<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-20803
------------------------
IXC COMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C>
DELAWARE 75-2644120
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5000 PLAZA ON THE LAKE, SUITE 200,
AUSTIN, TEXAS 78746
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) (512) 328-1112
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 [ ]
The number of shares of Common Stock, $.01 par value, outstanding (the only
class of common stock of the Company outstanding) was 30,799,560 on May 12,
1997.
================================================================================
<PAGE> 2
IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
QUARTER ENDED MARCH 31, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of March 31, 1997
and December 31, 1996........................................ 3
Condensed Consolidated Statements of Operations for the Three
Months Ended March 31, 1997 and 1996......................... 4
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1997 and 1996......................... 5
Notes to Condensed Consolidated Financial Statements......... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 10
Item 3. Quantitative and Qualitative Disclosures About Market
Risks........................................................ 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................ 15
Item 2. Changes in Securities........................................ 15
Item 3. Defaults Upon Senior Securities.............................. 15
Item 4. Submission of Matters to a Vote of Security Holders.......... 15
Item 5. Other Information............................................ 15
Item 6. Exhibits and Reports on Form 8-K............................. 16
SIGNATURE............................................................................ 19
</TABLE>
2
<PAGE> 3
IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED) (SEE NOTE 1)
<S> <C> <C>
Current assets:
Cash and cash equivalents....................................... $ 4,394 $ 61,340
Accounts receivable and other receivables, net of allowance for
doubtful accounts of $5,168 at March 31, 1997 and $4,030 at
December 31, 1996............................................ 55,083 47,568
Other current assets............................................ 2,874 2,197
--------- --------
Total current assets.................................... 62,351 111,105
Property and equipment............................................ 411,041 337,742
Less: accumulated depreciation.................................... (77,441) (69,133)
--------- --------
333,600 268,609
Escrow under Senior Notes......................................... 17,840 51,412
Investment in unconsolidated subsidiaries......................... 10,899 5,486
Deferred charges and other assets................................. 25,314 22,539
--------- --------
Total assets............................................ $ 450,004 $459,151
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other current liabilities.................. $ 75,949 $ 74,945
Accrued interest................................................ 17,813 8,906
Current portion of long-term debt and capital lease
obligations.................................................. 5,156 6,750
--------- --------
Total current liabilities............................... 98,918 90,601
Long-term debt and capital lease obligations, less current
portion......................................................... 297,152 295,531
Other noncurrent liabilities...................................... 10,405 9,540
Stockholders' equity:
Preferred stock, 3,000,000 shares authorized; 10% Junior Series
3 cumulative preferred stock, $.01 par value; 12,550 shares
issued and outstanding (aggregate liquidation preference of
$19,529 at March 31, 1997)................................... 13 13
Common stock, $.01 par value; 100,000,000 shares authorized:
shares issued and outstanding 30,799,560 at March 31, 1997
and 30,795,014 at December 31, 1996.......................... 308 308
Additional paid-in capital........................................ 123,362 123,434
Accumulated deficit............................................... (80,154) (60,276)
--------- --------
Total stockholders' equity.............................. 43,529 63,479
--------- --------
Total liabilities and stockholders' equity.............. $ 450,004 $459,151
========= ========
</TABLE>
See accompanying notes.
3
<PAGE> 4
IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS AND NUMBER OF SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
---------------------
1997 1996
-------- --------
<S> <C> <C>
Net operating revenues:
Private line....................................................... $ 30,869 $ 22,629
Switched long distance............................................. 53,041 3,621
-------- --------
Net operating revenues..................................... 83,910 26,250
Operating expenses:
Cost of communication services..................................... 68,982 15,600
Operations and administration...................................... 16,567 10,417
Depreciation and amortization...................................... 10,002 6,010
-------- --------
(11,641) (5,777)
Interest income...................................................... 1,076 126
Interest income on escrow under Senior Notes......................... 203 2,557
Interest expense..................................................... (7,746) (9,870)
Equity in net loss of unconsolidated subsidiaries.................... (1,819) (5)
-------- --------
Loss before benefit for income taxes and minority interest........... (19,927) (12,969)
Benefit for income taxes............................................. 252 1,363
Minority interest.................................................... (203) (93)
-------- --------
Net loss............................................................. (19,878) (11,699)
Dividends applicable to preferred stock.............................. (470) (433)
-------- --------
Net loss applicable to common stockholders........................... $(20,348) $(12,132)
-------- --------
Net loss per common and common equivalent share...................... $ (0.65) $ (0.49)
======== ========
Weighted average common and common equivalent shares................. 31,484 25,011
======== ========
</TABLE>
See accompanying notes.
4
<PAGE> 5
IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
---------------------------
1997 1996
----------- -----------
<S> <C> <C>
Net cash provided by (used in) operating activities............... $ (11,077) $ 3,003
Investing activities
Release of funds from escrow under Senior Notes................. 51,588 13,225
Deposit into escrow under Senior Notes.......................... (18,152) (2,557)
Purchase of property and equipment.............................. (68,743) (13,564)
--------- ---------
Net cash used in investing activities............................. (35,307) (2,896)
Financing activities
Principal payments on long-term debt and capital lease
obligations.................................................. (3,257) (1,359)
Capital contribution to unconsolidated subsidiary............... (7,233) --
Other financing activities...................................... (72) (171)
--------- ---------
Net cash used in financing activities............................. (10,562) (1,530)
--------- ---------
Net decrease in cash and cash equivalents......................... (56,946) (1,423)
Cash and cash equivalents at beginning of period.................. 61,340 6,915
--------- ---------
Cash and cash equivalents at end of period........................ $ 4,394 $ 5,492
========= =========
Supplemental disclosure of cash flow information:
Cash paid (received) for:
Interest..................................................... $ 291 $ 304
========= =========
Taxes........................................................ $ 70 $ (908)
========= =========
</TABLE>
See accompanying notes.
5
<PAGE> 6
IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited Condensed Consolidated Financial Statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31, 1997
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1997. The Balance Sheet at December 31, 1996 has been derived
from the audited financial statements at that date, but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. The accompanying financial
statements should be read in conjunction with the audited consolidated financial
statements (including the notes thereto) for the year ended December 31, 1996.
2. EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Earnings (loss) per common share is based on net income (loss) less
preferred stock dividend requirements, divided by the weighted average common
and common equivalent shares outstanding during the period. Outstanding options
are included in the calculation to the extent they are dilutive or were issued
within one year of the Company's initial public offering. Earnings (loss) per
share on a fully diluted basis is not presented as the fully diluted effect is
either antidilutive or not materially different from primary earnings (loss) per
common share, as computed.
3. INCOME TAXES
The Company has determined that a valuation allowance should be applied
against a portion of the deferred tax assets related to the net operating loss
incurred in the first quarter of 1997 due to uncertainty regarding its
realizability. The difference between the tax benefit recorded for the three
months ended March 31, 1997 and the expected benefit at the federal statutory
rate is primarily due to the valuation allowance applied against the deferred
tax assets.
4. COMMITMENTS AND CONTINGENCIES
During 1997 the Company has made and will continue to make material
commitments related to the fiber expansion. These commitments are expected to be
paid with the proceeds received from the Company's recent convertible preferred
stock issuance (See Note 7 -- Subsequent Events), sale of fiber and cost sharing
arrangements which the Company has entered into with other large users of fiber
capacity.
During the first quarter of 1997, the Company entered into two agreements
with major long distance carriers for the sale of dark fiber for approximately
$219 million. These agreements provide for certain penalties if the Company does
not complete construction of the defined routes within the time frame specified
in the agreements. Management does not anticipate that the Company will incur
any substantial penalties under these provisions.
On April 4, 1997 Tel-Central Communications, Inc. ("Tel-Central") filed a
complaint against IXC Long Distance, Inc., one of the Company's subsidiaries, in
the United States District Court in the Western District of Missouri after the
Company terminated service to Tel-Central for failure to pay for services.
Tel-Central's complaint makes various state and federal law claims and seeks
damages of over $100 million and asks for punitive damages of $100 million. The
Company believes that Tel-Central's claims are without merit and that the
complaint is part of an attempt by Tel-Central to avoid payment of its
outstanding balance to the
6
<PAGE> 7
IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Company. The Company believes that it is unlikely that this suit will result in
any material liability to the Company.
From time to time the Company is involved in various legal proceedings
arising in the ordinary course of business, some of which are covered by
insurance. In the opinion of the Company's management, none of the claims
relating to such proceedings will have a material effect on the financial
condition or results of operations of the Company.
5. STOCK OPTIONS
During the quarter ended March 31, 1997, the Company granted no stock
options under the 1994 and 1996 Stock Plans. At March 31, 1997 stock options
covering 1,696,026 shares of common stock were outstanding.
6. PROSPECTIVE ACCOUNTING CHANGES
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share" ("SFAS
#128"), which simplifies the calculation of earnings per share. Under SFAS #128,
stock options and other equity instruments are excluded from the calculation of
"basic earnings per share", which will replace primary earnings per share
disclosures. SFAS #128 is effective for financial statements for periods ending
after December 15, 1997. The Company believes that the future adoption of SFAS
#128 will not have a significant impact on earnings per share disclosures for
the periods presented.
7. SUBSEQUENT EVENTS
In April 1997 the Company issued $100 million of 7 1/4% Junior Convertible
Preferred Stock Due 2007 ("Convertible Preferred Stock"). The net proceeds of
approximately $97.5 million from the offering will be used to fund capital
expenditures and for general corporate purposes. The Convertible Preferred Stock
and the common stock issuable upon conversion thereof have not been registered
under the Securities Act of 1933 and may not be offered or sold in the United
States absent registration or an applicable exemption from registration
requirements. On March 31, 2007, the Convertible Preferred Stock must be
redeemed by the Company at a price equal to the liquidation preference plus
accrued and unpaid dividends; thus it is "mandatorily redeemable" and will not
be included in stockholders' equity.
8. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR
SUBSIDIARIES
The Company conducts a significant portion of its business through
subsidiaries. The Senior Notes are unconditionally guaranteed, jointly and
severally, by certain wholly-owned direct and indirect subsidiaries (the
"Subsidiary Guarantors"). The obligations of each Subsidiary Guarantor are
limited to the minimum extent necessary to prevent the guarantee from violating
or becoming voidable under applicable law relating to fraudulent conveyance or
fraudulent transfer or similar laws affecting the rights of creditors generally.
Certain subsidiaries of the Company do not guarantee the Senior Notes (the
"Non-Guarantor Subsidiaries"). The claims of creditors of Non-Guarantor
Subsidiaries have priority over the rights of the Company to receive dividends
or distributions from such subsidiaries.
The equity method has been used by the Company with respect to investments
in subsidiaries. The equity method has been used by Subsidiary Guarantors with
respect to investments in Non-Guarantor Subsidiaries. Separate financial
statements for Subsidiary Guarantors are not presented based on management's
determination that they do not provide additional information that is material
to investors. Presented below is condensed consolidating financial information
for the Company, the Subsidiary Guarantors and the Non-Guarantor Subsidiaries as
of and for the three months ended March 31, 1997.
7
<PAGE> 8
IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
8. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR
SUBSIDIARIES -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31, 1997
------------------------------------------------------------------
NON-
SUBSIDIARY GUARANTOR
IXC GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ---------- ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.............. $ 9,210 $ (7,195) $ 1,104 $ 1,275 $ 4,394
Accounts receivable and other
receivables, net.................... 23 38,491 38,810 (22,241) 55,083
Other current assets................... 7,744 6,269 83 (11,222) 2,874
-------- -------- -------- ---------- --------
Total current assets........... 16,977 37,565 39,997 (32,188) 62,351
Property and equipment, net.............. 3,836 287,750 42,274 (260) 333,600
Escrow under Senior Notes................ 17,840 -- -- -- 17,840
Due from affiliates...................... 318,118 57,140 -- (375,258) --
Deferred charges and other assets........ (10,547) (6,649) 24,562 28,847 36,213
-------- -------- -------- ---------- --------
Total assets................... $346,224 $375,806 $106,833 $ (378,859) $450,004
======== ======== ======== ========== ========
Current liabilities:
Accounts payable, accrued interest and
other current liabilities........... $ 20,984 $ 72,422 $ 19,693 $ (19,337) $ 93,762
Due to affiliate....................... 3,173 6,650 4,228 (14,051) --
Current portion of long-term debt and
capital lease obligations........... -- 522 6,430 (1,796) 5,156
-------- -------- -------- ---------- --------
Total current liabilities...... 24,157 79,594 30,351 (35,184) 98,918
Long-term debt and capital lease
obligations, less current portion...... 277,771 1,128 23,020 (4,767) 297,152
Due to affiliates........................ -- 315,469 55,833 (371,302) --
Other noncurrent liabilities............. -- 11,945 763 (2,303) 10,405
Stockholders' equity (deficit):
Preferred stock........................ 13 -- 2,585 (2,585) 13
Common stock........................... 308 4 2 (6) 308
Additional paid-in capital............. 123,362 33,284 33,015 (66,299) 123,362
Retained earnings (accumulated
deficit)............................ (79,390) (65,618) (38,736) 103,590 (80,154)
-------- -------- -------- ---------- --------
Total stockholders' equity
(deficit).................... 44,296 (32,330) (3,134) 34,697 43,529
-------- -------- -------- ---------- --------
Total liabilities and
stockholders' equity
(deficit).................... $346,224 $375,806 $106,833 $ (378,859) $450,004
======== ======== ======== ========== ========
</TABLE>
8
<PAGE> 9
IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
8. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR
SUBSIDIARIES -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1997
-------------------------------------------------------------------
NON-
SUBSIDIARY GUARANTOR
IXC GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ---------- ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net operating revenue:
Private line........................................... $ -- $ 33,836 $ 3,463 $ (6,430) $ 30,869
Switched long distance................................. -- 23,962 48,017 (18,938) 53,041
-------- -------- -------- -------- --------
Net operating revenues.......................... -- 57,798 51,480 (25,368) 83,910
Operating expenses:
Cost of communication service.......................... -- 43,408 50,744 (25,170) 68,982
Operations and administration.......................... -- 12,060 4,705 (198) 16,567
Depreciation and amortization.......................... 41 6,824 3,159 (22) 10,002
-------- -------- -------- -------- --------
(41) (4,494) (7,128) 22 (11,641)
Interest income.......................................... 8,848 2,430 330 (10,532) 1,076
Interest income on escrow under Senior Notes............. 203 -- -- -- 203
Interest expense......................................... (9,303) (6,991) (1,984) 10,532 (7,746)
Equity in net income (loss) of unconsolidated
subsidiaries........................................... (19,837) (10,013) (382) 28,413 (1,819)
-------- -------- -------- -------- --------
Income (loss) before (provision) benefit for income taxes
and minority interest.................................. (20,130) (19,068) (9,164) 27,734 (19,927)
Benefit (provision) for income taxes................... 252 (85) 786 (701) 252
Minority interest........................................ -- -- -- (203) (203)
-------- -------- -------- -------- --------
Net income (loss)........................................ $(19,878) $(19,153) $ (8,378) $ 27,531 $(19,878)
======== ======== ======== ======== ========
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1997
-------------------------------------------------------------------
NON-
SUBSIDIARY GUARANTOR
IXC GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ---------- ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating activities...... $ 12,687 $ (3,987) $ (9,612) $(10,165) $(11,077)
Investing activities:
Release of funds from escrow under Senior Notes........ 51,588 51,588
Deposits into escrow under Senior Notes................ (18,152) -- -- -- (18,152)
Purchase of property and equipment..................... (2,856) (62,086) (3,801) -- (68,743)
-------- -------- -------- -------- --------
Net cash provided by (used) in, investing activities... 30,580 (62,086) (3,801) -- (35,307)
Financing Activities
Payments from (advance to) affiliates.................. (99,348) 67,405 21,664 10,279 --
Principal payments on long-term debt and capital lease
obligations.......................................... -- (2,306) (1,291) 340 (3,257)
Capital contribution to unconsolidated subsidiary...... -- -- (7,233) -- (7,233)
Other financing activities............................. (72) 3,234 (3,234) -- (72)
-------- -------- -------- -------- --------
Net cash provided by (used in) financing activities.... (99,420) 68,333 9,906 10,619 (10,562)
Net increase (decrease) in cash and cash equivalents... (56,153) 2,260 (3,507) 454 (56,946)
Cash and cash equivalents at beginning of period....... 65,363 (9,455) 4,611 821 61,340
-------- -------- -------- -------- --------
Cash and cash equivalents at end of period............. $ 9,210 $ (7,195) $ 1,104 $ 1,275 $ 4,394
======== ======== ======== ======== ========
</TABLE>
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 COMPARED WITH THE THREE MONTHS ENDED MARCH 31,
1996
Net operating revenues for the three months ended March 31, 1997 increased
219.0% to $83.9 million from $26.3 million for the three months ended March 31,
1996. The increase is primarily a result of the Company's rapid growth in
switched long distance revenues since its entry into this business in the fourth
quarter of 1995. Switched long distance services revenues for the three months
ended March 31, 1997 increased to $53.0 million from $3.6 million for the three
months ended March 31, 1996. Billable minutes of use for the three months ended
March 31, 1997 increased to 594 million from 34 million for the three months
ended March 31, 1996. Revenues for the Company's private line business for the
three months ended March 31, 1997 increased 36.7% to $30.9 million from $22.6
million for the three months ended March 31, 1996, primarily due to an increase
in market demand for capacity.
Cost of communication services consists principally of access charges paid
to Local Exchange Carriers ("LECs") and transmission lease payments to, and
exchanges with, other carriers. Cost of communication services for the three
months ended March 31, 1997 increased 342.3% to $69.0 million from $15.6 million
for the three months ended March 31, 1996. The increase is primarily a result of
the addition of long distance leases supporting the switched long distance
business, MOUs leased from other carriers and access charges paid to LECs in
connection with the switched long distance business and consistent with the
significant revenue growth. The Company has historically had a relatively low
cost of communication services as a percentage of revenues because substantially
all its revenues were derived from private line services, generally made at a
relatively low cost over its own network. The Company expects that, in the event
it achieves increases in private line revenues, its cost of communication
services as a percentage of such revenues will increase because additional
leases (or exchanges) of capacity from other carriers, at a relatively high
cost, will be required to support new business. The cost of communication
services as a percentage of revenues in the switched long distance business is
substantially greater than that in the private line business due to the
relatively high cost of LEC access charges, leases for long distance circuits
and MOUs leased from other carriers. Accordingly, increases in switched long
distance revenues are expected to further increase the Company's cost of
communication services as a percentage of revenues.
Operations and administration expenses for the three months ended March 31,
1997 increased 59.6% to $16.6 million from $10.4 million for the three months
ended March 31, 1996. This increase is primarily the result of operating
expenses associated with the Company's switched network. The Company anticipates
that as it expands its switched service business, operations and administration
expenses will continue to increase, but decline as a percentage of revenue.
Depreciation and amortization for the three months ended March 31, 1997
increased 66.7% to $10.0 million from $6.0 million for the three months ended
March 31, 1996. The increase is primarily the result of depreciation related to
capital assets associated with the Company's expansion and improvement of its
network. Depreciation and amortization will increase in subsequent periods, as
the Company's investment in newly constructed routes and other network equipment
is placed in service and depreciated.
Interest income for the three months ended March 31, 1997 decreased to $1.3
million from $2.7 million for the three months ended March 31, 1996. The
decrease relates to the use for purposes other than investment of the proceeds
from the sale of the Company's 12 1/2% Senior Notes due 2005 (the "Senior
Notes"), the Company's initial public offering in July 1996 (the "IPO") and the
sale of Common Stock to Trustees of General Electric Pension Trust in a private
placement which occurred simultaneously with the IPO (the "GEPT Private
Placement").
Interest expense for the three months ended March 31, 1997 decreased to
$7.7 million from $9.9 million for the three months ended March 31, 1996. The
decrease is primarily the result of capitalized interest expense associated with
the Company's network expansion.
Income taxes for the three months ended March 31, 1997 resulted in a $0.3
million tax benefit as opposed to a benefit of $1.4 million for the three months
ended March 31, 1996. The difference between the tax
10
<PAGE> 11
benefits recorded for the three months ended March 31, 1997 and the expected
benefit at the federal statutory rate is primarily due to losses incurred (the
tax benefit of which is not recorded due to uncertainty regarding its
realization).
The Company experienced a net loss of $19.9 million for the three months
ended March 31, 1997 as opposed to a net loss of $11.7 million for the three
months ended March 31, 1996 as a result of the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Except for the historical information contained below, the matters
discussed in this section are forward-looking statements that involve a number
of risks and uncertainties. The Company's actual liquidity needs, capital
resources and results may differ materially from the discussion set forth in the
forward-looking statements. For a discussion of important factors that would
materially affect such matters, see "Business -- Risk Factors" in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996.
Cash used in operating activities was $11.1 million for the three months
ended March 31, 1997 compared to cash provided by operations of $3.0 million in
the comparable period of 1996, primarily as a result of expansion and
operational expenses associated with the Company's development of its switched
services business. The Company's switched long distance business will require
cash to meet operating expenses until sufficient traffic is routed by the
Company's customers over the network.
Cash used in investing activities for the three months ended March 31, 1997
increased to $35.3 million from $2.9 million for the three months ended March
31, 1996, primarily as a result of the purchases of property and equipment for
the fiber expansion and deposits into escrow under the Senior Notes to fund
interest requirements. The Company's total capital expenditures were $68.7
million for the three months ended March 31, 1997 including capital expenditures
relating to the construction of network routes and related equipment.
As of March 31, 1997, the Company had approximately $22.2 million in cash,
including $17.8 million in funds held in escrow under the Senior Notes which was
held to meet the April 1997 interest payment with respect to the Senior Notes.
In February 1997, the Company and a carrier entered into a contract pursuant to
which the carrier will purchase an indefeasible right to use fibers from Chicago
to Los Angeles (the "Chicago-Los Angeles Fiber Sale") which will result in
proceeds to the Company of approximately $97.9 million. The Company expects to
receive all of such amount in 1997, assuming the construction of the network
expansion between Los Angeles and Chicago proceeds according to schedule. In
April 1997, the Company received net proceeds of approximately $97.5 million
through the issuance and sale (the "Convertible Stock Sale") of its 7 1/4%
Junior Convertible Preferred Stock Due 2007 (the "Convertible Preferred Stock").
In addition, the Company is engaged in discussions with potential lenders
regarding a revolving credit facility (the "Proposed Credit Facility") under
which it expects to be able to borrow up to a certain percentage of eligible
accounts receivable. Although the total availability under the Proposed Credit
Facility will vary from time to time according to the aggregate amount of
eligible accounts receivable, the Company anticipates that the lender will
impose a limit on borrowings under the facility. There can be no assurance that
the Company will obtain such facility. The Company expects that its operating
income (loss) plus depreciation and amortization ("EBITDA") for 1997 will
increase significantly over EBITDA for 1996. In February 1997, the Company
entered into a contract with another carrier pursuant to which the carrier will
purchase an indefeasible right to use fibers from Los Angeles to New York (the
"New York-Los Angeles Fiber Sale") which entitles the Company to receive
approximately $121.0 million. Assuming that the network expansion proceeds
according to schedule, this amount will be due in January 1998. However, the
carrier has the option to pay this amount over a period of up to 24 months
commencing January 1998.
The preceding forward-looking statements regarding the Company's operating
income and EBITDA for 1997 are based on certain assumptions as to future events,
many of which are not within the Company's control. Important factors that could
adversely affect the Company's ability to achieve the EBITDA results discussed
above include: (i) delays or cost overruns with respect to the network
expansion; (ii) delays by the Company's contractors and partners in cost-saving
arrangements in fulfilling their obligations; (iii) delays or
11
<PAGE> 12
higher-than-expected costs in obtaining rights-of-way; (iv) delays in the
completion of the routes of the network expansion scheduled for completion in
1997; (v) an inability by the Company to continue to increase traffic on its
switched network, in particular, higher margin traffic; (vi) an inability by the
Company to successfully commence service for new switched long distance services
on a cost-effective basis (including the provision of billing information in an
accurate and timely manner) for volumes that it has not previously handled,
(vii) the loss of one or more large customers; (viii) increases in expenses; and
(ix) decreases in the Company's rates caused by the competitive pressures.
The Company anticipates the following uses for its available cash: (i) the
network expansion and other capital expenditures; (ii) debt service; (iii) lease
payments; (iv) funding its joint venture in Mexico; and (v) working capital.
The Company anticipates that capital expenditures for 1997 will be as
follows: (i) for construction of the network expansion, at least $260.0 million;
and (ii) for other capital expenditures, at least $90.0 million. The Company
frequently revises its estimates of capital expenditures because of the rapid
growth of the Company's business and because the large, on-going network
expansion is subject to changes in design, route and capacity and is also
subject to variances from expected costs. The Company anticipates that in the
event customers require additional facilities or elements of the network
expansion are accelerated into 1997, expenditures in 1997 may be increased. In
addition, if and to the extent cash is available, the Company plans to make
additional capital expenditures of up to $50.0 million to increase the capacity
and efficiency of the network. The preceding forward-looking statement regarding
capital expenditures for 1997 are based on certain assumptions as to future
events, many of which are not under the Company's control. Important factors
which could increase the amount of the capital expenditures include construction
delays or construction cost overruns, delays or higher than expected costs in
obtaining rights of way, or changes in the scope of the network expansion and
increased demands by the Company's customers. Capital expenditures of $68.7
million were made during the three months ended March 31, 1997. The Company
expects to continue to make substantial capital expenditures in 1998 and
thereafter.
The Company is required to make interest payments in the amount of $35.6
million on the Senior Notes each year. The Company's EBITDA is currently
insufficient to cover the Company's debt service requirements under the Senior
Notes. The Company anticipates that such payments during 1997 will be made from
cash on hand. At March 31, 1997, the aggregate liquidation preference was
approximately $19.5 million, including accrued and unpaid dividends on the
Series 3 Preferred Stock. Such dividends accrue at an annual rate of 10% (based
on the liquidation preference) plus interest. The Company will also be required
(except in certain limited circumstances) to pay quarterly cash dividends on the
Convertible Preferred Stock (at an annual rate of 7 1/4%) beginning June 30,
1999 (and prior to such time such dividends may be paid in cash or additional
shares of Convertible Preferred Stock). Payment of dividends on the Convertible
Preferred Stock is not currently permitted under the terms of the indenture (the
"Indenture") for the Company's 12 1/2% Senior Notes due 2005 (the "Senior
Notes") until certain financial conditions have been met or under the terms of
the Series 3 Preferred Stock until the Company's Restated Certificate of
Incorporation, as amended, is amended (which is expected to occur in June 1997).
The Company expects to meet its needs for cash in 1997 by using cash on
hand, the proceeds of the Convertible Stock Sale, cash generated by operations,
the proceeds of the Chicago-Los Angeles Fiber Sale, additional cost-saving
arrangements and vendor financing it may seek. In addition, the Company is
engaged in discussions with potential lenders regarding the Proposed Credit
Facility under which it expects to be able to borrow up to a certain percentage
of eligible accounts receivable and may also be eligible to borrow additional
funds on a secured basis. Although the total availability under the Proposed
Credit Facility will vary from time to time according to the aggregate amount of
eligible accounts receivable, the Company anticipates that the lender will
impose a limit on borrowings under the facility. There can be no assurance that
the Company will be successful in obtaining the necessary cash or the Proposed
Credit Facility to meet its needs. A failure to raise such cash would delay or
prevent such capital expenditures and the construction of the network expansion.
Also, the foregoing capital expenditure and cash requirements for 1997 and 1998
do not take into account any acquisitions.
12
<PAGE> 13
The Company is indirectly participating in the development of a long
distance network to engage in the telecommunications business in Mexico by
Marca-Tel S.A. de C.V. ("Marca-Tel"). The Company indirectly owns 24.5% of
Marca-Tel through its ownership of 50% of Progress International LLC ("Progress
International"), which owns 49% of Marca-Tel. The remaining 51% of Marca-Tel is
owned by a Mexican individual and Fomento Radio Beep, S.A. de C.V. The other 50%
of Progress International is owned by Westel International, Inc.
Progress International, which is seeking FCC authority to operate in the
United States as an international resale carrier, is responsible for providing
all the capital that may be required from Marca-Tel's stockholders in order to
finance Marca-Tel. The Company and Westel jointly have contributed funds to
Progress International (approximately $21.0 million by the Company as of March
31, 1997), substantially all of which has been used to fund Marca-Tel. Although
the Company cannot accurately predict the capital that will be required from
Progress International to implement the Marca-Tel business plan, it estimates
that an additional $45.0 million (and possibly significantly more) will be
required by Marca-Tel from the stockholders of Progress International during
1997-1998. Progress International is considering selling equity interests in
Progress International to one or more third parties who could assist Progress
International with the funding of Marca-Tel. However, Progress International has
not had any material discussions in this regard and there can be no assurance
that any such funding will be available on satisfactory terms or at all. The
Company is currently, and may remain, the primary source of funds available to
Progress International for investment in Marca-Tel. Since the ownership
interests of the Company and Westel in Progress International are to be
proportional to their respective capital contributions, the Company's percentage
ownership of Progress International, and therefore its indirect ownership
interest in Marca-Tel, could increase if it makes additional capital
contributions. The Indenture contains significant limitations on the Company's
ability to invest in Progress International or Marca-Tel.
Marca-Tel is deploying three switching centers and a fiber optic route
linking Mexico's three major cities (Mexico City, Monterrey and Guadalajara),
with interconnection to the Company's U.S. network at its border crossing at
Reynosa/McAllen. Marca-Tel has entered into a turn-key contract with a major
international supplier of telecommunications equipment for a portion of this
build that provides for interim vendor financing for the equipment and fiber
purchases as well as a portion of the construction work. The Company anticipates
that Marca-Tel may be able to obtain additional funding through some combination
of the following: (i) offerings of debt or equity securities; (ii) other
incurrences of debt; (iii) joint venture arrangements with third parties; and
(iv) additional vendor financing of equipment purchases. Initially, such sources
of capital likely will not be adequate to meet the needs of Marca-Tel, and the
Company anticipates that, until such sources are adequate to enable Marca-Tel to
continue to pursue its business plan, it will be necessary for Progress
International to fund the shortfall. The Company is not obligated to continue to
fund Progress International; however, if Progress International does not fund
Marca-Tel's needs, the Company's interest in Progress International, and thus
its indirect interest in Marca-Tel, may be diluted or lost entirely. Although
the Indenture generally restricts the amount of funding the Company can provide
Progress International, the Indenture does allow the Company to use the $12.5
million proceeds of the GEPT Private Placement for Progress International. The
Indenture also allows the Company to fund Progress International with the
proceeds of certain equity offerings or, under certain circumstances, with funds
raised through debt incurrence or, provided that the Company meets certain
financial ratios, from working capital. No assurance can be given that adequate
funding sources will be available from Progress International or from third
parties to implement Marca-Tel's business plan or, if implemented, that such
business plan will be successful.
13
<PAGE> 14
The forward-looking statements set forth above with respect to the
estimated cash requirements relating to capital expenditures, the Company's
ability to meet such cash requirements, the Company's ability to service its
debt, the Company's and Westel's ability to fund Marca-Tel and the successful
completion and operation of Marca-Tel's fiber optic system in Mexico are based
on certain assumptions as to future events. Important factors that could
adversely affect the Company's ability to achieve the results discussed above
include that: (i) there will be no significant delays or cost overruns with
respect to the network expansion; (ii) the Company's contractors and partners in
cost-saving arrangements will perform their obligations; (iii) rights-of-way can
be obtained in a timely, cost-effective basis; (iv) the routes of the network
expansion scheduled for completion in 1997 are substantially completed on
schedule; (v) the Company will continue to increase traffic on its switched
network; (vi) the Company can successfully commence service for new switched
long distance services on a cost effective basis (including the provision of
billing information in an accurate and timely manner) for volumes that it has
not previously handled; (vii) the Company can successfully complete the
Chicago-Los Angeles Fiber Sale and the New York-Los Angeles Fiber Sale; and
(viii) the Company can obtain funds from vendor financing, the Proposed Credit
Facility or otherwise.
14
<PAGE> 15
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Not Applicable.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On April 4, 1997 Tel-Central Communications, Inc. ("Tel-Central") filed a
complaint against IXC Long Distance, Inc., one of the Company's subsidiaries, in
the United States District Court in the Western District of Missouri after the
Company terminated service to Tel-Central for failure to pay for services.
Tel-Central's complaint makes various state and federal law claims and seeks
damages of over $100 million and asks for punitive damages of $100 million. The
Company believes that Tel-Central's claims are without merit and that such
complaint is part of an attempt by Tel-Central to avoid payment of its
outstanding balance to the Company. The Company believes that it is unlikely
that this suit will result in any material liability to the Company.
