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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 20, 1997
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IXC Communications, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-20803 74-2644120
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(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
5000 Plaza on the Lake, Suite 200, Austin, Texas 78746
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (512) 328-1112
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Not applicable
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(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS.
On August 20, 1997, IXC Communications, Inc. (the "Company") issued $300
million of 12 1/2% Junior Exchangeable Preferred Stock due 2009 ("Exchangeable
Preferred Stock") pursuant to terms of a purchase agreement by and among the
Company and the initial purchasers named therein (the "Purchase Agreement"). The
net proceeds to the Company are estimated to be $288 million (after deducting
the estimated fees and expenses of the offering). The Company intends to use
substantially all of the net proceeds from the offering to fund capital
expenditures, including a portion of its network expansion, and to use the
balance for general corporate purposes.
The following discussion is a summary of certain provisions of: (1) the
Certificate of Designation with respect to the Exchangeable Preferred Stock (the
"Certificate of Designation"); (2) the Exchange Indenture between the Company
and The Bank of New York, as trustee (the "Exchange Indenture"); (3) a
registration rights agreement with respect to the Exchangeable Preferred Stock
(the "Registration Rights Agreement"); and (4) the Purchase Agreement, and does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, all the provisions of such documents. Copies of the Purchase
Agreement, Exchange Indenture, and the Registration Rights Agreement are
attached hereto as Exhibits 4.1 through 4.3 and incorporated herein by
reference. A copy of the Certificate of Designation is incorporated herein by
reference to Exhibit 4.18 of the Company's Amendment No. 1 to the Registration
Statement on Form S-3 filed with the Securities and Exchange Commission (the
"Commission") on August 27, 1997.
THE EXCHANGEABLE PREFERRED STOCK
The Exchangeable Preferred Stock will be subject to the following terms:
Dividends
Dividends on the Exchangeable Preferred Stock accrue at a rate of
12 1/2% per annum of the liquidation preference ("Liquidation Preference")
thereof and are payable quarterly in arrears on February 15, May 15, August 15
and November 15 of each year (each a "Dividend Payment Date") commencing
November 15, 1997. Dividends are payable in cash, except that on each Dividend
Payment Date occurring on or prior to February 15, 2001, dividends may be
paid, at the Company's option, by the issuance of additional shares of
Exchangeable Preferred Stock (including fractional shares) having an aggregate
Liquidation Preference equal to the amount of such dividends.
Liquidation Preference
The Liquidation Preference of the Exchangeable Preferred Stock is
$1,000 per share.
Ranking
The Exchangeable Preferred Stock ranks: (i) senior to all existing and
future classes of common stock and to each other class of capital stock or
series of preferred stock established hereafter by the Board of Directors, the
terms of which do not expressly provide that it ranks senior to, or on a parity
with, the Exchangeable Preferred Stock (collectively, the "Junior Stock"); (ii)
subject to certain conditions, on a parity with the Company's 7 1/4% Junior
Convertible Preferred Stock due 2009 and each other class of capital stock or
series of preferred stock established hereafter by the Board of Directors, the
terms of which expressly provide that such class or series will rank on a parity
with the Exchangeable Preferred Stock; and (iii) junior to the Company's 10%
Junior Series 3 Preferred Stock and each class of capital stock or series of
preferred stock established hereafter by the Board of Directors, the terms of
which expressly provide that such class or series will rank senior to the
Exchangeable Preferred Stock as to dividend rights upon liquidation, winding-up
and dissolution of the Company (the "Senior Stock").
2.
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Optional Redemption
The Exchangeable Preferred Stock is not redeemable prior to August 15,
2002, except that, on or prior to August 15, 2000, the Company may redeem, at
its option, up to 35% of the outstanding Exchangeable Preferred Stock with the
net proceeds of one or more public equity offerings if at least $195 million
aggregate Liquidation Preference of the Exchangeable Preferred Stock remains
outstanding after each such redemption. On or after August 15, 2002, the
Exchangeable Preferred Stock is redeemable at the option of the Company, in
whole or in part at the redemption prices set forth in the Certificate of
Designation plus accumulated and unpaid dividends, if any, to the date of
redemption.
Mandatory Redemption
The Exchangeable Preferred Stock is subject to mandatory redemption at
its Liquidation Preference, plus accumulated and unpaid dividends, if any, on
August 15, 2009, out of any funds legally available therefor.
Change of Control
In the event of a change of control of the Company (a "Change of
Control") as defined in the Certificate of Designation with respect to the
Exchangeable Preferred Stock, if the Company elects, the Company shall offer to
purchase shares of Exchangeable Preferred Stock, in whole or in part, at a
purchase price equal to 101% of the aggregate Liquidation Preference thereof,
plus accumulated and unpaid dividends, if any, to the date of purchase.
In the event the Company does not elect to make the offer referred to
above, then holders of a majority of the Exchangeable Preferred Stock (and, in
certain circumstances, the Company) will designate an independent financial
advisor to determine the appropriate dividend rate that the Exchangeable
Preferred Stock should bear so that, after such reset, the Exchangeable
Preferred Stock would have a market value of 101% of the Liquidation
Preference. After determination of the reset rate, the Exchangeable Preferred
Stock shall accrue and accumulate dividends at the reset rate as of the date of
occurrence of the Change of Control; provided, however, that the reset rate
shall in no event be less than 12 1/2% per annum (the initial dividend rate on
the Exchangeable Preferred Stock) or greater than 15% per annum.
Voting Rights
Holders of the Exchangeable Preferred Stock have limited voting
rights, including (i) those required by law and (ii) that holders of the
outstanding shares of Exchangeable Preferred Stock, voting together as a class
with the holders of any other series of preferred stock upon which like rights
have been conferred and are exercisable, (a) upon the failure of the Company
(1) to pay dividends for six or more Dividend Periods (as defined in the
Certificate of Designation), whether or not consecutive, (2) to satisfy any
mandatory redemption obligation with
3.
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respect to the Exchangeable Preferred Stock, (3) to comply with the covenants
set forth in the Certificate of Designation or (4) to comply with certain
covenants or make certain payments on certain Indebtedness (as defined in the
Certificate of Designation), will be entitled to elect two members to the Board
of Directors of the Company; and (b) have the right to approve each issuance by
the Company of any Senior Stock, except that without the consent of the holders
of Exchangeable Preferred Stock, the Company may create additional classes of
stock, increase the authorized number of shares of preferred stock or issue
series of a stock that ranks junior to or on parity with the Exchangeable
Preferred Stock.
Covenants
The Certificate of Designation for the Exchangeable Preferred Stock
limits: (i) the incurrence of additional debt by the Company and certain of its
subsidiaries; (ii) the payment of dividends on Junior Stock of the Company and
the purchase, redemption or retirement of Junior Stock; (iii) investments; (iv)
certain transactions with affiliates; and (v) certain consolidations, mergers
and transfers of assets. The Certificate of Designation also prohibits certain
restrictions on distributions from certain subsidiaries. All of these
limitations and prohibitions, however, are subject to a number of important
qualifications.
Exchange Feature
On any scheduled dividend payment date, the Company may, at its option,
exchange all but not less than all, of the shares of Exchangeable Preferred
Stock then outstanding for 12 1/2% Subordinated Exchange Debentures Due 2009
(the "Exchange Debentures") in a principal amount equal to the Liquidation
Preference of the shares of Exchangeable Preferred Stock held by such holder at
the time of such exchange.
THE EXCHANGE DEBENTURES
The Exchange Debentures will be subject to the following terms:
Maturity
The Exchange Debentures will mature on August 15, 2009.
Interest
The Exchange Debentures will bear interest at the rate of 12 1/2% per
annum, payable semiannually on February 15 and August 15, commencing with the
first of such dates to occur after the date of exchange for Exchangeable
Preferred Stock. On or prior to February 15, 2001, interest may, at the option
of the Company, be paid by issuing additional Exchange Debentures with a
principal amount equal to such interest. After February 15, 2001, interest on
the Exchange Debentures may be paid only in cash.
4.
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Ranking
The Exchange Debentures will be general unsecured obligations of the
Company, subordinated in right of payment to all existing and future senior
indebtedness (including the Company's 12 1/2% Senior Notes due 2005) of the
Company and to all indebtedness and other liabilities (including trade
payables) of the Company's subsidiaries.
Optional Redemption
The Exchange Debentures will not be redeemable prior to August 15, 2002,
except that, until August 15, 2000, the Company may redeem, at its option, up to
an aggregate of 35% of the aggregate principal amount of the Exchange Debentures
at the redemption price set forth in the Exchange Indenture with the net
proceeds of one or more public equity offerings if at least $195 million of the
principal amount of the Exchange Debentures remains outstanding after each such
redemption. On or after August 15, 2002, the Exchange Debentures are redeemable
at the option of the Company, in whole or in part, at the redemption prices set
forth in the Exchange Indenture plus accrued and unpaid interest, if any, to the
date of redemption.
Change of Control
In the event of a Change of Control, holders of the Exchange Debentures
will have the right to require the Company to purchase their Exchange
Debentures, in whole or in part, at a price equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of purchase.
Restrictive Covenants
The Exchange Indenture under which the Exchange Debentures will be
issued will limit: (i) the incurrence of additional debt by the Company and
certain of its subsidiaries; (ii) the payment of dividends on capital stock of
the Company and the purchase, redemption or retirement of capital stock or
indebtedness which ranks junior to the Exchange Debentures, (iii) investments,
(iv) certain transactions with affiliates; (v) sales of assets, including
capital stock of subsidiaries; and (vi) certain consolidations, mergers and
transfers of assets. The Exchange Indenture will also prohibit certain
restrictions on distributions from certain subsidiaries. All of these
limitations and prohibitions, however, are subject to a number of important
qualifications.
EXCHANGE OFFER; REGISTRATION RIGHTS
The Company has agreed pursuant to the Registration Rights Agreement (i)
to file a registration statement (the "Exchange Offer Registration
Statement") with respect to an offer to exchange (the "Exchange Offer") (x) the
Exchangeable Preferred Stock for a new issue of
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preferred stock of the Company registered under the Securities Act of 1933, as
amended (the "Securities Act"), with terms substantially identical to those of
the Exchangeable Preferred Stock or (y) if the Exchangeable Preferred Stock has
previously been converted into Exchange Debentures, the Exchange Debentures for
a new issue of debentures of the Company registered under the Securities Act,
with terms substantially identical to those of the Exchange Debentures, within
45 days after the initial issue of the Exchangeable Preferred Stock, and (ii) to
use its best efforts to cause the Exchange Offer Registration Statement to
become effective under the Securities Act within 120 days after the initial
issue of the Exchangeable Preferred Stock. In the event that applicable law or
interpretations of the staff of the Securities and Exchange Commission ("the
Commission") do not permit the Company to effect the Exchange Offer, or if
certain holders of the Exchangeable Preferred Stock or Exchange Debentures, as
the case may be, are not permitted to participate in the Exchange Offer, the
Company will use its best efforts to cause to become effective a shelf
registration statement (the "Shelf Registration Statement") with respect to the
resale of the Exchangeable Preferred Stock or Exchange Debentures, as the case
may be, and to keep such Shelf Registration Statement effective until all the
Exchangeable Preferred Stock or Exchange Debentures, as the case may be, has
been sold thereunder or the date on which all the Exchangeable Preferred Stock
or Exchange Debentures, as the case may be, held by persons that are not
affiliates of the Company may be resold without registration pursuant to Rule
144(k) under the Securities Act. The dividend rate on the Exchangeable Preferred
Stock or the interest rate on the Exchange Debentures, as the case may be, is
subject to increase under certain circumstances if the Company is not in
compliance with its obligations under the Registration Rights Agreement.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) EXHIBITS
4.1 Purchase Agreement dated as of August 14, 1997 by and among IXC
Communications, Inc. and the initial purchasers named in
Schedule A thereto.
4.2 Indenture dated as of August 15, 1997 between IXC
Communications, Inc. and the Bank of New York.
6.
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4.3 Registration Rights Agreement dated as of August 14, 1997 by and among
IXC Communications, Inc. and the purchasers named therein.
4.4 Certificate of Designation of Powers, Preferences and Relative,
Participating, Optional or Other Special Rights of 12 1/2% Junior
Exchangeable Preferred Stock Due 2009 and 12 1/2% Series B Junior
Exchangeable Preferred Stock Due 2009 and Qualifications, Limitations
and Restrictions Thereof (incorporated by reference to Exhibit 4.18 of
IXC Communications, Inc.'s Amendment No. 1 to the Registration
Statement on Form S-3 filed with the Commission on August 27, 1997)
(File No. 333-33421).
7.
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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 hereunto duly authorized.
Date: August 27, 1997
IXC Communications, Inc.
By: /s/ JAMES F. GUTHRIE
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James F. Guthrie
Executive Vice President and
Chief Financial Officer
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EXHIBIT INDEX
Exhibit
Number Description
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4.1 Purchase Agreement dated as of August 14, 1997 by and among IXC
Communications, Inc. and the initial purchasers named in Schedule A
thereto.
4.2 Indenture dated as of August 15, 1997 between IXC Communications, Inc.
and the Bank of New York.
4.3 Registration Rights Agreement dated as of August 4, 1997 by and among
IXC Communications, Inc. and the purchasers named therein.
4.4 Certificate of Designation of Powers, Preferences and Relative,
Participating, Optional or Other Special Rights of 12 1/2% Junior
Exchangeable Preferred Stock Due 2009 and 12 1/2% Series B Junior
Exchangeable Preferred Stock Due 2009 and Qualifications, Limitations
and Restrictions Thereof (incorporated by reference to Exhibit 4.18 of
the Form S-3).
9.
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EXHIBIT 4.1
EXECUTION COPY
IXC COMMUNICATIONS, INC.
12 1/2% JUNIOR EXCHANGEABLE PREFERRED STOCK DUE 2009
(LIQUIDATION PREFERENCE $1,000 PER SHARE)
PURCHASE AGREEMENT
August 14, 1997
CREDIT SUISSE FIRST BOSTON CORPORATION
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
C/O CREDIT SUISSE FIRST BOSTON CORPORATION
Eleven Madison Avenue
New York, N.Y. 10010
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") 300,000 shares of its 12 1/2% Junior Exchangeable Preferred Stock
Due 2009 (liquidation preference $1,000 per share) (the "Exchangeable Preferred
Stock"). The Company may, at its option (on any scheduled dividend payment
date), exchange all but not less than all of the Exchangeable Preferred Stock
then outstanding for Exchange Debentures (the "Exchange Debentures") in a
principal amount equal to the liquidation preference of the Exchangeable
Preferred Stock held by such holder at the time of such exchange. The
Exchangeable Preferred Stock and the Exchange Debentures issuable upon exchange
of the Exchangeable Preferred Stock are collectively herein referred to as the
"Offered Securities". Holders of shares of Exchangeable Preferred Stock or
Exchange Debentures will have the registration rights set forth in the
Registration Rights Agreement dated as of August 14, 1997 between the Company
and the Purchasers. 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
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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 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. 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-K for the year ending on December 31, 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 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 Exchangeable Preferred Stock has been duly and validly
authorized; and when the Exchangeable Preferred Stock has been delivered and
paid for pursuant to this Agreement
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on the Closing Date (as defined below), such Exchangeable 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 Exchangeable Preferred Stock have been duly and validly
authorized and reserved for issuance upon payment of dividends on the
Exchangeable Preferred Stock in additional shares of Exchangeable 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) 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.
(f) 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 (as defined) 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.
(g) The execution, delivery and performance of the Registration Rights
Agreement among the Company and the Purchasers dated the date hereof (the
"Registration Rights 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.
(h) 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.
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(i) This Agreement has been duly authorized, executed and delivered by
the Company.
(j) Except as disclosed in the Offering Document and on Schedule 2(j)
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.
(k) 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.
(l) 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.
(m) 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.
(n) 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.
(o) 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
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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.
(p) 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.
(q) 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 other
than the dividend paid on June 30, 1997 with respect to the Company's 7 1/4
Junior Convertible Preferred Stock.
(r) 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.
(s) 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.
(t) 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.
(u) 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
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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.
(v) The Company is subject to Section 13 or 15(d) of the Exchange Act.
(w) 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").
(x) 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,
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.
(y) 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.
(z) 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.
(aa) 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 $965 per share plus accumulated
dividends (if any) from August 20, 1997 to the Closing Date (as hereinafter
defined) the Exchangeable 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 in the form
of one or more permanent global securities in definitive form (the "Restricted
Global Securities"), deposited with The Bank of New York, as custodian for the
Depository Trust Company ("DTC"), and registered
<PAGE> 7
7
in the name of Cede & Co., as nominee for DTC. Each 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 Securities will be held only in book-entry form through DTC except in the
limited circumstances described in the Offering Document.
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 August 20, 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
The Bank of New York, as custodian for DTC of the Restricted Global Securities,
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"). 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, 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."
<PAGE> 8
8
Unless otherwise defined herein, terms used in this subsection (b) have the
meanings given to them by Regulation S.
(c) 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.
(d) 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.
(e) 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.
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
<PAGE> 9
9
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 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 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.
<PAGE> 10
10
(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 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.
(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
Exchangeable Preferred Stock, (b) any debentures of the Company or any other
securities of the Company which are substantially similar to the Exchange
Debentures, or (c) any other securities which are convertible into, or
exercisable or exchangeable for, preferred stock or such substantially similar
securities of the Company, or debentures or such substantially similar
securities of the Company, without the prior written consent of CSFBC, except
the offer, sale, contract to sell, or other disposition of (i) the Exchangeable
Preferred Stock, (ii) the Exchange Debentures issued or delivered upon exchange
of the Exchangeable 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,
<PAGE> 11
11
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) 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:
(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 August 12, 1997, there was any change in the capital
stock or additional 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
June 30, 1997 unaudited condensed consolidated balance sheet
included in the Offering Document; or
(B) for the period from July 1, 1997 to August 12, 1997
there were any decreases, as compared with the corresponding
period in the preceding year, in consolidated operating
revenues, increase in operating loss, increase in the total
amount of net loss, or increase in the amount that earnings were
inadequate to cover combined fixed charges and preferred stock
dividends.
<PAGE> 12
12
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 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.
<PAGE> 13
13
(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 Exchangeable 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 Exchangeable
Preferred Stock have been duly and validly authorized and reserved for
issuance upon payment of dividends on the Exchangeable Preferred Stock
in additional shares of Exchangeable 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 Exchangeable Preferred
Stock are exchangeable, at the option of the Company on any scheduled
dividend payment date, for Exchange Debentures of the Company in
accordance with their terms;
(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) 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
<PAGE> 14
14
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 June 30, 1997, 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 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;
(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.
<PAGE> 15
15
(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.
(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
<PAGE> 16
16
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) 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 Exchangeable Preferred
Stock may be paid with additional shares of Exchangeable Preferred Stock.
(h) The Company shall have filed with the Secretary of State of the
State of Delaware the Certificate of Designation for the Exchangeable 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, in the Company's Form 8-K
dated July 3, 1997 and the press release issued by the Company and attached as
an exhibit thereto, 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
<PAGE> 17
17
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 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 a Public Market for the
Exchangeable 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
<PAGE> 18
18
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 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
<PAGE> 19
19
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, 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.
<PAGE> 20
20
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.
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/ JAMES F. GUTHRIE
------------------------------
Name: James F. Guthrie
Title: Chief Financial Officer and
Executive Vice President
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
By: CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ PETER BECKETT
-----------------------------
Name: Peter Beckett
Title: Director
<PAGE> 21
SCHEDULE A
<TABLE>
<CAPTION>
Purchasers Number of Shares
- ---------- ----------------
<S> <C>
Credit Suisse First Boston Corporation 150,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated 75,000
Morgan Stanley & Co. Incorporated 75,000
--------
300,000
========
</TABLE>
A-1
<PAGE> 22
SCHEDULE B
Registration Rights Agreement
B-1
<PAGE> 1
EXHIBIT 4.2
INDENTURE dated as of August 15, 1997, between
IXC COMMUNICATIONS, INC., a Delaware corporation (the
"Company") and THE BANK OF NEW YORK, a New York
banking corporation (the "Trustee").
