, Licensee shall, at Licensee's sole
cost and expense, keep in full force and effect the following insurance:
(1) standard form property insurance insuring against the perils of
fire, vandalism, malicious mischief, extended coverage ("all-risk") and
sprinkler leakage. This insurance policy shall be on all property owned by
Licensee, or for which Licensee is legally liable, or that was installed
at Licensee's request, and which is located in the Facility, in an amount
not less than its full replacement cost. If there is a dispute about the
amount which comprises full replacement cost, the decision of Licensor
shall be conclusive.
(2) commercial general liability insurance insuring Licensee against
any liability arising out of the license, use occupancy or maintenance of
the Facility and all areas appurtenant thereto. Such insurance shall be in
the amount of $2 million ($5 million on railroad right of way) combined
single limit for injury to or death of one or more persons in an
occurrence, and for damage to tangible property (including loss of use) in
an occurrence. The policy shall insure the hazards of the Facility and
Licensee's operations thereon, independent contractors, contractual
liability (covering the indemnity of Licensee contained in this License),
and shall (a) list Licensor as an additional insured, (b) contain a cross
liability provision, and (c) contain a provision that the insurance
provided to Licensor hereunder shall be primary and noncontributing with
any other insurance available to Licensor.
(3) workers compensation as required by applicable state law, and
employer's liability insurance with minimum limits of $1,000,000 per
occurrence. If the Facility is located in a "monopolistic" state, Licensee
shall carry "stop gap" coverage with minimum limits of $1,000,000 per
occurrence.
(4) business automobile insurance in an amount not less than
$1,000,000 per occurrence covering all autos used at the Facility,
including owned, non-owned and hired autos.
10
<PAGE>
(b) All the insurance required of Licensee under this Agreement shall: (1)
be issued as a primary policy by an insurer with an A M Best rating of VII
or better, (2) contain an endorsement requiring sixty (60) days written
notice from the insurance company to both parties before cancellation or
material reduction in the coverage, scope or amount of any policy. Each
liability insurance policy shall list Licensor, its, officers, directors
and employees as additional insureds and loss payees. Each policy, or a
certificate of the policy acceptable in form and content to Licensor,
shall be deposited with Licensor within thirty (30) days after execution
of this Agreement and on renewal of the policy not less than thirty (30)
days after expiration of the initial term of the policy.
(c) Anything in this License to the contrary notwithstanding, Licensor and
Licensee each waives all rights of recovery, claim, action or cause of
action against the other, its agents (including partners, both general and
limited), trustees, officers, directors, agents and employees, for any
loss or damage that may occur to the Facility, or any improvements
thereto, or any property of such party therein, arising from any cause
covered by any insurance carried by such party, including negligence of
the other party. Licensor and Licensee shall cause their respective
insurers to issue appropriate waiver of subrogation rights endorsements to
all insurance policies carried in connection with the Facility or the
contents.
13. ASSIGNMENT AND SUBLICENSING: Licensor may freely assign this License.
Licensee shall not sell, assign, pledge, encumber or otherwise transfer by
operation of law or otherwise all or any part of Licensee's rights or
obligations under this License, nor permit any other person to occupy or
use the Facility or any portion thereof, without first obtaining
Licensor's prior written consent, which consent may be withheld in
Licensor's sole discretion. Licensee shall notify Licensor sixty (60) days
prior to the effective date of any proposed assignment of its intention to
assign this License. Any attempted sale, assignment, encumbrance or other
transfer of all or any part of this License by Licensee shall be void and
shall constitute a breach of this License.
14. SERVICES PROVIDED BY LICENSOR: Licensor shall make available the following
services for Licensee's use of the Equipment Space:
(a) HVAC sufficient to maintain an ambient temperature of 50(degrees)F to
86(degrees)F and relative noncondensing humidity.
(b) AC power consisting of commercial, unprotected and interruptible 120
volt, 20 amp each, single phase, duplex outlets, for testing of equipment
only.
(c) Except as otherwise specified in Exhibit A, DC power consisting of
fused 30 amp A supply and fused 30 amp B supply, negative 48 volts, for
each rack.
(d) Fire suppression system, either sprinkler system or other system that
conforms with local, state, and federal laws and regulations.
(e) Battery reserve, as is available to Licensor.
(f) Grounding.
Installation of Licensee's equipment shall be performed in accordance with
Licensor's installation policies and specifications. Licensee shall
supply the fiber, cable and the equipment that will be installed on the
shelves. For cable terminations, all connectors shall be compatible with
BNC connectors. For fiber terminations, all connectors shall be standard
EC connectors. Licensor will perform the interconnection between
Licensor's and Licensee's equipment. All services shall be provided at the
Facilities and under the direction and instruction
11
<PAGE>
of Licensee's personnel, and Licensee accepts sole responsibility for
services performed by Licensor.
LICENSOR SHALL HAVE NO DUTY TO MONITOR, MAINTAIN, OR CARE FOR THE
EQUIPMENT INSTALLED BY OR FOR LICENSEE.
15. TERMINATION IN THE EVENT OF CASUALTY OR CONDEMNATION: In the event of any
damage, destruction or condemnation of the Facility that renders the
Facility unusable or inoperable, Licensor shall have the right to
terminate this License and all of its duties and obligations hereunder by
giving notice to Licensee within thirty (30) days after such damage,
destruction or condemnation.
16. SURRENDER OF THE PREMISES: Within fifteen (15) days of expiration or
earlier termination of this License, Licensee shall remove its equipment
from the Facility at Licensee's expense. Licensee shall surrender the
Equipment Space in good condition, reasonable wear and tear excepted. If
Licensee fails to remove its equipment and other personal property from
the Facility within thirty (30) days after the date of expiration or other
termination, Licensor may remove such items at Licensee's sole cost and
expense.
In addition, upon expiration or other termination of this License for any
reason, Licensee shall, at its sole cost and expense, remove all
alterations, additions and improvements made or installed by Licensee and
restore the Facility to the same or as good condition as existed as when
Licensee first installed equipment, reasonable wear and tear excepted.
17. EVENTS OF DEFAULT:
(a) The occurrence of any one or more of the following events shall
constitute a default and breach of this License by Licensee ("Events of
Default"):
(1) Licensee's failure to pay when due any recurring monthly license
fees and charges, initial installation charges, or other amounts.
(2) The installation by Licensee of any equipment in the Facility
without first obtaining Licensor's consent.
(3) Licensee's vacation or abandonment of a Facility.
(5) Interference by Licensee with Licensor or any other user of a
Facility that continues for four (4) hours following notice from Licensor.
(6) A transfer or assignment by Licensee of its interest in this
License, except as specifically permitted by the terms of this License.
(7) Licensee's failure to relocate Licensee's equipment in
accordance with section 1(e).
(8) Licensee's failure to perform or observe any other term,
covenant or condition of this License, if the failure continues for thirty
(30) days after notice has been given to Licensee.
(b) Upon the occurrence of any Event of Default, Licensor may, without
notice or demand and in addition to any other right or remedy available at
law or equity, terminate this License and remove all of Licensee's
equipment from the Facility and store the same at Licensee's expense.
Licensee hereby waives any damages occasioned by such removal. Any
equipment so removed will be returned to Licensee upon payment in full of
all storage costs, past due license fees and charges. If within thirty
(30) days following such equipment removal, Licensee has not requested the
return
12
<PAGE>
of its equipment and paid any sums owed, then Licensor may exercise all
rights of ownership over such equipment including the right to sell same
and retain possession of any sale proceeds. Licensor's exercise of any
remedies provided for in this section shall be without prejudice to any
other remedies Licensor may have provided for herein or by law.
18. FORCE MAJEURE: Should the performance of any act required by this License,
other than the payment of money, be prevented or delayed by reason of an
act of God, strike, lockout, labor troubles, inability of Licensor to
secure materials necessary to provide the services, restrictive
governmental laws or regulations, or any other cause beyond the control of
the party required to perform the act, the time for performance will be
extended for a period equivalent to the period of delay and performance of
the act during the period of delay will be excused.
19. GOVERNING LAW: This License shall be governed by and construed in
accordance with the laws of the State of New York.
20. INTERPRETATION: Licensor and Licensee hereby expressly agree that this
License constitutes a mere license and not an interest in the Facility.
21. WAIVER: No waiver by Licensor of any default or breach of Licensee's
performance of any term, condition or covenant of this License shall be
deemed to be a waiver of any subsequent default or breach by Licensee of
the same or any other term, condition or covenant contained in this
License.
22. NOTICES: All notices required or permitted by this License shall be in
writing and delivered by hand, courier, overnight delivery service or
registered or certified mail return receipt requested. Any notice or other
communication under this License shall be deemed given when received or
refused and shall be directed to the following addresses:
(a) If to Licensor:
Qwest Communications Corporation
555 17th Street, 7th Floor
Denver, Colorado 80202
Attention: Vice President, Transport Engineering
with copies to:
Qwest Communications Corporation
555 17th Street, 7th Floor
Denver, Colorado 80202
Attention: Contracts Manager, Field Operations
And:
Qwest Communications Corporation
555 17th Street, 7th Floor
Denver, Colorado 80202
Attention: General Counsel
(b) If to Licensee:
____________________________________________
____________________________________________
____________________________________________
Attention: _________________________________
13
<PAGE>
In addition, Licensor may give Licensee notice of potential interruption
of or interference with service under section 17(a)(5) by electronic
delivery at the following internet address: [email protected].
Licensor's Access Control Center: (888) 345-4762.
Licensee's Access Control Center: ________________
Either party may change its address for purposes of this section by notice
similarly given.
23. TERMS AND HEADINGS: The section titles of this License shall have no
effect upon the construction or interpretation of any part hereof.
24. SUCCESSORS: This License shall inure to the benefit of and be binding on
the parties, and their heirs, successors, assigns and legal
representatives, but nothing contained in this section shall be construed
to permit an assignment or other transfer except as specifically provided
herein.
25. SEVERABILITY: Any provision of this License which shall prove to be
invalid, void or illegal shall in no way affect, impair or invalidate any
other provision hereof and the remaining provisions hereof shall remain in
full force and effect to the greatest extent permitted by law.
26. RULES AND REGULATIONS: Licensee and its employees, agents and invitees
shall abide by and observe all reasonable rules and regulations as may be
promulgated by Licensor or Licensor's lessor for the maintenance and use
of the Facility. Notice of the rules and regulations will be posted or
provided to Licensee. Licensor may periodically amend or supplement the
rules and regulations at its sole discretion.
27. AMENDMENT AND MODIFICATION: This License may be amended, changed or
modified only by an instrument in writing signed by duly authorized
representatives of the parties hereto. Licensee expressly agrees to
execute any amendment to this License which may be required by a holder of
a superior interest in the Facility, which does not materially and
adversely affect Licensee's rights under this License, within fifteen (15)
days of a written request by Licensor or Licensor may terminate this
License on notice to Licensee.
28. ATTORNEYS' FEES: If either party commences an action against the other
party arising out of or concerning this License, the prevailing party in
such litigation shall be entitled to reasonable attorneys fees and costs
in addition to such other relief as may be awarded.
29. ENTIRE AGREEMENT: This License contains all of the agreements of the
parties concerning the Facility, and there are no spoken or other
agreements that modify or affect this License. This License supersedes any
and all prior agreements made or executed by or on behalf of the parties
hereto regarding the Facility.
30. CONFIDENTIALITY: The parties agree that this License is and shall be kept
confidential. Neither party shall divulge or otherwise disclose any of the
provisions of this License to any third party without the prior written
consent of the other party, except that either party may make disclosure
to those required for the implementation of this License, and to customers
and prospective customers, purchasers and prospective purchasers,
auditors, attorneys, financial advisors, lenders and prospective lenders,
investors and prospective investors, provided that in each case the
recipient agrees in writing to be bound by the confidentiality provisions
set forth in this section. In addition, either party may make disclosure
as required by a court order or as otherwise required by law or in any
legal or arbitration proceeding relating to this License. If either party
is required by law or by interrogatories, requests for information or
documents, subpoena, civil investigative demand or similar process to
disclose the provisions of this License, it will provide the other party
with prompt prior notice of such request or requirement so that such party
may seek an appropriate protective order and/or waive compliance with this
Section. The
14
<PAGE>
party whose consent to disclose information is requested shall respond to
such request, in writing, within five (5) working days of the request by
either authorizing the disclosure or advising of its election to seek a
protective order, or if such party fails to respond within the prescribed
period the disclosure shall be deemed approved.
In addition, Licensee shall submit to Licensor all news releases,
advertising and other publicity material related to this License wherein
Licensor's name is mentioned or language is used from which a connection
to Licensor's name therein may, in Licensor's judgment, be inferred or
implied. Licensee shall neither publish nor use such material nor use
Licensor's name, without the prior written consent of Licensor.
IN WITNESS WHEREOF, the parties have executed this License the date first
above written.
Licensor: Qwest Communications
Corporation
By:_____________________________________
Name:___________________________________
Title:__________________________________
Date:___________________________________
Licensee:_______________________________
By:_____________________________________
Name:___________________________________
Title:__________________________________
Date:___________________________________
15
<PAGE>
COLLOCATION AGREEMENT
EXHIBIT A
LOCATION OF THE FACILITY
REQUEST NO. RESERVATION NO.
THE EQUIPMENT SPACE
Number of bays/racks:
Dimensions of each bay/rack: 23" by 19" and seven feet tall
Space Type: Common
DC Power Requirements:
Voltage:________________________
Total amperage: A&B Feeds Required:
Number Of Breakers Needed (per feed):
20 amp: 30 amp: 40 amp:
50 amp: 60 amp: l00 amp:
Other:
Signal Interface (Choose One):
Dark Fiber: |_| Connection:
Optical: |_| Type:
Electrical: |_| Bit Rate:
Notes, Special Requirements:
LICENSE FEES AND OTHER CHARGES
A One-time Nonrecurring Charge ("NRC") of $2500.00 per rack.
A Monthly Recurring Charge ("MRC") of $1500.00 per rack (up to 30
amps of DC power per rack included in the MRC).
An additional monthly recurring charge of $10 per amp of DC power
per rack (provided in 10 amp increments) for power furnished above
30 amps per rack.
16
<PAGE>
OPTIONAL CLAUSES:
In addition, Licensor may give Licensee notice of the availability
or interruption of the services described in section 3, or a planned
maintenance, by electronic delivery at all of the following internet
addresses:
__________________________
__________________________
__________________________
and Licensee may give Licensor notice of rejection of a rack by
electronic delivery at the following internet address:
______________(a)qwest.net
In the case of an emergency, Licensor may notify Licensee either
through the Internet addresses set forth above, or at the following
telephone numbers:
Primary Telephone Number: (703) 265-4662
Alternate Telephone Number: (703) 265-4667
EXHIBIT __
AMENDMENT TO COLLOCATION LICENSE AGREEMENT
This Amendment to the Collocation License Agreement ("Amendment") is
entered into as of the ____ day of________, 199_ or 200_, by and between Qwest
Communications Corporation ("Licensor"') and _________________ (the "Licensee").
Recitals
A. The parties entered into that certain Collocation Agreement dated
_________________ (the "Master Agreement").
B. By the terms of the Master Agreement, Licensee is entitled to
increase the number of bays dedicated for its use at certain
Facilities that are subject to the Master Agreement.
C. Licensee has elected to increase the number of bays at certain
Facilities, and Licensor and the Licensee wish to amend the Master
Agreement to include additional bays.
Additional Terms
In consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Licensor and Licensee agree as follows:
1. Defined Terms. Unless otherwise defined herein, all capitalized terms
used herein shall have the meanings given to them in the Agreement.
2. The Bays. Exhibit A of the Master Agreement is hereby amended to
include the following additional bays:
Address of Facility Number of Bays Dedicated to Licensee's Use
17
<PAGE>
3. Confirmation of Agreement. Licensor and Licensee confirm and ratify in
all respects the terms and conditions of the Agreement, as amended by this
Amendment.
Licensor and Licensee have executed this Amendment effective as of
the day first written above.
___________________________________ Qwest Communications Corporation
By:________________________________ By:_____________________________________
Name:______________________________ Name:___________________________________
Title:_____________________________ Title:__________________________________
Date:______________________________ Date:___________________________________
Additional Space.
Licensor may offer to license to Licensee additional Equipment Space in
Licensor's Facilities on the terms and conditions of this License. If Licensee
accepts such offer, within ten (10) days following acceptance of Licensor's
offer, the parties shall execute an amendment to Exhibit A of this License. The
amendment shall be in the form attached hereto as Exhibit __. The Term of the
license for the Equipment Space shall be as set forth in Exhibit A.
Option to Renew.
Licensor grants to Licensee the right and option to extend the Term for an
additional _____ years (the "Renewal Term"). Licensee shall notify Licensor of
its election to extend this License for the Renewal Term not later than six (6)
months before the expiration date of the then existing Term. License's failure
to exercise the option in a timely manner shall cause such option to extinguish
automatically, time being of the essence. The Renewal Term shall be upon all of
the terms, covenants, and conditions of this License.
Permitted Assignments
Notwithstanding anything contained in this License to the contrary, Licensee
may, without the prior consent of Licensor, assign this License to any company
into which Licensee may be merged or consolidated, or that acquires
substantially all of the assets of Licensee.
18
<PAGE>
EXHIBIT D: FORM OF COLLOCATION AGREEMENT
19
<PAGE>
EXHIBIT 10.21
PILOT NETWORK SERVICES, INC.
COMMON STOCK PURCHASE AGREEMENT
December 28, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. PURCHASE AND SALE OF COMMON STOCK...................................... 1
1.1 Sale and Issuance of Common Stock................................. 1
1.2 Closing; Delivery................................................. 1
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................... 1
2.1 Organization, Good Standing and Qualification.................... 1
2.2 Authorization.................................................... 1
2.3 Valid Authorization and Issuance of Shares....................... 2
2.4 Litigation....................................................... 2
2.5 Compliance with Other Instruments................................ 2
2.6 Rights of Registration and Voting Rights......................... 3
2.7 Financial Statements............................................. 3
2.8 Corporate Documents.............................................. 3
2.9 Capitalization................................................... 3
2.10 No Material Adverse Change....................................... 4
2.11 Real Property.................................................... 4
2.12 Insurance........................................................ 4
2.13 Intellectual Property............................................ 4
2.14 Consents......................................................... 4
2.15 Labor Agreements and Actions..................................... 4
2.16 Disclosure....................................................... 5
2.17 Securities Filings............................................... 5
2.18 Year 2000 Compliance............................................. 5
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER........................ 5
3.1 Authorization..................................................... 6
3.2 Purchase Entirely for Own Account................................. 6
3.3 Disclosure of Information......................................... 6
3.4 Restricted Securities............................................. 6
3.5 Legends........................................................... 6
3.6 Accredited Investor............................................... 7
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
4. CONDITIONS OF THE PURCHASER'S OBLIGATIONS AT CLOSING................... 7
4.1 Representations and Warranties.................................... 7
4.2 Qualifications.................................................... 7
4.3 Warrant........................................................... 7
4.4 Strategic Business Relationship Agreement......................... 7
4.5 Escrow Agreement.................................................. 7
4.6 Opinion........................................................... 7
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING..................... 7
5.1 Representations and Warranties.................................... 7
5.2 Qualifications.................................................... 7
6. COVENANTS OF THE COMPANY............................................... 8
6.1 Nomination of Director............................................ 8
6.2 Amendment to Existing Investors' Rights Agreement................. 8
7. MISCELLANEOUS.......................................................... 8
7.1 Survival of Warranties........................................... 8
7.2 Transfer; Successors and Assigns................................. 8
7.3 Governing Law.................................................... 9
7.4 Counterparts..................................................... 9
7.5 Titles and Subtitles............................................. 9
7.6 Notices.......................................................... 9
7.7 Fees and Expenses................................................ 9
7.8 Amendments and Waivers........................................... 9
7.9 Severability..................................................... 9
7.10 Delays or Omissions.............................................. 9
7.11 Entire Agreement................................................. 10
7.12 Corporate Securities Law......................................... 10
7.13 Confidentiality.................................................. 10
</TABLE>
EXHIBIT A FORM OF WARRANT
EXHIBIT B FORM OF ESCROW AGREEMENT
-ii-
<PAGE>
PILOT NETWORK SERVICES, INC.
COMMON STOCK PURCHASE AGREEMENT
-------------------------------
This Common Stock Purchase Agreement (the "Agreement") is made as of the
---------
28th day of December, 1999 by and between Pilot Network Services, Inc., a
Delaware corporation (the "Company") and Primus Telecommunications Group,
-------
Incorporated (the "Purchaser").
---------
The parties hereby agree as follows:
1. Purchase and Sale of Common Stock.
---------------------------------
1.1 Sale and Issuance of Common Stock. Subject to the terms and
---------------------------------
conditions of this Agreement, the Purchaser agrees to purchase at the Closing
and the Company agrees to sell and issue to the Purchaser at the Closing,
919,540 shares of Common Stock at a purchase price of $16.3125 per share, for an
aggregate purchase price of $14,999,996.25. The shares of Common Stock issued to
the Purchaser pursuant to this Agreement shall be hereinafter referred to as the
"Shares."
------
1.2 Closing; Delivery.
-----------------
(a) The purchase and sale of the Shares shall take place at the
offices of Orrick, Herrington & Sutcliffe LLP, San Francisco, California, at
10:00 a.m., on December 28, 1999 (which time and place are designated as the
"Closing").
-------
(b) At the Closing, the Company shall deliver to the Purchaser a
certificate representing the Common Stock and the Warrant (as defined herein)
being purchased hereby against payment of the purchase price therefor by a check
payable to the Company. The stock certificate, the Warrant and the check shall
be delivered to the escrow holder pursuant to the Escrow Agreement in the form
of Exhibit B hereto (the "Escrow Agreement").
----------------
2. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to the Purchaser that:
2.1 Organization, Good Standing and Qualification. The Company is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business and enter into the Agreements (as defined below). The
Company is duly qualified to transact business and is in good standing in each
jurisdiction in which the failure so to qualify would have a material adverse
effect on its business or properties.
2.2 Authorization. All corporate action on the part of the Company,
-------------
its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement, the Warrant in the form attached
hereto as Exhibit A (the "Warrant"), the Escrow Agreement and Strategic Business
--------- -------
Relationship Agreement to be entered into between the Company and the Purchaser
(the "Strategic Business Relationship Agreement" and, collectively with this
-----------------------------------------
Agreement, the Escrow Agreement and the Warrant, the "Agreements") and the
----------
performance of all obligations of the Company hereunder and thereunder has been
taken prior to
<PAGE>
the Closing. The Agreements, when executed and delivered by the Company, shall
constitute valid and legally binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and other laws of general application affecting enforcement of
creditors' rights generally, as limited by laws relating to the availability of
specific performance, injunctive relief, or other equitable remedies.
2.3 Valid Authorization and Issuance of Shares. The Shares that are
------------------------------------------
being issued to the Purchaser hereunder have been duly authorized for issuance
and, when issued, sold and delivered in accordance with the terms hereof for the
consideration expressed herein, will be duly and validly issued, fully paid and
nonassessable and free of restrictions on transfer other than applicable state
and federal securities laws. Based in part upon the representations of the
Purchaser in this Agreement and subject to the filing of any applicable notices
under federal and state securities laws, the Shares will be issued in compliance
with all applicable federal and state securities laws.
2.4 Litigation. There is no action, suit, proceeding or investigation
----------
pending or, to the Company's knowledge, currently threatened against the Company
or any of its subsidiaries that questions the validity of the Agreements or the
right of the Company to enter into them, or to consummate the transactions
contemplated hereby or thereby, or that might result, either individually or in
the aggregate, in any material adverse changes in the assets, condition or
affairs of the Company, financially or otherwise, or any change in the current
equity ownership of the Company, nor is the Company aware that there is any
basis for the foregoing. Neither the Company nor any of its subsidiaries is a
party or subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality. There is no action,
suit, proceeding or investigation by the Company or any of its subsidiaries
currently pending or which the Company or any of its subsidiaries intends to
initiate.
2.5 Compliance with Other Instruments. Neither the Company nor any of
---------------------------------
its subsidiaries is in violation or default of any provisions of (i) their
respective charters or bylaws (or similar applicable organizational documents),
(ii) any instrument, judgment, order, writ, decree, agreement (written or oral)
or contract to which any of them is a party or by which any of them is bound or
(iii) any federal or state statute, rule or regulation, except in the case of
clause (ii) or (iii) above, where any such violation or default would not be
material or have a material adverse effect on the Company. The execution,
delivery and performance of the Agreements by the Company and the consummation
by the Company of the transactions contemplated hereby or thereby (1) will not
be an event which results in the creation of any lien, charge or encumbrance
upon any assets of the Company or any of its subsidiaries and (2) will not
result in any violation or be in conflict with or constitute, with or without
the passage of time and giving of notice, a default under (a) the Company's
charter or bylaws, (b) any instrument, judgment, order, writ, decree, agreement
(written or oral) or contract or (c) any federal or state statute, rule or
regulation, except in the case of clause (b) or (c) above, where any such
violation, conflict or default would not be material or have a material adverse
effect on the Company.
2.6 Rights of Registration and Voting Rights. Except as provided in
----------------------------------------
that certain Amended and Restated Investors' Rights Agreement, dated as of March
31, 1997, among the Company and the investors listed on Schedule I thereto, as
amended by that certain
-2-
<PAGE>
Amendment to Investors' Rights Agreement dated as of December 22, 1997 and that
certain Second Amendment to Investors' Rights Agreement dated February 26, 1998,
including the obligation of the Company to amend such agreement to grant
registration rights to Greyrock Capital (the "Existing Investors' Rights
--------------------------
Agreement"), the Company has not granted or agreed to grant any registration
- ---------
rights, including piggyback rights, to any person or entity. To the Company's
knowledge, no stockholder of the Company has entered into any agreements with
respect to the voting of capital shares of the Company.
2.7 Financial Statements. The Company has made available to the
--------------------
Purchaser its audited financial statements (including balance sheet, income
statement and statement of cash flows) for the fiscal year ended March 31, 1999
included in the Company's Annual Report on Form 10-K for such year and the
unaudited financial statements for the quarters ended June 30, 1999 and
September 30, 1999 included in the Company's Quarterly Reports on Form 10-Q for
such quarters (collectively, the "Financial Statements"). The Financial
--------------------
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated. The
Financial Statements fairly present the financial condition and operating
results of the Company as of the dates, and for the periods, indicated therein,
subject, in the case of the unaudited financial statements, to normal year-end
audit adjustments. Except as set forth in the Financial Statements, the Company
(i) has no material liabilities, contingent or otherwise, other than (a)
liabilities incurred in the ordinary course of business subsequent to September
30, 1999 and (b) obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally accepted accounting
principles to be reflected in the Financial Statements, which, in both cases,
individually or in the aggregate are not material to the financial condition or
operating results of the Company and (ii) has not entered into any material
transaction other than transactions in the ordinary course of business or which
are not material to the Company, other than the transaction with Greyrock
Capital, a description of which has been provided to the Purchaser. The net
operating loss carryforwards of the Company are accurately described in the
Financial Statements.
2.8 Corporate Documents. The Restated Certificate of Incorporation
-------------------
and Bylaws of the Company are in the form provided by the Company to the
Purchaser. Such documents are in full force and effect and have not since been
amended.
2.9 Capitalization. The authorized and outstanding capital of the
--------------
Company as of September 30, 1999 is as set forth on Schedule 2.9 hereto. There
have been no changes to such capitalization since such date except for the
exercise of options by option holders, the exercise or conversion of warrants to
purchase 75,000 shares of Common Stock of the Company by warrant holders and the
issuance of warrants to purchase 121,212 shares of Common Stock of the Company
to Greyrock Capital for $8.25 per share.
2.10 No Material Adverse Change. Since September 30, 1999, there has
--------------------------
not been any change in the assets, liabilities, financial condition or operating
results of the Company from that reflected in the Financial Statements, except
changes in the ordinary course of business that have not been, in the aggregate,
materially adverse.
-3-
<PAGE>
2.11 Real Property. The Company does not own any real property. With
-------------
respect to the real property it leases, the Company is in compliance with such
leases and, to its knowledge, holds a valid leasehold interest free of any
liens, claims or encumbrances.
2.12 Insurance. The Company has in full force and effect fire,
---------
casualty and liability insurance policies, with extended coverage on its
properties in such amounts as are customarily maintained by persons engaged in
similar businesses and owning similar properties in the same general areas in
which the Company operates.
2.13 Intellectual Property. The Company owns or possesses sufficient
---------------------
legal rights to all patents, trademarks, service marks, tradenames, copyrights,
trade secrets, source or object code, licenses, information and proprietary
rights and processes necessary for its business without any conflict with, or
infringement of, the rights of others. The Company has not received any
communications alleging that the Company has violated or, by conducting its
business, would violate any of the patents, trademarks, service marks,
tradenames, copyrights, trade secrets, source or object code, or other
proprietary rights or processes of any other person or entity and, to the
Company's knowledge, it is not in violation of any of the foregoing rights with
respect to any third party. The Company is not aware that any of its employees
is obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of such
employee's best efforts to promote the interest of the Company or that would
conflict with the Company's business.
2.14 Consents. No consent, approval, order or authorization of, or
--------
registration, qualification, designation, declaration or filing with, any third
party or any federal, state or local governmental authority on the part of the
Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for filings that may be required under
applicable securities laws and compliance with the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 in connection with the exercise of the Warrant under
certain circumstances.
2.15 Labor Agreements and Actions. The Company is not bound by or
----------------------------
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any of the employees, representatives or agents
of the Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company, nor is the Company aware of any
labor organization activity involving its employees. The employment of each
officer and employee of the Company is terminable at the will of the Company.
The Company has complied in all material respects with all applicable state and
federal equal employment opportunity laws and with other laws related to
employment.
2.16 Disclosure. No representation or warranty of the Company
----------
contained in this Agreement and the exhibits and schedules attached hereto, any
certificate furnished or to be furnished to the Purchaser at the Closing, or any
other information regarding the Company provided by the Company to the Purchaser
contains any untrue statement of a material fact or
-4-
<PAGE>
omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made.
2.17 Securities Filings. The Company has made available to the
------------------
Purchaser each registration statement, report, proxy statement or information
statement and all exhibits thereto (collectively, the "Company Reports")
---------------
prepared by it since the effective date of the Company's initial registration
statement, each in the form (including exhibits and any amendments thereto)
filed with the Securities and Exchange Commission (the "SEC"). The Company
---
Reports were filed with the SEC in a timely manner and constitute all forms,
reports and documents required to be filed by the Company pursuant to the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Securities Laws"). As of their respective dates,
---------------
the Company Reports (a) complied as to form in all material respects with the
applicable requirements of the Securities Laws and (b) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading. There is no
unresolved violation asserted by any governmental authority with respect to any
of the Company Reports.
2.18 Year 2000 Compliance. The Company has (a) conducted a review and
--------------------
assessment of all areas within its business and operations (including those
affected by suppliers and vendors) that could be adversely affected by the risk
that computer applications used by the Company (or its suppliers and vendors)
may be unable to recognize and perform properly date-sensitive functions
involving any date after December 31, 1999 (the "Year 2000 Problem") and (b)
-----------------
developed and implemented a plan for addressing the Year 2000 Problem on a
timely basis. All computer applications that are necessary to the Company's
business and operations (including, to the Company's knowledge, the computer
applications of the Company's suppliers and vendors) will be Year 2000 compliant
by being able to perform properly on a timely basis date-sensitive functions for
all dates after December 31, 1999, except to the extent that a failure to do so
could not reasonably be expected to have a material adverse effect on the
Company. The Company will promptly notify the Purchaser in the event the
Company discovers or determines that any computer application (including those
of its suppliers and vendors) that is necessary to its business and operations
will not be Year 2000 compliant on a timely basis. The Company will cooperate
fully with the Purchaser in connection with any due diligence review that the
Purchaser may conduct in determining whether the Company has a Year 2000
Problem.
3. Representations and Warranties of the Purchaser. The Purchaser hereby
-----------------------------------------------
represents and warrants to the Company that:
3.1 Authorization. The Purchaser has full power and authority to
-------------
enter into this Agreement. The Agreements, when executed and delivered by the
Purchaser, will constitute valid and legally binding obligations of the
Purchaser, enforceable in accordance with their terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and any other laws of general application affecting enforcement of
creditors' rights generally, and as limited by laws relating to the availability
of a specific performance, injunctive relief, or other equitable remedies.
-5-
<PAGE>
3.2 Purchase Entirely for Own Account. This Agreement is made with
---------------------------------
the Purchaser in reliance upon the Purchaser's representation to the Company,
which by the Purchaser's execution of this Agreement, the Purchaser hereby
confirms, that the Shares to be acquired by the Purchaser will be acquired for
investment for the Purchaser's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof except in
accordance with the restrictions on transfer set forth in any legends thereon,
this Agreement and in accordance with the Existing Investors' Rights Agreement.
By executing this Agreement, the Purchaser further represents that the Purchaser
does not presently have any contract, undertaking, agreement or arrangement with
any person to sell, transfer or grant participations to such person or to any
third person, with respect to any of the Shares. The Purchaser has not been
formed for the specific purpose of acquiring the Shares.
3.3 Disclosure of Information. The Purchaser has had an opportunity
-------------------------
to discuss the Company's business, management, financial affairs and the terms
and conditions of the offering of the Shares with the Company's management and
has had an opportunity to review the Company's facilities.
3.4 Restricted Securities. The Purchaser understands that the Shares
---------------------
have not been registered under the Securities Act of 1933 (the "Securities
----------
Act"), by reason of a specific exemption from the registration provisions of the
- ---
Securities Act which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of the Purchaser's representations as
expressed herein. The Purchaser understands that the Shares are "restricted
securities" under applicable U.S. federal and state securities laws and that,
pursuant to these laws, the Purchaser must hold the Shares indefinitely unless
they are registered with the Securities and Exchange Commission and qualified by
state authorities, or an exemption from such registration and qualification
requirements is available. The Purchaser further acknowledges that if an
exemption from registration or qualification is available, it may be conditioned
on various requirements including, but not limited to, the time and manner of
sale, the holding period for the Shares, and on requirements relating to the
Company which are outside of the Purchaser's control, and which the Company is
under no obligation and may not be able to satisfy.
3.5 Legends. The Purchaser understands that the Shares and any
-------
securities issued in respect of or exchange for the Shares may bear one or all
of the following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A
FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933."
(b) Any legend set forth in the other Agreements.
-6-
<PAGE>
(c) Any legend required by the Blue Sky laws of any state to the
extent such laws are applicable to the shares represented by the certificate so
legended.
3.6 Accredited Investor. The Purchaser is an accredited investor as
-------------------
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
4. Conditions of the Purchaser's Obligations at Closing. The obligations
----------------------------------------------------
of the Purchaser to the Company under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
4.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 2 shall be true and correct on
and as of the Closing.
4.2 Qualifications. All authorizations, approvals or permits, if any,
--------------
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Shares pursuant to this Agreement shall be obtained and effective as of the
Closing.
4.3 Warrant. The Company shall have executed and delivered to the
-------
Purchaser the Warrant in substantially the form attached as Exhibit A.
---------
4.4 Strategic Business Relationship Agreement. The Company and the
-----------------------------------------
Purchaser shall have executed and delivered a Strategic Business Relationship
Agreement in a form agreed to by the Company and the Purchaser.
4.5 Escrow Agreement. The Company and the Purchaser shall have
----------------
entered into the Escrow Agreement substantially in the form of Exhibit B hereto.
4.6 Opinion. The Company shall have delivered to the Purchaser an
-------
opinion of Orrick, Herrington & Sutcliffe LLP in a form agreed to by the
Purchaser and its counsel.
5. Conditions of the Company's Obligations at Closing. The obligations of
--------------------------------------------------
the Company to the Purchaser under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
5.1 Representations and Warranties. The representations and
------------------------------
warranties of the Purchaser contained in Section 3 shall be true and correct on
and as of the Closing.
5.2 Qualifications. All authorizations, approvals or permits, if any,
--------------
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Shares pursuant to this Agreement shall be obtained and effective as of the
Closing.
-7-
<PAGE>
6. Covenants of the Company.
------------------------
6.1 Nomination of Director.
----------------------
(a) Effective as of the date of this Agreement, the Company will
cause K. Paul Singh to be elected a member of the Board of Directors of the
Company as a "Class II" director.
(b) At the annual meeting of stockholders of the Company to be
held in the year 2000, the Company and the Company's Board of Directors will
nominate and recommend to the Company's stockholders K. Paul Singh to serve on
the Board of Directors of the Company as a "Class II" director. The Company also
shall use its reasonable efforts to solicit from the stockholders of the Company
eligible to vote in the election of directors at such meeting a proxy to vote
for K. Paul Singh.
6.2 Amendment to Existing Investors' Rights Agreement. The Company
-------------------------------------------------
agrees to use its best efforts to obtain by January 31, 2000 the requisite
consent of the holders of registrable stock under the Existing Investors' Rights
Agreement and Grayrock Capital necessary to amend such agreement (a) to grant to
the Purchaser demand registration rights with respect to the Shares and the
shares of Common Stock issuable upon exercise of the Warrant (the "Warrant
-------
Shares") beginning six months after the date hereof and (b) to grant piggyback
- ------
registration rights to the Purchaser with respect to the Shares and the Warrant
Shares on the same terms and conditions as are generally applicable to the other
holders of registrable stock thereunder; provided, however, that the Purchaser
will have the right to demand a registration if the Purchaser proposes to
register at least 50% of the Shares or all of the Warrant Shares. If the Company
is unable to so amend the Existing Investors' Rights Agreement, the Company
shall enter into a registration rights agreement with the Purchaser in a form
reasonably acceptable to the Purchaser.
7. Miscellaneous.
-------------
7.1 Survival of Warranties. Unless otherwise set forth in this
----------------------
Agreement, the warranties, representations and covenants of the Company and the
Purchaser contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing.
7.2 Transfer; Successors and Assigns. The terms and conditions of
--------------------------------
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
7.3 Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Delaware, without giving effect to principles of conflicts of law.
-8-
<PAGE>
7.4 Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original and all of which together shall
constitute one instrument.