ITEM 2. CHANGES IN SECURITIES
The Company did not sell any unregistered securities during the three
months ended March 31, 1997.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
On April 1, 1997, IXC Communications, Inc. (the "Company") issued and sold
1,000,000 shares of 7 1/4% Junior Convertible Preferred Stock Due 2007 (the
"Convertible Preferred Stock") in a private placement to two initial purchasers,
which shares were subsequently sold to "qualified institutional buyers" and
certain "accredited investors" (as defined in the Securities Act of 1933, as
amended). The Convertible Preferred Stock is convertible at the option of the
holders, unless previously redeemed, at any time after May 31, 1997, into shares
of Common Stock at a rate (subject to adjustment in certain events) of 4.263
shares of Common Stock for each share of Convertible Preferred Stock, equivalent
to a conversion price of $23.46 for each share of Common Stock. Dividends on the
Convertible Preferred Stock accrue at a rate per annum of 7 1/4% per share on
the liquidation preference thereof of $100 per share ($7.25 per annum per
share). Dividends payable prior to or on March 31, 1999, are, at the option of
the Company, payable (i) in cash or (ii) through the issuance of additional
shares of Convertible Preferred Stock equal to the dividend amount divided by
the liquidation preference of such additional shares. After March 31, 1999, to
the extent and for so long as the Company is not permitted to pay cash dividends
on the Convertible Preferred Stock by the terms of any then outstanding
indebtedness or any other agreement or instrument to which the Company is
subject, the Company will be required to pay dividends, which shall accrue at
the rate per annum of 8 3/4%, through the issuance of additional shares of
Convertible Preferred Stock. Payment of dividends on the Convertible Preferred
Stock is not currently permitted under the Indenture for the Company's 12 1/2%
Senior Notes due 2005 until certain financial conditions have been met or under
the terms of the Company's 10% Junior Series 3 Cumulative Redeemable Preferred
Stock ("Series 3 Preferred Stock") until certain financial conditions have been
met or under the terms of the Series 3 Preferred Stock until the Company's
Restated Certificate of Incorporation, as amended, is amended (which is expected
to occur in June 1997).
In January 1997, the Company entered into an agreement to purchase L.D.
Services, Inc. ("LDS"), a long-distance switchless reseller with 1996 revenues
of approximately $30.0 million. The consideration for this acquisition will be
Common Stock of the Company. A regulatory commission has stayed the LDS
acquisition pending further investigation. The Company is unable to determine
when and if the closing of the LDS acquisition will occur.
15
<PAGE> 16
The Company has revised its earlier announced estimate of the net cost of
the network expansion for various reasons, including changes in the route,
changes in the electronics to be included in the network and revisions in the
estimated cost of the network expansion. The Company now estimates that the cost
of the network expansion (net of cost-saving arrangements and the proceeds of
fiber sales through March 31, 1997) will be approximately $203.9 million or
$29,100 per mile.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------------------
<C> <S>
3.1+ Restated Certificate of Incorporation of the Company, as amended.
3.2+ Bylaws of the Company, as amended.
4.1 Specimen certificate representing shares of Common Stock of the Company
(incorporated by reference to Exhibit 4.1 of the Company Registration Statement on
Form S-1 filed with the Securities and Exchange Commission (the "Commission") on
May 20, 1996, as amended (File No. 333-4061) (the "S-1")).
4.2 Indenture dated as of October 5, 1995 by and among the Company, on its behalf and
as successor-in-interest to I-Link Holdings, Inc. and IXC Carrier Group, Inc.,
each of IXC Carrier, Inc., on its behalf and as successor-in-interest to I-Link,
Inc., CTI Investments, Inc., Texas Microwave, Inc. and WTM Microwave, Inc.,
Atlantic States Microwave Transmission Company, Central States Microwave
Transmission Company, Telcom Engineering, Inc., on its behalf and as
successor-in-interest to SWTT Company and Microwave Network, Inc., Tower
Communication Systems Corp., West Texas Microwave Company, Western States
Microwave Transmission Company, Rio Grande Transmission, Inc., IXC Long Distance,
Inc., Link Net International, Inc. (collectively, the "Guarantors") and IBJ
Schroder Bank & Trust Company, as Trustee, with respect to the 12 1/2% Series A
and Series B Senior Notes due 2005 (incorporated by reference to Exhibit 4.1 of
the Company's and each of the Guarantor's Registration Statement on Form S-4 filed
with the Commission on April 1, 1996, as amended (File No. 333-2936) (the "S-4")).
4.3 Purchase Agreement dated October 5, 1995 by and among the Company, and the
Purchasers named therein (incorporated by reference to Exhibit 4.2 of the S-4).
4.4 A/B Exchange Registration Rights Agreement dated as of October 5, 1995 by and
among the Company, the Guarantors and the Purchasers named therein (incorporated
by reference to Exhibit 4.3 of the S-4).
4.5 Escrow Account and Disbursement Agreement dated as of October 5, 1995 by and among
the Company, IBJ Schroder Bank & Trust Company, as Escrow Holder, and IBJ Schroder
Bank & Trust Company, as Collateral Agent (incorporated by reference to Exhibit
4.4 of the S-4).
4.6 Escrow Account Security Agreement dated as of October 5, 1995 by and between the
Company and IBJ Schroder Bank & Trust Company (incorporated by reference to
Exhibit 4.5 of the S-4).
4.7 Form of 12 1/2% Series A Senior Notes due 2005 (incorporated by reference to
Exhibit 4.6 of the S-4).
4.8 Form of 12 1/2% Series B Senior Notes due 2005 and Subsidiary Guarantee
(incorporated by reference to Exhibit 4.8 of the S-1).
4.9 Amendment No. 1 to Indenture and Subsidiary Guarantee dated as of June 4, 1996 by
and among the Company, the Guarantors and the Trustee (incorporated by reference
to Exhibit 4.11 of the S-1).
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------------------
<C> <S>
4.10 Stock Exchange Agreement dated as of June 10, 1996 by and between the Company and
Trustees of General Electric Pension Trust ("GEPT") (incorporated by reference to
Exhibit 4.12 of the S-1).
4.11 Registration Rights Agreement dated as of June 10, 1996 by and among IXC
Communications, Inc., GEPT and certain stockholders of the Company (incorporated
by reference to Exhibit 4.13 of the S-1).
4.12 + Purchase Agreement dated as of March 25, 1997 by and among the Company, Credit
Suisse First Boston Corporation ("CS First Boston") and Dillon Read & Co. Inc.
("Dillon Read").
4.13 + Registration Rights Agreement dated as of March 25, 1997 by and among the Company,
CS First Boston and Dillon Read.
4.14 + Amendment to Registration Rights Agreement dated as of March 25, 1995 between the
Company and GEPT.
10.1 Office Lease dated June 21, 1989 with USAA Real Estate Company, as amended
(incorporated by reference to Exhibit 10.1 of the S-4).
10.2 Equipment Lease dated as of December 1, 1994 by and between DSC Finance
Corporation and Switched Services Communications, L.L.C.; Assignment Agreement
dated as of December 1, 1994 by and between Switched Services Communications,
L.L.C. and DSC Finance Corporation; and Guaranty dated December 1, 1994 made in
favor of DSC Finance Corporation by the Company (incorporated by reference to
Exhibit 10.2 of the S-4).
10.3 Amended and Restated 1994 Stock Plan of the Company, as amended (incorporated by
reference to Exhibit 10.3 of the Company's Annual Report on Form 10-K (the "10-K")
for the year ended December 31, 1996).
10.4 Form of Non-Qualified Stock Option Agreement under the 1994 Stock Plan of the
Company (incorporated by reference to Exhibit 10.4 of the S-4).
10.5 Form of the Company's Restricted Stock Agreement (incorporated by reference to
Exhibit 10.5 of the S-4).
10.6 Form of the Company's Restricted Stock Agreement (incorporated by reference to
Exhibit 10.6 of the S-4).
10.7 Amended and Restated Development Agreement by and between Intertech Management
Group, Inc. and IXC Long Distance, Inc. (incorporated by reference to Exhibit 10.7
of the S-4).
10.8 Second Amended and Restated Service Agreement dated as of January 1, 1996 by and
between Switched Services Communications, L.L.C. and Excel Telecommunications,
Inc. (incorporated by reference to Exhibit 10.8 of the S-4).
10.9 Equipment Purchase Agreement dated as of January 16, 1996 by and between Siecor
Corporation and IXC Carrier, Inc. (incorporated by reference to Exhibit 10.9 of
the S-4).
10.10 1996 Stock Plan of the Company, as amended (incorporated by reference to Exhibit
10.10 of the 10-K).
10.11 IRU Agreement dated as of November 1995 between WorldCom, Inc. and IXC Carrier,
Inc. (incorporated by reference to Exhibit 10.11 of the S-4).
10.12 Outside Directors' Phantom Stock Plan of the Company, as amended (incorporated by
reference to Exhibit 10.12 of the 10-K).
10.13 Business Consultant and Management Agreement dated as of January 3, 1995 by and
between the Company and Culp Communications Associates (incorporated by reference
to Exhibit 10.13 of the S-1).
</TABLE>
17
<PAGE> 18
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------------------
<C> <S>
10.14 Employment Agreement dated December 28, 1995 by and between the Company and James
F. Guthrie (incorporated by reference to Exhibit 10.14 of the S-1).
10.15 Employment Agreement dated August 28, 1995, by and between the Company and David
J. Thomas (incorporated by reference to Exhibit 10.15 of the S-1).
10.16 Special Stock Plan of the Company (incorporated by reference to Exhibit 10.16 of
the 10-K).
10.17 Stock Acquisition Agreement and Plan of Merger dated as of January 17, 1997 by and
among the Company, IXC Long Distance, Inc., IXC-One Acquisition Corp., L.D.
Services, Inc. and the Shareholders named therein (incorporated by reference to
Exhibit 10.17 of the 10-K).
11.1+ Statement of Computation of Earnings per Share.
27 + Financial Data Schedule.
</TABLE>
- ---------------
+ Filed herewith.
(b) Reports on Form 8-K.
(1) Form 8-K dated February 27, 1997 and filed with the Commission on March
3, 1997 announcing that the Company had entered into a Securities Purchase
Agreement (the "Purchase Agreement") with Morgan Stanley Capital Partners III,
L.P. and two related investment limited partnerships and Trustees of General
Electric Pension Trust in connection with the proposed issuance of a new 7%
Series A Convertible Preferred Stock of the Company (the "Series A Stock"). The
Purchase Agreement was never consummated and the Series A Stock has never been
issued and is no longer authorized under the Company's charter.
(2) Form 8-K dated March 6, 1997 and filed with the Commission on March 7,
1997 reporting the Company's audited financial statements for the year ended
December 31, 1996.
(3) Form 8-K dated March 26, 1997 and filed with the Commission on March
27, 1997 with respect to the Company's notice of proposed unregistered offering
pursuant to Rule 135c(d) of the Securities Act of 1933, as amended, with respect
to the sale of Convertible Preferred Stock, which subsequently occurred in April
1997.
18
<PAGE> 19
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IXC Communications, Inc.,
a Delaware corporation
May 14, 1997 By: /s/ JOHN J. WILLINGHAM
------------------------------------
John J. Willingham
Senior Vice President
Chief Financial Officer and
Assistant Secretary (Duly
Authorized Officer and
Principal Financial Officer)
19
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE
OF
INCORPORATION, AS AMENDED
Fiber Optic Communications, Inc., a corporation organized and existing
under the laws of the State of Delaware, hereby certifies as follows:
1. The name of this corporation is Fiber Optic Communications,
Inc. Fiber Optic Communications, Inc. was originally incorporated under the
same name. The original Certificate of Incorporation of this corporation was
filed with the Secretary of State of the State of Delaware on July 27, 1992.
2. Pursuant to Sections 242 and 245 of the General Corporation
Law of the State of Delaware, this Restated Certificate of Incorporation has
been duly adopted and restates, integrates and further amends the provisions of
the Certificate of Incorporation of this corporation.
3. This Restated Certificate of Incorporation was duly consented
to, and adopted by, the holders of (i) a majority of the outstanding shares of
common stock, par value $.01 per share, of the Corporation and 10% Senior
Series 1 Cumulative Redeemable Preferred Stock, par value $.01 per share, of
this corporation ("Series 1 Preferred Stock"), consenting together as a class
and by (ii) over three-fourths (3/4s) of the outstanding shares of Series 1
Preferred Stock, acting without a meeting by unanimous written consent pursuant
to Section 228 of the General Corporation Law of the State of Delaware.
4. The text of the Restated Certificate of Incorporation as
heretofore amended or supplemented is hereby restated and further amended to
read in its entirety as follows:
FIRST: The name of this corporation (the "Corporation") is "IXC
Communications, Inc."
SECOND: The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle, Delaware 19801. The name of its
registered agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may now or hereafter be organized under the
General Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code.
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is one hundred and three million (103,000,000)
consisting of (i) one
1
<PAGE> 2
hundred million (100,000,000) shares of common stock, par value $.01 per share,
and (ii) three million (3,000,000) shares of preferred stock, par value $.01
per share. The preferred stock may be issued at any time, and from time to
time, in one or more series pursuant hereto or to a resolution or resolutions
providing for such issue duly adopted by the board of directors (the "Board")
of the Corporation (authority to do so being hereby expressly vested in the
Board), and such resolution or resolutions shall also set forth the voting
powers, full or limited, or none, of each such series of preferred stock and
shall fix the designations, preferences and relative, participating, optional
or other special rights and qualifications, limitations or restrictions of each
such series of preferred stock.
Upon the filing of this Second Amendment to Restated
Certificate of Incorporation which amends Article FOURTH to read as set forth
above, and without any further action on the part of the holders thereof, each
issued and outstanding share of common stock will be reclassified and changed
into 0.8083 shares of common stock.
FIFTH: The business and affairs of the Corporation shall be managed
by and under the direction of the Board. The exact number of directors of the
Corporation shall be fixed by or in the manner provided in the Bylaws of the
Corporation (the "Bylaws").
SIXTH: In furtherance and not in limitation of the powers conferred
by statute, the Board is expressly authorized:
(a) to adopt, repeal, rescind, alter or amend in any respect the
Bylaws, and to confer in the Bylaws powers and authorities upon the directors
of the Corporation in addition to the powers and authorities expressly
conferred upon them by statute;
(b) from time to time to set apart out of any funds or assets of
the Corporation available for dividends an amount or amounts to be reserved as
working capital or for any other lawful purpose and to abolish any reserve so
created and to determine whether any, and, if any, what part, of the surplus of
the Corporation or its net profits applicable to dividends shall be declared in
dividends and paid to its stockholders, and all rights of the holders of stock
of the Corporation in respect of dividends shall be subject to the power of the
Board so to do;
(c) subject to the laws of the State of Delaware, from time to
time to sell, lease or otherwise dispose of any part or parts of the properties
of the Corporation and to cease to conduct the business connected therewith or
again to resume the same, as it may deem best; and
(d) in addition to the powers and authorities hereinbefore and by
the laws of the State of Delaware conferred upon the Board, to execute all such
powers and to do all acts and things as may be exercised or done by the
Corporation; subject, nevertheless, to the express provisions of such laws, of
the Restated Certificate of Incorporation of the Corporation and its Bylaws.
2
<PAGE> 3
SEVENTH: Meetings of stockholders of the Corporation may be held
within or without the State of Delaware, as the Bylaws provide. The books
of the Corporation may be kept (subject to any provision of applicable law)
outside the State of Delaware at such place or places as may be designated
from time to time by the Board or in the Bylaws.
EIGHTH: The Corporation reserves the right to adopt, repeal, rescind,
alter or amend in any respect any provision contained in this Restated
Certificate of Incorporation in the manner now or hereafter prescribed by
applicable laws, and all rights conferred on stockholders herein are granted
subject to this reservation.
NINTH: The Corporation is to have perpetual existence.
TENTH: A director of this Corporation shall not be personally liable
to the Corporation or its stockholder for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, as the same exists or hereafter may be amended, or (iv) for
any transaction from which the director derived an improper personal benefit.
If the Delaware General Corporation Law hereafter is amended to authorize the
further elimination or limitation of the liability of directors, then the
liability of a director of the Corporation, in addition to the limitation on
personal liability provided herein, shall be limited to the fullest extent
permitted by the amended Delaware Corporation Law. No amendment to or repeal
of this Article Tenth shall apply to or have any effect on the liability or
alleged liability of any director of the Corporation for or with respect to any
acts or omissions of such director occurring prior to such amendment or repeal.
ELEVENTH:
A. Designation of Two Series of Preferred Stock. There are
hereby provided two series of preferred stock designated and to be known as
"10% Senior Series 1 Cumulative Redeemable Preferred Stock" and "10% Junior
Series 3 Cumulative Redeemable Preferred Stock."
B. Definitions. As used in this Eleventh Article, the following
terms shall have the meanings indicated:
1. "Common Stock" shall mean the common stock, $.01 par
value per share, issued or to be issued by the Corporation.
2. "Original Issue Date" shall mean, with respect to any
share of Series Preferred Stock, the date of the original issuance of such
shares.
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<PAGE> 4
3. "Preferred Stock" shall mean the preferred stock,
$.01 par value per share, issued or to be issued by the Corporation.
4. "Series 1 Preferred Stock" shall mean the 10% Senior
Series 1 Cumulative Redeemable Preferred Stock, $.01 par value per share,
issued or to be issued by the Corporation.
5. "Series 3 Preferred Stock" shall mean the 10% Junior
Series 3 Cumulative Redeemable Preferred Stock, $.01 par value per share,
issued or to be issued by the Corporation.
6. "Series Preferred Stock" shall mean, collectively,
the Series 1 Preferred Stock and the Series 3 Preferred Stock.
C. Number of Shares. The number of shares constituting the
Series 1 Preferred Stock shall be 2,000. The number of shares constituting the
Series 3 Preferred Stock shall be 12,550.
D. Rights, Preferences, Privileges and Restrictions. The voting
powers and relative rights, preferences, restrictions and other mattes relating
to the Series Preferred Stock are as follows:
1. Dividends.
(a) The holders of shares of Series 1 Preferred
Stock then outstanding shall be entitled to receive, prior to the payment of
any dividend on any other Preferred Stock of the Corporation or the Common
Stock of the Corporation, when, as and if declared by the Board, out of funds
legally available for the payment of dividends, cumulative dividends in an
annual amount equal to $100 per share, plus an amount determined by applying a
10% annual rate, compounded annually, to any accrued but unpaid dividend amount
from the last day of the period when such dividend accrues to the actual date
of payment of such dividend, and no more. The holders of shares of Series 3
Preferred Stock then outstanding shall be entitled to receive, prior to the
payment of any dividend on any other Preferred Stock of the Corporation (other
than the Series 1 Preferred Stock) or the Common Stock of the Corporation, when
as and if declared by the Board, out of funds legally available for the payment
of dividends, cumulative dividends in an annual amount equal to $100 per share,
plus an amount determined by applying a 10% annual rate, compounded annually,
to any accrued but unpaid dividend amount from the last day of the period when
such dividend accrues to the actual date of payment of such dividend, and no
more. Such dividends on the outstanding shares of Series Preferred Stock shall
be payable on such date as the Board may from time to time determine (each such
date being a "dividend payment date"). The Board may fix a record date for the
determination of holders of shares of Series Preferred Stock entitled to
receive payment of a dividend declared thereon, which record date shall not be
more than sixty (60) days prior to the date fixed for
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<PAGE> 5
the payment thereof. Each such annual dividend shall be fully cumulative and
shall accrue from day to day (whether or not declared) from the first day of
each period in which such dividend may be payable as herein provided, except
that the first annual dividend with respect to each share of Series Preferred
Stock shall accrue from the Original Issue Date of such share or such other
date as determined by the Board, except that dividends with respect to each
share of Series 3 Preferred Stock shall accrue from August 14, 1992.
Dividends, when, as and if declared, shall be payable in cash.
(b) The holder of each outstanding fractional
share of Series Preferred Stock shall be entitled to a ratably proportionate
amount of all dividends accruing with respect to each outstanding share of
Series Preferred Stock with the same Original Issue Date and all such dividends
with respect to each such outstanding fractional share shall be fully
cumulative and shall accrue (whether or not declared) and shall be payable in
the same manner and at such times as provided for in Section 1(a).
(c) All dividends paid with respect to the
outstanding shares of Series Preferred Stock pursuant to Section 1(a) shall be
paid pro rata to the holders of each class entitled thereto. Each Series 1
Preferred Stock holder's pro rata share of such dividends shall be calculated
by multiplying the total dividends to be paid by the percentage of (i) the
aggregate accrued but unpaid dividends to the date such payment is made on all
issued and outstanding shares of Series 1 Preferred Stock represented by (ii)
the aggregate accrued but unpaid dividends to the date such payment is made on
all shares (including fractional shares) of Series 1 Preferred Stock held by
such holder, and no more. Each Series 3 Preferred Stock holder's pro rata
share of such dividends shall be calculated by multiplying the total dividends
to be paid by the percentage of (i) the aggregate accrued but unpaid dividends
to the date such payment is made on all issued and outstanding shares of Series
3 Preferred Stock represented by (ii) the aggregate accrued but unpaid
dividends to the date such payment is made on all shares (including fractional
shares) of Series 3 Preferred Stock held by such holder, and no more.
2. Liquidation Rights of Series Preferred Stock:
(a) In the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, the holders
of outstanding shares of Series Preferred Stock shall be entitled to be paid
out of the assets of the Corporation available for distribution to its
stockholders, whether such assets are capital, surplus, or earnings, before any
payment or declaration and setting apart for payment of any amount shall be
made in respect of the outstanding shares of any other Preferred Stock of the
Corporation or Common Stock of the Corporation, an amount equal to $1,000 per
share of Series Preferred Stock then outstanding, plus all accrued but unpaid
dividends thereon to the date such payment is actually made, and no more. If
upon any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the assets to be distributed among the holders of the
outstanding shares of Series Preferred Stock shall be insufficient to permit
the payment to such stockholders of the full preferential amounts set forth
above, then
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<PAGE> 6
the entire assets of the Corporation to be distributed shall be distributed (i)
first, ratably among the holders of outstanding shares of Series 1 Preferred
Stock based on the full preferential amounts for the number of outstanding
shares of Series 1 Preferred Stock held by each holder and (ii) second, ratably
among the holders of outstanding shares of Series 3 Preferred Stock based on
the full preferential amounts for the number of outstanding shares of Series 3
Preferred Stock held by each holder. The Corporation will mail written notice
of such liquidation, dissolution or winding up, not less than sixty (60) days
prior to the payment date stated therein, to each record holder of Series
Preferred Stock.
(b) A consolidation or merger of the Corporation
with or into any other corporation or corporations or a sale of all or
substantially all of the assets of the Corporation shall not be deemed to be a
liquidation, dissolution, or winding up of the Corporation as those terms are
used in this Section 2 unless such consolidation, merger or sale shall be in
connection with a dissolution or winding up of the Corporation.
(c) The payment of preferential amounts pursuant
to this Section 2 with respect to each outstanding fractional share of Series 1
Preferred Stock shall be equal to a ratably proportionate amount of the
preferential amount payable with respect to each outstanding share of Series 1
Preferred Stock with the same Original Issue Date. The payment of preferential
amounts pursuant to this Section 2 with respect to each outstanding fractional
share of Series 3 Preferred Stock shall be equal to the ratably proportionate
amount of the preferential amount payable with respect to each outstanding
share of Series 3 Preferred Stock with the same Original Issue Date.
3. Voluntary Redemption by the Corporation.
(a) The Corporation, at the option of the Board,
may at any time or from time to time redeem the outstanding shares of Series 1
Preferred Stock in whole or in part from any source of funds legally available
therefor. The Corporation, at the option of the Board, may at any time or from
time to time redeem the outstanding shares of Series 3 Preferred Stock in whole
or in part from any source of funds legally available therefor, provided that
there shall then be no outstanding shares of Series 1 Preferred Stock.
(b) The redemption price for each outstanding
share of Series Preferred Stock shall be equal to $1,000 plus an amount equal
to any accrued and unpaid dividends on such share through the Redemption Date
(as defined below), whether or not declared (the "Redemption Price").
(c) In the event of a redemption of only a part
of the outstanding shares of a class of Series Preferred Stock, the Corporation
shall effect such redemption pro rata according to the number of shares held by
each holder of outstanding shares of such class of Series Preferred Stock.
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<PAGE> 7
(d) At least ten (10) days and not more than
sixty (60) days prior to the date fixed for any redemption of shares of a class
of Series Preferred Stock (the "Redemption Date"), written notice (the
"Redemption Notice," and the class of Series Preferred Stock referenced in such
Redemption Notice shall be referred to herein as the "Redeemed Stock") shall be
sent, by registered mail, to each holder of record of the outstanding shares of
Redeemed Stock at his or her mailing address last shown on the records of the
Corporation. Any notice which is mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the holder
received the notice, and failure duly to give the notice by mail, or any defect
in the notice, to any holder of shares of such class of Series Preferred Stock
designated for redemption shall not affect the validity of the proceedings for
the redemption of any other shares of such class of Series Preferred Stock.
The Redemption Notice shall state:
(i) whether all or less than all of the
outstanding shares of the class of Series Preferred Stock are to be redeemed
and the total number of shares being redeemed;
(ii) the number of outstanding shares of
Redeemed Stock held by the holder which the Corporation intends to redeem;
(iii) the Redemption Date and the
Redemption Price;
(iv) that from and after the Redemption
Date, dividends shall cease to accrue; and
(v) that the holder is to surrender to
the Corporation, in the manner and at the place designated, the certificate or
certificates representing the outstanding shares of Redeemed Stock to be
redeemed.
(e) On or before the Redemption Date, each holder
of outstanding shares of Redeemed Stock shall surrender the certificate or
certificates representing such shares to the Corporation, in the manner and at
the place designated in the Redemption Notice, and thereupon the Redemption
Price for such shares shall be payable to the order of the person whose name
appears on such certificate or certificates as the owner thereof, and each
surrendered certificate shall be cancelled and retired. In the event less than
all of the shares represented by any such certificate or certificates are
redeemed, a new certificate or certificates shall be issued representing the
unredeemed shares. All shares of the class of Series Preferred Stock called
for redemption will cease to accrue dividends as of the Redemption Date. After
the Redemption Date, holders of such class of Series Preferred Stock shall no
longer be treated as stockholders of the Corporation with respect to the shares
of Series Preferred Stock being redeemed, except with respect to the right to
receive the Redemption Price, without interest, upon the surrender of their
respective certificates.
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<PAGE> 8
(f) The Corporation may, at its option, on or
prior to the Redemption Date, deposit with its transfer agent or other
redemption agent selected by the Board of Directors of the Corporation, as a
trust fund, a sum sufficient to redeem the shares called for redemption, with
irrevocable instructions and authority to such transfer agent or other
redemption agent to give or complete the Redemption Notice and to pay to the
respective holders of such shares, as evidenced by a list of such holders
certified by an officer of the Corporation, the Redemption Price upon
surrender of their respective share certificates. Such deposit shall be
deemed to constitute full payment of such shares to their holders. In case
the holders of any shares shall not, within five (5) years after such deposit,
claim the amount deposited for redemption thereof, such transfer agent or
other redemption agent shall, upon demand, pay over to the Corporation the
balance of such amount so deposited and shall thereupon be relieved of all
responsibility to the holders thereof. Any interest accrued on any funds so
deposited shall belong to the Corporation, and shall be paid to it from time
to time on demand.
(g) All shares of Series 1 Preferred Stock which
shall have been redeemed pursuant to this Section 3 shall thereupon be
restored to the status of authorized but unissued shares of Series 1 Preferred
Stock.
(h) All shares of Series 3 Preferred Stock which
shall have been redeemed pursuant to this Section 3 shall thereupon be
restored to the status of authorized but unissued shares of Series 3 Preferred
Stock.
4. Voting Rights. Except as otherwise provided herein or by the
General Corporation Law of the State of Delaware, holders of outstanding shares
of Series 1 Preferred Stock shall have no voting rights. At all meetings of
the stockholders of the Corporation and in the case of any actions of
stockholders in lieu of a meeting, each share of Series 3 Preferred Stock shall
entitle the holder thereof to one vote. Except as otherwise provided herein or
by the General Corporation Law of the State of Delaware, the holders of Common
Stock and Series 3 Preferred Stock shall vote together as a single class, and
neither the Common Stock nor Series 3 Preferred Stock shall be entitled to vote
as a separate class on any matter to be voted on by shareholders of the
Corporation, except that the holders of the Series 3 Preferred Stock shall be
entitled to vote as a separate class to elect one member of the Board of
Directors of the Corporation.
5. Restrictions and Limitations. Except as otherwise provided by
the General Corporation Law of the State of Delaware, no amendment to this
Restated Certificate of Incorporation shall be made by the Corporation which
would change any of the terms, rights, preferences, privileges or restrictions
provided herein so as to affect adversely any shares of Series Preferred Stock
without the prior written consent of the holders of at least a majority of each
of the Series 1 Preferred Stock and the Series 3 Preferred Stock entitled to
vote thereon and outstanding at the time such action is taken; provided that no
amendment will change (i) the rate or times at which or the manner in which
dividends on any series of the Series Preferred Stock accrue or become payable,
(ii) the preferences with
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<PAGE> 9
respect to dividends and liquidation payments set forth in Section 1 and 2 or
(iii) the percentage of the holders of the Series Preferred Stock required to
approve any changes described in clauses (i) or (ii) above, without the prior
written consent of the holders of at least three-fourths (3/4s) of each of the
Series 1 Preferred Stock and the Series 3 Preferred Stock, as applicable, then
outstanding; and, provided further, that no change in the terms hereof may be
accomplished by merger or consolidation of the Corporation with another
corporation unless the Corporation has obtained the prior written consent of
the holders of the applicable percentages of the Series 1 Preferred Stock and
the Series 3 Preferred Stock then outstanding.
IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation to be signed and attested by its duly authorized
officers this 31st day of January 1994.
/s/ Ralph J. Swett
-------------------------------
Ralph J. Swett, President
Attest:
/s/ John J. Willingham
- -----------------------------
John J. Willingham, Secretary
9
<PAGE> 10
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
IXC CARRIER GROUP, INC.
INTO
IXC COMMUNICATIONS, INC.
(PURSUANT TO SECTION 253 OF THE GENERAL
CORPORATION LAW OF DELAWARE)
IXC Communications, Inc., a Delaware corporation (the "Corporation"),
does hereby certify:
FIRST: That the Corporation is incorporated pursuant to the General
Corporation Law of the State of Delaware.
SECOND: That the Corporation owns all of the outstanding shares of each
class of the capital stock of IXC Carrier Group, Inc., a Delaware corporation
(the "Merging Corporation").
THIRD: That the Corporation, by the following resolutions of its Board
of Directors, duly adopted on the 6th day of October 1995, determined to merge
into itself the Merging Corporation on the conditions set forth in such
resolutions:
"RESOLVED, that the Corporation merge into itself its
subsidiary, IXC Carrier Group, Inc., a Delaware corporation, and assume
all of said subsidiary's liabilities and obligations;
FURTHER RESOLVED, that the President and Secretary of the
Corporation be, and they hereby are, directed to make, execute and
acknowledge a certificate of ownership and merger setting forth a copy
of the resolutions to merge IXC Carrier Group, Inc. into the
Corporation and to assume said subsidiary's liabilities and obligations
and the date of adoption thereof and to file the same in the office of
the Secretary of State of the State of Delaware and a certified copy
thereof in the Office of the Recorder of Deeds of New Castle County;
and
FURTHER RESOLVED, that the effective date of such merger is
November 30, 1995."
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed and this certificate to be signed by Ralph J. Swett, its President, and
John J. Willingham, its Secretary, this 28th day of November 1995.
IXC COMMUNICATIONS, INC.,
a Delaware corporation
By: /s/ Ralph J. Swett
--------------------------------
Ralph J. Swett, President
ATTEST:
By: /s/ John J. Willingham
---------------------------------
John J. Willingham, Secretary [SEAL]
<PAGE> 11
IN WITNESS WHEREOF, this Certificate has been signed on this Thirteenth
day of March, 1997.
IXC COMMUNICATIONS, INC.