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Company's
12 1/2% Subordinated Exchange Debentures Due 2009 (the "Initial Securities")
and, if and when issued pursuant to a registered exchange for Initial
Securities, the Company's 12 1/2% Subordinated Exchange Debentures Due 2009 (the
"Exchange Securities") and if and when issued pursuant to a private exchange for
Initial Securities, the Company's 12 1/2% Subordinated Exchange Debentures Due
2009 (the "Private Exchange Securities", together with the Exchange Securities
and the Initial Securities, the "Securities"):
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Accounts Receivable" means, with respect to any Person, all
accounts receivable of such Person net of allowances for uncollectible accounts,
discounts, refunds and all other allowances as determined in accordance with
GAAP.
"Additional Assets" means (i) any property or assets (other
than Indebtedness and Capital Stock) in a Related Business; (ii) the Capital
Stock of a Person that becomes a Restricted Subsidiary as a result of the
acquisition of such Capital Stock by the Company or another Restricted
Subsidiary; or (iii) Capital Stock in any Person that at such time is a
Restricted Subsidiary; provided, however, that any such Restricted Subsidiary
described in
<PAGE> 2
2
clauses (ii) or (iii) above is primarily engaged in a Related Business.
"Affiliate" of any specified Person means any other Person,
directly or indirectly, controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of Sections 4.04, 4.06 and 4.07 only, "Affiliate" shall also mean any
beneficial owner of Capital Stock representing 10% or more of the total voting
power of the Voting Stock (on a fully diluted basis) of the Company or of rights
or warrants to purchase such Capital Stock (whether or not currently
exercisable) and any Person who would be an Affiliate of any such beneficial
owner pursuant to the first sentence hereof.
"Asset Disposition" means (i) the sale, lease, conveyance or
other disposition of any assets (including by way of a sale and leaseback) other
than in the ordinary course of business consistent with past practices (provided
that the sale, lease, conveyance or other disposition of all or substantially
all the assets of the Company and its Restricted Subsidiaries taken as a whole
will be deemed not to constitute an Asset Disposition but will be governed by
Section 5.01, and not by Section 4.06) and (ii) the issue or sale by the Company
or any of its Restricted Subsidiaries of Capital Stock of any of the Company's
Restricted Subsidiaries, in the case of either clause (i) or (ii), whether in a
single transaction or a series of related transactions (a) that have a fair
market value in excess of $1,000,000 or (b) for net proceeds in excess of
$1,000,000. Notwithstanding the foregoing: (i) a transfer of assets by the
Company to its Wholly Owned Subsidiaries or by its Restricted Subsidiaries to
the Company or to another of the Company's Wholly Owned Subsidiaries, (ii) an
issuance of Capital Stock by a Wholly Owned Restricted Subsidiary of the Company
to the Company or to another of the Company's Wholly
<PAGE> 3
3
Owned Subsidiaries, (iii) a Restricted Payment that is not prohibited by Section
4.04, (iv) an issuance or sale of Capital Stock of an Unrestricted Subsidiary,
(v) an Asset Swap and (vi) the sale of any IRU pursuant to IRU Agreements the
network of the Company and its Restricted Subsidiaries (including, without
limitation, sales of IRUs specifically provided for in the PSINet Agreement),
will be deemed not to constitute Asset Dispositions.
"Asset Swap" means an exchange of assets by the Company or any
of its Restricted Subsidiaries for one or more Permitted Businesses, assets to
be used in a Permitted Business, or for a controlling equity interest in any
Person whose assets consist primarily of one or more Permitted Businesses.
"Attributable Debt" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
dividend or interest rate borne by the Exchangeable Preferred Stock or the
Securities, as the case may be, compounded annually) of the total obligations of
the lessee for rental payments during the remaining term of the lease included
in such Sale/Leaseback Transaction (including any period for which such lease
has been extended).
"Average Life" means, as of the date of determination, with
respect to any Indebtedness or Preferred Stock, the quotient obtained by
dividing (i) the sum of the products of the numbers of years from the date of
determination to the dates of each successive scheduled principal payment of
such Indebtedness or redemption or similar payment with respect to such
Preferred Stock multiplied by the amount of such payment by (ii) the sum of all
such payments.
"Board of Directors" means the Board of Directors of the
Company or any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
<PAGE> 4
4
"Capital Lease Obligations" means an obligation that is
required to be classified and accounted for as a capital lease for financial
reporting purposes in accordance with GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP; and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under such
lease prior to the first date upon which such lease may be terminated by the
lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares, rights
to purchase, warrants, options, participations 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.
"Change of Control" means the occurrence of any of the
following events (each a "Change of Control"):
(i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than one or more Permitted Holders,
is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5
under the Exchange Act, except that for purposes of this clause (i)
such person shall be deemed to have "beneficial ownership" of all
shares that any such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time, and
except that any person that is deemed to have beneficial ownership of
shares solely as a result of being part of a group pursuant to Rule
13d-5(b)(1) shall not be deemed to have beneficial ownership of any
shares held by a Permitted Holder forming a part of such group),
directly or indirectly, of more than 50% of the total voting power of
the Voting Stock of the Company (for the purposes of this clause (i),
such other person shall be deemed to beneficially own any Voting Stock
of a specified corporation held by a parent corporation, if such other
person is the beneficial owner (as defined in this clause (i)),
<PAGE> 5
5
directly or indirectly, of more than 35% of the voting power of the
Voting Stock of such parent corporation and the Permitted Holders
beneficially own (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, in the aggregate a lesser
percentage of the voting power of the Voting Stock of such parent
corporation and do not have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of
the board of directors of such parent corporation);
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors
(together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the
Company was approved by a vote of a majority of the directors of the
Company then still in office who were either directors at the beginning
of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority
of the Board of Directors then in office; provided, however, that any
directors elected by holders of Preferred Stock of the Company pursuant
to any voting rights provisions included in the certificate of
designation relating to such Preferred Stock shall be excluded in
making any determination pursuant to this clause (ii); or
(iii) the merger or consolidation of the Company with or into
another Person or the merger of another Person with or into the
Company, or the sale of all or substantially all the assets of the
Company to another Person (other than a Person that is controlled by
the Permitted Holders), and, in the case of any such merger or
consolidation, the securities of the Company that are outstanding
immediately prior to such transaction and which represent 100% of the
aggregate voting power of the Voting Stock of the Company are changed
into or exchanged for cash, securities or property, unless pursuant to
such transaction such securities are changed into or exchanged for, in
addition to any other
<PAGE> 6
6
consideration, securities of the surviving corporation that represent
immediately after such transaction, at least a majority of the
aggregate voting power of the Voting Stock of the surviving
corporation.
Notwithstanding the foregoing, a Change of Control shall not
be deemed to have occurred if, after such event that otherwise would constitute
a Change of Control, the Securities are rated Investment Grade by Moody's or
Standard & Poor's on the 30th day following the event that otherwise would
constitute a Change of Control (the "Change of Control Determination Date");
provided, however, that to the extent there is a "rating watch" with respect to
the Exchangeable Preferred Stock or other rating agency review on such 30th day,
then the Change of Control Determination Date shall be the first Business Day
thereafter on which the Securities are not subject to a "rating watch" or other
rating agency review by either Moody's or Standard & Poor's. The term
"Investment Grade", for such purpose, means a rating of Baa3 or higher in the
case of Moody's, or BBB- or higher in the case of Standard & Poor's.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor and, for
purposes of any provision contained herein and required by the TIA, each other
obligor on the indenture securities.
"Consolidated Capital Ratio" of any Person as of any date
means the ratio of (i) the aggregate consolidated principal amount of
Indebtedness of such Person then outstanding to (ii) the greater of either (a)
the aggregate consolidated paid-in capital of such Person as of such date or (b)
the stockholders' equity as of such date as shown on the consolidated balance
sheet of such Person determined in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, the
total interest expense of the Company and its
<PAGE> 7
7
consolidated Restricted Subsidiaries, plus, to the extent not included in such
total interest expense, and to the extent incurred by the Company or its
Restricted Subsidiaries, without duplication, (i) interest expense attributable
to capital leases and the interest expense attributable to leases constituting
part of a Sale/Leaseback Transaction, (ii) amortization of debt discount and
debt issuance cost, (iii) capitalized interest, (iv) noncash interest expenses,
(v) commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing, (vi) net costs associated
with Hedging Obligations (including amortization of fees), (vii) Preferred Stock
dividends in respect of all (A) Preferred Stock of Restricted Subsidiaries and
(B) Preferred Stock of the Company that is Disqualified Stock, in each case held
by Persons other than the Company or a Restricted Subsidiary, (viii) interest
incurred in connection with Investments in discontinued operations, (ix)
interest accruing on any Indebtedness of any other Person to the extent such
Indebtedness is Guaranteed by (or secured by the assets of) the Company or any
Restricted Subsidiary and (x) the cash contributions to any employee stock
ownership plan or similar trust to the extent such contributions are used by
such plan or trust to pay interest or fees to any Person (other than the
Company) in connection with Indebtedness Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net
income of the Company and its consolidated Subsidiaries; provided, however,
that there shall not be included in such Consolidated Net Income:
(i) any net income of any Person (other than the Company) if
such Person is not a Restricted Subsidiary, except that subject to the
exclusion contained in clause (iv) below, the net income of any such
Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Person during such period to the Company or a Restricted Subsidiary as
a dividend or other distribution (subject, in the case of a dividend
<PAGE> 8
8
or other distribution paid to a Restricted Subsidiary, to the
limitations contained in clause (iii) below);
(ii) any net income (or loss) of any Person acquired by the
Company or a Subsidiary in a pooling of interests transaction for any
period prior to the date of such acquisition;
(iii) any net income of any Restricted Subsidiary if such
Restricted Subsidiary is subject to restrictions, directly or
indirectly, on the payment of dividends or the making of distributions
by such Restricted Subsidiary, directly or indirectly, to the Company,
except that subject to the exclusion contained in clause (iv) below,
the net income of any such Restricted Subsidiary for such period shall
be included in such Consolidated Net Income up to the aggregate amount
of cash actually distributed by such Restricted Subsidiary during such
period to the Company or another Restricted Subsidiary as a dividend or
other distribution (subject, in the case of a dividend or other
distribution paid to another Restricted Subsidiary, to the limitation
contained in this clause);
(iv) any gain (but not loss) realized upon the sale or other
disposition of any assets of the Company, its consolidated Subsidiaries
or any other Person (including pursuant to any sale-and-leaseback
arrangement) which is not sold or otherwise disposed of in the ordinary
course of business and any gain (but not loss) realized upon the sale
or other disposition of any Capital Stock of any Person;
(v) extraordinary gains or losses; and
(vi) the cumulative effect of a change in accounting
principles.
Notwithstanding the foregoing, for the purpose of Section 4.04 only, there shall
be excluded from Consolidated Net Income any dividends, repayments of loans or
advances or
<PAGE> 9
9
other transfers of assets from any Person (including any Unrestricted
Subsidiary) to the Company or a Restricted Subsidiary to the extent such
dividends, repayments or transfers increase the amount of Restricted Payments
permitted under such Section pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means, with respect to any Person as
of any date, the sum of: (i) the consolidated equity of the common stockholders
of such Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the Issue Date in the book value of any asset
owned by such Person or a consolidated Subsidiary of such Person, (y) all
investments as of such date in unconsolidated Subsidiaries and in Persons that
are not Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, as determined in accordance with GAAP.
"Consolidated Tangible Assets" means, with respect to any
Person as of any date, the sum of the consolidated gross book value as reflected
in accounting books and records of such Person of all its property, both real
and personal, less (i) the net book value of all its licenses, patents, patent
applications, copyrights, trademarks, tradenames, goodwill, non-compete
agreements or organizational expenses and other like intangibles, (ii)
unamortized debt discount and expenses, (iii) all reserves for depreciation,
obsolescence, depletion and amortization of its properties and (iv) all other
proper
<PAGE> 10
10
reserves which should be provided in connection with the business conducted by
such Person, all of the foregoing as determined in accordance with GAAP.
"Convertible Preferred Stock" means the Company's 7 1/4%
Junior Convertible Preferred Stock Due 2007.
"Credit Agreements" means one or more debt facilities or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit loans, term loans, receivables financing (including through
the sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time.
"Cumulative Consolidated Interest Expense" means, with respect
to any Person, as of any date of determination, Consolidated Interest Expense
for the period (taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the Issue Date to the end of such Person's most
recently ended fiscal quarter for which internal financial statements are
available at such date of determination.
"Cumulative Operating Cash Flow" means, as of any date of
determination, Operating Cash Flow for the Company and its Restricted
Subsidiaries for the period (taken as one accounting period) from the beginning
of the first fiscal quarter commencing after the Issue Date to the end of the
Company's most recently ended fiscal quarter for which internal financial
statements are available at such date of determination.
"Currency Agreement" means in respect of a Person any foreign
exchange contract, currency swap agreement or other similar agreement designed
to protect such Person against fluctuations in currency values.
<PAGE> 11
11
"Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Senior Notes
and any Indebtedness Incurred pursuant to clause (1) of paragraph (b) of Section
4.03 and (ii) any other Senior Indebtedness of the Company which, at the date of
determination, has an aggregate principal amount outstanding of, or under which,
at the date of determination, the holders thereof are committed to lend up to,
at least $25 million and is specifically designated by the Company in the
instrument evidencing or governing such Senior Indebtedness as "Designated
Senior Indebtedness" for purposes of this Indenture.
"Disqualified Stock" means, with respect to any Person, any
Capital Stock which by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable) or upon the happening of any
event (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to the first anniversary of the
Stated Maturity of the Securities; provided, however, that any Capital Stock
that would not constitute Disqualified Stock but for provisions thereof giving
holders thereof the right to require such Person to repurchase or redeem such
Capital Stock upon the occurrence of an "asset sale" or "change of control"
occurring prior to the first anniversary of the Stated Maturity of the
Securities shall not constitute Disqualified Stock if the "asset sale" or
"change of control" provisions applicable to such Capital Stock are not more
favorable to the holders of such Capital Stock than the provisions of Sections
4.06 and 4.09; provided further, however, that the Company's Convertible
Preferred Stock outstanding on the Issue Date (and any shares of Convertible
Preferred Stock issued as payment of a dividend on Convertible Preferred Stock)
shall be deemed not to constitute Disqualified Stock.
<PAGE> 12
12
"Exchangeable Preferred Stock" means the Company's 12 1/2%
Junior Exchangeable Preferred Stock Due 2009.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Date" means the date on which the Securities are
exchanged for the Exchangeable Preferred Stock.
"Excluded PSINet Transactions" means any transaction between
the Company or any of its Restricted Subsidiaries with PSINet Inc., so long as
at the time of engaging in, or contracting to engage in, such transaction, the
Company and its Subsidiaries have not acquired shares of PSINet Common Stock
other than the PSINet Shares.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the Issue Date, including those set
forth in (i) the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC. All ratios and
computations based on GAAP contained in this Indenture shall be computed in
conformity with GAAP.
"GE Capital Communications" means GE Capital Communications
Services Corporation.
"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness of any Person
and any obligation, direct or indirect, contingent or otherwise, of such Person
(i) to
<PAGE> 13
13
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such Person or (ii) entered into for the purpose of assuring in
any other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Hedging Obligations" of any Person means the obligations of
such Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise
become liable for; provided, however, that any Indebtedness or Capital Stock of
a Person existing at the time such Person becomes a Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred
by such Subsidiary at the time it becomes a Subsidiary. The term "Incurrence"
when used as a noun shall have a correlative meaning. The accretion of principal
of a non-interest bearing or other discount security shall be deemed the
Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date
of determination (without duplication):
(i) the principal in respect of (A) indebtedness of such
Person for money borrowed and (B) indebtedness evidenced by Securities,
debentures, bonds or other similar instruments for the payment of which
such Person is responsible or liable, including, in each case, any
premium on such indebtedness to the extent such premium has become due
and payable;
<PAGE> 14
14
(ii) all Capital Lease Obligations of such Person and all
Attributable Debt in respect of Sale/Leaseback Transactions entered
into by such Person;
(iii) all obligations of such Person issued or assumed as the
deferred purchase price of property, and all obligations of such Person
under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business);
(iv) all obligations of such Person for the reimbursement of
any obligor on any letter of credit, banker's acceptance or similar
credit transaction (other than obligations with respect to letters of
credit securing obligations (other than obligations described in
clauses (i) through (iii) above) entered into in the ordinary course of
business of such Person to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is
reimbursed no later than the tenth Business Day following payment on
the letter of credit);
(v) the amount of all obligations of such Person with respect
to the redemption, repayment or other repurchase of any Disqualified
Stock or, with respect to any Subsidiary of such Person, the
liquidation preference with respect to, any Preferred Stock (but
excluding, in each case, any accrued dividends) of such Subsidiary
(which will constitute Indebtedness Incurred by such Subsidiary and not
Indebtedness Incurred by such Person);
(vi) all obligations of the type referred to in clauses (i)
through (v) of other Persons and all dividends of other Persons for the
payment of which, in either case, such Person is responsible or liable,
directly or indirectly, as obligor, guarantor or otherwise, including
by means of any Guarantee;
(vii) all obligations of the type referred to in clauses (i)
through (vi) of other Persons secured by any Lien on any property or
asset of such Person
<PAGE> 15
15
(whether or not such obligation is assumed by such Person), the amount
of such obligation being deemed to be the lesser of the value of such
property or assets or the amount of the obligation so secured; and
(viii) to the extent not otherwise included in this
definition, Hedging Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date.
"Indebtedness to Operating Cash Flow Ratio" means, as of any
date of determination, the ratio of (a) the aggregate principal amount of all
outstanding Indebtedness of a Person and its Restricted Subsidiaries as of such
date on a consolidated basis, plus the aggregate liquidation preference of all
outstanding Preferred Stock of the Restricted Subsidiaries of such Person as of
such date (excluding any such Preferred Stock held by such Person or a Wholly
Owned Restricted Subsidiary of such Person), plus the aggregate liquidation
preference or redemption amount of all Disqualified Stock of such Person
(excluding any Disqualified Stock held by such Person or a Wholly Owned
Restricted Subsidiary of such Person) as of such date to (b) Operating Cash Flow
of such Person and its Restricted Subsidiaries for the most recent four-quarter
period for which internal financial statements are available, determined on a
pro forma basis after giving effect to all acquisitions and dispositions of
assets (notwithstanding clause (ii) of the definition of "Consolidated Net
Income" and including Asset Swaps) made by such Person and its Restricted
Subsidiaries since the beginning of such four-quarter period through such date
as if such acquisitions and dispositions had occurred at the beginning of such
four-quarter period through such date as if such acquisitions and dispositions
had occurred at the beginning of such four-quarter period.
<PAGE> 16
16
"Independent Financial Advisor" means a United States
investment banking firm of national standing in the United States which does
not, and whose directors, officers and employees or affiliates do not, have a
direct or indirect financial interest in the Company.
"Indenture" means this Indenture as amended or supplemented
from time to time.
"Interest Rate Agreement" means in respect of a Person any
interest rate swap agreement, interest rate cap agreement or other financial
agreement or arrangement designed to protect such Person against fluctuations in
interest rates.