7.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient (i) upon delivery, when delivered
personally or sent by facsimile, (ii) on the next business day after dispatch
when delivered by overnight courier or sent by telegram, or (iii) on the fifth
business day after being deposited in the U.S. mail, as certified or registered
mail, with postage prepaid, addressed (a) if to the Company, to 1080 Marina
Village Parkway, Alameda, California 94501, Attn: Chief Financial Officer,
facsimile number (510) 433-7811, with a copy to Orrick, Herrington & Sutcliffe
LLP, 400 Sansome Street, San Francisco, California 94111, Attn: Peter Lillevand,
Esq., facsimile number (415) 773-5759 or (b) if to the Purchaser, to 1700 Old
Meadow Road, Third Floor, McLean, Virginia 22102, Attn: David P. Slotkin, Esq.,
Deputy General Counsel, with a copy to Hogan & Hartson L.L.P., Columbia Square,
555 Thirteenth Street, N.W., Washington, D.C. 20004, Attn: David W. Bonser,
Esq., or such other addresses as either party may from time to time specify in
writing.
7.7 Fees and Expenses. Each party shall pay its own fees and expenses
-----------------
incurred with respect to this Agreement and the transactions contemplated
hereby, except for any registration expenses payable by the Company under the
Existing Investors' Rights Agreement, as amended as contemplated hereby.
7.8 Amendments and Waivers. Any term of this Agreement may be amended
----------------------
or waived only with the written consent of the Company and the Purchaser.
7.9 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
7.10 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any party under this Agreement, upon any breach or
default of any other party under this Agreement, shall impair any such right,
power or remedy of such non-breaching or non-defaulting party nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative.
-9-
<PAGE>
7.11 Entire Agreement. This Agreement and the documents referred to
----------------
herein constitute the entire agreement between the parties hereto pertaining to
the subject matter hereof, and any and all other written or oral agreements
relating to the subject matter hereof existing between the parties hereto are
expressly canceled.
7.12 Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE
------------------------
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO THE
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE
QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON
THE QUALIFICATION BEING OBTAINED UNLESS THE SALE IS SO EXEMPT.
7.13 Confidentiality. Each party hereto agrees that, except with the
---------------
prior written permission of the other party, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other parties to which such party has been
or shall become privy by reason of this Agreement, discussions or negotiations
relating to this Agreement, the performance of its obligations hereunder or the
ownership of Shares purchased hereunder. The provisions of this Section 7.13
shall be in addition to, and not in substitution for, the provisions of any
separate nondisclosure agreement executed by the parties hereto with respect to
the transactions contemplated hereby. The provisions of this Section 7.13 shall
not apply to any information that (a) is or becomes a part of the public domain
through no act or omission of the receiving party; (b) was in the receiving
party's lawful possession prior to any disclosure by the other party and had not
been obtained by the receiving party either directly or indirectly from the
disclosing party, as demonstrated by files in existence at the time of
disclosure; (c) is furnished by the disclosing party to a third party without
restrictions similar to those contained in this Agreement; (d) is lawfully
disclosed to the receiving party by a third party without, to the knowledge of
the receiving party, restriction on disclosure; (e) is independently developed
by the receiving party without reference to confidential information received
under this Agreement; or (f) is compelled by law or legal process to be
disclosed, provided that the receiving party has complied with Section 5(a) of
the Mutual Non-Disclosure Agreement dated November 1, 1999 by and between the
Company and the Purchaser.
[Signature Pages Follow]
-10-
<PAGE>
The parties have executed this Agreement as of the date first written
above.
COMPANY:
Pilot Network Services, Inc.
/s/ William C. Leetham
By:__________________________________
William C. Leetham
Name:________________________________
(print)
CFO
Title:_______________________________
PURCHASER:
Primus Telecommunications Group,
Incorporated
/s/ Neil L. Hazard
By:__________________________________
Neil L. Hazard
Name:________________________________
(print)
Executive Vice President
Title:_______________________________
<PAGE>
EXHIBIT A
---------
FORM OF WARRANT
<PAGE>
EXHIBIT B
---------
FORM OF ESCROW AGREEMENT
<PAGE>
EXHIBIT 10.22
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL, WHICH MAY BE IN-HOUSE COUNSEL,
IN A FORM REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
___________________________________
WARRANT TO PURCHASE STOCK
Warrant to Purchase 200,000 Shares Issue Date: December 28, 1999
of the Common Stock of Pilot Expiration Date: December 28, 2002
Network Services, Inc. Initial Exercise Price: $25.00 per share
FOR VALUE RECEIVED, PILOT NETWORK SERVICES, INC., a Delaware corporation
(the "Company"), hereby certifies that PRIMUS TELECOMMUNICATIONS GROUP,
-------
INCORPORATED ("Holder") is entitled to purchase the number of fully paid and
------
non-assessable shares of common stock (the "Shares") of the Company at the
------
initial exercise price per Share (the "Warrant Price") all as set forth above
-------------
and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions
and upon the terms and conditions set forth in this Warrant.
ARTICLE 1. EXERCISE.
1.1 Method of Exercise. This Warrant is exercisable, in whole or in part,
at any time and from time to time on or before the Expiration Date set forth
above; provided, however, that this Warrant may not be exercised until all
applicable requirements, if any, of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), have been satisfied. The Company agrees
-------
to file and cooperate with Holder in filing all documents required to comply
with the HSR Act. Holder may exercise this Warrant by delivering a duly executed
Notice of Exercise in substantially the form attached as Appendix 1 to the
principal office of the Company. Holder shall also deliver to the Company a wire
transfer or certified check for the aggregate Warrant Price for the Shares being
purchased.
1.2 Delivery of Certificate and New Warrant. Promptly after Holder
exercises this Warrant, the Company shall deliver at its expense to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised and has not expired, a new Warrant representing the Shares not so
acquired.
1.3 Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, on surrender and cancellation of this
<PAGE>
Warrant, the Company shall execute and deliver, in lieu of this Warrant, a new
warrant of like tenor.
1.4 Fractional Shares. No fractional Shares shall be issuable upon
exercise of the Warrant and the number of Shares to be issued shall be rounded
down to the nearest whole Share. If a fractional share interest arises upon any
exercise of the Warrant, the Company shall eliminate such fractional share
interest by paying Holder an amount computed by multiplying the fractional
interest by the fair market value of a full Share.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
dividend on its common stock payable in common stock or other securities,
combines its outstanding shares of common stock, makes a distribution of capital
stock to holders of its common stock or subdivides the outstanding common stock
into a greater amount of common stock, then the number of shares for which this
Warrant may be exercised shall be proportionately adjusted such that, upon
exercise of this Warrant, Holder shall receive a proportionate number of
securities to which Holder would have been entitled had Holder owned the Shares
of record as of the date the applicable event occurred, and the per share
Warrant Price shall be adjusted so that the aggregate Warrant Price remains the
same.
2.2 Reclassification. Upon any reclassification that results in a change
of the number and/or class of the securities issuable upon exercise of this
Warrant, Holder shall be entitled to receive, upon exercise of this Warrant, the
number and kind of securities and property that Holder would have received for
the Shares if this Warrant had been exercised immediately before such
reclassification. The Company shall promptly issue to Holder a new Warrant for
such new securities or other property. The new Warrant shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and the number of securities or property
issuable upon exercise of the new Warrant. The provisions of this Section 2.2
shall similarly apply to successive reclassifications.
2.3 Adjustments for Business Combinations, Etc. Upon a merger or
consolidation of the Company with or into, or a transfer of all or substantially
all of the assets of the Company to, another entity (a "Consolidation Event"),
-------------------
then the Holder shall be entitled to receive upon such transfer, merger or
consolidation becoming effective, and upon payment of the Warrant Price, the
number of shares or other securities or property of the Company or of the
successor corporation resulting from such merger or consolidation, which would
have been received by the Holder for the shares of stock subject to this Warrant
had this Warrant been exercised immediately prior to such transfer, merger or
consolidation becoming effective or to the applicable record date thereof, as
the case may be. The Company shall not effect any Consolidation Event unless the
resulting successor or acquiring entity (if not the Company) assumes by written
instrument the obligation to deliver to the Holder such shares of stock and/or
other securities as the Holder is entitled to receive had this Warrant been
exercised in accordance with the foregoing. Such successor shall promptly issue
to Holder a new Warrant for such new securities or other property. The new
Warrant shall provide for adjustments which shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Article 2
2
<PAGE>
including, without limitation, adjustments to the Warrant Price and the number
of securities or property issuable upon exercise of the new Warrant. The
provisions of this Section 2.3 shall similarly apply to successive
reclassifications, exchanges, substitutions, or other events.
2.4 No Impairment. The Company shall not, by amendment of its Certificate
of Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment.
2.5 Certificate as to Adjustments. Upon each adjustment of the Warrant
Price, the Company shall promptly compute such adjustment and furnish Holder
with a certificate of its Chief Financial Officer setting forth such adjustment
and the facts upon which such adjustment is based. The Company shall, upon
written request, furnish Holder a certificate setting forth the Warrant Price in
effect upon the date thereof and the series of adjustments leading to such
Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Validly Issued Shares. The Company hereby represents and warrants to
the Holder that the Shares that may be issued upon the exercise of the purchase
right represented by this Warrant shall, upon issuance, be duly authorized,
validly issued, fully paid and non-assessable, and free of any liens and
encumbrances except for restrictions on transfer provided for herein or under
applicable federal and state securities laws.
3.2 Valid Authorization. The Company hereby represents and warrants to the
Holder that the execution and delivery of this Warrant by the Company have been
duly authorized by all necessary corporate action on the part of the Company and
no additional consent or approval by any third party or governmental authority
is required for the execution and delivery by the Company of this Warrant, other
than those required under the HSR Act under certain circumstances.
3.3 Notice of Certain Events. If the Company proposes at any time (a) to
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities (other than a regular cash dividend); (b)
to offer for subscription pro rata to the holders of common stock any additional
shares of stock of any class or series or other rights; (c) to effect any
reclassification or recapitalization of common stock; or (d) to merge or
consolidate with or into any other corporation, or sell or convey all or
substantially all of its assets, or to liquidate, dissolve or wind up; then, in
connection with each such event, the Company shall give Holder (1) at least 10
business days prior written notice of the date on which a record will be taken
for such dividend, distribution, or subscription rights (and specifying the date
on which the holders of common stock will be entitled thereto) or for
determining rights to vote, if any, in respect of the matters referred to in (c)
and (d) above; and (2) in the case of the matters referred to in (c) and (d)
above, the same notice that is provided to stockholders of the Company including
when the same will take place (and specifying the date on which the holders of
common stock will be
3
<PAGE>
entitled to exchange their common stock for securities or other property
deliverable upon the occurrence of such event).
3.4 Reservation of Shares. The Company shall at all times reserve for
issuance pursuant to this Warrant such number of shares of Common Stock as are
issuable upon exercise of this Warrant.
3.5 Periodic Reports. The Company shall continue to file with the
Securities and Exchange Commission all periodic reports required under the
Securities Exchange Act of 1934 during the term of this Warrant; provided,
however, that such obligation may terminate in the event of a merger or
consolidation of the Company in which the Company is not the surviving entity,
the acquisition of substantially all of the voting stock of the Company by a
single entity or group of related entities or a sale of all or substantially all
of the assets of the Company.
3.6 NASDAQ Listing. (a) The Company will cause the shares of Common Stock
issuable upon exercise of this Warrant to be listed for trading on the NASDAQ
National Market System.
(b) The Company will use its best efforts to cause its common stock
to remain listed for trading on the NASDAQ National Market System or the New
York Stock Exchange; provided, however, that such obligation may terminate in
the event of or merger or consolidation of the Company in which the Company is
not the surviving entity, the acquisition of substantially all of the voting
stock of the Company by a single entity or group of related entities or a sale
of all or substantially all of the assets of the Company.
3.7 Registration Rights. The Company agrees to use its best efforts to
obtain by January 31, 2000 the requisite consent of the holders of registrable
stock under that certain Amended and Restated Investors' Rights Agreement, dated
as of March 31, 1997, among the Company and the investors listed on Schedule I
thereto, as amended by that certain Amendment to Investors' Rights Agreement
dated as of December 22, 1997 and that certain Second Amendment to Investors'
Rights Agreement dated February 26, 1998, including the obligation of the
Company to amend such agreement to grant registration rights to Greyrock Capital
(the "Existing Investors' Rights Agreement"), necessary to amend such agreement
------------------------------------
(a) to grant to the Holder demand registration rights with respect to the Shares
beginning six months after the date hereof and (b) to grant piggyback
registration rights to the Holder with respect to the Shares on the same terms
and conditions as are generally applicable to the other holders of registrable
stock thereunder; provided, however, that the Holder will have the right to
demand a registration if the Holder proposes to register all of the Shares. If
the Company is unable to so amend the Existing Investors' Rights Agreement, the
Company shall enter into a registration rights agreement with the Holder in a
form reasonably acceptable to the Holder.
ARTICLE 4. MISCELLANEOUS.
4.1 This Warrant and the Shares shall be imprinted with a legend in
substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
4
<PAGE>
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT
TO RULE 144 OR AN OPINION OF COUNSEL, WHICH MAY BE IN-HOUSE COUNSEL, IN A FORM
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
4.2 Compliance with Securities Laws on Transfer. This Warrant and the
Shares issuable upon exercise of this Warrant may not be transferred or assigned
in whole or in part without compliance with applicable federal and state
securities laws (including, without limitation, the delivery of investment
representation letters and legal opinions satisfactory to the Company, if
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e),
the selling broker represents that it has complied with Rule 144(f), and the
Company is provided with a copy of Holder's notice of proposed sale.
4.3 Transfer Procedure. Subject to the provisions of Sections 4.1 and 4.2,
Holder may transfer all or part of this Warrant by giving the Company notice of
the portion of the Warrant being transferred setting forth the name, address and
taxpayer identification number of the transferee and surrendering this Warrant
to the Company for reissuance to the transferee (and Holder if applicable).
4.4 Notices. Any notice required or permitted by this Warrant shall be in
writing and shall be deemed sufficient (i) upon delivery, when delivered
personally or sent by facsimile, (ii) on the next business day after dispatch
when delivered by overnight courier or sent by telegram, or (iii) on the fifth
business day after being deposited in the U.S. mail, as certified or registered
mail, with postage prepaid, addressed (a) if to the Company, to 1080 Marina
Village Parkway, Alameda, California 94501, Attn: Chief Financial Officer,
facsimile number (510) 433-7811, with a copy to Orrick, Herrington & Sutcliffe
LLP, 400 Sansome Street, San Francisco, California 94111, Attn: Peter Lillevand,
Esq., facsimile number (415) 773-5759 or (b) if to the Holder, to 1700 Old
Meadow Road, Third Floor, McLean, Virginia 22102, Attn: David P. Slotkin, Esq.,
Deputy General Counsel, with a copy to Hogan & Hartson L.L.P., Columbia Square,
555 Thirteenth Street, N.W., Washington, D.C. 20004, Attn: David W. Bonser,
Esq., or such other addresses as either party may from time to time specify in
writing.
4.5 Waiver. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.6 Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to its
principles regarding conflicts of law.
PILOT NETWORK SERVICES, INC.
/s/ William C. Leetham
By ______________________________
Name: William C. Leetham
Title:CFO
5
<PAGE>
APPENDIX 1
NOTICE OF EXERCISE
------------------
1. The undersigned hereby elects to purchase _________________ shares of
the Common Stock of Pilot Network Services, Inc. pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price of such
shares in full.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:
_____________________________
(NAME)
_____________________________
_____________________________
_____________________________
(ADDRESS)
3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
______________________
(Signature)
______________________
(Date)
6
<PAGE>
EXHIBIT 10.23
LOAN AND SECURITY AGREEMENT
---------------------------
This LOAN AND SECURITY AGREEMENT ("Agreement"), is dated as of November 22,
---------
1999, by and between the following parties:
LENDER: NTFC CAPITAL CORPORATION, a Delaware corporation with offices at
501 Corporate Centre Drive, Suite 600, Franklin Tennessee 37067
and its affiliates, successors or assigns
BORROWER: PRIMUS TELECOMMUNICATIONS, INC., a Delaware corporation with its
principal office at 1700 Old Meadow Rd., McLean, VA 22102
("Borrower").
--------
COMMITMENT
AMOUNT: US$30,000,000.00
SUPPLIER: NORTEL NETWORKS CORP.
This Loan Agreement is entered into pursuant to that certain Proposal
Letter dated August 28, 1999, as supplemented and revised by that certain
Commitment Letter dated October 6, 1999, from Lender and accepted by Borrower as
evidenced hereby (collectively, the "Commitment Letter").
IN WITNESS WHEREOF, the parties have executed this Loan Agreement by their
duly authorized representatives:
NTFC CAPITAL CORPORATION PRIMUS TELECOMMUNICATIONS, INC.
BY:_____________________________ BY:_____________________________
TITLE:__________________________ TITLE:__________________________
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Certain Definitions..................................................
2. Commitments to Lend..................................................
3. The Notes and Payment Terms..........................................
4. Procedures for Borrowing.............................................
5. Place of Payment.....................................................
6. Prepayment...........................................................
7. Mandatory Prepayment.................................................
8. Security Interest; Guaranties; Obligations Secured...................
9. Description of Collateral............................................
10. Maintenance, Use and Operation.......................................
11. Representations, Warranties and Covenants of Borrower................
12. Insurance............................................................
13. Casualty.............................................................
14. Default..............................................................
15. Rights and Remedies of Default.......................................
16. General Authority....................................................
17. Expenses.............................................................
18. Indemnity............................................................
19. Assignment...........................................................
20. Miscellaneous........................................................
21. Notices..............................................................
22. Counterparts.........................................................
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
23. Entire Agreement.....................................................
24. Binding Nature.......................................................
25. Conditions of Closing................................................
26. Conditions of Lending................................................
</TABLE>
SCHEDULES TO LOAN AND SECURITY AGREEMENT
----------------------------------------
Schedule 2.01 Borrowers' Information, Offices, etc
Schedule 8.01 Collateral Description and Locations of Collateral
Schedule 11.01 Disclosure Schedule
Schedule 11.02 Permitted Encumbrances
Schedule 11.03 Senior Note Covenants
Schedule 11.04 Schedule of Qualifying Leases and Conveyances
Schedule 24.01 Post-Closing Documents
EXHIBITS TO LOAN AND SECURITY AGREEMENT
---------------------------------------
Exhibit A Form of Note
Exhibit B Form of Borrowing Certificate
Exhibit C Form of Borrower's Counsel Opinion
Exhibit D Form of Borrower's Regulatory Counsel Opinion
Exhibit E Form of Landlord's Consent
Exhibit F Form of Collateral Assignment of Purchase Agreement
Exhibit G-1 Form of Subsidiary Guaranty -- Australia
Exhibit H-1 Form of Deed of Charge -- Australia
ii
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("Agreement"), is dated as of November 22,
---------
1999, by and between PRIMUS TELECOMMUNICATIONS, INC., a Delaware corporation
with its principal office at 1700 Old Meadow Rd., McLean, VA 22102 ("Borrower")
--------
and NTFC CAPITAL CORPORATION, a Delaware corporation with offices at 501
Corporate Centre Drive, Suite 600, Franklin Tennessee 37067 and its affiliates,
successors or assigns ("Lender").
------
This Loan Agreement is entered into pursuant to the Commitment Letter from
Lender and accepted by Borrower as evidenced hereby.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and intending to be legally bound hereby, the parties
hereto agree as follows:
1. CERTAIN DEFINITIONS: In addition to other words and terms defined in
-------------------
the preamble hereof or elsewhere in this Agreement, or on the schedules hereto,
the following words and terms shall have the following meanings unless the
context otherwise clearly requires:
"Advance(s)": any advance or loan of funds made by Lender to or on behalf
----------
of Borrower pursuant to this Agreement.
"Amortization Schedule": a schedule described in Section 3(e) attached to a
--------------------- ------------
Note showing anticipated amortization of that Note assuming full funding
thereof.
"Assignee": an assignee described in Section 19 hereof.
-------- ----------
"Borrowing Certificate": a certificate substantially in the form of Exhibit
---------------------
B hereto, executed by Borrower.
"Borrowing Date": any Business Day on which an Advance is made to Borrower
--------------
hereunder.
"Borrower": Primus Telecommunications, Inc.; its successors and assigns.
--------
"Borrower's Obligations": all payment obligations of Borrower owed to
----------------------
Lender hereunder, including indemnity, expense reimbursement, taxes, fee and
other obligations set forth in this Agreement, any Note and/or other Loan
Documents.
"Business Day": a day other than a Saturday, Sunday or other day on which
------------
commercial banks in Nashville, Tennessee, are authorized or required by law to
close.
"Change in Control": any change in the direct or indirect control of,
-----------------
or the ability or right to control, a majority of the voting shares of any class
of securities or ownership rights in Borrower or in the right and/or the power
to control the election of the board of directors of
1
<PAGE>
Borrower.
"Closing Date": as defined on Schedule 24.01 hereto.
------------ --------------
"Collateral": as defined and described in Sections 8 and 9 hereof.
---------- ----------------
"Collateral Schedule": as defined and described in Section 9 hereof.
------------------- ---------
"Commitment Letter": that certain Proposal Letter dated August 28, 1999,
-----------------
from Lender, as supplemented and revised by that certain Commitment Letter dated
October 6, 1999, from Lender and accepted by Borrower as evidenced hereby.
"Consent": a consent to a collateral assignment of the NORTEL Purchase
-------
Agreement, a consent to a collateral assignment of a Vendor Purchase Agreement,
a Landlord Consent, and/or a Mortgagee's Consent.
"Deed of Charge": a Deed of Charge substantially in the form of Exhibit H-1
-------------- -----------
attached hereto, to be executed by any Australian Subsidiary acquiring rights to
Equipment and a Deed of Charge or other security agreement in form reasonably
acceptable to Lender for a Subsidiary located in a different jurisdiction
acquiring rights to Equipment other than pursuant to a Qualifying Lease.
"Default": any of the conditions or occurrences specified in Section 14,
------- ----------
whether or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition has been satisfied.
"Default Rate": a rate of interest equal to the lesser of (i) three
------------
percentage points (3%) in excess of the Interest Rate or (ii) the maximum
permissible rate under applicable law in effect at any time.
"Equipment": the equipment defined in Section 9 hereof.
--------- ---------
"Event of Default": any of the events specified in Section 14 hereof,
---------------- ----------
provided that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, under 14 or otherwise, has been satisfied.
"Event of Loss": as defined in Section 13 hereof.
------------- ----------
"Financing Termination Date": December 31, 2000, the date on which Lender's
--------------------------
agreement to make any further Advances to Borrower terminates.
"First Funding Date": the date of the first funding by a Lender under any
------------------
Loan hereunder.
"GAAP": generally accepted accounting principles in the United States of
----
America (as such principles may change from time to time) applied on a
consistent basis (except for changes in application in which Borrower's
independent certified public accountants concur),
2
<PAGE>
applied both to classification of items and amounts.
"Governmental Authority": the federal government, any state or
----------------------
political subdivision thereof, any city or municipal entity, any foreign
government having jurisdiction over Borrower, any of its Subsidiaries or their
respective properties, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
over or with respect to Borrower or any of its Subsidiaries or their respective
businesses or any Collateral.
"Guaranty": a Guaranty or Guaranty Agreement substantially in the form of
--------
Exhibit G-1 attached hereto, to be executed by any Australian Subsidiary
- -----------
acquiring rights to Equipment and a Guaranty in form reasonably acceptable to
Lender for a Subsidiary located in a different jurisdiction acquiring rights to
Equipment other than pursuant to a Qualifying Lease.
"Indebtedness": as to any Person, at a particular time, (a) indebtedness
------------
for borrowed money or for the deferred purchase price of property or services in
respect of which such Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or in respect of which such Person otherwise assures a
creditor against loss; (b) obligations under leases which shall have been or
should be, in accordance with GAAP, recorded as capital leases in respect of
which obligations such Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or in respect of which obligations such Person assures a
creditor against loss; (c) obligations of such Person to purchase or repurchase
accounts receivable, chattel paper or other payment rights sold or assigned by
such Person; and (d) indebtedness or obligations of such Person under or with
respect to letters of credit, notes, bonds or other debt instruments.
"Installation Site(s)": any of the sites where Equipment is or is to be
--------------------
located, including those set forth on Schedule 8.01 hereto.
"Interest Only Period": as defined in Section 3(e) hereof.
-------------------- ------------
"Interest Payment Date": as defined in Section 3(e) hereof.
--------------------- ------------
"Interest Payments": as set forth in Section 3(e) hereof
----------------- ------------
"Interest Rate": as set forth in Section 3(e) hereof.
------------- ------------
"Landlord Consent": a consent substantially in the form of Exhibit E hereto
---------------- ---------
or in other form acceptable to Lender, to be executed by the owner/landlord,
sublessor and/or licensor (including carriers) of any real property where any of
the Collateral is to be located.
"Lease": a Lease of the Equipment by Borrower as lessor and a Subsidiary of
-----
Borrower as lessee.
"Lender": NTFC Capital Corporation; and its successors and assigns.
------
3
<PAGE>
"Lender's Expenses": as described in 17 hereof.
----------------- --
"Lien": any mortgage, pledge, hypothecation, lien (statutory or other),
----
judgment lien, security interest, security agreement, charge or other
encumbrance, or other security arrangement of any nature whatsoever, including,
without limitation, any installment contract, conditional sale or other title
retention arrangement, any sale of accounts receivable or chattel paper, and any
assignment, deposit arrangement or lease intended as, or having the effect of,
security and the filing of any financing statement under the UCC or comparable
law of any jurisdiction.
"Loan": the loans and loan facilities described in Section 3 hereof and all
---- ---------
Advances pursuant hereto.
"Loan Documents": a collective reference to this Agreement, each Note, any
--------------
Guaranty Deed of Charge or assignment of Lease, and all other documents,
instruments, agreements and certificates evidencing or securing any advance
hereunder or any obligation for the payment or performance thereof and/or
executed and delivered in connection with any of the foregoing.
"Maturity Date": the date defined in each Note, which shall be the Payment
-------------
Date sixty (60) months after the date of such Note, on which all principal,
interest, premium, expenses, fees, penalties and other amounts due under that
Note shall be finally due and payable.
"Mortgagee's consent": a consent to be executed by any Person holding a
-------------------
lien on real property leased or otherwise provided to Borrower or any of its
Subsidiaries on which any of the Equipment is located.
"Note": collectively, one or more promissory notes issued by Borrower to
----
Lender pursuant to this Agreement, and all extensions, renewals, modifications,
replacements, amendments, restatements and refinancings thereof.
"Obligations": all indebtedness, liabilities and obligations of Borrower to
Lender of any class or nature, whether arising under or in connection with this
Agreement, a Note and/or the other Loan Documents or otherwise, whether now
existing or hereafter incurred, direct or indirect, absolute or contingent,
secured or unsecured, matured or unmatured, joint or several, whether for
principal, interest, fees, Lender's Expenses, lease obligations, indemnities or
otherwise, including, without limitation, future advances of any sort, all
future advances made by Lender for taxes, levies, insurance and/or repairs to or
maintenance of the Collateral, the unpaid principal amount of, and accrued
interest on, a Note, and any Lender's Expenses.
"Payment Date": the date on which any payment under any Note is due, as set
------------
forth in Section 3 hereof.
---------
"Permitted Encumbrances": the Liens permitted under Section 11(k) hereof.
---------------------- -------------
"Product Computing Loads": as defined in Section 10 hereof.
----------------------- ----------
4
<PAGE>
"Purchase Agreement": individually and collectively, the Purchase Agreement
------------------
and the Vendor Purchase Agreement.
"Qualifying Lease": a Lease to a Subsidiary of Borrower in a form
----------------
reasonably acceptable to Lender.
"Regulatory Authorizations": all approvals, authorizations, licenses,
-------------------------
filings, notices, registrations, consents, permits, exemptions, registrations,
qualifications, designations, declarations, or other actions or undertakings now
or hereafter made by, to or in respect of any Governmental Authority, including,
without limitation, any certificates of public convenience and all grants,
approvals, licenses, filings and registrations from or to the Federal
Communications Commission or any state Public Utilities Commission or any
foreign Governmental Authority having jurisdiction over Borrower or any of its
Subsidiaries that is necessary in order to enable Borrower or any of its
Subsidiaries to own, construct, maintain and operate the Equipment or any
System, and any authorizations specified on Schedule 11.01 hereto.
--------------
"Required Consents": the Regulatory Authorizations or consents of other
-----------------
Persons required with respect to Borrower's execution, delivery and performance
of this Agreement and the other Loan Documents, as described in Sections 26 and
-----------
27 hereto.
- --
"Software" and "Software Licenses": any software now or hereafter owned by,
-------- -----------------
or licensed to, Borrower or any of its Subsidiaries or with respect to which
Borrower or any of its Subsidiaries has or may have license or use rights and
all licenses with respect to such rights.
"Subsidiary": as to any Person, a corporation, partnership, limited
----------
liability company, or other entity in which equity interests having ordinary
voting power to elect a majority of the board of directors, managers or similar
persons of the entity are at the time directly or indirectly owned or controlled
by such Person (regardless of any contingency which does or may suspend or
dilute the voting rights of such class). Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of Borrower and also to entities that are under
common control with Borrower by being Subsidiaries of Borrower's parent
corporation, Primus Telecommunications Group, Inc. Specifically, all references
to an Australian Subsidiary include any corporation in the position of a
Subsidiary of Primus Telecommunications Group, Inc., of which Borrower is also a
Subsidiary.
"Supplier": NORTEL and any other Vendor approved in writing by Lender.
--------
"System": Borrower's or any of its Subsidiaries' telecommunications network
------
or system constructed and/or operated by Borrower or any of its Subsidiaries or
lessee of Equipment permitted hereunder (including any future development and
expansions thereof), of which any Equipment forms a part
"Taxes": as defined in Section 3(h) hereof.
----- ------------
"UCC": the Uniform Commercial Code as the same may from time to time be in
---
effect
5
<PAGE>
in the State of Tennessee, or the Uniform Commercial Code of another
jurisdiction, to the extent it may be required to apply to any item or items of
Collateral.
"Vendor" means any manufacturer or supplier of Equipment or licensor
------
or supplier of Software approved in writing by Lender, in each case other than
NORTEL.
"Vendor Purchase Agreement": any purchase agreement, together with any
-------------------------
amendments or supplements thereto, between a Vendor and Borrower or an assignor
of Borrower and all purchase orders and invoices issued pursuant thereto for the
sale of Equipment.
2. COMMITMENT TO LEND: Subject to the terms and conditions provided
in this Loan and Security Agreement ("Agreement") and so long as no Event of
---------
Default (as defined in Section 14 hereof) or event or condition which with
----------
notice or passage of time or both would constitute an Event of Default has
occurred and is continuing hereunder, Lender agrees to lend to Borrower, until
the Financing Termination Date, an amount in the aggregate not to exceed the
Commitment Amount set forth on the first page of this Agreement, which sum shall
be used solely for the purchase by Borrower of telecommunications equipment and
associated software sublicenses from the Supplier or another approved Vendor
pursuant to one or more Purchase Agreements made by and between the Supplier (or
another approved Vendor) and Borrower for installation in the United States or
Canada, Australia, Japan, Germany, the United Kingdom and other jurisdictions
approved by Lender in writing.
3. NOTES AND PAYMENT TERMS:
(a) All Advances of funds to Borrower shall be evidenced by a Note in
the form of Exhibit A executed by Borrower, which shall be in a form and
---------
substance satisfactory to the Lender and evidence the obligation of Borrower to
pay the Indebtedness evidenced by that Note, plus any accrued interest thereon,
and all extensions, renewals or modifications thereof including, without
limitation, any Lender's Expenses or other amounts due to Lender under the Note
or this Agreement.
(b) Each Note shall be dated the Closing Date or the First Funding
Date with respect thereto and shall mature on the Note's stated Maturity Date.
Except as otherwise provided herein, each Note shall bear interest from the
borrowing date on the outstanding unpaid Principal Amount thereof at the
Interest Rate stated below (compounded monthly and computed on the basis of a
year of 365 days for the actual days elapsed). In computing interest on the
Notes, the Borrowing Date shall be included and the Payment Date excluded.
Borrower and Lender understand that the Amortization Schedule attached to each
Note is intended to amortize fully the principal amount of that Note and any
other principal and interest amounts outstanding will be added to the final
payment on the Maturity Date. In any event, the entire outstanding principal
amount of the Note and all accrued but unpaid interest and all other outstanding
amounts due thereunder shall be paid on the Maturity Date with respect thereto.
If a Payment Date is not a Business Day, the Payment Date shall
6
<PAGE>
be on the first business day following the day which is not a Business Day, and
interest thereon shall be payable at the rate in effect during such extension.
Each payment shall be credited first to accrued and unpaid interest and the
balance to the Principal Amount (provided that in any event the entire Principal
Amount of the Notes then outstanding together with any accrued and unpaid
interest shall be paid on the Maturity Date). The Lender is authorized to
endorse the date and amount of each Advance and each payment of the Principal
Amount and interest with respect to the Notes on the Amortization Schedule
annexed to and constituting a part of the Notes, which endorsement shall
constitute prima facie evidence of the accuracy of the information endorsed.
(c) All payments shall be made in lawful money of the United States
of America in immediately available funds and without set off or counterclaim to
the Lender or any subsequent assignee of a Note.
(d) Unless otherwise provided on a Note executed subsequent to the
Closing Date of this Agreement, the first twenty-four (24) monthly months
following the First Funding Date of each Loan shall be an Interest Only Period
during which Borrower shall make Interest Payments only at the Interest Rate.
Thereafter, beginning on first Business Day of the twenty-fifth (25th) month and
for thirty-six (36) consecutive months, Borrower shall make amortizing Payments
in accordance with the Amortization Schedule attached to the applicable Note.
(e) The "Interest Rate" on each Loan shall be equal to a rate
-------------
determined by adding 495 basis points to the published yield on Five (5) Year
Constant Maturity United States Treasury Notes as reported in Federal Reserve
Statistical Release H.15(519), as published by the Board of Governors of the
Federal Reserve System, or any successor publication by the Board of Governors
of the Federal Reserve System, three days prior to the First Funding Date with
respect to that Loan. Beginning with the first amortizing Payment, unless
otherwise provided in the Amortization Schedule attached to a Note, each
amortizing Payment shall consist of an Interest Payment and a Principal Payment
constituting a partial repayment of the applicable Loan as set forth below:
Payment Number Percentage of Loan
-------------- ------------------
25 - 36 1.667%
37 - 48 2.500%
49 - 59 4.167%
60 All Unpaid Principal
Plus any other Obligation
(f) Whenever any Payment due under a Loan is not made within ten(10)
days after the date when due, Borrower agrees to pay on demand (as a fee to
offset Lender's Expenses), one and one-half percent (1-1/2%) per month of all
overdue amounts from the due date until paid, but not exceeding the lawful
maximum, if any.
(g) Notwithstanding any provision of this Agreement, it is the intent
of Lender and Borrower that Lender, or any subsequent holder of a Note, shall
never be entitled to
7
<PAGE>
receive, collect, reserve or apply, as interest, any amount in excess of the
maximum non-usurious lawful rate of interest permitted to be charged by
applicable law, as amended or enacted from time to time. In the event Lender, or
any subsequent holder of a Note, ever receives, collects, reserves or applies as
interest, interest in excess of the then maximum lawful rate of interest, such
amount which would be excessive interest shall be deemed a partial prepayment of
the Principal Amount and treated hereunder as such (except that no prepayment
premium otherwise applicable shall be payable thereon), or, if the Principal
Amount and all other amounts due are paid in full, any remaining excess funds
shall immediately be paid to Borrower which made the excessive payment. In
determining whether or not the interest paid or payable, under any specific
contingency, exceeds the maximum lawful rate of interest, Borrower and Lender
shall, to the maximum extent permitted under applicable law, (a) exclude
voluntary prepayments and the effects thereof as it may relate to any fees
charged by the Lender, and (b) amortize, prorate, allocate and spread, in equal
parts, the total amount of interest throughout the entire term of the
Indebtedness; provided that if the Indebtedness is paid in full prior to the end
of the full contemplated term hereof, and if the interest received over the
actual period of existence hereof exceeds the maximum lawful rate of interest,
Lender or any subsequent holder of a Note shall refund to Borrower the amount of
such excess, and in such event shall not be subject to any penalties provided by
any laws for contracting for, charging, reserving, collecting or receiving
interest in excess of the maximum lawful rate of interest.
(h) Borrower agrees to pay all amounts owing by it under this
Agreement, any Note or the other Loan Documents free and clear of and without
deduction for any present or future taxes (excepting any taxes assessed on
Lender's income by the United States of America) (collectively, the "Taxes") and
-----
represents that it has paid, and agrees that it shall pay, when due all
applicable deductions or withholdings for or on account of any Taxes, levies,
duties, fees, deductions or withholdings, restrictions or conditions of any
nature imposed by or on behalf of any jurisdiction (other than the United States
of America) or any taxing authority (other than the United States of America)
whatsoever on the payments by Borrower to Lender under this Agreement, any Note
or the other Loan Documents and
(i) that if it is prevented by operation of law from paying any
Taxes, then the interest rate or fees required to be paid under this
Agreement, any Note or the other Loan Documents shall be increased by
the amount necessary to yield to Lender interest or fees at the rates
specified in this Agreement, any Note or the other Loan Documents
after provision for the payment of all such Taxes and without taking
into account any tax benefits accruing to Lender from such payment;
(ii) that it shall at the request of Lender execute and deliver
to Lender such further instruments as may be necessary or desirable to
effect the increase in the interest or fees as provided for in clause
(A) immediately above, including a new Note to be issued in exchange
for any Note theretofore issued;
(iii) that it shall hold Lender harmless from and against any
liabilities with respect to any Taxes (whether or not properly or
legally asserted); and
8
<PAGE>
(iv) that it shall provide Lender with the original or a
certified copy of evidence of the payment of any Taxes by it, as
Lender may reasonably request, or, if no Taxes have been paid, to
provide to Lender, at Lender's request, with a certificate from the
appropriate taxing authority or an opinion of counsel acceptable to
Lender stating that no Taxes are payable.
(i) If Lender shall receive a refund of any Taxes paid by Borrower
pursuant to this Section by reason of the fact that such Taxes were not
correctly or legally asserted, Lender shall within sixty (60) days after receipt
of such refund pay to Borrower the amount of such refund, as determined solely
by Lender; provided, however, that in no event shall the amount paid by Lender
-------- -------
to Borrower pursuant to this sentence exceed the amount of Taxes originally paid
by Borrower; and further provided that Lender shall not have any obligation
------- --------
under this Agreement to claim or otherwise seek to obtain any such refund.