By: /s/ Ralph J. Swett
-----------------------------------
Ralph J. Swett, Chairman, President
and Chief Executive Officer
Attested by:
/s/ John J. Willingham
- --------------------------------------
John J. Willingham, Senior Vice
President and Assistant Secretary
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<PAGE> 12
EXECUTION COPY
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL
AND OTHER SPECIAL RIGHTS OF 7 1/4% JUNIOR
CONVERTIBLE PREFERRED STOCK DUE 2007 AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
- ----------------------------------------------------------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
- ----------------------------------------------------------------------------
IXC Communications, Inc. (the "Company"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does
hereby certify that, pursuant to authority conferred upon the board of
directors of the Corporation (the "Board of Directors") by its Restated
Certificate of Incorporation (hereinafter referred to as the "Restated
Certificate of Incorporation"), and pursuant to the provisions of Section 151
of the General Corporation Law of the State of Delaware, said Board of
Directors, at a meeting duly called and held on March 28, 1997, duly approved
and adopted the following resolution (the "Resolution"):
RESOLVED that, pursuant to the authority vested in the Board of Directors by
its Certificate of Incorporation, the Board of Directors does hereby create,
authorize and provide for the issuance of 7 1/4% Junior Convertible Preferred
Stock Due 2007, par value $.01 per share, with a stated value initially of
$100 per share, consisting of up to 1,400,000 shares having the designation,
preferences, relative, participating, optional and other special rights and
the qualifications, limitations and restrictions thereof that are set forth
in the Restated Certificate of Incorporation and in this Resolution as
follows:
(a) Designation. There is hereby created out of the authorized and
unissued shares of Preferred Stock of the Company a series of Preferred Stock
designated as the "7 1/4% Junior Convertible Preferred Stock Due 2007" (the
"Convertible Preferred Stock"). The number of shares constituting the
Convertible Preferred Stock shall be 1,400,000. The liquidation preference of
the Convertible Preferred Stock shall be $100 per share (the "Liquidation
Preference").
<PAGE> 13
(b) Rank. The Convertible Preferred Stock will, with respect to dividend
rights and rights on liquidation, winding-up and dissolution, rank (i) senior
to all classes of common stock and to each other class of Capital Stock or
series of Preferred Stock established hereafter by the Board of Directors of
the Company, the terms of which do not expressly provide that it ranks senior
to, or on a parity with, the Convertible Preferred Stock as to dividend rights
and rights on liquidation, winding-up and dissolution of the Company
(collectively referred to, together with all classes of common stock of the
Company, as "Junior Stock"); (ii) on a parity with each other class of Capital
Stock or series of Preferred Stock established hereafter by the Board of
Directors of the Company, the terms of which expressly provide that such class
or series will rank on a parity with the Convertible Preferred Stock as to
dividend rights and rights on liquidation, winding-up and dissolution
(collectively referred to as "Parity Stock"); and (iii) junior to each share of
Series 3 Preferred Stock now or hereafter outstanding and junior to each class
of Capital Stock or series of Preferred Stock established hereafter by the
Board of Directors of the Company, the terms of which hereafter established
classes or series expressly provide that such class or series will rank senior
to the Convertible Preferred Stock as to dividend rights or rights on
liquidation, winding-up and dissolution of the Company (collectively referred
to as "Senior Stock"). The Company may not authorize, create or increase the
authorized amount of any class or series of Senior Stock without the approval
of the holders of at least two-thirds of the shares of Convertible Preferred
Stock then outstanding, voting or consenting, as the case may be, as one class.
All claims of the holders of the Convertible Preferred Stock, including claims
with respect to dividend payments, redemption payments, mandatory repurchase
payments or rights upon liquidation, winding-up or dissolution, shall rank
junior to the claims of the holders of any debt of the Company and all other
creditors of the Company.
(c) Dividends. (i) Holders of the outstanding shares of Convertible
Preferred Stock will be entitled to receive, when, as and if declared by the
Board of Directors of the Company, out of funds legally available therefor,
dividends on each share of the Convertible Preferred Stock at a rate per annum
equal to 7 1/4% of the Liquidation
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<PAGE> 14
Preference of such share payable quarterly (each such quarterly period being
herein called a "Dividend Period"). In addition to the dividends described in
the preceding sentence, holders of outstanding shares of Convertible Preferred
Stock which are Transfer Restricted Securities will be entitled to additional
dividends (the "Additional Dividends"), when, as and if declared by the Board
of Directors of the Company, out of funds legally available therefor, with
respect to the shares of Convertible Preferred Stock, which Additional
Dividends shall accrue as follows if any of the following events occur (each
such event in clauses (A) and (B) below being herein called a "Registration
Default"): (A) if by August 31, 1997, the Shelf Registration Statement has not
been declared effective by the Commission; or (B) if after the Shelf
Registration Statement is declared effective (1) the Shelf Registration
Statement thereafter ceases to be effective; or (2) the Shelf Registration
Statement or the related prospectus ceases to be usable (in each case except as
permitted below) in connection with resales of Transfer Restricted Securities
in accordance with and during the periods specified herein because either (I)
any event occurs as a result of which the related prospectus forming part of
such Shelf Registration Statement would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which they were made
not misleading, or (II) it shall be necessary to amend such Shelf Registration
Statement or supplement the related prospectus, to comply with the Securities
Act or the Exchange Act or the respective rules thereunder.
Additional Dividends shall accrue on the shares of Convertible Preferred
Stock which are Transfer Restricted Securities from and including the date on
which any such Registration Default shall occur, to but excluding the date on
which all such Registration Defaults have been cured, at a rate of 7 3/4% per
annum.
A Registration Default referred to in clause (B) of paragraph (c)(i) shall
be deemed not to have occurred and be continuing in relation to the Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to the Shelf Registration Statement to incorporate annual audited
financial information with respect to the Company where such post-effective
amendment is not yet effective and needs to be
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<PAGE> 15
declared effective to permit Holders to use the related prospectus or (y) other
material events with respect to the Company that would need to be described in
the Shelf Registration Statement or the related prospectus and (ii) in the case
of clause (y), the Company proceeds promptly and in good faith to amend or
supplement the Shelf Registration Statement and related prospectus to describe
such events unless the Company has determined in good faith that there are
material legal or commercial impediments in doing so; provided, however, that
in any case if such Registration Default occurs for a continuous period in
excess of 45 days, Additional Dividends shall be payable in accordance with the
immediately preceding paragraphs of this paragraph (c)(i) from the day such
Registration Default initially occurs until such Registration Default is cured.
Any amounts of Additional Dividends due pursuant to clauses (A) or (B) of
this paragraph (c)(i) or pursuant to the proviso contained in the preceding
sentence will be payable on the regular dividend payment dates with respect to
the Convertible Preferred Stock and on the same terms and conditions and
subject to the same limitations as pertain at such time for the payment of
regular dividends. The amount of Additional Dividends will be determined by
multiplying the applicable Additional Dividends rate by the aggregate
liquidation preference of the outstanding shares of Convertible Preferred
Stock, multiplied by a fraction, the numerator of which is the number of days
such Additional Dividend rate was applicable during such period (determined on
the basis of a 360-day year comprised of twelve 30-day months), and the
denominator of which is 360.
All dividends on the Convertible Preferred Stock, including Additional
Dividends, to the extent accrued, shall be cumulative, whether or not earned or
declared, on a daily basis from the Issue Date or, in the case of additional
shares of Convertible Preferred Stock issued in payment of a dividend, from the
date of issuance of such additional shares of Convertible Preferred Stock, and
shall be payable quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year (each a "Dividend Payment Date"), commencing on June
30, 1997 to holders of record on the March 15, June 15, September 15 and
December 15 immediately preceding the relevant Dividend Payment Date. Any
dividend on the Convertible Preferred Stock payable pursuant to this paragraph
(c)(i) on or prior to March 31, 1999 shall be, at the option of the Company,
payable (1) in cash or (2) through the issuance of a number of additional
shares
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<PAGE> 16
(rounded to the nearest whole share) of Convertible Preferred Stock (the
"Additional Shares") equal to the dividend amount divided by the Liquidation
Preference of such Additional Shares. With respect to dividends accrued after
March 31, 1999, all dividends shall be payable in cash; provided, however, that
to the extent and for so long as the Company is prohibited by the terms of any
of its indebtedness then outstanding or by the terms of the Series 3 Preferred
Stock of the Company or any agreement or instrument to which the Company is
then subject, from paying cash dividends on the Convertible Preferred Stock,
such dividends will accrue on each share at the rate per annum equal to 8 3/4%
of the Liquidation Preference per share (instead of the 7 1/4% rate set forth
in the first paragraph of this paragraph (c)(i)) (together with any Additional
Dividends then payable, which for purposes of this paragraph shall be payable
at a rate of 0.50% over and above the 8 3/4% rate) payable through the issuance
of a number of Additional Shares (rounded to the nearest whole share) equal to
the dividend amount on such share divided by the Liquidation Preference of such
Additional Shares on the relevant Dividend Payment Date. Except as provided
herein, accrued and unpaid dividends, if any, will not bear interest or bear
dividends thereon.
(ii) All dividends paid with respect to shares of the Convertible Preferred
Stock pursuant to paragraph (c)(i) shall be paid pro rata to the holders
entitled thereto.
(iii) No full dividends may be declared or paid or set apart for the
payment of dividends by the Company on any Parity Stock for any period unless
full cumulative dividends in respect of each Dividend Period ending on or
before such period shall have been or contemporaneously are declared and paid
(or are deemed declared and paid) in full or declared and, if payable in cash,
a sum in cash sufficient for such payment set apart for such payment on the
Convertible Preferred Stock. If full dividends are not so paid, the
Convertible Preferred Stock will share dividends pro rata with the Parity
Stock.
(iv) The Company will not (A) declare, pay or set apart funds for the
payment of any dividend or other distribution with respect to any Junior Stock
or (B) redeem, purchase or otherwise acquire for consideration any Junior Stock
through a sinking fund or otherwise, unless (1) all accrued and unpaid
dividends with respect to the Convertible Preferred Stock and any Parity Stock
at the time such
5
<PAGE> 17
dividends are payable have been paid or funds have been set apart for payment
of such dividends and (2) sufficient funds have been paid or set apart for the
payment of the dividend for the current dividend period with respect to the
Convertible Preferred Stock and any Parity Stock. As used herein, the term
"dividend" does not include dividends payable solely in shares of Junior Stock
on Junior Stock or in options, warrants or rights to holders of Junior Stock to
subscribe or purchase any Junior Stock.
(v) Dividends on account of arrears for any past Dividend Period and
dividends in connection with any optional redemption may be declared and paid
at any time, without reference to any regular Dividend Payment Date, to holders
of record on such date, not more than 45 days prior to the payment thereof, as
may be fixed by the Board of Directors of the Company.
(vi) Dividends payable on the Convertible Preferred Stock for any period
other than a Dividend Period shall be computed on the basis of a 360-day
consisting year of twelve 30-day months and the actual number of days elapsed
in the period for which payable. Dividends payable on the Convertible
Preferred Stock for a full Dividend Period will be computed by dividing the per
annum dividend rate by four.
(vii) Certificates of Common Stock relating to Convertible Preferred Stock
surrendered for conversion by a registered Holder during the period from the
close of business on any regular record date next preceding any Dividend
Payment Date to the opening of business on such Dividend Payment Date (except
Convertible Preferred Shares called for redemption on a Redemption Date within
such period) must be accompanied by payment in cash of an amount equal to the
accrued but unpaid dividends thereon which such registered Holder is to receive
on such Dividend Payment Date with respect to the Convertible Preferred Stock
so surrendered.
(d) Liquidation Preference. (i) Upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, holders of Convertible
Preferred Stock will be entitled to be paid, out of the assets of the Company
available for distribution to its stockholders, the Liquidation Preference of
the outstanding shares of Convertible Preferred Stock, plus, without
duplication, an amount in cash equal to all accumulated and unpaid dividends
6
<PAGE> 18
(whether or not earned or declared and including Additional Dividends, if any,)
thereon to the date fixed for liquidation, dissolution or winding-up (including
an amount equal to a prorated dividend for the period from the last Dividend
Payment Date to the date fixed for liquidation, dissolution or winding-up that
would have been payable had the Convertible Preferred Stock been the subject of
an Optional Redemption on such date) before any distribution is made on any
Junior Stock. If, upon any voluntary or involuntary liquidation, dissolution
or winding up of the Company, the amounts payable with respect to the
Convertible Preferred Stock and all Parity Stock are not paid in full, the
Convertible Preferred Stock and the Parity Stock will share equally and ratably
(in proportion to the respective amounts that would be payable on such shares
of Convertible Preferred Stock and the Parity Stock, respectively, if all
amounts payable thereon had been paid in full) in any distribution of assets of
the Company to which each is entitled. After payment of the full amount of the
Liquidation Preference of the outstanding shares of Convertible Preferred Stock
(and, if applicable, an amount equal to a prorated dividend), the holders of
shares of Convertible Preferred Stock will not be entitled to any further
participation in any distribution of assets of the Company.
(ii) For the purposes of this paragraph (d), neither the sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Company nor the consolidation or merger of the Company with or into one or more
other entities shall be deemed to be a liquidation, dissolution or winding-up
of the Company.
(e) Redemption. (i) Optional Redemption. (A) The Convertible Preferred
Stock shall not be redeemable prior to April 3, 2000. On or after April 3,
2000, each share of the Convertible Preferred Stock may be redeemed (subject to
the legal availability of funds therefor) at any time, in whole or in part, at
the option of the Company, at the redemption prices (expressed as a percentage
of the Liquidation Preference of such share) set forth below, plus, without
duplication, an amount in cash equal to all accrued and unpaid Liquidated
Damages and all accrued and unpaid dividends to the date fixed for redemption
(the "Optional Redemption Date") (including an amount in cash equal to a
prorated dividend for the period from the Dividend Payment Date immediately
prior to the Optional Redemption Date) (the
7
<PAGE> 19
"Optional Redemption Price"). Notwithstanding the foregoing, prior to April 1,
2002, the Company shall only have the option to redeem shares of Convertible
Preferred Stock if, during the period of 30 consecutive Trading Days ending on
the Trading Day immediately preceding the date that the Redemption Notice is
mailed to holders, the Closing Bid Price for the Common Stock exceeded 150% of
the Conversion Price effective on the date of such Redemption Notice for at
least 20 of such Trading Days. If redeemed during the 12-month period
beginning April 1 of each of the years set forth below (or in the case of the
year 2000, April 3), the Optional Redemption Price per share shall be the
applicable percentage of the Liquidation Preference of such share set forth
below plus, without duplication, in each case, an amount in cash equal to all
accrued and unpaid Liquidated Damages and all accrued and unpaid dividends
(including an amount equal to a prorated dividend from the immediately
preceding Dividend Payment Date to the Optional Redemption Date), if any, to
the Optional Redemption Date:
<TABLE>
<CAPTION>
Year in which redemption occurs Percentage
------------------------------- ----------
<S> <C>
2000 . . . . . . . . . . . . . 104.83%
2001 . . . . . . . . . . . . . 104.03%
2002 . . . . . . . . . . . . . 103.22%
2003 . . . . . . . . . . . . . 102.42%
2004 . . . . . . . . . . . . . 101.61%
2005 . . . . . . . . . . . . . 100.81%
2006 . . . . . . . . . . . . . 100.00%
</TABLE>
(B) In the event of a redemption of only a portion of the then outstanding
shares of Convertible Preferred Stock, the Company shall effect such redemption
on a pro rata basis, except that the Company may redeem all of the shares held
by holders of fewer than 100 shares (or all of the shares held by holders who
would hold less than 100 shares as a result of such redemption), as may be
determined by the Company.
(ii) Mandatory Redemption. Each share of the Convertible Preferred Stock
(if not earlier redeemed or converted) shall be subject to mandatory redemption
in whole (to the extent of lawfully available funds therefor) on March 31, 2007
(the "Mandatory Redemption Date") at a price equal to 100% of the Liquidation
Preference of such share, plus, without duplication, all accrued and unpaid
Liquidated Damages and accrued and unpaid dividends thereon (including
8
<PAGE> 20
an amount equal to a prorated dividend thereon from the immediately preceding
Dividend Payment Date to the Mandatory Redemption Date), if any, to the
Mandatory Redemption Date (the "Mandatory Redemption Price").
(iii) Procedure for Redemption. (A) On and after the Optional Redemption
Date or the Mandatory Redemption Date, as the case may be (the "Redemption
Date"), unless the Company defaults in the payment of the applicable redemption
price, dividends will cease to accumulate on shares of Convertible Preferred
Stock called for redemption and all rights of holders of such shares will
terminate except for the right to receive the Optional Redemption Price or the
Mandatory Redemption Price, as the case may be, without interest; provided,
however, that if a notice of redemption shall have been given as provided in
paragraph (iii)(B) and the funds necessary for redemption (including an amount
in respect of all dividends that will accrue to the Redemption Date) shall have
been segregated and irrevocably set apart by the Company, in trust for the
benefit of the holders of the shares called for redemption, then dividends
shall cease to accumulate on the Redemption Date on the shares to be redeemed
and, at the close of business on the day on which such funds are segregated and
set apart, the holders of the shares to be redeemed shall, with respect to the
shares to be redeemed, cease to be stockholders of the Company and shall be
entitled only to receive the Optional Redemption Price or the Mandatory
Redemption Price, as the case may be, for such shares without interest from the
Redemption Date.
(B) With respect to a redemption pursuant to paragraph (e)(i) or (e)(ii),
the Company will send a written notice of redemption by first class mail to
each holder of record of shares of Convertible Preferred Stock, not fewer than
15 days nor more than 60 days prior to the Redemption Date at its registered
address (the "Redemption Notice"); provided, however, that no failure to give
such notice nor any deficiency therein shall affect the validity of the
procedure for the redemption of any shares of Convertible Preferred Stock to be
redeemed except as to the holder or holders to whom the Company has failed to
give said notice or except as to the holder or holders whose notice was
defective. The Redemption Notice shall state:
(1) whether the redemption is pursuant to paragraph (e)(i) or (e)(ii)
hereof;
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<PAGE> 21
(2) the Optional Redemption Price or the Mandatory Redemption Price, as
the case may be;
(3) whether all or less than all the outstanding shares of the Convertible
Preferred Stock are to be redeemed and the total number of shares of the
Convertible Preferred Stock being redeemed;
(4) the Redemption Date;
(5) that the holder is to surrender to the Company, in the manner, at the
place or places and at the price designated, his certificate or certificates
representing the shares of Convertible Preferred Stock to be redeemed; and
(6) that dividends on the shares of the Convertible Preferred Stock to be
redeemed shall cease to accumulate on such Redemption Date unless the Company
defaults in the payment of the Optional Redemption Price or the Mandatory
Redemption Price, as the case may be.
(C) Each holder of Convertible Preferred Stock shall surrender the
certificate or certificates representing such shares of Convertible Preferred
Stock to the Company, duly endorsed (or otherwise in proper form for transfer,
as determined by the Company), in the manner and at the place designated in the
Redemption Notice, and on the Redemption Date the full Optional Redemption
Price or Mandatory Redemption Price, as the case may be, for such shares shall
be payable in cash to the person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall be
canceled and retired. In the event that less than all of the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
(f) Voting Rights. (i) The holders of Convertible Preferred Stock, except
as otherwise required under Delaware law or as set forth in paragraphs (ii) and
(iii) below, shall not be entitled or permitted to vote on any matter required
or permitted to be voted upon by the stockholders of the Company.
(ii) (A) If (1) dividends on the Convertible Preferred Stock are in
arrears and unpaid for six or more Dividend Periods (whether or not
consecutive) (a "Dividend
10
<PAGE> 22
Default"); or (2) the Company fails to redeem the Convertible Preferred Stock on
March 31, 2007, or fails to otherwise discharge any redemption obligation with
respect to the Convertible Preferred Stock, then the number of directors
constituting the Board of Directors of the Company will be increased by two and
the Holders of the then outstanding shares of Convertible Preferred Stock
(together with the holders of Parity Stock upon which like rights have been
conferred and are exercisable), voting separately and as a class, shall have the
right and power to elect such two additional directors. Each such event
described in clauses (1) or (2) above is a "Voting Rights Triggering Event". A
Voting Rights Triggering Event shall not be deemed to have occurred if at the
time of such event there are less than 200,000 shares of Convertible Preferred
Stock then outstanding.
(B) The voting rights set forth in subparagraph (f)(ii)(A) above will
continue until such time as (x) in the case of a Dividend Default, all
dividends in arrears on the Convertible Preferred Stock are paid in full in
cash, (y) in all other cases, any failure, breach or default giving rise to
such Voting Rights Triggering Event is remedied or waived by the Holders of at
least two-thirds of the shares of Convertible Preferred Stock then outstanding
or (z) at any time there are less than 200,000 shares of Convertible Preferred
Stock outstanding, at which time the term of any directors elected pursuant to
the provisions of subparagraph (f)(ii)(A) above shall terminate and the number
of directors constituting the Board of Directors shall be decreased by two
(until the occurrence of any subsequent Voting Rights Triggering Event). At
any time after voting power to elect directors shall have become vested and be
continuing in the holders of Convertible Preferred Stock (together with the
holders of Parity Stock upon which like rights have been conferred and are
exercisable) pursuant to subparagraph (f)(ii)(A) hereof, or if vacancies shall
exist in the offices of directors elected by such holders, a proper officer of
the Company may, and upon the written request of the holders of record of at
least 25% of the shares of Convertible Preferred Stock then outstanding or the
holders of 25% of the shares of Parity Stock then outstanding upon which like
rights have been confirmed and are exercisable addressed to the secretary of
the Company shall, call a special meeting of the Holders of Convertible
Preferred Stock and the holders of such Parity Stock for the purpose of
electing the directors which such holders are entitled to elect pursuant to the
terms hereof;
11
<PAGE> 23
provided, however, that no such special meeting shall be called if the next
annual meeting of stockholders of the Company is to be held within 60 days
after the voting power to elect directors shall have become vested, in which
case such meeting shall be deemed to have been called for such next annual
meeting. If such meeting shall not be called by a proper officer of the
Company within 20 days after personal service to the secretary of the Company
at its principal executive offices, then the Holders of record of at least 25%
of the outstanding shares of Convertible Preferred Stock or the holders of 25%
of the shares of Parity Stock upon which like rights have been confirmed and
are exercisable may designate in writing one of their members to call such
meeting at the expense of the Company, and such meeting may be called by the
person so designated upon the notice required for the annual meetings of
stockholders of the Company and shall be held at the place for holding the
annual meetings of stockholders. Any holder of Convertible Preferred Stock or
such Parity Stock so designated shall have, and the Company shall provide,
access to the lists of holders of Convertible Preferred Stock and the holders
of such Parity Stock to be called pursuant to the provisions hereof. If no
special meeting of the Holders of Convertible Preferred Stock and the holders
of such Parity Stock is called as provided in this paragraph (f)(ii), then such
meeting shall be deemed to have been called for the next annual meeting of
stockholders of the Company or special meeting of the holders of any other
capital stock of the Company.
(C) At any meeting held for the purposes of electing directors at which the
Holders of Convertible Preferred Stock (together with the holders of Parity
Stock upon which like rights have been conferred and are exercisable) shall
have the right, voting together as a separate class, to elect directors as
aforesaid, the presence in person or by proxy of the holders of at least a
majority in voting power of the outstanding shares of Convertible Preferred
Stock (and such Parity Stock) shall be required to constitute a quorum thereof.
(D) Any vacancy occurring in the office of a director elected by the
Holders of Convertible Preferred Stock (and such Parity Stock) may be filled by
the remaining director elected by the Holders of Convertible Preferred Stock
(and such Parity Stock) unless and until such vacancy shall be filled by the
Holders of Convertible Preferred Stock (and such Parity Stock).
12
<PAGE> 24
(iii) (A) So long as any shares of the Convertible Preferred Stock are
outstanding, the Company will not authorize, create or increase the authorized
amount of any class or series of Senior Stock without the affirmative vote or
consent of holders of at least two-thirds of the shares of Convertible
Preferred Stock then outstanding, voting or consenting, as the case may be, as
one class, given in person or by proxy, either in writing or by resolution
adopted at an annual or special meeting (except that no such vote or consent
shall be required for the issuance of additional shares of Series 3 Preferred
Stock to be paid as dividends on such Series 3 Preferred Stock pursuant to the
terms of such Series 3 Preferred Stock).
(B) So long as any shares of the Convertible Preferred Stock are
outstanding, the Company will not amend this Certificate of Designation so as
to affect adversely the specified rights, preferences, privileges or voting
rights of Holders of shares of Convertible Preferred Stock or to authorize the
issuance of any additional shares of Convertible Preferred Stock (except to
authorize the issuance of additional shares of Convertible Preferred Stock to
be paid as dividends on the Convertible Preferred Stock, for which no consent
shall be necessary) without the affirmative vote or consent of Holders of at
least two-thirds of the issued and outstanding shares of Convertible Preferred
Stock, voting or consenting, as the case may be, as one class, given in person
or by proxy, either in writing or by resolution adopted at an annual or special
meeting.
(C) Except as set forth in paragraph (f)(iii)(A) or (B) above, (x) the
creation, authorization or issuance of any shares of any Junior Stock, Parity
Stock or Senior Stock, including the designation of a series of Convertible
Preferred Stock, or (y) the increase or decrease in the amount of authorized
Capital Stock of any class, including Preferred Stock, shall not require the
consent of Holders of Convertible Preferred Stock and shall not be deemed to
affect adversely the rights, preferences, privileges or voting rights of shares
of Convertible Preferred Stock.
(iv) In any case in which the Holders of Convertible Preferred Stock shall
be entitled to vote pursuant to this paragraph (f) or pursuant to Delaware law,
each Holder of Convertible Preferred Stock entitled to vote with respect to
such matters shall be entitled to one vote for each share of Convertible
Preferred Stock held.
13
<PAGE> 25
(v) Except as required by law, the Holders of the Convertible Preferred
Stock will not be entitled to vote on any merger or consolidation involving the
Company or a sale of all or substantially all the assets of the Company.
(g) Conversion. (i) At any time after 60 days from the Issue Date, at the
option of the Holder thereof, any share of Convertible Preferred Stock may be
converted at the Liquidation Preference thereof into fully paid and
nonassessable Common Stock (calculated as to each conversion to the nearest
1/100 of a share), at the Conversion Price, determined as hereinafter provided,
in effect at the time of conversion. Such conversion right shall expire at the
close of business on the Mandatory Redemption Date. In case a share of
Convertible Preferred Stock is called for optional redemption, such conversion
right in respect of the share of Convertible Preferred Stock so called shall
expire at the close of business on the applicable Optional Redemption Date,
unless the Company defaults in making the payment due upon redemption.
The price at which Common Stock shall be delivered upon conversion (herein
called the "Conversion Price") shall be initially $23.46 per share of Common
Stock. The Conversion Price shall be adjusted in certain instances as provided
in paragraph (g)(iv) and paragraph (g)(v).
(ii) In order to exercise the conversion privilege, the Holder of any share
of Convertible Preferred Stock to be converted shall surrender the certificate
for such share of Convertible Preferred Stock, duly endorsed or assigned to the
Company or in blank, at the office of the Transfer Agent or at any office or
agency of the Company maintained for that purpose, accompanied by written
notice to the Company in the form of Exhibit B that the Holder elects to
convert such share of Convertible Preferred Stock or, if fewer than all of the
shares of Convertible Preferred Stock represented by a single share certificate
are to be converted, the number of shares represented thereby to be converted.
Except as provided in paragraph (c)(viii), no payment or adjustment shall be
made upon any conversion on account of any dividends accrued on the shares of
Convertible Preferred Stock surrendered for conversion or on account of any
dividends on the Common Stock issued upon conversion. Such notice shall also
contain the office or the address to which the Company should deliver shares of
Common Stock issuable upon conversion (and any other payments or certificates
related thereto). Except as
14
<PAGE> 26
provided in paragraph (c)(viii), in no event shall the Company be obligated to
pay any converting Holder any unpaid dividend, whether or not in arrears, on
converted shares or any dividends on the shares of Common Stock issued upon
such conversion.
Shares of Convertible Preferred Stock shall be deemed to have been converted
immediately prior to the close of business on the day of surrender of such
shares of Convertible Preferred Stock for conversion in accordance with the
foregoing provisions, and at such time the rights of the Holders of such shares
of Convertible Preferred Stock 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 holder or holders of such Common Stock
at such time. As promptly as practicable on or after the conversion date, the
Company shall issue and shall deliver to such office or agency as the
converting Holder shall have designated in its written notice to the Company a
certificate or certificates for the number of full Common Stock issuable upon
conversion, together with payment in lieu of any fraction of a share, as
provided in paragraph (g)(iii) hereof.
In the case of any conversion of fewer than all the shares of Convertible
Preferred Stock evidenced by a certificate, upon such conversion the Company
shall execute and the Transfer Agent shall authenticate and deliver to the
Holder thereof (at the address designated by such Holder), at the expense of
the Company, a new certificate or certificates representing the number of
unconverted shares of Convertible Preferred Stock.
(iii) No fractional Common Stock shall be issued upon the conversion of a
share of Convertible Preferred Stock. If more than one share of Convertible
Preferred Stock shall be surrendered for conversion at one time by the same
holder, the number of full shares of Common Stock which shall be issuable upon
conversion thereof shall be computed on the basis of the aggregate shares of
Convertible Preferred Stock so surrendered. Instead of any fractional share of
Common Stock which would otherwise be issuable upon conversion of any share of
Convertible Preferred Stock, the Company shall pay a cash adjustment in respect
of such fraction in an amount equal to the same fraction of the closing price
(as defined in paragraph (g)(iv)(7)) per share of Common Stock at the close of
business on the Business Day prior to the day of conversion.
15
<PAGE> 27
(iv) The Conversion Price shall be adjusted from time to time by the
Company as follows:
(1) If the Company shall hereafter pay a dividend or make a distribution in
Common Stock to all holders of any outstanding class or series of Common
Stock of the Company, the Conversion Price in effect at the opening of
business on the date following the date fixed for the determination of
shareholders entitled to receive such dividend or other distribution shall be
reduced by multiplying such Conversion Price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the
close of business on the Record Date (as defined in paragraph (g)(iv)(7))
fixed for such determination and the denominator shall be the sum of such
number of outstanding shares and the total number of shares constituting such
dividend or other distribution, such reduction to 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
paragraph (g)(iv)(i) 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.
(2) If the Company shall offer or issue rights or warrants to all holders
of its outstanding Common Stock entitling them to subscribe for or purchase
Common Stock at a price per share less than the Current Market Price (as
defined in paragraph (g)(iv)(7)) on the Record Date fixed for the
determination of shareholders 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 of which the
numerator shall be the number of shares of Common Stock outstanding at the
close of business on the Record Date plus the number of shares of Common
Stock which the aggregate offering price of the total number of shares of
Common Stock subject to such rights or warrants would purchase at such
Current Market Price and of which the denominator shall be the number of
shares of Common Stock outstanding at the close of business on the Record
Date plus the total number of additional shares of Common Stock subject to
such
16
<PAGE> 28
rights or warrants for subscription or purchase. Such adjustment shall
become effective immediately after the opening of business on the day
following the Record Date fixed for determination of shareholders entitled to
purchase or receive such rights or warrants. To the extent that shares of
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 again be adjusted to be 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 delivery of only the number of shares of Common
Stock actually delivered. If 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
shareholders 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 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, with the value of such consideration, if other
than cash, to be determined by the Board of Directors.
(3) If 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, if the 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.
(4) If the Company shall, by dividend or otherwise, distribute to all
holders of its shares of Common Stock shares of any class of capital stock of
the Company (other than any dividends or distributions
17
<PAGE> 29
to which paragraph (g)(iv)(1) applies) or evidences of its indebtedness, cash
or other assets (including securities, but excluding any rights or warrants
of a type referred to in paragraph (g)(iv)(2) and excluding dividends and
distributions paid exclusively in cash and excluding any capital stock,
evidences of indebtedness, cash or assets distributed upon a merger or
consolidation to which paragraph (g)(v) applies) (the foregoing hereinafter
in this paragraph (g)(iv)(4) called the "Distributed Securities"), then, in
each such case, 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 paragraph (g)(iv)(7)) with respect to such distribution by a
fraction of which the numerator shall be the Current Market Price (determined
as provided in paragraph (g)(iv)(7)) of the Common Stock on such date less
the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the Board
of Directors) on such date of the portion of the Distributed Securities so
distributed applicable to one share of Common Stock and the denominator shall
be such Current Market Price, such reduction to become effective immediately
prior to the opening of business on the day following the Record Date;
provided, however, that, in the event the then fair market value (as so
determined) of the portion of the Distributed 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 of Convertible Preferred
Stock shall have the right to receive upon conversion of a share of
Convertible Preferred Stock (or any portion thereof) the amount of
Distributed Securities such holder would have received had such holder
converted such share of Convertible Preferred Stock (or portion thereof)
immediately prior to such Record Date. If 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 paragraph
(g)(iv)(4) by reference to the actual or when issued trading market for any
securities comprising all
18
<PAGE> 30
or part of such distribution, it must in doing so consider the prices in such
market over the same period used in computing the Current Market Price
pursuant to paragraph (g)(iv)(7) to the extent possible.