"Investment" in any Person means any direct or indirect
advance, loan or any other extensions of credit (other than advances, loans or
other extensions of credit to customers in the ordinary course of business that
are recorded as accounts receivable on the balance sheet of the lender and other
than commission, travel, relocation and similar advances to directors, officers
and employees made in the ordinary course of business) (including by way of
Guarantee or similar arrangement) or capital contribution to any Person (by
means of any transfer of cash or other property to others or any payment for
property or services for the account or use of such Person), or any purchase or
acquisition of Capital Stock, Indebtedness or other similar instruments issued
by such Person. For purposes of the definition of "Unrestricted Subsidiary," the
definition of "Restricted Payment" and Section 4.04, (i) "Investment" shall
include the portion (proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of any Subsidiary of the
Company at the time that such Subsidiary is designated an Unrestricted
Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a
Restricted Subsidiary, the Company shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary equal to an amount (if
positive) equal to (x) the Company's "Investment" in such Subsidiary at the time
of such redesignation less (y) the portion (proportionate to the Company's
equity interest in
<PAGE> 17
17
such Subsidiary) of the fair market value of the net assets of such Subsidiary
at the time of such redesignation; and (ii) any property transferred to or from
an Unrestricted Subsidiary shall be valued at its fair market value at the time
of such transfer, in each case as determined in good faith by the Board of
Directors; provided further, however, that an acquisition of assets, Capital
Stock or other securities by the Company or any of its Restricted Subsidiaries
shall not be deemed to be an Investment to the extent the consideration for such
Capital Stock or other securities consists of common equity securities of the
Company.
"IRU" means an indefeasible right to use fiber or
telecommunications capacity.
"IRU Agreement" means an agreement pursuant to which an
interest in an IRU is sold or leased or otherwise transferred.
"Issue Date" means the date on which the Exchangeable
Preferred Stock is originally issued.
"IXC Internet Capital Contribution" means the contribution by
the Company to IXC Internet, Inc. (so long as IXC Internet, Inc. is a
Subsidiary) of $10 million in cash, an IRU in two excess fibers in the Company's
network (including two fibers in network routes to be built or acquired in the
future) and space in certain points of presence, in each case as contemplated in
connection with the transactions contemplated by the PSINet Agreement.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any conditional sale or other
title retention agreement or lease in the nature thereof).
"Moody's" means Moody's Investors Service, Inc. or its
successor.
"Net Available Cash" means the aggregate cash proceeds
received by the Company or any of its Restricted
<PAGE> 18
18
Subsidiaries in respect of any Asset Disposition (including any cash received
upon the sale or other disposition of any noncash consideration received in any
Asset Disposition), net of the direct costs relating to such Asset Disposition
(including legal, accounting and investment banking fees, and sales commissions)
and any relocation expenses incurred as a result thereof, taxes paid or payable
as a result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness (other than Indebtedness Incurred pursuant to
clause (1) of Section 4.03(b)) secured by a Lien on the asset or assets that
were the subject of such Asset Disposition and any reserve for adjustment in
respect of the sale price of such asset or assets established in accordance with
GAAP; provided, however, that Net Available Cash shall not include that portion
of Net Available Cash from an Asset Disposition by a Restricted Subsidiary of
the Company that are paid as a pro rata dividend or distributed with respect to
Capital Stock of such Restricted Subsidiary, or used to purchase, redeem or
otherwise retire for value Capital Stock of such Restricted Subsidiary, held by
a Person other than the Company or any of its Affiliates.
"Net Cash Proceeds", with respect to any issuance or sale of
Capital Stock, means the cash proceeds of such issuance or sale net of
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Officer" means the Chairman of the Board, the President, any
Vice President, the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two
Officers.
"Operating Cash Flow" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period, (A) plus
(i) extraordinary net
<PAGE> 19
19
losses, net losses on sales of assets outside the ordinary course of business
during such period and noncash charges relating to write-downs of property and
equipment, to the extent such losses and charges were deducted in computing such
Consolidated Net Income, plus (ii) provision for taxes based on income or
profits, to the extent such provision for taxes was included in computing such
Consolidated Net Income, and any provision for taxes utilized in computing the
net losses under clause (i) hereof, plus (iii) Consolidated Interest Expense of
such Person and its Restricted Subsidiaries for such period, to the extent that
any such expense was deducted in computing such Consolidated Net Income, plus
(iv) depreciation, amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) and other noncash charges (excluding any such noncash charge
to the extent that it represents an accrual of or reserve for cash charges in
any future period or amortization of a prepaid cash expense that was paid in a
prior period) of such Person and its Restricted Subsidiaries for such period to
the extent that such depreciation, amortization and other noncash charges were
deducted in computing such Consolidated Net Income and (B) less all noncash
income for such period (excluding any such noncash income to the extent it
represents an accrual of cash income in any future period or amortization of
cash income received in a period). Notwithstanding the foregoing, the provision
for taxes on the income or profits of, and the depreciation and amortization and
other noncash charges of, a Restricted Subsidiary of the referent Person shall
be added to Consolidated Net Income to compute Operating Cash Flow only to the
extent (and in the same proportion) that the net income of such Restricted
Subsidiary was included in calculating the Consolidated Net Income of such
Person for such period and only if and to the extent such Restricted Subsidiary
could have paid such amount at the date of determination as a dividend or
similar distribution to the referent Person by such Restricted Subsidiary
without prior governmental approval (that has not been obtained), pursuant to
the terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental
<PAGE> 20
20
regulations applicable to that Restricted Subsidiary or its stockholders.
"Opinion of Counsel" means a written opinion from legal
counsel who is acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Permitted Business" means (i) any communications business and
(ii) any business reasonably related or ancillary thereto.
"Permitted Holders" means the officers and directors of the
Company, and Trustees of General Electric Pension Trust, Grumman Hill
Associates, Inc. and Grumman Hill Investments, L.P., and each of their
respective officers and directors and their Related Parties.
"Permitted Investment" means an Investment by the Company or
any Restricted Subsidiary in (i) the Company, a Restricted Subsidiary or a
Person that will, upon the making of such Investment, become a Restricted
Subsidiary; provided, however, that the primary business of such Restricted
Subsidiary is a Related Business; (ii) another Person if as a result of such
Investment such other Person is merged or consolidated with or into, or
transfers or conveys all or substantially all its assets to, the Company or a
Restricted Subsidiary; provided, however, that such Person's primary business is
a Related Business; (iii) Temporary Cash Investments; (iv) receivables owing to
the Company or any Restricted Subsidiary if created or acquired in the ordinary
course of business and payable or dischargeable in accordance with customary
trade terms; provided, however, that such trade terms may include such
concessionary trade terms as the Company or any such Restricted Subsidiary deems
reasonable under the circumstances; (v) payroll, travel, commission and similar
advances to cover matters that are expected at the time of such advances
ultimately to be treated as expenses for accounting purposes and that are made
in the ordinary course of business; (vi) loans or advances to employees made in
the ordinary course of business consistent with past practices
<PAGE> 21
21
of the Company or such Restricted Subsidiary; (vii) stock, obligations or
securities received in settlement of debts created in the ordinary course of
business and owing to the Company or any Restricted Subsidiary or in
satisfaction of judgments; (viii) any Person to the extent such Investment
represents the noncash portion of the consideration received for an Asset
Disposition as permitted pursuant to Section 4.06; (ix) the IXC Internet Capital
Contribution; (x) the Investment in PSINet Inc. contemplated by the PSINet
Agreement, including the Investment in shares of PSINet Common Stock purchased
pursuant to the PSINet Agreement and the $240 million value protection right
provided for by the PSINet Agreement; and (xi) other Investments in any Person
that in the aggregate do not exceed $30 million without regard to increases and
decreases in the value of the Investments).
"Permitted PSINet Non-Recourse Debt" means Indebtedness where
(i) the holders of such Indebtedness expressly agree that they will look solely
to the shares of PSINet Common Stock held by the issuer of such Indebtedness for
payment on or in respect of such Indebtedness and expressly waive any recourse
they may have on or with respect to such Indebtedness to the Company or any
Restricted Subsidiary, (ii) neither the Company nor any Restricted Subsidiary
(A) provides credit support (whether or not in the form of an undertaking,
agreement or instrument which would constitute Indebtedness), other than the
pledge by the issuer of such Indebtedness of shares of PSINet Common Stock, or
(B) is directly or indirectly liable and (iii) no default with respect to such
Indebtedness (including any rights which the holders thereof may have to take
enforcement action against the shares of PSINet Common Stock securing such
Indebtedness) would permit (upon notice, lapse of time or both) any holder of
any other Indebtedness of the Company or any Restricted Subsidiary to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture,
<PAGE> 22
22
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
Person, means Capital Stock of any class or classes (however designated) which
is preferred as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over shares of Capital Stock of any other class of
such Person.
"principal" of a Security means the principal of the Security
plus the premium, if any, payable on the Security which is due or overdue or is
to become due at the relevant time.
"PSINet Agreement" means the IRU and Stock Purchase Agreement
dated as of July 22, 1997, between IXC Internet Services, Inc. and PSINet Inc.
and the related documents executed in connection therewith, in each case as in
effect as of the Issue Date.
"PSINet Common Stock" means the common stock of PSINet, Inc.
"PSINet Shares" means the shares of PSINet Common Stock
acquired by the Company or any Subsidiary pursuant to the terms of the PSINet
Agreement.
"Public Equity Offering" means an underwritten primary public
offering of common stock of the Company pursuant to an effective registration
statement under the Securities Act.
"Refinance" means, in respect of any Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue other Indebtedness in exchange or replacement for, such indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
<PAGE> 23
23
"Refinancing Indebtedness" means Indebtedness that Refinances
any Indebtedness of the Company or any Restricted Subsidiary existing on the
Issue Date or Incurred in compliance with this Indenture, including Indebtedness
that Refinances Refinancing Indebtedness; provided, however, that (i) such
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus accrued interest on the principal amount of
Indebtedness Refinanced, and fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; provided further,
however, that Refinancing Indebtedness shall not include (x) Indebtedness of a
Subsidiary that Refinances Indebtedness of the Company (unless such Subsidiary
was obligated under, or a guarantor of, the Indebtedness being Refinanced) or
(y) Indebtedness of the Company or a Restricted Subsidiary that Refinances
Indebtedness of an Unrestricted Subsidiary.
"Related Business" means any Permitted Business, the
businesses conducted by the Company and the Restricted Subsidiaries on the Issue
Date and any business related, ancillary or complementary to such businesses
conducted by the Company and the Restricted Subsidiaries on the Issue Date.
"Related Party" with respect to any Permitted Holder means (i)
any controlling stockholder, 80% (or more) owned Subsidiary, or spouse or
immediate family member (in the case of an individual) of such Principal or (ii)
any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% or more
controlling interest of
<PAGE> 24
24
which consist of such Permitted Holder or such other Persons referred to in the
immediately preceding clause (i).
"Representative" means any trustee, agent or representative
(if any) for an issue of Senior Indebtedness of the Company.
"Restricted Payment" with respect to any Person means (i) the
declaration or payment of any dividends or any other distributions of any sort
in respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving such Person) or similar payment to the direct
or indirect holders of its Capital Stock (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and
dividends or distributions to the extent paid to the Company or a Restricted
Subsidiary, and other than pro rata dividends or other distributions made by a
Subsidiary that is not a Wholly Owned Restricted Subsidiary to minority
stockholders (or owners of an equivalent interest in the case of a Subsidiary
that is an entity other than a corporation)), (ii) the purchase, redemption or
other acquisition or retirement for value of any Capital Stock of the Company
held by any Person or of any Capital Stock of a Restricted Subsidiary held by
any Affiliate of the Company (other than the Company or a Restricted
Subsidiary), including the exercise of any option to exchange any Capital Stock
(other than into Capital Stock of the Company that is not Disqualified Stock),
(iii) the purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value, prior to scheduled maturity, scheduled repayment or
scheduled sinking fund payment of any Subordinated Obligations (other than the
purchase, repurchase, or other acquisition of Subordinated Obligations purchased
in anticipation of satisfying a sinking fund obligation, principal installment
or final maturity, in each case due within one year of the date of acquisition)
or (iv) the making of any Investment in any Person (other than a Permitted
Investment).
"Restricted Subsidiary" means any Subsidiary of the Company
that is not an Unrestricted Subsidiary.
<PAGE> 25
25
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired whereby the Company or a Restricted
Subsidiary transfers such property to a Person and the Company or a Restricted
Subsidiary leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of
the Company secured by a Lien.
"Securities" means the Securities defined as such in the
recitals to this Indenture and issued under this Indenture.
"Secured Indebtedness" means any Indebtedness of the Company
secured by a Lien.
"Senior Indebtedness" of the Company means (i) Indebtedness of
the Company, whether outstanding on the Issue Date or thereafter Incurred, and
(ii) accrued and unpaid interest (including interest accruing on or after the
filing of any petition in bankruptcy or for reorganization relating to the
Company to the extent post-filing interest is allowed in such proceeding) in
respect of (A) indebtedness of the Company for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable unless, in the
case of (i) and (ii), in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is provided that such obligations
are subordinate or pari passu in right of payment to the Securities; provided,
however, that Senior Indebtedness shall not include (1) any obligation of such
Person to any Subsidiary of such Person, (2) any liability for Federal, state,
local or other taxes owed or owing by such Person, (3) any accounts payable or
other liability to trade creditors arising in the ordinary course of business
(including guarantees thereof or instruments evidencing such liabilities) or (4)
that portion
<PAGE> 26
26
of any Indebtedness which at the time of Incurrence is Incurred in violation of
this Indenture.
"Senior Notes" means the Company's 12 1/2% Senior Notes Due
2005.
"Significant Subsidiary" means any Restricted Subsidiary that
would be a "Significant Subsidiary" of the Company within the meaning of Rule
1-02 under Regulation S-X promulgated by the SEC.
"Standard & Poor's" means Standard & Poor's Ratings Group, or
its successor.
"Stated Maturity" means, with respect to any security, the
date specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"Subordinated Indebtedness" means the Securities and any other
Indebtedness of the Company that specifically provides that such Indebtedness is
to rank pari passu with the Securities in right of payment and is not
subordinated by its terms to any Indebtedness or other obligation of the Company
which is not Senior Indebtedness.
"Subordinated Obligation" means any Indebtedness of the
Company (whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Securities pursuant to a
written agreement to that effect.
"Subsidiary" means, in respect of any Person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of
<PAGE> 27
27
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by (i) such Person, (ii) such Person and one or more
Subsidiaries of such Person or (iii) one or more Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following: (i)
any investment in direct obligations of the United States of America or any
agency thereof or obligations guaranteed by the United States of America or any
agency thereof, (ii) investments in time deposit accounts, certificates of
deposit and money market deposits maturing within 180 days of the date of
acquisition thereof issued by a bank or trust company which is organized under
the laws of the United States of America, any state thereof or any foreign
country recognized by the United States of America, and which bank or trust
company has capital, surplus and undivided profits aggregating in excess of
$50,000,000 (or the foreign currency equivalent thereof) and has outstanding
debt which is rated "A" (or such similar equivalent rating) or higher by at
least one nationally recognized statistical rating organization (as defined in
Rule 436 under the Securities Act) or any money-market fund sponsored by a
registered broker dealer or mutual fund distributor, (iii) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clause (i) above entered into with a bank meeting the
qualifications described in clause (ii) above, (iv) investments in commercial
paper, maturing not more than 90 days after the date of acquisition, issued by a
corporation (other than an Affiliate of the Company) organized and in existence
under the laws of the United States of America or any foreign country recognized
by the United States of America with a rating at the time as of which any
investment therein is made of "P-1" (or higher) according to Moody's Investors
Service, Inc. or "A-1" (or higher) according to Standard and Poor's Ratings
Group, and (v) investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any political
subdivision or taxing authority thereof, and rated at least "A" by Standard
<PAGE> 28
28
& Poor's Ratings Group or "A" by Moody's Investors Service, Inc.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
SectionSection 77aaa-77bbbb) as in effect on the date of this Indenture, except
as provided in Section 9.03.
"Trustee" means the party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor.
"Trust Officer" means any officer or assistant officer of the
Trustee assigned by the Trustee to administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform
Commercial Code as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of
its Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien (excluding Liens incurred to secure obligations in respect of an IRU) on
any property of, the Company or any Restricted Subsidiary; provided, however,
that either (A) the Subsidiary to be so designated has total assets of $1,000 or
less or (B) if such Subsidiary has assets greater than $1,000, the Investment
resulting from such designation would be permitted under Section 4.04. The Board
of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided, however, that immediately after giving effect to such
designation (x) the Company could Incur $1.00 of additional Indebtedness under
Section 4.03(a) and (y) no Default shall have occurred and be continuing. Any
such designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the resolution of the
<PAGE> 29
29
Board of Directors giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock
or other interests (including partnership interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof.
"Wholly Owned Restricted Subsidiary" means a Restricted
Subsidiary all the Capital Stock of which (other than directors' qualifying
shares) is owned by the Company or one or more Wholly Owned Subsidiaries.
SECTION 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- -------
<S> <C>
"Affiliate Transaction" ................ 4.07
"Bankruptcy Law" ....................... 6.01
"Blockage Notice" ...................... 10.03
"covenant defeasance option" ........... 8.01 b)
"Custodian" ............................ 6.01
"Event of Default" ..................... 6.01
"legal defeasance option" .............. 8.01(b)
"Legal Holiday" ........................ 11.08
"Offer" ................................ 4.06(b)
"Offer Amount" ......................... 4.06(c)(2)
"Offer Period" ......................... 4.06(c)(2)
"pay the Securities" ................... 10.03
"Paying Agent" ......................... 2.03
</TABLE>
<PAGE> 30
30
<TABLE>
<S> <C>
"Payment Blockage Period" .............. 10.03
"Purchase Date" ........................ 4.06(c)(1)
"Registrar"............................. 2.03
"Successor Company" .................... 5.01
</TABLE>
SECTION 1.03. Incorporation by Reference of Trust Indenture
Act. This Indenture is subject to the mandatory provisions of the TIA whi h are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC;
"indenture securities" means the Securities;
"indenture security holder" means a Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the indenture securities means the Company and
any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context
otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
<PAGE> 31
31
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the
plural include the singular;
(6) unsecured Indebtedness shall not be deemed to be
subordinate or junior to Secured Indebtedness merely by virtue of its
nature as unsecured Indebtedness;
(7) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof
that would be shown on a balance sheet of the issuer dated such date
prepared in accordance with GAAP and accretion of principal on such
security shall be deemed to be the Incurrence of Indebtedness; and
(8) the principal amount of any Preferred Stock shall be (i)
the maximum liquidation value of such Preferred Stock or (ii) the
maximum mandatory redemption or mandatory repurchase price with
respect to such Preferred Stock, whichever is greater.
SECTION 1.05. Effectiveness of Indenture. The provisions of
this Indenture as set forth in Article 4, Article 5 and Article 6 shall not be
effective unless and until the Company issues Securities hereunder.
<PAGE> 32
32
ARTICLE 2
The Securities
SECTION 2.01. Form and Dating. Provisions relating to the
Initial Securities, the Exchange Securities and the Private Exchange Securities
are set forth in the Rule 144A/Regulation S Appendix attached hereto (the
"Appendix") which is hereby incorporated in and expressly made part of this
Indenture. The Initial Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit 1 to the Appendix
which is hereby incorporated in and expressly made a part of this Indenture. The
Exchange Securities, the Private Exchange Securities and the Trustee'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 Indenture. The
Securities 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 Security shall be dated the date of its authentication.
The terms of the Securities set forth in Exhibit 1 to the Appendix and Exhibit A
are part of the terms of this Indenture.
SECTION 2.02. Execution and Authentication. Two Officers shall
sign the Securities for the Company by manual or facsimile signature. The
Company's seal shall be impressed, affixed, imprinted or reproduced on the
Securities and may be in facsimile form.
If an Officer whose signature is on a Security no longer holds
that office at the time the Trustee authenticates the Security, the Security
shall be valid never the less.
A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture. The Trustee shall authenticate
<PAGE> 33
33
Securities upon receipt of an Officers' Certificate instructing it to do so.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Securities. Unless limited by the
terms of such appointment, an authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Registrar, Paying Agent or agent
for service of notices and demands.