4. PROCEDURES FOR BORROWING: Borrower shall execute and deliver to
Lender, at least five (5) business days prior to the date of the requested
Advance (unless Lender shortens such period), a Borrowing Certificate in the
form of Exhibit B to request Advances to finance the acquisition by Borrower of
---------
Equipment. Each Borrowing Certificate shall be in form and substance
satisfactory to Lender, and shall specify the business day on which the
borrowing is to be made and the amount of the borrowing and have attached
thereto the applicable purchase order issued by Borrower and related invoice
from the Supplier which is to be paid by Lender with the proceeds of the Loan
and a Collateral Schedule listing and describing the Equipment and Software to
be financed. On the borrowing date specified in the Borrowing Certificate,
providing that all conditions precedent have been satisfied, Lender shall
transmit the borrowed funds to an account maintained by and in the name of
Supplier. The aggregate principal amount of each borrowing shall be not less
than $25,000. Lender shall not be required to make Advances more than twice per
calendar month.
5. PLACE OF PAYMENT: The Principal Amount, interest and fees, if
any, shall be payable at 501 Corporate Centre Drive, Suite 600, Franklin,
Tennessee 37067, or such other place as may be designated, from time to time in
writing, by Lender or any subsequent holder.
6. PREPAYMENT: Borrower may, at its option but subject to the
satisfaction of the requirements of the next sentence, at any time and from time
to time, prepay any Loan, in whole or in part, upon at least (30) business days
prior written notice to Lender specifying the date and amount of prepayment in a
minimum amount of $50,000. Any such prepayment occurring during the first,
second and third years following the First Funding Date of such Loan shall be
subject to a prepayment premium equal to a percentage of the amount being
prepaid as follows: three percent (3%) if the prepayment is made during the
first year following the First Funding Date; two percent (2%) if the prepayment
is made during the second year following the First Funding Date; and one percent
(1%) if the prepayment is made during the third year following the First Funding
Date. Any Loan may be prepaid without premium thereafter.
7. MANDATORY PREPAYMENT: Upon Lender's demand, if Borrower leases
9
<PAGE>
or sells or disposes of any Equipment other than pursuant to a Qualifying Lease
or secured by an appropriate Guaranty and Deed of Charge (if applicable) or upon
the written consent of Lender, or if any Lease ceases to be a Qualifying Lease,
Borrower shall prepay all Advances to the extent proceeds thereof were used to
purchase Equipment and related Software so leased or sold, pro rata to the
Lender according to their respective percentages of the aggregate Advances made
hereunder. All such prepayments shall include all principal, accrued interest,
Prepayment Premium (if any), and expenses then outstanding and due (the
"Mandatory Prepayments")
---------------------
8. SECURITY INTEREST; GUARANTIES; OBLIGATIONS SECURED:
(a) Borrower (as debtor) hereby assigns as collateral and grants to
Lender (as secured party), as security for all of the Indebtedness, a continuing
security interest and/or charge in and to, all of Borrower's (or any
Subsidiary's except an Australian Subsidiary where the Lender's right, title and
interest are secured by a Guaranty and a Deed of Charge) right, title and
interest in and to the property and the property rights described in Section 9
---------
hereof, whether now owned or hereafter acquired or arising, wherever located,
together with all substitutions therefor and all accessions, replacements and
renewals thereof, to the extent financed or refinanced with proceeds of an
Advance hereunder.
(b) Borrower shall cause each Subsidiary that acquires rights in any
such Collateral to execute and deliver to Lender a Guaranty substantially in the
form of Exhibit G-1 attached hereto (or such other form as Lender shall
-----------
reasonably require on the advice of counsel) guaranteeing so much of the
Indebtedness hereunder as is represented by the purchase price and installation
costs and other associated costs of such Collateral, plus the financing costs
attributable thereto. Borrower also shall cause each such Subsidiary to grant to
Lender a security interest and/or charge in the Collateral in which it acquires
rights either directly or as security for the Subsidiary's Guaranty, at the
discretion of Lender reasonably exercised on the advice of counsel.
9. DESCRIPTION OF COLLATERAL.Borrower (as debtor) hereby assigns to
Lender as collateral, and grants to Lender (as secured party) a continuing
security interest (or in foreign jurisdictions, the equivalent) in and to, all
of Borrower's right, title and interest in and to the following kinds and types
of property, whether now owned or hereafter acquired or arising, wherever
located, together with all substitutions therefor and all accessions,
replacements and renewals thereof, to the extent financed or refinanced with
proceeds of an Advance hereunder, and in all proceeds and products thereof,
including without limitation the collateral specifically described on Schedule
--------
8.01 hereto located in the locations described on Schedule 8.01, including the
- ---- -------------
rights and interests of any Subsidiary acquiring rights in such collateral not
separately secured to the Lender by a Guaranty and Deed of Charge (collectively,
the "Collateral"):
----------
(a) All Equipment financed or refinanced with proceeds of an Advance
and in each case any and all additions, substitutions, and replacements to or of
any of the foregoing, together with all attachments, components, parts,
improvements, upgrades, and accessions installed thereon or affixed thereto, but
excluding such additions, attachments, components, parts, improvements,
upgrades, and accessions not financed pursuant hereto provided that the
10
<PAGE>
removal thereof would not harm the Equipment to which it is attached. The
Equipment shall include installation services provided by NORTEL or any other
Vendor in connection therewith (collectively, "Equipment");
---------
(b) All of Borrower's right, title and interest in and to the NORTEL
Purchase Agreement, which shall be evidenced by a Collateral Assignment of
Purchase Agreement substantially in the form of Exhibit F to this Agreement,
---------
together with any future or additional purchase agreements subsequently entered
into with NORTEL or any other Supplier whose Equipment is financed pursuant
hereto, to be delivered with consents to the Lender from NORTEL or such Supplier
for those subsequent assignments within ten (10) business days after the
effective date of each subsequent purchase agreement using substantially the
same form as Exhibit F to this Agreement; .
---------
(c) All general intangibles and intangible property (including all
contracts and contract rights) constituting part of, or provided by or through
NORTEL or any Vendor in connection with the Equipment or associated with any
System which are necessary for the proper operation of the Equipment, including
without limitation insurance proceeds and amounts due under insurance policies,
licenses, license rights, rights in intellectual property, Software, Software
Licenses, computer programming (including source codes, object codes and all
other embodiments of computer programming or information), refunds, warranties
and indemnification rights, and all amounts owed at any time to Borrower by
Lender or NORTEL or by a Supplier in connection with a Purchase Agreement
relating to Equipment (collectively, "General Intangibles");
-------------------
(d) All of Borrower's right, title and interest in and to all Leases
of Equipment by Borrower as lessor, which shall be further evidenced by
assignments of Leases reasonable acceptable to Lender; and
(e) All Equipment and Software listed on a Collateral Schedule
attached to a Borrowing Certificate, each Collateral Schedule hereby being
incorporated in and made a part of this Agreement.
10. MAINTENANCE, USE AND OPERATION:
(a) At all times during the Term, Borrower or any Subsidiary that
leases or acquires an interest in any Equipment, at its sole cost and expense,
shall maintain the applicable Equipment and System in good repair, condition and
working order in accordance with established maintenance procedures such that
the System performs in accordance with published specifications, and Borrower or
the lessee of Equipment shall maintain (and upgrade if necessary) the Equipment
at all times within two of the Supplier's latest Product Computing Loads.
Borrower shall, and shall cause any Subsidiary which leases or acquires an
interest in any Equipment, to use the Equipment and all parts thereof for its
designated purpose and in compliance with all applicable laws and shall at all
time keep the Equipment in its possession and control and not permit such
Equipment to be moved from the Installation Sites, as set forth in Schedule
--------
8.01, without Lender's prior written consent.
- ----
(b) The Equipment is, and shall at all time be deemed to be, personal
property
11
<PAGE>
even iF the Equipment is affixed or attached to real property or any
improvements thereon. At Lender's request, Borrower or any lessee of Equipment
shall at no charge promptly cause to be affixed to the Equipment any tags,
decals, or plates furnished by Lender indicating Lender's interest in the
Equipment, and Borrower or a lessee of Equipment shall not permit their removal
or concealment. Borrower or any lessee of Equipment shall at all times keep the
Equipment free and clear of all liens and encumbrances, except those arising
through actions of Lender or permitted in writing by Lender. Borrower or any
lessee of Equipment at its respective expense, shall otherwise cooperate to
defend the interest of Lender in the applicable Equipment and to maintain the
status of the Equipment and all parts thereof as personal property.
(c) Borrower will, at Borrower's expense, furnish a Landlord's
Consent or Mortgagee's Consent, as appropriate, from any party having an
interest in any real estate or building in which any Equipment is located or
furnish an acknowledgment satisfactory to Lender from any affiliate, landlord,
mortgagee, easement grantor, or other person who is in a position to claim
rights in property where the Equipment is located, promising to give Lender
notice of any claimed default by Borrower with respect to such property interest
and an opportunity to remove the Equipment and other elements of the System upon
commercially reasonable terms. Lender may inspect the System at any time during
normal business hours of a Borrower or lessee of Equipment subject to its normal
operational procedures.
11. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER. Borrower
represents, warrants and covenants to Lender and, so long as this Agreement is
in effect and any part of Borrower's Obligations to Lender under any Loan remain
unfulfilled, and shall continue to warrant, represent and covenant in each
Borrowing Certificate that:
(a) Borrower and each Subsidiary which leases or acquires an interest
in Equipment is a corporation duly organized, validly existing, and in good
standing under the laws of the state or nation of its incorporation and that it
is authorized to do business and/or is in good standing as a foreign corporation
in each jurisdiction in which any System it operates is located, and each
Borrower and Subsidiary which leases or purchases Equipment is authorized and
licensed under applicable law to operate as a facilities based carrier therein,
and each Borrower and Subsidiary which leases or purchases Equipment has the
corporate power and capacity to enter into this Agreement, any Loan authorized
pursuant to this Agreement, or any Lease of Equipment, as the case may be, and
to perform all of its obligations hereunder and thereunder.
(b) This Agreement, the Schedules, the Exhibits, and all other Loan
Documents and the performance by Borrower and each Subsidiary which leases or
purchases Equipment hereunder of their respective obligations have been duly and
validly authorized and approved under all laws and regulations and procedures
applicable to Borrower or any Subsidiary which leases or acquires an interest in
Equipment hereunder, and under the terms and provisions of the resolutions of
such entity's governing body, a copy of which has been provided herewith or will
be provided in connection with any subsequent Loan; the consent of all necessary
persons or bodies has been obtained; and all of such documents executed by
Borrower or any Subsidiary which leases or acquires an interest in Equipment
hereunder
12
<PAGE>
have been duly and validly executed and delivered by authorized representatives
of such entity and constitute valid, legal and binding obligations of such,
enforceable against such entity in accordance with their respective terms.
(c) No other approval, Consent, Regulatory Authorization, or
withholding of objection is required from any Governmental Authority with
respect to the entering into or performance by Borrower of this Agreement, or
the performance by Borrower or any Subsidiary which leases or acquires an
interest in Equipment hereunder of the transactions contemplated hereby.
(d) The entering into and performance of this Agreement and any Loan
entered into pursuant hereto will not violate any judgment, order, law or
regulation applicable to Borrower or result in any breach of, or constitute a
default under, or result in the creation of any lien, charge, security interest
or other encumbrance upon any assets of Borrower or on any Equipment pursuant to
any instrument to which Borrower is a party or by which it or its assets may be
bound, except pursuant to the transactions and documents contemplated in this
Agreement.
(e) Borrower and each of its Subsidiaries has conducted and continues
to conduct its business in all material respects in accordance with applicable
laws, and has paid or will cause to be paid all taxes, assessments and other
governmental charges as and when due except those challenged in good faith by
appropriate proceedings. Except as set forth in Schedule 11.01, Borrower and
--------------
each of its Subsidiaries has all of the Regulatory Authorizations necessary to
conduct their respective businesses in the jurisdictions were such businesses
are conducted, and Borrower covenants to obtain all Regulatory Authorizations
required for any future operations by Borrower and each of its Subsidiaries in
any jurisdiction.
(f) Except as set forth in Schedule 11.01 there are no actions, suits
--------------
or proceedings pending or, to the knowledge of Borrower's senior executive
officers, threatened against or affecting Borrower or any of its Subsidiaries in
any court or before any Governmental Authority, board or commission which, if
adversely determined, could reasonably be expected to have a material adverse
effect on the ability of Borrower and its Subsidiaries taken as a whole to
perform its obligations hereunder or under any Loan authorized pursuant hereto.
(g) Lender has a valid first perfected security interest (or in
foreign jurisdictions, the equivalent), subject only to Permitted Encumbrances,
in all Collateral pursuant hereto, or under any Loan authorized pursuant hereto,
at each Installation Site where it may be located, which secures all Obligations
of Borrower hereunder.
(h) Borrower has reviewed its operations and those of its
Subsidiaries with a view to assessing whether its business (together with the
businesses of its Subsidiaries on a consolidated basis), will be vulnerable to a
Year 2000 Problem or will be vulnerable to the effects of a Year 2000 Problem
suffered by any major commercial customers of Borrower or of any of its
Subsidiaries, and has a reasonable basis to believe that no Year 2000 Problem
could reasonably be expected to cause a material adverse effect to Borrower and
its Subsidiaries on a consolidated basis. For purposes of this Agreement, "Year
2000 Problem" means any
13
<PAGE>
significant risk that computer hardware, software or equipment containing
embedded microchips essential to the business or operations of Borrower will
not, in the case of dates or time periods occurring after December 31, 1999,
function at least as effectively and reliably as in the case of times or time
periods occurring before January 1, 2000, including the making of leap year
calculations. The foregoing representation with respect to Equipment financed
pursuant hereto is limited to the representations and warranties of the Supplier
with respect to such Equipment.
(i) Borrower shall take all actions necessary and commit adequate
resources to assure that computer-based and other systems of Borrower and its
Subsidiaries are able to process dates effectively, including dates before, on
and after January 1, 2000, without experiencing any Year 2000 Problem that could
reasonably be expected to cause a material adverse effect to Borrower and its
Subsidiaries taken as a whole.
(j) Borrower shall provide to Lender, at the same time it provides
them to First Union National Bank (or any other trustee with respect to its
12.75% Senior Notes described below), copies of its consolidated annual
financial statements prepared in accordance with GAAP, audited by a firm of
auditors nationally recognized or approved by Lender in writing; and, within
forty-five (45) days of the end of any quarter, unaudited quarterly consolidated
balance sheets, income statements and cash flow statements prepared in
accordance with GAAP, throughout the term of this Agreement..
(k) Neither Borrower nor any Subsidiary of Borrower shall create or
suffer to exist any Lien on the Collateral, or any part thereof, whether
superior or subordinate to the Lien of the Loan Documents, or assign, convey,
sell or otherwise dispose of or encumber its interest in the Collateral, or any
part thereof (including, without limitation, execution of any lease), nor permit
any such action to be taken, except for the following permitted dispositions and
encumbrances ("Permitted Encumbrances"): (i) the Lien created hereby or pursuant
----------------------
to the other Loan Documents; (ii) Liens for taxes not yet due, or which are
being contested in good faith and by appropriate proceedings; (iii) carriers',
warehousemen's, mechanics', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business which are overdue for a period not
longer than thirty (30) days or which are being contested in good faith and by
appropriate proceedings; (iv) pledges or liens in connection with workers'
compensation, unemployment insurance and other social security legislation; (v)
deposits to secure the performance of bids, trade contracts (other than for
borrowed money), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business; (vi) easements, rights-of-way, restrictions and
other similar encumbrances that are not substantial in amount, and which do not
in any case materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the business of Borrower; (vii) judgment
liens with respect to which execution has been stayed within ten (10) days by
appropriate judicial proceedings and the posting of adequate security which may
not be any of the Collateral; (viii) Qualifying Leases and Deeds of Charge;
(viii) a Change in Control not constituting a default pursuant to Section 14(i)
-------------
hereof; and (ix) specific liens, if any, identified on Schedule 11.02 hereto.
--------------
Any of the foregoing Liens shall remain "Permitted Encumbrances" as long as they
are being contested by Borrower in good faith.
14
<PAGE>
(l) Borrower shall comply in all material respects with the Covenants
set forth in Schedule 11.03 attached hereto, which are derived from the
--------------
covenants of Borrower contained in the Trust Indenture between Borrower and
First Union National Bank dated October 15, 1999 pertaining to Borrower' 12.75%
Senior Notes due 2009.
(m) Borrower shall not permit or acquiesce in any change, waiver or
other alteration with respect to any Lease that could reasonably be expected to
have a material adverse effect upon it, provided, however, that Qualifying
-------- -------
Leases may be amended without Lender's consent to the extent permitted by the
terms of a previously approved form of Qualifying Lease.
(n) Borrower shall, and shall cause each Subsidiary which leases or
acquires an interest in any Equipment to, maintain its existence, good standing
and rights in full force and effect in its jurisdiction of organization.
Borrower shall, and shall cause each Subsidiary which leases or acquires an
interest in any Equipment to, qualify to do business and remain qualified and in
good standing and shall obtain all necessary authorizations to do business in
each jurisdiction in which failure to receive or retain such could reasonably be
expected to have a material adverse effect upon Borrower and its Subsidiaries
taken as a whole or upon Lender's ability to exercise its rights and remedies
with respect to the Collateral.
(o) Borrower shall, and shall cause any Subsidiary which leases or
acquires an interest in any Equipment to continue to engage solely in the
business described on Schedule 2.01 hereto; and acquire and maintain in full
-------------
force and effect all rights, privileges, franchises and licenses necessary for
the operation and maintenance of such business (including, without limitation
any license or authorization required by the FCC or any PUC or any other
Governmental Authority).
(p) Promptly upon their becoming available to Borrower, it shall
deliver to Lender copies of (i) all annual or special reports or effective
registration statements which Borrower or any of its Subsidiaries shall file
with any Governmental Authority, including the FCC or any PUC (or any successor
thereto) or any securities exchange, (ii) financial statements, material
reports, and other information distributed by Borrower to its creditors or the
financial community in general, and (iii) all press releases issued by or
concerning Borrower or its Subsidiaries.
12. INSURANCE: Borrower or any lessee of Equipment shall, at its
expense, upon delivery of each item of Equipment to its Installation Site and at
all times thereafter, cause each item of Equipment to remain insured against all
risks or loss or damage for an amount at least equal to the portion of the Loan
Amount attributable to that item of Equipment, as depreciated, or the
replacement cost, whichever is greater. All insurance polices shall name Lender
as an additional insured and loss payee, as appropriate, and shall be with an
insurer, having a "Best Policy Holders" rating of "A1" or better (or the
equivalent), and in such form, amount and deductibles as are reasonably
satisfactory to Lender. The proceeds of any such polices shall be payable to
Lender or Borrower or any lessee of Equipment, as their interests may appear.
Each such policy must state by endorsement that the insurer shall give Lender
not less than thirty (30) days prior written
15
<PAGE>
notice of any amendment, renewal or cancellation. Borrower or any lessee of
Equipment shall upon request, furnish to Lender satisfactory evidence that such
insurance coverage is in effect. Borrower may self insure with respect to the
above coverage, with Lender's prior written consent.
13. CASUALTY: If any Equipment, in whole or in part, shall be lost or
stolen or destroyed, or damaged from any cause whatsoever, or is taken in any
condemnation or similar proceedings by a Governmental Authority (any such event
is hereafter called an "Event of Loss"), Borrower shall promptly and fully
-------------
notify Lender thereof. Borrower shall, at its option, do the following: (i)
immediately place the affected Equipment and Software in good condition and
working order, or (ii) replace the affected item with like equipment or software
in good repair, condition and working order, or (iii) to the extent not fully
covered by insurance as set forth in Section 12 above, pay to Lender, within
----------
thirty (30) days of the later of the Event of Loss or a determination of less
than full insurance coverage, an amount equal to the applicable Loan, plus any
other amounts then due and unpaid with respect to such Equipment and Software,
less applicable insurance proceeds. Upon the making of all required payments by
Borrower pursuant to (iii) Borrower shall be entitled to retain possession of
the applicable Equipment or the sublicense to the applicable Software, (with no
warranties) subject to the rights, if any, of the insurer. If Lender shall
receive any other insurance proceeds or net awards, Lender shall apply all or
part of such proceeds and awards to any Obligations of Borrower to Lender.
14. DEFAULT: Borrower shall be in default under each Loan upon the
occurrence of any of the following events ("Event of Default" or "default"):
(a) The failure of any Borrower to pay when due any Payment Amount or
any other amounts payable under this Agreement or any Note within five (5) days
of the date when due;
(b) A breach or failure in the observance or performance by any
Borrower or any of its Subsidiaries of any other material provision of this
Agreement or any other Loan Document which is not remedied within thirty (30)
days after receipt by Borrower or any of its Subsidiaries of notice of such
breach or failure;
(c) Any material representation, warranty or covenant made herein, or
in any certificate, document, financial or other statement delivered in
connection with this Agreement, or hereafter made by Borrower proves to have
been incorrect in any material adverse respect when made or given;
(d) Borrower, or any surety or guarantor of the Indebtedness
evidenced by this Agreement or a Note (i) files a petition or has a petition
filed against it under the bankruptcy code, or any proceeding for relief of
insolvent debtors; (ii) generally fails to pay its debts as such debts become
due; (iii) shall admit in writing its inability to pay its debts as they become
due; (iv) has a custodian, trustee or receiver appointed, voluntarily or
otherwise, for it or its assets; (v) benefits from, or is subject to, the entry
of an order for relief by any court of insolvency; (vi) makes an assignment for
the benefit of creditors; (vii) becomes insolvent (however otherwise evidenced);
(viii) liquidates, winds-up, dissolves or suspends business; or
16
<PAGE>
(ix) has commenced against it any case, proceeding or other action seeking the
issuance of a warrant of attachment, execution, distraint or similar process
against all or any substantial part of its assets, which results in the entry of
an order for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within sixty (60) days from the entry thereof;
(e) Borrower shall (i) commit a default in any payment of any other
instrument or agreement (other than with Lender) that could reasonably be
expected to cause a material adverse effect to Borrower and its Subsidiaries on
a consolidated basis, or (ii) default in the observance of any other provision
of such other instrument or agreement as to cause, or permit the holder of such
instrument or agreement to cause, the obligations thereunder to become due prior
to its stated maturity;
(f) One or more judgments or decrees shall be entered against
Borrower or any of its Subsidiaries involving in the aggregate a liability (not
paid or fully covered by insurance) that could reasonably be expected to cause a
material adverse effect to Borrower and its Subsidiaries on a consolidated
basis, if such judgment or decree shall not have been vacated, discharged, or
stayed or bonded pending appeal within sixty (60) days after the entry thereof;
or
(g) Any guaranty or any subordination agreement required or delivered
in connection with this Agreement is breached or becomes ineffective, or any
guarantor, or subordinating creditor disavows its obligations under the guaranty
or subordination agreement, as the case may be; or
(h) Borrower or any of its Subsidiaries fails to perform any of its
obligations under any other agreement or lease with Lender (subject to any cure
rights or notice periods contained in such other agreement or lease); or
(i) If any Change in Control of Borrower should occur without
Lender's prior written consent if such Change in Control results or would result
upon consummation in an entity obligated hereunder that is less creditworthy
than Borrower, based upon financial information with respect to the transaction
which must be supplied by Borrower sufficiently in advance of the consummation
thereof so as to enable Lender reasonably to determine such creditworthiness; or
(j) The occurrence of a material adverse effect on, or material
adverse change in, (i) the business, operations or financial condition of
Borrower and its Subsidiaries taken as a whole, (ii) the ability of Borrower to
perform its obligations under this Agreement, any Note, or the other Loan
Documents, or (iii) the Lender's ability to enforce the rights and remedies
granted under this Agreement or the other Loan Documents, in all cases whether
attributable to a single circumstance or event or an aggregation of
circumstances or events.
(k) If Borrower shall grant, or suffer to exist for more than twenty
(20) days, or fail to contest immediately after discovering the same, any lien
on any Collateral hereunder in favor of any person other than Lender (except for
a purchase money security interest in favor of NORTEL or other approved
Supplier).
17
<PAGE>
15. RIGHTS AND REMEDIES ON DEFAULT:
(a) At Lender's option, upon the occurrence of any such Event of
Default under Section 14, and at any time thereafter, at Lender's option,
----------
Lender's commitment to lend shall terminate and/or all unmatured Indebtedness
evidenced by any Note will immediately become due and payable without
presentation, demand, protest, or notice of any kind (except as expressly
provided for herein), all of which are expressly waived. Lender may exercise,
from time to time, any rights and remedies available to it under this Agreement,
any Note, the Uniform Commercial Code and other applicable law. Borrower agrees
that upon the occurrence and during the continuance of an Event of Default, to
the extent permitted by applicable law (i) any amounts payable under this
Agreement or under any Note shall thereafter bear interest at a rate per annum
equal to the Interest Rate plus three percent (3%) (in lieu of the 1-1/2% per
month referenced in Section 3(f) hereof), or the maximum rate per annum allowed
-------------
by law, whichever is less, compounded monthly and payable on demand (both before
and after judgment), until the Indebtedness is paid in full or the Event of
Default is cured, (ii) it will, at Lender's request, assemble the Collateral and
make it available to Lender at places which Lender shall reasonably select, and
(iii) Lender, by itself or its agent, may, without notice to any person and
without judicial process of any kind, enter into any premises or upon any land
owned, leased or otherwise under the real or apparent control of Borrower, or
any agent of Borrower, where the Collateral may be, or where Lender believes the
Collateral may be, and disassemble, render unusable, and/or repossess all or any
item of the Collateral, disconnecting and separating the Collateral from any
other property. Borrower expressly waives all further rights to possession of
the Collateral after the occurrence and during the continuance of an Event of
Default and all claims for injuries suffered through, or loss caused by, such
entering and/or repossession.
(b) Lender shall have the right to sell, lease or otherwise dispose
of the Collateral (or contract to do so), whether in its then condition or after
further preparation or processing, either at public or private sale, in lots or
in bulk, for cash or for credit, with or without warranties or representations,
and upon such terms and conditions as Lender, in its sole discretion, may deem
advisable. Lender shall have the right to purchase at any such sale. Lender will
give Borrower reasonable notice of the time and place of any public sale of the
Collateral or of the time after which any private sale or other intended
disposition of the Collateral is to be made. Unless otherwise provided by law,
the requirement of reasonable notice shall be met if such notice is delivered to
the address of Borrower set forth above at least ten (10) days before the time
of the sale or disposition. Any proceeds of any disposition by Lender of any of
the Collateral may be first applied by Lender to the payment of Lender's
Expenses, incurred in connection with the repossession, care, safekeeping, sale
or otherwise of any or all of the Collateral, or in any way relating to the
rights of Lender hereunder. Any balance of such proceeds may be applied by
Lender toward the payment of the Indebtedness in such order as Lender, in its
sole discretion, shall determine. Borrower shall be liable for, and shall pay to
Lender on demand, any deficiency which may remain after such sale, lease or
other disposition, and Lender agrees to remit to Borrower any surplus resulting
therefrom.
(c) If, for the purposes of obtaining judgment in respect of any
claim under this Agreement or any other Loan Document in any court, it is
necessary to convert a sum due
18
<PAGE>
hereunder or thereunder to the Lender in any currency (the "Original Currency")
into another currency (the "Other Currency"), the parties hereto agree, to the
fullest extent that they may effectively do so, that the rate of exchange used
shall be that at which in accordance with normal banking procedures Lender could
purchase the Original Currency with the Other Currency on the Business Day
preceding that on which final judgment is paid or satisfied.
(d) The obligations of Borrower in respect of any sum due in the
Original Currency to the Lender under this Agreement or any other Loan Document
shall, notwithstanding any judgment in any Other Currency, be discharged only to
the extent that on the business day following receipt by Lender of any sum
adjudged to be so due in such Other Currency, Lender may in accordance with
normal banking procedures purchase the Original Currency with such Other
Currency. If the amount of the Original Currency so purchased is less than the
sum originally due to the Lender in the Original Currency, Borrower shall, as a
separate obligation and notwithstanding any such judgment, jointly and
severally, indemnify Lender against such loss, and if the amount of the Original
Currency so purchased exceeds the sum originally due to Lender in the Original
Currency, Lender shall remit such excess to Borrower.
(e) Notwithstanding the foregoing, Lender shall not exercise any
remedy in violation of applicable law in the jurisdiction where such remedy is
exercisable.
16. GENERAL AUTHORITY: Upon the occurrence and during the continuance
of an Event of Default hereunder, Lender shall have the full power to exercise
at any time and from time to time all or any of the following powers with
respect to all or any of the Collateral:
(a) To demand, sue for collection, receive and give acquittance for
any and all monies due or to become due upon or by virtue thereof;
(b) To receive, take, endorse, assign and deliver any and all checks,
notes, drafts, documents and other property taken or received by Lender in
connection therewith;
(c) To settle, compromise, compound, prosecute or defend any action
or proceeding with respect thereof;
(d) To sell, transfer, assign or otherwise deal in or with the same
or the proceeds thereof, as fully and effectually as if Lender were the absolute
owner thereof; and
(e) In general, to do all things necessary to perform the terms of
this Agreement, including, without limitation, to take any action or proceedings
which Lender deems necessary or appropriate to protect and preserve the security
interest of Lender in the Collateral. In the case of failure of Borrower to
comply with any provision of this Agreement, Lender shall have the right, but
shall not be obligated, to so comply in whole or in part, and all moneys spent,
and expenses and obligations incurred or assumed by Lender in connection with
such performance or compliance, shall be payable on demand together with
interest on such amounts equal to the Interest Rate plus three percent (3%) from
the date and amount is
19
<PAGE>
expended or advanced by the Lender until paid. Such sums plus interest shall
constitute indebtedness secured hereby. Lender's effecting such compliance shall
not be a waiver of Borrower's default. Lender shall be under no obligation or
duty to exercise any of the powers hereby conferred upon it.
17. EXPENSES: Borrower agrees (a) to pay or reimburse Lender for all
its reasonable costs, fees, charges and expenses incurred or arising in
connection with the negotiation, review, preparation and execution of this
Agreement, the Loan Documents, any commitment or proposal letter, or any
amendment, supplement, waiver, modification to, or restructuring of this
Agreement, the Indebtedness incurred hereunder, or the other Loan Documents,
including, without limitation, reasonable outside counsel legal fees and
disbursements, expenses, document charges and other charges of Lender, (b) to
pay or reimburse Lender for all its reasonable costs, fees, charges and expenses
incurred in connection with the administration of this Agreement and the other
Loan Documents or the enforcement, protection or preservation of any rights
under or in connection with this Agreement or any other Loan Documents,
including, without limitation, reasonable outside counsel legal fees and
disbursements, audit fees and charges, and all reasonable out-of-pocket
expenses, (c) to pay, indemnify, and to hold Lender harmless from, any and all
recording and filing fees and taxes and any and all liabilities with respect to,
or resulting from any delay in paying, stamp, excise and other taxes (excluding
income and franchise taxes and taxes of similar nature), if any, which may be
payable or determined to be payable in connection with the execution and
delivery or recordation or filing of, or consummation of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement and the other Loan Documents.
All of the amounts described in this Section are referred to collectively as the
"Lender's Expenses," shall be payable upon Lender's demand, and shall accrue
-----------------
interest at the Interest Rate in effect when such demand is made from five (5)
days after the date of demand until paid in full. All Lender's Expenses, and
interest thereon, shall be part of the Indebtedness and shall be secured by the
Collateral. The agreements in this Section shall survive repayment of the other
Indebtedness. All Lender's Expenses that are outstanding on any Borrowing Date
shall be paid before or with such Advance. If Borrower has not paid to Lender
the amount of all Lender's Expenses billed to Borrower before such Borrowing
Date, Lender shall be authorized to retain from any Advance on such Borrowing
Date the amount of such Lender's Expenses that remain unpaid. Borrower's
obligation to pay Lender's Expenses shall not be limited by any limitation on
the amount of the Commitment that may be designated as available for such
purposes, and any amounts so designated shall be used to pay Lender's Expenses
accrued at the time of any Advance before any of the legal fees or similar
expenses of Borrower.
18. INDEMNITY: Borrower shall indemnify Lender against and hold
Lender harmless from, and covenants to defend Lender against, any and all
losses, claims, encumbrances, actions, suits, damages, obligations, liabilities
and liens (and all Lender's Expenses) arising out of or in any way related to
each Loan including, without limitation, the selection, purchase, delivery,
ownership, licensing, possession, maintenance, condition, use, operation,
rejection or return of the Collateral, the recovery of claims under insurance
policies thereon, from Borrower's failure to commence operation of a System, or
from any misuse, breach or violation of the Software sublicense, including
without limitation, unauthorized
20
<PAGE>
duplication of or modification to the Software, or arising by operation of law,
excluding, however, any of the foregoing which result from the sole negligence
or willful misconduct of Lender and further excluding such losses, claims,
encumbrances, actions, suits, damages, obligations, liabilities and liens
arising from the sole negligence or willful misconduct of Lender in the exercise
of its remedies hereunder. Borrower agrees that upon written notice by Lender of
the assertion of any claims, liens, encumbrances, actions, damages, obligations
or liabilities, Borrower shall assume full responsibility for, or at Borrower's
option, reimburse Lender for the defense thereof. The provisions of this Section
shall continue in full force and effect notwithstanding full payment of the
Obligations under the Loans and survive the termination of this Agreement or any
Loan for any reason, provided, however, the provisions hereof shall not survive
longer than the applicable statute of limitations.
19. ASSIGNMENT: Lender may, in whole or in part, with notice to, but
without the consent of Borrower, sell, assign all or any portion of a Loan
hereunder and any amounts due or to become due hereunder to one or more third
party assignees ("Assignee"), which interests may be reassigned in whole or in
part. No such assignment shall be effective against Borrower unless and until
Borrower shall have received a copy or written notice thereof identifying the
name and address of the Assignee. Upon receiving written notice from Lender,
Borrower shall if so directed, make all Payments and other amounts due directly
to Assignee without abatement, deduction or setoff and free from any deduction
for any other person or entity. Any Assignee shall be entitled to rely on
Borrower's agreements as stated in his Agreement, any Note or other Loan
Documents, as applicable, and shall be considered a third-party beneficiary
thereof. Borrower shall also promptly execute and deliver or cause to be
executed and delivered to Lender or any Assignee any additional documentation as
Lender or the Assignee may reasonably request to acknowledge the assignment.
Lender shall be relieved of its future obligations under the Loan as a result of
such assignment if the Assignee assumes Lender's future obligations hereunder.
WITHOUT LENDER'S PRIOR WRITTEN CONSENT, BORROWER SHALL NOT ASSIGN, LEASE,
TRANSFER, PLEDGE, MORTGAGE OR OTHERWISE ENCUMBER (COLLECTIVELY, A "TRANSFER")
ANY LOAN OR COLLATERAL HEREUNDER OR PERMIT ANY LEVY, LIEN OR ENCUMBRANCE THEREON
EXCEPT FOR QUALIFYING LEASES AND DEEDS OF CHARGE, OR A CHANGE IN CONTROL NOT
CONSTITUTING A DEFAULT PURSUANT TO SECTION 14(i) HEREOF OR AS OTHERWISE
PERMITTED HEREIN. LENDER AGREES NOT TO UNREASONABLY WITHHOLD CONSENT TO AN
ASSIGNMENT BY BORROWER TO A WHOLLY OWNED SUBSIDIARY OF BORROWER OF ITS RIGHTS
HEREIN. ANY ATTEMPTED NON-CONSENSUAL TRANSFER BY BORROWER SHALL BE VOID AB
INITIO. NO TRANSFER SHALL RELIEVE BORROWER OF ANY OF ITS OBLIGATIONS UNDER THE
LOAN UNLESS LENDER RELEASES BORROWER FROM SUCH OBLIGATIONS IN WRITING.
20. MISCELLANEOUS: (a) Any failure of Lender to require strict
performance by Borrower, or any waiver by Lender of any provision of this
Agreement or any other Loan Document shall not be construed as a consent to or
waiver of any other breach of the same or of any other provision; (b) No
obligation of the Lender hereunder shall survive the expiration or other
termination of this Agreement; (c) All of the Borrower's indemnities, waiver,
assumptions of liability and duties contained in this Agreement and all Lender's
21
<PAGE>
disclaimers shall continue in full force and effect and survive the expiration
or other termination of this Agreement; (d) Borrower agrees to execute and
deliver or cause to be executed and delivered, upon demand, any and all other
documents necessary to evidence the intent of any Loan authorized hereunder, or
to protect Lender's interest in any Collateral, including any UCC financing
statements or other security documents or any waivers of interest or liens, and
to this end, Borrower appoints Lender as its attorney-in-fact to execute and
deliver all such financing statements or other documents and to collect
insurance proceeds. Borrower agrees to pay the costs of filing and recording
such documentation; (e) Borrower shall deliver to Lender such additional
financial information available to the public or other creditors as Lender may
reasonably request; (f) This Agreement shall be governed by the laws of the
Commonwealth of Virginia, except to the extent the internal laws of the state or
nation where the Collateral is located govern the perfection of security
interests in such property or the exercise of remedies therein; (g) If any
provision shall be held to be invalid or unenforceable, the validity and
enforceability of the remaining provisions shall not in any way be affected or
impaired; (i) In the event Borrower fails to pay or perform any obligations
under this Agreement, Lender may, at its option, pay or perform said obligation,
and any payment made or expense incurred by Lender in connection therewith shall
be due and payable by Borrower upon demand by Lender with interest thereon
accruing at the maximum rate permitted by law until paid; (h) No loan charge,
late charge fee or interest, if applicable, is intended to exceed the maximum
amount permitted to be charged or collected by applicable law. If one or more of
such charges exceed such maximum, then such charges will be reduced to the
legally permitted maximum charge and any excess charge will be used to reduce
the applicable Loan Amount or refunded; (i) Time is of the essence in this
Agreement and in each of its provisions.
21. NOTICES: Notices, demands and other communications to be
effective shall be transmitted in writing by telex, telecopy, or other facsimile
transmission, by hand delivery, or if given in the United States, by first
class, Registered or Certified Mail, return receipt requested, or by an
overnight courier service, addressed to Lender or to Borrower at the applicable
address in the preamble, or at such other address as the parties may hereinafter
substitute by written notice. Notice shall be effective in the United States
four (4) days after the date it was mailed (if mailed in the United States), or
upon receipt, which may be evidenced in electronic form, whichever is earlier.
22. COUNTERPARTS: The Loan, including the Exhibits and any Schedules
and other Loan Documents, may be executed by one or more of the parties on any
number of separate counterparts (which may be originals or copies sent by
facsimile transmission) each of which counterparts shall be an original, but all
of which taken together shall be deemed to constitute on and the same
instrument.