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
("Dilution Trigger Event"): (i) are deemed to be transferred with such
Common Stock; (ii) are not exercisable; and (iii) are also issued in respect
of future issuances of Common Stock, shall be deemed not to have been
distributed for purposes of this paragraph (g)(iv)(4) (and no adjustment to
the Conversion Price under this paragraph (g)(iv)(4) shall be required) until
the occurrence of the earliest Dilution Trigger Event, whereupon such rights
and warrants shall be deemed to have been distributed and an appropriate
adjustment to the Conversion Price under this paragraph (g)(iv)(4) shall be
made. If any such rights or warrants, including any such existing rights or
warrants distributed prior to the date hereof, are subject to subsequent
events, upon the occurrence of each of which such rights or warrants shall
become exercisable to purchase different securities, evidences of
indebtedness or other assets, then the occurrence of each such event shall be
deemed to be such date of issuance and record date with respect to new rights
or warrants (and a termination or expiration of the existing rights or
warrants without exercise by the holder thereof). In addition, in the event
of any distribution (or deemed distribution) of rights or warrants, or any
Dilution Trigger Event with respect thereto, that was counted for purposes of
calculating a distribution amount for which an adjustment to the Conversion
Price under this paragraph (g)(iv)(4) was made, (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 Dilution 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 or holders of Common Stock with respect to such rights or
19
<PAGE> 31
warrants (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 which shall have expired or
been terminated without exercise by any holders thereof, the Conversion Price
shall be readjusted as if such rights and warrants had not been issued.
Notwithstanding any other provision of this paragraph (g)(iv)(4) to the
contrary, capital stock, rights, warrants, evidences of indebtedness, other
securities, cash or other assets (including, without limitation, any rights
distributed pursuant to any shareholder rights plan) shall be deemed not to
have been distributed for purposes of this paragraph (g)(iv)(4) if the
Company makes proper provision so that each holder of shares of Convertible
Preferred Stock who converts a share of Convertible Preferred Stock (or any
portion thereof) after the date fixed for determination of shareholders
entitled to receive such distribution shall be entitled to receive upon such
conversion, in addition to the Common Stock issuable upon such conversion,
the amount and kind of such distributions that such holder would have been
entitled to receive if such holder had, immediately prior to such
determination date, converted such share of Convertible Preferred Stock into
Common Stock.
For purposes of this paragraph (g)(iv)(4) and paragraphs (g)(iv)(1) and (2),
any dividend or distribution to which this paragraph (g)(iv)(4) is
applicable that also includes Common Stock, or rights or warrants to
subscribe for or purchase Common Stock to which paragraph (g)(iv)(2) applies
(or both), shall be deemed instead to be (1) a dividend or distribution of
the evidences of indebtedness, cash, assets, shares of capital stock, rights
or warrants other than (A) such shares of Common Stock or (B) rights or
warrants to which paragraph (g)(iv)(2) applies (and any Conversion Price
reduction required by this paragraph (g)(iv)(4) with respect to such dividend
or distribution shall then be made) immediately followed by (2) a dividend or
distribution of such Common Stock or such rights or warrants (and any further
Conversion Price reduction required by paragraph (g)(iv)(1) and (2) with
respect to such dividend or distribution shall then be made), except that (1)
the Record Date of such
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dividend or distribution shall be substituted as "the Record Date fixed for
the determination of stockholders entitled to receive such dividend or other
distribution", "Record Date fixed for such determination" and "Record Date"
within the meaning of paragraph (g)(iv)(1) and as "the Record Date fixed for
the determination of shareholders entitled to receive such rights or
warrants", "the date fixed for the determination of the shareholders entitled
to receive such rights or warrants" and "such Record Date" within the meaning
of paragraph (g)(iv)(2), and (2) any share 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
paragraph (g)(iv)(1).
(5) If the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock cash (excluding any cash that is distributed upon
a merger or consolidation to which paragraph (g)(v) applies or as part of a
distribution referred to in paragraph (g)(iv)) in an aggregate amount that,
combined together with (1) the aggregate amount of any other such
distributions to all holders of its 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 paragraph (g)(iv)(5) 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 described in a resolution of the Board of Directors) of consideration
payable in respect of any tender offer by the Company or a Subsidiary of the
Company for all or any portion of the Common Stock concluded within the 12
months preceding the date of payment of such distribution, and in respect of
which no adjustment pursuant to paragraph (g)(iv)(4) has been made, exceeds
12.5% of the product of the Current Market Price (determined as provided in
paragraph (g)(iv)(7)) 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
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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 12.5% amount
divided by (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 Record Date; provided, however, that, if the portion of the
cash so distributed applicable to one share of Common Stock is equal to or
greater than the Current Market Price of the Common Stock on the Record Date,
in lieu of the foregoing adjustment, adequate provision shall be made so that
each holder of Convertible Preferred Stock shall have the right to receive
upon conversion of a share of Convertible Preferred Stock (or any portion
thereof) the amount of cash such holder would have received had such holder
converted such share of Convertible Preferred Stock (or portion thereof)
immediately prior to such Record Date. If 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.
(6) If a tender or exchange offer made by the Company or any of its
Subsidiaries for all or any portion of the Common Stock expires and such
tender or exchange offer (as amended upon the expiration thereof) requires
the payment to shareholders (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 described in a resolution of the Board of Directors) 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 described in a resolution of the Board of Directors), 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 paragraph (g)(iv)(6) has been made and (2) the aggregate
amount of any distributions to all holders of
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<PAGE> 34
the 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 paragraph (g)(iv)(5) has been made, exceeds 12.5% of the product
of the Current Market Price (determined as provided in paragraph (g)(iv)(7))
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) at 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
the close of business on the date of the Expiration Time by a fraction of
which the numerator 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 the denominator shall be the sum of (x) the fair
market value (determined as aforesaid) of the aggregate consideration payable
to shareholders 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)
at 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)
to become effective immediately prior to the opening of business on the day
following the Expiration Time. If 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 paragraph (g)(iv)(6) to any tender
offer would result in an increase in the Conversion Price, no adjustment
shall be made for such tender offer under this paragraph (g)(iv)(6).
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(7) For purposes of this paragraph (g)(iv), the following terms shall have
the meaning indicated:
"closing price" with respect to any securities on any day means the closing
price on such day or, if no such sale takes place on such day, the average of
the reported high and low prices on such day, in each case on The Nasdaq
National Market or the New York Stock Exchange, as applicable, or, if such
security is not listed or admitted to trading on such national market or
exchange, on the principal national securities exchange or quotation system
on which such security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national securities exchange
or quotation system, the average of the high and low prices of such security
on the over-the-counter market on the day in question as reported by the
National Quotation Bureau Incorporated or a similar generally accepted
reporting service, or, if not so available, in such manner as furnished by
any New York Stock Exchange member firm selected from time to time by the
Board of Directors for that purpose, or a price determined in good faith by
the Board of Directors, whose determination shall be conclusive and described
in a resolution of the Board of Directors.
"Current Market Price" means the average of the daily closing prices per
share of Common Stock for the 10 consecutive trading days immediately prior
to the date in question; provided, however, that (A) if 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 paragraphs (g)(iv)(1), (2), (3), (4), (5) or (6) occurs
during such 10 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, (B) if
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 paragraphs (g)(iv)(1), (2), (3), (4), (5) or (6) 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
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<PAGE> 36
"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 (C) if 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 (A) or (B) 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 paragraphs (g)(iv)(4) or (5), whose determination shall be
conclusive and described in a resolution of the Board of Directors) of the
evidence of indebtedness, shares of capital stock or assets being distributed
applicable to one Common Stock as of the close of business on the day before
such "ex" date. For purposes of any computation under paragraph (g)(vi), the
Current Market Price 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 paragraph (g)(iv)(1), (2),
(3), (4), (5) or (6) 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 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 (I) when used 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, (II) when used with respect to any subdivision or combination
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 (III) when used with respect
to any tender or exchange offer means the first date on which the Common
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<PAGE> 37
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
paragraph (g)(iv), such adjustments shall be made to the Current Market Price
as may be necessary or appropriate to effectuate the intent of this paragraph
(g)(iv) and to avoid unjust or inequitable results, as determined in good
faith by the Board of Directors.
"fair market value" shall mean the amount which a willing buyer would pay a
willing seller in an arm's-length transaction.
"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 shareholders 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).
(8) 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
paragraph (g)(iv)(8) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
paragraph (g)(iv)(8) 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.
(9) Whenever the Conversion Price is adjusted as herein provided, the
Company shall promptly file with the Transfer Agent an Officers' Certificate
setting forth the Conversion Price after such adjustment and setting forth a
brief statement of the facts requiring such adjustment. Promptly after
delivery of such certificate, the Company shall prepare a notice of such
adjustment of the Conversion Price setting forth the
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<PAGE> 38
adjusted Conversion Price and the date on which each adjustment becomes
effective and shall mail such notice of such adjustment of the Conversion
Price to each holder of Convertible Preferred Stock at such holder's last
address appearing on the register of holders maintained for that purpose
within 20 days of the effective date of such adjustment. Failure to deliver
such notice shall not affect the legality or validity of any such adjustment.
(10) In any case in which this paragraph (g)(iv) 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 issuing to
the holder of any share of Convertible Preferred Stock converted after such
Record Date and before the occurrence of such event the additional 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.
(11) For purposes of this paragraph (g)(iv), 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 Common Stock. The Company shall
not pay any dividend or make any distribution on Common Stock held in the
treasury of the Company.
(v) In case of any consolidation of the Company with, or merger of the
Company into, any other corporation, or in case of any merger of another
corporation into the Company (other than a merger which does not result in
any reclassification, conversion, exchange or cancellation of outstanding
shares of Common Stock of the Company), or in case of any conveyance or
transfer of the properties and assets of the Company substantially as an
entirety, the holder of each share of Convertible Preferred Stock then
outstanding shall have the right thereafter, during the period such
Convertible Preferred Stock shall be convertible as specified in paragraph
(g)(i), to convert such share of Convertible Preferred Stock only into the
kind and amount of securities, cash and other property receivable upon such
consolidation, merger, conveyance or transfer by a holder of the number of
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<PAGE> 39
shares of Common Stock of the Company into which such share of Convertible
Preferred Stock might have been converted immediately prior to such
consolidation, merger, conveyance or transfer, assuming such holder of Common
Stock of the Company failed to exercise his rights of election, if any, as to
the kind or amount of securities, cash and other property receivable upon
such consolidation, merger, conveyance or transfer (provided that, if the
kind or amount of securities, cash and other property receivable upon such
consolidation, merger, conveyance or transfer is not the same for each share
of Common Stock of the Company in respect of which such rights of election
shall not have been exercised ("nonelecting share"), then for the purpose of
this paragraph (g)(v) the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, conveyance or transfer
by each nonelecting share shall be deemed to be the kind and amount so
receivable per share by a plurality of the nonelecting shares). Such
securities shall provide for adjustments which, for events subsequent to the
effective date of the triggering event, shall be as nearly equivalent as may
be practicable to the adjustments provided for in this paragraph (g)(v). The
above provisions of this Section shall similarly apply to successive
consolidations, mergers, conveyances or transfers.
(vi) In case:
(1) the Company shall declare a dividend (or any other distribution) on its
Common Stock payable otherwise than in cash out of its earned surplus; or
(2) the Company shall authorize the granting to all holders of its Common
Stock of rights or warrants to subscribe for or purchase any shares of capital
stock of any class or of any other rights; or
(3) of any reclassification of the Common Stock of the Company (other than a
subdivision or combination of its outstanding Common Stock), or of any
consolidation or merger to which the Company is a party and for which approval
of any shareholders of the Company is required, or the sale or transfer of all
or substantially all the assets of the Company; or
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(4) of the voluntary or involuntary dissolution, liquidation or winding up
of the Company;
then the Company shall cause to be filed with the Transfer Agent and at each
office or agency maintained for the purpose of conversion of the Convertible
Preferred Stock, and shall cause to be mailed to all holders at their last
addresses as they shall appear in the Convertible Preferred Stock Register, at
least 20 days (or 10 days in any case specified in clause (1) or (2) above)
prior to the applicable date hereinafter specified, a notice stating (x) 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 (y) the date
on which such reclassification, consolidation, merger, sale, transfer,
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 Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up. Failure to give the notice requested
by this Section or any defect therein shall not affect the legality or validity
of any dividend, distribution, right, warrant, reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding up, or the vote
upon any such action.
(vii) The Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued shares of Common Stock
(or out of its authorized shares of Common Stock held in the treasury of the
Company), for the purpose of effecting the conversion of the Convertible
Preferred Stock, the full number of Common Stock then issuable upon the
conversion of all outstanding shares of Convertible Preferred Stock.
(viii) The Company will pay any and all document, stamp or similar issue or
transfer taxes that may be payable in respect of the issue or delivery of
Common Stock on conversion of the Convertible Preferred Stock pursuant hereto.
The Company shall not, however, be required to pay any tax 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 share of
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Convertible Preferred Stock or the shares of Convertible Preferred Stock to be
converted, and no such issue or delivery shall be made unless and until the
Person requesting such issue has paid to the Company the amount of any such
tax, or has established to the satisfaction of the Company that such tax has
been paid.
(ix) (1) Notwithstanding any other provision in the preceding paragraphs
to the contrary, if any Change in Control occurs then, if the Company does not
elect to make a Change in Control Offer, the Conversion Price in effect shall
be adjusted immediately after such Change in Control as described below. In
addition, in the event of a Common Stock Change in Control (as defined in this
paragraph (g)(ix)), each share of the Convertible Preferred Stock shall be
convertible solely into common stock of the kind received by holders of Common
Stock as the result of such Common Stock Change in Control. For purposes of
calculating any adjustment to be made pursuant to this paragraph in the event
of a Change in Control, immediately after such Change in Control:
(A) in the case of a Non-Stock Change in Control (as defined in this
paragraph (g)(ix)), the Conversion Price shall thereupon become the lower of
(x) the Conversion Price in effect immediately prior to such Non-Stock Change
in Control, but after giving effect to any other prior adjustments, and (y)
the result obtained by multiplying the greater of the Applicable Price (as
defined in this paragraph (g)(ix)) or the then applicable Reference Market
Price (as defined in this paragraph (g)(ix)) by a fraction of which the
numerator shall be $100.00 and the denominator shall be the then current
Optional Redemption Price per share; and
(B) in the case of a Common Stock Change in Control, the Conversion Price in
effect immediately prior to such Common Stock Change in Control, but after
giving effect to any prior adjustments, shall thereupon be adjusted by
multiplying such Conversion Price by a fraction, of which the numerator shall
be the Purchaser Stock Price (as defined in this paragraph (g)(ix)) and the
denominator shall be the Applicable Price; provided, however, that in the
event of a Common Stock Change in Control in which (x) 100% of the value of
the consideration received by a holder of Common Stock is common stock of the
successor, acquiror, or other third
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party (and cash, if any, is paid with respect to any fractional interests in
such common stock resulting from such Common Stock Change in Control) and (y)
all of the Common Stock will have been exchanged for, converted into, or
acquired for, common stock (and cash with respect to fractional interests) of
the successor, acquiror or other third party, the Conversion Price in effect
immediately prior to such Common Stock Change in Control shall thereupon be
adjusted by multiplying such Conversion Price by a fraction, of which the
numerator shall be one (1) and the denominator shall be the number of shares
of common stock of the successor, acquiror, or other third party received by
a holder of one share of Common Stock as a result of such Common Stock Change
in Control.
(3) For purposes of this paragraph (ix), the following terms shall have the
meanings indicated:
"Applicable Price" means (i) in the event of a Non-Stock Change in Control
in which the holders of the Common Stock receive only cash, the amount of
cash received by the holder of one share of Common Stock and (ii) in the
event of any other Non-Stock Change in Control or any Common Stock Change in
Control, the average of the Closing Bid Prices for the Common Stock during
the ten Trading Days prior to and including the record date for the
determination of the holders of Common Stock entitled to receive cash,
securities, property or other assets in connection with such Non-Stock Change
in Control or Common Stock Change in Control or, if there is no such record
date, the date upon which the holders of the Common Stock shall have the
right to receive such cash, securities, property or other assets, in each
case, as adjusted in good faith by the Board of Directors to appropriately
reflect any of the events referred to in paragraph (g)(iv)(1) through (6).
"Common Stock Change in Control" means any Change in Control in which more
than 50% of the value (as determined in good faith by the Board of Directors
of the Company) of the consideration received by holders of Common Stock
consists of common stock that for each of the ten consecutive Trading Days
referred to in the preceding paragraph has been admitted for listing or
admitted for listing subject to notice of issuance on a national securities
exchange or quoted on The Nasdaq
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National Market; provided, however, that a Change in Control shall not be a
Common Stock Change in Control unless either (i) the Company continues to
exist after the occurrence of such Change in Control and the outstanding
shares of Convertible Preferred Stock continue to exist as outstanding shares
of Convertible Preferred Stock, or (ii) not later than the occurrence of such
Change in Control, the outstanding shares of Convertible Preferred Stock are
converted into or exchanged for shares of convertible preferred stock of a
corporation succeeding to the business of the Company, which convertible
preferred stock has powers, preferences and relative, participating, optional
or other rights, and qualifications, limitations and restrictions,
substantially similar to those of the Convertible Preferred Stock.
"Non-Stock Change in Control" means any Change in Control other than a
Common Stock Change in Control.
"Purchaser Stock Price" means, with respect to any Common Stock Change in
Control, the product of (i) the number of shares of common stock received in
such Common Stock Change of Control for each share of Common Stock, and (ii)
the average of the per share Closing Prices for the common stock received in
such Common Stock Change in Control for the ten consecutive Trading Days
prior to and including the record date for the determination of the holders
of Common Stock entitled to receive such common stock, or if there is no such
record date, the date upon which the holders of the Common Stock shall have
the right to receive such common stock, in each case, as adjusted in good
faith by the Board of Directors to appropriately reflect any of the events
referred to in paragraph (g)(iv)(1) through (6); provided, however, that if
no such Closing Prices exist, then the Purchaser Stock Price shall be set at
a price determined in good faith by the Board of Directors of the Company.
"Reference Market Price" shall initially mean $13.50 (which is an amount
equal to 66-2/3% of the reported last sale price for the Common Stock on The
Nasdaq National Market on March 25, 1997), and in the event of any adjustment
to the conversion prices other than as a result of a Change in Control, the
Reference Market Price shall also be adjusted so that the ratio of the
Reference Market Price to the Conversion Price
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after giving effect to any such adjustment shall always be the same as the
ratio of $13.50 to the initial Conversion Price set forth in paragraph
(g)(i).
(h) Change in Control. (i) Upon the occurrence of a Change of Control
(the date of such occurrence being the "Change in Control Date"), the Company
shall be obligated to (1) purchase all or a portion of each holder's
Convertible Preferred Stock in cash pursuant to the offer described in
paragraph (h)(iii) (the "Change of Control Offer") at a purchase price equal to
100% of the Liquidation Preference, plus, without duplication, all accrued and
unpaid Liquidated Damages and all accrued and unpaid dividends, if any, to the
Change of Control Payment Date, including an amount in cash equal to a prorated
dividend for the period from the Dividend Payment Date immediately prior to the
Change of Control Payment Date to the Change of Control Payment Date or (2)
adjust the conversion price as provided under paragraph (g)(ix).
Notwithstanding the foregoing, the Company shall, prior to electing to make a
Change of Control Offer, make an offer to redeem all outstanding shares of
Series 3 Preferred Stock.
(ii) Prior to the mailing of the notice referred to in paragraph (h)(iii),
but in any event within 15 days following the date on which the Company knows
or reasonably should have known that a Change in Control has occurred, the
Company covenants that it shall promptly determine if the purchase of the
Convertible Preferred Stock would violate or constitute a default under the
Indenture or other indebtedness of the Company.
(iii) Within 15 days following the date on which the Company knows or
reasonably should have known that a Change in Control has occurred, the Company
must send, by first-class mail, postage prepaid, a notice to each holder of
Convertible Preferred Stock. Such notice shall state whether the Change of
Control Offer would be permitted under the Indenture or other indebtedness of
the Company, and if permitted, such notice shall contain all instructions and
materials necessary to enable such holders to tender Convertible Preferred
Stock pursuant to the Change of Control Offer. If the Change of Control Offer
would be permitted under the Indenture or other indebtedness of the Company,
such notice shall state:
(A) that a Change of Control has occurred, that the Change of Control Offer
is being made pursuant to
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this paragraph (h) and that all Convertible Preferred Stock validly tendered
and not withdrawn will be accepted for payment;
(B) the purchase price (including the amount of accrued dividends, if any)
and the purchase date (which must be no earlier than 30 days nor later than
75 days from the date such notice is mailed, other than as may be required by
law) (the "Change of Control Payment Date");
(C) that any shares of Convertible Preferred Stock not tendered will
continue to accrue dividends;
(D) that, unless the Company defaults in making payment therefor, any share
of Convertible Preferred Stock accepted for payment pursuant to the Change of
Control Offer shall cease to accrue dividends after the Change of Control
Payment Date;
(E) that holders electing to have any shares of Convertible Preferred Stock
purchased pursuant to a Change of Control Offer will be required to surrender
such shares of Convertible Preferred Stock, properly endorsed for transfer,
together with such other customary documents as the Company and the Transfer
Agent may reasonably request to the Transfer Agent and registrar for the
Convertible Preferred Stock at the address specified in the notice prior to
the close of business on the Business Day prior to the Change of Control
Payment Date;
(F) that holders will be entitled to withdraw their election if the Company
receives, not later than five Business Days prior to the Change of Control
Payment Date, a telegram, a telex, facsimile transmission or letter setting
forth the name of the holder, the number of shares of Convertible Preferred
Stock the holder delivered for purchase and a statement that such holder is
withdrawing his election to have such shares of Convertible Preferred Stock
purchased;
(G) that holders whose shares of Convertible Preferred Stock are purchased
only in part will be issued a new certificate representing the unpurchased
shares of Convertible Preferred Stock; and
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<PAGE> 46
(H) the circumstances and relevant facts regarding such Change of Control.
If the Change of Control Offer would not be permitted under the Indenture
or other indebtedness of the Company, such notice shall state the Conversion
Price as adjusted pursuant to paragraph (g)(ix).
(iv) The Company will comply with any tender offer rules under the Exchange
Act which then may be applicable, including Rules 13e-4 and 14e-1, in
connection with any offer required to be made by the Company to repurchase the
shares of Convertible Preferred Stock as a result of a Change of Control. To
the extent that the provisions of any securities laws or regulations conflict
with provisions of this Certificate of Designation, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Certificate of Designation by virtue
thereof.
(v) On the Change of Control Payment Date the Company shall (A) accept for
payment the shares of Convertible Preferred Stock validly tendered pursuant to
the Change of Control Offer, (B) pay to the holders of shares so accepted the
purchase price therefor in cash and (C) cancel and retire each surrendered
certificate. Unless the Company defaults in the payment for the shares of
Convertible Preferred Stock tendered pursuant to the Change of Control Offer,
dividends will cease to accrue with respect to the shares of Convertible
Preferred Stock tendered and all rights of holders of such tendered shares will
terminate, except for the right to receive payment therefor, on the Change of
Control Payment Date.
(vi) To accept the Change of Control Offer, the holder of a share of
Convertible Preferred Stock shall deliver, on or before the 10th day prior to
the Change of Control Payment Date, written notice to the Company (or an agent
designated by the Company for such purpose) of such holder's acceptance,
together with certificates evidencing the shares of Convertible Preferred Stock
with respect to which the Change of Control Offer is being accepted, duly
endorsed for transfer.
(i) Reissuance of Convertible Preferred Stock. Shares of Convertible
Preferred Stock that have been issued and reacquired in any manner, including
shares purchased or redeemed or exchanged, shall not be reissued as shares of
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Convertible Preferred Stock and shall (upon compliance with any applicable
provisions of the laws of Delaware) have the status of authorized and
unissued shares of Preferred Stock undesignated as to series and may be
redesignated and reissued as part of any series of Preferred Stock; provided,
however, that so long as any shares of Convertible Preferred Stock are
outstanding, any issuance of such shares must be in compliance with the terms
hereof.
(j) Business Day. If any payment, redemption or exchange shall be required
by the terms hereof to be made on a day that is not a Business Day, such
payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
(k) Limitation on Mergers and Asset Sales. The Company may not consolidate
with or merge with or into, or convey, transfer or lease all or substantially
all its assets to, any person unless: (1) the successor, transferee or lessee
(if not the Company) is organized and existing under the laws of the United
States of America or any State thereof or the District of Columbia and the
Convertible Preferred Stock shall be converted into or exchanged for and shall
become shares of such successor, transferee or lessee, having in respect of
such successor, transferee or lessee substantially the same powers, preference
and relative participating, optional or other special rights and the
qualifications, limitations or restrictions thereon, that the Convertible
Preferred Stock had immediately prior to such transaction; and (2) the Company
delivers to the Transfer Agent an Officers' Certificate and an Opinion of
Counsel stating that such consolidation, merger or transfer complies with this
Certificate of Designation. The successor, transferee or lessee will be the
successor company.
(l) Certificates. (i) Form and Dating. The Convertible Preferred Stock
and the Transfer Agent's certificate of authentication shall be substantially
in the form of Exhibit A, which is hereby incorporated in and expressly made a
part of this Certificate of Designation. The Convertible Preferred Stock
certificate may have notations, legends or endorsements required by law, stock
exchange rule, agreements to which the Company is subject, if any, or usage
(provided that any such notation, legend or endorsement is in a form acceptable
to the Company). Each Convertible Preferred Stock certificate shall be dated
the date of its authentication. The terms of the Convertible
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Preferred Stock certificate set forth in Exhibit A are part of the terms of
this Certificate of Designation.
(A) Global Convertible Preferred Stock. The Convertible Preferred Stock
sold in reliance on Rule 144A shall be issued initially in the form of one or
more fully registered global certificates with the global securities legend and
restricted securities legend set forth in Exhibit A hereto (the "Global
Convertible Preferred Stock"), which shall be deposited on behalf of the
purchasers represented thereby with the Transfer Agent, at its New York office,
as custodian for DTC (or with such other custodian as DTC may direct), and
registered in the name of DTC or a nominee of DTC, duly executed by the Company
and authenticated by the Transfer Agent as hereinafter provided. The number of
shares of Convertible Preferred Stock represented by Global Convertible
Preferred Stock may from time to time be increased or decreased by adjustments
made on the records of the Transfer Agent and DTC or its nominee as hereinafter
provided.
(B) Book-Entry Provisions. In the event Global Convertible Preferred Stock
is deposited with or on behalf of DTC, the Company shall execute and the
Transfer Agent shall authenticate and deliver initially one or more Global
Convertible Preferred Stock certificates that (a) shall be registered in the
name of DTC for such Global Convertible Preferred Stock or the nominee of DTC
and (b) shall be delivered by the Transfer Agent to DTC or pursuant to DTC's
instructions or held by the Transfer Agent as custodian for DTC.
Members of, or participants in, DTC ("Agent Members") shall have no rights
under this Certificate of Designation with respect to any Global Convertible
Preferred Stock held on their behalf by DTC or by the Transfer Agent as the
custodian of DTC or under such Global Convertible Preferred Stock, and DTC may
be treated by the Company, the Transfer Agent and any agent of the Company or
the Transfer Agent as the absolute owner of such Global Convertible Preferred
Stock for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Transfer Agent or any agent of the
Company or the Transfer Agent from giving effect to any written certification,
proxy or other authorization furnished by DTC or impair, as between DTC and its
Agent Members, the operation of customary practices of DTC governing the
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exercise of the rights of a holder of a beneficial interest in any Global
Convertible Preferred Stock.
(C) Certificated Convertible Preferred Stock. Convertible Preferred Stock
initially sold to certain "accredited investors" (as defined in Rule 501(a)(1),
(2), (3), (4), (5), (6) or (7) under the Securities Act) or sold in offshore
transactions pursuant to Regulation S under the Securities Act will be issued
in fully registered certificated form ("Certificated Convertible Preferred
Stock").
Except as provided in this paragraph (l)(i) or in paragraph (l)(iii), owners
of beneficial interests in Global Convertible Preferred Stock will not be
entitled to receive physical delivery of Certificated Convertible Preferred
Stock.
After a transfer of any Convertible Preferred Stock during the period of the
effectiveness of a Shelf Registration Statement with respect to such
Convertible Preferred Stock, all requirements pertaining to legends on such
Convertible Preferred Stock will cease to apply, the requirements requiring
that any such Convertible Preferred Stock issued to Holders be issued in global
form will cease to apply, and Certificated Convertible Preferred Stock without
legends will be available to the transferee of the Holder of such Convertible
Preferred Stock upon exchange of such transferring Holder's Convertible
Preferred Stock or directions to transfer such Holder's interest in the Global
Convertible Preferred Stock, as applicable.
(ii) Execution and Authentication. Two Officers shall sign the Convertible
Preferred Stock for the Company by manual or facsimile signature. The
Company's seal shall be impressed, affixed, imprinted or reproduced on the
Convertible Preferred Stock and may be in facsimile form.
If an Officer whose signature is on Convertible Preferred Stock no longer
holds that office at the time the Transfer Agent authenticates the Convertible
Preferred Stock, the Convertible Preferred Stock shall be valid nevertheless.
A Convertible Preferred Stock shall not be valid until an authorized
signatory of the Transfer Agent manually signs the certificate of
authentication on the Convertible Preferred Stock. The signature shall be
conclusive evidence
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that the Convertible Preferred Stock has been authenticated under this
Certificate of Designation.
The Transfer Agent shall authenticate and deliver 1,000,000 shares of
Convertible Preferred Stock for original issue upon a written order of the
Company signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of the Company. In addition, the Transfer
Agent shall authenticate and deliver, from time to time, Additional Shares for
original issue upon order of the Company signed by two Officers or by an
Officer or either an Assistant Treasurer or Assistant Secretary of the Company.
Such orders shall specify the number of shares of Convertible Preferred Stock
to be authenticated and the date on which the original issue of Convertible
Preferred Stock is to be authenticated.
The Transfer Agent may appoint an authenticating agent reasonably acceptable
to the Company to authenticate the Convertible Preferred Stock. Unless limited
by the terms of such appointment, an authenticating agent may authenticate
Convertible Preferred Stock whenever the Transfer Agent may do so. Each
reference in this Certificate of Designation to authentication by the Transfer
Agent includes authentication by such agent. An authenticating agent has the
same rights as the Transfer Agent or agent for service of notices and demands.
(iii) Transfer and Exchange. (A) Transfer and Exchange of Certificated
Convertible Preferred Stock. When Certificated Convertible Preferred Stock is
presented to the Transfer Agent with a request to register the transfer of such
Certificated Convertible Preferred Stock or to exchange such Certificated
Convertible Preferred Stock for an equal number of shares of Certificated
Convertible Preferred Stock of other authorized denominations, the Transfer
Agent shall register the transfer or make the exchange as requested if its
reasonable requirements for such transaction are met; provided, however, that
the Certificated Convertible Preferred Stock surrendered for transfer or
exchange:
(1) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the Transfer
Agent, duly executed by the Holder thereof or its attorney duly authorized in
writing; and
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(2) in the case of Transfer Restricted Securities that are Certificated
Convertible Preferred Stock, are being transferred or exchanged pursuant to
an effective registration statement under the Securities Act or pursuant to
clause (I), (II) or (III) below, and are accompanied by the following
additional information and documents, as applicable:
(I) if such Transfer Restricted Securities are being delivered to the
Transfer Agent by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that effect in
substantially the form of Exhibit C hereto; or
(II) if such Transfer Restricted Securities are being transferred to the
Company or to a "qualified institutional buyer" ("QIB") in accordance with
Rule 144A under the Securities Act or pursuant to an exemption from
registration in accordance with Rule 144 or Regulation S under the
Securities Act, a certification to that effect (in substantially the form of
Exhibit C hereto); or
(III) if such Transfer Restricted Securities are being transferred to an
"accredited investor" as described in Rule 501(a)(1), (2), (3), (4), (5),
(6) or (7) under the Securities Act that is acquiring the Securities for its
own account, or for the account of such an accredited investor, in each case
in a minimum principal amount of $100,000 for investment purposes and not
with a view to, or for offer or sale in connection with, any distribution in
violation of the Securities Act, or in reliance on another exemption from
the registration requirements of the Securities Act: a certification to that
effect in substantially the form of Exhibit C hereto, and if the Company or
the Transfer Agent so requests, evidence reasonably satisfactory to them as
to the compliance with the restrictions set forth in the legend set forth in
paragraph (l)(iii)(G)(1) below.
(B) Restrictions on Transfer of Certificated Convertible Preferred Stock
for a Beneficial Interest in Global Convertible Preferred Stock. Certificated
Convertible Preferred Stock may not be exchanged for a
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<PAGE> 52
beneficial interest in Global Convertible Preferred Stock except upon
satisfaction of the requirements set forth below. Upon receipt by the
Transfer Agent of Certificated Convertible Preferred Stock, duly endorsed or
accompanied by appropriate instruments of transfer, in form satisfactory to
the Transfer Agent, together with:
(1) if such Certificated Convertible Preferred Stock is a Transfer
Restricted Security, certification that such Certificated Convertible
Preferred Stock is being transferred to a QIB in accordance with Rule 144A
under the Securities Act; and
(2) whether or not such Certificated Convertible Preferred Stock is a
Transfer Restricted Security, written instructions directing the Transfer
Agent to make, or to direct DTC to make, an adjustment on its books and
records with respect to such Global Convertible Preferred Stock to reflect an
increase in the number of shares of Convertible Preferred Stock represented
by the Global Convertible Preferred Stock,
then the Transfer Agent shall cancel such Certificated Convertible Preferred
Stock and cause, or direct DTC to cause, in accordance with the standing
instructions and procedures existing between DTC and the Transfer Agent, the
number of shares of Convertible Preferred Stock represented by the Global
Convertible Preferred Stock to be increased accordingly. If no Global
Convertible Preferred Stock is then outstanding, the Company shall issue and
the Transfer Agent shall authenticate, upon written order of the Company in the
form of an Officers' Certificate, a new Global Convertible Preferred Stock
representing the appropriate number of shares.