SECTION 2.03. Registrar and Paying Agent. The Company shall
maintain an office or agency where Securities may be presented for registration
of transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Company may have one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement
with any Registrar, Paying Agent or co-registrar not a party to this Indenture,
which shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Company shall
promptly notify the Trustee of the name and address of any such agent. If the
Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as
such and shall be entitled to appropriate compensation therefor pursuant to
Section 7.07. The Company or any of its domestically incorporated Wholly Owned
Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer agent.
The Company initially appoints the Trustee as Registrar and
Paying Agent in connection with the Securities.
<PAGE> 34
34
SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to
each due date of the principal and interest on any Security, the Company shall
deposit with the Paying Agent a sum sufficient to pay such principal and
interest when so becoming due. The Company shall require each Paying Agent
(other than the Trustee) to agree in writing that the Paying Agent shall hold in
trust for the benefit of Securityholders or the Trustee all money held by the
Paying Agent for the payment of principal of or interest on the Securities and
shall promptly notify the Trustee of any default by the Company in making any
such payment. If the Company or a Subsidiary acts as Paying Agent, it shall
segregate the money held by it as Paying Agent and hold it as a separate trust
fund. The Company at any time may require a Paying Agent to pay all money held
by it to the Trustee and to account for any funds disbursed by the Paying Agent.
Upon complying with this Section, the Paying Agent shall have no further
liability for the money delivered to the Trustee.
SECTION 2.05. Securityholder Lists. The Trustee shall preserve
in as current a form as is reasonably practicable the most recent list
available to it of the names and addresses of Securityholders. If the Trustee is
not the Registrar, the Company shall furnish to the Trustee, in writing at least
five Business Days before each interest payment date and at such other times as
the Trustee may request in writing, a list in such form and as of such date as
the Trustee may reasonably require of the names and addresses of
Securityholders.
SECTION 2.06. Replacement Securities. If a mutilated Security
is surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies
any other reasonable requirements of the Trustee. Such Holder shall furnish an
indemnity bond sufficient in the judgment of the Company and the Trustee to
protect the Company, the Trustee, the Paying Agent, the Registrar and any
co-registrar from any loss
<PAGE> 35
35
which any of them may suffer if a Security is replaced. The Company and the
Trustee may charge the Holder for their expenses in replacing a Security.
Every replacement Security is an additional obligation of the
Company.
SECTION 2.07. Outstanding Securities. Securities outstanding
at any time are all Securities authenticated by the Trustee except for those
canceled by it, those delivered to it for cancellation and those described in
this Section as not outstanding. A Security does not cease to be outstanding
because the Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Sec tion 2.06, it ceases
to be outstanding unless the Trustee and the Company receive proof satisfactory
to them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a redemption date or maturity date money
sufficient to pay all principal and interest payable on that date with respect
to the Securities (or portions thereof) to be redeemed or maturing, as the case
may be, and the Paying Agent is not prohibited from paying such money to the
Securityholders on that date pursuant to the terms of this Indenture, then on
and after that date such Securities (or portions thereof) cease to be
outstanding and interest on them ceases to accrue.
SECTION 2.08. Temporary Securities. Until definitive
Securities are ready for delivery, the Company may prepare and the Trustee shall
authenticate temporary Securities. Temporary Securities shall be substantially
in the form of definitive Securities but may have variations that the Company
considers appropriate for temporary Secur ities. Without unreasonable delay, the
Company shall prepare and the Trustee shall authenticate definitive Securities
and make them available for delivery in exchange for temporary Securities.
<PAGE> 36
36
SECTION 2.09. Cancellation. The Company at any time may
deliver Securities to the Trustee for cancellation. The Registrar and the Paying
Agent shall forward to the Trustee any Securities surrendered to them for
registration of transfer, exchange or payment. The Trustee and no one else shall
cancel all Securities surrendered for registration of transfer, exchange,
payment or cancellation and deliver such cancelled Securities to the Company.
The Company may not issue new Securities to replace Securities it has redeemed,
paid or delivered to the Trustee for cancellation.
SECTION 2.10. Defaulted Interest. If the Company defaults in a
payment of interest on the Securities, the Company shall pay defaulted interest
(plus interest on such defaulted interest to the extent lawful) in any lawful
manner. The Company may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date. The Company shall fix or
cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
SECTION 2.11. CUSIP Numbers. The Company in issuing the
Securities may use "CUSIP" numbers (if then generally in use) and, if so, the
Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to
Holders; provided, however, that any such notice may state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Company shall promptly inform the Trustee of any
change in the CUSIP numbers.
<PAGE> 37
37
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee. If the Company elects to
redeem Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date, the principal amount of Securities to
be redeemed and the paragraph of the Securities pursuant to which the redemption
will occur.
The Company shall give each notice to the Trustee provided for
in this Section at least 60 days before the redemption date unless the Trustee
consents in writing to a shorter period. Such notice shall be accompanied by an
Officers' Certificate and an Opinion of Counsel from the Company to the effect
that such redemption will comply with all of the conditions herein.
SECTION 3.02. Selection of Securities To Be Redeemed. If fewer
than all the Securities are to be redeemed, the Trustee shall select the
Securities to be redeemed pro rata or by lot or by a method that complies with
applicable legal and securities exchange requirements, if any, and that the
Trustee in its sole discretion shall deem to be fair and appropriate and in
accordance with methods generally used at the time of selection by fiduciaries
in similar circumstances. The Trustee shall make the selection from outstanding
Securities not previously called for redemption. The Trustee may select for
redemption portions of the principal of Securities that have denominations
larger than $1,000. Securities and portions of them the Trustee selects shall be
in amounts of $1,000 or a whole multiple of $1,000. Provisions of this Indenture
that apply to Securities called for redemption also apply to portions of
Securities called for redemption. The Trustee shall notify the Company promptly
of the Securities or portions of Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not
more than 60 days before a date for redemption of Securities, the Company shall
mail a notice of
<PAGE> 38
38
redemption by first-class mail to each Holder of Securities to be redeemed at
such Holder's registered address.
The notice shall identify the Securities to be redeemed
(including CUSIP numbers) and shall state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be
redeemed, the identification and principal amounts of the particular
Securities to be redeemed;
(6) that, unless the Company defaults in making such
redemption payment or the Paying Agent is prohibited from making such
payment pursuant to the terms of this Indenture, interest on Securities
(or portion thereof) called for redemption ceases to accrue on and
after the redemption date;
(7) the paragraph of the Securities pursuant to which the
Securities called for redemption are being redeemed; and
(8) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed
on the Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for
<PAGE> 39
39
redemption become due and payable on the redemption date and at the redemption
price stated in the notice. Upon surrender to the Paying Agent, such Securities
shall be paid at the redemption price stated in the notice, plus accrued
interest to the redemption date. Failure to give notice or any defect in the
notice to any Holder shall not affect the validity of the notice to any other
Holder.
SECTION 3.05. Deposit of Redemption Price. Prior to the
redemption date, the Company shall deposit with the Paying Agent (or, if the
Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust)
money sufficient to pay the redemption price of and accrued interest on all
Securities to be redeemed on that date other than Securities or portions of
Securities called for redemption which have been delivered by the Company to the
Trustee for cancellation.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Security surrendered.
ARTICLE 4
Covenants
SECTION 4.01. Payment of Securities. The Company shall
promptly pay the principal of and interest on the Securities on the dates and in
the manner provided in the Securities and in this Indenture. Principal and
interest shall be considered paid on the date due if on such date the Trustee or
the Paying Agent holds in accordance with this Indenture money sufficient to pay
all principal and interest then due and the Trustee or the Paying Agent, as the
case may be, is not prohibited from paying such money to the Securityholders on
that date pursuant to the terms of this Indenture.
<PAGE> 40
40
The Company shall pay interest on overdue princi pal at the
rate specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. SEC Reports. The Company shall file with the
Trustee and provide Securityholders, within 15 days after it files them with the
SEC, copies of its annual report and the information, documents and other
reports which the Company is required to file with the SEC pursuant to Section
13 or 15(d) of the Exchange Act. Notwithstanding that the Company may not be, or
may not be required to remain, subject to the reporting requirements of Section
13 or 15(d) of the Exchange Act, the Company shall continue to file with the SEC
and provide the Trustee and Securityholders with such annual reports and such
information, documents and other reports as are specified in Sections 13 and
15(d) of the Exchange Act and applicable to a U.S. corporation subject to such
Sections, such information, documents and other reports to be so filed and
provided at the times specified for the filing of such information, documents
and reports under such Sections. The Company also shall comply with the other
provisions of TIA Section 314(a).
Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 4.03. Limitation on Indebtedness. (a) The Company
shall not Incur, and shall not permit any Restricted Subsidiary to Incur,
directly or indirectly, any Indebtedness unless, on the date of such Incurrence
and after giving pro forma effect thereto (including pro forma application of
the net proceeds therefrom) and to any other Indebtedness Incurred or repaid
since the end of the period referred to below and the receipt and application of
the
<PAGE> 41
41
proceeds thereof, either (i) the Indebtedness to Operating Cash Flow Ratio for
the Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
Indebtedness is Incurred would have been not more than 5.0 to 1.0, or (ii) the
Company's Consolidated Capital Ratio as of the end of the most recent fiscal
quarter for which internal financial statements are available immediately
preceding the date on which such Indebtedness is Incurred is less than 2.0 to
1.0.
(b) Notwithstanding the foregoing paragraph (a), the Company
and its Restricted Subsidiaries may Incur any or all of the following
Indebtedness:
(1) Indebtedness Incurred pursuant to one or more Credit
Agreements; provided, however, that, after giving effect to any such
Incurrence, the aggregate principal amount of such Indebtedness then
outstanding does not exceed the greater of (A) $150,000,000 and (B) 85%
of the book value of the Accounts Receivables of the Company and its
Restricted Subsidiaries;
(2) Indebtedness owed to and held by the Company or a
Restricted Subsidiary; provided, however, that any subsequent issuance
or transfer of any Capital Stock which results in any Restricted
Subsidiary ceasing to be a Restricted Subsidiary or any subsequent
transfer of such Indebtedness (other than to the Company or another
Restricted Subsidiary) shall be deemed, in each case, to constitute the
Incurrence of such Indebtedness by the issuer thereof;
(3) the Securities (including Securities issued in lieu of
cash interest payments with respect to Securities);
(4) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (1), (2) or (3) of this Section
4.03(b));
<PAGE> 42
42
(5) Refinancing Indebtedness in respect of Indebtedness
Incurred pursuant to Section 4.03(a) or pursuant to clause (3) or (4)
of this Section 4.03(b) or this clause (5);
(6) Hedging Obligations consisting of Interest Rate Agreements
directly related to Indebtedness permitted to be Incurred by the
Company and its Restricted Subsidiaries pursuant to the Exchange
Indenture;
(7) Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case
Incurred for the purpose of financing all or any part of the purchase
price or cost of construction or improvement of property used in the
business of the Company or such Restricted Subsidiary;
(8) In the event that the PSINet Shares are held by the
Company or a Restricted Subsidiary, the Incurrence by the Company or
such Restricted Subsidiary of Permitted PSINet Non-Recourse Debt; and
(9) Indebtedness in an aggregate principal amount at any time
outstanding which, together with the amount of all other Indebtedness
of the Company and its Restricted Subsidiaries outstanding on the date
of such Incurrence (other than Indebtedness permitted by clauses (1)
through (8) of this Section 4.03(b) and Section 4.03(a)), does not
exceed 5% of Consolidated Tangible Assets.
(c) Notwithstanding the foregoing, the Company shall not Incur any
Indebtedness pursuant to Section 4.03(b) if the proceeds thereof are used,
directly or indirectly, to Refinance any Subordinated Obligations unless such
Indebtedness shall be subordinated to the Exchange Debentures to at least the
same extent as such Subordinated Obligations.
(d) For purposes of determining compliance with this Section 4.03, (i)
in the event that an item of Indebtedness
<PAGE> 43
43
meets the criteria of more than one of the types of Indebtedness described
above, the Company, in its sole discretion, will classify such item of
Indebtedness and only be required to include the amount and type of such
Indebtedness in one of the above clauses and (ii) an item of Indebtedness may be
divided and classified in more than one of the types of Indebtedness described
above.
SECTION 4.04. Limitation on Restricted Payments. (a) The
Company shall not, and shall not permit any Restricted Subsidiary, directly or
indirectly, to make a Restricted Payment if at the time the Company or such
Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would
result therefrom);
(2) the Company is not able to Incur an additional $1.00 of
Indebtedness under Section 4.03(a); or
(3) the aggregate amount of such Restricted Payment and all
other Restricted Payments since the Issue Date would exceed the sum of:
(A) an amount equal to the Cumulative Operating Cash
Flow for the period (taken as one accounting period) from the
beginning of the first full fiscal quarter commencing after
the Issue Date to the end of the Company's most recently ended
fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment less 1.50
times the Company's Cumulative Consolidated Interest Expense
for such period;
(B) the aggregate Net Cash Proceeds received by the
Company from the issuance or sale of its Capital Stock (other
than Disqualified Stock) subsequent to the Issue Date (other
than an issuance or sale to a Subsidiary of the Company and
other than an issuance or sale to an employee stock ownership
plan or to a trust established by
<PAGE> 44
44
the Company or any of its Subsidiaries for the benefit of
their employees);
(C) the amount by which Indebtedness of the Company
is reduced on the Company's balance sheet upon the conversion
or exchange (other than by a Subsidiary of the Company)
subsequent to the Issue Date of any Indebtedness of the
Company convertible or exchangeable for Capital Stock (other
than Disqualified Stock) of the Company (less the amount of
any cash, or the fair value of any other property, distributed
by the Company upon such conversion or exchange); and
(D) an amount equal to the sum of (i) the net
reduction in Investments in any Person resulting from
dividends, repayments of loans or advances or other transfers
of assets (but excluding such interest, dividends, repayments,
advances or other transfers of assets to the extent any such
item increases Consolidated Net Income), in each case to the
Company or any Restricted Subsidiary from any Person
(including, without limitation, from Unrestricted
Subsidiaries), and (ii) the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair
market value of the net assets of an Unrestricted Subsidiary
at the time such Unrestricted Subsidiary is designated a
Restricted Subsidiary; provided, however, that the foregoing
sum shall not exceed, in the case of any Person (including any
Unrestricted Subsidiary), the amount of Investments previously
made (and treated as a Restricted Payment) by the Company or
any Restricted Subsidiary in such Person.
(b) The provisions of Section 4.04(a) shall not prohibit:
(i) any Restricted Payment made out of the proceeds of the
substantially concurrent sale of, or any acquisition of any Capital
Stock of the Company made by exchange for, Capital Stock of the Company
<PAGE> 45
45
(other than Disqualified Stock and other than Capital Stock issued or
sold to a Subsidiary of the Company or an employee stock ownership plan
or to a trust established by the Company or any of its Subsidiaries for
the benefit of their employees); provided, however, that (A) such
Restricted Payment shall be excluded in the calculation of the amount
of Restricted Payments and (B) the Net Cash Proceeds from such sale
shall be excluded from the calculation of amounts under clause (3)(B)
of Section 4.04(a);
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent
sale of, Indebtedness of the Company which is permitted to be Incurred
pursuant to Section 4.03; provided, however, that such purchase,
repurchase, redemption, defeasance or other acquisition or retirement
for value shall be excluded in the calculation of the amount of
Restricted Payments;
(iii) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend would
have complied with this Section 4.04; provided, however, that at the
time of payment of such dividend, no other Default shall have occurred
and be continuing (or result therefrom); provided further, however,
that such dividend shall be included in the calculation of the amount
of Restricted Payments;
(iv) the repurchase or other acquisition of shares of, or
options to purchase shares of, common stock of the Company or any of
its Subsidiaries from employees, former employees, directors or former
directors of the Company or any of its Subsidiaries (or permitted
transferees of such employees, former employees, directors or former
directors), pursuant to the terms of the agreements (including
employment agreements) or plans (or amendments thereto) approved by the
Board of Directors under which such individuals purchase or sell
<PAGE> 46
46
or are granted the option to purchase or sell, shares of such common
stock; provided, however, that the aggregate amount of such repurchases
and other acquisitions shall not exceed $1,000,000 in any calendar
year; provided further, however, that such repurchases and other
acquisitions shall be excluded in the calculation of the amount of
Restricted Payments; or
(v) dividends paid on the Convertible Preferred Stock pursuant
to its terms; provided, however, that at the time of any such payment
no Default shall have occurred and be continuing (or result therefrom);
provided further, however, that such dividends shall be excluded in the
calculation of the amount of Restricted Payments.
SECTION 4.05. Limitation on Restrictions on Distributions from
Restricted Subsidiaries. The Company shall not, and shall not permit any
Restricted Subsidiary to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (a) pay dividends or make any other distributions on
its Capital Stock to the Company or a Restricted Subsidiary or pay any
Indebtedness owed to the Company, (b) make any loans or advances to the Company
or (c) transfer any of its property or assets to the Company, except:
(i) any encumbrance or restriction pursuant to an
agreement in effect at or entered into on the Issue
Date;
(ii) any encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement relating to any
Indebtedness Incurred by such Restricted Subsidiary on or prior to the
date on which such
<PAGE> 47
47
Restricted Subsidiary was acquired by the Company (other than
Indebtedness Incurred as consideration in, or to provide all or any
portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such
Restricted Subsidiary became a Restricted Subsidiary or was acquired by
the Company) and outstanding on such date;
(iii) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an
agreement referred to in clause (i) or (ii) of this Section 4.05 or
this clause (iii) or contained in any amendment to an agreement
referred to in clause (i) or (ii) of this Section 4.05 or this clause
(iii); provided, however, that the encumbrances and restrictions with
respect to such Restricted Subsidiary contained in any such refinancing
agreement or amendment are no less favorable to the Securityholders
than encumbrances and restrictions with respect to such Restricted
Subsidiary contained in such predecessor agreements;
(iv) any such encumbrance or restriction consisting of
customary nonassignment provisions in leases governing leasehold
interests to the extent such provisions restrict the transfer of the
lease or the property leased thereunder;
(v) in the case of clause (c) above, restrictions contained in
IRU Agreements, security agreements or mortgages securing Indebtedness
or other obligations of a Restricted Subsidiary to the extent such
restrictions restrict the transfer of the property subject to such
security agreements or mortgages;
(vi) any restriction with respect to a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or assets of
such Restricted Subsidiary pending the closing of such sale or
disposition; and
(vii) any such encumbrance or restriction contained in the
PSINet Agreement.
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48
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock. (a)
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, consummate any Asset Disposition unless (i) the Company
(or such Restricted Subsidiary, as the case may be) receives consideration at
the time of such Asset Disposition at least equal to the fair market value
(evidenced by a resolution of the Board of Directors as set forth in an
Officers' Certificate delivered to the Trustee), (ii) after giving effect to
such Asset Disposition, the noncash consideration received in connection with
all Asset Dispositions for the period beginning on the Issue Date through and
including the date of such proposed Asset Disposition, less cash received in
connection with the sale, disposition, transfer or other conversion of noncash
consideration received in connection with Asset Dispositions during such period,
does not exceed 5% of the Company's Consolidated Tangible Assets after giving
effect to such Asset Disposition and (iii) an amount equal to 100% of the Net
Available Cash from such Asset Disposition is applied by the Company (or such
Restricted Subsidiary, as the case may be) (A) first, to the extent the Company
elects (or is required by the terms of any Indebtedness), to prepay, repay,
redeem or purchase Senior Indebtedness or Indebtedness (other than any
Disqualified Stock) of a Restricted Subsidiary (in each case other than
Indebtedness owed to the Company or an Affiliate of the Company, unless
permitted pursuant to the last sentence of Section 4.07(b)) within one year from
the later of the date of such Asset Disposition or the receipt of such Net
Available Cash; (B) second, to the extent of the balance of such Net Available
Cash after application in accordance with clause (A), to the extent the Company
elects, to acquire Additional Assets within one year from the later of the date
of such Asset Disposition or the receipt of such Net Available Cash; and (C)
third, to the extent of the balance of such Net Available Cash after application
in accordance with clauses (A) and (B), to make an offer to the holders of the
Securities (and to holders of other Subordinated Indebtedness designated by the
Company) to purchase Securities (and such other Subordinated Indebtedness)
pursuant to and subject to the conditions contained in this Indenture; provided,
however, that in connection with any
<PAGE> 49
49
prepayment, repayment or purchase of Indebtedness pursuant to clause (A) or (C)
above, the Company or such Restricted Subsidiary shall permanently retire such
Indebtedness and shall cause the related loan commitment (if any) to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased. Notwithstanding the foregoing provisions of this paragraph,
the Company and the Restricted Subsidiaries shall not be required to apply any
Net Available Cash in accordance with this paragraph except to the extent that
the aggregate Net Available Cash from all Asset Dispositions which are not
applied in accordance with this paragraph exceeds $10 million. Pending
application of Net Available Cash pursuant to this covenant, such Net Available
Cash shall be invested in Permitted Investments.