22
<PAGE>
23. ENTIRE AGREEMENT: This Agreement and its Schedules and Exhibits
and other Loan Documents executed and delivered in connection herewith
constitute the entire agreement between Lender and Borrower with respect to the
subject matter hereof and supersede the Commitment Letter (except as referenced
herein), all previous negotiations, proposals, commitments, writings, and
understandings of any nature whatsoever. No agent, employee, or representative
of Lender has any authority to bind Lender to any representation or warranty
concerning the Equipment or Software and, unless such representation or warranty
is specifically included in this Agreement or other Loan Documents executed by
Lender, it shall not be enforceable by Borrower against Lender.
24. BINDING NATURE: This Agreement and each Loan shall be binding
upon and inure to the benefit of Lender and Borrower and their respective
successors and permitted assigns and/or Subsidiaries. It is acknowledged for the
purpose of this Agreement that no Australian Subsidiary is a party to this
Agreement and that obligations expressed on behalf of Subsidiaries hereunder, so
far as they could apply to an Australian Subsidiary, are obligations of Borrower
to cause that obligation to be performed. A Guaranty and Deed of Charge in favor
of Lender by an Australian Subsidiary contain the obligations of the Australian
Subsidiary to Lender.
25. CONDITIONS OF CLOSING: The Closing Date is stated on Schedule
--------
24.01 hereto. In On or before the Closing Date, the following conditions must
- -----
have been satisfied:
(a) Closing Certificates. A certificate of Borrower signed by a duly
--------------------
authorized Responsible Officer, certifying as to (i) true copies of
Organizational Documents of Borrower in effect on such date; (ii) true copies of
all corporate action taken by Borrower relative to this Agreement, each Note,
and the other Loan Documents; (iii) the names, true signatures and incumbency of
the Responsible Officers of Borrower authorized to execute and deliver this
Agreement, each Note, and the other Loan Documents; (iv) a Certificate of Good
Standing (or equivalent certificate) for Borrower duly issued by the Secretary
of State of each state in which Borrower intends to do business; and (v) such
other matters as Lender shall reasonably request.
(b) Opinions of Counsel. Lender shall have received the following
-------------------
opinions, all dated as of the Closing Date and in form and substance
satisfactory to Lender:
(i) A written opinion of counsel to Borrower, substantially in
the form of Exhibit C hereto;
---------
(ii) A written opinion of regulatory counsel for Borrower,
substantially in the form of Exhibit D hereto; and
---------
(c) Closing Documents. Lender shall have received the following
------------------
documents, all in form and substance satisfactory to Lender:
(i) Agreement. This Agreement, duly executed by Borrower;
---------
23
<PAGE>
(ii) Notes. Each Note, duly executed by Borrower;
-----
(iii) Financing Statements. All UCC-1 financing statements or
---------------------
other filings or recordations necessary to perfect the Liens granted
hereby, each duly executed by Borrower, and duly recorded in all the
offices identified on Schedule 8.01 hereto;
-------------
(iv) Collateral Assignment of Purchase Agreement. The
---------------------------------------------
Collateral Assignment of Purchase Agreement, duly executed by Borrower,
and the Consent to Collateral Assignment of Purchase Agreement, duly
executed by NORTEL;
(v) Insurance. Policies and certificates of insurance required
---------
by Section 12, accompanied by evidence of the payment of the premiums
----------
therefor;
(vi) Financial Statements. The financial statements described
--------------------
in Section 10(k) hereof;
-------------
(vii) Balance Sheet. A balance sheet of Borrower, dated as of
-------------
the end of the fiscal quarter preceding the Closing Date, certified by
a Responsible Officer as fairly presenting the financial condition of
Borrower.
(viii) Certificate of Financial Condition. A Certificate of
------------------------------------
Financial Condition, duly executed by a Responsible Officer of
Borrower.
(ix) Copies of all executed Leases, each of which must be a
Qualifying Lease, together with a duly executed assignment of lease
with respect to each Lease.
(x) Guaranties. Original executed Guaranties of any
----------
Subsidiaries to which any Collateral is conveyed or to be conveyed by
Borrower or in the case of the Australian Subsidiary in the form of
Exhibit G-1.
-----------
(xi) Deeds of Charge. Original executed Deeds of Charge of any
---------------
Subsidiaries to which any Collateral is conveyed or to be conveyed by
Borrower or in the case of the Australian Subsidiary in the form of
Exhibit H-1.
-----------
(xii) An updated Schedule 11.04, which contains an accurate list
--------------
of all executed and proposed Leases or other conveyances of Collateral,
and their status.
(xiii) Pre-Closing Lien Searches. Lien searches from all
-------------------------
jurisdictions reasonably determined by Lender to be appropriate,
effective as of a date reasonably close to the Closing Date, reflecting
no other Liens (other than Permitted Encumbrances) on any of the
Collateral.
24
<PAGE>
26. CONDITIONS OF LENDING:
(a) Conditions for First Advance. On or before the First Funding
------------------------------
Date, with respect to each Loan, the following conditions shall have been met to
Lender's satisfaction:
(i) Post-Closing Lien Searches. Lender shall have received
--------------------------
satisfactory results of Lien searches in all jurisdictions reasonably
determined by Lender to be appropriate, reflecting the filing of
financing statements in favor of Lender pursuant hereto and no other
Liens other than Permitted Encumbrances.
(ii) Required Consents. Lender shall have received satisfactory
-----------------
evidence of Borrower's obtaining the Required Consents.
(b) Conditions for All Loans and Advances. The obligation of Lender
-------------------------------------
to make any Loan or Advance hereunder is subject to Borrower's performance of
its obligations hereunder on or before the date of such Loan or Advance, and to
the satisfaction of the following further conditions on or before the Borrowing
Date for any Loan or Advance, including the first Advance:
(i) Filings, Registrations and Recordings. Any financing
-------------------------------------
statements or other recordings required hereunder shall have been
properly filed, registered or recorded in each office in each
jurisdiction required in order to create in favor of Lender a
perfected first-priority Lien on the Collateral, subject to no other
Lien; Lender shall have received acknowledgment copies of all such
filings, registrations and recordations stamped by the appropriate
filing officer; and Lender shall have received results of searches of
such filing offices, and satisfactory evidence that any other Liens
(other than Permitted Encumbrances) on the Collateral have been duly
released, that all necessary filing fees, recording fees, taxes and
other expenses related to such filings, registrations and recordings
have been paid in full.
(ii) Borrowing Certificate. Lender shall have received a duly
---------------------
executed Borrowing Certificate in the form of Exhibit B, including a
detailed Collateral Schedule listing all goods and services to be paid
with the proceeds of the Advance and accompanied by other supporting
documentation satisfactory to Lender.
(iii) Reporting Requirements. Borrower shall have provided Lender
-----------------------
with all relevant reports and information required under Section 11
----------
hereof.
(iv) No Regulatory Event. No action by any Governmental
-------------------
Authority (in either Borrower's or Lender's reasonable determination)
that could reasonably be expected to cause a material adverse effect
to Borrower and its Subsidiaries on a consolidated basis shall have
occurred and be continuing, or would exist upon the consummation of
transactions to occur on such Borrowing Date.
25
<PAGE>
(v) No Default or Event of Default. No Default or Event of
---------------------------------
Default shall have occurred and be continuing or would exist upon the
consummation of transactions to occur on such Borrowing Date.
(vi) No Material Adverse Change. No material adverse change
--------------------------
in the financial condition of Borrower and its Subsidiaries on a
consolidated basis shall have occurred, or would occur after giving
effect to such Advance, since the date of the last financial statements
delivered to Lender pursuant hereto.
(vii) Representations and Warranties. The representations and
------------------------------
warranties contained in Section 11 hereof shall be true on and as of
----------
the date of each such Advance hereunder.
(viii) Lender's Expenses. All closing costs, and other
-----------------
Lender's Expenses shall have been paid in full.
(ix) Opinions. Lender shall have received from Borrower such
--------
opinions of counsel for Borrower or a Subsidiary of Borrower as may be
reasonably acceptable to Lender in form and substance with respect to
the perfection and priority of the Liens created by the Security
Documents in each such jurisdictional location.
(x) Details, Proceedings and Documents. All legal details
----------------------------------
and proceedings in connection with the transactions contemplated by
this Agreement shall be reasonably satisfactory to Lender and Lender
shall have received all such counterpart originals or certified or
other copies of such documents and proceedings in connection with such
transactions, in form and substance reasonably satisfactory to Lender,
as Lender may from time to time request.
(xi) Consents. Lender shall have received Required Consents
--------
duly executed by all parties and in form satisfactory to Lender.
(xii) Fees. Lender shall have received the fee(s) described
----
in Sections 3 and 17 hereof.
---------- --
(xiii) Purchase Agreements. Lender shall have received a copy
of each executed NORTEL Purchase Agreement and/or Vendor Purchase
Agreement with respect to which proceeds of an Advance shall be used to
acquire NORTEL Equipment or other Equipment, and Lender's shall have
reviewed and approved the Equipment to be acquired with proceeds of an
Advance, together with the collateral assignment and consent specified
in Section 25 of this Agreement.
----------
(xv) Lease Schedule. Lender shall have received an updated
--------------
Schedule 11.04, which contains an accurate list of all executed and
--------------
proposed Leases and their status.
26
<PAGE>
(xvi) Post-Closing Items. The post-closing items described on
------------------
Schedule 24.01 hereto, if any, shall have been completed in the time
--------------
permitted, and Borrower shall have provided Lender with satisfactory
evidence thereof.
(c) Affirmation of Representations and Warranties. Any Borrowing
---------------------------------------------
Certificate or other request for any Advance hereunder shall constitute a
representation and warranty that (i) the representations and warranties
contained in hereof are true and correct on and as of the date of such request
with the same effect as though made on and as of the date of such request and
(ii) on the date of such request no Default or Event of Default has occurred and
is continuing or exists or will occur or exist after giving effect to such
Advance (for this purpose such Advance being deemed to have been made on the
date of such request). Failure of Lender to receive notice from a Borrower to
the contrary before such Advance is made shall constitute a further
representation and warranty by the Borrower that (x) the representations and
warranties of the Borrower contained in the first sentence of this Section 26(c)
-------------
are true and correct on and as of the date of such Advance with the same effect
as though made on and as of the date of such Advance and (y) on the date of the
Advance no Default or Event of Default has occurred and is continuing or exists
or will occur or exist after giving effect to such Advance.
(d) Deadline for Funding Conditions. Lender shall have no obligation
-------------------------------
to make any Advances hereunder if all of the conditions set forth in Sections 25
-----------
and 26 hereof have not been fully satisfied, and the first Advance made
--
hereunder, within the period of four (4) calendar months following the Closing
Date.
END OF LOAN AND SECURITY AGREEMENT
(Signatures on First Page)
27
<PAGE>
SCHEDULE 2.01 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
Borrower Information
--------------------
1
<PAGE>
SCHEDULE 8.01 TO
----------------
LOAN AND SECURITY AGREEMENT
---------------------------
Collateral Descriptions and Locations of Collateral
---------------------------------------------------
1
<PAGE>
SCHEDULE 11.01 TO
-----------------
LOAN AND SECURITY AGREEMENT
---------------------------
Disclosure Schedule
-------------------
1
<PAGE>
SCHEDULE 11.02 TO
-----------------
LOAN AND SECURITY AGREEMENT
---------------------------
Permitted Encumbrances
----------------------
2
<PAGE>
SCHEDULE 11.03 TO
-----------------
LOAN AND SECURITY AGREEMENT
---------------------------
Senior Note Covenants
---------------------
1
<PAGE>
SCHEDULE 11.04 TO
-----------------
LOAN AND SECURITY AGREEMENT
---------------------------
Qualifying Leases and Conveyances
---------------------------------
2
<PAGE>
SCHEDULE 25.01 TO
-----------------
LOAN AND SECURITY AGREEMENT
---------------------------
Post-Closing Conditions
-----------------------
1
<PAGE>
PROMISSORY NOTE
US $30,000,000 November 22, 1999
(or such amount as may
be advanced hereunder)
FOR VALUE RECEIVED, PRIMUS TELECOMMUNICATIONS, INC., a Delaware
corporation with its principal place of business at 1700 Old Meadow Road,
McLean, VA 22102 ("Borrower") promises and agrees to pay to the order of NTFC
--------
CAPITAL CORPORATION, a Delaware corporation, its successors, assigns or any
subsequent holder of this Note (the "Lender") at its offices located at 501
------
Corporate Centre Drive, Suite 600, Franklin, Tennessee 37067, or at such other
place as may be designated in writing by Lender, in lawful money of the United
States of America in immediately available funds:
the lesser of Thirty Million Dollars and 00/100 (US$30,000,000), or all
amounts advanced hereunder pursuant to the Loan Agreement (defined below),
plus legal fees, charges and expenses,
together with interest thereon and other amounts due as provided below. The
amortization schedule attached hereto is for convenience only, and the failure
of the Lender to attach an amortization schedule, or any error or incorrect
notation by the Lender on any amortization schedule, shall not diminish the
obligations of the Borrower under this Note.
This Note shall mature November 21, 2004 (the "Maturity Date"), on which
date all then-outstanding principal, interest, premium, expenses, fees,
penalties and other amounts due under the Note shall be finally due and payable.
This Note is issued pursuant to that certain Loan and Security Agreement
dated November 22, 1999, by and between Borrower and Lender (as it may be
modified, amended or restated from time to time, the "Loan Agreement"). Any
--------------
term not otherwise defined in this Note shall have the same meaning as in the
Loan Agreement. Reference is made to the Loan Agreement, which, among other
things, permits the acceleration of the maturity hereof upon the occurrence of
certain events and for prepayments in certain circumstances and upon certain
terms and conditions. This Note is secured by, among other things, the
Collateral described in the Loan Agreement and the other Loan Documents.
All Advances hereunder shall bear interest from the date of such
Advance (the "Borrowing Date") on the outstanding unpaid Principal Amount
thereof until such amount is due and payable (whether on any Payment Date, at
the Maturity Date, by acceleration, or otherwise), for each Advance, at a fixed
rate equal to a rate determined by adding 495
<PAGE>
basis points to the published yield on the Five (5) Year Constant Maturity
United States Treasury Notes as reported in Federal Reserve Statistical Release
H.15(519) as published by the Board of Governors of the Federal Reserve System,
or any successor publication by the Board of Governors of the Federal Reserve
System, three days prior to the First Funding Date with respect to that Loan.
The interest rate shall be expressed as an annual rate of interest, compounded
monthly, and calculated on the basis of a 365-day year.
This Note shall have an "Interest Only Period," which is the twenty-four
(24) months immediately following the date of this Note, during which only the
interest on the principal outstanding under the Loan shall be paid monthly in
arrears, together with other amounts (if any) as provided in the Loan Agreement.
Following the expiration of the Interest Only Period, all outstanding
principal amounts, together with interest, shall be paid in arrears in thirty-
six (36) monthly installments on the first day of the month (each, a "Payment
Date"). Beginning with the first amortizing Payment, unless otherwise provided
in the Amortization Schedule attached to this Note, each amortizing Payment
shall consist of an Interest Payment and a Principal Payment constituting a
partial repayment of the Principal amount due hereunder as set forth below:
Payment Number Percentage of Loan
-------------- -------------------
25 - 36 1.667%
37 - 48 2.500%
49 - 59 4.167%
60 All Unpaid Principal
Plus any other Obligation
All payments of principal will be credited to the repayment of all outstanding
Advances represented on that Schedule pro rata. The final payment shall be in an
amount equal to all outstanding principal hereunder, plus all accrued and unpaid
interest and all other unpaid charges and expenses hereunder.
In the event of any additional Advances hereunder after the initial Payment
Date on Schedule A, an additional amortization schedule (Schedule B, etc.) will
---------- ----------
be attached for each additional Advance, reflecting the amortization of the
principal amount of such Advance and the applicable Interest Rate. All such
amortization schedules shall provide for amortization of all principal and
interest through the Maturity Date. If any principal, interest, or other charge
or expense remains outstanding on the Maturity Date, such amount shall be added
to the payment due on the Maturity Date.
Borrower may, at its option but subject to the satisfaction of the
requirements of the next sentence, at any time and from time to time, prepay
this Note, in whole or in part, upon at least (30) business days prior written
notice to Lender specifying the date and amount of prepayment in a minimum
amount of $50,000. Any such prepayment
<PAGE>
occurring during the first, second and third years following the date hereof
shall be subject to a prepayment premium equal to a percentage of the amount
being prepaid as follows: three percent (3%) if the prepayment is made during
the first year following the date hereof; two percent (2%) if the prepayment is
made during the second year following the date hereof; and one percent (1%) if
the prepayment is made during the third year following the date hereof. The Note
may be prepaid without premium thereafter.
Whenever any Payment due under a Loan is not made within ten(10) days after
the date when due, Borrower agrees to pay on demand (as a fee to offset Lender's
Expenses), one and one-half percent (1-1/2%) per month of all overdue amounts
from the due date until paid, but not exceeding the lawful maximum, if any.
Notwithstanding the foregoing, if Borrower shall fail to pay within ten
(10) days after the due date any principal amount or interest or other amount
payable under this Note, Borrower shall pay to Lender, to defray the
administrative costs of handling such late payments, an amount equal to interest
on the amount unpaid, to the extent permitted under applicable law, at a rate
equal to the lesser of three percent (3%) higher than the then applicable
interest rate or the maximum permissible interest rate under applicable law (the
"Default Rate") (instead of the Interest Rate and in lieu of the 1-1/2% per
month referenced in the immediately preceding paragraph), from the due date
until such overdue principal amount, interest or other unpaid amount is paid in
full (both before and after judgment) whether or not any notice of default in
the payment thereof has been delivered under the Loan Agreement. In addition,
but without duplication, upon the occurrence and during the continuance of an
Event of Default, all outstanding amounts hereunder shall bear interest at the
Default Rate (instead of the Interest Rate) until such amounts are paid in full
or such Event of Default is waived in writing by Lender.
Notwithstanding any provision of this Note or the Loan Agreement to the
contrary, it is the intent of the Lender and the Borrower that the Lender or any
subsequent holder of this Note shall never be entitled to receive, collect,
reserve or apply, as interest, any amount in excess of the maximum rate of
interest permitted to be charged by applicable law, as amended or enacted, from
time to time. In the event Lender, or any subsequent holder of this Note, ever
receives, collects, reserves or applies, as interest, any such excess, such
amount which would be excessive interest shall be deemed a partial prepayment of
principal and treated as such (except that no prepayment premium will be payable
thereon), or, if the principal indebtedness and all other amounts due are paid
in full, any remaining excess funds shall immediately be paid to the Borrower.
In determining whether or not the interest paid or payable, under any specific
contingency, exceeds the highest lawful rate, the Borrower and the Lender shall,
to the maximum extent permitted under applicable law, (a) exclude voluntary
prepayments and the effects thereof as it may relate to any fees charged by the
Lender, and (b) amortize, prorate, allocate, and spread, in equal parts, the
total amount of interest throughout the entire term of the indebtedness;
provided that if the indebtedness is paid and performed in full prior to the end
of the full contemplated term hereof, and if the interest received for the
actual period of existence hereof exceeds the maximum
<PAGE>
lawful rate, the Lender or any subsequent holder of the Note shall refund to the
Borrower the amount of such excess or credit the amount of such excess against
the principal portion of the indebtedness, as of the date it was received, and,
in such event, the Lender shall not be subject to any penalties provided by any
laws for contracting for, charging, reserving or receiving interest in excess of
the maximum lawful rate.
All amounts received for payment under this Note shall at the option of
Lender be applied first to any unpaid expenses due Lender under this Note or
under any other documents evidencing or securing the obligations of Borrower to
Lender, then to any unpaid late charges, then to any unpaid interest accrued at
the Default Rate, then to all other accrued but unpaid interest due under this
Note and finally to the reduction of outstanding principal due under this Note.
Upon the occurrence of any one or more of the Events of Default specified
in the Loan Agreement (each, an "Event of Default"), all amounts then remaining
unpaid on this Note shall be, or may be declared to be, immediately due and
payable as provided in the Loan Agreement, without further notice, at the option
of the Lender. Lender may waive any Event of Default before or after the same
has been declared and restore this Note to full force and effect without
impairing any rights hereunder, such right of waiver being a continuing one, but
one waiver shall not imply any additional or subsequent waiver. Time is of the
essence of this Note.
Demand, presentment, notice and protest are expressly waived, except for
notices to Borrower otherwise expressly required in the Loan Agreement. Borrower
and any and all endorsers, guarantors and other parties liable on this Note, and
any and all general partners of Borrower or any endorsers, guarantors or other
parties liable on this Note (collectively, the "Obligors") jointly and severally
waive presentment for payment, protest, notice of protest, notice of nonpayment
of this Note, demand and all legal diligence in enforcing collection, and hereby
expressly consent to (i) any and all delays, extensions, renewals or other
modifications of this Note or any waivers of any term hereof, (ii) any release
or discharge by Lender of any of the Obligors, (iii) any release, substitution
or exchange of any security for the payment hereof, (iv) any failure to act on
the part of Lender, and (vi) any indulgence shown by Lender from time to time
(without notice or further assent from any of the Obligors) and hereby agree
that no such action, failure to act or failure to exercise any right or remedy
by Lender shall in any way affect or impair the obligations of any of the
Obligors.
BORROWER HEREBY IRREVOCABLY CONSENTS TO THE JURISDICTION OF THE COURTS
LOCATED IN DAVIDSON OR WILLIAMSON COUNTY, TENNESSEE, INCLUDING WITHOUT
LIMITATION FEDERAL COURTS SITTING IN THE MIDDLE DISTRICT OF TENNESSEE AND THE
CHANCERY COURT FOR DAVIDSON OR WILLIAMSON COUNTY, TENNESSEE, FOR ANY SUIT
BROUGHT OR ACTION COMMENCED IN CONNECTION WITH THIS NOTE, ANY DOCUMENTS EXECUTED
OR DELIVERED IN CONNECTION HEREWITH, INCLUDING WITHOUT LIMITATION THE LOAN
AGREEMENT, OR ANY RELATIONSHIP BETWEEN LENDER AND BORROWER, AND AGREES NOT TO
<PAGE>
CONTEST OR CHALLENGE VENUE IN ANY SUCH COURTS.
Borrower irrevocably consents to the service of process of any such courts
in any such action or proceeding by the mailing of copies thereof by registered
or certified mail, postage prepaid, return receipt requested, to Borrower at the
address opposite its signature below or to such other address as Borrower may
have furnished to Lender in writing, and agrees that such service shall become
effective fifty (50) days after such mailing. However, nothing herein shall
affect the right of Lender or Borrower to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed against
Lender or Borrower in any other jurisdiction.
BORROWER HEREBY KNOWINGLY, WILLINGLY AND IRREVOCABLY WAIVES ITS RIGHTS TO
DEMAND A JURY TRIAL IN ANY ACTION OR PROCEEDING INVOLVING THIS NOTE, ANY
DOCUMENTS EXECUTED OR DELIVERED IN CONNECTION HEREWITH INCLUDING WITHOUT
LIMITATION THE LOAN AGREEMENT OR ANY RELATIONSHIP BETWEEN BORROWER AND LENDER.
BORROWER AGREES THAT LENDER MAY FILE AN ORIGINAL COUNTERPART OR COPY OF THIS
PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF BORROWER'S EXPRESS WAIVER OF ITS
RIGHT TO TRIAL BY JURY.
IN ANY ACTION TO ENFORCE THIS NOTE, BORROWER HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL
RIGHTS UNDER THE LAWS OF ANY STATE TO CLAIM OR RECOVER ANY SPECIAL, EXEMPLARY,
PUNITIVE, CONSEQUENTIAL OR OTHER DAMAGES OTHER THAN ACTUAL DIRECT DAMAGES.
In the event this Note is placed in the hands of one or more attorneys for
collection or enforcement or protection of the holder's rights described herein
or in the Loan Agreement or the other Loan Documents, the Borrower agrees to pay
all reasonable attorneys' fees and all court and other out-of-pocket costs
incurred by the holder hereof (as of which shall be due on demand and shall bear
interest at the rate then payable hereunder from five (5) days after such demand
is made until paid).
This Note is governed by and shall be construed in accordance with the
internal laws of the State of Tennessee. If any provision of this Note should
for any reason be invalid or unenforceable, the remaining provisions hereof
shall remain in full force and effect.
This Note may not be changed, extended or terminated except in writing. No
waiver of any term or provision hereof shall be valid unless in writing signed
by Lender.
<PAGE>
Executed as of November 22, 1999.
PRIMUS TELECOMMUNICATIONS, INC.
By:_______________________________
Title:____________________________
<PAGE>
SCHEDULE A
SCHEDULE OF LOANS AND PAYMENTS
OF PRINCIPAL AND INTEREST
Principal Amount of Unpaid Amount of Unpaid
Amount Principal Interest Interest
Date of Loan Paid Balance Paid Balance
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<PAGE>
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<PAGE>
EXHIBIT 10.24
================================================================================
RESALE REGISTRATION RIGHTS AGREEMENT
Dated as of February 24, 2000
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
PRIMUS TELECOMMUNICATIONS, INC.
PRIMUS TELECOMMUNICATIONS (AUSTRALIA) PTY. LTD.
PRIMUS TELECOMMUNICATIONS PTY. LTD.
and
LEHMAN BROTHERS INC.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
================================================================================
<PAGE>
Resale Registration Rights Agreement, dated as of February 24, 2000,
among Primus Telecommunications Group, Incorporated, a Delaware corporation
(together with any successor entity, herein referred to as the "Issuer"), Primus
Telecommunications Incorporated, a Delaware corporation, Primus
Telecommunications (Australia) Pty. Ltd., an Australian corporation, Primus
Telecommunications Pty. Ltd., an Australian corporation, and Lehman Brothers
Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley &
Co. Incorporated (collectively, the "Initial Purchasers").
Pursuant to the Purchase Agreement, dated February 17, 2000, between
the Issuer, the Principal Subsidiaries (as defined below) and the Initial
Purchasers (the "Purchase Agreement"), the Initial Purchasers have agreed to
purchase from the Issuer up to $250,000,000 ($300,000,000 if the Initial
Purchasers exercise the over-allotment option in full) in aggregate principal
amount of 5 3/4% Convertible Subordinated Debentures due 2007 (the
"Debentures"). The Debentures will be convertible into fully paid,
nonassessable common stock, par value $.01 per share, of the Issuer (the
"Common Stock") on the terms, and subject to the conditions, set forth in the
Indenture (as defined herein). To induce the Initial Purchasers to purchase the
Debentures, and in satisfaction of a condition to the Initial Purchasers'
obligations under the Purchase Agreement, the Issuer has agreed to provide the
registration rights set forth in this Agreement.
The parties hereby agree as follows:
1. Definitions. As used in this Agreement, the following
capitalized terms shall have the following meanings:
Advice: As defined in Section 4(c)(ii) hereof.
Agreement: This Resale Registration Rights Agreement.
Blue Sky Application: As defined in Section 6(a) hereof.
Broker-Dealer: Any broker or dealer registered under the Exchange
Act.
Business Day: A day other than a Saturday or Sunday or any federal
holiday in the United States.
Closing Date: The date of this Agreement.
Commission: Securities and Exchange Commission.
Common Stock: As defined in the preamble hereto.
Damages Payment Date: Each Interest Payment Date. For purposes of
this Agreement, if no Debentures are outstanding, "Damages Payment Date"
shall mean each February 15 and August 15.
Debentures: As defined in the preamble hereto.
<PAGE>
Effectiveness Period: As defined in Section 2(a)(iii) hereof.
Effectiveness Target Date: As defined in Section 2(a)(ii) hereof.
Exchange Act: Securities Exchange Act of 1934, as amended.
Holder: A Person who owns, beneficially or otherwise, Transfer
Restricted Securities.
Indemnified Holder: As defined in Section 6(a) hereof.
Indenture: The Indenture, dated as of October 13, 1999, between the
Issuer and Chase Manhattan Bank and Trust Company, National Association, as
trustee (the "Trustee"), pursuant to which the Debentures are to be issued,
as such Indenture is amended, modified or supplemented from time to time in
accordance with the terms thereof.
Initial Purchasers: As defined in the preamble hereto.
Interest Payment Date: As defined in the Indenture.
Issuer: As defined in the preamble hereto.
Liquidated Damages: As defined in Section 3(a) hereof.
Majority of Holders: Holders holding over 50% of the aggregate
principal amount of Debentures outstanding; provided that, for purpose of
this definition, a holder of shares of Common Stock which constitute
Transfer Restricted Securities and issued upon conversion of the Debentures
shall be deemed to hold an aggregate principal amount of Debentures (in
addition to the principal amount of Debentures held by such holder) equal
to the product of (x) the number of such shares of Common Stock held by
such holder and (y) the prevailing conversion price, such prevailing
conversion price as determined in accordance with Section 12 of the
Indenture.
NASD: National Association of Securities Dealers, Inc.
Person: An individual, partnership, corporation, unincorporated
organization, trust, joint venture or a government or agency or political
subdivision thereof.
Prospectus: The prospectus included in a Shelf Registration
Statement, as amended or supplemented by any prospectus supplement and by
all other amendments thereto, including post-effective amendments, and all
material incorporated by reference into such Prospectus.
Questionnaire Deadline: As defined in Section 2(b) hereof.
2
<PAGE>
Record Holder: With respect to any Damages Payment Date, each Person
who is a Holder on the record date with respect to the Interest Payment
Date on which such Damages Payment Date shall occur. In the case of a
Holder of shares of Common Stock issued upon conversion of the Debentures,
"Record Holder" shall mean each Person who is a Holder of shares of Common
Stock which constitute Transfer Restricted Securities on the February 1 or
August 1 immediately preceding the Damages Payment Date.
Registration Default: As defined in Section 3(a) hereof.
Sale Notice: As defined in Section 4(e) hereof.
Securities Act: Securities Act of 1933, as amended.
Shelf Filing Deadline: As defined in Section 2(a)(i) hereof.
Shelf Registration Statement: As defined in Section 2(a)(i) hereof.
Suspension Period. As defined in Section 4(b)(i) hereof.
TIA: Trust Indenture Act of 1939, as in effect on the date the
Indenture is qualified under the TIA.
Transfer Restricted Securities: Each Debenture and each share of
Common Stock issued upon conversion of Debentures until the earlier of:
(i) the date on which such Debenture or such share of Common
Stock issued upon conversion has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement;
(ii) the date on which such Debenture or such share of Common
Stock issued upon conversion is transferred in compliance with Rule 144
under the Securities Act or may be sold or transferred pursuant to Rule 144
under the Securities Act (or any other similar provision then in force); or
(iii) the date on which such Debenture or such share of Common
Stock issued upon conversion ceases to be outstanding (whether as a result of
redemption, repurchase and cancellation, conversion or otherwise).
Underwritten Registration or Underwritten Offering: A registration in
which securities of the Issuer are sold to an underwriter for reoffering to
the public.
3
<PAGE>
2. Shelf Registration.
(a) The Issuer shall:
(i) not later than 90 days after the date hereof (the "Shelf
Filing Deadline"), cause to be filed a registration statement pursuant to
Rule 415 under the Securities Act (the "Shelf Registration Statement"),
which Shelf Registration Statement shall provide for resales of all
Transfer Restricted Securities held by Holders that have provided the
information required pursuant to the terms of Section 2(b) hereof;
(ii) use its reasonable best efforts to cause the Shelf
Registration Statement to be declared effective by the Commission as
promptly as practicable, but in no event later than 180 days after the date
hereof (the "Effectiveness Target Date"); and
(iii) use its reasonable best efforts to keep the Shelf
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 4(b) hereof to the extent necessary
to ensure that (A) it is available for resales by the Holders of Transfer
Restricted Securities entitled to the benefit of this Agreement and (B)
conforms with the requirements of this Agreement and the Securities Act and
the rules and regulations of the Commission promulgated thereunder as
announced from time to time for a period (the "Effectiveness Period") of:
(1) two years following the last date of original issuance
of Debentures; or
(2) such shorter period that will terminate when (x) all of
the Holders of Transfer Restricted Securities are able to sell all
Transfer Restricted Securities immediately without restriction
pursuant to Rule 144(k) under the Securities Act or any successor rule
thereto, (y) when all Transfer Restricted Securities have ceased to be
outstanding (whether as a result of redemption, repurchase and
cancellation, conversion or otherwise) or (z) all Transfer Restricted
Securities registered under the Shelf Registration Statement have been
sold.
(b) No Holder of Transfer Restricted Securities may include any of
its Transfer Restricted Securities in the Shelf Registration Statement pursuant
to this Agreement unless such Holder furnishes to the Issuer in writing, prior
to or on the 20th Business Days after receipt of a request therefor (the
"Questionnaire Deadline"), such information as the Issuer may reasonably request
for use in connection with the Shelf Registration Statement or Prospectus or
preliminary Prospectus included therein and in any application to be filed with
or under state securities laws. In connection with all such requests for
information from Holders of Transfer Restricted Securities, the Issuer shall
notify such Holders of the requirements set forth in the preceding sentence. No
Holder of Transfer Restricted Securities shall be entitled to Liquidated Damages
pursuant to
4
<PAGE>
Section 3 hereof unless such Holder shall have provided all such reasonably
requested information prior to or on the Questionnaire Deadline. Each Holder as
to which the Shelf Registration Statement is being effected agrees to furnish
promptly to the Issuer all information required to be disclosed in order to make
information previously furnished to the Issuer by such Holder not materially
misleading.
3. Liquidated Damages.
(a) If:
(i) the Shelf Registration Statement has not been declared
effective by the Commission prior to or on the Effectiveness Target Date;
(ii) subject to the provisions of Section 4(b)(i) hereof, the
Shelf Registration Statement is filed and declared effective but, during
the Effectiveness Period and after the Effectiveness Target Date, shall
thereafter cease to be effective or fail to be usable for its intended
purpose without being succeeded within five Business Days by a post-
effective amendment to the Shelf Registration Statement or a report filed
with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act that cures such failure and, in the case of a post-effective
amendment, is itself immediately declared effective; or
(iii) prior to or on the 45th or 75th day, as the case may be, of
any Suspension Period, such suspension has not been terminated,
(each such event referred to in foregoing clauses (i) through (iii), a
"Registration Default"), the Issuer hereby agrees to pay liquidated damages
("Liquidated Damages") with respect to the Transfer Restricted Securities from
and including the day following the Registration Default to but excluding the
day on which the Registration Default has been cured:
(A) in respect of the Debentures, to each holder of
Debentures, (x) with respect to the first 90-day period during which a
Registration Default shall have occurred and be continuing, in an
amount per year equal to an additional 0.25% of the principal amount
of the then outstanding and not converted Debentures, and (y) with
respect to the period commencing on the 91st day following the day the
Registration Default shall have occurred and be continuing, in an
amount per year equal to an additional 0.50% of the principal amount
of the then outstanding and not converted Debentures; provided that in
no event shall the aggregate Liquidated Damages pursuant to this
clause (A) and clause (B) accrue at a rate per year exceeding 0.50% of
the sum of the principal amount of the then outstanding and not
converted Debentures plus the principal amount of the converted
Debentures; and
(B) in respect of any shares of Common Stock, to each
holder of shares of Common Stock issued upon conversion of Debentures,
(x) with respect to the first 90-day period in which a Registration
Default shall have occurred and be continuing, in an amount per year
equal to 0.25% of the principal amount of the converted Debentures,
and (y) with respect to the period commencing the 91st day following
the day the Registration Default
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shall have occurred and be continuing, in an amount per year equal to
0.50% of the principal amount of the converted Debentures; provided
that in no event shall the aggregate Liquidated Damages pursuant to
this clause (B) and clause (A) above accrue at a rate per year
exceeding 0.50% of the sum of the principal amount of the outstanding
and not converted Debentures plus the principal amount of the then
converted Debentures.
(b) All accrued Liquidated Damages shall be paid in arrears to Record
Holders by the Issuer on each Damages Payment Date by wire transfer of
immediately available funds or by federal funds check. Following the cure of all
Registration Defaults relating to any particular Debenture or share of Common
Stock, the accrual of Liquidated Damages with respect to such Debenture or share
of Common Stock will cease.
All obligations of the Issuer set forth in this Section 3 that are
outstanding with respect to any Transfer Restricted Security at the time such
security ceases to be a Transfer Restricted Security shall survive until such
time as all such obligations with respect to such Transfer Restricted Security
shall have been satisfied in full.
The Liquidated Damages set forth above shall be the exclusive monetary
remedy available to the Holders of Transfer Restricted Securities for such
Registration Default.
4. Registration Procedures.
(a) In connection with the Shelf Registration Statement, the Issuer
shall comply with all the provisions of Section 4(b) hereof and shall, in
accordance with Section 2, prepare and file with the Commission a Shelf
Registration Statement relating to the registration on any appropriate form
under the Securities Act.
(b) In connection with the Shelf Registration Statement and any
Prospectus required by this Agreement to permit the sale or resale of Transfer
Restricted Securities, the Issuer shall:
(i) Subject to any notice by the Issuer in accordance with this
Section 4(b) of the existence of any fact or event of the kind described in
Section 4(b)(iii)(D), use its reasonable best efforts to keep the Shelf
Registration Statement continuously effective during the Effectiveness
Period; upon the occurrence of any event that would cause the Shelf
Registration Statement or the Prospectus contained therein (A) to contain a
material misstatement or omission or (B) not be effective and usable for
resale of Transfer Restricted Securities during the Effectiveness Period,
the Issuer shall file promptly an appropriate amendment to the Shelf
Registration Statement or a report filed with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, in
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the case of clause (A), correcting any such misstatement or omission, and,
in the case of either clause (A) or (B), use its reasonable best efforts to
cause such amendment to be declared effective and the Shelf Registration
Statement and the related Prospectus to become usable for their intended
purposes as soon as practicable thereafter. Notwithstanding the foregoing,
the Issuer may suspend the effectiveness of the Shelf Registration
Statement by written notice to the Holders for a period not to exceed an
aggregate of 45 days in any 90-day period (each such period, a "Suspension
Period") if:
(x) an event occurs and is continuing as a result of which
the Shelf Registration Statement would, in the Issuer's reasonable
judgment, 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
(y) the Issuer reasonably determines that the disclosure
of such event at such time would have a material adverse effect on the
business of the Issuer (and its subsidiaries, if any, taken as a
whole);
provided that in the event the disclosure relates to a previously
undisclosed proposed or pending material business transaction, the
disclosure of which would impede the Issuer's ability to consummate such
transaction, the Issuer may extend a Suspension Period from 45 days to 75
days; provided, however, that the Suspension Periods shall not exceed an
aggregate of 90 days in any 360-day period. Each holder, by its acceptance
of a Debenture, agrees to hold any communication by us in response to a
notice of a proposed material business transaction in confidence.