(C) Transfer and Exchange of Global Convertible Preferred Stock. The
transfer and exchange of Global Convertible Preferred Stock or beneficial
interests therein shall be effected through DTC, in accordance with this
Certificate of Designation (including applicable restrictions on transfer set
forth herein, if any) and the procedures of DTC therefor.
(D) Transfer of a Beneficial Interest in Global Convertible Preferred Stock
for a Certificated Convertible Preferred Stock.
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(1) Any person having a beneficial interest in Convertible Preferred
Stock that is being transferred or exchanged pursuant to an effective
registration statement under the Securities Act or pursuant to clause (I),
(II) or (III) below may upon request, and if accompanied by the information
specified below, exchange such beneficial interest for Certificated
Convertible Preferred Stock representing the same number of shares of
Convertible Preferred Stock. Upon receipt by the Transfer Agent of written
instructions or such other form of instructions as is customary for DTC from
DTC or its nominee on behalf of any person having a beneficial interest in
Global Convertible Preferred Stock and upon receipt by the Transfer Agent of
a written order or such other form of instructions as is customary for DTC
or the person designated by DTC as having such a beneficial interest in a
Transfer Restricted Security only, and upon the following additional
information and documents (all of which may be submitted by facsimile):
(I) if such beneficial interest is being transferred to the person
designated by DTC as being the owner of a beneficial interest in Global
Convertible Preferred Stock, a certification from such person to that
effect (in substantially the form of Exhibit C hereto);
(II) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act or pursuant to an
exemption from registration in accordance with Rule 144 or Regulation S
under the Securities Act, a certification to that effect (in substantially
the form of Exhibit C hereto); or
(III) if such beneficial interest is being transferred to an "accredited
investor" as described in Rule 501(a)(1), (2), (3), (4), (5), (6) or (7)
under the Securities Act that is acquiring the security for its own
account, or for the account of such an accredited investor, in each case in
a minimum principal amount of $100,000 for investment purposes and not with
a view to, or for offer or sale in connection with, any distribution in
violation of the Securities Act, or in reliance on another exemption from
the registration requirements of the Securities Act, a
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<PAGE> 54
certification to that effect from the transferor (in substantially the form
of Exhibit C hereto), and if the Company or the Transfer Agent so requests,
evidence reasonably satisfactory to them as to the compliance with the
restrictions set forth in the legend set forth in paragraph (l)(iii)(G)(1)
below;
then, the Transfer Agent or DTC, at the direction of the Transfer Agent, will
cause, in accordance with the standing instructions and procedures existing
between DTC and the Transfer Agent, the number of shares of Convertible
Preferred Stock represented by Global Convertible Preferred Stock to be reduced
on its books and records and, following such reduction, the Company will
execute and the Transfer Agent will authenticate and deliver to the transferee
Certificated Convertible Preferred Stock.
(2) Certificated Convertible Preferred Stock issued in exchange for a
beneficial interest in a Global Convertible Preferred Stock pursuant to this
paragraph (l)(iii)(D) shall be registered in such names and in such
authorized denominations as DTC, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Transfer Agent. The
Transfer Agent shall deliver such Certificated Convertible Preferred Stock to
the persons in whose names such Convertible Preferred Stock are so registered
in accordance with the instructions of DTC.
(E) Restrictions on Transfer and Exchange of Global Convertible Preferred
Stock. Notwithstanding any other provisions of this Certificate of Designation
(other than the provisions set forth in paragraph (l)(iii)(F)), Global
Convertible Preferred Stock may not be transferred as a whole except by DTC to
a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by
DTC or any such nominee to a successor depository or a nominee of such
successor depository.
(F) Authentication of Certificated Convertible Preferred Stock. If at any
time:
(1) DTC notifies the Company that DTC is unwilling or unable to continue as
depository for the Global Convertible Preferred Stock and a successor
depository for the Global Convertible Preferred Stock is not appointed by the
Company within 90 days after delivery of such notice;
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(2) DTC ceases to be a clearing agency registered under the Exchange Act;
(3) there shall have occurred and be continuing a Voting Rights Triggering
Event; or
(4) the Company, in its sole discretion, notifies the Transfer Agent in
writing that it elects to cause the issuance of Certificated Convertible
Preferred Stock under this Certificate of Designation,
then the Company will execute, and the Transfer Agent, upon receipt of a
written order of the Company signed by two Officers or by an Officer and either
an Assistant Treasurer or an Assistant Secretary of the Company requesting the
authentication and delivery of Certificated Convertible Preferred Stock to the
persons designated by the Company, will authenticate and deliver Certificated
Convertible Preferred Stock equal to the number of shares of Convertible
Preferred Stock represented by the Global Convertible Preferred Stock, in
exchange for such Global Convertible Preferred Stock.
(G) Legend. (1) Except as permitted by the following paragraph (2), each
certificate evidencing the Global Convertible Preferred Stock and the
Certificated Convertible Preferred Stock (and all Convertible Preferred Stock
issued in exchange therefor or substitution thereof) shall bear a legend in
substantially the following form:
"THE SECURITY EVIDENCED HEREBY (OR ITS PREDECESSOR) (AND THE COMMON STOCK
INTO WHICH THIS SECURITY IS CONVERTIBLE) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED IN ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED
HEREBY (OR THE COMMON STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE) IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY (AND OF THE COMMON
STOCK INTO WHICH THIS SECURITY IN CONVERTIBLE) AGREES FOR THE
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BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY (AND THE COMMON STOCK INTO
WHICH THIS SECURITY IS CONVERTIBLE) MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE), (4) TO THE COMPANY OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES."
(2) Upon any sale or transfer of a Transfer Restricted Security (including
any Transfer Restricted Security represented by Global Convertible Preferred
Stock) pursuant to Rule 144 under the Securities Act or an effective
registration statement under the Securities Act:
(I) in the case of any Transfer Restricted Security that is a Certificated
Convertible Preferred Stock, the Transfer Agent shall permit the Holder
thereof to exchange such Transfer Restricted Security for a Certificated
Convertible Preferred Stock that does not bear the legend set forth above
and rescind any restriction on the transfer of such Transfer Restricted
Security; and
(II) in the case of any Transfer Restricted Security that is represented
by a Global Convertible Preferred Stock, the Transfer Agent shall permit the
Holder thereof to exchange such Transfer Restricted Security for a
Certificated Convertible Preferred Stock Security that does not bear the
legend set forth above and rescind any restriction on the transfer of such
Transfer Restricted Security, if the Holder's request for such exchange was
made in reliance on Rule 144 and the Holder certifies to that effect in
writing to the Transfer Agent (such certification to be in the form set
forth on the reverse of the Transfer Restricted Security).
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(H) Cancellation or Adjustment of Global Convertible Preferred Stock. At
such time as all beneficial interests in Global Convertible Preferred Stock
have either been exchanged for Certificated Convertible Preferred Stock,
redeemed, repurchased or canceled, such Global Convertible Preferred Stock
shall be returned to DTC for cancellation or retained and canceled by the
Transfer Agent. At any time prior to such cancellation, if any beneficial
interest in Global Convertible Preferred Stock is exchanged for Certificated
Convertible Preferred Stock, redeemed, repurchased or canceled, the number of
shares of Convertible Preferred Stock represented by such Global Convertible
Preferred Stock shall be reduced and an adjustment shall be made on the books
and records of the Transfer Agent with respect to such Global Convertible
Preferred Stock, by the Transfer Agent or DTC, to reflect such reduction.
(I) Obligations with Respect to Transfers and Exchanges of Convertible
Preferred Stock. (1) To permit registrations of transfers and exchanges, the
Company shall execute and the Transfer Agent shall authenticate Certificated
Convertible Preferred Stock and Global Convertible Preferred Stock as required
pursuant to the provisions of this paragraph (iii).
(2) All Certificated Convertible Preferred Stock and Global Convertible
Preferred Stock issued upon any registration of transfer or exchange of
Certificated Convertible Preferred Stock or Global Convertible Preferred
Stock shall be the valid obligations of the Company, entitled to the same
benefits under this Certificate of Designation as the Certificated
Convertible Preferred Stock or Global Convertible Preferred Stock surrendered
upon such registration of transfer or exchange.
(3) Prior to due presentment for registration of transfer of any shares of
Convertible Preferred Stock, the Transfer Agent and the Company may deem and
treat the person in whose name such shares of Convertible Preferred Stock are
registered as the absolute owner of such Convertible Preferred Stock and
neither the Transfer Agent nor the Company shall be affected by notice to the
contrary.
(4) No service charge shall be made to a Holder for any registration of
transfer or exchange upon surrender of any Convertible Preferred Stock
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Certificate at the office of the Transfer Agent maintained for that purpose.
However, the Company may require payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Convertible Preferred Stock
Certificates.
(5) Upon any sale or transfer of shares of Convertible Preferred Stock
(including any Convertible Preferred Stock represented by a Global
Convertible Preferred Stock Certificate) pursuant to an effective
registration statement under the Securities Act, pursuant to Rule 144 under
the Securities Act or pursuant to an opinion of counsel reasonably
satisfactory to the Company that no legend is required:
(A) in the case of any Certificated Convertible Preferred Stock, the
Transfer Agent shall permit the holder thereof to exchange such
Convertible Preferred Stock for Certificated Convertible Preferred
Stock that does not bear the legend set forth in paragraph (iii)(G)
above and rescind any restriction on the transfer of such Convertible
Preferred Stock; and
(B) in the case of any Global Convertible Preferred Stock, such
Convertible Preferred Stock shall not be required to bear the legend
set forth in paragraph (iii)(G) above but shall continue to be subject
to the provisions of paragraph (iii)(D) hereof; provided, however,
that with respect to any request for an exchange of Convertible
Preferred Stock that is represented by Global Convertible Preferred
Stock for Certificated Convertible Preferred Stock that does not bear
the legend set forth in paragraph (iii)(G) above in connection with a
sale or transfer thereof pursuant to Rule 144 (and based upon an
opinion of counsel if the Company so requests), the Holder thereof
shall certify in writing to the Transfer Agent that such request is
being made pursuant to Rule 144 (such certification to be
substantially in the form of Exhibit C hereto).
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(iv) Replacement Certificates. If a mutilated Convertible Preferred
Stock certificate is surrendered to the Transfer Agent or if the Holder of a
Convertible Preferred Stock certificate claims that the Convertible Preferred
Stock certificate has been lost, destroyed or wrongfully taken, the Company
shall issue and the Transfer Agent shall countersign a replacement
Convertible Preferred Stock certificate if the reasonable requirements of the
Transfer Agent and of Section 8-405 of the Uniform Commercial Code as in
effect in the State of New York are met. If required by the Transfer Agent
or the Company, such Holder shall furnish an indemnity bond sufficient in the
judgment of the Company and the Transfer Agent to protect the Company and the
Transfer Agent from any loss which either of them may suffer if a Convertible
Preferred Stock certificate is replaced. The Company and the Transfer Agent
may charge the Holder for their expenses in replacing a Convertible Preferred
Stock certificate.
(v) Temporary Certificates. Until definitive Convertible Preferred Stock
certificates are ready for delivery, the Company may prepare and the Transfer
Agent shall countersign temporary Convertible Preferred Stock certificates.
Temporary Convertible Preferred Stock certificates shall be substantially in
the form of definitive Convertible Preferred Stock certificates but may have
variations that the Company considers appropriate for temporary Convertible
Preferred Stock certificates. Without unreasonable delay, the Company shall
prepare and the Transfer Agent shall countersign definitive Convertible
Preferred Stock certificates and deliver them in exchange for temporary
Convertible Preferred Stock certificates.
(vi) Cancellation. (A) In the event the Company shall purchase or
otherwise acquire Certificated Convertible Preferred Stock, the same shall
thereupon be delivered to the Transfer Agent for cancellation.
(B) At such time as all beneficial interests in Global Convertible
Preferred Stock have either been exchanged for Certificated Convertible
Preferred Stock, redeemed, repurchased or canceled, such Global Convertible
Preferred Stock shall thereupon be delivered to the Transfer Agent for
cancellation.
(C) The Transfer Agent and no one else shall cancel and destroy all
Convertible Preferred Stock certificates surrendered for transfer, exchange,
replacement
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or cancellation and deliver a certificate of such destruction to the Company
unless the Company directs the Transfer Agent to deliver canceled Convertible
Preferred Stock certificates to the Company. The Company may not issue new
Convertible Preferred Stock certificates to replace Convertible Preferred Stock
certificates to the extent they evidence Convertible Preferred Stock which the
Company has purchased or otherwise acquired.
(m) Additional Rights of Holders. In addition to the rights provided to
Holders under this Certificate of Designation, Holders shall have the rights
set forth in the Registration Rights Agreement.
(o) Certain Definitions. As used in this Certificate of Designation, the
following terms shall have the following meanings (and (1) terms defined in the
singular have comparable meanings when used in the plural and vice versa, (2)
"including" means including without limitation, (3) "or" is not exclusive and
(4) an accounting term not otherwise defined has the meaning assigned to it in
accordance with United States generally accepted accounting principles as in
effect on the Issue Date and all accounting calculations will be determined in
accordance with such principles), unless the content otherwise requires:
"Business Day" means each day which is not a Legal Holiday.
"capital stock" of any person means any and all shares, interests, rights to
purchase, warrants, options, participation or other equivalents of or interests
in (however designated) equity of such person, including any Preferred Stock,
but excluding any debt securities convertible into or exchangeable for such
equity.
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"Change in Control" or "Change of Control" means: (i) the sale, lease,
transfer, conveyance 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 "person" (as such term is used in Section 13(d)(3) of the Exchange
Act), (ii) the adoption of a plan relating to the liquidation or dissolution of
the Company, (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), (other than officers, directors and stockholders
of the Company and their affiliates on the date of this Certificate of
Designation), becomes the beneficial owner (as determined in accordance with
Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more
than 50% of the voting stock of the Company or (iv) the first day on which a
majority of the members of the board of directors (excluding the directors
elected pursuant to paragraph (f) are not Continuing Directors.
"Closing Bid Price" means on any day the last reported bid price on such
day, or in case no bid takes place on such day, the average of the reported
closing bid and asked prices, in each case on the Nasdaq National Market or, if
the Common Stock is not quoted on such system, on the principal national
securities exchange on which such stock is listed or admitted to trading, or if
not listed or admitted to trading on any national securities exchange, the
average of the closing bid and asked prices as furnished by any independent
registered broker-dealer firm, selected by the Company for that purpose.
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors who (i) was a member of such Board of Directors on the
date of this Certificate of Designation or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board of Directors at the time of
such nomination or election.
"Default" means any event which is, or after notice or passage of time or
both would be, a Voting Rights Triggering Event.
"DTC" means The Depository Trust Company.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holders" means the registered holders from time to time of the Convertible
Preferred Stock.
"Indenture" means the Indenture dated as of October 5, 1995 between the
Company and IBJ Schroder Bank & Trust Company.
"Issue Date" means the date on which the Convertible Preferred Stock is
initially issued.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York.
"Liquidated Damages" means, with respect to any share of Convertible
Preferred Stock, the Additional Dividends then accrued, if any, on such share
pursuant to paragraph (c).
"Officer" means the Chairman of the Board of Directors, the President, any
Vice President, the Treasurer, the Secretary or any Assistant Secretary of the
Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Transfer Agent. The counsel may be an employee of or counsel
to the Company or the Transfer Agent.
"person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred
as to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
51
<PAGE> 63
"Registration Rights Agreement" means the Registration Rights Agreement
dated March 25, 1997 among the Company, Credit Suisse First Boston Corporation
and Dillon, Read & Co. Inc. with respect to the Convertible Preferred Stock.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933.
"Series 3 Preferred Stock" means the 10% Junior Series 3 Preferred Stock of
the Company.
"Shelf Registration Statement" means a shelf registration statement filed
with the SEC to cover resales of Transfer Restricted Securities by holders
thereof, as required by the Registration Rights Agreement.
"Subsidiary" means any corporation, association, partnership, limited
liability company or other business entity of which more than 50% of the total
voting power of shares of capital stock or other interests entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by the Company, the Company and one or more
Subsidiaries or one or more Subsidiaries and any partnership the sole general
partner or the managing partner of which the Company or any Subsidiary or the
only general partners of which are the Company and one or more Subsidiaries or
one or more Subsidiaries.
"Trading Day" means, in respect of any securities exchange or securities
market, each Monday, Tuesday, Wednesday, Thursday and Friday, other than any
day on which securities are not traded on the applicable securities exchange or
in the applicable securities market.
"Transfer Agent" means the transfer agent for the Convertible Preferred
Stock appointed by the Company, which initially shall be ChaseMellon
Shareholder Services, L.L.C.
"Transfer Restricted Securities" means each share of Convertible Preferred
Stock (or the shares of Common Stock into which such share of Convertible
Preferred Stock is convertible) (including additional shares of Convertible
Preferred Stock issued in payment of dividends on the
52
<PAGE> 64
Convertible Preferred Stock, if any, as permitted in accordance with the terms
hereof) until (i) the date on which such security has been effectively
registered under the Securities Act and disposed of in accordance with the
Shelf Registration Statement or (ii) the date on which such security is
distributed to the public pursuant to Rule 144 under the Securities Act or is
saleable pursuant to Rule 144(k) under the Securities Act (or any successor
rule thereof) or would be saleable pursuant to Rule 144(k) under the Securities
Act had it not been held by, or had it never been held by, an affiliate of the
Company.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
53
<PAGE> 65
IN WITNESS WHEREOF, said IXC Communications, Inc., has caused this
Certificate of Designation to be signed by John J. Willingham, its Senior Vice
President and Chief Financial Officer, this 31st day of March, 1997.
IXC COMMUNICATIONS, INC.,
by /s/ John J. Willingham
----------------------------------
Name: John J. Willingham
Title: Senior Vice President
and Chief Financial Officer
54
<PAGE> 66
EXHIBIT A
FORM OF CONVERTIBLE PREFERRED STOCK
FACE OF SECURITY
[THE SECURITY EVIDENCED HEREBY (OR ITS PREDECESSOR) (AND THE COMMON STOCK
INTO WHICH THIS SECURITY IS CONVERTIBLE) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED IN ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY (OR THE COMMON
STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE) IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY (AND OF THE COMMON STOCK INTO WHICH THIS SECURITY IS
CONVERTIBLE) AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY (AND
THE COMMON STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE) MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE
904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE), (4) TO THE COMPANY OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES.]*
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK,
TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OF PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON
__________________________________
* Subject to removal upon registration under the Securities Act of 1933 or
otherwise when the security shall no longer be a restricted security.
<PAGE> 67
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO. HAS AN INTEREST
HEREIN.]**
[TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
CERTIFICATE OF DESIGNATION REFERRED TO BELOW.]**
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND
TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH REGISTRAR AND
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES
WITH THE FOREGOING RESTRICTIONS.
Number of Shares of Convertible
Certificate Number Preferred Stock
[ ] [ ]
CUSIP NO.: [ ]
7 1/4% Junior Convertible Preferred Stock Due 2007
(par value $0.01) (liquidation preference $100
per share of Convertible Preferred Stock)
of
IXC Communications, Inc.
IXC Communications, Inc., a Delaware corporation (the "Company"), hereby
certifies that [ ] (the "Holder") is the registered owner of fully paid
and non-assessable preferred securities of the Company designated the 7 1/4%
Junior Convertible Preferred Stock Due 2007 (par value $0.01) (liquidation
preference $100 per share of Convertible Preferred Stock) (the "Convertible
Preferred Stock"). The shares of Convertible Preferred Stock are transferable
on the books and records of the Registrar, in person or by a duly authorized
attorney, upon surrender of this certificate duly endorsed and in proper form
for transfer. The designation, rights, privileges,
__________________________________
** Subject to removal if not a global security.
2
<PAGE> 68
restrictions, preferences and other terms and provisions of the Convertible
Preferred Stock represented hereby are issued and shall in all respects be
subject to the provisions of the Certificate of Designation dated March [ ],
1997, as the same may be amended from time to time (the "Certificate of
Designation"). Capitalized terms used herein but not defined shall have the
meaning given them in the Certificate of Designation. The Company will provide
a copy of the Certificate of Designation to a Holder without charge upon
written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Convertible Preferred
Stock set forth on the reverse hereof, and to the Certificate of Designation,
which select provisions and the Certificate of Designation shall for all
purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of
Designation and is entitled to the benefits thereunder.
Unless the Transfer Agent's Certificate of Authentication hereon has been
properly executed, these shares of Convertible Preferred Stock shall not be
entitled to any benefit under the Certificate of Designation or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has executed this certificate this [ ] day
of [ ], [ ].
IXC COMMUNICATIONS, INC.,
By:
-------------------------------
Name:
Title:
[Seal]
By:
-------------------------------
Name:
Title:
3
<PAGE> 69
TRANSFER AGENT'S CERTIFICATE OF AUTHENTICATION
This is one of the Convertible Preferred Stock referred to in the within
mentioned Certificate of Designation.
Dated: [ ], [ ]
CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.
as Transfer Agent,
By:
---------------------------
Authorized Signatory
4
<PAGE> 70
REVERSE OF SECURITY
Dividends on each share of Convertible Preferred Stock shall be payable at a
rate per annum set forth in the face hereof or as provided in the Certificate
of Designation (including Additional Dividends).
The shares of Convertible Preferred Stock shall be redeemable as provided in
the Certificate of Designation. The shares of Convertible Preferred Stock
shall be convertible into the Company's Common Stock in the manner and
according to the terms set forth in the Certificate of Designation.
As required under Delaware law, the Company shall furnish to any Holder upon
request and without charge, a full summary statement of the designations,
voting rights preferences, limitations and special rights of the shares of each
class or series authorized to be issued by the Company so far as they have been
fixed and determined and the authority of the Board of Directors to fix and
determine the designations, voting rights, preferences, limitations and special
rights of the class and series of shares of the Company.
5
<PAGE> 71
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of
Convertible Preferred Stock evidenced hereby to:
------------------------------
- -------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- -------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
agent to transfer the shares of Convertible Preferred Stock evidenced hereby on
the books of the Transfer Agent and Registrar. The agent may substitute
another to act for him or her.
Date:
------------------------------
Signature:
-------------------------
(Sign exactly as your name appears on the other side of this Convertible
Preferred Stock Certificate)
Signature Guarantee:***
------------------------------------------------------
- ------------------------
*** (Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.)
6
<PAGE> 72
EXHIBIT B
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Convertible, Preferred Stock)
The undersigned hereby irrevocably elects to convert (the "Conversion") shares
of 7 1/4% Junior Convertible Preferred Stock (the "Convertible Preferred
Stock"), represented by stock certificate No(s). _______________ (the
"Convertible Preferred Stock Certificates") into shares of common stock
("Common Stock") of IXC Communications, Inc. (the "Company") according to the
conditions of the Certificate of Designations, Preferences and Rights of the
Convertible Preferred Stock (the "Certificate of Designation"), as of the date
written below. If shares 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 and is delivering herewith such certificates. No fee will be
charged to the holder for any conversion, except for transfer taxes, if any. A
copy of each Convertible Preferred Stock Certificate is attached hereto (or
evidence of loss, theft or destruction thereof).
The undersigned represents and warrants that all offers and sales by the
undersigned of the shares of Common Stock issuable to the undersigned upon
conversion of the Convertible Preferred Stock shall be made pursuant to
registration of the Common Stock under the Securities Act of 1933 (the "Act"),
or pursuant to any exemption from registration under the Act.
Any holder, upon the exercise of its conversion rights in accordance with the
terms of the Certificate of Designation and the Convertible Preferred Stock,
agrees to be bound by the terms of the Registration Rights Agreement.
Capitalized terms used but not defined herein shall have the meanings ascribed
thereto in or pursuant to the Certificate of Designation.
Date of Conversion: ________________________
Applicable Conversion Price: _______________
Number of shares of Convertible
Preferred Stock to be Converted: ____________
<PAGE> 73
Number of shares of
Common Stock to be Issued: _________________
Signature: _________________________________
Name: ______________________________________
Address:** _________________________________
Fax No.: ___________________________________
- -----------------------------
* The Company is not required to issue shares of Common Stock until the
original Convertible Preferred Stock Certificate(s) (or evidence of loss,
theft or destruction thereof) to be converted are received by the Company or
its Transfer Agent. The Company shall issue and deliver shares of Common
Stock to an overnight courier not later than three business days following
receipt of the original Convertible Preferred Stock Certificate(s) to be
converted.
** Address where shares of Common Stock and any other payments or certificates
shall be sent by the Company.
2
<PAGE> 74
EXHIBIT C
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF CONVERTIBLE PREFERRED STOCK
Re: 7 1/4% Junior Convertible Preferred Stock Due 2007 (the "Convertible
Preferred Stock") of IXC Communications, Inc. (the "Company")
This Certificate relates to ____ shares of Convertible Preferred Stock held
in [ ] */ book-entry or [ ] */ definitive form by _______________ (the
"Transferor").
The Transferor*:
[ ] has requested the Transfer Agent by written order to deliver in exchange
for its beneficial interest in the Convertible Preferred Stock held by the
depository shares of Convertible Preferred Stock in definitive, registered form
equal to its beneficial interest in such Convertible Preferred Stock (or the
portion thereof indicated above); or
[ ] has requested the Transfer Agent by written order to exchange or
register the transfer of Convertible Preferred Stock.
In connection with such request and in respect of such Convertible Preferred
Stock, the Transferor does hereby certify that the Transferor is familiar with
the Certificate of Designation relating to the above captioned Convertible
Preferred Stock and that the transfer of this Convertible Preferred Stock does
not require registration under the Securities Act of 1933 (the "Securities
Act") because */:
[ ] Such Convertible Preferred Stock is being acquired for the Transferor's
own account without transfer.
[ ] Such Convertible Preferred Stock is being transferred to the Company.
[ ] Such Convertible Preferred Stock is being transferred (i) to a qualified
institutional buyer (as defined in Rule 144A under the Securities Act), in
reliance on Rule 144A or (ii) pursuant to an exemption from registration in
accordance with Rule 904 under the Securities Act (and, in the case of clause
(ii), based on an opinion of counsel if the Company so requests and together
__________________________________
*/Please check applicable box.
<PAGE> 75
with a certification in substantially the form of Exhibit E to the
Certificate of Designation).
[ ] Such Convertible Preferred Stock is being transferred to an accredited
investor within the meaning of Rule 501(a)(1), (2), (3), (4), (5), (6) or (7)
under the Securities Act pursuant to a private placement exemption from the
registration requirements of the Securities Act (together with a certification
in substantially the form of Exhibit D to the Certificate of Designation).
[ ] Such Convertible Preferred Stock is being transferred in reliance on and
in compliance with another exemption from the registration requirements of the
Securities Act (and based on an opinion of counsel if the Company so requests).
-------------------------------
[INSERT NAME OF TRANSFEROR]
Date: By
------------------------------- -------------------------------
2
<PAGE> 76
EXHIBIT D
FORM OF CERTIFICATE
TO BE DELIVERED BY ACCREDITED INVESTORS
_____________, _____
ChaseMellon Shareholder Services, L.L.C.
Attention: [ ]
Ladies and Gentlemen:
In connection with our proposed purchase of certain 7 1/4% Junior
Convertible Preferred Stock Due 2007 (the "Convertible Preferred Stock"), of
IXC Communications, Inc., a Delaware corporation (the "Company"), we represent
that:
(i) we are an "accredited investor" within the meaning of Rule
501(a)(1),(2),(3),(4),(5),(6) or (7) under the Securities Act of 1933 (the
"Securities Act") (an "Accredited Investor"), or an entity in which all of
the equity owners are Accredited Investors;
(ii) any purchase of Convertible Preferred Stock will be for our own account
or for the account of one or more other Accredited Investors as to which we
exercise sole investment discretion;
(iii) we have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of purchasing
Convertible Preferred Stock and we and any accounts for which we are acting
are able to bear the economic risks of our or their investment;
(iv) we are not acquiring Convertible Preferred Stock with a view to any
distribution thereof in a transaction that would violate the Securities Act
or the securities laws of any State of the United States or any other
applicable jurisdiction; provided that the disposition of our property and
the property of any accounts for which we are acting as fiduciary shall
remain at all times without our control; and
(v) we acknowledge that we have had access to such financial and other
information, and have been afforded the opportunity to ask such questions of
representatives of the Company and receive answers
<PAGE> 77
thereto, as we deem necessary in connection with our decision to purchase
Convertible Preferred Stock.
We understand that the Convertible Preferred Stock has not been registered
under the Securities Act, and we agree, on our own behalf and on behalf of each
account for which we acquire any Convertible Preferred Stock, that such
Convertible Preferred Stock may be offered, resold, pledged or otherwise
transferred only (i) to a person whom we reasonably believe to be a qualified
institutional buyer (as defined in Rule 144A under the Securities Act) in a
transaction meeting the requirements of Rule 144A, in a transaction meeting the
requirements of Rule 144 under the Securities Act, outside the United States to
a foreign person in a transaction meeting the requirements of Rule 904 under
the Securities Act (and, unless such transfer occurs in a transaction meeting
the requirements of Rule 144A, based upon an opinion of counsel, if the Company
so requests), (ii) to the Company or (iii) pursuant to an effective
registration statement, and, in each case, in accordance with any applicable
securities laws of any State of the United States or any other applicable
jurisdiction. We understand that the registrar will not be required to accept
for registration of transfer any shares of Convertible Preferred Stock, except
upon presentation of evidence satisfactory to the Company that the foregoing
restrictions on transfer have been complied with. We further understand that
the Convertible Preferred Stock purchased by us will bear a legend reflecting
the substance of this paragraph. We further agree to provide to any person
acquiring any of the Convertible Preferred Stock from us a notice advising such
person that resales of the Convertible Preferred Stock are restricted as stated
herein.
We acknowledge that you, the Company and others will rely upon our
confirmations, acknowledgements and agreements set forth herein, and we agree
to notify you promptly in writing if any of our representations or warranties
herein ceases to be accurate and complete.
2
<PAGE> 78
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
Very truly yours,
-------------------------------
(Name of Transferee)
By:
---------------------------
Name:
Title:
Address:
3
<PAGE> 79
EXHIBIT E
FORM OF CERTIFICATE TO BE DELIVERED IN
CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S
__________, ____
ChaseMellon Shareholder Services, L.L.C.
Attention: [ ]
Ladies and Gentlemen:
In connection with our proposed sale of certain 7 1/4% Junior Convertible
Preferred Stock Due 2007 (the "Convertible Preferred Stock") of IXC
Communications, Inc., a Delaware corporation ("the "Company"), we represent
that:
(i) the offer of the Convertible Preferred Stock was not made to a person
in the United States;
(ii) at the time the buy order was originated, the transferee was outside
the United States or we and any person acting on our behalf reasonably
believed that the transferee was outside the United States;
(iii) no directed selling efforts have been made by us in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S under the Securities Act of 1933 (the "Securities Act"), as
applicable; and
(iv) the transaction is not part of a plan or scheme by us to evade the
registration requirements of the Securities Act.
You and the Company are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with
<PAGE> 80
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:
-------------------------------
Name:
Title:
Address:
2
<PAGE> 1
EXHIBIT 3.2
IXC COMMUNICATIONS, INC.
BYLAWS
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other
places both within and without the State of Delaware as the Board of Directors
may from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election
of directors shall be held at such place either within or without the State of
Delaware as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the State of
Delaware, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2. Annual meetings of stockholders shall be held at
such date and time as shall be designated from time to time by the Board of
Directors and stated in the notice of the meeting, at which the stockholders
shall elect directors by a plurality vote, and transact such other business as
may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the
place, date and hour of the meeting shall be given to each stockholder entitled
to vote at such meeting not less than ten (10) nor more than sixty (60) days
before the date of the meeting.
Section 4. The officer who has charge of the stock ledger of
the corporation shall prepare and make, at least ten (10) days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified,
<PAGE> 2
at the place where the meeting is to be held. The list shall also be produced
and kept at the time and place of the meeting during the whole time thereof, and
may be inspected by any stockholder who is present.
Section 5. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the president and shall be called
by the president or secretary at the request in writing of a majority of the
Board of Directors, or at the request in writing of stockholders owning a
majority in amount of the entire capital stock of the corporation issued and
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the
place, date and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be given not less than ten (10) nor more than sixty
(60) days before the date of the meeting, to each stockholder entitled to vote
at such meeting.