For the purposes of this Section 4.06, the following are
deemed to be cash or cash equivalents: (x) the assumption of Indebtedness of the
Company or any Restricted Subsidiary and the release of the Company or such
Restricted Subsidiary from all liability on such Indebtedness in connection with
such Asset Disposition (which assumption shall also constitute a repayment of
Indebtedness pursuant to the preceding paragraph) and (y) securities received by
the Company or any Restricted Subsidiary from the transferee that are promptly
converted by the Company or such Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that results in the
purchase of the Securities (and other Subordinated Indebtedness) pursuant to
clause (a)(ii)(C) above, the Company will be required to purchase Securities
tendered pursuant to an offer by the Company for the Securities (and other
Subordinated Indebtedness) at a purchase price of 100% of their principal amount
(without premium) plus accrued but unpaid interest (or, in respect of such other
Subordinated Indebtedness, such lesser price, if any, as may be provided for by
the terms of, or agreed to by the holders of, such Subordinated Indebtedness) in
accordance with the procedures (including prorating in the event of
oversubscription) set forth in this Indenture. The Company shall not be required
to make such an offer to purchase Securities (and other Subordinated
Indebtedness)
<PAGE> 50
50
pursuant to this covenant if the Net Available Cash available therefor is less
than $10 million (which lesser amount shall be carried forward for purposes of
determining whether such an offer is required with respect to the Net Available
Cash from any subsequent Asset Disposition).
(c) (1) Promptly, and in any event within 10 days after the
Company becomes obligated to make an Offer, the Company shall be obligated to
deliver to the Trustee and send, by first-class mail to each Holder, a written
notice stating that the Holder may elect to have his Securities purchased by the
Company either in whole or in part (subject to prorating as hereinafter
described in the event the Offer is oversubscribed) in integral multiples of
$1,000 of principal amount, at the applicable purchase price. The notice shall
specify a purchase date not less than 30 days nor more than 60 days after the
date of such notice (the "Purchase Date") and shall contain such information
concerning the business of the Company which the Company in good faith believes
will enable such Holders to make an informed decision (which at a minimum will
include (i) the most recently filed Annual Report on Form 10-K (including
audited consolidated financial statements) of the Company, the most recent
subsequently filed Quarterly Report on Form 10-Q and any Current Report on Form
8-K of the Company filed subsequent to such Quarterly Report, other than Current
Reports describing Asset Dispositions otherwise described in the offering
materials (or corresponding successor reports), (ii) a description of material
developments in the Company's business subsequent to the date of the latest of
such Reports, and (iii) if material, appropriate pro forma financial
information) and all instructions and materials necessary to tender Securities
pursuant to the Offer, together with the information contained in clause (3).
(2) Not later than the date upon which written notice of an
Offer is delivered to the Trustee as provided below, the Company shall deliver
to the Trustee an Officers' Certificate as to (i) the amount of the Offer (the
"Offer Amount"), (ii) the allocation of the Net Available Cash from the Asset
Dispositions pursuant to which such Offer is being made and (iii) the compliance
of such allocation with the
<PAGE> 51
51
provisions of Section 4.06(a). On such date, the Company shall also irrevocably
deposit with the Trustee or with a paying agent (or, if the Company is acting as
its own paying agent, segregate and hold in trust) in Temporary Cash
Investments, maturing on the last day prior to the Purchase Date or on the
Purchase Date if funds are immediately available by open of business, an amount
equal to the Offer Amount to be held for payment in accordance with the
provisions of this Section. Upon the expiration of the period for which the
Offer remains open (the "Offer Period"), the Company shall deliver to the
Trustee for cancellation the Securities or portions thereof which have been
properly tendered to and are to be accepted by the Company. The Trustee shall,
on the Purchase Date, mail or deliver payment to each tendering Holder in the
amount of the purchase price. In the event that the aggregate purchase price of
the Securities delivered by the Company to the Trustee is less than the Offer
Amount, the Trustee shall deliver the excess to the Company promptly after the
expiration of the Offer Period for application in accordance with this Section.
(3) Holders electing to have a Security purchased shall be
required to surrender the Security, with an appropriate form duly completed, to
the Company at the address specified in the notice at least three Business Days
prior to the Purchase Date. Holders shall be entitled to withdraw their election
if the Trustee or the Company receives not later than one Business Day prior to
the Purchase Date, a facsimile transmission or letter setting forth the name of
the Holder, the principal amount of the Security which was delivered for
purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Security purchased. If at the expiration of the Offer
Period the aggregate principal amount of Securities surrendered by Holders
exceeds the Offer Amount, the Company shall select the Securities to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Securities in denominations of $1,000,
or integral multiples thereof, shall be purchased). Holders whose Securities are
purchased only in part shall be
<PAGE> 52
52
issued new Securities equal in principal amount to the unpurchased portion of
the Securities surrendered.
(4) At the time the Company delivers Securities to the Trustee
which are to be accepted for purchase, the Company shall also deliver an
Officers' Certificate stating that such Securities are to be accepted by the
Company pursuant to and in accordance with the terms of this Section. A
Security shall be deemed to have been accepted for purchase at the time the
Trustee, directly or through an agent, mails or delivers payment therefor to the
surrendering Holder.
(d) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant to
this covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.06, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this clause by virtue thereof.
SECTION 4.07. Limitation on Affiliate Transactions. (a) The
Company shall not, and shall not permit any Restricted Subsidiary to, enter into
or permit to exist any transaction (including the purchase, sale, lease or
exchange of any property, employee compensation arrangements or the rendering of
any service) with any Affiliate of the Company (an "Affiliate Transaction")
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction involving aggregate consideration
in excess of $1,000,000 a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction complies with
clause (i) above and that such Affiliate Transaction has been approved by a
majority of the
<PAGE> 53
53
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction involving aggregate consideration in excess of
$10,000,000, other than transactions with GE Capital Communication and Excluded
PSINet Transactions, an opinion as to the fairness to the Company or such
Restricted Subsidiary of such Affiliate Transaction from a financial point of
view issued by an investment banking firm of national standing.
(b) The provisions of the foregoing paragraph (a) shall not
prohibit (i) any Restricted Payment permitted to be paid pursuant to Section
4.04, (ii) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of, employment
arrangements, stock options and stock ownership plans approved by the Board of
Directors, (iii) the grant of stock options or similar rights to employees and
directors of the Company pursuant to plans approved by the Board of Directors,
(iv) loans or advances to employees in the ordinary course of business in
accordance with the past practices of the Company or its Restricted
Subsidiaries, but in any event not to exceed $500,000 in the aggregate
outstanding at any one time, (v) any employment or consulting arrangement or
agreement entered into by the Company or any of its Restricted Subsidiaries in
the ordinary course of business and consistent with the past practice of the
Company or such Restricted Subsidiary, (vi) the payment of reasonable fees to
directors of the Company and its Restricted Subsidiaries who are not employees
of the Company or its Restricted Subsidiaries, (vii) any Affiliate Transaction
between the Company and a Restricted Subsidiary or between Restricted
Subsidiaries, (viii) transactions in connection with Permitted Businesses
between the Company and GE Capital Communication, (ix) transactions between the
Company or any Restricted Subsidiary specifically contemplated by the PSINet
Agreement and (x) the issuance or sale of any Capital Stock (other than
Disqualified Stock) of the Company. Notwithstanding the foregoing, Affiliate
Transactions shall not include any transaction involving the sale, purchase,
repurchase, redemption, transfer, exchange or other acquisition or disposition
of Senior Notes, Securities or
<PAGE> 54
54
Convertible Preferred Stock by or from, or the payment of principal of, premium,
if any, and interest on, or liquidation preference of and dividend on, any
Senior Notes, Securities or Convertible Preferred Stock, as the case may be, to
any Affiliate of the Company or any Affiliate of a Restricted Subsidiary of the
Company; provided, however, that such transaction is offered substantially
concurrently to all other holders of Senior Notes, Securities or Convertible
Preferred Stock, as the case may be, on the same terms and conditions; provided
further, however, that such transaction is approved by a majority of the
disinterested members of the Board of Directors, other than transactions in
connection with the payment of principal of, premium, if any, and interest on,
or liquidation preference of and dividends on, Senior Notes, Securities or
Convertible Preferred Stock, as the case may be, pursuant to the provisions of
the indenture or certificate of designation governing the payment of interest
and principal, dividends and liquidation preference, optional redemption,
repurchases from the proceeds of an asset disposition and repurchases upon a
change of control.
SECTION 4.08. Limitation on the Sale or Issuance of Common
Stock of Restricted Subsidiaries. The Company shall not sell or otherwise
dispose of any Common Stock of a Restricted Subsidiary, and shall not permit any
Restricted Subsidiary, directly or indirectly, to issue or sell or otherwise
dispose of any of its Common Stock except (i) to the Company or a Wholly Owned
Restricted Subsidiary, (ii) if, immediately after giving effect to such
issuance, sale or other disposition, neither the Company nor any of its
Subsidiaries own any Common Stock of such Restricted Subsidiary or (iii) if,
immediately after giving effect to such issuance, sale or other disposition,
such Restricted Subsidiary would no longer constitute a Restricted Subsidiary
and any Investment in such Person remaining after giving effect thereto would
have been permitted to be made under the covenant described in Section 4.04 if
made on the date of such issuance, sale or other disposition.
SECTION 4.09. Change of Control. (a) Upon the
occurrence of a Change of Control, each Securityholder shall
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55
have the right to require that the Company repurchase such Securityholder's
Securities at a purchase price in cash equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of Securityholders of record on the relevant record date
to receive interest due on the relevant interest payment date), in accordance
with the terms contemplated in Section 4.09(b).
(b) Within 30 days following any Change of Control, the
Company shall mail a notice to each Securityholder with a copy to the Trustee
stating: (1) that a Change of Control has occurred and that such Securityholder
has the right to require the Company to purchase such Securityholder's
Securities at a purchase price in cash equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of Securityholders of record on the relevant record date
to receive interest on the relevant interest payment date); (2) the
circumstances and relevant facts regarding such Change of Control (including
information with respect to pro forma historical income, cash flow and
capitalization after giving effect to such Change of Control); (3) the purchase
date (which shall be no earlier than 30 days nor later than 60 days from the
date such notice is mailed); and (4) the instructions determined by the Company,
consistent with the covenant described hereunder, that a Securityholder must
follow in order to have its Securities purchased.
(c) Securityholders electing to have a Security purchased will
be required to surrender the Security, with an appropriate form duly completed,
to the Company at the address specified in the notice at least three Business
Days prior to the purchase date. Securityholders will be entitled to withdraw
their election if the Trustee or the Company receives not later than one
Business Day prior to the purchase date, a facsimile transmission or letter
setting forth the name of the Securityholder, the principal amount of the
Security which was delivered for purchase by the Securityholder and a statement
that such Securityholder is withdrawing his election to have such Security
purchased.
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(d) On the purchase date, all Securities purchased by the
Company under this Section shall be delivered by the Trustee for cancellation,
and the Company shall pay the purchase price plus accrued and unpaid interest,
if any, to the Securityholders entitled thereto.
(e) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the purchase of Securities pursuant to
this Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section by virtue thereof.
SECTION 4.10. Compliance Certificate. The Company shall
deliver to the Trustee within 120 days after the end of each fiscal year of the
Company an Officers' Certificate, one of the signers of which shall be the
principal executive officer, principal financial officer or principal accounting
officer of the Company, stating that in the course of the performance by the
signers of their duties as Officers of the Company they would normally have
knowledge of any Default and whether or not the signers know of any Default that
occurred during such period. If they do, the certificate shall describe the
Default, its status and what action the Company is taking or proposes to take
with respect thereto. The Company also shall comply with TIA Section 314(a)(4).
SECTION 4.11. Further Instruments and Acts. Upon request of
the Trustee, the Company will execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 4.12. Statement by Officers as to Default. The Company
shall deliver to the Trustee, as soon as possible and in any event within five
days after the Company becomes aware of the occurrence of any Default or
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Event of Default, an Officers' Certificate setting forth the details of such
Default or Event of Default and the action which the Company proposes to take
with respect thereto.
ARTICLE 5
Successor Company
SECTION 5.01. When Company May Merge or Transfer Assets. The
Company shall not consolidate with or merge with or into, or convey,
transfer or lease, in one transaction or a series of transactions, all
or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the
"Successor Company") shall be a Person organized and existing under the
laws of the United States of America, any State thereof or the District
of Columbia and the Successor Company (if not the Company) shall
expressly assume, by an indenture supplemental thereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Securities and this Indenture;
(ii) immediately after giving effect to such transaction (and treating
any Indebtedness which becomes an obligation of the Successor Company
or any Subsidiary as a result of such transaction as having been
Incurred by such Successor Company or such Subsidiary at the time of
such transaction), no Default shall have occurred and be continuing,
(iii) immediately after giving effect to such transaction, the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a); (iv) immediately after giving
effect to such transaction, the Successor Company shall have
Consolidated Net Worth in an amount that is not less than the
Consolidated Net Worth of the Company immediately prior to such
transaction; and (v) the Company shall have delivered to the Trustee an
Officers' Certificate, stating that such consolidation,
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merger or transfer and such supplemental indenture (if any) comply with
this Indenture.
The Successor Company shall be the successor to the Company
and shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture, but the predecessor Company in the
case of a conveyance, transfer or lease shall not be released from the
obligation to pay the principal of and interest on the Securities except in the
case of a sale, assignment, transfer, lease, conveyance or other disposition of
all the Company's assets that meets the requirements described in the preceding
paragraph.
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default. An "Event of
Default" occurs if:
(1) the Company defaults in any payment of interest on any
Security when the same becomes due and payable, whether or not such
payment shall be prohibited by Article 10, and such default continues
for a period of 30 days;
(2) the Company (i) defaults in the payment of the principal
of any Security when the same becomes due and payable at its Stated
Maturity, upon optional redemption, upon required repurchase, upon
declaration or otherwise, whether or not such payment shall be
prohibited by Article 10 or (ii) fails to redeem or purchase Securities
when required pursuant to this Indenture or the Securities, whether or
not such redemption or purchase shall be prohibited by Article 10;
(3) the Company fails to comply with Section 5.01;
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(4) the Company fails to comply with Section 4.02, 4.03, 4.04,
4.05, 4.06, 4.07, 4.08 or 4.09 (other than a failure to purchase
Securities when required under Section 4.06 or 4.09) and such failure
continues for 30 days after the notice specified below;
(5) the Company fails to comply with any of its agreements in
the Securities or this Indenture (other than those referred to in
clause (1), (2), (3) or (4) above) and such failure continues for 60
days after the notice specified below;
(6) Indebtedness of the Company or any Significant Subsidiary
(other than any Permitted PSINet Non-Recourse Debt) is not paid within
any applicable grace period after final maturity or is accelerated by
the holders thereof because of a default and the total amount of such
Indebtedness unpaid or accelerated exceeds $5.0 million, or its foreign
currency equivalent at the time;
(7) the Company or any Significant Subsidiary
pursuant to or within the meaning of any Bankruptcy
Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief
against it in an involuntary case;
(C) consents to the appointment of a Custodian of it
or for any substantial part of its property; or
(D) makes a general assignment for the benefit of its
creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
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(8) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any
Significant Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any
Significant Subsidiary or for any substantial part of its
property; or
(C) orders the winding up or liquidation of the
Company or any Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order
or decree remains unstayed and in effect for 60 days; or
(9) any judgment or decree for the payment of money in excess
of $5.0 million or its foreign currency equivalent at the time is
entered against the Company or any Significant Subsidiary, remains
outstanding for a period of 60 days following the entry of such
judgment or decree and is not discharged, waived or the execution
thereof stayed within 10 days after the notice specified below.
The foregoing will constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary or involuntary
or is effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body.
The term "Bankruptcy Law" means Title 11, United States Code,
or any similar Federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
A Default under clauses (4), (5), or (9) is not an Event of
Default until the Trustee or the holders of at least 25% in principal amount of
the outstanding Securities
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61
notify the Company of the Default and the Company does not cure such Default
within the time specified after receipt of such notice. Such notice must specify
the Default, demand that it be remedied and state that such notice is a "Notice
of Default".
The Company shall deliver to the Trustee, within 30 days after
the occurrence thereof, written notice in the form of an Officers' Certificate
of any Event of Default under clause (6) and any event which with the giving of
notice or the lapse of time would become an Event of Default under clause (4),
(5) or (9), its status and what action the Company is taking or proposes to take
with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default (other than
an Event of Default specified in Section 6.01(7) or (8) with respect to the
Company) occurs and is continuing, the Trustee by notice to the Company, or the
Holders of at least 25% in principal amount of the Securities by notice to the
Company and the Trustee, may declare the principal of and accrued but unpaid
interest on all the Securities to be due and payable. Upon such a declaration,
such principal and interest shall be due and payable immediately. If an Event of
Default specified in Section 6.01(7) or (8) with respect to the Company occurs,
the principal of and interest on all the Securities shall ipso facto become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any Securityholders. The Holders of a majority in principal
amount of the Securities by notice to the Trustee may rescind an acceleration
and its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of
acceleration. No such rescission shall affect any subsequent Default or impair
any right consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default occurs
and is continuing, the Trustee may pursue any available remedy to collect the
payment of principal of or
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interest on the Securities or to enforce the performance of any provision of the
Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any Securityholder in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a
majority in principal amount of the Securities by notice to the Trustee may
waive an existing Default and its consequences except (i) a Default in the
payment of the principal of or interest on a Security or (ii) a Default in
respect of a provision that under Section 9.02 cannot be amended without the
consent of each Securityholder affected. When a Default is waived, it is deemed
cured, but no such waiver shall extend to any subsequent or other Default or
impair any consequent right.
SECTION 6.05. Control by Majority. The Holders of a majority
in principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
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SECTION 6.06. Limitation on Suits. Except to enforce the right
to receive payment of principal, premium (if any) or interest when due, no
Securityholder may pursue any remedy with respect to this Indenture or the
Securities unless:
(1) the Holder gives to the Trustee written notice stating
that an Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the
Securities make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable
security or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of security or
indemnity; and
(5) the Holders of a majority in principal amount of the
Securities do not give the Trustee a direction inconsistent with the
request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over
another Securityholder.
SECTION 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
to receive payment of principal of and interest on the Securities held by such
Holder, on or after the respective due dates expressed in the Securities, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of
Default specified in Section 6.01(1) or (2) occurs and is continuing, the
Trustee may recover judgment in its
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own name and as trustee of an express trust against the Company for the whole
amount then due and owing (together with interest on any unpaid interest to the
extent lawful) and the amounts provided for in Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee
may file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, its creditors or
its property and, unless prohibited by law or applicable regulations, may vote
on behalf of the Holders in any election of a trustee in bankruptcy or other
Person performing similar functions, and any Custodian in any such judicial
proceeding is hereby authorized by each Holder to make payments to the Trustee
and, in the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and its counsel, and any other amounts due the Trustee under Section
7.07.