(ii) Prepare and file with the Commission such amendments and
post-effective amendments to the Shelf Registration Statement as may be
necessary to keep the Shelf Registration Statement effective during the
Effectiveness Period; cause the Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant
to Rule 424 under the Securities Act, and to comply fully with the
applicable provisions of Rules 424 and 430A under the Securities Act in a
timely manner; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by the Shelf
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers thereof set forth
in the Shelf Registration Statement or supplement to the Prospectus.
(iii) Advise the underwriter(s), if any, and, in the case of (A),
(C) and (D) below, the selling Holders promptly and, if requested by such
Persons, to confirm such advice in writing:
(A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to the
Shelf
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Registration Statement or any post-effective amendment thereto,
when the same has become effective,
(B) of any request by the Commission for amendments to the
Shelf Registration Statement or amendments or supplements to the
Prospectus or for additional information relating thereto,
(C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Shelf Registration Statement under
the Securities Act or of the suspension by any state securities
commission of the qualification of the Transfer Restricted Securities
for offering or sale in any jurisdiction, or the initiation of any
proceeding for any of the preceding purposes, or
(D) of the existence of any fact or the happening of any
event, during the Effectiveness Period, that makes any statement of a
material fact made in the Shelf Registration Statement, the
Prospectus, any amendment or supplement thereto, or any document
incorporated by reference therein untrue, or that requires the making
of any additions to or changes in the Shelf Registration Statement or
the Prospectus in order to make the statements therein not misleading.
If at any time the Commission shall issue any stop order suspending the
effectiveness of the Shelf Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending
the qualification or exemption from qualification of the Transfer
Restricted Securities under state securities or Blue Sky laws, the Issuer
shall use its reasonable best efforts to obtain the withdrawal or lifting
of such order at the earliest possible time.
(iv) Furnish to each of the selling Holders and each of the
underwriter(s), if any, before filing with the Commission, a copy of the
Shelf Registration Statement and copies of any Prospectus included therein
or any amendments or supplements to any the Shelf Registration Statement or
Prospectus (other than documents incorporated by reference after the
initial filing of the Shelf Registration Statement), which documents will
be subject to the review of such holders and underwriter(s), if any, for a
period of two Business Days, and the Issuer will not file the Shelf
Registration Statement or Prospectus or any amendment or supplement to the
Shelf Registration Statement or Prospectus (other than documents
incorporated by reference) to which a selling Holder of Transfer Restricted
Securities covered by the Shelf Registration Statement or the
underwriter(s), if any, shall reasonably object within two Business Days
after the receipt thereof. A selling Holder or underwriter, if any, shall
be deemed to have reasonably objected to such filing if the Shelf
Registration Statement, amendment, Prospectus or supplement, as applicable,
as proposed to be filed, contains a material misstatement or omission.
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<PAGE>
(v) Subject to the execution of a confidentiality agreement
reasonably acceptable to the Issuer, make available at reasonable times for
inspection by one or more representatives of the selling Holders,
designated in writing by a Majority of Holders whose Transfer Restricted
Securities are included in the Shelf Registration Statement, any
underwriter, if any, participating in any distribution pursuant to the
Shelf Registration Statement, and any attorney or accountant retained by
the Majority of Holders or any of the underwriter(s), all financial and
other records, pertinent corporate documents and properties of the Issuer
as shall be reasonably necessary to enable them to exercise any applicable
due diligence responsibilities, and cause the Issuer's officers, directors,
managers and employees to supply all information reasonably requested by
any such representative or representatives of the selling Holders,
underwriter, attorney or accountant in connection with the Shelf
Registration Statement after the filing thereof and before its
effectiveness; provided, however, that any information designated by the
Company as confidential at the time of delivery of such information shall
be kept confidential by the recipient thereof.
(vi) If requested by any selling Holders or the underwriter(s),
if any, promptly incorporate in the Shelf Registration Statement or
Prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such selling Holders and underwriter(s), if
any, may reasonably request to have included therein, including, without
limitation: (1) information relating to the "Plan of Distribution" of the
Transfer Restricted Securities, (2) information with respect to the
principal amount of Debentures or number of shares of Common Stock being
sold (3) the purchase price being paid therefor and (4) any other terms of
the offering of the Transfer Restricted Securities to be sold in such
offering; and make all required filings of such Prospectus supplement or
post-effective amendment as soon as reasonably practicable after the Issuer
is notified of the matters to be incorporated in such Prospectus supplement
or post-effective amendment.
(vii) Furnish to each selling Holder and each of the
underwriter(s), if any, without charge, at least one copy of the Shelf
Registration Statement, as first filed with the Commission, and of each
amendment thereto (and any documents incorporated by reference therein or
exhibits thereto (or exhibits incorporated in such exhibits by reference)
as such Person may request).
(viii) Deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement
thereto as such Persons reasonably may request; subject to any notice by
the Issuer in accordance with this Section 4(b) of the existence of any
fact or event of the kind described in Section 4(b)(iii)(D), the Issuer
hereby consents to the use of the Prospectus and any amendment or
supplement thereto by each of the selling Holders and each of the
underwriter(s), if any, in connection with the offering and the sale of the
Transfer Restricted Securities covered by the Prospectus or any amendment
or supplement thereto.
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<PAGE>
(ix) If an underwriting agreement is entered into and the
registration is an Underwritten Registration, the Issuer shall:
(A) upon request, furnish to each selling Holder and each
underwriter, if any, in such substance and scope as they may
reasonably request and as are customarily made by issuers to
underwriters in primary underwritten offerings, upon the date of
closing of any sale of Transfer Restricted Securities in an
Underwritten Registration:
(1) a certificate, dated the date of such closing,
signed by (y) the Chairman of the Board, its President or a Vice
President and (z) the Chief Financial Officer of the Issuer
confirming, as of the date thereof, such matters as such parties
may reasonably request;
(2) opinions, each dated the date of such closing, of
counsel to the Issuer covering such matters as are customarily
covered in legal opinions to underwriters in connection with
primary underwritten offerings of securities; and
(3) customary comfort letters, dated the date of such
closing, from the Issuer's independent accountants (and from any other
accountants whose report is contained or incorporated by reference in
the Shelf Registration Statement), in the customary form and covering
matters of the type customarily covered in comfort letters to
underwriters in connection with primary underwritten offerings of
securities;
(B) set forth in full in the underwriting agreement, if
any, indemnification provisions and procedures which provide rights no less
protective than those set forth in Section 6 hereof with respect to all
parties to be indemnified; and
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with clause (A)
above and with any customary conditions contained in the underwriting
agreement or other agreement entered into by the selling Holders pursuant
to this clause (ix).
(x) Before any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the underwriter(s), if any,
and their respective counsel in connection with the registration and
qualification of the Transfer Restricted Securities under the securities or
Blue Sky laws of such jurisdictions as the selling Holders or
underwriter(s), if any, may reasonably request and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the Shelf
Registration Statement; provided, however, that the Issuer shall not be
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<PAGE>
required (A) to register or qualify as a foreign corporation or a dealer of
securities where it is not now so qualified or to take any action that
would subject it to the service of process in any jurisdiction where it is
not now so subject or (B) to subject themselves to taxation in any such
jurisdiction if they are not now so subject.
(xi) Cooperate with the selling Holders and the
underwriter(s), if any, to facilitate the timely preparation and delivery
of certificates representing Transfer Restricted Securities to be sold and
not bearing any restrictive legends (unless required by applicable
securities laws); and enable such Transfer Restricted Securities to be in
such denominations and registered in such names as the Holders or the
underwriter(s), if any, may reasonably request at least two Business Days
before any sale of Transfer Restricted Securities made by such
underwriter(s).
(xii) Use its reasonable best efforts to cause the Transfer
Restricted Securities covered by the Shelf Registration Statement to be
registered with or approved by such other U.S. governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof or
the underwriter(s), if any, to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso in clause (x) above.
(xiii) Subject to Section 4(b)(i) hereof, if any fact or event
contemplated by Section 4(b)(iii)(D) hereof shall exist or have occurred,
use its reasonable best efforts prepare a supplement or post-effective
amendment to the Shelf Registration Statement or related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
(xiv) Provide CUSIP numbers for all Transfer Restricted
Securities not later than the effective date of the Shelf Registration
Statement and provide the Trustee under the Indenture with certificates for
the Debentures that are in a form eligible for deposit with The Depository
Trust Company.
(xv) Cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation by
any underwriter that is required to be retained in accordance with the
rules and regulations of the NASD.
(xvi) Otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission and all reporting
requirements under the rules and regulations of the Exchange Act.
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(xvii) Cause the Indenture to be qualified under the TIA not
later than the effective date of the Shelf Registration Statement required
by this Agreement, and, in connection therewith, cooperate with the trustee
and the holders of Debentures to effect such changes to the Indenture as
may be required for such Indenture to be so qualified in accordance with
the terms of the TIA; and execute and use its reasonable best efforts to
cause the trustee thereunder to execute all documents that may be required
to effect such changes and all other forms and documents required to be
filed with the Commission to enable such Indenture to be so qualified in a
timely manner.
(xviii) Cause all Transfer Restricted Securities covered by the
Shelf Registration Statement to be listed or quoted, as the case may be, on
each securities exchange or automated quotation system on which similar
securities issued by the Issuer are then listed or quoted.
(xix) Provide promptly to each Holder upon written request
each document filed with the Commission pursuant to the requirements of
Section 13 and Section 15 of the Exchange Act after the effective date of
the Shelf Registration Statement.
(xx) If requested by the underwriters in an Underwritten
Offering, make appropriate officers of the Issuer available to the
underwriters for meetings with prospective purchasers of the Transfer
Restricted Securities and prepare and present to potential investors
customary "road show" material in a manner consistent with other new
issuances of other securities similar to the Transfer Restricted
Securities.
(c) Each Holder agrees by acquisition of a Transfer Restricted
Security that, upon receipt of any notice from the Issuer of the existence of
any fact of the kind described in Section 4(b)(iii)(D) hereof, such Holder will,
and will use its reasonable best efforts to cause any underwriter(s) in an
Underwritten Offering to, forthwith discontinue disposition of Transfer
Restricted Securities pursuant to the Shelf Registration Statement until:
(i) such Holder has received copies of the supplemented or
amended Prospectus contemplated by Section 4(b)(xiii) hereof; or
(ii) such Holder is advised in writing (the "Advice") by the
Issuer that the use of the Prospectus may be resumed, and has received
copies of any additional or supplemental filings that are incorporated by
reference in the Prospectus.
If so directed by the Issuer, each Holder will deliver to the Issuer (at the
Issuer's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of such notice of suspension.
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(d) Each Holder who intends to be named as a selling Holder in the
Shelf Registration Statement shall furnish to the Issuer in writing, within 20
Business Days after receipt of a request therefor as set forth in a
questionnaire, such information regarding such Holder and the proposed
distribution by such Holder of its Transfer Restricted Securities as the Issuer
may reasonably request for use in connection with the Shelf Registration
Statement or Prospectus or preliminary Prospectus included therein. (The form of
the questionnaire is attached hereto as Exhibit A.) Holders that do not complete
the questionnaire and deliver it to the Issuer shall not be named as selling
securityholders in the Prospectus or preliminary Prospectus included in the
Shelf Registration Statement and therefore shall not be permitted to sell any
Transfer Restricted Securities pursuant to the Shelf Registration Statement.
Each Holder who intends to be named as a selling Holder in the Shelf
Registration Statement shall promptly furnish to the Issuer in writing such
other information as the Issuer may from time to time reasonably request in
writing.
(e) Upon the effectiveness of the Shelf Registration Statement, each
Holder shall notify the Issuer at least three Business Days prior to any
intended distribution of Transfer Restricted Securities pursuant to the Shelf
Registration Statement (a "Sale Notice"), which notice shall be effective for
five Business Days. Each Holder of this Security, by accepting the same, agrees
to hold any communication by the Company in response to a Sale Notice in
confidence.
5. Registration Expenses.
(a) All expenses incident to the Issuer's performance of or
compliance with this Agreement shall be borne by the Issuer regardless of
whether a Shelf Registration Statement becomes effective, including, without
limitation:
(i) all registration and filing fees and expenses (including
filings made by any Initial Purchasers or Holders with the NASD);
(ii) all fees and expenses of compliance with federal securities
and state Blue Sky or securities laws;
(iii) all expenses of printing (including printing of
Prospectuses and certificates for the Common Stock to be issued upon
conversion of the Debentures), messenger and delivery services and
telephone;
(iv) all fees and disbursements of counsel to the Issuer and,
subject to Section 5(b) below, the Holders of Transfer Restricted
Securities;
(v) all application and filing fees in connection with listing
(or authorizing for quotation) the Common Stock on a national securities
exchange or automated quotation system pursuant to the requirements hereof;
and
(vi) all fees and disbursements of independent certified public
accountants of the Issuer (including the expenses of any special audit and
comfort letters required by or incident to such performance).
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The Issuer shall bear its internal expenses (including, without
limitation, all salaries and expenses of their officers and employees performing
legal, accounting or other duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Issuer.
(b) In connection with the Shelf Registration Statement required by
this Agreement, the Issuer shall reimburse the Initial Purchasers and the
Holders of Transfer Restricted Securities being registered pursuant to the Shelf
Registration Statement, as applicable, for the reasonable fees and disbursements
of not more than one counsel, which shall be Weil, Gotshal & Manges LLP, or such
other counsel as may be chosen by a Majority of Holders for whose benefit the
Shelf Registration Statement is being prepared and which shall be reasonably
acceptable to the Issuer. The Issuer shall not be required to pay any
underwriter discount, commission or similar fees related to the sale of the
Securities.
6. Indemnification and Contribution.
(a) The Issuer and Primus Telecommunications, Inc., a Delaware
corporation, and Primus Telecommunications (Australia) Pty. Ltd., a company
organized under the laws of Australia, and Primus Telecommunications Pty. Ltd.,
a company organized under the laws of Australia (together, the "Principal
Subsidiaries"), jointly and severally, shall indemnify and hold harmless each
Holder, such Holder's directors, officers and employees and each person, if any,
who controls such Holder within the meaning of Section 15 of the Securities Act
(each, an "Indemnified Holder"), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof (including, but
not limited to, any loss, claim, damage, liability or action relating to resales
of the Transfer Restricted Securities), to which such Indemnified Holder may
become subject, under the Securities Act or otherwise, insofar as any such loss,
claim, damage, liability or action arises out of, or is based upon:
(i) any untrue statement or alleged untrue statement of a
material fact contained in (A) the Shelf Registration Statement or
Prospectus or any amendment or supplement thereto or (B) any blue sky
application or other document or any amendment or supplement thereto
prepared or executed by the Issuer (or based upon written information
furnished by or on behalf of the Issuer expressly for use in such blue sky
application or other document or amendment on supplement) filed in any
jurisdiction specifically for the purpose of qualifying any or all of the
Transfer Restricted Securities under the securities law of any state or
other jurisdiction (such application or document being hereinafter called a
"Blue Sky Application"); or
(ii) the omission or alleged omission to state therein any
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading,
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and shall reimburse each Indemnified Holder promptly upon demand for any legal
or other expenses reasonably incurred by such Indemnified Holder in connection
with investigating or defending or preparing to defend against any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
however, that the Issuer shall not be liable in any such case to the extent that
any such loss, claim, damage, liability or action arises out of, or is based
upon, any untrue statement or alleged untrue statement or omission or alleged
omission made in the Shelf Registration Statement or Prospectus or amendment or
supplement thereto or Blue Sky Application in reliance upon and in conformity
with written information furnished to the Issuer by or on behalf of any Holder
(or its related Indemnified Holder) specifically for use therein; provided
further that as to any preliminary Prospectus, this indemnity agreement shall
not inure to the benefit of any Indemnified Holder or any officer, employee,
director or controlling person of that Indemnified Holder on account of any
loss, claim, damage, liability or action arising from the sale of the Transfer
Restricted Securities sold pursuant to the Shelf Registration Statement to any
person by such Indemnified Holder if (i) that Indemnified Holder failed to send
or give a copy of the Prospectus, as the same may be amended or supplemented, to
that person within the time required by the Securities Act and (ii) the untrue
statement or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact in such preliminary Prospectus was corrected
in the Prospectus or a supplement or amendment thereto, as the case may be,
unless in each case, such failure resulted from noncompliance by the Issuer with
Section 4. The foregoing indemnity agreement is in addition to any liability
which the Issuer and the Principal Subsidiaries may otherwise have to any
Indemnified Holder.
(b) Each Holder, severally and not jointly, shall indemnify and hold
harmless the Issuer, its directors, officers and employees and each person,
if any, who controls the Issuer within the meaning of Section 15 of the
Securities Act, from and against any loss, claim, damage or liability,
joint or several, or any action in respect thereof, to which the Issuer or
any such officer, employee or controlling person may become subject,
insofar as any such loss, claim, damage or liability or action arises out
of, or is based upon:
(i) any untrue statement or alleged untrue statement of any
material fact contained in the Shelf Registration Statement or Prospectus
or any amendment or supplement thereto or any Blue Sky Application; or
(ii) the omission or the alleged omission to state therein any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading,
but in each case 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 Issuer by or on behalf of
such Holder (or its related Indemnified Holder) specifically for use therein,
and shall reimburse the Issuer and any such director, officer, employee or
controlling person promptly upon demand for any legal or other expenses
reasonably incurred by the Issuer and the Principal Subsidiaries or
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any such officer, employee or controlling person in connection with
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action as such expenses are incurred. The foregoing
indemnity agreement is in addition to any liability which any Holder may
otherwise have to the Issuer and any such director, officer, employee or
controlling person.
(c) Promptly after receipt by an indemnified party under this Section
6 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 6, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 6 except to the extent it has
been materially prejudiced by such failure and, provided, further, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 6.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
the indemnified party shall have the right to employ counsel to represent
jointly the indemnified party and its respective directors, employees, officers
and controlling persons who may be subject to liability arising out of any claim
in respect of which indemnity may be sought by the indemnified party against the
indemnifying party under this Section 6 if such indemnified party shall have
been advised in writing that the representation of such indemnified party and
those directors, employees, officers and controlling persons by the same counsel
would be inappropriate under applicable standards of professional conduct due to
actual or potential differing interests between them, and in that event the fees
and expenses of such separate counsel shall be paid by the indemnifying party.
It is understood that the indemnifying party shall not be liable for the fees
and expenses of more than one separate firm (in addition to local counsel in
each jurisdiction) for all indemnified parties in connection with any proceeding
or related proceedings. Each indemnified party, as a condition of the indemnity
agreements contained in Sections 6(a) and 6(b), shall use its reasonable best
efforts to cooperate with the indemnifying party in the defense of any such
action or claim. No indemnifying party shall:
(i) without the prior written consent of the indemnified parties
(which consent shall not be unreasonably withheld) settle or compromise or
consent to the entry of any judgment with respect to any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or
action) unless such settlement,
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compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or
proceeding, or
(ii) be liable for any settlement of any such action effected
without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and
against any loss of liability by reason of such settlement or judgment in
accordance with this Section 6.
(d) If the indemnification provided for in this Section 6 shall for
any reason be unavailable or insufficient to hold harmless an indemnified party
under Section 6(a) or 6(b) in respect of any loss, claim, damage or liability
(or action in respect thereof) referred to therein, each indemnifying party
shall, in lieu of indemnifying such indemnified party, contribute to the amount
paid or payable by such indemnified party as a result of such loss, claim,
damage or liability (or action in respect thereof, in such proportion as is
appropriate to reflect the relative fault of the Company and the Principal
Subsidiaries, on the one hand, and the Holders, on the other hand, with respect
to the statements or omissions which resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant equitable
considerations. The relative fault 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 the Company and the Principal Subsidiaries, on the one hand, or the
Holders, on the other hand, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
statement or omission. Each of the Company and the Principal Subsidiaries and
each Holder agrees that it would not be just and equitable if contributions
pursuant to this Section 6(d) were to be determined by pro rata allocation (even
if either the Holders or the Company and the Principal Subsidiaries, as the case
may be, were treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section 6(d) shall be deemed to include, subject to
the limitations set forth above, any legal or other 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 indemnify or contribute any amount in excess of the amount
by which the total price at which the Transfer Restricted Securities purchased
by it were resold exceeds the amount of any damages which such Holder has
otherwise paid or become liable to pay by reason of any 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 remedies provided for in this Section 6 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity. The Holders' obligations
to contribute as provided in this Section 6(d) are several and not joint.
17
<PAGE>
(e) The indemnity and contribution provisions contained in this
Section 6 shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of any Initial Purchaser, any Holder or any person controlling any Initial
Purchaser or any Holder, or by or on behalf of the Company, its officers or
directors or any person controlling the Company, and (iii) any sale of Transfer
Restricted Securities pursuant to a Shelf Registration Statement.
7. Rule 144A. In the event the Issuer is not subject to Section 13
or 15(d) of the Exchange Act, the Issuer hereby agrees with each Holder, for so
long as any Transfer Restricted Securities remain outstanding, to make available
to any Holder or beneficial owner of Transfer Restricted Securities in
connection with any sale thereof and any prospective purchaser of such Transfer
Restricted Securities from such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Securities Act in order to permit resales
of such Transfer Restricted Securities pursuant to Rule 144A.
8. Participation in Underwritten Registrations. No Holder may
participate in any Underwritten Registration hereunder unless such Holder:
(i) agrees to sell such Holder's Transfer Restricted 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 reasonable questionnaires, powers
of attorney, indemnities, underwriting agreements, lock-up letters and
other documents reasonably required under the terms of such underwriting
arrangements.
Selection of Underwriters. The Majority of Holders of Transfer
Restricted Securities covered by the Shelf Registration Statement who desire to
do so may sell such Transfer Restricted Securities in an Underwritten Offering.
In any such Underwritten Offering, the investment banker or investment bankers
and manager or managers that will administer the offering will be selected by a
Majority of Holders whose Transfer Restricted Securities are included in such
offering; provided, that such investment bankers and managers must be reasonably
satisfactory to the Issuer.
9. Miscellaneous.
(a) Remedies. The Issuer acknowledges and agrees that any failure by
the Issuer to comply with its obligations under Section 2 hereof may result in
material irreparable injury to the Initial Purchasers or the Holders for which
there is no adequate remedy at law, that it will not be possible to measure
damages for such injuries precisely and that, in the event of any such failure,
the Initial Purchasers or any Holder may obtain such relief as may be required
to specifically enforce the Issuer's obligations under Section 2 hereof. The
Issuer further agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
18
<PAGE>
(b) No Inconsistent Agreements. The Issuer will not, on or after the
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. In addition, the Issuer shall
not grant to any of its security holders (other than the holders of Transfer
Restricted Securities in such capacity) the right to include any of its
securities in the Shelf Registration Statement provided for in this Agreement
other than the Transfer Restricted Securities. Other than as disclosed in the
Issuer's Offering Memorandum dated February 17, 2000, the Issuer has not
previously entered into any agreement (which has not expired or been terminated)
granting any registration rights with respect to its securities to any Person
which rights conflict with the provisions hereof.
(c) Adjustments Affecting Transfer Restricted Securities. The Issuer
shall not, directly or indirectly, take any action with respect to the Transfer
Restricted Securities as a class that would adversely affect the ability of the
Holders of Transfer Restricted Securities to include such Transfer Restricted
Securities in a registration undertaken pursuant to this Agreement.
(d) Amendments and Waivers. This Agreement may not be amended,
modified or supplemented, and waivers or consents to or departures from the
provisions hereof may not be given, unless the Issuer has obtained the written
consent of a Majority of Holders; provided, however, that no amendment,
modification, supplement, waiver or consent to or departure from the provisions
of Section 6 that materially and adversely affects a Holder hereof shall be
effective as against any such Holder of Transfer Restricted Securities unless
consented to in writing by such Holder.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the registrar under the Indenture or the transfer agent of the Common
Stock, as the case may be; and
(ii) if to the Issuer or any of the Principal Subsidiaries:
1700 Old Meadow Road
McLean, VA 22102
Attention: David Slotkin, Esq.
Facsimile: (703) 902-2814
With a copy to:
Simpson Thacher & Bartlett
19
<PAGE>
425 Lexington Avenue
New York, NY 10017
Attention: Edward P. Tolley, Esq.
Facsimile: (212) 455-2502
(iii) if to the Initial Purchasers:
c/o Lehman Brothers Inc.
Three World Financial Center
New York, NY 10285
Attention: Syndicate Department
Facsimile: (212) 528-6395.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next Business Day, if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
A document or notice shall be deemed to have been furnished to the
Holders of the Transfer Restricted Securities if it is provided to the
registered holders of the Transfer Restricted Securities at the address set
forth in clause (1) above.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; provided,
however, that (i) nothing contained herein shall be deemed to permit any
assignment, transfer or other disposition of Transfer Restricted Securities in
violation of the terms of the Purchase Agreement or the Indenture and (ii) this
Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities from such Holder. If any transferee of any Holder
shall acquire Transfer Restricted Securities, in any manner, whether by
operation of law or otherwise, such Transfer Restricted Securities shall be held
subject to all of the terms of this Agreement, and by taking and holding such
Transfer Restricted Securities such person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement and such Person shall be entitled to receive the benefits hereof. The
Initial Purchasers (in their capacity as Initial Purchasers) shall have no
liability or obligation to the Issuer with respect to any failure by a Holder to
comply with, or breach by any Holder of, any of the obligations of such Holder
under this Agreement.
20
<PAGE>
(g) Purchases and Sales of Debentures. The Company shall not, and
shall use its reasonable best efforts to cause its affiliates (as defined in
Rule 405 under the Securities Act) not to, purchase and then resell or otherwise
transfer any Debentures.
(h) Third Party Beneficiary. The Holders shall be third party
beneficiaries to agreements made hereunder between the Issuer and Principal
Subsidiaries, on the one hand, and the Initial Purchasers, on the other hand,
and such Initial Purchasers shall have the right to enforce such agreements
directly to the extent they deem such enforcement necessary or advisable to
protect their rights or the rights of Holders hereunder.
(i) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(j) Securities Held by the Issuer or Their Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Transfer Restricted
Securities is required hereunder, Transfer Restricted Securities held by the
Issuer or its "affiliates" (as such term is defined in Rule 405 under the
Securities Act) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
(k) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(l) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York.
(m) Consent to Jusisdiction. Each party irrevocably agrees that any
legal suit, action or proceeding arising out of or based upon this Agreement or
the transactions contemplated hereby ("Related Proceedings") may be instituted
in the federal courts of the United States of America located in the City of New
York or the courts of the State of New York in each case located in the Borough
of Manhattan in the City of New York (collectively, the "Specified Courts"), and
irrevocably submits to the exclusive jurisdiction (except for proceedings
instituted in regard to the enforcement of a judgment of any such court (a
"Related Judgment"), as to which such Jurisdiction is non-exclusive) of such
courts in any such suit, action or proceeding. The parties further agree that
service of any process, summons, notice or document by mail to such party's
address set forth above shall be effective service of process for any lawsuit,
action or other proceeding brought in any such court. The parties hereby
irrevocably and unconditionally waive any objection to the laying of venue of
any lawsuit, action or other proceeding in the Specified Courts, and hereby
further irrevocably and unconditionally waive and agree not to plead or claim in
any such court that any such lawsuit, action or other proceeding brought in any
such court has been brought in an inconvenient forum. Each of Primus
Telecommunications (Australia) Pty. Ltd. and Primus Telecommunications Pty. Ltd.
hereby irrevocably appoints CT Corporation System, which currently maintains a
New
21
<PAGE>
York City office at 1633 Broadway, New York, New York 10019, United States of
America, as its agent to receive service of process or other legal summons for
purposes of any such action or proceeding that may be instituted in any state or
federal court in the City and State of New York.
(n) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
(o) Entire Agreement. This Agreement. together with the Purchase
Agreement and the Indenture, is intended by the parties as a final expression of
their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein with respect to
the registration rights granted by the Issuer with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
(p) Required Consents. Whenever the consent or approval of Holders
of a specified percentage of Transfer Restricted Securities is required
hereunder, Transfer Restricted Securities held by the Issuer or its affiliates
(as such term is defined in Rule 405 under the Securities Act) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
22
<PAGE>
In Witness Whereof, the parties have executed this Agreement as of the
date first written above.
Primus Telecommunications
Group, Incorporated
/s/ K. Paul Singh
By:______________________________
Name: K. Paul Singh
Title: President and Chief Executive
Officer
Primus Telecommunications,
Inc.
/s/ K. Paul Singh
By:______________________________
Name: K. Paul Singh
Title: President
Primus Telecommunications
(Australia) Pty. Ltd.
/s/ K. Paul Singh
By:______________________________
Name: K. Paul Singh
Title: Director
Primus Telecommunications
Pty. Ltd.
/s/ K. Paul Singh
By:______________________________
Name: K. Paul Singh
Title: Director
23
<PAGE>
LEHMAN BROTHERS INC.
MERRILL LYNCH, PIERCE FENNER &
SMITH INCORPORATED
MORGAN STANLEY & CO.
INCORPORATED
By: LEHMAN BROTHERS INC.
/s/ Brian Reilly
By:______________________________
Authorized Representative
24
<PAGE>
Exhibit A
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
NOTICE OF REGISTRATION STATEMENT
AND
SELLING SECURITYHOLDER ELECTION AND QUESTIONNAIRE
_______________
NOTICE
Primus Telecommunications Group, Incorporated (the "Company") has
filed, or intends shortly to file, with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-3 or such other Form as
may be available (the "Shelf 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 % Convertible Subordinated Debentures due 2007 (CUSIP
No.________) (the "Debentures"), and common stock, par value $ per share,
issuable upon conversion thereof (the "Shares" and together with the Debentures,
the "Transfer Restricted Securities") in accordance with the terms of the
Registration Rights Agreement, dated as of ________ __, 2000 (the "Registration
Rights Agreement") between the Company and Lehman Brothers Inc., and
___________. A copy of the Registration Rights Agreement is available from the
Company. All capitalized terms not otherwise defined herein have the meaning
ascribed thereto in the Registration Rights Agreement.
To sell or otherwise dispose of any Transfer Restricted Securities
pursuant to the Shelf Registration Statement, a beneficial owner of Transfer
Restricted Securities generally will be required to be named as a selling
securityholder in the related Prospectus, deliver a Prospectus to purchasers of
Transfer Restricted Securities, be subject to certain civil liability provisions
of the Securities Act and be bound by those provisions of the Registration
Rights Agreement applicable to such beneficial owner (including certain
indemnification rights and obligations, as described below). To be included in
the Shelf Registration Statement, this Election and Questionnaire must be
completed, executed and delivered to the Company at the address set forth herein
for receipt PRIOR TO OR ON [insert date that is 20 business days from the notice
date] (the "Election and Questionnaire Deadline"). Beneficial owners that do not
complete and return this Election and Questionnaire prior to the Election and
Questionnaire Deadline and deliver it to the Company as provided below will not
be named as selling securityholders in the prospectus and therefore will not be
permitted to sell any Transfer Restricted Securities pursuant to the Shelf
Registration Statement.
A-1
<PAGE>
Certain legal consequences arise from being named as a selling
securityholder in the Shelf Registration Statement and the related Prospectus.
Accordingly, holders and beneficial owners of Transfer Restricted 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 Shelf
Registration Statement and the related Prospectus.
ELECTION
The undersigned holder (the "Selling Securityholder") of Transfer
Restricted Securities hereby elects to include in the Shelf Registration
Statement the Transfer Restricted Securities beneficially owned by it and listed
below in Item 3 (unless otherwise specified under Item 3). The undersigned, by
signing and returning this Election and Questionnaire, understands that it will
be bound with respect to such Transfer Restricted Securities by the terms and
conditions of this Election and Questionnaire and the Registration Rights
Agreement.
Pursuant to the Registration Rights Agreement, the Selling
Securityholder has agreed to indemnify and hold harmless the Company, the
Company's directors, the Company's officers who sign the Shelf Registration
Statement and each person, if any, who controls the Company within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act,
from and against certain losses arising in connection with statements concerning
the Selling Securityholder made in the Shelf Registration Statement or the
related Prospectus in reliance upon the information provided in this Election
and Questionnaire.
The Selling Securityholder hereby provides the following information
to the Company and represents and warrants that such information is accurate and
complete:
QUESTIONNAIRE
1. (a) Full legal name of Selling Securityholder:
(b) Full legal name of registered holder (if not the same as (a) above)
through which Transfer Restricted Securities listed in (3) below are
held:
(c) Full legal name of DTC participant (if applicable and if not the same
as (b) above) through which Transfer Restricted Securities listed in
(3) are held:
2. Address for notices to Selling Securityholders:
Telephone:
Fax:
Contact Person:
A-2
<PAGE>
3. Beneficial ownership of Transfer Restricted Securities:
(a) Type of Transfer Restricted Securities beneficially owned, and
principal amount of Debentures or number of shares of Common Stock, as
the case may be, beneficially owned:
(b) CUSIP No(s). of such Transfer Restricted Securities beneficially
owned:
4. Beneficial ownership of the Issuer's securities owned by the Selling
Securityholder:
Except as set forth below in this Item (4), the undersigned is not the
beneficial or registered owner of any securities of the Issuer other than
the Transfer Restricted Securities listed above in Item (3) ("Other
Securities").
(a) Type and amount of Other Securities beneficially owned by the Selling
Securityholder:
(a) CUSIP No(s). of such Other Securities beneficially owned:
5. Relationship with the Issuer
Except as set forth below, neither the undersigned 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 Issuer (or their predecessors or affiliates) during the past three
years.
State any exceptions here:
6. Plan of Distribution
Except as set forth below, the undersigned (including its donees or
pledgees) intends to distribute the Transfer Restricted Securities listed
above in Item (3) pursuant to the Shelf Registration Statement only as
follows (if at all). Such Transfer Restricted Securities may be sold from
time to time directly by the undersigned or, alternatively, through
underwriters, broker-dealers or agents. If the Transfer Restricted
Securities are sold through underwriters or broker-dealers, the Selling
Securityholder will be responsible for underwriting discounts or
commissions or agent's commissions. Such Transfer Restricted Securities
may be
A-3
<PAGE>
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):
on any national securities exchange or quotation service on which
the Transfer Restricted Securities may be listed or quoted at the time of
sale;
in the over-the-counter market;
in transactions otherwise than on such exchanges or services or
in the over-the-counter market; or
through the writing of options.
In connection with sales of the Transfer Restricted Securities or
otherwise, the undersigned may enter into hedging transactions with broker-
dealers, which may in turn engage in short sales of the Transfer Restricted
Securities and deliver Transfer Restricted Securities to close out such
short positions, or loan or pledge Transfer Restricted Securities to
broker-dealers that in turn may sell such securities.
State any exceptions here:
Note: In no event will such method(s) of distribution take the form of an
underwritten offering of the Transfer Restricted Securities without the prior
agreement of the Issuer.
The undersigned acknowledges that it understands its obligation to comply
with the provisions of the Exchange Act and the rules and regulations
promulgated thereunder relating to stock manipulation, particularly Regulation M
thereunder (or any successor rules or regulations), in connection with any
offering of Transfer Restricted Securities pursuant to the Shelf Registration
Statement. The undersigned agrees that neither it nor any person acting on its
behalf will engage in any transaction in violation of such provisions.
The Selling Securityholder hereby acknowledges its obligations under the
Registration Rights Agreement to indemnify and hold harmless certain persons as
set forth therein.
Pursuant to the Registration Rights Agreement, the Issuer has agreed under
certain circumstances to indemnify the Selling Securityholders against certain
liabilities.
In accordance with the undersigned's obligation under the Registration
Rights Agreement to provide such information as may be required by law for
inclusion in the
A-4
<PAGE>
Shelf Registration Statement, the undersigned agrees to promptly notify the
Issuer of any inaccuracies or changes in the information provided herein that
may occur subsequent to the date hereof at any time while the Shelf Registration
Statement remains effective. All notices hereunder and pursuant to the
Registration Rights Agreement shall be made in writing at the address set forth
below.
By signing below, the undersigned 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 Shelf Registration Statement and the
related Prospectus. The undersigned understands that such information will be
relied upon by the Issuer in connection with the preparation or amendment of the
Shelf Registration Statement and the related Prospectus.
A-5
<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:
Beneficial Owner
By:______________________________
Name:
Title:
Please return the completed and executed Notice and Questionnaire to Primus
Telecommunications Group, Incorporated at:
Primus Telecommunications Group, Incorporated
1700 Old Meadow Road
McLean, VA 22102
Attention: David Slotkin
A-6
<PAGE>
EXHIBIT 10.25
DATED 1999
PRIMUS TELECOMMUNICATIONS LIMITED
as Borrower
- and -
ERICSSON I.F.S.
as Lender
________________________________
GBP 21,250,000
MULTI-CURRENCY CREDIT
FACILITY AGREEMENT
________________________________
EVERSHEDS
S O L I C I T O R S
International Banking and Finance Department
Senator House, 85 Queen Victoria Street
London EC4V 4JL
Tel: +44 20 7919 4500 Fax: +44 20 7919 4919
<PAGE>
TABLE OF CONTENTS
CONTENTS
<TABLE>
<CAPTION>
Clause Page
<S> <C>
1. DEFINITIONS AND INTERPRETATION........................................... 1
2. THE FACILITY............................................................. 7
3. PURPOSE.................................................................. 7
4. CONDITIONS PRECEDENT..................................................... 7
5. AVAILABILITY OF THE FACILITY............................................. 7
6. AVAILABILITY OF THE MULTI-CURRENCY OPTION................................ 9
7. AMOUNTS OF ADVANCES...................................................... 10
8. INTEREST PERIODS......................................................... 10
9. INTEREST................................................................. 10
10. ALTERNATIVE INTEREST RATES............................................... 11
11. REPAYMENT................................................................ 11
12. PREPAYMENT............................................................... 12
13. REPRESENTATIONS AND WARRANTIES........................................... 12
14. COVENANTS................................................................ 13
15. EVENTS OF DEFAULT........................................................ 17
16. PAYMENTS................................................................. 20
17. PAYMENT AND EXCHANGE RATE INDEMNITIES.................................... 21
18. CHANGES IN CIRCUMSTANCES, TERMINATION OF COMMITMENT AND INCREASED COSTS.. 22
19. SET-OFF.................................................................. 23
20. WAIVERS.................................................................. 24
21. COSTS AND EXPENSES....................................................... 24
22. BENEFIT OF AGREEMENT AND TRANSFERS....................................... 24
23. NOTICES.................................................................. 25
24. CONFIDENTIALITY.......................................................... 25
25. LAW...................................................................... 26
THE FIRST SCHEDULE............................................................ 27
THE SECOND SCHEDULE........................................................... 30
THE THIRD SCHEDULE............................................................ 32
ANNEXURE A.................................................................... 43
THE FOURTH SCHEDULE........................................................... 44
EXECUTION PAGE................................................................ 46
</TABLE>
<PAGE>
MULTI-CURRENCY CREDIT FACILITY AGREEMENT
DATED: 1999
PARTIES:
(1) PRIMUS TELECOMMUNICATIONS LIMITED as Borrower;
(2) ERICSSON I.F.S. as Lender.