Section 7. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty (30) days, or if at the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote
of the holders of a majority of the stock having voting power present in person
or represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of
incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by
2.
<PAGE> 3
proxy for each share of the capital stock having voting power held by such
stockholder, but no proxy shall be voted on after three years from its date,
unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
such action at a meeting at which all shares entitled to vote thereon were
present and voted. Prompt notice of the taking of the action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors may be fixed from time to
time by resolution of the Board of Directors, but shall be not less than six
(6) and not more than eight (8). The number of directors constituting the
Board of Directors shall be six (6) until changed by a duly adopted resolution
of the Board of Directors or increased or decreased pursuant to the certificate
of incorporation. Except as otherwise provided in the certificate of
incorporation or as provided in Section 2 of this Article, the directors shall
be elected at the annual meeting of the stockholders, and each director
elected shall hold office until his successor is elected and qualified.
Directors need not be stockholders.
Section 2. Except as otherwise provided in the certificate of
incorporation, vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. Except as otherwise
provided in the certificate of incorporation, if, at the time of filling any
vacancy of any newly created directorship, the directors then in office shall
constitute less than a majority of the whole Board (as constituted immediately
prior to any such increase), the Court of Chancery may, upon application of any
stockholder or stockholders holding at least ten percent (10%) of the total
number of the shares at the time outstanding having the right to vote for such
directors, summarily order an election to be held to fill any such vacancies or
newly created directorships, or to replace the directors chosen by the directors
then in office.
3.
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Section 3. The business of the corporation shall be managed by
or under the direction of its Board of Directors which may exercise all such
powers of the corporation and do all such lawful acts and things as are not by
statute or by the certificate of incorporation or by these Bylaws directed or
required to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. The first meeting of each newly elected Board of
Directors shall be held at such time and place as shall be fixed by the vote of
the stockholders at the annual meeting, and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
Board of Directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the Board of Directors may be
held without notice at such time and at such place as shall from time to time be
determined by the Board.
Section 7. Special meetings of the Board may be called by the
president on one (1) day's notice to each director, either personally or by mail
or by telegram; special meetings shall be called by the president or secretary
in like manner and on like notice on the written request of two directors unless
the Board consists of only one director; in which case special meetings shall be
called by the president or secretary in like manner and on like notice on the
written request of the sole director.
Section 8. At all meetings of the Board a majority of
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these Bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the
4.
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Board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board or
committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
Board may designate one or more of the directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not such member or members constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in place of any such absent or disqualified member.
Any such committee, to the extent provided in the resolution
of the Board of Directors or in these Bylaws, shall have and may exercise all
the powers and authority of the Board of Directors in the management of the
business and affairs of the corporation, and may authorize the seal of the
corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to the following
matters: (i) approving or adopting, or recommending to the stockholders, any
action or matter expressly required by law to be submitted to stockholders for
approval or (ii) adopting, amending or repealing any Bylaw of the corporation.
Such committee or committees shall have such name or names as may be determined
from time to time by resolution adopted by the Board of Directors.
Section 12. Unless the Board of Directors otherwise provides,
each committee designated by the Board of Directors may adopt, amend and repeal
rules for the conduct of its business. In the absence of a provision by the
Board of Directors or a provision in the rules of such committee to the
contrary, a majority of the entire authorized number of members of such
committee shall constitute a quorum for the transaction of business, the vote of
a majority of the members present at a meeting at the time of such vote if a
quorum
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<PAGE> 6
is then present shall be the act of such committee, and in other respects each
committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to Article III of these Bylaws. Each
committee shall keep regular minutes of its meetings and report the same to the
Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these Bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or by law, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or
of the certificate of incorporation or of these Bylaws, notice is required to be
given to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing and will be deemed to have been
duly given if personally delivered or sent by United States mail (addressed to
such director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid), or by telegram, telex or facsimile
confirmed by letter, and will be deemed given, unless earlier received, if by
mail, at the time when the same shall be deposited in the United States mail,
and if by telegram, telex or facsimile, on the day such confirmation letter
shall be deposited in the United States mail.
Section 2. Whenever any notice is required to be given under
the provisions of the statutes or of the certificate of incorporation or of
these Bylaws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
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ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be a
president, a chief financial officer, one or more vice presidents and a
secretary. The corporation may also have, at the discretion of the Board of
Directors, a chief executive officer, a corporate controller, one or more
assistant vice presidents, one or more assistant secretaries and such other
officers as may be appointed in accordance with the provisions hereof. One
person may hold two or more offices. The salaries of all officers of the
corporation shall be fixed by the Board of Directors.
Section 2. The officers of the corporation, except such
officers as may be appointed in accordance with the provisions of Section 3 or
Section 5 of this Article V, shall be chosen annually by the Board of Directors,
and each shall hold his office until he shall resign or shall be removed or
otherwise disqualified to serve, or his or her successor shall be elected and
qualified.
Section 3. The Board of Directors may appoint such other
officers as the business of the corporation may require, each of whom shall have
such authority and perform such duties as are provided in these Bylaws or as the
Board of Directors or the president may from time to time specify, and shall
hold office until he or she shall resign or shall be removed or otherwise
disqualified to serve.
Section 4. Any officer may be removed, either with or without
cause, by the Board of Directors at any regular or special meeting of the Board
of Directors or, except in case of an officer chosen by the Board of Directors,
by any officer upon whom such power or removal may be conferred by the Board of
Directors.
Any officer may resign at any time by giving written notice to
the Board of Directors, the chairman of the Board of Directors, if any, the
president or the secretary of the corporation. Any such resignation shall take
effect at the date of the receipt of such notice or at any later time specified
therein; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 5. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the Bylaws for the regular appointments to such office.
7.
<PAGE> 8
THE CHIEF EXECUTIVE OFFICER
Section 6. The chief executive officer (if there is such an
officer) of the corporation shall, subject to the control of the Board of
Directors, have general supervision, direction and control of the business and
affairs of the corporation. He or she shall preside at all meetings of
stockholders and the Board of Directors. He or she shall have the general powers
and duties of management usually vested in the chief executive officer of a
corporation, and shall have such other powers and duties with respect to the
administration of the business and affairs of the corporation as may from time
to time be assigned to him or her by the Board of Directors or as prescribed by
these Bylaws. In the absence or disability of the president, the chief executive
officer, in addition to his or her assigned duties and powers, shall perform all
the duties of the president and when so acting shall have all the powers and be
subject to all the restrictions upon the president.
THE PRESIDENT
Section 7. The president shall exercise and perform such
powers and duties with respect to the administration of the business and affairs
of the corporation as may from time to time be assigned to him or her by the
chief executive officer (unless the president is also the chief executive
officer) or by the Board of Directors or as is prescribed by these Bylaws. In
the absence or disability of the chief executive officer, the president shall
perform all of the duties of the chief executive officer and when so acting
shall have all of the powers and be subject to all the restrictions upon the
chief executive officer.
THE VICE PRESIDENTS
Section 8. The vice presidents shall exercise and perform such
powers and duties with respect to the administration of the business and affairs
of the corporation as may from time to time be assigned to each of them by the
chief executive officer, the president, by the Board of Directors or as is
prescribed by these Bylaws. In the absence or disability of the chief executive
officer (if there is such an officer) and of the president, the vice presidents,
in order of their rank as fixed by the Board of Directors, or if not ranked, the
vice president designated by the Board of Directors, shall perform all of the
duties of the president and when so acting shall have all of the powers of and
be subject to all the restrictions upon the president.
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The secretary shall keep, or cause to be kept, a
book of minutes at the principal office for the transaction of the business of
the corporation, or such other place as the Board of Directors may order, of all
meetings of directors and stockholders, with the time and place of holding,
whether regular or special, and if special, how authorized and the
8.
<PAGE> 9
notice thereof given, the names of those present at directors' meetings, the
number of shares present or represented at stockholders' meetings and the
proceedings thereof.
Section 10. The secretary shall keep, or cause to be kept, at
the principal offices for the transaction of the business of the corporation or
at the office of the corporation's transfer agent, a share register, or a
duplicate share register, showing the names of the stockholders and their
addresses, the number and classes of shares held by each; the number and date of
certificates issued for the same; and the number and date of cancellation of
every certificate surrendered for cancellation.
Section 11. The secretary shall give, or cause to be given,
notice of all the meetings of the stockholders and of the Board of Directors
required by these Bylaws or by law to be given, and he or she shall keep the
seal of the corporation in safe custody, and shall have such other powers and
perform such other duties as may be prescribed by the Board of Directors or
these Bylaws. If for any reason the secretary shall fail to give notice of any
special meeting of the Board of Directors called by one or more of the persons
identified in Section 7 of Article III of these Bylaws, or if he or she shall
fail to give notice of any special meeting of the stockholders called by one or
more of the persons identified in Section 5 of Article II of these Bylaws, then
any such person or persons may give notice of any such special meeting.
THE CHIEF FINANCIAL OFFICER
Section 12. The chief financial officer shall keep and
maintain, or cause to be kept and maintained, adequate and correct accounts of
the properties and business transactions of the corporation, including accounts
of its assets, liabilities, receipts, disbursements, gains, losses, capital,
surplus and shares. Any surplus, including earned surplus, paid-in surplus and
surplus arising from a reduction of capital, shall be classified according to
source and shown in a separate account. The books of account shall at all
reasonable times be open to inspection by any director.
The chief financial officer shall deposit, or cause to be
deposited, all moneys and other valuables in the name and to the credit of the
corporation with such depositories as may be designated by the Board of
Directors. He or she shall disburse the funds of the corporation as may be
ordered by the Board of Directors, shall render to the chief executive officer
(if there is such an officer), to the president and to the directors, whenever
they request it, an account of all of his or her transactions as chief financial
officer and of the financial condition of the corporation, and shall have such
other powers and perform such other duties as may be prescribed by the Board of
Directors or the Bylaws.
9.
<PAGE> 10
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation by,
the chairman or vice chairman of the Board of Directors, or the chief executive
officer, president or a vice president and the treasurer or an assistant
treasurer, or the secretary or an assistant secretary of the corporation,
certifying the number of shares owned by such holder in the corporation.
Section 2. Any of or all the signatures on the certificate may
be facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he or she
were such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The corporation may issue a new certificate of
stock in the place of any certificate theretofore issued by it, alleged to have
been lost, stolen or destroyed, and the corporation may require the owner of the
lost, stolen or destroyed certificate, or his legal representative, to give the
corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer
agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which record date shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting. If no record date is fixed by the Board of Directors, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be
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at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 6. In order that the corporation may determine the
stockholders entitled to consent to corporate action in writing without a
meeting, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the Board of Directors, and which date shall not be more than ten (10) days
after the date upon which the resolution fixing the record date is adopted by
the Board of Directors. If no record date has been fixed by the Board of
Directors, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the Board
of Directors is required by law, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the corporation by delivery to its registered office in Delaware,
its principal place of business, or an officer or agent of the corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
Section 7. In order that the corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
REGISTERED STOCKHOLDERS
Section 8. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or
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interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation.
Section 2. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for repairing or
maintaining any property of the corporation, or for such other purpose as the
directors shall think conducive to the interest of the corporation, and the
directors may modify or abolish any such reserve in the manner in which it was
created.
ANNUAL STATEMENT
Section 3. The Board of Directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the corporation.
CHECKS
Section 4. All checks for demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
12.
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SEAL
Section 6. The corporate seal shall have inscribed thereon the
name of the corporation, the year of its organization and the words "Corporate
Seal." The seal may be used by causing it or a facsimile thereof to be impressed
or affixed or reproduced or otherwise.
WAIVER OF NOTICE
Section 7. Whenever notice is required to be given by law or
under any provision of the Certificate of Incorporation or these Bylaws, a
written waiver thereof, signed by the person entitled to notice, whether before
or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors, or members of a committee of directors need be
specified in any written waiver of notice unless so required by the Certificate
of Incorporation or these Bylaws. Unless either proper notice of a meeting of
the Board of Directors, or any committee thereof, has been given or else the
persons entitled thereto have waived such notice (either in writing or by
attendance as set forth above), any business transacted at such meeting shall be
null and void.
INDEMNIFICATION
Section 8. The corporation shall indemnify its officers,
directors, employees and agents to the fullest extent permitted by the General
Corporation Law of Delaware.
ARTICLE VIII
AMENDMENTS
Section 1. These Bylaws may be altered, amended or repealed,
or new Bylaws may be adopted by the stockholders or by the Board of Directors,
when such power is conferred upon the Board of Directors by the certificate of
incorporation, at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors, if notice of such alteration, amendment, repeal or adoption of new
Bylaws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal Bylaws is conferred upon the Board of Directors by the
certificate of
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incorporation, it shall not divest or limit the power of the stockholders to
adopt, amend or repeal Bylaws.
14.
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EXHIBIT 4.12
EXECUTION COPY
IXC COMMUNICATIONS, INC.
7 1/4% JUNIOR CONVERTIBLE PREFERRED STOCK DUE 2007
(LIQUIDATION PREFERENCE $100 PER SHARE)
PURCHASE AGREEMENT
March 25, 1997
CREDIT SUISSE FIRST BOSTON CORPORATION
Eleven Madison Avenue
New York, N.Y. 10010
DILLON, READ & CO. INC.
535 Madison Avenue
New York, NY 10022
Dear Sirs:
1. Introductory. IXC Communications, Inc., a Delaware corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell to the several initial purchasers named in Schedule A hereto
(the "Purchasers") 1,000,000 shares of its 7 1/4% Junior Convertible Preferred
Stock Due 2007 (liquidation preference $100 per share) (the "Convertible
Preferred Stock"). The Convertible Preferred Stock will be convertible into
shares of Common Stock, par value $0.01 per share, of the Company (the "Common
Stock") at the conversion price set forth in the Offering Circular dated March
25, 1997, subject to adjustment in accordance with the Certificate of
Designation relating to the Convertible Preferred Securities (the "Certificate
of Designation"). The Convertible Preferred Stock and the Common Stock
issuable upon conversion of the Convertible Preferred Stock are collectively
herein referred to as the "Offered Securities". The United States Securities
Act of 1933 is herein referred to as the "Securities Act."
The Company hereby agrees with the several Purchasers as follows:
2. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, the several Purchasers that:
(a) A preliminary offering circular and an offering circular relating to
the Offered Securities to be offered by the Purchasers have been prepared by the
Company. Such preliminary offering circular and an offering circular relating
to the Offered Securities, as both are supplemented as of the date of this
Agreement, together with any other document
<PAGE> 2
approved by the Company for use in connection with the contemplated resale of
the Offered Securities are hereinafter collectively referred to as the
"Offering Document". On the date of this Agreement, the Offering Document does
not include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except for the
statements in the preliminary offering circular regarding (i) payment in kind
of approximately $6.5 million (as of December 31, 1996) of the dividends on the
10% Junior Series 3 Preferred Stock (the "Series 3 Preferred Stock") of the
Company and (ii) the amount of Convertible Preferred Stock to be purchased by
affiliates of the Company, which have been corrected in the Offering Circular
(the "Corrected Statements"). The preceding sentence does not apply to
statements in or omissions from the Offering Document based upon written
information furnished to the Company by any Purchaser through Credit Suisse
First Boston Corporation ("CSFBC") specifically for use therein, it being
understood and agreed that the only such information is that described as such
in Section 7(b). Except as disclosed in the Offering Document, on the date of
this Agreement, the Company's Form 10-Q for the quarter ending on June 30,
1996, filed with the Securities and Exchange Commission (the "Commission") and
all subsequent reports (collectively, the "Exchange Act Reports") which have
been filed by the Company with the Commission or sent to stockholders pursuant
to the Securities Exchange Act of 1934 (the "Exchange Act") do not include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except for forward looking
statements contained in the liquidity and capital resources discussions in such
Exchange Act Reports that have been superseded by the Offering Document. Such
documents, when they were filed with the Commission, conformed in all material
respects to the requirements of the Exchange Act and the rules and regulations
of the Commission thereunder.
(b) The Company has been duly incorporated and is an existing corporation
in good standing under the laws of the State of Delaware, with power and
authority (corporate and governmental) to own its properties and conduct its
business as described in the Offering Document; and the Company is duly
qualified to do business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the conduct of its
business requires such qualification except to the extent the failure to be so
qualified or to be in good standing would not have a material adverse effect on
the condition (financial or other), business, properties or results of
operations of the Company and its subsidiaries taken as a whole (a "Material
Adverse Effect").
(c) Each subsidiary of the Company has been duly incorporated and is an
existing corporation in good standing under the laws of the jurisdiction of its
incorporation, with power and authority (corporate and governmental) to own its
properties and conduct its business as described in the Offering Document; and
each subsidiary of the Company is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions in which its ownership
or lease of property or the conduct of its business requires such qualification
except to the extent the failure to be so qualified would not have Material
Adverse Effect; all of the issued and outstanding capital stock of each
subsidiary of the
2
<PAGE> 3
Company has been duly authorized and validly issued and is fully paid and
nonassessable; and the capital stock of each subsidiary owned by the Company,
directly or through subsidiaries, is owned free from liens, encumbrances and
defects, except for the subsidiaries and liens listed on Schedule 2(c).
(d) The Convertible Preferred Stock has been duly and validly authorized;
and when the Convertible Preferred Stock has been delivered and paid for
pursuant to this Agreement on the Closing Date (as defined below), such
Convertible Preferred Stock will be validly issued, fully paid and nonassessable
and will conform, in all material respects, to the description thereof contained
in the Offering Document; shares of Convertible Preferred Stock have been duly
and validly authorized and reserved for issuance upon payment of dividends on
the Convertible Preferred Stock in additional shares of Convertible Preferred
Stock and when so issued will be fully paid and nonassessable; the issuance of
the Offered Securities is not subject to preemptive or other similar rights.
(e) When the Convertible Preferred Stock is delivered and paid for
pursuant to this Agreement on the Closing Date, such Convertible Preferred Stock
will be convertible into the shares of Common Stock ("Underlying Shares") of the
Company in accordance with the terms of the Convertible Preferred Stock and the
Certificate of Designation; the Underlying Shares initially issuable upon
conversion of such Convertible Preferred Stock have been duly authorized and
reserved for issuance upon such conversion and, when issued upon such
conversion, will be validly issued, fully paid and nonassessable; the
outstanding shares of Common Stock have been duly authorized and validly issued,
are fully paid and nonassessable and conform to the description thereof
contained in the Offering Document; and the stockholders of the Company have no
preemptive rights with respect to the Convertible Preferred Stock or the
Underlying Shares.
(f) Except as contemplated by this Agreement or as disclosed in the
Offering Document, there are no contracts, agreements or understandings between
the Company and any person that would give rise to a valid claim against the
Company or any Purchaser for a brokerage commission, finder's fee or other like
payment in connection with the transactions contemplated by this Agreement.
(g) Except for the filing of a notice on Form D pursuant to Rule 503 under
the Securities Act, no consent, approval, authorization, or order of, or filing
with, any governmental agency or body or any court is required for the
consummation of the transactions contemplated by this Agreement in connection
with the issuance and sale of the Offered Securities by the Company, other than
as may be required under the Securities Act and the Rules and Regulations of the
Commission thereunder with respect to the Registration Rights Agreement and the
transactions contemplated thereunder, and such as may be required by securities
or blue sky laws of any state of the United States or of any foreign
jurisdiction in connection with the offer and sale of the Offered Securities.
(h) The execution, delivery and performance of the Registration Rights
Agreement among the Company and the Purchasers dated the date hereof (the
"Registration Rights
3
<PAGE> 4
Agreement") and this Agreement, and the issuance and sale of the Offered
Securities and compliance with the terms and provisions thereof will not result
in a breach or violation of any of the terms and provisions of, or constitute a
default under, any statute, rule, regulation or order of any governmental
agency or body or any court, domestic or foreign, having jurisdiction over
either of the Company or any of its subsidiaries or any of their properties, or
any agreement or instrument to which the Company or any such subsidiary is a
party or by which the Company or any such subsidiary is bound or to which any
of the properties of either of the Company or any such subsidiary is subject,
or the charter or by-laws of the Company or any such subsidiary; and the
Company has full corporate power and authority to authorize, issue and sell the
Offered Securities to be sold by the Company as contemplated by this Agreement.
(i) The Registration Rights Agreement has been duly authorized by the
Company and, when executed and delivered, will conform in all material respects
to the description thereof contained in the Offering Circular. The Registration
Rights Agreement when validly executed and delivered by the Company will
constitute a valid and binding obligation of the Company and will be enforceable
against it in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
other laws of general applicability relating to or affecting creditors' rights
and to general equity principals and except as the right to indemnity and
contribution may be limited by state or federal securities laws or the public
policy underlying such laws.
(j) This Agreement has been duly authorized, executed and delivered by the
Company.
(k) Except as disclosed in the Offering Document and on Schedule 2(k) the
Company and its subsidiaries have good and marketable title to all real
properties and all other properties and assets owned by them, in each case free
from liens, encumbrances and defects that would materially affect the value
thereof or materially interfere with the use made or to be made thereof by them;
and except as disclosed in the Offering Document, the Company and its
subsidiaries hold any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with the
use made or to be made thereof by them.
(l) The Company and its subsidiaries possess adequate certificates,
authorities or permits which have been issued by appropriate governmental
agencies or bodies, necessary to conduct the business now operated by them,
except for such certificates, authorities or permits where the lack thereof
would not have a Material Adverse Effect, and have not received any notice of
proceedings relating to the revocation or modification of any such certificate,
authority or permit that, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a Material Adverse
Effect.
(m) No labor dispute with the employees of the Company or any of its
subsidiaries exists or, to the knowledge of the Company, is imminent that might
have a Material Adverse Effect.
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<PAGE> 5
(n) The Company and its subsidiaries own, possess or can acquire on
reasonable terms, adequate trademarks, trade names and other rights to
inventions, know-how, patents, copyrights, confidential information and other
intellectual property (collectively, "intellectual property rights") necessary
to conduct the business now operated by them, or presently employed by them, and
have not received any notice of infringement of or conflict with asserted rights
of others with respect to any intellectual property rights that, if determined
adversely to the Company or any of its subsidiaries, would individually or in
the aggregate have a Material Adverse Effect.
(o) Except as disclosed in the Offering Document, neither the Company nor
any of its subsidiaries is in violation of any statute, rule, regulation,
decision or order of any governmental agency or body or any court, domestic or
foreign, relating to the use, disposal or release of hazardous or toxic
substances or relating to the protection or restoration of the environment or
human exposure to hazardous or toxic substances (collectively, "environmental
laws"), owns or operates any real property contaminated with any substance that
is subject to any environmental laws, is liable for any off-site disposal or
contamination pursuant to any environmental laws, or is subject to any claim
relating to any environmental laws, which violation, contamination, liability or
claim would individually or in the aggregate have a Material Adverse Effect; and
the Company is not aware of any pending investigation which might lead to such a
claim.
(p) Except as disclosed in the Offering Document, there are no pending
actions, suits or proceedings against or affecting the Company, any of its
subsidiaries or any of their respective properties that if determined adversely
to the Company or any of its subsidiaries, would, individually or in the
aggregate, have a Material Adverse Effect, or would materially and adversely
affect the ability of the Company to perform its obligations under the
Registration Rights Agreement or this Agreement, or which are otherwise material
in the context of the sale of the Offered Securities; and to the Company's
knowledge, no such actions, suits or proceedings are threatened or contemplated.
(q) The financial statements included in the Offering Document present
fairly the financial position of the Company and its consolidated subsidiaries
as of the dates shown and their results of operations and cash flows for the
periods shown, and such financial statements have been prepared in conformity
with generally accepted accounting principles in the United States applied on a
consistent basis.
(r) Except as disclosed in the Offering Document, since the date of the
latest audited financial statements included in the Offering Document, there has
been no material adverse change, nor any development or event involving a
prospective material adverse change, in the condition (financial or other),
business, properties or results of operations of the Company and its
subsidiaries taken as a whole, and, except as disclosed in or contemplated by
the Offering Document, there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital stock.
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<PAGE> 6
(s) The Company is not an open-end investment company, unit investment
trust or face-amount certificate company that is or is required to be registered
under Section 8 of the United States Investment Company Act of 1940 (the
"Investment Company Act"), and the Company is not a closed-end investment
company required to be registered, but not registered, thereunder; and the
Company is not and, after giving effect to the offering and sale of the Offered
Securities and the application of the proceeds thereof as described in the
Offering Document, will not be an "investment company" as defined in the
Investment Company Act.
(t) No securities of the same class (within the meaning of Rule 144A(d)(3)
under the Securities Act) as the Offered Securities are listed on any national
securities exchange registered under Section 6 of the Exchange Act or quoted in
a U.S. automated inter-dealer quotation system.
(u) Assuming the accuracy of the representations of the Purchasers
contained in Section 4, the offer and sale of the Offered Securities in the
manner contemplated by this Agreement will be exempt from the registration
requirements of the Securities Act by reason of Section 4(2) thereof, Regulation
D thereunder and Regulation S thereunder.
(v) None of the Company, any of its affiliates or any person acting on its
or their behalf (i) has, within the six-month period prior to the date hereof,
offered or sold in the United States or to any U.S. person (as such terms are
defined in Regulation S under the Securities Act) the Offered Securities or any
security of the same class or series as the Offered Securities or (ii) has
offered or will offer or sell the Offered Securities (A) in the United States by
means of any form of general solicitation or general advertising within the
meaning of Rule 502(c) under the Securities Act or (B) with respect to any such
securities sold in reliance on Rule 903 of Regulation S ("Regulation S") under
the Securities Act, by means of any directed selling efforts within the meaning
of Rule 902(b) of Regulation S. The Company, its affiliates and any person
acting on their behalf have complied and will comply with the offering
restrictions requirement of Regulation S. The Company has not entered and will
not enter into any contractual arrangement with respect to the distribution of
the Offered Securities except for this Agreement.
(w) The Company is subject to Section 13 or 15(d) of the Exchange Act.
(x) The Company and its subsidiaries are, and will remain, in compliance
in all material respects with the Communications Act of 1934, as amended by the
Telecommunications Act of 1996 (the "Communications Act"), and with all
applicable rules, regulations and policies of the Federal Communications
Commission (the "FCC").
(y) The Company has provided to the Purchasers a complete and accurate
list of all licenses granted to the Company and its subsidiaries by the FCC (the
"Licenses"). All of the Licenses are currently valid and in full force and
effect except for Licenses that individually or in the aggregate would not have
a Material Adverse Effect. Neither of the Company nor any of its subsidiaries
have any knowledge of any investigation, notice of apparent liability,
6
<PAGE> 7
violation, forfeiture or other order or complaint issued by or before any court
or regulatory body, including the FCC, or of any other proceedings which could
in any manner materially threaten or adversely affect the validity or continued
effectiveness of any of the Licenses.
(z) No event has occurred which (i) results in, or after notice or lapse
of time or both would result in, revocation, suspension, adverse modification,
non-renewal, impairment, restriction or termination of, or order of forfeiture
with respect to, any License or (ii) materially and adversely affects or could
reasonably be expected in the future to materially adversely affect any of the
rights of the Company or any of its subsidiaries thereunder.
(aa) The Company and its subsidiaries have duly filed in a timely manner
all material filings, reports, applications, documents, instruments and
information required to be filed by them under the Communications Act, and all
such filings are true, correct and complete in all material respects.
(ab) Neither of the Company nor any of its subsidiaries have any reason to
believe that any of the Licenses will not be renewed in the ordinary course.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Purchasers, and the Purchasers agree, severally and not jointly, to purchase
from the Company, at a purchase price of 97.296 per share plus accumulated
dividends (if any) from April 1, 1997 to the Closing Date (as hereinafter
defined) the Convertible Preferred Stock set forth opposite the names of the
several Purchasers in Schedule A hereto.
The Company will deliver against payment of the purchase price therefor the
Offered Securities to be purchased by each Purchaser hereunder and to be offered
and sold by each Purchaser in reliance on Rule 144A under the Securities Act
(the "144A Securities") in the form of one permanent global security in
definitive form (the "Restricted Global Security"), deposited with ChaseMellon
Shareholder Services L.L.C. as custodian for the Depository Trust Company
("DTC") and registered in the name of Cede & Co., as nominee for DTC. The
Restricted Global Security shall include the legend regarding restrictions on
transfer set forth under "Transfer Restrictions" in the Offering Document.
Interests in the Restricted Global Security will be held only in book-entry form
through DTC except in the limited circumstances described in the Offering
Document.
Notwithstanding the foregoing, any Offered Securities sold in reliance on
Regulations S (the "Regulation S Securities") or to Accredited Investors (as
hereinafter defined) pursuant to Section 4(c) shall be issued in definitive,
fully registered form and shall bear the legend relating thereto set forth under
"Transfer Restrictions" in the Offering Document, but shall be paid for in the
same manner as any Offered Securities to be purchased by the Purchasers
hereunder and to be offered and sold by them in reliance on Rule 144A under the
Securities Act.
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<PAGE> 8
Payment for the Offered Securities shall be made by the Purchasers in
Federal (same day) funds by wire transfer to an account previously designated to
CSFBC by the Company at a bank acceptable to CSFBC, at the office of Cravath,
Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue, New York, N.Y. 10019-7475 at
10:00 A.M. (New York time), on April 1, 1997, or at such other time not later
than seven full business days thereafter as CSFBC and the Company determine,
such time being herein referred to as the "Closing Date", against delivery to
ChaseMellon Shareholder Services L.L.C. as custodian for DTC of the Restricted
Global Security and to CSFBC of the Regulation S Securities and the Offered
Securities sold to Accredited Investors (as hereinafter defined) representing in
the aggregate all of the Offered Securities. The Offered Securities will be
made available for checking at the offices of Cravath, Swaine & Moore at least
24 hours prior to the Closing Date.
4. Representations and Agreements by Purchasers; Resale by Purchasers.
(a) Each Purchaser represents and warrants to the Company that it is an
"accredited investor" within the meaning of Regulation D under the Securities
Act.
(b) Each Purchaser acknowledges that the Offered Securities have not been
registered under the Securities Act and may not be offered or sold within the
United States or to, or for the account or benefit of, U.S. persons except in
accordance with Regulation S. In addition, each Purchaser acknowledges that the
Offered Securities have not been registered under the Securities Act and may not
be offered or sold, otherwise than as provided in the proceeding sentence,
except pursuant to an exemption from the registration requirements of the
Securities Act. Each Purchaser represents and agrees that it has offered and
sold the Offered Securities, and will offer and sell the Offered Securities as
part of their distribution at any time and in accordance with Regulation S or
Rule 144A under the Securities Act ("Rule 144A") or, in the case of CSFBC or any
other Purchaser authorized by CSFBC, to certain Accredited Investors in
accordance with subsection (c). Accordingly, each Purchaser represents and
agrees that neither such Purchaser nor its affiliates, nor any persons acting on
its or their behalf, have engaged or will engage in any directed selling efforts
with respect to the Offered Securities, and such Purchaser, its affiliates and
all persons acting on its or their behalf have complied and will comply with the
offering restrictions requirement of Regulation S. Each Purchaser agrees that,
at or prior to confirmation of sale of the Offered Securities, other than a sale
pursuant to Rule 144A or a sale to an Accredited Investor in accordance with
clause (c), such Purchaser will have sent to each distributor, dealer or person
receiving a selling concession, fee or other remuneration that purchases the
Offered Securities from it during the restricted period a confirmation or notice
to substantially the following effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933 (the "Securities Act") and may not be offered or
sold within the United States or to, or for the account or benefit of, U.S.
persons as part of their distribution at any time, except in accordance
with Regulation S (or Rule 144A if available) under the Securities Act."
8
<PAGE> 9
Unless otherwise defined herein, terms used in this subsection (b) have the
meanings given to them by Regulation S.
(c) CSFBC and any other Purchaser authorized by CSFBC may offer and sell
Offered Securities in definitive, fully registered form to a limited number of
investors, each of which is reasonably believed by such Purchaser to be an
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3), (4), (5),
(6) or (7) under the Securities Act or an entity in which all of the equity
owners are accredited investors within the meaning of Rule 501(a)(1), (2) or (3)
under the Securities Act (each, an "Accredited Investor"); provided that each
such Accredited Investor executes and delivers to such Purchaser and the
Company, prior to the consummation of any sale of Offered Securities to such
Accredited Investor, a Purchaser's Letter in substantially the form attached
hereto as Schedule C (a "Purchaser's Letter").
(d) Each Purchaser agrees that it and each of its affiliates has not
entered and will not enter into any contractual arrangement with respect to the
distribution of the Offered Securities except with the prior written consent of
the Company.