SECTION 6.10. Priorities. If the Trustee collects any money or
property pursuant to this Article 6, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to holders of Senior Indebtedness of the
Company to the extent required by Article 10;
THIRD: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
FOURTH: to the Company.
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The Trustee may fix a record date and payment date for any
payment to Securityholders pursuant to this Section. At least 15 days before
such record date, the Company shall mail to each Securityholder and the Trustee
a notice that states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees and expenses,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section does
not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07
or a suit by Holders of more than 10% in principal amount of the Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. The Company
(to the extent it may lawfully do so) shall not at any time insist upon, or
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, which may affect the covenants or the performance of this Indenture; and
the Company (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and shall not hinder, delay or impede
the execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law had been enacted.
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ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee. (a) If an Event of Default
has occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, in the case of any such certificates or
opinions which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under a duty to examine
the same to determine whether or not they conform to the requirements
of this Indenture (but need not conform or investigate the accuracy of
mathematical calculations or other facts stated therein).
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(1) this paragraph does not limit the effect of paragraph (b)
of this Section;
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(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on
any document believed by it to be genuine and to have been signed or presented
to it by the proper person. The Trustee need not investigate any fact or matter
stated in the document.
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(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
the Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Trustee's conduct does not
constitute wilful misconduct or negligence.
(e) The Trustee may consult with counsel of its selection, and
the advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Securities shall be full and complete authorization and
protection from liability in respect to any action taken, omitted or suffered by
it hereunder in good faith and in accordance with the advice or opinion of such
counsel.
(f) The Trustee shall not be deemed to have notice of any
Default or Event of Default unless a Trust Officer has actual knowledge thereof
or unless written notice of any event which is in fact such a default is
received by the Trustee at the principal corporate trust office of the Trustee,
and such notice references the Securities and this Indenture.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar
or co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
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SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Company in the Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is
continuing and if it is actually known to the Trustee, the Trustee shall mail to
each Securityholder notice of the Default within 90 days after it occurs. Except
in the case of a Default in payment of principal of or interest on any Security
(including payments pursuant to the mandatory redemption provisions of such
Security, if any), the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding the
notice is in the interests of Securityholders.
SECTION 7.06. Reports by Trustee to Holders. As promptly as
practicable after each May 15 beginning with the May 15 following the date of
this Indenture, and in any event prior to July 15 in each year, the Trustee
shall mail to each Securityholder a brief report dated as of such May 15 that
complies with TIA Section 313(a). The Trustee also shall comply with TIA Section
313(b).
A copy of each report at the time of its mailing to
Securityholders shall be filed with the SEC and each stock exchange (if any) on
which the Securities are listed. The Company agrees to notify promptly the
Trustee whenever the Securities become listed on any stock exchange and of any
delisting thereof.
SECTION 7.07. Compensation and Indemnity. The Company shall
pay to the Trustee from time to time such compensation as shall be agreed in
writing from time to time between the Company and the Trustee for its services.
The Trustee's compensation shall not be limited by any law on
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compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable out-of-pocket expenses incurred or made
by it, including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel, accountants and
experts. The Company shall indemnify the Trustee against any and all loss,
liability, damage, claim or expense (including attorneys' fees and expenses)
incurred by it in connection with the acceptance or administration of this trust
and the performance of its duties hereunder. The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder. The Company shall defend the claim and the Trustee may
have separate counsel and the Company shall pay the fees and expenses of such
counsel. The Company need not reimburse any expense or indemnify against any
loss, liability or expense incurred by the Trustee through the Trustee's own
wilful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section,
the Trustee shall have a lien prior to the Securities on all money or property
held or collected by the Trustee other than money or property held in trust to
pay principal of and interest on particular Securities.
The Company's payment obligations pursuant to this Section
shall survive the discharge of this Indenture. When the Trustee incurs expenses
after the occurrence of a Default specified in Section 6.01(7) or (8) with
respect to the Company, the expenses are intended to constitute expenses of
administration under the Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign
at any time by so notifying the Company. The Holders of a majority in principal
amount of the Securities may remove the Trustee by so notifying the
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71
Trustee by so notifying the Trustee and may appoint a successor Trustee. The
Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the
Holders of a majority in principal amount of the Securities and such Holders do
not reasonably promptly appoint a successor Trustee, or if a vacancy exists in
the office of Trustee for any reason (the Trustee in such event being referred
to herein as the retiring Trustee), the Company shall promptly appoint a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee or the
Holders of 10% in principal amount of the Securities may petition, at the
expense of the Company, any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent
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jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
Notwithstanding the replacement of the Trustee pursuant to
this Section, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall
at all times satisfy the requirements of TIA Section 310(a). The Trustee shall
have a combined capital and surplus of at least $50,000,000 as set forth in its
most recent published annual report of condition. The Trustee shall comply with
TIA Section 310(b); provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which other
securities or certificates of interest or participation in other securities of
the Company are
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outstanding if the requirements for such exclusion set forth in TIA Section
310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against
Company. The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated.
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities;
Defeasance. (a) When (i) the Company delivers to the Trustee all outstanding
Securities (other than Securities replaced pursuant to Section 2.07) for
cancellation or (ii) all outstanding Securities have become due and payable,
whether at maturity or as a result of the mailing of a notice of redemption
pursuant to Article 3 hereof and the Company irrevocably deposits with the
Trustee funds sufficient to pay at maturity or upon redemption all outstanding
Securities, including interest thereon to maturity or such redemption date
(other than Securities replaced pursuant to Section 2.07), and if in either case
the Company pays all other sums payable hereunder by the Company, then this
Indenture shall, subject to Section 8.01(c), cease to be of further effect. The
Trustee shall acknowledge satisfaction and discharge of this Indenture on demand
of the Company accompanied by an Officers' Certificate and an Opinion of Counsel
and at the cost and expense of the Company.
(b) Subject to Sections 8.01(c) and 8.02, the Company at any
time may terminate (i) all its obligations under the Securities and this
Indenture ("legal defeasance option") or (ii) its obligations under Sections
4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08 and the operation of Sections 6.01(6),
6.01(7), 6.01(8) and 6.01(9) (but, in the case of Sections 6.01(7) and (8), with
respect only to Significant Subsidiaries) and the limitations contained in
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Sections 5.01(iii) and (iv) ("covenant defeasance option"). The Company may
exercise its legal defeasance option notwithstanding its prior exercise of its
covenant defeasance option.
If the Company exercises its legal defeasance option, payment
of the Securities may not be accelerated because of an Event of Default with
respect thereto. If the Company exercises its covenant defeasance option,
payment of the Securities may not be accelerated because of an Event of Default
specified in Sections 6.01(4), 6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in
the case of Sections 6.01(7) and (8), with respect only to Significant
Subsidiaries) or because of the failure of the Company to comply with Section
5.01(iii) or (iv).
Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07 and 7.08 and in
this Article 8 shall survive until the Securities have been paid in full.
Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 shall
survive.
SECTION 8.02. Conditions to Defeasance. The Company may
exercise its legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee
money or U.S. Government Obligations for the payment of principal of
and interest on the Securities to maturity or redemption, as the case
may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and
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without reinvestment on the deposited U.S. Government Obligations plus
any deposited money without investment will provide cash at such times
and in such amounts as will be sufficient to pay principal and interest
when due on all the Securities to maturity or redemption, as the case
may be;
(3) 123 days pass after the deposit is made and during the
123-day period no Default specified in Sections 6.01(7) or (8) with
respect to the Company occurs which is continuing at the end of the
period;
(4) the deposit does not constitute a default under any other
agreement binding on the Company and is not prohibited by Article 10;
(5) the Company delivers to the Trustee an Opinion of Counsel
to the effect that the trust resulting from the deposit does not
constitute, or is qualified as, a regulated investment company under
the Investment Company Act of 1940;
(6) in the case of the legal defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(i) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (ii) since the date of this
Indenture there has been a change in the applicable Federal income tax
law, in either case to the effect that, and based thereon such Opinion
of Counsel shall confirm that, the Securityholders will not recognize
income, gain or loss for Federal income tax purposes as a result of
such defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such defeasance had not occurred;
(7) in the case of the covenant defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Securityholders will not recognize income, gain or loss for
Federal income tax purposes as a result of such
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covenant defeasance and will be subject to Federal income tax on the
same amounts, in the same manner and at the same times as would have
been the case if such covenant defeasance had not occurred; and
(8) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance and discharge of the Securities as
contemplated by this Article 8 have been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article 3.
SECTION 8.03. Application of Trust Money. The Trustee shall
hold in trust money or U.S. Government Obligations deposited with it pursuant to
this Article 8. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest on the Securities. Money
and securities so held in trust are not subject to Article 10.
SECTION 8.04. Repayment to Company. The Trustee and the Paying
Agent shall promptly turn over to the Company upon written request any excess
money or securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee
and the Paying Agent shall pay to the Company upon request any money held by
them for the payment of principal or interest that remains unclaimed for two
years, and, thereafter, Securityholders entitled to the money must look to the
Company for payment as general creditors.
SECTION 8.05. Indemnity for Government Obligations. The
Company shall pay and shall indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against deposited U.S. Government Obligations or
the principal and interest received on such U.S. Government Obligations.
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SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with this
Article 8 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 8 until such time as the Trustee
or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article 8; provided, however, that, if the
Company has made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Securities to receive such payment from the
money or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders. The Company and the
Trustee may amend this Indenture or the Securities without notice to or consent
of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in addition to or
in place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
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(4) to make any change in Article 10 that would limit or
terminate the benefits available to any holder of Senior Indebtedness
(or Representatives therefor) under Article 10;
(5) to add guarantees with respect to the Securities, or to
secure the Securities;
(6) to add to the covenants of the Company for the benefit of
the Holders or to surrender any right or power herein conferred upon
the Company;
(7) to comply with any requirements of the SEC in connection
with qualifying, or maintaining the qualification of, this Indenture
under the TIA; or
(8) to make any change that does not adversely affect the
rights of any Securityholder.
An amendment under this Section may not make any change that
adversely affects the rights under Article 10 of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness (or
any group or representative thereof authorized to give a consent) consent to
such change.
After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 9.02. With Consent of Holders. The Company and the
Trustee may amend this Indenture or the Securities without notice to any
Securityholder but with the written consent of the Holders of at least a
majority in
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principal amount of the Securities then outstanding (including consents obtained
in connection with a tender offer or exchange for the Securities). However,
without the consent of each Securityholder affected thereby, an amendment may
not:
(1) reduce the amount of Securities whose Holders must consent
to an amendment;
(2) reduce the rate of or extend the time for payment of
interest on any Security;
(3) reduce the principal of or extend the Stated Maturity of
any Security;
(4) reduce the premium payable upon the redemption of any
Security or change the time at which any Security may be redeemed in
accordance with Article 3;
(5) make any Security payable in money other than that stated
in the Security;
(6) impair the right of any Holder to receive payment of
principal of and interest on such Holder's Securities on or after the
due dates therefor or to institute suit for the enforcement of any
payment on or with respect to such Holder's Securities;
(7) make any change in Article 10 that adversely affects the
rights of any Securityholder under Article 10; or
(8) make any change in Section 6.04 or 6.07 or the second
sentence of this Section.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
An amendment under this Section may not make any change that
adversely affects the rights under Article 10 of
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any holder of Senior Indebtedness then outstanding unless the holders of such
Senior Indebtedness (or any group or representative thereof authorized to give a
consent) consent to such change.
After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 9.03. Compliance with Trust Indenture Act. Every
amendment to this Indenture or the Securities shall comply with the TIA as then
in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any such
Holder or subsequent Holder may revoke the consent or waiver as to such Holder's
Security or portion of the Security if the Trustee receives the notice of
revocation before the date the amendment or waiver becomes effective. After an
amendment or waiver becomes effective, it shall bind every Securityholder. An
amendment or waiver becomes effective upon the execution of such amendment or
waiver by the Trustee.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Securityholders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were
Securityholders at such record date (or their duly designated proxies), and only
those Persons, shall be entitled to give such consent or to revoke any consent
previously given or to take any such
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action, whether or not such Persons continue to be Holders after such record
date. No such consent shall be valid or effective for more than 120 days after
such record date.
SECTION 9.05. Notation on or Exchange of Securities. If an
amendment changes the terms of a Security, the Trustee may require the Holder of
the Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall
sign any amendment authorized pursuant to this Article 9 if the amendment does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may but need not sign it. In signing such
amendment the Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive, and (subject to Section 7.01) shall be fully
protected in relying upon, an Officers' Certificate and an Opinion of Counsel
stating that such amendment is authorized or permitted by this Indenture.
SECTION 9.07. Payment for Consent. Neither the Company nor any
Affiliate of the Company shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
<PAGE> 82
82
ARTICLE 10
Subordination
SECTION 10.01. Agreement To Subordinate. The Company agrees,
and each Securityholder by accepting a Security agrees, that the Indebtedness
evidenced by the Securities is subordinated in right of payment, to the extent
and in the manner provided in this Article 10, to the prior payment of all
Senior Indebtedness and that the subordination is for the benefit of and
enforceable by the holders of such Senior Indebtedness. The Securities shall
rank pari passu with all other Subordinated Indebtedness of the Company and only
Indebtedness which is Senior Indebtedness shall rank senior to the Securities in
accordance with the provisions set forth herein. All provisions of this Article
10 shall be subject to Section 10.12.
SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets of the Company to creditors upon a total
or partial liquidation or a total or partial dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property:
(1) holders of Senior Indebtedness shall be entitled to
receive payment in full of such Senior Indebtedness before
Securityholders shall be entitled to receive any payment of principal
of or interest on the Securities; and
(2) until such Senior Indebtedness is paid in full, any
payment or distribution to which Securityholders would be entitled but
for this Article 10 shall be made to holders of such Senior
Indebtedness as their interests may appear, except that Securityholders
may receive shares of stock and any debt securities that are
subordinated to such Senior Indebtedness to at least the same extent as
the Securities.
<PAGE> 83
83
SECTION 10.03. Default on Senior Indebtedness. The Company may
not pay the principal of or interest on the Securities or make any deposit
pursuant to Section 8.01 and may not repurchase, redeem or otherwise retire any
Securities (collectively, "pay the Securities") if (i) any Designated Senior
Indebtedness is not paid when due or (ii) any other default on Designated Senior
Indebtedness occurs and the maturity of such Designated Senior Indebtedness is
accelerated in accordance with its terms unless, in either case, (x) the default
has been cured or waived and any such acceleration has been rescinded or (y)
such Designated Senior Indebtedness has been paid in full; provided, however,
that the Company may pay the Securities without regard to the foregoing if the
Company and the Trustee receive written notice approving such payment from the
Representative of such Designated Senior Indebtedness. During the continuance of
any default (other than a default described in clause (i) or (ii) of the
preceding sentence) with respect to any Designated Senior Indebtedness pursuant
to which the maturity thereof may be accelerated immediately without further
notice (except such notice as may be required to effect such acceleration) or
the expiration of any applicable grace periods, the Company may not pay the
Securities for a period (a "Payment Blockage Period") commencing upon the
receipt by the Company and the Trustee of written notice (a "Blockage Notice")
of such default from the Representative of such Designated Senior Indebtedness
specifying an election to effect a Payment Blockage Period and ending 179 days
thereafter (or earlier if such Payment Blockage Period is terminated (i) by
written notice to the Trustee and the Company from the Person or Persons who
gave such Blockage Notice, (ii) because the default giving rise to such Blockage
Notice is no longer continuing) or (iii) because such Designated Senior
Indebtedness has been repaid in full. Notwithstanding the provisions described
in the immediately preceding sentence (but subject to the provisions contained
in the first sentence of this Section), unless the holders of such Designated
Senior Indebtedness or the Representative of such holders shall have accelerated
the maturity of such Designated Senior Indebtedness, the Company may resume
payments on the Securities after termination of such Payment Blockage Period.
Not more than
<PAGE> 84
84
one Blockage Notice may be given in any consecutive 360-day period, irrespective
of the number of defaults with respect to Designated Senior Indebtedness during
such period. For purposes of this Section, no default or event of default which
existed or was continuing on the date of the commencement of any Payment
Blockage Period with respect to the Designated Senior Indebtedness initiating
such Payment Blockage Period shall be, or be made, the basis of the commencement
of a subsequent Payment Blockage Period by the Representative of such Designated
Senior Indebtedness, whether or not within a period of 360 consecutive days,
unless such default or event of default shall have been cured or waived for a
period of not less than 90 consecutive days.
SECTION 10.04. Acceleration of Payment of Securities. If
payment of the Securities is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the holders of the Designated
Senior Indebtedness (or their Representatives) of the acceleration.
SECTION 10.05. When Distribution Must Be Paid Over. If a
distribution is made to Securityholders that because of this Article 10 should
not have been made to them, the Securityholders who receive the distribution
shall hold it in trust for holders of Senior Indebtedness and pay it over to
them as their interests may appear.
SECTION 10.06. Subrogation. After all Senior Indebtedness is
paid in full and until the Securities are paid in full, Securityholders shall be
subrogated to the rights of holders of such Senior Indebtedness to receive
distributions applicable to such Senior Indebtedness. A distribution made under
this Article 10 to holders of such Senior Indebtedness which otherwise would
have been made to Securityholders is not, as between the Company and
Securityholders, a payment by the Company on such Senior Indebtedness.
<PAGE> 85
85
SECTION 10.07. Relative Rights. This Article 10 defines the
relative rights of Securityholders and holders of Senior Indebtedness. Nothing
in this Indenture shall:
(1) impair, as between the Company and Securityholders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Securities in accordance with their
terms; or
(2) prevent the Trustee or any Securityholder from exercising
its available remedies upon a Default, subject to the rights of holders
of Senior Indebtedness to receive distributions otherwise payable to
Securityholders.
SECTION 10.08. Subordination May Not Be Impaired by Company.
No right of any holder of Senior Indebtedness to enforce the subordination of
the Indebtedness evidenced by the Securities shall be impaired by any act or
failure to act by the Company or by its failure to comply with this Indenture.
SECTION 10.09. Rights of Trustee and Paying Agent.
Notwithstanding Section 10.03, the Trustee or Paying Agent may continue to make
payments on the Securities and shall not be charged with knowledge of the
existence of facts that would prohibit the making of any such payments unless,
not less than two Business Days prior to the date of such payment, a Trust
Officer of the Trustee receives notice satisfactory to it that payments may not
be made under this Article 10. The Company, the Registrar or co-registrar, the
Paying Agent, a Representative or a holder of Senior Indebtedness may give the
notice; provided, however, that, if an issue of Senior Indebtedness has a
Representative, only the Representative may give the notice.
The Trustee in its individual or any other capacity may hold
Senior Indebtedness with the same rights it would have if it were not Trustee.
The Registrar and co-registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set
<PAGE> 86
86
forth in this Article 10 with respect to any Senior Indebtedness which may at
any time be held by it, to the same extent as any other holder of such Senior
Indebtedness; and nothing in Article 7 shall deprive the Trustee of any of its
rights as such holder. Nothing in this Article 10 shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 7.07.
SECTION 10.10. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of Senior
Indebtedness, the distribution may be made and the notice given to their
Representative (if any).
SECTION 10.11. Article 10 Not To Prevent Events of Default or
Limit Right To Accelerate. The failure to make a payment pursuant to the
Securities by reason of any provision in this Article 10 shall not be construed
as preventing the occurrence of a Default. Nothing in this Article 10 shall have
any effect on the right of the Securityholders or the Trustee to accelerate the
maturity of the Securities.
SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Government Obligations held in trust under Article 8 by the Trustee for
the payment of principal of and interest on the Securities shall not be
subordinated to the prior payment of any Senior Indebtedness or subject to the
restrictions set forth in this Article 10, and none of the Securityholders shall
be obligated to pay over any such amount or any holder of Senior Indebtedness or
any other creditor of the Company.