RECITALS:
(A) Under the terms of the Supply Contract, the Borrower has agreed to
purchase, and the Supplier has agreed to supply the Equipment, the Software
and related services.
(B) The Lender has agreed to provide finance to the Borrower in the maximum
aggregate principal amount of the Facility Amount in order to assist the
Borrower and the Primus Affiliates with certain of their respective payment
obligations in relation to the Equipment and Software under Purchase Orders
issued in accordance with the terms of the Supply Contract.
OPERATIVE TERMS:
1. DEFINITIONS AND INTERPRETATION
1.1 Unless otherwise defined in this Agreement or the context otherwise
requires, terms defined in the Supply Contract shall have the same meaning
when used in this Agreement.
1.2 In this Agreement:
"Advance" means an advance made by the Lender as referred to in Clause 5,
being any amount up to the aggregate VAT exclusive amount due under all
invoices specified in the Notice of Drawdown in respect of such Advance,
(in each case as the same may from time to time be reduced by prepayment
and/or repayment) made or to be made under this Agreement (together the
"Advances");
"Affiliate" of a company or corporate body means any company or corporate
body:
(i) which is controlled, direct or indirectly, by the first mentioned
company or corporate body; and/or
(ii) more than half the issued equity capital of which is beneficially
owned, direct or indirectly, by the first mentioned company or
corporate body; and/or
(iii) which is a Affiliate of another Affiliate of the first mentioned
company or corporate body; and/or
(iv) unless the context otherwise requires, which is a subsidiary
undertaking (within the meaning of section 21 of the Companies Act
1989) of the first mentioned company or corporate body
and, for these purposes, a company or corporate body will be treated as
being controlled by another if that other company or corporate body is able
to direct its affairs and/or to control the composition of its board of
directors or equivalent body;
"Affiliate Undertaking" means the guarantee indemnity and undertaking to be
given by each Primus Affiliate in the form set out in the Third Schedule
(or with such amendments to it as the Lender may agree);
"Agreed Value" means, in relation to any Equipment, the full replacement
value of such Equipment;
1
<PAGE>
"Agreement" means, at any point in time, this document as amended, varied,
supplemented or novated up to that point in time;
"Applicable Margin" means a rate of 5.8 per cent. per annum;
"Applicable Schedule" means, in relation to each Advance, a schedule of
payments in the form attached to the Notice of Drawdown for such Advance;
"Available Facility"means, save as otherwise provided in this Agreement,
the Commitment less (1) the Sterling Amount or the equivalent amount of an
Optional Currency of each Advance which is then outstanding under this
Agreement and (2) any amount which is due to be repaid on a Repayment Date;
"Availability Period" means, subject to the terms of Clause 5.3, a period
commencing on the date of this Agreement and terminating on the Termination
Date;
"Borrower" means Primus Telecommunications Limited, a company incorporated
in England with registered number 02937312 and having its registered office
at 4 Victoria Street, London SW1H 0NE (and includes its successors and
permitted assigns and any person with whom it may amalgamate);
"Charge" means:
(i) in respect of Equipment and Software to be purchased by the Borrower
pursuant to a Purchase Order, a fixed charge to be executed by the
Borrower in relation to such Equipment and Software; and
(ii) in respect of Equipment and Software to be purchased by a Primus
Affiliate pursuant to a Purchase Order, a security interest having
the characteristics of a fixed charge (as that expression is
understood under English law) in relation to such Equipment and
Software,
each to be in form and content satisfactory to the Lender (together the
"Charges");
"Commencement Date" means the 1 January, 1999, being the date for
commencement of the third stage of EMU;
"Commitment" means (Pounds)21,250,000 as such amount may be reduced,
cancelled or terminated in accordance with the terms of this Agreement (or
as otherwise may be agreed in writing between the Lender and the Borrower);
"Disposition" means an assignment, novation or transfer of any or all of
the Lender's rights or obligations or interest in, under and to this
Agreement and/or any of the Documents;
"Documents" means this Agreement, the Equipment Charge, the Charges, the
Guarantee and any Affiliate Undertakings (each a "Document");
"Drawdown Date" means, in relation to an Advance, the date upon which the
Borrower has requested such Advance to be advanced to it pursuant to clause
5 or (as the context requires) the date on which such Advance is actually
advanced to the Borrower under this Agreement;
"EMU" means economic and monetary union as contemplated by the Treaty;
"EMU Legislation" means Council Regulation (EC) No 974/98 on the
introduction of the euro and the other legislative measures of the Council
of the European Union for the introduction and operation of the euro;
"Equipment" means the items of Hardware and Software purchased by the
Borrower pursuant to the Supply Contract;
"Equipment Charge" means an equipment charge of even date with this
Agreement and made between the Borrower and the Lender;
"Ericsson Affiliate" means any Affiliate of Telefonaktiebolaget LM Ericsson
from time to time;
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"Event of Default" means any of those events specified in Clause 15;
"Facility" means the multi-currency credit facility granted to the Borrower
in this Agreement;
"Facility Amount" means the amount specified in Clause 2.2 (or the
equivalent in an Optional Currency) (or as otherwise may be agreed in
writing between the Lender and the Borrower);
"Final Acceptance Date" means, in relation to each Purchase Order, the
date of Final Acceptance as calculated in accordance with the terms of
Clause 21 of the Supply Contract;
"Final Repayment Date" means, in relation to the Facility, the earlier of
(i) the final Repayment Date in respect of the last Advance made in
accordance with Clause 5.5 and (2) the date falling sixty months after the
Termination Date;
"Frame Agreement" means, the frame agreement dated on or about the date of
this Agreement and made between the Supplier and the Borrower (as such
frame agreement may be amended, varied, supplemented or novated from time
to time);
"Guarantee" means a guarantee of even date with this Agreement and made
between the Guarantor and the Lender (in a form approved by the Lender);
"Guarantor" means Primus Telecommunications Group Inc, a company
incorporated in under the laws of the State of Delaware, USA, and having
its principal place of business at 1700 Old Meadow Road, McLean, Virginia
22102, U.S.A. (and includes its successors and permitted assigns and any
person with whom it may amalgamate);
"Hardware" means the Hardware as specified in the Purchase Order;
"Interest Payment Date" means, in relation to an Advance, the date for
payment of interest in respect of such Advance as referred to in Clause
9.1;
"Interest Period" means, save as otherwise provided in this Agreement, any
of those periods mentioned in Clause 8.2;
"Lender" means Ericsson I.F.S., a company incorporated in Ireland with
registered number 150734 and having its registered office at International
House, 3 Harbourmaster Place, IFSC, Dublin 1, Republic of Ireland (and
includes its successors and permitted assigns and any person with whom it
may amalgamate);
"LIBOR" means the arithmetic mean (rounded up to the next higher one
hundred thousandth of a percentage point) of the rate per annum of the
offered quotations for deposits in the currency of the relevant Advance for
a period equal or comparable to the relevant Interest Period in an amount
comparable to the Advance:
(i) which appear on the page designated as page "LIBP" on the Reuters
Monitor Money Rates Service as of 10.00 a.m. (London time) in the
case of Sterling (or such other page as may be appropriate for the
relevant Optional Currency) (or such other pages as may replace page
LIBP or the relevant page for the relevant Optional Currency on that
service); or
(ii) (in circumstances where fewer than two quotations appear on the LIBP
page (or such other page as may be appropriate for the relevant
Optional Currency) or there is no LIBP page (or such other page as
may be appropriate for the relevant Optional Currency) for such date)
which are offered by the Reference Banks (or, as the case may be,
such of the Reference Banks as shall offer quotations) as of 10.00
a.m. (London time);
"Loan" means the aggregate principal amount for the time being outstanding
under this Agreement;
"Loss Date" shall have the meaning ascribed to it in Clause 14.4;
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"Maximum Amount" means the aggregate maximum amount to be advanced by the
Lender in relation to each Purchase Order (being 85% of the Price
(exclusive of VAT) payable under each such Purchase Order);
"Notice of Drawdown" means a notice substantially in the form set out in
the First Schedule or in such other form as may be acceptable to the Lender
or as the Lender may require from time to time;
"Optional Currency" means, subject to Clause 17, euros, Dollars and any
other currency which is freely transferable and freely convertible into
Sterling;
"Original Sterling Amount" in relation to an Advance means:
(i) when such Advance came into existence as a result of a drawing under
the Facility, the amount specified as such in the Notice of Drawdown
relating thereto; and
(ii) when such Advance came into existence upon the consolidation of two
or more Advances, the aggregate of the amounts specified as such in
the Notices of Drawdown relating to each of the Advances so
consolidated;
"Participating Member State" means a state which adopts the euro in
accordance with the Treaty;
"Potential Event of Default" means any event which would become (with the
passage of time, the giving of notice, the making of any determination
under this Agreement or any combination thereof) an Event of Default;
"Preliminary Payment" means the payment to be made by the Borrower (or, as
appropriate, the relevant Primus Affiliate) of 15% of the Price under each
Purchase Order in accordance with the terms of the Supply Contract;
"Primus Affiliate" means any Affiliate of the Guarantor from time to time
to whom the Borrower's rights and obligations under the Supply Contract or
a Purchase Order have been novated, assigned or otherwise transferred;
"Primus Notes" means the notes issued by the Guarantor (i) dated 30 July
1997 in an amount up to $225 million due 2004 and bearing interest at the
rate of 11 3/4%, (ii) dated 14 May 1998 in an amount up to $150 million due
2008 and bearing interest at the rate of 9O%, and (iii) dated 29 January
1999 in an amount up to $200 million due 2009 and bearing interest at the
rate of 11 1/4% and all future notes and bonds issued by the Guarantor;
"Purchase Order" means a Purchase Order entered into pursuant to the terms
of the Supply Contract;
"Quotation Date" in relation to any period for which an interest rate is to
be determined under this Agreement means the day on which quotations would
ordinarily be given by prime banks in the London Interbank Market for
deposits in the currency in relation to which such rate is to be determined
for delivery on the first day of that period provided that, if, for any
-------------
such period, quotations would ordinarily be given on more than one date,
the Quotation Date for that period shall be the last of those dates;
"Reference Banks" means the principal London offices of Barclays Bank PLC,
Lloyds Bank Plc and National Westminster Bank plc or such other bank or
banks as may from time to time be agreed between the Lender and the
Borrower;
"Repayment Date" shall have the meaning ascribed to it in Clause 11.1;
"Software" means the Software as specified in the Purchase Order;
"Sterling Amount" means:
(i) in relation to an Advance, its Original Sterling Amount as reduced
by the proportion (if any) of such Advance which has been prepaid
and/or repaid; and
(ii) in relation to the Loan, the aggregate of the Sterling Amounts of
the outstanding Advances;
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"Supplier" means Ericsson Limited, a company incorporated in England with
company number 942215 and having its registered office at
Telecommunications Centre, Ericsson Way, Burgess Hill, West Sussex RH15 9UB
(and includes its successors and assigns and any person with whom it may
amalgamate);
"Supply Contract" means the supply contract dated 6 December 1996 and made
between the Supplier and the Borrower, as amended and supplemented by the
Frame Agreement (or otherwise as such supply contract may be amended,
varied, supplemented or novated from time to time);
"Termination Date" means the date falling two years after the date of this
Agreement;
"Total Loss" means, in relation to any Equipment, (i) its actual,
constructive, compromised, arranged or agreed total loss; or (ii) its
destruction, damage beyond repair or being rendered permanently unfit for
normal use for any reason whatsoever;
"Total Loss Date" means (i) in the case of an actual total loss or
destruction, damage beyond repair, or being rendered permanently unfit, the
date on which such loss, destruction, damage or rendition occurs; and (ii)
in the case of a constructive, compromised, arranged or agreed total loss,
whichever shall be the earlier of (a) the date being 30 days after the date
on which notice claiming such total loss is issued to the insurers or
brokers, and (b) the date on which such loss is agreed or compromised by
the insurers,
"Total Loss Proceeds" means the proceeds of any insurance, or any
compensation or similar payment, arising in respect of a Total Loss.
"Treaty" means the treaty establishing the European Community signed in
Rome on 25th March 1957 as amended from time to time;
1.3 Any reference in this Agreement to:
a "business day" shall be construed as a reference to a day (other than a
Saturday or Sunday) on which banks are generally open for business in
London and Dublin and, if such reference relates to the date for the
payment or purchase of any amount denominated in:
(a) any Optional Currency (other than euros), in the principal financial
centre of the country of such Optional Currency; or
(b) euros, in such other principal financial centre of any participating
Member State as the Lender may nominate for the purpose and for the
avoidance of doubt, in relation to a payment or rate fixing in euros,
which is also a day on which the Trans European Automated Real-time
Gross settlement Express Transfer System (TARGET) is operating;
a "Clause" shall, subject to any contrary indication, be construed as a
reference to a clause of this Agreement;
a "currency" includes, without limitation, euros;
an "encumbrance" shall be construed as a reference to any mortgage, pledge,
lien, charge, equity, assignment by way of security, hypothecation,
security interest and any other security arrangement and, if entered into
for the purpose of raising borrowed money, any deferred purchase, title
retention, financial lease, sale and repurchase or sale and lease-back
arrangement and any royalty, over-riding royalty, net profits interest or
production payment of any kind;
"euro unit" means a euro as defined in the second sentence of Article 2 of
Council Regulation (EC) No 974/98 on the introduction of the euro;
"indebtedness" shall be construed so as to include any obligation (whether
incurred as principal or as surety) for the payment or repayment of money,
whether present or future, actual or contingent;
"indebtedness for borrowed money" shall be construed so as to mean any
indebtedness incurred in respect of:
(a) any moneys borrowed or raised under a credit or loan facility;
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(b) any debenture, bond, note, loan stock or similar instrument (whether
or not issued or raised for a cash consideration);
(c) amounts raised under any acceptance credit facility;
(d) amounts raised under any bill discounting or note purchase facility;
(e) any lease or hire purchase agreement entered into primarily as a
method of raising finance or for financing the acquisition of the
asset leased or hired;
(f) amounts raised under any other transaction having the commercial
effect of a borrowing entered into by a person in order to enable such
person (or, if such person is liable jointly or severally, with, or a
surety for, any other person in respect of such indebtedness, such
other person) to finance its operations or capital requirements but
excluding any amounts owing for assets purchased or services obtained
in the ordinary course of trading where the credit is provided on
terms usual in the course of similar businesses and does not in any
event exceed 60 days;
a "month" is a reference to a period starting on one day in a calendar
month and ending on the numerically corresponding day in the next calendar
month save that, when any such period would otherwise end on a day which is
not a business day, it shall end on the next business day, unless that day
falls in the calendar month succeeding that in which it would otherwise
have ended, in which case it shall end on the preceding business day
provided that, if a period starts on the last business day in a calendar
-------------
month or if there is no numerically corresponding day in the month in which
that period ends, that period shall end on the last business day in that
later month (and references to "months" shall be construed accordingly);
"national currency unit" means the unit of currency (other than the euro
unit) of a Participating Member State;
a "person" shall be construed as a reference to any person, firm, company,
corporation, government, state or agency of a state or any association or
partnership (whether or not having separate legal personality) of two or
more of the foregoing;
"repay" (or any derivative form thereof) shall, subject to any contrary
indication, be construed to include "prepay" (or, as the case may be, the
corresponding derivative form thereof);
a "Schedule" shall, subject to any contrary indication, be construed as a
reference to a schedule to this Agreement;
a "subsidiary" means an entity from time to time of which a person has
direct or indirect control, or owns directly or indirectly, more than fifty
per cent. (50%) of the share capital or a similar right of ownership;
"tax" or "taxes" shall be construed so as to include any tax, levy, impost,
duty or other charge of a similar nature (including, without limitation,
any penalty or interest payable in connection with any failure to pay or
any delay in paying any of the same); and
the "winding-up", "dissolution" or "administration" of a company shall be
construed so as to include any equivalent or analogous proceedings under
the law of the jurisdiction in which such company is incorporated or any
jurisdiction in which such company carries on business.
1.4 "euro" and "euros" denotes the single currency of the Participating Member
States introduced on the Commencement Date; "GBP", "Sterling" and
"(Pounds)" denotes the lawful currency of the United Kingdom; "USD",
"Dollars" and "$" denotes the lawful currency of the United States of
America.
1.5 Any provision of this Agreement that is expressed to come into effect as
from the Commencement Date shall, to the extent that it relates to the
currency of a member state of the European Community which is not a
Participating Member State on the Commencement Date, come into effect in
relation to the currency as from the date on which that state becomes a
Participating Member State.
1.6 The Lender and the Borrower may at any time agree so as to bind the
Borrower and the Lender that any references in this Agreement to a business
day, day-count fraction or other convention (whether for the
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calculation of interest, determination of payment dates or otherwise)
shall, with effect from or after the Commencement Date, if different on
account of implementation of EMU, be amended to comply with any generally
accepted conventions and market practice from time to time applicable to
euro denominated obligations in the London Interbank Market. The agreement
of the Lender and the Borrower under this Clause 1.6 is not be unreasonably
withheld or delayed.
1.7 Save where the contrary is indicated, any reference in this Agreement to:
1.7.1 this Agreement or any other agreement or document shall be construed
as a reference to this Agreement or, as the case may be, such other
agreement or document as the same may have been, or may from time to
time be, amended, varied, novated or supplemented;
1.7.2 a statute shall be construed as a reference to such statute as the
same may have been, or may from time to time be, amended or re-
enacted; and
1.7.3 a time of day shall be construed as a reference to London time.
1.8 Clause and Schedule headings are for ease of reference only.
2. THE FACILITY
2.1 The Lender agrees to make available to the Borrower, upon the terms and
subject to the conditions of this Agreement, a multi-currency credit
facility of up to the Facility Amount or its equivalent from time to time
in other Optional Currencies;
2.2 For the purpose of the definition of Facility Amount in Clause 1.2 the
Sterling Amount is (Pounds)21,250,000.
3. PURPOSE
3.1 The Facility is intended for the purpose of satisfying certain of the
payment obligations of the Borrower (or, as appropriate, any Primus
Affiliate) in respect of the Hardware and Software under Purchase Orders to
be issued in accordance with the terms of the Supply Contract and,
accordingly, the Borrower shall apply all amounts raised by it under this
Agreement in or towards satisfaction of the respective payment obligations
under each such Purchase Order. In this connection, if a Primus Affiliate
is obliged to make a payment under a Purchase Order then the Lender hereby
consents to the Borrower making the proceeds of an Advance relating to such
Purchase Order available to such Primus Affiliate so that such Primus
Affiliate can comply with such payment obligation.
3.2 Without prejudice to the obligations of the Borrower under Clause 3.1, the
Lender shall not be obliged to concern itself with the application of
amounts raised by the Borrower under this Agreement.
4. CONDITIONS PRECEDENT
4.1 The Lender will have no obligation under the Facility until it shall have
received in form and content satisfactory to it (in its absolute
discretion) all of the documents listed in Part A of the Second Schedule.
5. AVAILABILITY OF THE FACILITY
5.1 Subject to the other terms of this Agreement, the Lender will make an
Advance available to the Borrower in accordance with the following
provisions of this Clause 5.
5.2 Once a Purchase Order has been executed by both the Supplier and the
Borrower, the Borrower (or, as appropriate, the relevant Primus Affiliate
if that Purchase Order has been novated by the Borrower to the relevant
Primus Affiliate) will have an obligation to pay to the Supplier (or, as
appropriate, the relevant Ericsson Affiliate if that Purchase Order has
been novated by the Supplier to the relevant Ericsson Affiliate) the
Preliminary Payment in accordance with the terms of the Supply Contract.
5.3 Once the Preliminary Payment has been paid to the Supplier (or, as
appropriate, the relevant Ericsson Affiliate) the Borrower may request an
Advance to be made by the Lender, provided that the following conditions
-------------
are fulfilled:
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5.3.1 by 10.00 a.m. (London time) on the seventh business day before the
proposed date for the making of such Advance, the Lender has
received from the Borrower a Notice of Drawdown (which shall be
irrevocable) in relation to such Advance, receipt of which shall
oblige the Borrower to borrow the amount requested in such Notice
on the date stated in such Notice upon the terms and subject to the
conditions contained in this Agreement;
5.3.2 the proposed date for the making of such Advance is a business day
during the Availability Period;
5.3.3 the currency of the proposed Advance must be in Sterling or an
Optional Currency;
5.3.4 the proposed Original Sterling Amount of each Advance is (a) a
minimum amount of (Pounds)250,000 or the equivalent amount of an
Optional Currency and is less than the amount of the Available
Facility or (b) equal to the amount of the Available Facility;
5.3.5 the Advance cannot exceed the balance of the Price due under the
Purchase Order in relation to which the Preliminary Payment has
been made;
5.3.6 the Lender has not determined that deposits in Sterling or in the
applicable Optional Currency (after applying the provisions of
Clause 6.2 as appropriate) of the amount of such Advance are not
being offered to prime banks in the London Interbank Market (by
reason of circumstances affecting the London Interbank Market
generally) for the proposed duration of the first Interest Period
of such Advance;
5.3.7 either:
5.3.7.1 no event has occurred which is an Event of Default or a
Potential Event of Default; and
5.3.7.2 the representations set out in Clause 13 are true on
and as of the proposed date for the making of such
Advance
or the Lender agrees (notwithstanding any matter mentioned at (a)
or (b) above) to make such Advance available;
5.3.8 the long term corporate credit rating of the Guarantor as published
from time to time by Standard & Poors has not fallen below the
level of CCC+;
5.3.9 the Notice of Drawdown specifies the purpose to which the Advance
is to be put and has attached to it copies of all relevant invoices
issued to the Borrower or Primus Affiliates (as applicable) by the
Supplier or Ericsson Affiliates (as appropriate) in respect of each
Purchase Order specified in the Notice of Drawdown; and
5.3.10 the Lender shall be satisfied that the Supplier (or, as
appropriate, the relevant Ericsson Affiliate) has received the
Preliminary Payment in respect of each Purchase Order specified in
the Notice of Drawdown,
5.4 The Lender will have no obligation to make available an Advance unless and
until:
5.4.1 it shall have received from the Borrower the Applicable Schedule in
respect of such Advance as duly accepted on behalf of the Borrower;
and
5.4.2 it shall have received in form and content satisfactory to it (in
its absolute discretion):
5.4.2.1 in the case of an Advance being made available in
connection with payment obligations of the Borrower
under a Purchase Order, all of the documents listed in
paragraph 1 of Part B of the Second Schedule; and
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5.4.2.2 in the case of an Advance being made available in
connection with payment obligations of a Primus
Affiliate under a Purchase Order, all of the documents
listed in paragraph 2 of Part B of the Second Schedule.
5.5 Subject to the terms of this Agreement (including, without limitation, the
satisfaction of the Lender with the conditions set out in Clauses 5.3 and
5.4), the Lender agrees that on the Drawdown Date in relation to each
Advance, it will make available to the Borrower the amount of such Advance
in the currency and in accordance with the Borrower's instructions as set
out in the relevant Notice of Drawdown.
5.6 If and to the extent that the Facility has not been fully drawn by close of
business on the Termination Date, the Available Facility shall then be
immediately cancelled.
6. AVAILABILITY OF THE MULTI-CURRENCY OPTION
6.1 The Borrower may in the Notice of Drawdown relating to any proposed Advance
request that the relevant Advance be denominated in any Optional Currency
provided that such Optional Currency is specified as the currency of
-------------
payment in the relevant Purchase Order. Otherwise each Advance shall be
denominated in Sterling.
6.2 If the Borrower requests that an Advance be denominated in an Optional
Currency as provided in Clause 6.1 and:
6.2.1 no later than 5.00 p.m. on the third business day preceding the
first day of the first Interest Period in relation to such Advance,
the Lender is notified that:
6.2.1.1 (by reason of circumstances affecting the London
Interbank Market generally) such Optional Currency is not
available to it in the London Interbank Market; or
6.2.1.2 (by reason of circumstances affecting the London
Interbank Market generally) that the rate at which such
deposits are available will not or does not accurately
reflect the cost to the Lender of making or funding such
Advance; or
6.2.1.3 that it is contrary to any applicable law, regulation or
official directive (whether or not having the force of
law) for the Lender to fund such Advance in such
Optional Currency; or
6.2.2 the Lender, no later than 11.00 a.m. on the Quotation Date for such
Interest Period, notifies the Borrower that the Lender is of the
opinion that, by reason of circumstances affecting the London
Interbank Market generally, it is not feasible for such Advance to
be made in such Optional Currency or, as the case may be,
denominated in such Optional Currency during such Interest Period,
then, the Lender will:
6.2.3 (if possible) give the Borrower prior notice of the same; and
6.2.4 use its reasonable endeavours to agree with the Borrower an
alternative currency in which to make such Advance available and to
obtain the agreement of the relevant Primus Affiliate to accept
payment in such alternative currency,
failing which such Advance shall be denominated in Sterling.
7. AMOUNTS OF ADVANCES
7.1 The amount of an Advance during an Interest Period relating thereto (in
determining which it shall be assumed that any part of such Advance falling
to be repaid on or before the last day of the preceding Interest Period
relating thereto is duly repaid) shall be the Sterling Amount of such
Advance during such Interest Period or, if such Advance is to be
denominated in an Optional Currency during such Interest Period, the amount
of such Optional Currency which could be purchased with the Sterling Amount
of such
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Advance at the spot rate of exchange quoted to the Lender at 11.00 a.m. on
the Quotation Date for such Interest Period for the purchase of such
Optional Currency with Sterling (in an amount equal to the original
Sterling Amount of such Advance) for delivery two business days
thereafter.
8. INTEREST PERIODS
8.1 The period for which an Advance is outstanding will be divided into
successive periods each of which (other than the first) will start on the
day following the last day of the preceding such period.
8.2 The duration of each Interest Period shall, save as otherwise provided in
this Agreement, be:
8.2.1 in the case of the first Interest Period in relation to each
Advance, the period commencing on the Drawdown Date in relation to
such Advance and ending on the day before the Repayment Date next
following the Drawdown Date in relation to such Advance; and
8.2.2 in the case of each subsequent Interest Period in relation to each
Advance, the period commencing on the preceding Repayment Date in
relation to such Advance and ending on the day before the next
Repayment Date in relation to such Advance,
Provided that:
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8.2.2.1 if such Advance to which such Interest Period relates is
denominated in a currency for which the Repayment Date is
not a business day, then the Repayment Date in relation
to such Advance shall be the immediately succeeding
business day for such currency; and
8.2.2.2 the last Interest Period shall expire on the Final
Repayment Date in respect of such Advance.
9. INTEREST
9.1 On each Interest Payment Date the Borrower shall pay accrued interest in
arrears in respect of each Advance as calculated in accordance with the
terms of Clause 9.2. The first Interest Payment Date in relation to an
Advance shall be the first Repayment Date next following the Drawdown Date
in relation to such Advance and each subsequent Interest Payment Date in
relation to such Advance shall be the next succeeding Repayment Date in
relation to such Advance.
9.2 Subject to Clause 9.3, the rate of interest applicable to an Advance from
time to time during an Interest Period relating to it shall be the rate
per annum which is the sum of (a) the Applicable Margin and (b) LIBOR on
the Quotation Date therefor.
9.3 If the Lender shall secure an export credit guarantee from EKN (the
Swedish Export Credit Guarantee Board) in terms acceptable to the Lender
(and the Lender shall use its reasonable endeavours to procure the same in
respect of each Advance), then the rate per annum calculated in accordance
with Clause 9.2 shall be reduced by 2.0 per cent. per annum provided that
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such reduction shall only apply:
9.3.1 for the duration of such EKN guarantee; and
9.3.2 for that portion of the Loan the subject of such EKN guarantee.
9.4 The Lender shall notify the Borrower in writing as soon as reasonably
practicable following the issue of a Notice of Drawdown as to whether an
EKN guarantee shall apply to the proposed Advance.
10. ALTERNATIVE INTEREST RATES
10.1 If, in relation to any Advance and any Interest Period relating thereto,:
10.1.1 the Lender determines that at 11.00 a.m. on the Quotation Date for
such Interest Period none of the Reference Banks was offering to
prime banks in the London Interbank Market deposits
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in Sterling or in the applicable Optional Currency for the
proposed duration of such Interest Period; and
10.1.2 before the close of business in London on the Quotation Date for
such Interest Period, the Lender, shall determine that by reason
of circumstances affecting the London Interbank Market generally,
adequate and reasonable means do not exist for ascertaining the
interest rate applicable to such Interest Period
then, notwithstanding the provisions of Clauses 8 and 9;
10.1.3 the duration of that Interest Period shall be such period (being
of a similar duration to the originally requested period as
possible) as is selected by the Lender after consultation with the
Borrower; and
10.1.4 the rate of interest applicable to such Advance from time to time
during such Interest Period shall be the rate per annum which is
the sum of the Applicable Margin and the rate per annum notified
to the Borrower on the Quotation Date for such Interest Period to
be that which expresses as a percentage rate per annum the cost to
the Lender of funding from whatever sources it may select such
Advance during such Interest Period and the Lender agrees that it
will ensure that such cost is the lowest cost of funding
reasonably obtainable by it and not more than the cost to the
Lender of funding at that time advances to other prime customers
in the same currency and in the same amount as such Advance.
10.2 If (i) either of the events mentioned in Clauses 10.1.1 and 10.1.2 occurs
or (ii) by reason of circumstances generally affecting the London
Interbank Market during any period of three consecutive business days
there are no deposits in Sterling or the applicable Optional Currency
available to prime banks in the London Interbank Market, then:
10.2.1 the Lender shall notify the Borrower of such event;
10.2.2 if the Lender or the Borrower so require, within five business
days of such notification, the Lender and the Borrower shall enter
into negotiations with a view to agreeing a substitute basis (i)
for determining the rates of interest from time to time applicable
to the Advances and/or (ii) upon which the Advances may be
maintained (whether in Sterling or some other currency) thereafter
and any such substitute basis that is agreed shall take effect in
accordance with its terms and be binding on each party to this
Agreement; and
10.2.3 if the Lender and the Borrower have failed to reach agreement in
accordance with Clause 10.2.2 within fifteen business days from
the date of the notice sent by the Lender to the Borrower pursuant
to Clause 10.2.1 (or such longer period as the parties may agree
in writing), then the rate of interest applicable to each Advance
from time to time during an Interest Period relating thereto shall
be the rate per annum which is the sum of the Applicable Margin at
such time and the rate per annum which expresses as a percentage
rate per annum the cost to the Lender of funding from whatever
sources it may reasonably select such Advance during such Interest
Period and the Lender agrees that it will ensure that such cost is
the lowest cost of funding reasonably obtainable by it and not
more than the cost to the Lender of funding at that time advances
to other prime customers in the same currency and in the same
amount as such Advance.
11. REPAYMENT
11.1 The Borrower shall repay to the Lender the amount of each Advance by
twenty equal consecutive quarterly instalments payable on 15 February, 15
May, 15 August and 15 November in each year (each a "Repayment Date") as
set out in the Applicable Schedule relating to such Advance, the first
such instalment to be repayable on the first Repayment Date falling after
the Drawdown Date in relation to such Advance. On the Final Repayment Date
in respect of the last Advance outstanding under this Agreement, the
Borrower shall additionally pay to the Lender all other amounts then
outstanding or payable under this Agreement;
11.2 Amounts repaid under this Agreement may not be reborrowed.
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12. PREPAYMENT
12.1 The Borrower may prepay the whole or any part of any Advance on a
Repayment Date provided that:
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12.1.1 the Lender shall have received from the Borrower not less than
seven (7) days' irrevocable notice of its intention to make such
prepayment and specifying the amount and date on which such
prepayment is to be made;
12.1.2 the amount of such partial prepayment shall not be less than
(Pounds)100,000 or the balance of the Advance then outstanding (or
the equivalent in an Optional Currency);
12.1.3 each prepayment under this Agreement shall be made together with
accrued interest on the amount prepaid and all other amounts
payable on such repayment under the terms of this Agreement
(including, without limitation, any sums due pursuant to the terms
of Clause 18); and
12.1.4 each partial prepayment under this Clause shall be applied (in
inverse chronological order) against the repayment of the Advance
or part thereof in accordance with Clause 11.
12.2 In circumstances where the rate of interest applicable to any Advance is
being calculated in accordance with Clause 10.2.3, the Borrower may prepay
the whole (but not part) of such Advance provided that:
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12.2.1 the Lender shall have received from the Borrower irrevocable
notice of its intention to make such prepayment within 15 business
days from the date of the notice sent by the Lender to the
Borrower pursuant to Clause 10.2.1 and specifying the amount and
date on which such prepayment is to be made; and
12.2.2 each such prepayment shall be made together with accrued interest
on the amount prepaid and all other amounts payable on such
repayment under the terms of this Agreement (including, without
limitation, any sums due pursuant to the terms of Clause 17.2 or
Clause 18).
12.3 The Borrower shall not prepay or repay all or any part of any Advance or
the Loan except at the times and in the manner expressly provided for in
this Agreement.
12.4 The Borrower shall prepay the Loan if all or any part of the Primus Notes
are prepaid or redeemed prior to their scheduled maturity.
13. REPRESENTATIONS AND WARRANTIES
13.1 The Borrower represents that:
13.1.1 it is a company duly incorporated and validly existing under the
laws of England and Wales and has the corporate power and
authority to carry on its business as presently conducted and to
perform its obligations under this Agreement and, so far as the
Borrower is aware, is the holder of all necessary licences issued
by all governmental authorities having jurisdiction to authorise
or permit the Borrower to carry on its business as presently
conducted and to operate the Equipment and to perform and comply
with its obligations hereunder;
13.1.2 neither the execution and delivery hereof nor the consummation of
the transactions contemplated hereby nor compliance by the
Borrower with any terms and provisions hereof will contravene any
law applicable to the Borrower or result in any breach of, or
constitute any default under, or result in the creation of any
encumbrance upon any property or assets of the Borrower under any
indenture, mortgage, chattel mortgage, conditional sales contract,
bank loan or credit agreement, or other agreement or instrument to
which the Borrower is a party or by which the Borrower or its
property or assets may be bound or affected (other than the
Charges and the Equipment Charge);
13.1.3 the execution, performance and delivery by the Borrower of this
Agreement have been duly authorised by all necessary corporate
action on the part of the Borrower and, with respect to the
execution and delivery of this Agreement the Borrower has obtained
and complied with
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every necessary consent, licence, approval, order, or authorisation
of, or registration with, or the giving of prior notice to, any
government entity having jurisdiction all of which are valid and
subsisting;
13.1.4 this Agreement has been duly entered into and delivered by the
Borrower and constitutes the valid, legal and binding obligation of
the Borrower enforceable in accordance with its terms (except as
limited to (a) equitable principles, and (b) bankruptcy,
insolvency, reorganisation, moratorium or any laws affecting the
rights of creditors generally), and the provisions hereof will not
contravene any laws applicable to the Borrower which is in force or
the memorandum or articles of association of the Borrower or result
in any breach of, or constitute any default under or result in the
creation of any encumbrance upon any property or assets of the
Borrower under any indenture, mortgage, chattel mortgage,
conditional sales contract, bank loan or credit agreement, or other
agreement or instrument to which the Borrower is a party or by
which the Borrower or its properties or assets may be bound or
affected;
13.1.5 the Borrower has taken all necessary action under the laws
applicable to the Borrower in order to ensure the validity,
effectiveness and enforceability of this Agreement;
13.1.6 there are no suits or legal proceedings (including any
administrative proceeding) instituted against the Borrower or, so
far as the Borrower is aware, pending or threatened in writing
before any court or administrative agency against the Borrower
which, if adversely determined, would have a material adverse
affect upon its financial condition or business or its ability to
perform its obligations hereunder;
13.1.7 the obligations of the Borrower under this Agreement are or will
be, upon execution hereof by the Borrower, direct, general and
unconditional obligations of the Borrower and rank or, as the case
may be, will rank at least pari passu with all other present and
future unsecured and unsubordinated external obligations (including
contingent obligations) of the Borrower, with the exception of such
obligations as are mandatorily preferred by law and not by reason
of any encumbrance; and
13.1.8 no Event of Default or Potential Event of Default has occurred and
is continuing.
14. COVENANTS
14.1 The Borrower hereby undertakes with the Lender that, from the date of this
Agreement and for so long as the Loan or any other monies payable under
this Agreement remain outstanding, it will:
14.1.1 remain in and continue to operate substantially the same or similar
business as presently engaged in (and so that the Borrower will not
enter into any transaction or do anything which may result in a
fundamental change in the nature or business of the Borrower),
preserve its corporate existence and not make any change to its
memorandum or articles of association which may have a material
adverse effect on the Lender's rights or remedies hereunder;
14.1.2 not without the prior written consent of the Lender (which may be
withheld in the absolute discretion of the Lender) create or permit
to subsist any encumbrance or any agreement to give an encumbrance
in relation to the Equipment;
14.1.3 notify the Lender immediately upon it becoming aware of the
occurrence of any Event of Default or Potential Event of Default or
of any occurrence or circumstance which gives rise to a breach of
the Borrower's representations and warranties (whether or not
constituting an Event of Default or Potential Event of Default) or
the Borrower's undertakings under this Agreement;
14.1.4 use all reasonable endeavours to obtain and maintain all necessary
government and other consents, licences and permits in respect of
which the Borrower is aware are necessary and take all action which
the Borrower reasonably considers necessary for the continued due
performance of the Borrower's obligations under this Agreement, or
for the use and operation of the Equipment and in order for the
Borrower (or as appropriate, each Primus Affiliate) to
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remain in and continue to operate substantially the same or similar
business as presently engaged in;
14.1.5 use all reasonable endeavours to avoid putting the Equipment, or
procure that the Equipment is not put, into a position where the
Borrower reasonably believes that it would be in material jeopardy
provided that the Borrower shall not be in breach of the terms of
-------- ----
this Clause in relation to any action or matter carried out with
the prior written consent of the Lender;
14.1.6 take all necessary steps, or procure that all necessary steps are
taken, to complete and file all registrations (of a regulatory
nature) with relevant authorities in respect of the Equipment which
the Borrower should reasonably be aware should be made in order to
protect the interest of the Lender (including, without limitation,
the execution and delivery by the Borrower (or, as appropriate,
each Primus Affiliate) of a Charge in relation to such Equipment);
14.1.7 not assign its rights or interests under any of the Documents to
any person;
14.1.8 keep accurate and complete records of the Equipment and permit the
Lender and its authorised representatives to examine and take
copies of such records at any time upon giving reasonable notice;
14.1.9 not permit and procure that each Primus Affiliate does not permit
the Equipment or any part thereof to be subject to penalty,
forfeiture, seizure, arrest, impounding, detention, confiscations,
taking in execution, appropriation or destruction nor abandon such
Equipment or any part thereof;
14.1.10 other than in the case of a dispute with a third party (except
where such dispute poses a reasonable threat to the Lender's
security), discharge and procure that each Primus Affiliate
discharges all fees, charges and outgoings payable to any third
party in relation to the use or operation of the Equipment or any
premises where such Equipment is situated;
14.1.11 not declare, pay or make any dividend or other distribution other
than in the ordinary course of business;
14.1.12 as soon as any notice is issued to prepay the Primus Notes (or if
no notice is issued at the same time as any prepayment), notify the
Lender of the amount of such prepayment;
14.2 Financial Information
The Borrower shall:
14.2.1 as soon as same become available but in any event within 30 days of
the end of each quarterly accounting period to which they relate,
deliver to the Lender copies of the quarterly management accounts
(comprising profit and loss account, cashflow statement and balance
sheet) of the Borrower;
14.2.2 as soon as same become available but in any event within 120 days
of the end of each of its financial years, deliver to the Lender
copies of the audited financial statements (comprising profit and
loss account, cashflow statement and balance sheet) of the
Borrower;
14.3 Insurances
From the date of this Agreement and for so long as the Loan or any other
monies payable under any of the Documents remain outstanding, the Borrower
shall (at its own expense) keep the Equipment or procure that the Equipment
is kept fully insured in accordance with the terms of this Clause 14.3.