(e) Each Purchaser agrees that it and each of its affiliates will not
offer or sell the Offered Securities in the United States by means of any form
of general solicitation or general advertising within the meaning of Rule 502(c)
under the Securities Act, including, but not limited to (i) any advertisement,
article, notice or other communication published in any newspaper, magazine or
similar media or broadcast over television or radio, or (ii) any seminar or
meeting whose attendees have been invited by any general solicitation or general
advertising. Each Purchaser agrees, with respect to resales made in reliance on
Rule 144A of any of the Offered Securities, to deliver either with the
confirmation of such resale or otherwise prior to settlement of such resale a
notice to the effect that the resale of such Offered Securities has been made in
reliance upon the exemption from the registration requirements of the Securities
Act provided by Rule 144A.
(f) Each Purchaser represents and agrees that (i) it has not offered or
sold and, prior to the date six months after the date of issue of the Offered
Securities, will not offer or sell any Offered Securities to persons in the
United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995; (ii) it
has complied and will comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to the Offered
Securities in, from or otherwise involving the United Kingdom; and (iii) it has
only issued or passed on and will only issue or pass on in the United Kingdom
any document received by it in connection with the issue of the Offered
Securities to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996
or is a person to whom such document may otherwise lawfully be issued or passed
on.
9
<PAGE> 10
5. Certain Agreements of the Company. The Company agrees with the several
Purchasers that:
(a) The Company will advise CSFBC promptly of any proposal to amend or
supplement the Offering Document and will not effect such amendment or
supplementation without CSFBC's consent, which shall not be unreasonably
withheld or delayed. If, at any time prior to the completion of the resale of
the Offered Securities by the Purchasers, any event occurs as a result of which
the Offering Document as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary at any such time to
amend or supplement the Offering Document to comply with any applicable law, the
Company promptly will notify CSFBC of such event and promptly will prepare, at
its own expense, an amendment or supplement which will correct such statement or
omission or effect such compliance. Neither CSFBC's consent to, nor the
Purchaser's delivery to offerees or investors of, any such amendment or
supplement shall constitute a waiver of any of the conditions set forth in
Section 6.
(b) The Company will furnish to CSFBC copies of any preliminary offering
circular, the Offering Document and all amendments and supplements to such
documents, in each case as soon as available and in such quantities as CSFBC
requests, and the Company will furnish to CSFBC on the Closing Date three copies
of the Offering Document signed on the cover page by a duly authorized officer
of the Company, one of which will include the independent accountants' reports
therein manually signed by such independent accountants. At any time when the
Company is not subject to Section 13 or 15(d) of the Exchange Act, the Company
will promptly furnish or cause to be furnished to CSFBC (and upon request, to
each other Purchaser) and, upon request of holders and prospective purchasers of
the Offered Securities, to such holders and purchasers, copies of the
information required to be delivered to holders and prospective purchasers of
the Offered Securities pursuant to Rule 144A(d)(4) under the Securities Act (or
any successor provision thereto) in order to permit compliance with Rule 144A in
connection with resales by such holders of the Offered Securities. The Company
will pay the expenses of printing and distributing to the Purchasers all such
documents.
(c) The Company will use its commercially reasonable efforts to arrange
for the qualification of the Offered Securities for sale and the determination
of their eligibility for investment under the laws of such jurisdictions in the
United States and Canada as CSFBC designates and will continue such
qualifications in effect so long as required for the resale of the Offered
Securities by the Purchasers; provided, however, that the Company will not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any such state or jurisdiction if it is not otherwise
required to be so qualified or to so file.
(d) During the period of five years after the Closing Date, the Company
will furnish to CSFBC and, upon request, to each other Purchaser, as soon as
practicable after the end of each fiscal year, a copy of the Company's annual
report to stockholders for such year; and
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<PAGE> 11
the Company will furnish to CSFBC and, upon request, to each other Purchaser
(i) as soon as available, a copy of each report and any definitive proxy
statement of the Company filed with the Commission under the Exchange Act or
mailed to stockholders and (ii) from time to time, such other publicly
available information concerning the Company as CSFBC may reasonably request.
(e) During the period of two years after the Closing Date, the Company
will, upon request, furnish to CSFBC, each other Purchaser and any holder of
Offered Securities a copy of the restrictions on transfer applicable to the
Offered Securities.
(f) During the period of two years after the Closing Date, the Company
will not, and will not permit any of its affiliates (as defined in Rule 144
under the Securities Act, other than the Trustees of General Electric Pension
Trust or other affiliates who purchase Offered Securities from the Purchasers at
the Closing Date) to, resell any of the Offered Securities that have been
reacquired by any of them.
(g) During the period of two years after the Closing Date, the Company
will not be or become an open-end investment company, unit investment trust or
face-amount certificate company that is or is required to be registered under
Section 8 of the Investment Company Act, and the Company is not, or will not be
or become, a closed-end investment company required to be registered under the
Investment Company Act.
(h) The Company will pay all expenses incidental to the performance of the
Company's obligations under this Agreement, including (i) all expenses in
connection with the execution, issue, packaging and initial delivery of the
Offered Securities, the preparation and printing of the Offered Securities, the
Offering Document and amendments and supplements thereto, and any other document
relating to the issuance, offer, sale and delivery of the Offered Securities;
(ii) the cost of qualifying the Offered Securities for trading in the Private
Offerings, Resale and Trading through Automated Linkages (PORTAL) market and any
expenses incidental thereto; (iii) the cost of any advertising approved by the
Company in connection with the issue of the Offered Securities; (iv) any
expenses (including fees and disbursements of counsel) incurred in connection
with qualification of the Offered Securities for sale under the laws of such
jurisdictions in the United States and Canada as CSFBC designates and the
printing of memoranda relating thereto; and (v) all expenses incurred in
distributing preliminary offering circulars and the Offering Document (including
any amendments and supplements thereto) to the Purchasers. The Company will
also pay or reimburse the Purchasers (to the extent incurred by it) for all
travel expenses of the Company's officers and employees and any other expenses
of the Company in connection with attending or hosting meetings with prospective
purchasers of the Offered Securities from the Purchasers.
(i) In connection with the offering, until CSFBC shall have notified the
Company and the other Purchasers of the completion of the resale of the Offered
Securities, neither the Company nor any of its affiliates has or will, either
alone or with one or more other persons, bid for or purchased for any account in
which it or any of its affiliates has a beneficial interest
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<PAGE> 12
any Offered Securities or attempted to induce any person to purchase any
Offered Securities; and neither it nor any of its affiliates will make bids or
purchases for the purpose of creating actual, or apparent, active trading in,
or of raising the price of, the Offered Securities; provided, however, that the
provisions of this paragraph (i) shall not apply to the purchase of 300,000
shares of Convertible Preferred Stock to be purchased by the Trustees of
General Electric Pension Trust and the purchase of 24,000 shares of Convertible
Preferred Stock purchased by certain affiliates of the Company.
(j) For a period of 90 days after the date hereof, the Company will not
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Commission a registration statement under the
Securities Act covering the sale by the Company of, (a) any preferred stock or
any other securities of the Company which are substantially similar to the
Convertible Preferred Stock, (b) any shares of Common Stock of the Company or
any other capital stock of the Company, or (c) any other securities which are
convertible into, or exercisable or exchangeable for, preferred stock or such
substantially similar securities of the Company, Common Stock or other capital
stock of the Company, without the prior written consent of CSFBC, except the
offer, sale, contract to sell, or other disposition of (i) the Convertible
Preferred Stock, (ii) Common Stock issued or delivered upon conversion of the
Convertible Preferred Stock, (iii) securities issued or delivered upon
conversion, exchange or exercise of any other securities of the Company
outstanding on the date of the Offering Document, (iv) capital stock and options
of the Company issued pursuant to benefit or incentive plans maintained for its
officers, directors, employees or persons providing services to the Company, or
pursuant to a Company's dividend reinvestment plan, or (v) securities issued in
connection with mergers, acquisitions or similar transactions. The Company will
not at any time offer, sell, contract to sell, pledge or otherwise dispose of,
directly or indirectly, any securities under circumstances where such offer,
sale, pledge, contract or disposition would cause the exemption afforded by
Section 4(2) of the Securities Act or the safe harbor of Regulation S thereunder
to cease to be applicable to the offer and sale of the Offered Securities.
(k) In connection with the sale of the Offered Securities to the
Purchasers, the Company will file the notice on Form D required by Rule 503
under the Securities Act within the time required by such Rule and otherwise in
compliance with such Rule. A copy of such notice shall be furnished promptly to
CSFBC.
(l) The Company will cause each Offered Security to bear the legend set
forth in the Offering Document until such legend shall no longer be necessary or
advisable because the Offered Securities are no longer subject to the
restrictions on transfer described therein.
6. Conditions of the Obligations of the Purchasers. The obligations of
the several Purchasers to purchase and pay for the Offered Securities will be
subject to the accuracy of the representations and warranties on the part of the
Company herein, to the accuracy of the written statements of officers of the
Company made pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder and to the following additional conditions
precedent:
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(a) The Purchasers shall have received a letter, dated the date of this
Agreement, of Ernst & Young LLP, in agreed form, confirming that they are
independent public accountants within the meaning of the Securities Act and the
applicable published rules and regulations thereunder ("Rules and Regulations")
and stating to the effect that:
(i) in their opinion the financial statements examined by them and
included in the Offering Document comply as to form in all material
respects with the applicable accounting requirements of the Securities Act
and the related published Rules and Regulations;
(ii) on the basis of a reading of the latest available interim
financial statements of the Company, inquiries of certain officials of the
Company who have responsibility for financial and accounting matters and
other specified procedures, nothing came to their attention that caused
them to believe that:
(A) at March 21, 1997, there was any change in the capital stock
or paid-in capital, increase in short-term indebtedness or long-term
debt and capital lease obligations of the Company and its consolidated
subsidiaries or any decreases in consolidated net current assets or
stockholders' equity of the consolidated companies as compared with
amounts shown on the December 31, 1996 audited consolidated balance
sheet included in the Offering Document; or
(B) for the period from January 1, 1997 to March 21, there were
any decreases, as compared with the corresponding period in the
preceding year, in consolidated operating revenues, income from
operations or in the total or per-share amounts of net income, or in
the ratio of earnings to fixed charges and preferred stock dividends
combined;
except in all cases set forth in clauses (A) and (B) above for changes,
increases or decreases which the Offering Document discloses have occurred
or may occur or which are described in such letter; and
(iii) they have compared specified dollar amounts (or percentages
derived from such dollar amounts) and other financial information contained
in the Offering Document (in each case to the extent that such dollar
amounts, percentages and other financial information are derived from the
general accounting records of the Company and its subsidiaries subject to
the internal controls of the Company's accounting system or are derived
directly from such records by analysis or computation) with the results
obtained from inquiries, a reading of such general accounting records and
other procedures specified in such letter and have found such dollar
amounts, percentages and other financial information to be in agreement
with such results, except as otherwise specified in such letter.
(b) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) a change in U.S. or international financial,
political or economic conditions or currency exchange rates or exchange controls
as would, in the judgment of CSFBC, be likely to prejudice materially the
success of the proposed issue, sale or distribution of the Offered
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<PAGE> 14
Securities, whether in the primary market or in respect of dealings in the
secondary market, or (ii) (A) any change, or any development or event involving
a prospective change, in the condition (financial or other), business,
properties or results of operations of the Company or its subsidiaries which,
in the judgment of CSFBC, is material and adverse and makes it impractical or
inadvisable to proceed with completion of the offering or the sale of and
payment for the Offered Securities; (B) any downgrading in the rating of any
debt securities of the Company by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the Securities
Act), or any public announcement that any such organization has under
surveillance or review its rating of any debt securities of the Company (other
than an announcement with positive implications of a possible upgrading, and no
implication of a possible downgrading, of such rating); (C) any suspension or
limitation of trading in securities generally on the New York Stock Exchange,
or any setting of minimum prices for trading on such exchange, or any
suspension of trading of any securities of the Company on any exchange or in
the over-the-counter market; (D) any banking moratorium declared by U.S.
Federal or New York authorities; or (E) any outbreak or escalation of major
hostilities in which the United States is involved, any declaration of war by
Congress or any other substantial national or international calamity or
emergency if, in the judgment of the Purchasers including CSFBC, the effect of
any such outbreak, escalation, declaration, calamity or emergency makes it
impractical or inadvisable to proceed with completion of the offering or sale
of and payment for the Offered Securities.
(c) The Purchasers shall have received an opinion, dated the Closing Date,
of Riordan & McKinzie, a Professional Law Corporation, counsel for the Company,
substantially to the effect that (subject to customary assumptions and
disclaimers and except that no opinion shall be given as to laws other than the
laws of the State of California, the General Corporation Law of Delaware, and
the U.S. Federal law):
(i) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own its properties and conduct its
business as described in the Offering Document; and the Company is duly
qualified to do business as a foreign corporation in good standing in all
other jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification, except to the extent
the failure to be so qualified or to be in good standing would not have a
Material Adverse Effect;
(ii) The Convertible Preferred Stock has been duly authorized and
validly issued, and upon payment therefor will be fully paid and
nonassessable and conform in all material respects to the description
thereof contained in the Offering Document; shares of Convertible Preferred
Stock have been duly and validly authorized and reserved for issuance upon
payment of dividends on the Convertible Preferred Stock in additional
shares of Convertible Preferred Stock and when so issued will be fully paid
and nonassessable; to their knowledge, the stockholders of the Company have
no preemptive or other similar rights with respect to the Offered
Securities; the Convertible Preferred Stock are convertible into Common
Stock of the Company in accordance with their terms; the shares of Common
Stock issuable upon conversion of the Convertible Preferred Stock have been
duly authorized and reserved for
14
<PAGE> 15
issuance upon such conversion and, when issued upon such conversion, will
be validly issued, fully paid and nonassessable; the outstanding shares of
Common Stock have been duly authorized and validly issued, are fully paid
and nonassessable and conform to the description thereof contained in the
Offering Document; and to their knowledge the stockholders of the Company
have no preemptive rights with respect to the Common Stock;
(iii) The Company is not and, after giving effect to the offering and
sale of the Offered Securities and the application of the proceeds thereof
as described in the Offering Document, will not be an "investment company"
as defined in the Investment Company Act;
(iv) Except for the filing of a notice on Form D pursuant to Rule 503
under the Securities Act, no consent, approval, authorization or order of,
or filing with, any governmental agency or body or any court is required
for the consummation of the transactions contemplated by this Agreement in
connection with the issuance or sale of the Offered Securities by the
Company and the consummation of the transactions under the Registration
Rights Agreement, other than as may be required under the Securities Act
and the Rules and Regulations of the Commission thereunder with respect to
the Registration Rights Agreement and the transactions contemplated
thereunder and such as may be required by securities or blue sky laws of
the various states of the United States and of foreign jurisdictions in
connection with the offer and sale of the Offered Securities;
(v) The execution, delivery and performance of the Registration Rights
Agreement and this Agreement, and the issuance and sale of the Offered
Securities and compliance with the terms and provisions hereof and thereof
will not result in a breach or violation of any of the terms and provisions
of, or constitute a default under, any statute, rule or regulation or any
order of any governmental agency or body or any court having jurisdiction
over either of the Company or any subsidiary of the Company or any of their
properties, any agreement or instrument listed as an exhibit to the
Company's Annual Report on Form 10-K most recently filed with the
Commission or listed as an exhibit to or filed with any subsequent reports
filed by the Company under the Exchange Act through December 31, 1996, to
which the Company or any such subsidiary is a party or by which either of
the Company or any such subsidiary is bound or to which any of the
properties of the Company or any such subsidiary is subject, or the
charter or by-laws of the Company or any such subsidiary, and the Company
has full power and corporate authority to authorize, issue and sell the
Offered Securities to be sold by the Company as contemplated by this
Agreement;
(vi) Such counsel have no reason to believe that the Offering
Document, except for the Corrected Statements, or any amendment or
supplement thereto, as of the date hereof and as of the Closing Date,
contained any untrue statement of a material fact or omitted to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; it being
understood that such counsel need express no opinion as to the financial
statements or other financial data contained in the Offering Document;
15
<PAGE> 16
(vii) The descriptions in the Offering Document of statutes, legal and
governmental proceedings and contracts and other documents are accurate in
all material respects and fairly present the information purported to be
described therein;
(viii) the Registration Rights Agreement has been duly authorized,
executed and delivered by the Company and conforms in all material respects
to the description thereof contained in the Offering Document; the
Registration Rights Agreement constitutes a valid and legally binding
obligation of the Company enforceable in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles; and except that rights
to indemnity and contribution may be limited by federal and state
securities laws and public policy considerations;
(ix) This Agreement has been duly authorized, executed and delivered
by the Company;
(x) Assuming the accuracy of the representations of the Purchasers
contained in Section 4, it is not necessary in connection with (i) the
offer, sale and delivery of the Offered Securities by the Company to the
Purchasers pursuant to this Agreement or (ii) the resales of the Offered
Securities by the Purchasers in the manner contemplated by this Agreement,
to register the Offered Securities under the Securities Act.
(xi) To the best of such counsel's knowledge, the Company and its
subsidiaries are in compliance in all material respects with all material
terms and conditions of each License and with all applicable and material
rules, regulations and policies of the FCC pertaining to the Licenses.
(xii) To the best of such counsel's knowledge, all of the Licenses are
currently valid and in full force and effect, and there is no
investigation, notice of apparent liability, violation, forfeiture or other
order or complaint issued by or before any court or regulatory body,
including the FCC, or of any other proceedings (other than proceedings
relating to the wireless communications industries generally) which could
in any manner materially threaten or adversely affect the validity or
continued effectiveness of any of the Licenses.
(xiii) To the best of such counsel's knowledge, no event has occurred
which (i) results in, or after notice or lapse of time or both would result
in, revocation, suspension, adverse modification, non-renewal, impairment,
restriction or termination of, or order of forfeiture with respect to, any
License or (ii) materially and adversely affects or could reasonably be
expected in the future to materially adversely affect any of the rights of
the Company or any of its subsidiaries thereunder.
(xiv) To the best of such counsel's knowledge, the Company and its
subsidiaries have duly filed in a timely manner all material filings,
reports, applications, documents, instruments and information required to
be filed by them under the Communications Act pertaining to the Licenses.
16
<PAGE> 17
(xv) To the best of such counsel's knowledge, there is no reason to
believe that any of the Licenses will not be renewed in the ordinary
course.
The opinions set forth in clauses (iv) as applicable, (vii), as applicable,
(xi), (xii), (xiii), (xiv) and (xv) may be given by Reboul, McMurray, Hewit,
Maynard & Kristol and Smithwick & Belendiuk, P.C., counsel to the Company on FCC
matters.
(d) The Purchasers shall have received from Cravath, Swaine & Moore,
counsel for the Purchasers, such opinion or opinions, dated the Closing Date,
with respect to the incorporation of the Company, the validity of the Offered
Securities, the Offering Document, the exemption from registration for the offer
and sale of the Offered Securities by the Company to the Purchasers and the
resales by the several Purchasers as contemplated hereby and other related
matters as the Purchasers may require, and the Company shall have furnished to
such counsel such documents as they request for the purpose of enabling them to
pass upon such matters.
(e) The Purchasers shall have received a certificate, dated the Closing
Date, of the Chief Executive Officer or any Vice President and a principal
financial or accounting officer of the Company in which such officers, to the
best of their knowledge after reasonable investigation, shall state that the
representations and warranties of the Company in this Agreement are true and
correct, that the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior to the
Closing Date, and that, subsequent to the dates of the most recent financial
statements contained in the Offering Document there has been no material adverse
change, nor any development or event involving a prospective material adverse
change, in the condition (financial or other), business, properties or results
of operations of the Company and its subsidiaries taken as a whole except as set
forth in or contemplated by the Offering Document or as described in such
certificate.
(f) The Purchasers shall have received a letter, dated the Closing Date,
of Ernst & Young LLP which meets the requirements of subsection (a) of this
Section, except that the specified date referred to in such subsection will be a
date not more than five days prior to the Closing Date for the purposes of this
subsection.
(g) Simultaneously with the purchase of the Offered Securities by the
Purchasers, the Trustees of General Electric Pension Trust shall fund by wire
transfer to a specified account in the United States, as requested in writing by
CSFBC, the purchase of 300,000 shares of Convertible Preferred Stock for an
aggregate purchase price of $30,000,000.
(h) The Purchasers shall have received copies of the executed undertakings
from holders of shares of each of the Company's 10% Junior Series 3 Preferred
Stock and the Company's Common Stock sufficient to approve an amendment to the
Restated Certificate of Incorporation of the Company to provide that at any
time, all accrued and unpaid dividends on the Convertible Preferred Stock may be
paid with additional shares of Convertible Preferred Stock.
17
<PAGE> 18
(i) The Company shall have filed with the Secretary of State of the State
of Delaware the Certificate of Designation for the Convertible Preferred Stock.
The Company will furnish the Purchasers with such conformed copies of such
opinions, certificates, letters and documents as the Purchasers reasonably
request. CSFBC may in its sole discretion waive on behalf of the Purchasers
compliance with any conditions to the obligations of the Purchasers hereunder,
whether in respect of the Closing Date or otherwise.
7. Indemnification and Contribution. (a) The Company will indemnify and
hold harmless each Purchaser against any losses, claims, damages or liabilities,
joint or several, to which such Purchaser may become subject, under the
Securities Act or the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any breach of any of the representations and warranties of the Company
contained herein or any untrue statement or alleged untrue statement of any
material fact contained in the Offering Document, or any amendment or supplement
thereto, or any related preliminary offering circular, or in the press release
issued by the Company on March 17, 1997, attached hereto as Schedule D, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, and will reimburse
each Purchaser for any legal or other expenses reasonably incurred by such
Purchaser in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement in or omission or alleged omission from
any of such documents in reliance upon and in conformity with written
information furnished to the Company by any Purchaser through CSFBC specifically
for use therein, it being understood and agreed that the only such information
consists of the information described as such in subsection (b) below; provided
further, however, that with respect to any untrue statement or alleged untrue
statement in or omission or alleged omission from any preliminary offering
circular, the indemnity agreement contained in this subsection (a) shall not
inure to the benefit of any Purchaser that sold the Offered Securities concerned
to the person asserting any such losses, claims, damages or liabilities, to the
extent that such sale was an initial resale by such Purchaser and any such loss,
claim, damage or liability of such Purchaser results from the fact that there
was not sent or given to such person, at or prior to the written confirmation of
the sale of such Offered Securities to such person, a copy of the Offering
Document if the Company had previously furnished copies thereof to such
Purchaser and such Offering Document corrected such untrue statement or omission
or alleged untrue statement or omission.
(b) Each Purchaser, severally and not jointly, will indemnify and hold
harmless the Company against any losses, claims, damages or liabilities to which
the Company may become subject, under the Securities Act or the Exchange Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any breach of the
representations of such Purchaser contained herein or any untrue
18
<PAGE> 19
statement or alleged untrue statement of any material fact contained in the
Offering Document, or any amendment or supplement thereto, or any related
preliminary offering circular, or arise out of or are based upon the omission
or the alleged omission to state therein a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by such Purchaser through CSFBC specifically for use
therein, and will reimburse any legal or other expenses reasonably incurred by
the Company in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred, it being understood
and agreed that the only such information furnished by any Purchaser consists
of the following information in the Offering Document: the last paragraph at
the bottom of the cover page concerning the terms of the offering by the
Purchasers, the legends and disclosure concerning over-allotments and
stabilizing on the inside front cover page and under the caption "Plan of
Distribution" and the statements under the caption "Risk Factors--Absence of
Public Market for Convertible Preferred Stock" regarding the intention of the
Purchasers to make a market in the Offered Securities.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened action in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement includes an unconditional release of
such indemnified party from all liability on any claims that are the subject
matter of such action.
(d) If the indemnification provided for in this Section is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Purchasers on the other from the offering of the Offered
Securities or (ii) if
19
<PAGE> 20
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and the Purchasers on the other in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Purchasers on the other shall
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bear to the total
discounts and commissions received by the Purchasers from the Company under
this Agreement. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Purchasers and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim which is the subject of this
subsection (d). Notwithstanding the provisions of this subsection (d), no
Purchaser shall be required to contribute any amount in excess of the amount by
which the total price at which the Offered Securities purchased by it were
resold exceeds the amount of any damages which such Purchaser has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. The Purchasers' obligations in this subsection
(d) to contribute are several in proportion to their respective purchase
obligations and not joint.
(e) The obligations of the Company under this Section shall be in addition
to any liability which the Company may otherwise have and shall extend, upon the
same terms and conditions, to each person, if any, who controls any Purchaser
within the meaning of the Securities Act or the Exchange Act; and the
obligations of the Purchasers under this Section shall be in addition to any
liability which the respective Purchasers may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls the
Company within the meaning of the Securities Act or the Exchange Act.
8. Default of Purchasers. If any Purchaser defaults in its obligation to
purchase Offered Securities hereunder and arrangements satisfactory to CSFBC and
the Company for the purchase of such Offered Securities by other persons are not
made within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Purchaser or the Company, except as
provided in Section 9. As used in this Agreement, the term "Purchaser" includes
any person substituted for a Purchaser under this Section. Nothing herein will
relieve a defaulting Purchaser from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Company or its officers and of the Purchasers set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation, or statement as to the results thereof, made by or on behalf of
any Purchaser, the Company or any of their respective representatives,
20
<PAGE> 21
officers or directors or any controlling person, and will survive delivery of
and payment for the Offered Securities. If for any reason the purchase of the
Offered Securities by the Purchasers is not consummated, the Company shall
remain responsible for the expenses to be paid or reimbursed by it pursuant to
Section 5(h) and the respective obligations of the Company and the Purchasers
pursuant to Section 7 shall remain in effect. If the purchase of the Offered
Securities by the Purchasers is not consummated for any reason other than
solely because of occurrence of any event specified in clause (C), (D) or (E)
of Section 6(b)(ii), the Company will reimburse the Purchasers for all out-of-
pocket expenses (including fees and disbursements of counsel) reasonably
incurred by them in connection with the offering of the Offered Securities.
10. Notices. All communications hereunder will be in writing and, if sent
to the Purchasers will be mailed, delivered or faxed and confirmed to the
Purchasers c/o Credit Suisse First Boston Corporation, Eleven Madison Avenue,
New York, NY 10010, Attention: Investment Banking Department--Transactions
Advisory Group, or, if sent to the Company, will be mailed, delivered or
electronically transmitted and confirmed to it at 5000 Plaza on the Lake, Suite
200, Austin, Texas 78746, Attention: Chief Financial Officer, provided, however,
that any notice to a Purchaser pursuant to Section 7 will be mailed, delivered
or faxed and confirmed to such Purchaser.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
controlling persons referred to in Section 7, and no other person will have any
right or obligation hereunder, except that holders of Offered Securities shall
be entitled to enforce the agreements for their benefit contained in the second
and third sentences of Section 5(b) hereof against the Company as if such
holders were parties thereto.
12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
13. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.
The Company hereby submits to the non-exclusive jurisdiction of the Federal
and state courts in the Borough of Manhattan in The City of New York in any suit
or proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby.
21
<PAGE> 22
If the foregoing is in accordance with the Purchasers' understanding of our
agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement between the Company and the several
Purchasers in accordance with its terms.
Very truly yours,
IXC COMMUNICATIONS, INC.
By /s/ JOHN J. WILLINGHAM
------------------------------------
Name: John J. Willingham
Title: Senior Vice President and
Chief Financial Officer
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
By /s/ J. PETER BECKETT
----------------------------------
Name: J. Peter Beckett
Title: Director
DILLON, READ & CO. INC.
By /s/ JOHN FREDERICK STECKEL
---------------------------------
Name: John Frederick Steckel
Title: Vice President
22
<PAGE> 23
SCHEDULE A
Purchasers Number of Shares
---------- ----------------
[S] [C]
Credit Suisse First Boston Corporation 850,000
Dillon, Read & Co. Inc. 150,000
---------
1,000,000
=========
A-1
<PAGE> 24
SCHEDULE B
Registration Rights Agreement
B-1
<PAGE> 25
SCHEDULE C
FORM OF LETTER TO BE DELIVERED BY ACCREDITED INVESTORS
IXC Communications Inc.
500 Plaza on the Lake, Suite 200
Austin, TX 78746
Credit Suisse First Boston Corporation
Dillon, Read & Co. Inc.
c/o Credit Suisse First Boston
As Initial Purchasers
Eleven Madison Avenue
New York, NY 10010
We are delivering this letter in connection with an offering of 7 1/4%
Junior Convertible Preferred Stock Due 2007 (the "Convertible Preferred Stock")
of IXC Communications, Inc., a Delaware corporation (the "Company").
We hereby confirm that:
(i) we are an "accredited investor" within the meaning of Rule
501(a)(1), (2), (3), (4), (5), (6) or (7) under the Securities Act of
1933 (the "Securities Act"), or an entity in which all of the equity
owners are accredited investors within the meaning of Rule 501(a)(1),
(2), (3), (4), (5), (6) or (7) under the Securities Act (an
"Accredited Investor");
(ii) (A) any purchase of any Convertible Preferred Stock by us
will be for our own account or for the account of one or more other
Accredited Investors or a fiduciary for the account of one or more
trusts, each of which is an "accredited investor" within the meaning
of Rule 501(a)(7) under the Securities Act and for each of which we
exercise sole investment discretion or (B) we are a "bank", within the
meaning of Section 3(a)(2) of the Securities Act, or a "savings and
loan association" or other institution, described in Section
3(a)(5)(A) of the Securities Act, that is acquiring Convertible
Preferred Stock as fiduciary for the account of one or more
institutions for which we exercise sole investment discretion;
(iii) in the event that we purchase any of the Convertible
Preferred Stock, we will acquire Convertible Preferred Stock having a
minimum purchase price of not less than $100,000 for our own account
or for any separate account for which we are acting;
(iv) we have such knowledge and experience in financial and
business matters that we are capable of evaluating the merits and
risks of purchasing any of the Convertible Preferred Stock;
C-1
<PAGE> 26
(v) we are not acquiring the Convertible Preferred Stock with
a view to distribution thereof or with any present intention of
offering or selling any of the Convertible Preferred Stock, except
inside the United States in accordance with Rule 144A under the
Securities Act or outside the United States in accordance with
Regulation S under the Securities Act, as provided below; provided,
however, that the disposition of our property and the property of any
accounts for which we are acting as fiduciary shall remain at all
times within our control; and
(vi) we have received a copy of the Offering Circular relating
to the offering of the Convertible Preferred Stock and acknowledge
that we have had access to such financial and other information, and
have been afforded the opportunity to ask such questions of
representatives of the Company and receive answers thereto, as we deem
necessary in connection with our decision to purchase the Convertible
Preferred Stock.
We understand that the Convertible Preferred Stock is being offered in
a transaction not involving any public offering within the United States within
the meaning of the Securities Act and that the Convertible Preferred Stock and
the shares of Common Stock issuable upon conversion thereof have not been and
will not be registered under the Securities Act, and we agree, on our own
behalf and on behalf of each account for which we acquire any Convertible
Preferred Stock, that if in the future we decided to offer, resell, pledge or
otherwise transfer any of the Convertible Preferred Stock or the shares of
Common Stock issuable upon conversion thereof, such Convertible Preferred Stock
or Common Stock may be offered, resold, pledged or otherwise transferred only
(i) to a person who we reasonably believe is a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act) in a transaction meeting the
requirements of Rule 144A (if available), (ii) in an offshore transaction in
accordance with Rule 904 under the Securities Act, (iii) pursuant to an
exemption from registration under the Securities Act provided by Rule 144
thereunder (if available), (iv) to the Company, or (v) pursuant to an effective
registration statement under the Securities Act, in each of cases (i) through
(v) above, in accordance with any applicable securities laws of any State of
the United States or any other applicable jurisdiction. We agree to notify any
purchaser, pledgee or transferee of such Convertible Preferred Stock or Common
Stock of the restrictions referred to in clauses (i) through (v) above. We
understand that the registrar and transfer agent for the Convertible Preferred
Stock or the Common Stock, as applicable, will not be required to accept for
registration or transfer any Convertible Preferred Stock or the Common Stock,
as applicable, acquired by us except upon presentation of evidence satisfactory
to the Company and the transfer agent that the foregoing restrictions on
transfer have been complied with. We further understand that any Convertible
Preferred Stock or Common Stock issuable upon conversion thereof acquired by us
will be in the form of definitive physical certificates and that such
certificates will bear a legend reflecting the substance of this paragraph.
We acknowledge that you and others will rely upon our confirmations,
acknowledgments and agreements set forth herein, and we agree to notify you
promptly in writing if any of our representations or warranties herein ceases
to be accurate and complete.
C-2
<PAGE> 27
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS.
Date:
------------------------------- -------------------------------------
(Name of Purchaser)
By:
---------------------------------
Name:
Title:
Address:
C-3
<PAGE> 28
SCHEDULE D
Press Release
D-1
<PAGE> 1
EXHIBIT 4.13
EXECUTION COPY
IXC COMMUNICATIONS, INC.
7 1/4% JUNIOR CONVERTIBLE PREFERRED STOCK DUE 2007
(LIQUIDATION PREFERENCE $100 PER SHARE)
REGISTRATION RIGHTS AGREEMENT
March 25, 1997
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010
Dillon, Read & Co. Inc.