SECTION 10.13. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article 10, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 10.02
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
<PAGE> 87
87
Securityholders or (iii) upon the Representatives for the holders of Senior
Indebtedness for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of such Senior Indebtedness and
other Indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 10. In the event that the Trustee determines, in good
faith, that evidence is required with respect to the right of any Person as a
holder of Senior Indebtedness to participate in any payment or distribution
pursuant to this Article 10, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of such
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and other facts
pertinent to the rights of such Person under this Article 10, and, if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all
actions or omissions of actions by the Trustee pursuant to this Article 10.
SECTION 10.14. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness as provided in this Article 10 and appoints the Trustee as
attorney-in-fact for any and all such purposes.
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holders if it
shall mistakenly pay over or distribute to Securityholders or the Company or any
other Person, money or assets to which any holders of Senior Indebtedness shall
be entitled by virtue of this Article 10 or otherwise. With respect to the
<PAGE> 88
88
holders of Senior Indebtedness, the Trustee undertakes to perform or to observe
only such of its covenants or obligations as are specifically set forth in this
Article and no implied covenants or obligations with respect to holders of
Senior Indebtedness shall be read into this Indenture against the Trustee.
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness, whether such Senior Indebtedness was created or acquired before or
after the issuance of the Securities, to acquire and continue to hold, or to
continue to hold, such Senior Indebtedness and such holder of such Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness.
ARTICLE 11
Miscellaneous
SECTION 11.01. Trust Indenture Act Controls. If any provision
of this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 11.02. Notices. Any notice or communication shall be
in writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company:
IXC Communications, Inc.
5000 Plaza on the Lake
Suite 200
Austin, Texas 78746
<PAGE> 89
89
Attention: Chief Financial Officer
with a copy to:
Riordan & McKinzie
695 Town Center Drive
Suite 1500
Costa Mesa, California 92626
Attention: Michael P. Whalen, Esq.
if to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Trustee Administration
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Securityholder shall
be mailed to the Securityholder at the Securityholder's address as it appears on
the registration books of the Registrar and shall be sufficiently given if so
mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder
or any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 11.03. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA Section 312(c).
<PAGE> 90
90
SECTION 11.04. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company to the Trustee to take
or refrain from taking any action under this Indenture, the Company shall
furnish to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a covenant or
condition provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
<PAGE> 91
91
SECTION 11.06. When Securities Disregarded. In determining
whether the Holders of the required principal amount of Securities have
concurred in any direction, waiver or consent, Securities owned by the Company
or by any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company shall be disregarded and
deemed not to be outstanding, except that, for the purpose of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities which a Trust Officer of the Trustee actually knows
are so owned shall be so disregarded. Also, subject to the foregoing, only
Securities outstanding at the time shall be considered in any such
determination.
SECTION 11.07. Rules by Trustee, Paying Agent and Registrar.
The Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar and the Paying Agent may make reasonable rules
for their functions.
SECTION 11.08. Legal Holidays. A "Legal Holiday" is a
Saturday, a Sunday or a day on which banking institutions are not required to be
open in the State of New York. If a payment date is a Legal Holiday, payment
shall be made on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period. If a regular record date is a
Legal Holiday, the record date shall not be affected.
SECTION 11.09. Governing Law. This Indenture and the
Securities shall be governed by, and construed in accordance with, the laws of
the State of New York but without giving effect to applicable principles of
conflicts of law to the extent that the application of the laws of another
jurisdiction would be required thereby.
SECTION 11.10. No Recourse Against Others. A director,
officer, employee or stockholder, as such, of the Company shall not have any
liability for any obligations of the Company under the Securities or this
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
shall waive and release all such liability. The waiver and release shall be part
of the consideration for the issue of the Securities.
SECTION 11.11. Successors. All agreements of the
Company in this Indenture and the Securities shall bind its
<PAGE> 92
92
successors. All agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 11.12. Multiple Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement. One signed copy is enough to
prove this Indenture.
SECTION 11.13. Table of Contents; Headings. The table of
contents, cross-reference sheet and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any of
the terms or provisions hereof.
IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date first written above.
IXC COMMUNICATIONS, INC.,
By: /s/ JOHN J. WILLINGHAM
------------------------------
Name: John J. Willingham
Title: Senior Vice President
THE BANK OF NEW YORK, as Trustee,
By: /s/ TIMOTHY J. SHEA
------------------------------
Name: Timothy J. Shea
Title: Assistant Treasurer
<PAGE> 93
EXECUTION COPY
================================================================================
IXC COMMUNICATIONS, INC.
Issuer
THE BANK OF NEW YORK
Trustee
------------------------------
12 1/2% Subordinated Exchange Debentures Due 2009
------------------------------
EXCHANGE INDENTURE
Dated as of August 15, 1997
================================================================================
<PAGE> 94
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE 1
Definitions And Incorporation by Reference
<S> <C> <C>
SECTION 1.01. Definitions .............................................. 1
SECTION 1.02. Other Definitions ........................................ 24
SECTION 1.03. Incorporation by Reference of Trust Indenture Act ........ 24
SECTION 1.04. Rules of Construction .................................... 25
SECTION 1.05. Effectiveness of Indenture ............................... 25
ARTICLE 2
The Securities
SECTION 2.01. Form and Dating .......................................... 26
SECTION 2.02. Execution and Authentication ............................. 26
SECTION 2.03. Registrar and Paying Agent ............................... 27
SECTION 2.04. Paying Agent To Hold Money in Trust ...................... 27
SECTION 2.05. Securityholder Lists ..................................... 28
SECTION 2.06. Replacement Securities ................................... 28
SECTION 2.07. Outstanding Securities ................................... 28
SECTION 2.08. Temporary Securities ..................................... 29
SECTION 2.09. Cancelation .............................................. 29
SECTION 2.10. Defaulted Interest ....................................... 29
SECTION 2.11. CUSIP Numbers ............................................ 29
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee ....................................... 30
SECTION 3.02. Selection of Securities To Be Redeemed ................... 30
</TABLE>
i
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<TABLE>
<S> <C> <C>
SECTION 3.03. Notice of Redemption ..................................... 31
SECTION 3.04. Effect of Notice of Redemption ........................... 31
SECTION 3.05. Deposit of Redemption Price .............................. 32
SECTION 3.06. Securities Redeemed in Part .............................. 32
ARTICLE 4
Covenants
SECTION 4.01. Payment of Securities .................................... 32
SECTION 4.02. SEC Reports .............................................. 32
SECTION 4.03. Limitation on Debt ....................................... 33
SECTION 4.04. Limitation on Restricted Payments ........................ 35
SECTION 4.05. Limitation on Restrictions on Distributions from
Restricted Subsidiaries ................................ 37
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock ....... 39
SECTION 4.07. Limitation on Affiliates Transactions .................... 43
SECTION 4.08. Limitation on the Sale or Issuance of Common Stock of
Restricted Subsidiaries ................................ 44
SECTION 4.09. Change of Control ........................................ 44
SECTION 4.10. Compliance Certificate ................................... 46
SECTION 4.11. Further Instruments and Acts ............................. 46
SECTION 4.12. Statement by Officers as to
Default .................................................. 46
ARTICLE 5
Successor Company
SECTION 5.01. When Company May Merge or Transfer Assets ................ 47
</TABLE>
ii
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<TABLE>
<S> <C> <C>
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default ........................................ 48
SECTION 6.02. Acceleration ............................................. 50
SECTION 6.03. Other Remedies ........................................... 50
SECTION 6.04. Waiver of Past Defaults .................................. 50
SECTION 6.05. Control by Majority ...................................... 51
SECTION 6.06. Limitation on Suits ...................................... 51
SECTION 6.07. Rights of Holders To Receive Payment ..................... 52
SECTION 6.08. Collection Suit by Trustee ............................... 52
SECTION 6.09. Trustee May File Proofs of Claim
SECTION 6.10. Priorities ............................................... 52
SECTION 6.11. Undertaking for Costs .................................... 53
SECTION 6.12. Waiver of Stay or Extension Laws ......................... 53
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee ........................................ 54
SECTION 7.02. Rights of Trustee ........................................ 55
SECTION 7.03. Individual Rights of Trustee ............................. 56
SECTION 7.04. Trustee's Disclaimer ..................................... 56
SECTION 7.05. Notice of Defaults ....................................... 56
SECTION 7.06. Reports by Trustee to Holders ............................ 56
SECTION 7.07. Compensation and Indemnity ............................... 57
SECTION 7.08. Replacement of Trustee ................................... 57
SECTION 7.09. Successor Trustee by Merger .............................. 59
SECTION 7.10. Eligibility; Disqualification ............................ 59
SECTION 7.11. Preferential Collection of Claims Against Company ........ 59
</TABLE>
iii
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<TABLE>
<S> <C> <C>
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities; Defeasance ......... 59
SECTION 8.02. Conditions to Defeasance ................................. 61
SECTION 8.03. Application of Trust Money ............................... 62
SECTION 8.04. Repayment to Company ..................................... 62
SECTION 8.05. Indemnity for Government Obligations ..................... 62
SECTION 8.06. Reinstatement ............................................ 62
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders ............................... 63
SECTION 9.02. With Consent of Holders .................................. 64
SECTION 9.03. Compliance with Trust Indenture Act ...................... 65
SECTION 9.04. Revocation and Effect of Consents and Waivers ............ 65
SECTION 9.05. Notation on or Exchange of Securities .................... 66
SECTION 9.06. Trustee To Sign Amendments ............................... 66
SECTION 9.07. Payment for Consent ...................................... 66
ARTICLE 10
Subordination
SECTION 10.01. Agreement To Subordinate ................................. 67
SECTION 10.02. Liquidation, Dissolution, Bankruptcy ..................... 67
SECTION 10.03. Default on Senior Indebtedness ........................... 67
SECTION 10.04. Acceleration of Payment of Securities .................... 68
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 10.05. When Distribution Must Be Paid Over ...................... 69
SECTION 10.06. Subrogation .............................................. 69
SECTION 10.07. Relative Rights .......................................... 69
SECTION 10.08. Subordination May Not Be Impaired by Company ............. 69
SECTION 10.09. Rights of Trustee and Paying Agent ....................... 69
SECTION 10.10. Distribution or Notice to Representative ................. 70
SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit
Right To Accelerate .................................... 70
SECTION 10.12. Trust Moneys Not Subordinated ............................ 70
SECTION 10.13. Trustee Entitled to Rely ................................. 70
SECTION 10.14. Trustee To Effectuate Subordination ...................... 71
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness . 71
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions ............................... 72
ARTICLE 11
Miscellaneous
SECTION 11.01. Trust Indenture Act Controls ............................. 72
SECTION 11.02. Notices .................................................. 72
SECTION 11.03. Communication by Holders with Other Holders .............. 73
SECTION 11.04. Certificate and Opinion as to Conditions Precedent ....... 73
SECTION 11.05. Statements Required in Certificate or Opinion ............ 74
SECTION 11.06. When Securities Disregarded .............................. 74
SECTION 11.07. Rules by Trustee, Paying Agent and Registrar ............. 74
SECTION 11.08. Legal Holidays ........................................... 74
SECTION 11.09. Governing Law ............................................ 75
SECTION 11.10. No Recourse Against Others ............................... 75
SECTION 11.11. Successors ............................................... 75
SECTION 11.12. Multiple Originals ....................................... 75
SECTION 11.13. Table of Contents; Headings .............................. 75
</TABLE>
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<PAGE> 1
EXHIBIT 4.3
EXECUTION COPY
IXC COMMUNICATIONS, INC.
$300,000,000 12 1/2% JUNIOR EXCHANGEABLE PREFERRED STOCK DUE 2009
REGISTRATION RIGHTS AGREEMENT
August 14, 1997
Credit Suisse First Boston Corporation
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Morgan Stanley & Co. Incorporated
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010
Dear Sirs:
IXC Communications, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to Credit Suisse First Boston Corporation, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated
(the "Initial Purchasers"), upon the terms set forth in a purchase agreement of
even date herewith (the "Purchase Agreement"), 300,000 shares of its 12 1/2%
Junior Exchangeable Preferred Stock Due 2009 (the "Exchangeable Preferred
Stock"). As an inducement to the Initial Purchasers, the Company agrees with the
Initial Purchasers, for the benefit of the holders of the Initial Securities (as
defined below) (including, without limitation, the Initial Purchasers), the
Exchange Securities (as defined below) and the Private Exchange Securities (as
defined below) (collectively, the "Holders"), as follows:
1. Registered Exchange Offer. The Company shall, at its cost, prepare
and, not later than 45 days after (or if the 45th day is not a business day, the
first business day thereafter) the date of original issue of the Exchangeable
Preferred Stock (the "Issue Date"), file with the Securities and Exchange
Commission (the "Commission") a registration statement (the "Exchange Offer
Registration Statement") on an appropriate form under the Securities Act of
1933, as amended (the "Securities Act"), with respect to a proposed offer (the
"Registered Exchange Offer") to the Holders of the Initial Securities, who are
not prohibited by any law or policy of the Commission from participating in the
Registered Exchange Offer, to issue and deliver to such Holders, in exchange for
their respective shares of Exchangeable Preferred Stock or Exchange Debentures
(as defined), as the case may be (the "Initial Securities"), a like aggregate
liquidation preference of Exchangeable Preferred Stock or a like aggregate
principal amount of Exchange Debentures, as the case may be, of the Company
(collectively, the "Exchange Securities") identical in all material respects to
the Initial Securities (except for the transfer restrictions relating to the
Exchangeable Preferred Stock or Exchange Debentures) that would be registered
under the Securities Act. The Company shall use its best efforts to cause such
Exchange Offer Registration Statement to become effective under the Securities
Act within 120 days (or if the 120th day is not a business day, the first
business day thereafter) after the Issue Date and shall keep such Exchange Offer
Registration Statement effective
<PAGE> 2
2
for not less than 30 days (or longer, if required by applicable law) after the
date notice of the Registered Exchange Offer is mailed to the Holders (such
period being called the "Exchange Offer Registration Period").
If the Company effects the Registered Exchange Offer, the Company will
be entitled to close such Registered Exchange Offer 30 days after the
commencement thereof provided that the Company has accepted all the Initial
Securities theretofore validly tendered in accordance with the terms of the
Registered Exchange Offer.
Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder of the Initial Securities electing to exchange such Initial
Securities for Exchange Securities (assuming that such Holder is not an
affiliate of the Company within the meaning of the Securities Act, acquires the
Exchange Securities in the ordinary course of such Holder's business and has no
arrangements or understandings with any person to participate in the
distribution of the Exchange Securities and is not prohibited by any law or
policy of the Commission from participating in the Registered Exchange Offer) to
trade such Exchange Securities from and after their receipt without any
limitations or restrictions under the Securities Act and without material
restrictions under the securities laws of the states of the United States.
The Company acknowledges that, pursuant to current interpretations by
the Commission's staff of Section 5 of the Securities Act, in the absence of an
applicable exemption therefrom, (i) each Holder which is a broker-dealer
electing to exchange Initial Securities, acquired for its own account as a
result of market-making activities or other trading activities, for Exchange
Securities (an "Exchanging Dealer"), is required to deliver a prospectus
containing the information set forth in Annex A hereto on the cover, in Annex B
hereto in the "Exchange Offer Procedures" section and the "Purpose of the
Exchange Offer" section, and in Annex C hereto in the "Plan of Distribution"
section of such prospectus in connection with a sale of any such Exchange
Securities received by such Exchanging Dealer pursuant to the Registered
Exchange Offer and (ii) an Initial Purchaser that elects to sell Exchange
Securities acquired in exchange for Initial Securities constituting any portion
of an unsold allotment is required to deliver a prospectus containing the
information required by Items 507 or 508 of Regulation S-K under the Securities
Act, as applicable, in connection with such sale.
The Company shall use its best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the prospectus
contained therein, in order to permit such prospectus to be lawfully delivered
by all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Securities; provided, however, that (i) in the
case where such prospectus and any amendment or supplement thereto must be
delivered by an Exchanging Dealer or an Initial Purchaser, such period shall be
the lesser of 180 days and the date on which all Exchanging Dealers and the
Initial Purchasers have sold all Exchange Securities held by them (unless such
period is extended pursuant to Section 3(j) below) and (ii) the Company shall
make such prospectus and any amendment or supplement thereto, available to any
broker-dealer for use in connection with any resale of any Exchange Securities
for a period not less than 90 days after the consummation of the Registered
Exchange Offer.
<PAGE> 3
3
If, upon consummation of the Registered Exchange Offer, any Initial
Purchaser holds Exchangeable Preferred Stock or Exchange Debentures acquired by
it as part of its initial distribution, the Company, simultaneously with the
delivery of the Exchange Securities pursuant to the Registered Exchange Offer,
shall issue and deliver to such Initial Purchaser upon the written request of
such Initial Purchaser, in exchange (each, a "Private Exchange" and,
collectively, the "Private Exchanges") for the respective Securities held by
such Initial Purchaser, a like liquidation preference of Exchangeable Preferred
Stock or a like aggregate principal amount of Exchange Debentures of the Company
identical in all material respects (including the existence of restrictions on
transfer under the Securities Act and the securities laws of the several states
of the United States) to the Exchangeable Preferred Stock or the Exchange
Debentures, as the case may be (collectively, the "Private Exchange
Securities"). The Initial Securities, the Exchange Securities and the Private
Exchange Securities are herein collectively called the "Securities".
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the final prospectus forming part of
the Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30 days
(or longer, if required by applicable law) after the date notice thereof is
mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Initial Securities at any time
prior to the close of business, New York time, on the last business day on which
the Registered Exchange Offer shall remain open; and
(e) otherwise comply with all applicable laws.
As soon as practicable after the close of the Registered Exchange Offer
or Private Exchange, as the case may be, the Company shall:
(x) accept for exchange all the Initial Securities validly tendered and
not withdrawn pursuant to the Registered Exchange Offer or the Private Exchange,
as the case may be;
(y) deliver to the Company's transfer agent for the Exchangeable
Preferred Stock (the "Transfer Agent"), in the case of Exchangeable Preferred
Stock, or the trustee for the Exchange Debentures (the "Trustee"), in the case
of Exchange Debentures, for cancelation all Initial Securities so accepted for
exchange; and
(z) cause the Transfer Agent, in the case of Exchangeable Preferred
Stock, or the Trustee, in the case of Exchange Debentures, to authenticate and
deliver promptly to each Holder that validly tendered Initial Securities,
Exchange Securities or Private Exchange Securities, as the case may be, equal in
liquidation preference or principal amount, as applicable, to the Initial
Securities of such Holder so accepted for exchange.
<PAGE> 4
4
Dividends or interest, as applicable, on each Exchange Security or
Private Exchange Security issued pursuant to the Registered Exchange Offer or
Private Exchange will accrue from the last dividend payment date or interest
payment date, as applicable, on which dividends or interest, as applicable, was
paid on the Initial Security surrendered in exchange therefor or, if no
dividends or interest, as applicable, has been paid on such Initial Security,
from the date of original issue of such Initial Security.
Each Holder tendering Initial Securities in the Registered Exchange
Offer shall be required to represent to the Company that at the time of the
consummation of the Registered Exchange Offer (i) any Exchange Securities
received by such Holder will be acquired in the ordinary course of business,
(ii) such Holder will have no arrangements or understanding with any person to
participate in the distribution of the Initial Securities or the Exchange
Securities within the meaning of the Securities Act, (iii) such Holder is not an
"affiliate," as defined in Rule 405 of the Securities Act, of the Company or if
it is an affiliate, such Holder will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable, (iv) if
such Holder is not a broker-dealer, that it is not engaged in, and does not
intend to engage in, the distribution of the Exchange Securities and (v) if such
Holder is a broker-dealer, that it will receive Exchange Securities for its own
account in exchange for Initial Securities that were acquired as a result of
market-making activities or other trading activities and that it will be
required to acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Securities.