Such insurances shall be as are normally maintained by prudent companies
carrying on similar businesses and in form and substance reasonably
satisfactory to the Lender through such brokers and with such prudent
insurers as may be reasonably approved by the Lender and in a form of
policy against all loss or damage to the Equipment (inclusive of fire,
theft and accident) for the full replacement value of the Equipment and all
liability to third parties, for bodily injury or damage to property arising
in connection with the Equipment.
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14.3.1 The Borrower shall procure that:
14.3.1.1 the Lender shall be a named additional assured and sole
loss payee in respect of each policy of insurance from
time to time effected pursuant to this Clause 14.3 in
respect of the amount of the loss relative to the
Equipment; and
14.3.1.2 the amount equal to the full replacement value of the
Equipment shall be stated on the basis that the insurers
shall agree to waive any right of set-off in respect of
unpaid premiums and shall be adjusted by such amount as
the Borrower (after consultation with its insurance
advisers) considers appropriate if the insurers decline
to issue such a waiver.
14.3.2 If any insurances or reinsurance required by this Clause 14.3 are
effected by the Borrower directly with insurers or reinsurers and
without the intermediary of brokers:
14.3.2.1 the Borrower shall be entitled to satisfy its obligations
to supply evidence of such insurances or reinsurance to
the Lender by procuring the supply of such evidence from
the insurers or reinsurers, provided that such evidence
-------------
includes all the matters referred to in this Clause 14.3;
and
14.3.2.2 references to brokers in this Clause 14.3 shall be
disregarded in relation to such insurances or
reinsurance.
14.3.3 The Borrower shall comply (or procure the compliance) with all
legal requirements as to insurance of the Equipment or any part
thereof which may from time to time be imposed by the laws of the
country in which any Equipment is installed and/or used insofar as
they affect or concern the operation of the Equipment and, in
particular, those requirements compliance with which is necessary
to ensure that:
14.3.3.1 the Equipment is not in danger of detention or
forfeiture;
14.3.3.2 the insurances and reinsurances remain valid and in full
force and effect; and
14.3.3.3 the interests of the Lender in the insurances and the
Equipment or any part thereof are not thereby prejudiced.
14.3.4 If the Lender makes a Disposition to any other person or entity in
accordance with the terms of Clause 22.1 hereof, then the Borrower
shall (upon request and subject to the agreement of the insurers)
procure that such person or entity shall be added as additional
assured in any policy effected under this Clause 14.3, so as to
enjoy the same rights and insurances enjoyed by the Lender under
the insurance policy or policies and any amendments thereof.
14.3.5 The Borrower shall not use the Equipment (and shall procure that
the Equipment is not used) or cause or permit the same to be used
for any purpose or in any manner not covered by any insurance, or
for any purpose or in any manner which is contrary to any
applicable law. The Borrower shall comply with the terms and
conditions of each and every policy of insurance and shall not do,
consent or agree to any act or omission which may invalidate or
render unenforceable the whole or part of any such insurance.
14.3.6 The Lender may from time to time require the Borrower (at the
Borrower's expense) to effect such other insurances, or such
variations to the terms of the existing insurances, as the Lender
may by notice to the Borrower reasonably require in order fully to
protect the interests of the Lender.
14.3.7 The Borrower shall not without the prior written consent of the
Lender maintain insurances or reinsurances with respect to the
Equipment other than those required under this Clause 14.3.
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14.3.8 If the Lender wishes to revoke its approval of any insurer or
insurers, then it shall consult with the Borrower and the Borrower
and the Lender shall consider with the brokers to the Borrower for
the time being approved by the Lender whether such insurance shall
be changed to protect the interests of the parties insured. If the
brokers consider that such insurance should be changed, the
Borrower shall then arrange (with effect from the next annual
renewal date of such insurances) alternative insurance cover
reasonably satisfactory to the Lender and complying with this
Clause 14.3.
14.3.9 The Borrower shall provide the Lender with any information
reasonably requested by the Lender from time to time (other than
the amounts of premium paid or payable) concerning the insurances
or reinsurance maintained with respect to the Equipment (and any
part of it).
14.3.10 If at any time the Borrower fails to maintain insurances in
compliance with any provision of this Clause 14.3, the Lender shall
be entitled but not bound (without prejudice to any other rights
which it may have or acquire under this Agreement by reason of such
failure) to pay any premiums due or to effect or maintain
insurances satisfactory to the Lender or otherwise remedy such
failure in such manner as the Lender considers appropriate (and the
Borrower shall immediately reimburse the Lender in full for any
amount so expended).
14.3.11 The Borrower shall furnish to the Lender:
14.3.11.1 on reasonable request and at subsequent renewals prior
to each of the renewal dates, executed copies of
endorsements evidencing the insurance required to be
maintained pursuant to this Clause 14.3;
14.3.11.2 on request, evidence of any insurance required
hereunder; and
14.3.11.3 on request, evidence of payment of premium or premium
instalment due in respect of such insurances.
14.4 Total Loss
If in respect of Equipment a Total Loss occurs, then without prejudice to
the continuing obligations of the Borrower under this Agreement the Lender
and the Borrower shall proceed diligently and co-operate fully with each
other in the recovery of the Total Loss Proceeds.
14.4.1 On the date (the "Loss Date") which shall be the earlier of the
following dates:
14.4.1.1 the date on which the Total Loss Proceeds in respect of
such Equipment are received by the Lender; and
14.4.1.2 45 days after the Total Loss Date,
the Borrower shall pay to the Lender an amount (the "Total Loss
Amount") notified by the Lender to the Borrower, being the amount
equal to (a) the Agreed Value (calculated as at the Total Loss
Date) less (b) an amount equal to any Total Loss Proceeds received
by the Lender by the Loss Date.
14.4.2 The Lender shall apply the Total Loss Proceeds and the Total Loss
Amount pursuant to Clause 14.4 in discharge of any amounts accrued
but unpaid under the Documents.
14.5 Other Loss or Damage
If any Equipment or any part thereof suffers loss or damage not
constituting a Total Loss of such Equipment, all the obligations of the
Borrower under this Agreement shall continue in full force, and the
Borrower shall at the Borrower's expense promptly procure the repair of
such damaged Equipment. So long as no Event of Default has occurred and is
continuing, any insurance proceeds:
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14.5.1 received by the Lender which exceed (Pounds)100,000 or its
equivalent in an Optional Currency shall, at the election of the
Borrower, be applied by the Lender either in direct payment of the
cost of such repair or in reimbursement of the Borrower for the
cost of such repair; and
14.5.2 equal to or less than (Pounds)100,000 or its equivalent shall be
paid to the Borrower and the Borrower shall apply the same at its
election as aforesaid.
15. EVENTS OF DEFAULT
15.1 If:
15.1.1 the Borrower fails to pay any amount due from it under this
Agreement within three (3) business days of the due date (in the
currency and in the manner specified in this Agreement) or the
Guarantor fails to pay any amount due from it under the Guarantee
at the time (in the manner and in the currency specified in the
Guarantee); or
15.1.2 the Borrower fails to perform any material obligation expressed to
be assumed by it under Clause 14; or
15.1.3 the Borrower fails duly to perform any other term or condition of
this Agreement or the other Documents or the Guarantor fails duly
to perform any term or condition of the Guarantee or any Primus
Affiliate fails duly to perform any term or condition of an
Affiliate Undertaking which breach, if (in the Lender's opinion)
capable of remedy, has not been remedied within fourteen (14) days
of the Lender's notification of such failure to the Borrower; or
15.1.4 any representation or warranty made by the Borrower contained in
this Agreement, or made by the Guarantor contained in the
Guarantee, or made by any Primus Affiliate contained in any
Affiliate Undertaking, is untrue or incorrect when made and which
would have a material adverse effect on the ability of the Borrower
or the Guarantor or any Primus Affiliate to perform its obligations
under this Agreement or the Guarantee or any Affiliate Undertaking
(as the case may be) in any material respect when such event
occurs; or
15.1.5 the Borrower is unable to or shall admit inability to pay its debts
as they fall due or ceases or threatens to cease to carry on
business; or
15.1.6 dissolution or any similar proceeding shall be instituted by or
against the Borrower or if a petition is presented and served for
the liquidation of the Borrower (save for a petition for the
liquidation of the Borrower which is discharged, withdrawn or
compromised within ten (10) business days of its service or in
respect of which an order is granted restraining advertisement
within seven (7) business days of its service) or if the Borrower
enters into compulsory or voluntary liquidation (not being
voluntary liquidation for the purposes of reconstruction or
amalgamation on terms which have been previously approved by the
Lender in writing, such approval not to be unreasonably withheld or
delayed); or
15.1.7 a receiver, administrator, administrative receiver or receiver and
manager or trustee or similar officer is appointed in respect of
the Borrower or any part of its assets; or
15.1.8 the Borrower has any distress for rent or other seizure under
execution or other legal process made in respect of its assets and
such distress, seizure or other legal process is not discharged or
paid out within thirty (30) days; or
15.1.9 the Borrower or an Primus Affiliate shall do, cause to be done or
permit to suffer any act or thing whereby the Lender's rights in
the Equipment are prejudiced or put in material risk of jeopardy,
in either case, to an extent which materially affects the Lender's
rights in the Equipment; or
15.1.10 any indebtedness or obligations of the Borrower for the repayment
of any borrowed monies in excess of (Pounds)100,000 becomes due and
payable prior to the specified maturity date thereof and is not
paid within fifteen (15) days of becoming due or otherwise resolved
with such creditor and such default shall continue for fifteen (15)
days after the Lender shall have given
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the Borrower written notice specifying such default and demanding
the same to be remedied; or
15.1.11 any security created by any encumbrance created by the Borrower
where the amount secured is (Pounds)100,000 or more becomes
enforceable and either:
15.1.11.1 the indebtedness is not paid or is not otherwise
resolved with the beneficiary of the encumbrance within
fifteen (15) days of such indebtedness becoming
enforceable (whether or not such beneficiary takes
steps to enforce the same) and such default continues
for fifteen (15) days after the Lender shall have given
the Borrower written notice specifying such default and
demanding the same to be remedied; or
15.1.11.2 the beneficiary of such encumbrance takes steps to
enforce such encumbrance; or
15.1.12 the Equipment shall become encumbered by any encumbrances (save for
encumbrances created in favour of the Lender) or if the Equipment
is distrained against or otherwise seized under execution or other
legal process and not discharged or paid within 48 hours of the
distress being levied;
15.1.13 any other event should occur which would have a material adverse
effect on the ability of the Borrower, the Guarantor or any Primus
Affiliate to perform its obligations and such event shall continue
for fourteen (14) days after the Lender has given the Borrower
written notice specifying the event and demanding the same to be
remedied;
15.1.14 any event occurs under the laws of the country of incorporation of
any Primus Affiliate which has an analogous or equivalent effect to
any of the events specified in Clauses 15.1.5 to 15.1.12;
15.1.15 either the Borrower or any Primus Affiliate which owns or uses any
of the Equipment ceases to be a subsidiary of the Guarantor;
15.1.16 in respect of the Guarantor, a Change of Control occurs. For the
purpose of this Event of Default, the expression "Change of
Control" shall mean such time as:
15.1.16.1 a "person" or "group" (within the meaning of Sections
13(d) and 14(d)(2) of the US Exchange Act) becomes the
ultimate "beneficial owner" (as defined in Rule 13d-3
under the US Exchange Act) of more than 50% of the
total voting power of the then outstanding shares or
other securities of the Guarantor (on a fully diluted
basis) which ordinarily entitle the holders thereof to
voting rights;
15.1.16.2 individuals who at the beginning of any period of two
consecutive calendar years constituted the board of
directors (together with any directors who are members
of the board of directors then still in office who
either were members of the board of directors at the
beginning of such period or whose election or
nomination for election was previously so approved)
cease for any reason to constitute a majority of the
members of such board of directors then in office;
15.1.16.3 the sale, lease, transfer, conveyance or other
disposition (other than by way of merger or
consolidation), in one or a series of related
transactions, of all or substantially all of the assets
of the Guarantor and its subsidiaries taken as a whole
to any such "person" or "group" (other than to the
Guarantor, the Borrower or any Primus Affiliate);
15.1.16.4 the merger or consolidation of the Guarantor with or
into any corporation or the merger of another
corporation with or into the Guarantor with the effect
that immediately after such transaction any such
"person" or "group" or persons or entities shall have
become the beneficial owner of securities of the
surviving corporation of such merger or consolidation
representing a majority of the total
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voting power of the then outstanding shares or other
securities of the surviving corporation which
ordinarily entitle the holders thereof to voting
rights; or
15.1.16.5 the adoption of a plan relating to the liquidation or
dissolution of the Guarantor.
15.1.17 the Borrower or any Primus Affiliate hereafter borrows monies or
incurs any indebtedness (which shall exclude any indebtedness
incurred in the ordinary course of business on arms length terms)
from the Guarantor or any Affiliate of the Guarantor on terms that
the principal sum borrowed or indebtedness incurred is repayable or
payable or any interest is payable in priority to or is not
subordinated to any amounts due to the Lender by the Borrower under
this Agreement;
15.1.18 payment demand is made for or the Borrower repays any moneys
borrowed from or indebtedness due to or the Borrower pays any other
moneys or liabilities (including interest on borrowings) to the
Guarantor or any Affiliate of the Guarantor (other than payments or
demands in the ordinary course of business on arms length terms);
15.1.19 the Borrower or any Primus Affiliate declares or pays any dividend
or makes any distribution to its members (including on a reduction
of capital) other than in the ordinary course of business;
15.1.20 any event shall occur which may reasonably be expected to be
materially detrimental to the Lender's right or ability to enforce
or recover or realise the security for the Borrower's obligations
hereunder granted to the Lender under any of the Documents;
15.1.21 any government or other consent, license or permit required for the
Borrower (or as appropriate, any Primus Affiliate) to remain in and
continue to operate substantially in the same business as it is
presently engaged in is revoked or otherwise cancelled and which
would materially adversely affect the ability of the Borrower (or,
as appropriate, the relevant Primus Affiliate) to make payment of
any amount due from any of them under any of the Documents to which
they are a party;
15.1.22 any of the Documents ceases to be in full force and effect or
ceases to be legal, valid and binding in accordance with its terms;
15.1.23 at any time it is or becomes unlawful for any of the Borrower, the
Guarantor or any Primus Affiliate to perform or comply with any or
all of its obligations under any of the Documents to which it is a
party;
15.1.24 the Borrower repudiates this Agreement or does or causes to be done
any act or thing evidencing an intention to repudiate this
Agreement;
15.1.25 any circumstances arise which give reasonable grounds in the
opinion of the Lender to the belief that any of the Borrower, the
Guarantor or any Primus Affiliate may not (or may be unable to)
perform or comply with its obligations under any Document to which
it is a party;
15.1.26 there shall, in the reasonable opinion of the Lender, occur any
circumstance or any material adverse change in the business, assets
or conditions of the Borrower or the Guarantor from that existing
at the date of this Agreement which has, or is reasonably likely to
have, a material adverse effect on the financial condition of the
Borrower or, as the case may be, the Guarantor or imperil, delay or
prevent fulfilment by the Borrower or, as the case may be, the
Guarantor of their respective obligations under, or as contemplated
by, the Documents to which either is a party;
15.1.27 any amount under the Primus Notes is not paid when due or becomes
(or would with the giving of notice or lapse of time become) due
and payable prior to the date when it would otherwise have become
due;
then, and in any such case and at any time thereafter, the Lender may by
written notice to the Borrower:
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15.1.27.1 declare the Advances to be immediately due and payable
(whereupon the same shall become so payable together
with accrued interest thereon and any other amounts
then owed by the Borrower hereunder) or declare the
Advances to be due and payable on demand of the Lender;
and/or
15.1.27.2 declare that any undrawn portion of the Facility shall
be cancelled, whereupon the same shall be cancelled and
the Available Facility shall be reduced to zero.
15.2 If, pursuant to Clause 15.1, the Lender declares the Advances to be due and
payable on demand of the Lender, then, and at any time thereafter, the
Lender may by written notice to the Borrower:
15.2.1 call for repayment of the Advances on such date as it may specify
in such notice (whereupon the same shall become due and payable
on such date together with accrued interest thereon and any other
sums then owed by the Borrower under this Agreement) or withdraw
its declaration with effect from such date as it may specify in
such notice; and/or
15.2.2 select as the duration of any Interest Period which begins whilst
such declaration remains in effect a period of six months or
less.
16. PAYMENTS
16.1 All payments of whatsoever nature due to be made under or in connection
with this Agreement shall be made to the Lender in the currency in which
the funds were advanced or are due in immediately available funds by such
time during normal banking hours in a financial centre of the country whose
lawful currency that currency is (in the case of euros, in the principal
financial centre of such of the Participating Member States) or London or
as the Lender may reasonably specify, on the due date, to such account in
the name of the Lender as it shall previously have specified to the
Borrower.
16.2 Subject to the other provisions of this Agreement, if any amount becomes
due for payment under this Agreement on a day which is not a business day,
such payment shall be made on the next succeeding business day and interest
and other periodic payments shall be increased accordingly.
16.3 All interest under this Agreement shall accrue from day to day as well
after as before any demand therefor, judgment or the winding up or similar
process of the obligor, and shall be calculated by reference to the number
of days elapsed and (i) in the case of Sterling, a year of 365 days or (ii)
in the case of any other Optional Currency, 360 days (unless otherwise
customary in the relevant Euro-currency market).
16.4 All payments due under this Agreement shall, unless the law or any
regulation otherwise requires or in the case of manifest error, be paid in
full without set-off or counter-claim and free and clear of and without any
deduction or withholding or payment for or on account of any taxes (other
than taxes on the overall net income of the payee). If the Borrower is
required by any law or regulation to make any deduction or withholding from
any amount payable by it under this Agreement the Borrower shall promptly
notify the Lender and (subject to Clause 18.3) the amount payable by the
Borrower in respect of which such deduction or withholding is required to
be made shall be increased to the extent necessary to ensure that, after
the making of such deduction or withholding, the Lender to whom it is made
receives and is beneficially entitled to, free from any such deduction or
withholding, a net amount equal to the amount which it would have received
and been so entitled to had no such deduction or withholding been made.
16.5 If the Lender has received a tax benefit by reason of any deduction or
withholding in respect of which the Borrower has made an increased payment
under Clause 16.4 and provided the Lender has received all amounts which
are then due and payable by the Borrower under any of the provisions of
this Agreement, the Lender shall pay to the Borrower upon utilisation of
the tax benefit to secure a saving of tax that would otherwise have been
payable (to the extent that the Lender can do so without prejudicing the
amount of that tax benefit and the right of the Lender to obtain or utilise
any other benefit relief or allowance which may be available to it) such
amount, if any, as the Lender shall determine will leave the Lender in no
better and no worse position than the Lender would have been if the
deduction or withholding had been required.
16.6 The Lender shall maintain in its books a control account in which shall be
recorded (i) the amount of any Advance made or arising under this
Agreement, (ii) the amount of all principal, interest and other amounts
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due or to become due under or in connection with this Agreement from the
Borrower to the Lender and (iii) the amount received or recovered by the
Lender under or in connection with this Agreement.
16.7 In any cause of action or proceedings arising out of or in connection with
this Agreement the entries made in the account maintained pursuant to
Clause 16.6 shall be prima facie evidence of the existence and amount of
the obligations recorded in such accounts and a certificate as to any such
entry of the Lender shall, in the absence of manifest error, be prima
facie evidence in respect thereof.
16.8 If more than one currency or currency unit are at the same time recognised
by any country as the lawful currency of that country (other than as a
result of the introduction of the euro by a participating member state),
then:
16.8.1 any reference in this Agreement to, and any obligations arising
under this Agreement in, the currency of that country shall be
translated into, or paid in, the currency or currency unit of that
country designated by the Lender; and
16.8.2 any translation from one currency or currency unit to another
shall be at the official rate of exchange recognised by the
central bank for the conversion of that currency or currency unit
into the other, rounded up or down by the Lender acting
reasonably.
16.9 If a change in any currency of a country occurs (other than as a result of
the introduction of the euro by a participating member state), this
Agreement will be amended to the extent the Lender acting reasonably and
in good faith determines is necessary to reflect the change in currency
and to put the Borrower and the Lender in the same position, so far as
possible, that they would have been in if no change in currency had
occurred.
16.10 If and to the extent that any EMU Legislation provides that an amount
denominated either in the euro or in the national currency unit of a given
Participating Member State and payable within that Participating Member
State by crediting an account of the creditor can be paid by the debtor
either in the euro unit or in that national currency unit, the relevant
person shall be entitled to pay that amount either in the euro unit or in
the national currency unit.
17. PAYMENT AND EXCHANGE RATE INDEMNITIES
17.1 Without prejudice to the other provisions of this Agreement, if the
Borrower fails to pay when due any amount due or to become due under this
Agreement (whether of principal, interest or otherwise and including any
amounts which fall due under this Clause), it shall, from the date when
such amount fell due, pay interest on the unpaid amount up to the date of
actual receipt of payment by the payee, as well after as before judgment,
or its winding-up or similar process, at the rate which is two per cent.
per annum plus the arithmetic mean (rounded up, if necessary, to the
nearest whole multiple of one-sixteenth per cent.) of the rates notified
to the Borrower by the Lender to be that at which deposits of the amount
of the unpaid amount, and for such period not exceeding three months as
the Lender may select, are offered by prime banks to the Lender in the
London Interbank Market at or about 11.00 a.m. (London time) on the second
business day before the start of the period in question. Such interest
shall be payable at the end of each period selected as aforesaid and so
long as the amount remains unpaid the resultant interest shall be
compounded at the end of such period and interest shall continue to be
calculated on the same basis at the end of each succeeding period as
aforesaid.
17.2 If any Advance or any part thereof is, for any reason whatsoever
(including, without limitation, pursuant to Clause 12.1 but excluding a
pre-payment pursuant to Clause 12.2 and a repayment pursuant to Clause
18.1), paid to the Lender on a day which is not its original maturity or
if, following receipt of a Notice of Drawdown under Clause 5.1, a proposed
Advance is not made for whatever reason (except for the fault of
Ericsson), the Borrower will pay the Lender on request such amounts as may
be necessary to compensate the Lender (as certified by the Lender together
with reasonable evidence of the calculation of such amount) for any loss
or premium or penalty incurred by it in respect of the liquidation or re-
employment of funds allocated or borrowed for the purpose of maintaining
that Advance (including, if appropriate, such amounts as are necessary to
compensate the Lender for closing out all or part of any related hedging
arrangements).
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<PAGE>
17.3 If under any applicable law and whether pursuant to a judgment being made
or registered against any party to this Agreement or its liquidation,
insolvency or analogous process or for any other reason, any payment due
under or in connection with this Agreement is made or falls to be
satisfied in a currency (an "alternative currency") different from that
in which the payment due is expressed to be payable (the "required
currency"), then to the extent that the payment actually received by the
party entitled to it falls short of the amount expressed to be payable
under the terms of this Agreement (when converted into the required
currency at the rate of exchange ruling (i) on the date of payment or if
that is not practicable, as soon thereafter as is practicable, or (ii) in
the case of liquidation, insolvency or analogous process of a party to
this Agreement at the rate of exchange on the latest date permitted by
applicable law for the determination of liabilities in such liquidation,
insolvency or analogous process), the payer shall indemnify and hold
harmless the party entitled thereto against the amount of such shortfall.
For these purposes "rate of exchange" means the rate at which the party
entitled to the payment under this Agreement is able on the relevant date
to purchase the required currency with the alternative currency, and
shall take into account any premium and other costs of exchange.
17.4 The indemnity in Clause 17.3 shall constitute a separate and independent
obligation of the party obliged to make the payment from its other
obligations under this Agreement and shall give rise to a separate and
independent cause of action against the party obliged to make the
payment. Any such deficiency as aforesaid shall be deemed to constitute a
loss suffered by the relevant party and the party claiming under this
Agreement shall make available to the party obliged to make the payment
calculations as to how such loss has been computed.
17.5 If the Lender at any time determines that:
17.5.1 for reasons affecting the market in euros generally, euros are not
freely available in the international Interbank market;
17.5.2 the euro has ceased to be utilised as the basic accounting unit of
the European Economic Communities;
17.5.3 the euro has ceased to be used in the European Monetary System; or
17.5.4 it is illegal, impossible or impracticable for payments to be made
under this Agreement in euros.
then, the Lender may, in its discretion, but after consultation with the
Borrower, declare (such declaration to be binding on all the parties
hereto) that the repayment of any Advance denominated in euro and any
payment of interest thereon that is due and unpaid at the time of, or
becomes due after, such declaration shall be made in a specified
component currency, in which case the amount so to be paid in such
component currency shall be computed on the basis of the equivalent of
the euro in such component currency determined in accordance with the
provisions of Council Regulation (EC) no 3320/94 of the 22nd December,
1994 (as amended from time to time) and the rates to be used shall be the
Lender's rates for the purchase in the London foreign exchange market of
the replacement currency with each of the components at or about 11.00
a.m. two business days before the day the relevant payment in the
replacement currency is due.
18. CHANGES IN CIRCUMSTANCES, TERMINATION OF COMMITMENT AND INCREASED COSTS
18.1 If any change in applicable law or regulation or in the interpretation
thereof makes it unlawful in any jurisdiction for the Borrower to perform
its obligations under this Agreement with regard to the Lender or for the
Lender to make or fund or maintain the Advances or otherwise to give
effect to its obligations contemplated by this Agreement in respect of
the Facility, then (i) the Lender shall be discharged from all
obligations to make or maintain Advances and (ii) the Borrower shall
(subject to Clause 18.3) as soon as possible but in any event within
thirty business days of demand pay to the Lender without premium or
penalty the outstanding principal amount of the Loan together with
accrued interest and any other amount expressed to be payable to the
Lender under or in accordance with the terms of this Agreement.
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<PAGE>
18.2 The Borrower shall (subject to Clause 18.3) from time to time immediately
on demand pay to the Lender such amounts as the Lender may reasonably
determine are sufficient to indemnify it against the cost to it, by reason
of its continuing to perform its obligations under this Agreement, of
complying with the provisions of any new or amended law or regulation or of
any request from or requirement (whether or not having the force of law) of
any central bank or other fiscal, monetary or other authority (including
any relating to taxation, reserve asset, special deposit, cash ratio,
liquidity or capital adequacy requirements or any other form of banking or
monetary control) or any change in the interpretation or administration of
such laws or regulations or request or requirement when taken in
conjunction with the performance of its obligations to the Borrower under
this Agreement provided that any such change applies generally to lending
-------------
institutions and not solely to the Lender. Any determination by the Lender
of such cost shall, in the absence of manifest error, be conclusive and
binding upon the Borrower for the purposes of this Agreement.
For the purposes of this Clause, the word "cost" shall be deemed to include
(but without limitation):
18.2.1.1 the cost of making, funding or maintaining all or any
of a class of obligations which include the obligations
undertaken or to be undertaken by the Lender under this
Agreement;
18.2.1.2 any payment (not being a payment on the Lender's
overall net income) on or calculated by reference to
obligations of a class or kind including the Lender's
obligations under this Agreement;
18.2.1.3 any deposit or restriction on lending relating or
proportional to any class or kind of obligations which
include the obligations undertaken or to be undertaken
by the Lender under this Agreement;
18.2.1.4 any reduction in the Lender's income by reason of any
of the foregoing to the extent that the same may be
attributable to or in proportion to the Lender's
obligations under this Agreement.
18.3 If any circumstances arise by reason of which the Borrower is obliged to
make any increased payment or the Lender is entitled to make any claim
under any of Clauses 16.4, 18.1 or 18.2 then, without in any way limiting,
reducing or otherwise qualifying the Borrower's obligations or the rights
of the Lender under any of those Clauses upon becoming aware of the same
the Lender shall, in consultation with the Borrower and to the extent that
it can do so without prejudice to its own position, take reasonable steps
to mitigate such effects on the Borrower of such circumstances including
the filing of any return, claim, declaration or similar document or the
transfer of its rights and obligations to another financial institution in
a manner which will avoid the circumstances in question or of its lending
office to another jurisdiction in a manner which will avoid the
circumstances in question and on terms mutually acceptable to the Borrower
and the Lender, provided that the Lender shall not be under any obligation
-------------
to take any such action, if, in the reasonable opinion of the Lender, to do
so would or might have an adverse effect upon its business, operations or
financial condition or be contrary to its policies.
19. SET-OFF
19.1 The Borrower authorises the Lender to apply any credit balance to which the
Borrower is then entitled on any account of the Borrower with the Lender at
any of its offices in or towards satisfaction of any amount then due and
payable on the occurrence of an Event of Default from the Borrower to the
Lender under this Agreement. For this purpose the Lender is authorised to
purchase with the monies standing to the credit of any such account such
other currencies as may be necessary to effect such application. The
Lender shall not be obliged to exercise any right given to it by this
Clause. The Lender shall notify the Borrower forthwith upon the exercise
or purported exercise of any right of set-off giving full details in
relation thereto.
20. WAIVERS
20.1 No failure to exercise nor any delay in exercising on the part of the
Lender of any right or remedy under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right
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or remedy prevent any other exercise thereof or the exercise of any other
such right or remedy. The rights and remedies provided under or in
connection with this Agreement are cumulative and not exclusive of any
rights or remedies provided by law.
21. COSTS AND EXPENSES
21.1 The Borrower shall:
21.1.1 on demand reimburse the Lender for all out-of-pocket costs and
expenses (including, without limitation, legal fees) reasonably
incurred by it in the negotiation, preparation, execution and
delivery of the Documents and any other documents to be delivered
at any time pursuant to the Documents, provided that the Lender's
-------------
out-of-pocket costs and expenses shall be capped at a maximum of
(Pounds)30,000 (excluding VAT and disbursements) in respect of the
Documents to be delivered at the date of this Agreement (subject to
a proportionate increase in circumstances specified at the meeting
between the Lender and the Borrower on 5 July 1999);
21.1.2 pay to the Lender on demand an amount equal to all stamp and other
duties and taxes to which the Documents and/or any other documents
to be delivered at any time pursuant to the Documents are or at any
time may be subject and shall indemnify the Lender against any
liabilities, costs, claims and expenses resulting from any omission
to pay or delay in paying any such duty or tax; and
21.1.3 pay to the Lender on demand all reasonable costs, fees and expenses
(including, but not limited to, legal fees and expenses) and taxes
thereon incurred by the Lender in connection with:
(a) any variation of, or amendment or supplement to, any of the
terms of the Documents which has been requested by the
Borrower or any Primus Affiliate; and/or
(b) any consent or waiver required from the Lender in relation to
the Documents,
and in each case, regardless of whether the same is actually implemented,
completed or granted, as the case may be.
21.1.4 if an Event of Default shall have occurred and be continuing and
notice thereof shall have been given to the Borrower, pay to the
Lender on demand all relevant expenses (including the costs of
preparation of documents) payable or incurred by the Lender in
contemplation of or otherwise in connection with the enforcement of
or preservation of any rights under any of the Documents or
otherwise in respect of money owing under any of the Documents or
in respect of any breach of any representation, warranty, covenant
or undertaking herein contained, provided that such expenses were
reasonably incurred.
22. BENEFIT OF AGREEMENT AND TRANSFERS
22.1 The Lender is entitled to make a Disposition to any other person or entity,
provided that (i) the Lender shall not make a Disposition to a competitor
-------------
of the Borrower or to any person connected to such competitor (here, for
the purposes of this Clause 22.1, "connected" shall have the meaning
ascribed to it in Section 839A of the Income and Corporation Taxes Act
1988) or (ii) as a result of any such Disposition the Borrower will not be
liable to pay an additional amount pursuant to this Agreement which
additional amount would not have been payable had no such Disposition
occurred.
22.2 The Borrower shall not be entitled to assign or transfer this Agreement or
all or any of its rights, benefits, obligations and liabilities under this
Agreement to any other party.
23. NOTICES
23.1 Any communication or notice to be made or given by one person to another in
connection with this Agreement shall be made or given by letter or
facsimile transmission and (unless that person has by fifteen days' written
notice to the other specified another address or facsimile number) shall be
made or given to that person at the address or facsimile number specified
below, each communication or notice by letter being deemed to have been
made or given upon hand delivery to such address or, as the case may be,
two
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business days after being posted to it postage prepaid in an envelope
addressed to it at that address and each communication or notice by
facsimile transmission being deemed to have been made or given when sent
provided that the sender has received a transmission receipt confirming
-------------
full transmission of the relevant facsimile, in each case.
The parties' addresses for notices are as follows:
The Lender:
Address: International House
3 Harbourmaster Place
IFSC
Dublin 1
Republic of Ireland
Attention: Operations Manager
Facsimile No: +353 1 207 2770
Each of the Borrower and the Guarantor (two copies of each):
Address: Primus Telecommunications Limited
4 Victoria Street
London SW1H ONE
Attention: Andrew Reid/Oliver Buckley
Facsimile No: +44 207 669 0205
Address: Primus Telecommunications Group Inc.
1700 Old Meadow Road
McLean
Virginia 22102
United States of America
Attention: Neil Hazard/David Slotkin
Facsimile No: +1 703 902 2814
23.2 Each communication or document made or delivered by one party to another
pursuant to this Agreement shall be in the English language or accompanied
by a true and accurate translation thereof in English.
23.3 This Agreement may be executed in any number of counterparts, each of which
shall constitute an original document.
24. CONFIDENTIALITY
The terms and conditions of this Agreement and all disclosures made and
material exchanged or provided under or in connection with this Agreement
and all non-publicly available information about the Borrower and its
Affiliates are confidential and shall neither be disclosed (in whole or in
part) to any person nor published without the prior written consent of the
parties hereto (save that disclosure can be made to any person to whom it
is intended to make a Disposition and who has signed a confidentiality
undertaking approved (such approval not to be unreasonably withheld or
delayed) by the Borrower), provided that this Clause shall not prevent
-------------
disclosure as required by law or ministerial or judicial or parliamentary
or regulatory authority or to the legal or audit or taxation advisers or
bankers or other professional advisers of any party to this Agreement.
25. LAW
25.1 This Agreement shall be governed by and construed in accordance with
English law.
SIGNED and DELIVERED by each of the parties on the date specified at the
beginning.
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THE FIRST SCHEDULE
NOTICE OF DRAWDOWN
To: Ericsson I.F.S.
International House
3 Harbourmaster Place
IFSC
Dublin 1
Republic of Ireland
Attention: [ ]
Date:
Dear Sirs,
NOTICE OF DRAWDOWN
We refer to the loan agreement dated [ ] 1999 (the "Agreement") entered into
between yourselves as Lender and ourselves as Borrower pursuant to which a
credit facility of up to the Facility Amount has been made available to us.
Terms defined in the Agreement shall have the same meanings when used herein.
We refer to Clause 5.3 of the Agreement and hereby request the following
Advance:
(a) the purpose of the proposed Advance is for the satisfaction of the
obligations of [the Borrower/name of Primus Affiliate] under Purchase
Orders in relation to the [purchase of Equipment/purchase of
Software/combined purchase of items of Equipment/Software/installation of
any of the above] and we attach hereto a schedule of the relevant invoices
together with copies of such invoices (the "Invoices");
(b) the amount of the proposed Advance is ____________, being the aggregate
VAT exclusive amount due under the Invoices;
(c) the currency of the proposed Advance is _____________;
(d) the Drawdown Date of the proposed Advance is the date of payment of the
Invoice; and
(e) the payment instructions for the proposed Advance are [account details of
Supplier]:
Bank:
Address:
Sort code:
Account name:
Account number:
We confirm that:
(i) we have paid 15% of the amount due under all relevant Purchase Orders and
we attach a receipted invoice from [Supplier/Ericsson Affiliate];
(ii) the representations and warranties made by us in Clause 13 of the
Agreement are true and accurate on the date hereof as if made on such
date;
(iii) the undertakings contained in Clause 14 have at all times been complied
with; and
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(iv) no Event of Default or Potential Event of Default has occurred and is
continuing or would result from the making of the proposed Advance.
We ask that you complete and return to us the schedule of payment instalments
(as referred to in Clause 11.1 of the Agreement) which will apply in respect of
the Advance hereby requested (in the form of the Schedule set out below). After
receiving such completed schedule of payment instalments from you and subject to
being satisfied with it, we agree to sign and return it to you prior to the
Drawdown Date specified above.
Signed by:
_________________________________
Authorised Signatory
for and on behalf of
PRIMUS TELECOMMUNICATIONS LIMITED
Schedule of payments relating to the Advance
requested by the Notice of Drawdown dated ________
1. 2. 3.
- --------------------------------------------------------------------------------
Payment Payment Principal element of each Payment*
Type Dates
- --------------------------------------------------------------------------------
1.
- --------------------------------------------------------------------------------
2.
- --------------------------------------------------------------------------------
3.
- --------------------------------------------------------------------------------
4.
- --------------------------------------------------------------------------------
5.
- --------------------------------------------------------------------------------
6.
- --------------------------------------------------------------------------------
7.
- --------------------------------------------------------------------------------
8.