535 Madison Avenue
New York, NY 10022
Ladies and Gentlemen:
IXC Communications, Inc., a Delaware corporation (the "Company"), proposes
to issue and sell to Credit Suisse First Boston Corporation and Dillon, Read &
Co. Inc. (the "Initial Purchasers"), upon the terms set forth in a purchase
agreement of even date herewith (the "Purchase Agreement"), 1,000,000 shares of
its 7 1/4% Junior Convertible Preferred Stock Due 2007 (liquidation preference
$100 per share) (the "Convertible Preferred Stock"). The Convertible Preferred
Stock will be convertible into shares of Common Stock, par value $0.01 per
share, of the Company (the "Common Stock") at the conversion price set forth in
the Offering Circular dated March 25, 1997, subject to adjustment in accordance
with the Certificate of Designation of the Convertible Preferred Stock (the
"Certificate of Designation"). The Convertible Preferred Stock and the Common
Stock issuable upon conversion of the Convertible Preferred Stock are
collectively herein referred to as the "Securities" and each of them as held
singularly is herein referred to as a "Security". As an inducement to the
Initial Purchasers to enter into the Purchase Agreement and in satisfaction of a
condition to the Initial Purchasers' obligations thereunder, the Company agrees
with the Initial Purchasers, (i) for the benefit of the Initial Purchasers and
(ii) for the benefit of the holders of the
<PAGE> 2
Securities from time to time (each of the foregoing a "Holder" and together the
"Holders"), as follows:
1. Shelf Registration. So long as any Transfer Restricted Security
exists, the Company shall take the following actions:
(a) The Company shall, at its cost, prepare and, as promptly as
practicable, file with the Securities and Exchange Commission (the "Commission")
and thereafter shall use its best efforts to cause to be declared effective as
soon as practicable a registration statement on the appropriate form (the "Shelf
Registration Statement") covering the offer and sale of the Transfer Restricted
Securities (as defined in Section 5 hereof) by the Holders thereof from time to
time in accordance with the methods of distribution set forth in the Shelf
Registration Statement and Rule 415 under the Securities Act of 1933 (the
"Securities Act") (hereinafter, the "Shelf Registration").
(b) The Company shall use its best efforts to keep the Shelf Registration
Statement continuously effective, in order to permit the prospectus included
therein to be lawfully delivered by the Holders of the relevant Securities,
until such time as all the Securities covered by the Shelf Registration
Statement have been sold pursuant thereto or may be sold pursuant to Rule 144(k)
under the Securities Act (or any successor rule thereof), assuming for this
purpose that the Holders thereof are not affiliates of the Company (in any such
case, such period being called the "Shelf Registration Period"). The Company
shall be deemed not to have used its best efforts to keep the Shelf Registration
Statement effective during the requisite period if it voluntarily takes any
action that would result in Holders of Securities covered thereby not being able
to offer and sell such Securities during that period, unless (i) such action is
required by applicable law or (ii) upon the occurrence of any event contemplated
by paragraph 2(b)(v) below, such action is taken by the Company in good faith
and for valid business reasons and the Company thereafter promptly complies with
the requirements of paragraph 2(h) below if the Company has determined in good
faith that there are no material legal or commercial impediments in so doing.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Company shall cause (other than information required to be
supplied by the selling Holders
2
<PAGE> 3
pursuant to this Agreement) (i) the Shelf Registration Statement and the
related prospectus and any amendment or supplement thereto to comply in all
material respects with the applicable requirements of the Securities Act and
the rules and regulations of the Commission thereunder, (ii) the Shelf
Registration Statement and any amendment thereto not to contain, when it
becomes effective, 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 (iii) any prospectus forming a part of the Shelf
Registration Statement, and any amendment or supplement to such prospectus, not
to contain, as of the date of such prospectus or amendment or supplement, any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(d) The Company shall, from time to time, cause the Shelf Registration
Statement to be amended to cover additional shares of Convertible Preferred
Stock issued in payment of dividends, if any, as permitted in accordance with
the terms of the Convertible Preferred Stock.
2. Registration Procedures. In connection with the Shelf Registration
contemplated by Section 1 hereof the following provisions shall apply so long as
any Transfer Restricted Security exists:
(a) The Company shall (i) furnish, without charge, to the Initial
Purchasers, prior to the filing thereof with the Commission, a copy of the Shelf
Registration Statement and each amendment thereof and each amendment or
supplement, if any, to the prospectus included therein and, in the event that
the Initial Purchasers (with respect to any portion of an unsold allotment from
the original offering) are participating in the Shelf Registration Statement,
shall use its best efforts to reflect in each such document, when so filed with
the Commission, such comments as such Initial Purchasers reasonably may propose,
(ii) include in each such document the names of the Holders who propose to sell
Transfer Restricted Securities pursuant to the Shelf Registration Statement as
selling security holders and (iii) file pursuant to Rule 424(b) under the
Securities Act an amendment to the Shelf Registration Statement or amend the
prospectus to cover new Holders of Securities upon written notice by such new
Holders to the effect.
3
<PAGE> 4
(b) The Company shall give written notice to the Initial Purchasers and
the Holders (which notice pursuant to clauses (ii)-(v) hereof shall be
accompanied by an instruction, if applicable, to suspend the use of the
prospectus until the requisite changes have been made):
(i) when the Shelf Registration Statement or any amendment thereto has
been filed with the Commission and when the Shelf Registration Statement or
any post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or supplements to
the Shelf Registration Statement or the prospectus included therein or for
additional information;
(iii) of the issuance by the Commission of any stop order suspending
the effectiveness of the Shelf Registration Statement or the initiation of
any proceedings for that purpose;
(iv) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose; and
(v) of the happening of any event that requires the Company to make
changes in the Shelf Registration Statement or the prospectus in order that
the Shelf Registration Statement and the prospectus do not contain an
untrue statement of a material fact and do not omit to state a material
fact required to be stated therein or necessary to make the statements
therein (in the case of the prospectus, in light of the circumstances under
which they were made) not misleading, which written notice need not provide
any detail as to the nature of such event.
(c) The Company shall use reasonable commercial efforts to obtain the
withdrawal at the earliest possible time, of any order suspending the
effectiveness of the Shelf Registration Statement.
(d) The Company shall furnish to each Holder of Transfer Restricted
Securities included within the coverage of the Shelf Registration, without
charge, one copy of the Shelf
4
<PAGE> 5
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, and, if the Holder so requests in writing,
all exhibits thereto (other than those, if any, incorporated by reference).
(e) The Company shall, during the Shelf Registration Period, deliver to
each Holder of Transfer Restricted Securities included within the coverage of
the Shelf Registration Statement, without charge, as many copies of the
prospectus (including each preliminary prospectus) included in the Shelf
Registration Statement and any amendment or supplement thereto as such person
may reasonably request. The Company consents, subject to the provisions of this
Agreement, to the use of the then current prospectus or any amendment thereto,
together with any supplement thereto, by each of the selling Holders in
connection with the offering and sale of the Transfer Restricted Securities
covered by the prospectus, or any amendment or supplement thereto, included in
the Shelf Registration Statement.
(f) Prior to any public offering of the Securities pursuant to the Shelf
Registration Statement, the Company shall register or qualify or cooperate with
the Holders of the Transfer Restricted Securities included therein and their
respective counsel in connection with the registration or qualification of such
Securities for offer and sale under the securities or "blue sky" laws of such
states of the United States as any such Holder reasonably requests in writing
and do any and all other acts or things necessary or advisable to enable the
offer and sale in such jurisdictions of the Securities covered by the Shelf
Registration Statement; provided, however, that the Company shall not be
required to (i) qualify generally to do business in any jurisdiction where it is
not then otherwise required to be so qualified or (ii) take any action which
would subject it to general service of process or to taxation in any
jurisdiction where it is not then so subject.
(g) The Company shall cooperate with the Holders of the Transfer
Restricted Securities to facilitate the timely preparation and delivery of
certificates representing the Securities to be sold pursuant to the Shelf
Registration Statement free of any restrictive legends and in such denominations
and registered in such names as the Holders may request a reasonable period of
time prior to sales of the Securities pursuant to the Shelf Registration
Statement.
5
<PAGE> 6
(h) Upon the occurrence of any event contemplated by paragraphs (ii)
through (v) of Section 2(b) above during the period for which the Company is
required to maintain an effective Shelf Registration Statement, the Company
shall promptly prepare and file a post-effective amendment to the Shelf
Registration Statement or an amendment or supplement to the related prospectus
and any other required document so that, as thereafter delivered to Holders or
purchasers of 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, in light of the circumstances under
which they were made, not misleading. If the Company notifies the Initial
Purchasers or the Holders, in accordance with paragraphs (ii) through (v) of
Section 2(b) above, to suspend the use of the prospectus until the requisite
changes to the prospectus have been made, then the Initial Purchasers and the
Holders shall suspend use of such prospectus.
(i) Not later than the effective date of the Shelf Registration Statement,
the Company will provide CUSIP numbers for the Convertible Preferred Stock and
the Common Stock issuable upon conversion thereof registered under the Shelf
Registration Statement, and provide printed certificates for such Convertible
Preferred Stock or Common Stock, in form eligible for deposit with The
Depository Trust Company.
(j) The Company will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the Shelf
Registration and will make generally available to its security holders (or
otherwise provide in accordance with Section 11(a) of the Securities Act) an
earnings statement satisfying the provisions of Section 11(a) of the Securities
Act, no later than 45 days after the end of a 12-month period (or 90 days, if
such period is a fiscal year) beginning with the first month of the Company's
first fiscal quarter commencing after the effective date of the Shelf
Registration Statement, which statement shall cover such 12-month period.
(k) The Company may require each Holder of Securities to be sold pursuant
to the Shelf Registration Statement to furnish to the Company such information
regarding the Holder and the distribution of the Securities by such Holder as
the Company may from time to time reasonably require for inclusion in the Shelf
Registration Statement, and the Company may exclude from such registration the
Securities of any Holder that fails to furnish such information within a
reasonable time after receiving such request.
6
<PAGE> 7
(l) The Company shall (i) make reasonably available for inspection by the
Holders of the Transfer Restricted Securities and any attorney, accountant or
other agent retained by the Holders of the Securities all relevant financial and
other records, pertinent corporate documents and properties of the Company and
(ii) cause the Company's officers, directors, employees, accountants and
auditors to supply all relevant information reasonably requested by the Holders
of the Securities or any such attorney, accountant or agent in connection with
the Shelf Registration Statement, in each case, as shall be reasonably necessary
to enable such persons to conduct a reasonable investigation within the meaning
of Section 11 of the Securities Act; provided, however, that the foregoing
inspection and information gathering (i) shall be coordinated by you and, on
behalf of the other parties, by one counsel (the "Designated Counsel")
designated by the Holders of a majority in principal amount of the Securities
covered by the Shelf Registration Statement (provided that Holders of Common
Stock issued upon the conversion of the Convertible Preferred Stock shall be
deemed to be Holders of the aggregate number of Convertible Preferred Stock from
which such Common Stock was converted) and (ii) shall not be available for any
such Holder that is a competitor of the Company, and provided further that such
Holders shall keep the information so received confidential.
(m) The Company, if requested by the Designated Counsel, shall cause (i)
its counsel to deliver an opinion and updates thereof relating to the Transfer
Restricted Securities in customary form, with customary limitations,
qualifications and exceptions, addressed to such Holders, and dated, in the case
of the initial opinion, the effective date of such Shelf Registration Statement
(it being agreed that the matters to be covered by such opinion shall include
the due incorporation and good standing of the Company and its subsidiaries; the
qualification of the Company and its subsidiaries to transact business as
foreign corporations; the due authorization, execution and issuance, and the
validity and enforceability, of the applicable Securities; other than as
disclosed, the absence of material legal or governmental proceedings involving
the Company and its subsidiaries; other than as disclosed, the absence of
governmental approvals required to be obtained in connection with the Shelf
Registration Statement, or the offering
7
<PAGE> 8
and sale of the applicable Securities; the compliance as to form of such Shelf
Registration Statement and any documents incorporated by reference therein;
and, as of the date of the opinion and as of the effective date of the Shelf
Registration Statement or most recent post-effective amendment thereto, as the
case may be, the absence from such Shelf Registration Statement and the
prospectus included therein, as then amended or supplemented, and from any
documents incorporated by reference therein, of an untrue statement of a
material fact or the omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading (in
the case of any such documents, in the light of the circumstances existing at
the time that such documents were filed with the Commission under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))), (ii) its
officers to execute and deliver all customary documents and certificates and
updates thereof requested by the Designated Counsel and (iii) its independent
public accountants and the independent public accountants with respect to any
other entity for which financial information is provided in the Shelf
Registration Statement to provide to the selling Holders of the applicable
Securities a comfort letter in customary form and covering matters of the type
customarily covered in comfort letters in connection with primary underwritten
offerings, subject to receipt of appropriate documentation as contemplated, and
only if permitted, by Statement of Auditing Standards No. 72.
(n) The Company will use its best efforts to cause the Common Stock
relating to such Shelf Registration Statement to be listed on each securities
exchange, if any, on which any shares of Common Stock are then listed.
(o) The Company shall use reasonable commercial efforts to take all other
steps necessary to effect the registration of the Transfer Restricted Securities
covered by the Shelf Registration Statement contemplated hereby.
3. Registration Expenses. The Company shall bear all fees and expenses
incurred in connection with the performance of its obligations under Sections 1
through 2 hereof, whether or not the Shelf Registration Statement is filed or
becomes effective, and shall bear or reimburse the Holders of the Securities
covered by the Shelf Registration for the reasonable fees and disbursements of
the Designated Counsel (provided that Holders of Common Stock issued upon the
conversion of the Convertible
8
<PAGE> 9
Preferred Stock shall be deemed to be Holders of the aggregate number of
Convertible Preferred Stock from which such Common Stock was converted) to act
as counsel for the Holders in connection therewith.
4. Indemnification. (a) The Company agrees to indemnify and hold
harmless each Holder and each person, if any, who controls such Holder within
the meaning of the Securities Act or the Exchange Act (each Holder and such
controlling persons are referred to collectively as the "Indemnified Parties")
from and against any losses, claims, damages or liabilities, joint or several,
or any actions in respect thereof (including any losses, claims, damages,
liabilities or actions relating to purchases and sales of the Securities) to
which each Indemnified Party becomes subject under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities
or actions arise out of or are based upon, any untrue statement or alleged
untrue statement of a material fact contained in the Shelf Registration
Statement or prospectus or in any amendment or supplement thereto or in any
preliminary prospectus relating to the Shelf Registration, or arise out of, or
are based upon, the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and subject to subsection (c) below, shall reimburse, as
incurred, the Indemnified Parties for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action in respect thereof; provided, however, that
the Company shall not be liable in any such case to the extent that such loss,
claim, damage, liability, or action in respect thereof arises out of or is based
upon (x) the use of any prospectus in violation of the last sentence of Section
2(h), or (y) any untrue statement or alleged untrue statement or omission or
alleged omission made in the Shelf Registration Statement or prospectus or in
any amendment or supplement thereto or in any preliminary prospectus relating to
the Shelf Registration in reliance upon, and in conformity with, written
information pertaining to such Holder and furnished to the Company by or on
behalf of such Holder specifically for inclusion therein; provided further,
however, that this indemnity agreement will be separate from any liability which
the Company may otherwise have to such Indemnified Party; provided further,
however, that with respect to any untrue statement or alleged untrue statement
in or omission or alleged omission from any prospectus, the indemnity agreement
contained in this subsection (a) shall not inure to the
9
<PAGE> 10
benefit of any Holder that sold the Securities concerned to the person
asserting any such losses, claims, damages or liabilities, to the extent that
any such loss, claim, damage or liability of such Holder results from the fact
that there was not sent or given to such person, at or prior to the written
confirmation of the sale of such Securities to such person, a copy of the
prospectus if the Company had previously furnished copies thereof to such
Holder and such prospectus corrected such untrue statement or omission or
alleged untrue statement or omission.
(b) Each Holder, severally and not jointly, will indemnify and hold
harmless the Company and each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act from and against any
losses, claims, damages or liabilities or any actions in respect thereof, to
which the Company or any such controlling person becomes subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in a Shelf
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Shelf Registration, or arise out
of, or are based upon the omission or alleged omission to state therein a
material fact necessary to make the statements therein not misleading, but in
each case only to the extent that the untrue statement or omission or alleged
untrue statement or omission was made in reliance upon and in conformity with
written information pertaining to such Holder and furnished to the Company by or
on behalf of such Holder specifically for inclusion therein; and, subject to the
limitation set forth immediately preceding this clause, and to subsection (c)
below, shall reimburse, as incurred, the Company for any legal or other expenses
reasonably incurred by the Company or any such controlling person in connection
with investigating or defending any loss, claim, damage, liability or action in
respect thereof; provided, however, that such Holder shall not have any
liability under this clause (b) in excess of the aggregate purchase price paid
by such Holder for the shares of Convertible Preferred Stock purchased by such
Holder. This indemnity agreement will be separate from any liability which such
Holder may otherwise have to the Company or any of its controlling persons.
(c) Promptly after receipt by an indemnified party under this Section 4 of
notice of the commencement of any action or proceeding (including a governmental
investigation), such
10
<PAGE> 11
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 4, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not, in any event, relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation provided in
subsections (a) or (b) above. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the indemnifying party), and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof the indemnifying party will not be liable to such
indemnified party under this Section 4 for any legal or other expenses, other
than reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense thereof. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any
claims that are the subject matter of such action.
(d) If the indemnification provided for in this Section 4 is unavailable
or insufficient to hold harmless an indemnified party under subsections (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to in subsections (a) or
(b) above (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the registration of the Securities, pursuant
to the Shelf Registration, or (ii) if the allocation provided by the foregoing
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the indemnifying party or parties
11
<PAGE> 12
on the one hand and the indemnified party on the other, in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of the parties shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company on the one
hand or such Holder or such other indemnified party, as the case may be, on the
other, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid
by an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim which is the subject of this subsection (d). Notwithstanding any other
provision of this subsection (d), the Holders shall not be required to
contribute any amount in excess of the amount by which the net proceeds
received by such Holders from the sale of the Securities pursuant to the Shelf
Registration Statement exceeds the amount of damages which such Holders have
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this paragraph (d), each person,
if any, who controls such indemnified party within the meaning of the
Securities Act or the Exchange Act shall have the same rights to contribution
as such indemnified party and each person, if any, who controls the Company
within the meaning of the Securities Act or the Exchange Act shall have the
same rights to contribution as the Company.
(e) The agreements contained in this Section 4 shall survive the sale of
the Securities pursuant to the Shelf Registration Statement and shall remain in
full force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any indemnified party.
5. Additional Dividends Under Certain Circumstances. (a) Additional
dividends (the "Additional Dividends") with
12
<PAGE> 13
respect to the shares of Convertible Preferred Stock which are Transfer
Restricted Securities shall accrue as follows if any of the following events
occur (each such event in clauses (i) and (ii) below being herein called a
"Registration Default"):
(i) if by August 31, 1997, the Shelf Registration Statement has not
been declared effective by the Commission; or
(ii) if after the Shelf Registration Statement is declared effective
(A) the Shelf Registration Statement thereafter ceases to be effective; or
(B) the Shelf Registration Statement or the related prospectus ceases to be
usable (in each case except as permitted in paragraph (b) below) in
connection with resales of Transfer Restricted Securities in accordance
with and during the periods specified herein because either (1) any event
occurs as a result of which the related prospectus forming part of such
Shelf Registration Statement would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which they were
made not misleading, or (2) it shall be necessary to amend such Shelf
Registration Statement or supplement the related prospectus, to comply with
the Securities Act or the Exchange Act or the respective rules thereunder.
Additional Dividends shall accrue on the shares of Convertible Preferred
Stock which are Transfer Restricted Securities from and including the date on
which any such Registration Default shall occur, to but excluding the date on
which all such Registration Defaults have been cured, at a rate of 7 3/4% per
annum.
(b) A Registration Default referred to in Section 5(a)(ii) shall be deemed
not to have occurred and be continuing in relation to the Shelf Registration
Statement or the related prospectus if (i) such Registration Default has
occurred solely as a result of (x) the filing of a post-effective amendment to
the Shelf Registration Statement to incorporate annual audited financial
information with respect to the Company where such post-effective amendment is
not yet effective and needs to be declared effective to permit Holders to use
the related prospectus or (y) other material events, with respect to the Company
that would need to be described in the Shelf
13
<PAGE> 14
Registration Statement or the related prospectus and (ii) in the case of clause
(y), the Company proceeds promptly and in good faith to amend or supplement the
Shelf Registration Statement and related prospectus to describe such events if
the Company has determined in good faith that there are no material legal or
commercial impediments in so doing; provided, however, that in any case if such
Registration Default occurs for a continuous period in excess of 45 days,
Additional Dividends shall be payable in accordance with the above paragraph
from the day such Registration Default initially occurs until such Registration
Default is cured.
(c) Any amounts of Additional Dividends due pursuant to clause (a)(i) or
(a)(ii) of this Section 5 or pursuant to the proviso contained in Section 5(b)
will be payable on the regular dividend payment dates with respect to the
Convertible Preferred Stock on the same terms and conditions and subject to the
same limitations as pertain at such time for the payment of regular dividends.
The amount of Additional Dividends will be determined by multiplying the
applicable Additional Dividends rate by the aggregate liquidation preference of
the outstanding shares of Convertible Preferred Stock, multiplied by a fraction,
the numerator of which is the number of days such Additional Dividend rate was
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months), and the denominator of which is 360.
(d) "Transfer Restricted Securities" means each Security (including
additional shares of Convertible Preferred Stock issued in payment of dividends
on the Convertible Preferred Securities, if any, as permitted in accordance with
the terms of the Convertible Preferred Stock) until (i) the date on which such
Security has been effectively registered under the Securities Act and disposed
of in accordance with the Shelf Registration Statement or (ii) the date on which
such Security is distributed to the public pursuant to Rule 144 under the
Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act
(or any successor rule thereof) or would be saleable pursuant to Rule 144(k)
under the Securities Act had it not been held by, or had never been held by, an
affiliate of the Company.
6. Rules 144 and 144A. So long as any Transfer Restricted Security
exists, the Company shall use its best efforts to file the reports required to
be filed by it under the Securities Act and the Exchange Act in a timely manner
and, if at
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<PAGE> 15
any time the Company is not required to file such reports, it will, upon the
request of any Holder of Transfer Restricted Securities, make publicly
available other information so long as necessary to permit sales of its
securities pursuant to Rules 144 and 144A. The Company covenants that, if in
the event the Company is no longer subject to Sections 13 or 15(d) of the
Exchange Act, it will take such further action as any Holder of Transfer
Restricted Securities may reasonably request, all to the extent required from
time to time to enable such Holder to sell Transfer Restricted Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rules 144 and 144A (including the requirements of Rule
144A(d)(4)). The Company will provide a copy of this Agreement to prospective
purchasers of Securities identified to the Company by the Initial Purchasers
upon request. Notwithstanding the foregoing, nothing in this Section 6 shall
be deemed to require the Company to register any of its securities pursuant to
the Exchange Act.
7. Miscellaneous. (a) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, except by the Company
and the written consent of the Holders of a majority of the Transfer Restricted
Securities (provided that Holders of Common Stock issued upon conversion of
Convertible Preferred Stock shall be deemed to be Holders of the aggregate
number of Convertible Preferred Stock from which such Common Stock was
converted) affected by such amendment, modification, supplement, waiver or
consents.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which guarantees overnight delivery:
(1) if to the Holders, at the most current address given by the Holders
of record to the Company in accordance with the provisions of this Section
7(b), which address initially is, with respect to each Holder, the address
of such Holder to which confirmation of the sale of the
15
<PAGE> 16
Convertible Preferred Stock to such Holder was first sent by the Initial
Purchasers, with a copy in like manner to you as follows:
Credit Suisse First Boston Corporation
Dillon, Read & Co. Inc.
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629
Fax No.: (212) 325-8728
Attention: Transactions Advisory Group
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Fax No.: (212) 474-3700
Attention: Kris F. Heinzelman, Esq.
(2) if to the Company, at its address as follows:
IXC Communications, Inc.
5000 Plaza on the Lake, Suite 200
Austin, TX 78746
Fax No.: (512) 329-4717
Attention: Chief Financial Officer
with a copy to:
Riordan & McKinzie
695 Town Center Drive, Suite 1500
Costa Mesa, CA 92626
Fax No.: (714) 549-3244
Attention: Michael P. Whalen, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged by recipient's facsimile machine operator, if sent by facsimile
transmission; and on the day delivered, if sent by overnight air courier
guaranteeing next day delivery.
16
<PAGE> 17
(c) No Inconsistent Agreements; Damages. The Company has not, as of the
date hereof, entered into, nor shall it, on or after the date hereof, enter
into, any agreement with respect to its securities that is inconsistent with the
rights granted to the Holders herein or otherwise conflicts with the provisions
hereof. Notwithstanding anything to the contrary contained in this Agreement,
it is hereby acknowledged and agreed that the Company shall have no liability
for monetary damages to the Initial Purchasers or any Holder for any breaches,
failures to comply or violations by it of Section 1 or 2 of this Agreement
except as expressly provided in Section 4 or 5 hereof; provided, however, in the
event that the Company breaches, fails to comply or violates the provisions of
Section 1 or 2 hereof, the Holders shall be entitled to, and the Company shall
not oppose the granting of, equitable relief, including injunction and specific
performance.
(d) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties,
including, without the need for an express assignment or any consent by the
Company thereto, subsequent Holders of Transfer Restricted Securities. The
Company hereby agrees to extend the benefits of this Agreement to any Holder of
Transfer Restricted Securities and any such Holder may specifically enforce the
provisions of this Agreement as if an original party hereto.
(e) 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.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.
By the execution and delivery of this Agreement, the Company submits to the
nonexclusive jurisdiction of any federal or state court in the State of New
York.
17
<PAGE> 18
(h) 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.
(i) Securities Held by the Company. Whenever the consent or approval of
Holders of a specified percentage of Transfer Restricted Securities is required
hereunder, Securities held by the Company or its affiliates (other than
subsequent Holders of Transfer Restricted Securities if such subsequent Holders
are deemed to be affiliates solely by reason of their holdings of such
Securities and other than the Trustees of General Electric Pension Trust and
other than certain individuals that purchased in the aggregate 24,000 shares of
Convertible Preferred Stock directly from the Initial Purchasers) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
18
<PAGE> 19
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement among
the Initial Purchasers and the Company in accordance with its terms.
Very truly yours,
IXC COMMUNICATIONS, INC.
By /s/ JOHN J. WILLINGHAM
------------------------------------
Name: John J. Willingham
Title: Senior Vice President and
Chief Financial Officer
The foregoing Registration
Rights Agreement is hereby confirmed
and accepted as of the date first
above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ J. PETER BECKETT
--------------------------------
Name: J. Peter Beckett
Title: Director
DILLON, READ & CO. INC.
By: /s/ JOHN FREDERICK STECKEL
--------------------------------
Name: John Frederick Steckel
Title: Vice President
19
<PAGE> 1
EXHIBIT 4.14
AMENDMENT TO
REGISTRATION RIGHTS AGREEMENT
This Amendment to Registration Rights Agreement (this "Agreement") is
made as of March 25, 1997 by and between the Trustees of General Electric
Pension Trust, a New York trust ("GEPT"), and IXC Communications Inc., a
Delaware corporation ("IXC").
BACKGROUND
A. IXC, GEPT and certain other persons are parties to that
certain Registration Rights Agreement dated as of June 10, 1996 (the "1996
Agreement"). Furthermore, GEPT, as a holder of shares of IXC's 7 1/4% Junior
Convertible Preferred Stock (the "Preferred Stock"), has certain rights under
the Registration Rights Agreement dated as of March 25, 1997 among IXC, Credit
Suisse First Boston Corporation and Dillon, Read & Co., Inc. (the "1997
Agreement").
B. GEPT is willing to agree not to exercise any demand
registration rights under the 1996 Agreement prior to May 15, 1997 and, in
return, IXC is willing to extend the term of the 1996 Agreement and to grant
additional rights to GEPT with respect to the 1997 Agreement, all on the terms
and conditions set forth below.
AGREEMENT
Accordingly, in consideration of the foregoing and for the promises
set forth below, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. Amendment of Section 2(a) of the 1996 Agreement. The first
sentence of Section 2(a) of the 1996 Agreement is hereby amended to delete the
phrase "prior to March 1, 2000 (the "Registration Period")". The penultimate
sentence of Section 2(a) is hereby amended by replacing the number "10" with
the number "5" in each of the two places in which it appears. The purpose of
this amendment is to permit GEPT to exercise its demand registration rights
pursuant to such Section 2(a) at any time and to eliminate the expiration date
of such rights so long as GEPT holds at least 5% of the outstanding shares of
common stock of IXC.
2. Temporary Standstill. GEPT shall not exercise any demand
registration rights under the 1996 Agreement prior to May 15, 1997.
3. Review Rights relating to the 1997 Agreement. IXC agrees to
furnish, without charge, to GEPT, prior to the filing thereof with the
Securities and Exchange Commission (the "Commission"), a copy of the Shelf
Registration Statement (as defined in the 1997 Agreement) and each amendment
thereof and each amendment or supplement, if any, to the prospectus included
therein and, in the event that GEPT is participating in the Shelf Registration
Statement,
<PAGE> 2
shall use its best efforts to reflect in each such document, when so filed with
the Commission, such comments as GEPT reasonably may propose.
4. Effective Date. The provisions of this Agreement are
effective immediately.
5. Counterparts; Facsimile Signatures. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute a single agreement. This
Agreement may be executed by facsimile signature and facsimile signatures shall
be fully binding and effective for all purposes and shall be given the same
effect as original signatures. If any party delivers a copy of this Agreement
containing a facsimile signature, such party shall promptly forward an
originally executed copy to the other party; however, the failure by any party
to so deliver an originally executed copy shall not affect in any way the
binding nature of such party's facsimile signature.
6. No Other Changes. Except as expressly provided above, the 1996
Agreement shall remain unchanged and in full force and effect.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.
IXC COMMUNICATIONS, INC. TRUSTEES OF GENERAL ELECTRIC
PENSION TRUST
By: /s/ John J. Willingham By: /s/ Donald W. Torey
-------------------------------- ---------------------------
Name: John J. Willingham Name: Donald W. Torey
------------------------------ -------------------------
Title: Senior Vice President and
Chief Financial Officer Title: Trustee
----------------------------- ------------------------
3
<PAGE> 1
EXHIBIT 11.1
IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1997 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1997 1996
-------- --------
<S> <C> <C>
EARNINGS
Net income (loss).................................................... $(19,878) $(11,699)
Less: Dividends applicable to preferred stock..................... (470) (433)
-------- --------
Net income (loss) applicable to common stockholders.................. $(20,348) $(12,132)
======== ========
PRIMARY
Weighted average number of shares outstanding........................ 30,799 24,335
Add: Effect, for periods prior to the initial public offering (IPO),
of common stock options issued within one year of the IPO......... 810 833
Less: Assumed repurchase of shares under the treasury stock method... (82) (157)
-------- --------
Number of shares used to compute earnings (loss) applicable to common
shareholders...................................................... 31,527 25,011
======== ========
FULLY DILUTED
Weighted average number of shares outstanding........................ 30,799 24,335
Add: Effect, for periods prior to the IPO, of common stock options
issued within one year of the IPO................................. 810 833
Less: Assumed repurchase of shares under the treasury stock method... (125) (157)
-------- --------
Number of shares used to compute earnings (loss) applicable to common
shareholders...................................................... 31,484 25,011
======== ========
PRIMARY LOSS PER COMMON SHARE........................................ $ (0.65) $ (0.49)
======== ========
FULLY DILUTED LOSS PER COMMON SHARE.................................. $ (0.65) $ (0.49)
======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,394,000
<SECURITIES> 0
<RECEIVABLES> 60,251,000
<ALLOWANCES> 5,168,000
<INVENTORY> 0
<CURRENT-ASSETS> 62,351,000
<PP&E> 411,041,000
<DEPRECIATION> 77,441,000
<TOTAL-ASSETS> 450,004,000
<CURRENT-LIABILITIES> 98,918,000
<BONDS> 285,000,000
0
12,550
<COMMON> 308,000
<OTHER-SE> 43,529,000
<TOTAL-LIABILITY-AND-EQUITY> 450,004,000
<SALES> 0
<TOTAL-REVENUES> 83,910,000
<CGS> 0
<TOTAL-COSTS> 68,982,000
<OTHER-EXPENSES> 26,569,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,746,000
<INCOME-PRETAX> (19,927,000)
<INCOME-TAX> 252,000
<INCOME-CONTINUING> (19,878,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,878,000)
<EPS-PRIMARY> (0.65)
<EPS-DILUTED> (0.65)
</TABLE>