- --------------------------------------------------------------------------------
9.
- --------------------------------------------------------------------------------
10.
- --------------------------------------------------------------------------------
11.
- --------------------------------------------------------------------------------
12.
- --------------------------------------------------------------------------------
13.
- --------------------------------------------------------------------------------
14.
- --------------------------------------------------------------------------------
15.
- --------------------------------------------------------------------------------
16.
- --------------------------------------------------------------------------------
17.
- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
18.
- --------------------------------------------------------------------------------
19.
- --------------------------------------------------------------------------------
20.
- --------------------------------------------------------------------------------
*NB 1. The amount of each Payment will be the sum of (a) the principal element
set out above and (b) an amount for accrued interest .
2. The Lender shall complete columns 2 and 3 in relation to the payment
dates and the principal element of each Payment prior the Drawdown Date
for the applicable Advance.
3. Interest will be payable on each Repayment Date calculated at the rate
set out in Clause 9.2 of the Loan Agreement.
Signed by:
____________________________
Authorised Signatory
for and on behalf of
ERICSSON I.F.S.
Dated:
Accepted:
____________________________
Authorised Signatory
for and on behalf of
PRIMUS TELECOMMUNICATIONS LIMITED
Dated:
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THE SECOND SCHEDULE
CONDITION PRECEDENT DOCUMENTS
Part A (General Conditions Precedent)
1. In relation to the Borrower:
(a) a copy, certified to be a true and up-to-date copy by a duly
authorised officer of the Borrower, of the memorandum and articles of
association of the Borrower;
(b) a copy, certified to be a true copy by a duly authorised officer of
the Borrower, of a resolution of the board of directors of the
Borrower approving the terms of, and the transactions contemplated by,
this Agreement and resolving that it execute the Documents to which it
is a party, and authorising a specified person or persons to execute
on its behalf each of such Documents and to sign and/or despatch all
other documents and notices to be signed and/or despatched by it under
or in connection with such Documents;
(c) a certificate of a duly authorised officer of the Borrower setting out
the names and signatures of the persons authorised to sign, on behalf
of the Borrower, each of the Documents to which it is a party and any
documents to be delivered by the Borrower pursuant hereto or thereto.
2. In relation to the Guarantor:
(a) a copy, certified to be a true and up-to-date copy by a duly
authorised officer of the Guarantor, of the memorandum and articles of
association of the Guarantor;
(b) a copy, certified to be a true copy by a duly authorised officer of
the Guarantor, of a resolution of the board of directors of the
Guarantor approving the terms of, and the transactions contemplated
by, this Agreement and resolving that it execute the Documents to
which it is a party, and authorising a specified person or persons to
execute on its behalf each of such Documents and to sign and/or
despatch all other documents and notices to be signed and/or
despatched by it under or in connection with such Documents;
(c) a certificate of a duly authorised officer of the Guarantor setting
out the names and signatures of the persons authorised to sign, on
behalf of the Guarantor, each of the Documents to which it is a party
and any documents to be delivered by the Guarantor pursuant hereto or
thereto.
3. This Agreement duly executed by the Borrower and the Lender.
4. The Equipment Charge duly executed by the Borrower and the Lender.
5. The Guarantee executed by the Guarantor.
6. A copy of any other authorisation or other document, opinion or assurance
which the Lender considers to be necessary in connection with the entry
into and performance of, and the transactions contemplated by or for the
validity and enforceability of any of the Documents.
7. An opinion of Pepper Hamilton, US legal counsel, acceptable to the Lender
in respect of the Guarantor.
Part B (Conditions Precedent to each Advance)
In respect of each Advance:
1. When the Equipment is to be purchased by the Borrower pursuant to any
Purchase Orders specified in the Drawdown Notice for such Advance:
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1.1 a Charge duly executed by the Borrower;
1.2 if called upon to do so by the Lender, a letter addressed to the Lender
from the landlord of the premises at which the relevant Equipment is to be
installed or located whereby such Landlord waives all rights it may
otherwise have in such Equipment;
1.3 in relation to the Borrower:
(a) a copy, certified to be a true copy by a duly authorised officer of
the Borrower, of a resolution of the board of directors of the
Borrower approving the terms of, and the transaction contemplated by,
the Charge and resolving that it execute the Charge, and authorising a
specified person or persons to execute on its behalf the Charge and to
sign and/or despatch all other documents and notices to be signed
and/or despatched by it under or in connection with the Charge;
(b) a certificate of a duly authorised officer of the Borrower confirming
the memorandum and articles of association of the Borrower remain
unchanged since the last certified copy thereof was delivered to the
Lender under this Agreement and setting out the names and signatures
of the persons authorised to execute on its behalf the Charge and any
documents be delivered by the Borrower pursuant thereto;
2. When the Equipment is to be purchased by any Primus Affiliate pursuant to
any Purchase Orders specified in the Drawdown Notice for such Advance:
2.1 an Affiliate Undertaking duly executed by the relevant Primus Affiliate and
any documents to be delivered by such Primus Affiliate pursuant thereto;
2.2 a Charge duly executed by the relevant Primus Affiliate;
2.3 if called upon to do so by the Lender, a letter addressed to the Lender
from the Landlord of the premises at which the relevant equipment is to be
installed or located whereby such Landlord waives all rights it may
otherwise have in such Equipment;
2.4 in relation to the relevant Primus Affiliate:
(a) a copy, certified to be a true and up-to-date copy by a duly
authorised officer of such Primus Affiliate, of the constitutional
documents of such Primus Affiliate;
(b) a copy, certified to be a true copy by a duly authorised officer of
such Primus Affiliate, of a resolution of the board of directors of
such Primus Affiliate approving the terms of, and the transactions
contemplated by, the Documents to which it is a party and resolving
that it execute such Documents, and authorising a specified person or
persons to execute on its behalf such Documents and to sign and/or
despatch all other documents and notices to be signed and/or
despatched by it under or in connection with such Documents;
(c) a certificate of a duly authorised officer of such Primus Affiliate
setting out the names and signatures of the persons authorised to
execute on its behalf each of the Documents to which it is a party and
any documents to be delivered by such Primus Affiliate pursuant hereto
or thereto;
2.5 an opinion of the local legal counsel to the relevant Primus Affiliate
addressed to the Lender substantially in the form of the Fourth Schedule.
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THE THIRD SCHEDULE
AFFILIATE UNDERTAKING
DATED
[PRIMUS AFFILIATE]
as Affiliate
and
ERICSSON I.F.S.
as Lender
and
PRIMUS TELECOMMUNICATIONS LIMITED
as Company
_________________________________
GUARANTEE UNDERTAKING
AND INDEMNITY
_________________________________
EVERSHEDS
S O L I C I T O R S
International Banking and Finance Department
Senator House, 85 Queen Victoria Street
London EC4V 4JL
Tel: +44 20 7919 4500 Fax: +44 20 7919 4919
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CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS AND INTERPRETATION....................... 34
2. GUARANTEE............................................ 35
3. INDEMNITY............................................ 35
4. CONTINUING SECURITY.................................. 36
5. ADDITIONAL SECURITY.................................. 36
6. OBLIGATION AS PRIMARY OBLIGOR........................ 36
7. DEEMED EFFECTIVENESS................................. 36
8. AFFILIATE'S REPRESENTATIONS AND WARRANTIES........... 37
9. RIGHTS OF THE LENDER................................. 37
10. RESTRICTION OF AFFILIATE'S RIGHTS AGAINST THE COMPANY 38
11. ENFORCEMENT.......................................... 39
12. COSTS & EXPENSES..................................... 40
13. NOTICES.............................................. 40
14. MISCELLANEOUS PROVISIONS............................. 40
15. LAW AND JURISDICTION................................. 41
EXECUTION PAGE........................................... 42
ANNEXURE A............................................... 43
THE FOURTH SCHEDULE...................................... 44
EXECUTION PAGE........................................... 46
</TABLE>
32
<PAGE>
GUARANTEE UNDERTAKING AND INDEMNITY
DATED:
BETWEEN:
(1) [PRIMUS AFFILIATE] as Affiliate;
(2) ERICSSON I.F.S. as Lender; and
(3) PRIMUS TELECOMMUNICATIONS LIMITED as Company.
RECITALS
(A) Under the terms of the Facility Agreement, the Lender has agreed to provide
a loan facility to the Company for the purpose of satisfying certain of the
payment obligations of the Company (or, as appropriate, any Primus
Affiliate) under Purchase Orders to be issued in accordance the terms of
the Supply Contract.
(B) The Company has requested that an Advance be made available by the Lender
so that the proceeds thereof (or part of them) can be advanced by the
Company to the Affiliate and applied towards the Affiliate's purchase of
the System which the Lender has agreed to do on condition that the
Affiliate enters into this Guarantee.
OPERATIVE TERMS
1. DEFINITIONS AND INTERPRETATION
1.1 Unless otherwise defined in this Guarantee or the context otherwise
requires, terms defined in or by reference in the Facility Agreement shall
have the same meaning when used in this Guarantee.
1.2 In this Guarantee:
"Affiliate" means [insert name and details of the relevant Primus
Affiliate] (and includes its successors and permitted assigns and any
person with whom it may amalgamate);
"Company" means Primus Telecommunications Limited, a company incorporated
in England with registered number 02937312 and having its registered office
at 4 Victoria Street, London SW1H 0NE (and includes its successors and
permitted assigns and any person with whom it may amalgamate);
"Facility Agreement" means an agreement of even date between the Company
(as borrower) and the Lender (as lender) in respect of multi-currency loan
facility of up to GBP 21,250,000;
"Guaranteed Amounts" means all the sums referred to in Clause 2.1.1;
"Lender" means Ericsson I.F.S., a company incorporated in Ireland with
registered number 150734 and having its registered office at International
House, 3 Harbourmaster Place, IFSC, Dublin 1, Republic of Ireland (and
includes its successors and permitted assigns in accordance with Clause 14
and any person with whom it may amalgamate);
"Outstanding Amount" means such part of the Guaranteed Amounts as shall
from time to time be due and payable from the Company to the Lender;
"Outstanding Obligations" means any obligation on the part of the Company
assumed under the Facility Agreement in relation to the System which has
fallen due for performance in accordance with its terms;
"Parent" means Primus Telecommunications Group Inc., a company incorporated
in under the laws of the State of Delaware, USA, and having its principal
place of business at 1700 Old Meadow Road, McLean, Virginia 22102, U.S.A.
(and includes its successors and permitted assigns and any person with whom
it may amalgamate);
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"System" means those items of Equipment, Software, Services, Training,
Installation and otherwise specified in an invoice issued by [the
Lender/Ericsson Affiliate] to the Affiliate pursuant to the Supply
Contract, a copy of which invoice is attached hereto as Annexure A.
1.3 In this Guarantee, unless the context otherwise requires:
1.3.1 any references to "person" or "persons" shall include, without
limitation, individuals, partnerships, corporations, government
agencies, committees, departments, authorities and other bodies,
corporate or unincorporated, whether having distinct legal
personality or not;
1.3.2 words (including words and expressions defined) denoting the
singular shall include the plural and vice; words importing neuter
gender shall include the masculine or feminine gender;
1.3.3 any reference to this "Guarantee" or any other agreement or document
shall be construed as a reference to this Guarantee Undertaking and
Indemnity or, as the case may be, such other agreement or document
as the same may have been, or may from time to time be, amended,
varied, novated, supplemented or extended;
1.3.4 "business day" means a day (excluding Saturday or Sunday) on which
banks are open for business in London;
1.3.5 an "en cumbrance" shall be construed as a reference to any mortgage,
pledge, lien, charge, equity, assignment by way of security,
hypothecation, security interest, title retention and any other
security arrangement and, if entered into for the purpose of raising
borrowed money, any deferred purchase, title retention, financial
lease, sale and repurchase or sale and lease-back arrangement and
any royalty, over-riding royalty, net profits interest or production
payment of any kind;
1.3.6 any reference to a statute shall be construed as a reference to such
statute as the same may have been, or may from time to time be,
amended or re-enacted; and
1.3.7 any reference to a "Clause" or "Annexure" shall be construed as a
reference to a Clause of or an Annexure to this Guarantee.
1.4 Clause headings are for ease of reference only.
2. GUARANTEE
2.1 In consideration of the Lender agreeing to make the relevant Advance (or
part of it) available for the purpose described in Recital (B) above, the
Affiliate hereby unconditionally guarantees to the Lender:
2.1.1 the due and prompt payment by the Company of all monies which are
now or shall for the time being be due owing or incurred by the
Company under the Facility Agreement in relation to the Advance
referred to in Recital (B) or that portion of it which was applied
towards the Affiliate's purchase of the System, together with all
interest and other charges due under the Facility Agreement in
relation to such amount (as well after as before any judgment)
obtained in respect thereof;
2.1.2 the due performance and observance by the Company of the obligations
on the part of the Company assumed under the Facility Agreement in
relation to the System.
3. INDEMNITY
3.1 In addition to its obligations under Clause 2 and as a separate, continuing
and independent obligation, the Affiliate hereby irrevocably agrees to
indemnify and keep the Lender fully and effectively indemnified from and
against all actions and proceedings, costs, damages, expenses, claims,
demands and losses whatsoever arising as a result of any one or more of the
following:
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<PAGE>
3.1.1 any failure by the Company to make any payment of any Outstanding
Amounts;
3.1.2 the guarantee in Clause 2 being or becoming unenforceable or it
being or becoming unlawful for the Affiliate to give the guarantee
set out in Clause 2;
3.1.3 the obligations of the Company under the Facility Agreement in
respect of the System becoming illegal or unenforceable;
3.1.4 the rights of the Lender under the Facility Agreement in respect of
the System being unenforceable or in any way being incapable of
being enforced in accordance with their terms or otherwise.
4. CONTINUING SECURITY
4.1 The Affiliate hereby acknowledges that:
4.1.1 the guarantee, undertaking and indemnity contained in this Guarantee
shall continue in full force and effect until all the Guaranteed
Amounts have been paid in full and all other obligations of the
Company under the Facility Agreement in respect of the System have
been performed or discharged; and
4.1.2 it shall not be released from its obligations or liabilities under
this Guarantee by any intermediate payment or performance or
satisfaction of any Outstanding Amounts or Outstanding Obligations,
but rather that this Guarantee shall continue and be binding as a
continuing security of the Affiliate.
5. ADDITIONAL SECURITY
5.1 The Affiliate acknowledges that this Guarantee shall be in addition to and
shall not be in any way affected or prejudiced by any collateral or other
security (whether merely personal or involving an encumbrance on any
property and whether from the Company or any other person whatsoever) now
or hereafter held by the Lender (or any person on behalf of the Lender) in
respect of all or any part of the monies hereby secured or obligations
hereby guaranteed nor shall such collateral or other security or any lien
to which the Lender may be otherwise entitled or the liability of any
person or persons not parties hereto for all or any part of such monies be
in any way prejudiced or affected by this Guarantee and the Lender may at
its discretion give time for payment or make any other arrangement with
any other person or persons without prejudice to this Guarantee or any
liability of the Affiliate hereunder.
6. OBLIGATION AS PRIMARY OBLIGOR
6.1 The Affiliate acknowledges that its liability under this Guarantee shall
be as a sole or primary obligor and not merely as surety and shall not be
impaired or discharged by reason of any matter, act or omission whereby
the liability of the Affiliate would have been discharged if it had been a
principal debtor.
6.2 The Affiliate hereby waives all and any of its rights as surety which may
at any time be inconsistent with any of the provisions of this Guarantee.
7. DEEMED EFFECTIVENESS
7.1 The Affiliate acknowledges that its obligations in the Guarantee shall be
deemed to be effective whether or not the Company shall have incurred any
obligations to the Lender under the Facility Agreement before or upon or
after the date hereof.
8. AFFILIATE'S REPRESENTATIONS AND WARRANTIES
8.1 The Affiliate hereby represents and warrants to the Lender as follows:
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<PAGE>
8.1.1 it is a corporation duly organised and validly existing under the
laws of [country of incorporation] and has all requisite corporate
power and authority to execute and deliver this Guarantee and to
perform its obligations hereunder;
8.1.2 the execution and delivery of this Guarantee and performance of its
obligations hereunder has been duly authorised by appropriate
corporate action and does not cause it to be in breach of any
agreement or undertaking;
8.1.3 this Guarantee constitutes legal and valid obligations binding on it
and enforceable against it;
8.1.4 all governmental and other organisations' approvals, licences and
consents and declarations to any applicable governmental or other
authorities and agencies in respect of the execution by the
Affiliate of this Guarantee and for the performance and observance
by it of its obligations hereunder or to render the guarantee,
undertakings and indemnity contained herein legal, valid binding,
enforceable and admissible in evidence have been obtained and remain
in full force and effect.
9. RIGHTS OF THE LENDER
9.1 Indulgence and giving of Time
The Lender may at any time, without in any case affecting the guarantee,
undertakings and indemnity contained in this Guarantee in its absolute
discretion and with or without the assent or knowledge of the Affiliate:
9.1.1 give time to the Company and/or of any other person contingently or
otherwise liable for the monies hereby secured or the obligations
hereby assumed for payment of any or all monies hereby secured or
performance or observance of obligations hereby assumed or compound
with, accept compositions from or make any other arrangement with
the Company or any such other person or persons liable in respect of
such monies or obligations;
9.1.2 neglect or forbear to enforce payment of any or all monies hereby
secured or performance or observance of obligations hereby assumed
and (without prejudice to the generality of the foregoing) grant any
indulgence or forbearance to or fail to assert or delay in asserting
any right or remedy against the Company and/or any other person
liable (whether contingently or otherwise) in respect of such monies
or obligations or fail or delay in pursuing any rights or remedies
against the Company or such other person;
9.1.3 deal with, accept, vary, exchange, renew, abstain from perfecting or
release any security or other guarantees, indemnities or rights now
held or to be held by the Lender for or on account of all or any of
the monies hereby secured or obligations hereby assumed; or
9.1.4 amend, add to or vary the terms of the Facility Agreement and/or any
other arrangement with any person or persons contingently or
otherwise liable for the monies hereby secured or obligations hereby
assumed.
9.2 Other means of Payment
The Lender may:
9.2.1 (but shall not be obliged to) resort for its benefit to any other
means of payment or performance or observance of obligations under
the Facility Agreement at any time in any other way it thinks fit
without thereby diminishing the liability of the Affiliate under
this Guarantee; and
9.2.2 enforce this Guarantee either for:
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<PAGE>
9.2.2.1 the payment of the balance of any Outstanding Amount after
resorting to other means of payment; or
9.2.2.2 the due performance or observance of certain Outstanding
Obligations after resorting to enforcement of some
Outstanding Obligations only; or
9.2.2.3 the payment of any Outstanding Amount notwithstanding that
other means of payment of money have not been resorted to and
without entitling the Affiliate to any benefit from such
other means of payment.
9.3 Suspense Account
For the purpose of enabling the Lender to sue the Company or prove in its
liquidation, receivership, insolvency or administration for all monies
hereby secured or all obligations hereby undertaken to be performed by the
Affiliate or to preserve intact the liability of any person (including the
Affiliate), the Lender may at any time place and keep for such time as it
may think prudent any money received, recovered or realised under this
Guarantee in one or more separate or suspense accounts to the credit of the
Affiliate (or such other person as it shall think fit) without any
intermediate obligation on the Lender's part to apply the same or any part
thereof in or towards the discharge of the monies owing or obligations to
be observed or performed and without any intermediate right on the
Affiliate's part to sue the Company or prove in the liquidation,
receivership or insolvency of the Company in competition with the Lender or
so as to diminish any dividend or other advantage that would or might
accrue to the Lender or so as to treat the liability of the Company as
diminished.
9.4 Foreign Currency
The Lender may apply monies received recovered or realised by the Lender
under this Guarantee in or towards payment of the purchase of any currency
required in the discharge of any obligations hereby secured which under the
terms of the Facility Agreement fall to be discharged in a different
currency from the respective payment by the Affiliate (whether or not such
purchase price includes a premium over any official or any other rate of
exchange) and in or towards payment of any costs, charges and expenses
incurred by the Lender in connection with the acquisition by the Lender of
such currency.
10. RESTRICTION ON AFFILIATE'S RIGHTS AGAINST THE COMPANY
10.1 No counter-security without the Lender's consent
The Affiliate hereby warrants that it has not and covenants that it will
not in respect of all or any part of the monies hereby secured take from
the Company (or from any subsidiary or holding company of the Company or
subsidiary of the Company's holding company), whether directly or
indirectly, without the prior written consent of the Lender any promissory
note, bill of exchange, mortgage, charge, assignment by way of security or
any other counter-security, whether merely personal or involving a charge
on any property whatsoever of the Company (or any subsidiary or holding
company thereof) and whether it (or any person claiming through it by
endorsement, assignment or otherwise) would or might on the liquidation of
the Company and to the prejudice of the Lender increase the proofs in such
liquidation or diminish the assets distributable amongst the creditors of
the Company.
10.2 Hold counter-security in Trust
The Affiliate hereby covenants to hold any such counter-security which the
Affiliate may have taken or may take with such consent upon trust for the
Lender as a security to the Lender for the fulfilment of the obligations of
the Affiliate under this Guarantee and forthwith to deposit such counter-
security with the Lender (or any agent nominated by the Lender for such
purpose) and the Affiliate shall account to the Lender or such agent (as
the case may be) for all monies at any time received by it in respect
thereof.
10.3 Competition and Set-Off
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Unless and until all the monies hereby secured shall have been discharged
and satisfied in full and the Affiliate shall have been discharged, the
Affiliate shall not be entitled as against the Lender by paying off part
only of the Guaranteed Amounts or performance in part of the obligations
hereby assumed or by any other means or on any other ground to claim in the
liquidation of the Company any set-off or counterclaim against the Company
or claim or prove in competition with the Lender in respect of any payment
by it under this Guarantee or be entitled to claim or have the benefit of
any set-off, counterclaim or proof against or dividend, composition or
payment by the Company or the benefit of any other security which the
Lender may now or hereafter hold for the monies hereby secured or to have
any share therein.
10.4 Insolvent Company
10.4.1 The liquidation, receivership or insolvency of the Company shall
not affect or terminate the liability of the Affiliate under this
Guarantee.
10.4.2 All dividends, compositions and payments received by the Lender or
any trustee or agent of the Lender from the Company or any person
or persons or company liable or his or their estates and the
proceeds of any securities realised shall be taken and applied as
payments in gross without any right on the part of the Affiliate to
stand in the place of the Lender in respect of or to claim the
benefit of any such dividends, compositions or payments or security
released, received or held by the Lender until such time as the
Lender shall have received the full amount of its claim against the
Company in respect of all monies hereby secured.
11. ENFORCEMENT
11.1 Payment or Performance on Demand
Forthwith on the occurrence of any breach by the Company of any term or
provision on its part contained in the Facility Agreement in respect of the
System or upon any part of the Guaranteed Amounts having become due and
payable by the Company to the Lender, the Affiliate shall (without
prejudice to the generality of any provision of this Guarantee) on demand
of the Lender pay to the Lender such Outstanding Amounts or perform such
Outstanding Obligations.
11.2 Demand for Payment or Performance
The demand referred to in Clause 11.1 shall mean a demand for payment of an
Outstanding Amount or performance or observance of an Outstanding
Obligation made by the Lender (or on behalf of the Lender by any agent,
solicitor, secretary, manager, director or alternate director or other
officer or servant of the Lender) on the Affiliate by notice in writing and
such demand may be made when or at any time after the Lender becomes
entitled to call for payment of the Outstanding Amount or performance of
the Outstanding Obligation and separate demands may be made in respect of
separate amounts or obligations at different times.
11.3 No Withholding
Subject to Clause 11.4:
11.3.1 the Affiliate shall pay all monies due under this Guarantee in full
without any deduction, set-off, counterclaim or withholding
whatsoever; and
11.3.2 if the Affiliate shall be required by law to make any deduction or
withholding from any payment, then the Affiliate shall ensure that
such deduction or withholding will not exceed the minimum legal
liability therefor and shall forthwith pay to the Lender such
additional amount as will result in the receipt by the Lender of a
net amount equal to the amount it would have received had no such
deduction or withholding been required to be made.
11.4 If the Lender has received a tax benefit by reason of any deduction or
withholding in respect of which the Affiliate has made an increased payment
under Clause 11.3 and provided the Lender has received all amounts which
are then due and payable by the Affiliate under any of the provisions of
this Guarantee, the
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Lender shall pay to the Affiliate upon utilisation of the tax benefit to
secure a saving of tax that would otherwise have been payable (to the
extent that the Lender can do so without prejudicing the amount of that tax
benefit and the right of the Lender to obtain or utilise any other benefit
relief or allowance which may be available to it) such amount, if any, as
the Lender shall determine will leave the Lender in no better and no worse
position than the Lender would have been if the deduction or withholding
had been required.
12. COSTS AND EXPENSES
12.1 The Affiliate hereby covenants to pay to the Lender on demand the legal and
other costs, charges and expenses from time to time reasonably incurred by
the Lender in any way in connection with the enforcement or discharge of
this Guarantee.
13. NOTICES
13.1 Any communication or notice to be made or given by the Lender to the
Affiliate in connection with this Guarantee shall be made or given by
letter or facsimile transmission and (unless the Affiliate has by fifteen
days' written notice to the Lender specified another address or facsimile
number) shall be made or given to the Affiliate at the address or facsimile
number specified below, each communication or notice by letter being deemed
to have been made or given upon hand delivery to such address or, as the
case may be, five business days after being posted to it postage prepaid in
an envelope addressed to it at that address and each communication or
notice by facsimile transmission being deemed to have been made or given
when sent provided that the sender has received a transmission receipt
confirming full transmission of the relevant facsimile, in each case.
The Affiliate's address and facsimile number for communications and notices
are as follows:
Address: [ ]
Attention: [ ]
Fax number: [ ]
14. MISCELLANEOUS PROVISIONS
14.1 Successors
This Guarantee shall enure to the benefit of and be binding upon the
respective parties hereto and any person to whom the Lender has made a
Disposition in accordance with Clause 22 of the Facility Agreement
14.2 Severability
14.2.1 If at any time any one or more of the provisions of this Guarantee
is or becomes invalid, illegal or unenforceable in any respect or
under any applicable law, then the validity, legality and
enforceability of the remaining provisions hereof shall not in any
way be affected or impaired thereby.
14.2.2 If at any time the guarantee and/or indemnity contained in this
Guarantee is or becomes invalid or unenforceable in whole or in
part against the Affiliate, then the guarantee and/or the indemnity
(as the case may be) shall be deemed to continue in full force and
effect save to the extent that such guarantee and/or the indemnity
has become invalid or unenforceable.
14.3 Waivers
No delays by the Lender in exercising or the omission by the Lender to
exercise any right, power or privilege under this Guarantee shall impair
such right, power or privilege or be construed as a waiver of such right,
power or privilege, nor shall any singular or partial exercise of any
right, power or privilege preclude any further exercise thereof or the
exercise of any other right, power or privilege.
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14.4 Exercise of Rights
The rights and remedies provided in this Guarantee are cumulative and not
exclusive of any rights and remedies provided by law or otherwise.
14.5 Amendments
No modification of any provision of this Guarantee shall be binding unless
the same shall be evidenced in writing duly executed by the Affiliate, the
Lender and the Company.
15. LAW AND JURISDICTION
15.1 Governing Law
This Guarantee is governed by, and shall be construed in accordance with,
English law.
15.2 Submission to jurisdiction
For the benefit of the Lender, the Affiliate agrees that the courts of
England are to have jurisdiction to settle any disputes which may anise in
connection with the legal relationships established by this Guarantee
(including, without limitation, claims for set-off or counterclaim) or
otherwise arising in connection with this Guarantee.
15.3 The Affiliate irrevocably waives any objections on the ground of venue or
forum non conveniens or any similar grounds.
15.4 The submission to jurisdiction of the courts contained in Clause 15.2 shall
not (and shall not be construed so as to) limit the right of the Lender to
take any proceedings against the Affiliate in any other court of competent
jurisdiction nor shall the taking of the proceedings in any one or more
jurisdictions preclude the taking of proceedings in any other jurisdiction,
whether concurrently or not.
15.5 Process Agent
The Affiliate shall at all times maintain an agent for service of process
in England. Such agent shall be the Company and any writ, judgment or
other notice of legal process shall be sufficiently served on the Affiliate
if delivered to the Company at its address above.
15.6 The Company hereby acknowledges and consents to such appointment.
IN WITNESS WHEREOF this Guarantee Undertaking and Indemnity has been executed
and delivered as a deed by the Affiliate and executed under hand by the Lender
on the date stated at the beginning.
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EXECUTION PAGE
AFFILIATE
EXECUTED for )
[PRIMUS AFFILIATE] )
by: )
......................
Director
......................
Director
LENDER
SIGNED for and on behalf of )
ERICSSON I.F.S. by: )
......................
Authorised Signatory
COMPANY
SIGNED for and on behalf of )
PRIMUS TELECOMMUNICATIONS LIMITED )
by: )
......................
Authorised Signatory
41
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ANNEXURE A
[A copy of the relevant invoice is to be attached]
42
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THE FOURTH SCHEDULE
FORM OF LEGAL OPINION TO BE GIVEN BY
LOCAL LEGAL COUNSEL TO PRIMUS AFFILIATE
[TO BE TYPED ON LOCAL LEGAL COUNSEL'S LETTERHEADED NOTEPAPER]
To: Ericsson I.F.S.
International House
3 Harbourmaster Place
IFSC
Dublin 1
Republic of Ireland
Dear Sirs
1. Introduction
1.1 We give this opinion as special counsel on behalf of Ericsson IFS in
connection with a facility agreement dated _______ 1999 (the "Facility
Agreement") between Primus Telecommunications Limited (as borrower) and
Ericsson IFS (as lender) relating to a multi-currency credit facility of
up to an aggregate amount of (Pounds)21,250,000. Terms defined in or by
reference in the Facility Agreement shall have the same meanings herein.
2. DOCUMENTS EXAMINED
2.1 For the purpose of this opinion, we have examined and rely on:
2.1.1 an executed copy of [describe the applicable Affiliate
Undertaking];
2.1.2 an executed copy of [describe the applicable Charge];
2.1.3 [list any other documents that local counsel examined in order to
give this opinion].
3. OPINION
3.1 Based on and subject to the documents we have examined and the
assumptions, exceptions, qualifications and reservations set out
herein/1/, we are of the opinion that:
3.1.1 the Company is duly constituted and validly existing under the laws
of its state of incorporation;
3.1.2 the Company has full power, capacity and authority to own its
assets, to carry on its business as is now being carried on and to
discharge liabilities and perform obligations of the nature
specified in the Affiliate Undertaking and the Charge;
3.1.3 the Affiliate Undertaking and the Charge constitutes the Company's
legal, valid and binding obligations enforceable against it;
3.1.4 the persons who execute the Affiliate Undertaking and the Charge on
behalf of the Company are duly authorised to do so and to bind the
Company to its obligations under the Affiliate Undertaking and the
Charge;
_______________
/1/ Local counsel should include such assumptions, exceptions,
qualifications and reservations as are necessary to take account of
local law.
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3.1.5 the execution and delivery of the Affiliate Undertaking and the
Charge and the performance of the obligations and discharge of the
liabilities, contemplated therein do not and will not violate any
law or regulation in the [insert applicable jurisdiction] and are
not in conflict or inconsistent with the terms of any [insert
applicable jurisdiction] law;
3.1.6 all actions, conditions, consents and other requirements of [insert
applicable jurisdiction] law and of the Company's constitutional
documentation have been taken, fulfilled and observed so as to
enable the Company to incur and perform the obligations and
discharge the liabilities created by the Affiliate Undertaking and
the Charge;
3.1.7 it is not necessary for the legality, validity and enforceability or
admissibility in evidence of the Affiliate Undertaking and the
Charge that either of the documents be filed and recorded or
registered with any court or authority in or of [insert applicable
jurisdiction] and that no stamp duty, registration or other similar
tax is payable in [insert applicable jurisdiction];
3.1.8 the choice of English law to govern the Affiliate Undertaking and
the Charge is a valid choice under the laws of [insert applicable
jurisdiction] and will be enforced by a court in [insert applicable
jurisdiction] and that the Company's submission to the jurisdiction
of the English courts and its appointment of an agent to service of
process in England is valid;
3.1.9 it is not a requirement under [insert applicable jurisdiction] law
that the Lender be licenced, qualified or entitled to carry on
business in [insert applicable jurisdiction] in order to be able to
enter into, execute, deliver and enforce its rights under either of
the Affiliate Undertaking and the Charge;
3.1.10 the Lender will not become subject to taxation in [insert applicable
jurisdiction] solely by virtue of entering into the Affiliate
Undertaking and the Charge; and
3.1.11 no further action whatsoever (whether on the part of the Lender, the
Borrower, the Company or any other party) is required to ensure
that, following the occurrence of an Event of Default, the Lender
can recover actual physical possession of the equipment to which the
Charge relates;
3.1.12 [any other aspects which Counsel considers relevant].
NB Counsel is also required to advise as to whether any priority or
subordination arrangements will be required to be entered into with creditors of
the Company in order to ensure that the Lender has a first ranking security
interest created in its favour over the equipment to which the Charge relates.
44
<PAGE>
EXECUTION PAGE
BORROWER
PRIMUS TELECOMMUNICATIONS LIMITED
By: ___________________________
Name:
Title:
LENDER
ERICSSON I.F.S.
By: ___________________________
Name:
Title:
45
<PAGE>
Exhibit 21.1
Subsidiaries of Primus Telecommunications Group, Incorporated
Primus Telecommunications, Inc. [Delaware]
Primus Telecommunications de Mexico SA de CV [Mexico]
Stubbs, Ltd. [Hong Kong]
Primus Telecommunications International, Inc. [Delaware]
Primus Telcommunications Pty Ltd [Australia]
Primus Telecommunications (Australia) Pty Ltd [Australia]
Hotkey Internet Service Pty Ltd [Australia]
Eclipse Communications Pty Ltd [Australia]
Primus Telecommunications KK [Japan]
Primus Japan KK [Japan]
Telegroup Japan KK [Japan]
Primus Telecommunications Europe BV [Netherlands]
Primus Telecommunications SA [France]
Primus Telecommunications Srl [Italy]
Primus Telecommunications AG [Switzerland]
Primus Telecommunications Netherlands BV [Netherlands]
South East Telecom Ltd [United Kingdom]
Primus Telecommunications SA [Spain]
Primus Telecommunications GmbH [Austria]
Primus Telecommunications Ltd [Ireland]
Telegroup Deutschland GmbH [Germany]
Corporate Network Ltd. [United Kingdom]
Primus TeleCom A/S [Denmark]
Telegroup Network Services Denmark A/S [Denmark]
TeleContinent SA [France]
Telegroup Network Services SA [Switzerland]
Telegroup (UK) Ltd. [United Kingdom]
Telegroup Network Services Deutschland GmbH [Germany]
Telegroup Italia Srl [Italy]
Telegroup International BV [Netherlands]
Telegroup Nederland BV [Netherlands]
Phone Centre Communications [Service] Ltd. [United Kingdom]
Primus Telecommunications GmbH [Germany]
TCP/IP GmbH [Germany]
TouchNet GmbH [Germany]
Primus Telecommunications Ltd. [United Kingdom]
TresCom International Inc. [Florida]
TresCom U.S.A. Inc. [Florida]
Global Telephone Holding Inc. [US Virgin Islands]
InterIsland Telephone Corp. [US Virgin Islands]
St. Thomas & San Juan Telephone Co., Inc. [US Virgin Islands]
<PAGE>
STSJ Overseas Telephone Company Inc. [Puerto Rico]
Least Cost Routing, Inc. [Florida]
Rate Reductions Center, Inc. [Florida]
Rockwell Communications, Inc. [Florida]
Intex Telecommunications, Inc. [South Carolina]
TresCom Network Services Inc. [Florida]
IPRIMUS.com, Inc. [Delaware]
Primus Communicacoes do Brasil Ltd. [Brazil]
Matrix Internet, SA [Brazil]
Primus Telecommunications Canada Group Inc. [Canada]
Primus Network Services Inc. [Canada]
Primus Telecommunications Canada Inc. [Canada]
Primus Telecommunications Limited Partnership [Canada]
LCR Telecom Group Plc [United Kingdom]
LCR Telecom Group Inc. [British Virgin Islands]
LCR Telecom Offshore (Holdings) Limited [United Kingdom]
Virtual Technology Holdings Inc. [British Virgin Islands]
Commsol International Holdings Inc. [British Virgin Islands]
LCR Telecom (Jersey Limited [Jersey]
Binoche Holdings Pte [Madeira]
LCR Telecom Limited [United Kingdom]
Virtual Technology Telecom (UK) Limited [United Kingdom]
Phonetrack Limited [United Kingdom]
Discount Calls Limited [United Kingdom]
LCR France SA [France]
LCR Telecom Espana SA [Spain]
LCR Telecom Europe NV [Belgium]
LCR Telecom Luxembourg [Luxembourg]
LCR Telecom Belgium bvba [Belgium]
LCR International Inc. [California]
LCR Paraguay [Paraguay]
Virtual Technology Inc. [British Virgin Islands]
LCR Telecom (Kenya) Limited [Kenya]
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statements of
Primus Telecommunications Group, Incorporated (the "Company") on Form S-8 (Nos.
333-35005, 333-56557, and 333-73003) and Form S-3 No. 333-89539 of our report
dated February 10, 2000, except for Note 17 as to which the date is March 13,
2000, appearing in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999.
DELOITTE & TOUCHE LLP
McLean, Virginia
March 30, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE BALANCE SHEET OF
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED AT DECEMBER 31, 1999 AND THE
INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 471,542
<SECURITIES> 25,932
<RECEIVABLES> 201,837
<ALLOWANCES> 36,453
<INVENTORY> 0
<CURRENT-ASSETS> 719,852
<PP&E> 335,462
<DEPRECIATION> 50,072
<TOTAL-ASSETS> 1,451,373
<CURRENT-LIABILITIES> 341,838
<BONDS> 913,506
0
0
<COMMON> 371
<OTHER-SE> 191,115
<TOTAL-LIABILITY-AND-EQUITY> 1,451,373
<SALES> 0
<TOTAL-REVENUES> 860,647
<CGS> 0
<TOTAL-COSTS> 624,599
<OTHER-EXPENSES> 254,538
<LOSS-PROVISION> 27,908
<INTEREST-EXPENSE> 79,629
<INCOME-PRETAX> (112,736)
<INCOME-TAX> 0
<INCOME-CONTINUING> (112,736)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (112,736)
<EPS-BASIC> (3.72)
<EPS-DILUTED> (3.72)
</TABLE>