Notwithstanding any other provisions hereof, the Company will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any prospectus
forming part of any Exchange Offer Registration Statement, and any supplement to
such prospectus, does not include an 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 the light of the circumstances under which they
were made, not misleading.
2. Shelf Registration. If, (i) because of any change in law or in
applicable interpretations thereof by the staff of the Commission, the Company
is not permitted to effect the Registered Exchange Offer, as contemplated by
Section 1 hereof, (ii) the Registered Exchange Offer is not consummated within
150 days of the date hereof, (iii) any Initial Purchaser so requests with
respect to the Initial Securities (or the Private Exchange Securities) not
eligible to be exchanged for Exchange Securities in the Registered Exchange
Offer and held by it following consummation of the Registered Exchange Offer or
(iv) any Holder of Initial Securities (other than an Exchanging Dealer) is not
eligible to participate in the Registered Exchange Offer or, in the case of any
Holder (other than an Exchanging Dealer) that participates in the Registered
Exchange Offer, such Holder does not receive freely tradeable Exchange
Securities on the date of the exchange, the Company shall take the following
actions:
(a) The Company shall, at its cost, as promptly as practicable (but in
no event more than 45 days after so required or requested pursuant to this
Section 2) file with the Commission and thereafter shall use its best efforts to
cause to be declared effective a registration statement or
<PAGE> 5
5
statements (the "Shelf Registration Statement" and, together with the Exchange
Offer Registration Statement, a "Registration Statement") on an appropriate form
under the Securities Act relating to the offer and sale of the Transfer
Restricted Securities (as defined in Section 6 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
(hereinafter, the "Shelf Registration"); provided, however, that no Holder
(other than an Initial Purchaser) shall be entitled to have the Securities held
by it covered by such Shelf Registration Statement unless such Holder agrees in
writing to be bound by all the provisions of this Agreement applicable to such
Holder.
(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, for a period of two years (or for such longer period if extended
pursuant to Section 3(j) below) from the date of its effectiveness or such
shorter period that will terminate when all the Securities covered by the Shelf
Registration Statement (i) have been sold pursuant thereto or (ii) are eligible
for sale under Rule 144(k) under the Securities Act. 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 such action is required by
applicable law or is otherwise permitted to be taken pursuant to this Agreement.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Company shall cause the Shelf Registration Statement and the
related prospectus and any amendment or supplement thereto, as of the effective
date of the Shelf Registration Statement, amendment or supplement, (i) to comply
in all material respects with the applicable requirements of the Securities Act
and the rules and regulations of the Commission and (ii) not to contain 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.
3. Registration Procedures. In connection with any Shelf Registration
contemplated by Section 2 hereof and, to the extent applicable, any Registered
Exchange Offer contemplated by Section 1 hereof, the following provisions shall
apply:
(a) The Company shall (i) furnish to each Initial Purchaser, prior to
the filing thereof with the Commission, a copy of the Registration Statement and
each amendment thereof and each supplement, if any, to the prospectus included
therein and, in the event that an Initial Purchaser (with respect to any portion
of an unsold allotment from the original offering) is participating in the
Registered Exchange Offer or the Shelf Registration shall use its best efforts
to reflect in each such document, when so filed with the Commission, such
comments as such Initial Purchaser reasonably may propose; (ii) include the
information set forth in Annex A hereto on the cover, in Annex B hereto in the
"Exchange Offer Procedures" section and the "Purpose of the Exchange Offer"
section and in Annex C hereto in the "Plan of Distribution" section of the
prospectus forming a part of the Exchange Offer Registration Statement and
include the information set forth in Annex D hereto in the Letter of Transmittal
delivered pursuant to such Registered Exchange Offer; (iii) if requested by an
Initial Purchaser, include the information required by Items 507 or 508 of
Regulation S-K under the Securities Act, as applicable, in the prospectus
forming a part of the Exchange Offer Registration
<PAGE> 6
6
Statement; (iv) include within the prospectus contained in the Exchange Offer
Registration Statement a section entitled "Plan of Distribution," reasonably
acceptable to the Initial Purchasers, which shall contain a summary statement of
the positions taken or policies made by the staff of the Commission with respect
to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) of Exchange Securities received by such
broker-dealer in such Registered Exchange Offer (a "Participating
Broker-Dealer"), whether such positions or policies have been publicly
disseminated by the staff of the Commission or such positions or policies, in
the reasonable judgment of the Initial Purchasers based upon advice of counsel
(which may be in-house counsel), represent the prevailing views of the staff of
the Commission; and (v) in the case of a Shelf Registration, include the names
of the Holders, who propose to sell Securities pursuant to the Shelf
Registration Statement, as selling securityholders.
(b) The Company shall give written notice to the Initial Purchasers,
the Holders of the Securities and any Participating Broker-Dealer from whom the
Company has received prior written notice that it will be a Participating
Broker-Dealer in the Registered Exchange Offer (which notice pursuant to clauses
(ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the
prospectus until the requisite changes have been made):
(i) when the Registration Statement or any amendment thereto has been
filed with the Commission and when the Registration Statement or any
post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or supplements to
the 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 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 Registration Statement or the prospectus in order that the
Registration Statement or the prospectus does not contain an untrue statement of
a material fact nor 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 its best efforts to obtain the withdrawal at
the earliest possible time of any order suspending the effectiveness of the
Registration Statement.
(d) The Company shall furnish to each Holder of Securities included
within the coverage of the Shelf Registration, without charge, at least one copy
of the Shelf Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, and, if the Holder so requests in
writing, all exhibits thereto (including those, if any, incorporated by
reference).
<PAGE> 7
7
(e) The Company shall deliver to each Exchanging Dealer and each
Initial Purchaser, and to any other Holder who so requests, without charge, at
least one copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and schedules,
and, if any Initial Purchaser or any such Holder requests, all exhibits thereto
(including those, if any, incorporated by reference).
(f) The Company shall, during the Shelf Registration Period, deliver to
each Holder of Securities included within the coverage of the Shelf
Registration, 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
prospectus or any amendment or supplement thereto by each of the selling Holders
of the Securities in connection with the offering and sale of the Securities
covered by the prospectus, or any amendment or supplement thereto, included in
the Shelf Registration Statement.
(g) The Company shall deliver to each Initial Purchaser, any Exchanging
Dealer, any Participating Broker-Dealer and such other persons required to
deliver a prospectus following the Registered Exchange Offer, without charge, as
many copies of the final prospectus included in the Exchange Offer Registration
Statement and any amendment or supplement thereto as such persons may reasonably
request. The Company consents, subject to the provisions of this Agreement, to
the use of the prospectus or any amendment or supplement thereto by any Initial
Purchaser, if necessary, any Participating Broker-Dealer and such other persons
required to deliver a prospectus following the Registered Exchange Offer in
connection with the offering and sale of the Exchange Securities covered by the
prospectus, or any amendment or supplement thereto, included in such Exchange
Offer Registration Statement.
(h) Prior to any public offering of the Securities, pursuant to any
Registration Statement, the Company shall register or qualify or cooperate with
the Holders of the Securities included therein and their respective counsel in
connection with the registration or qualification of the Securities for offer
and sale under the securities or "blue sky" laws of such states of the United
States as any Holder of the Securities 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 such 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 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.
(i) The Company shall cooperate with the Holders of the Securities to
facilitate the timely preparation and delivery of certificates representing the
Securities to be sold pursuant to any 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 such Registration Statement.
(j) Upon the occurrence of any event contemplated by paragraphs (ii)
through (v) of Section 3(b) above during the period for which the Company is
required to maintain an effective Registration Statement, the Company shall
promptly prepare and file a post-effective amendment to the Registration
Statement or a supplement to the related prospectus and any other required
<PAGE> 8
8
document so that, as thereafter delivered to Holders of the Initial Securities
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, the Holders of the Securities and any known
Participating Broker-Dealer in accordance with paragraphs (ii) through (v) of
Section 3(b) above to suspend the use of the prospectus until the requisite
changes to the prospectus have been made, then the Initial Purchasers, the
Holders of the Securities and any such Participating Broker- Dealers shall
suspend use of such prospectus, and the period of effectiveness of the Shelf
Registration Statement provided for in Section 2(b) above or the Exchange Offer
Registration Statement provided for in Section 1 above, as the case may be,
shall be extended by the number of days from and including the date of the
giving of such notice to and including the date when the Initial Purchasers, the
Holders of the Securities and any known Participating Broker-Dealer shall have
received such amended or supplemented prospectus pursuant to this Section 3(j).
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide CUSIP numbers for the Initial Securities,
the Exchange Securities or the Private Exchange Securities, as the case may be,
and provide the Transfer Agent or the Trustee, as applicable, with printed
certificates for the Initial Securities, the Exchange Securities or the Private
Exchange Securities, as the case may be, in forms eligible for deposit with The
Depository Trust Company.
(l) The Company will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the Registered
Exchange Offer or the Shelf Registration, and will make generally available to
its securityholders (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 Registration Statement, which statement shall cover such 12-month period.
(m) The Company shall cause any indenture governing the Exchange
Securities (the "Exchange Indenture") to be qualified under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"), in a timely manner and
containing such changes, if any, as shall be reasonably necessary for such
qualification. In the event that such qualification would require the
appointment of a new trustee under the Exchange Indenture, the Company shall
appoint a new trustee thereunder pursuant to the applicable provisions of the
Exchange Indenture.
(n) 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 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 or, if necessary, update such
information within a reasonable time after receiving such request.
(o) The Company shall enter into such customary agreements (including
if requested an underwriting agreement in customary form) and take all such
other action, if any, as any Holder of
<PAGE> 9
9
the Securities shall reasonably request in order to facilitate the disposition
of the Securities pursuant to any Shelf Registration.
(p) In the case of any Shelf Registration, the Company shall (i) make
reasonably available for inspection by the Holders of the Securities, any
underwriter participating in any disposition pursuant to the Shelf Registration
Statement and any attorney, accountant or other agent retained by the Holders of
the Securities or any such underwriter 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 underwriter, 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 shall be coordinated on behalf of the
Initial Purchasers by you and on behalf of the other parties, by one counsel
(the "Designated Counsel") designated by and on behalf of such other parties as
described in Section 4 hereof.
(q) In the case of any Shelf Registration, the Company, if requested by
the Designated Counsel, shall cause (i) its counsel to deliver an opinion and
updates thereof relating to the Securities in customary form addressed to such
Holders and the managing underwriters, if any, thereof 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,
without limitation, 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
delivery of the relevant agreement of the type referred to in Section 3(o)
hereof; the due authorization, execution, authentication and issuance, and the
validity and enforceability, of the applicable Securities; the absence of
material legal or governmental proceedings involving the Company and its
subsidiaries; the absence of governmental approvals required to be obtained in
connection with the Shelf Registration Statement, the offering and sale of the
applicable Securities, or any agreement of the type referred to in Section 3(o)
hereof and the compliance as to form of such Shelf Registration Statement and
any documents incorporated by reference therein and of the Exchange Indenture
with the requirements of the Securities Act and the Trust Indenture Act,
respectively. Such opinion shall also state that no facts have come to its
attention which lead such counsel to believe that, 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 Shelf Registration
Statement and the prospectus included therein, as then amended or supplemented,
and from any documents incorporated by reference therein contain any untrue
statement of a material fact or omit to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
in the light of the circumstances existing at the time that such documents were
filed with the Commission under the Exchange Act (it being understood that such
counsel shall not be required to express any opinion as to the financial
statements and related notes, the financial projections and other financial,
statistical and accounting data included therein or appended thereto); (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 to provide to the selling Holders of the applicable
Securities and any underwriter therefor 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
<PAGE> 10
10
contemplated, and only if permitted, by Statement of Auditing Standards No. 72.
(r) In the case of the Registered Exchange Offer, if requested by any
Initial Purchaser or any known Participating Broker-Dealer, the Company shall
cause (i) its counsel to deliver to such Initial Purchaser or such Participating
Broker-Dealer a signed opinion in the form set forth in Section 6(c) of the
Purchase Agreement with such changes as are customary in connection with the
preparation of a Registration Statement and (ii) its independent public
accountants to deliver to such Initial Purchaser or such Participating
Broker-Dealer a comfort letter, in customary form, meeting the requirements as
to the substance thereof as set forth in Sections 6(a) and (k) of the Purchase
Agreement, with appropriate date changes.
(s) If a Registered Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Initial Securities by Holders to the Company
(or to such other Person as directed by the Company) in exchange for the
Exchange Securities or the Private Exchange Securities, as the case may be, the
Company shall mark, or cause to be marked, on the Initial Securities so
exchanged that such Initial Securities are being canceled in exchange for the
Exchange Securities or the Private Exchange Securities, as the case may be; in
no event shall the Initial Securities be marked as paid or otherwise satisfied.
(t) The Company shall use its best efforts to (a) if the Initial
Securities have been rated prior to the initial sale of such Initial Securities,
confirm such ratings will apply to the Securities covered by a Registration
Statement, or (b) if the Initial Securities were not previously rated, cause the
Securities covered by a Registration Statement to be rated with the appropriate
rating agencies, if so requested by Holders of a majority in aggregate
liquidation preference or principal amount, as applicable, of Securities covered
by such Registration Statement, or by the managing underwriters, if any.
(u) In the event that any broker-dealer registered under the Exchange
Act shall underwrite any Securities or participate as a member of an
underwriting syndicate or selling group or "assist in the distribution" (within
the meaning of the Conduct Rules of the National Association of Securities
Dealers, Inc. ("NASD")) thereof, whether as a Holder of such Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company shall assist such broker-dealer in complying
with the requirements of such Conduct Rules, including, without limitation, by
(i) if Rule 2720 thereto shall so require, engaging a "qualified independent
underwriter" (as defined in Rule 2720) to participate in the preparation of the
Registration Statement relating to such Securities, to exercise usual standards
of due diligence in respect thereto and, if any portion of the offering
contemplated by such Registration Statement is an underwritten offering or is
made through a placement or sales agent, to recommend the yield of such
Securities, (ii) indemnifying any such qualified independent underwriter to the
extent of the indemnification of underwriters provided in Section 5 hereof and
(iii) providing such information to such broker-dealer as may be required in
order for such broker-dealer to comply with the requirements of the Conduct
Rules of the NASD.
(v) The Company shall use its best efforts to take all other steps
necessary to effect the registration of the Securities covered by a Registration
Statement contemplated hereby.
4. Registration Expenses. The Company shall bear all fees and expenses
incurred in
<PAGE> 11
11
connection with the performance of its obligations under Sections 1 through 3
hereof, whether or not the Registered Exchange Offer or a Shelf Registration is
filed or becomes effective, and, in the event of a Shelf Registration, shall
bear or reimburse the Holders of the Securities covered thereby for the
reasonable fees and disbursements of the Designated Counsel, provided that such
Holders shall be responsible for any and all (i) underwriting discounts and
commissions and (ii) other out-of-pocket expenses of such Holders incurred in
connection with the Shelf Registration.
5. Indemnification. (a) The Company agrees to indemnify and hold
harmless each Holder of the Securities, any Participating Broker-Dealer and each
person, if any, who controls such Holder or such Participating Broker-Dealer
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act from and against any losses, claims, damages or liabilities, joint
or several, or any actions in respect thereof (including, but not limited to,
any losses, claims, damages, liabilities or actions relating to purchases and
sales of the Securities) to which each such indemnified party may become 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
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 required to be stated therein or necessary to make the statements
therein not misleading, and shall reimburse, as incurred, the such 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 (i) the Company
shall not be liable in any such case to the extent that such loss, claim, damage
or liability arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in a Registration
Statement or prospectus or in any amendment or supplement thereto or in any
preliminary prospectus relating to a 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
and (ii) with respect to any untrue statement or omission or alleged untrue
statement or omission made in any prospectus relating to a Shelf Registration
Statement, the indemnity agreement contained in this subsection (a) shall not
inure to the benefit of any Holder or Participating Broker-Dealer from whom the
person asserting any such losses, claims, damages or liabilities purchased the
Securities concerned, to the extent that a prospectus relating to such
Securities was required to be delivered by such Holder or Participating
Broker-Dealer under the Securities Act in connection with such purchase and any
such loss, claim, damage or liability of such Holder or Participating
Broker-Dealer 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 final prospectus, as amended or supplemented, if
the Company had previously furnished copies thereof to such Holder or
Participating Broker-Dealer; provided further, however, that this indemnity
agreement will be in addition to any liability which the Company may otherwise
have to such indemnified party. The Company shall also indemnify underwriters,
their officers and directors and each person who controls such underwriters
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act to the same extent as provided above with respect to the
indemnification of the Holders of the Securities if requested by such Holders.
(b) Each Holder of the Securities, severally and not jointly, will
indemnify and hold harmless the Company and each person, if any, who controls
the Company within the meaning of Section 15 of the Securities Act or Section
20(a) of the Exchange Act from and against any losses,
<PAGE> 12
12
claims, damages or liabilities or any actions in respect thereof, to which the
Company or any such controlling person may become 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 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, in light of the
circumstances under which they were made, 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, 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. This indemnity agreement
will be in addition to 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 5
of notice of the commencement of any action or proceeding (including a
governmental investigation), such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this Section 5,
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 paragraph (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 (in
which case, such indemnified party shall be entitled, at its option, to engage
at the indemnifying party's cost, separate counsel reasonably satisfactory to
the indemnifying party to act on behalf of all indemnified parties in connection
with such action), 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 5 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 5 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
subsection (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 exchange of the relevant
Initial Securities, pursuant to the Registered Exchange Offer, or (ii) if the
allocation provided by the
<PAGE> 13
13
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 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
Section 5(d), the Holders of the Securities 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 a 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 Section 15 of the Securities Act or Section 20(a) of 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
Section 15 of the Securities Act or Section 20(a) of the Exchange Act shall have
the same rights to contribution as the Company.
(e) The agreements contained in this Section 5 shall survive the sale
of the Securities pursuant to a Registration Statement and shall remain in full
force and effect, regardless of any termination or cancelation of this Agreement
or any investigation made by or on behalf of any indemnified party.
6. Additional Amounts Under Certain Circumstances. (a) Additional
dividends or interest, as the case may be, (the "Additional Amounts") with
respect to the Securities shall be assessed as follows if any of the following
events occur (each such event in clauses (i) through (iii) below, a
"Registration Default"):
(i) If by October 6, 1997, neither the Exchange Offer Registration
Statement nor a Shelf Registration Statement relating to the Securities has been
filed with the Commission;
(ii) If by January 19, 1998, neither the Registered Exchange Offer
relating to the Securities is consummated nor, if required in lieu thereof, a
Shelf Registration Statement relating to the Securities is declared effective by
the Commission; or
(iii) If, after January 19, 1998, and after either the Exchange Offer
Registration Statement or the Shelf Registration Statement relating to the
Securities is declared effective (A) such Registration Statement thereafter
ceases to be effective (except as permitted in paragraph (b)); or (B) such
Registration Statement or the related prospectus ceases to be usable (except as
permitted
<PAGE> 14
in paragraph (b)) in connection with resales of Transfer Restricted Securities
during the periods specified herein because either (1) any event occurs as a
result of which the related prospectus forming part of such 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 Registration Statement or supplement the related
prospectus, to comply with the Securities Act or the Exchange Act or the
respective rules thereunder.
Additional Amounts shall accrue on the Initial Securities and any Private
Securities exchanged therefor, at a rate of 0.50% per annum (the "Additional
Amounts Rate") over and above the dividend or interest, as applicable, set forth
in the title of the Initial Securities, in each case, from and including the
date on which any such Registration Default shall occur to but excluding the
date on which all such Registration Defaults relating to the relevant Securities
have been cured.
(b) A Registration Default referred to in Section 6(a)(iii) shall be
deemed not to have occurred and be continuing in relation to a Registration
Statement or the related prospectus if (i) such purported Registration Default
has occurred solely as a result of (x) the filing of a post-effective amendment
to such 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) the occurrence of other material events with
respect to the Company that would need to be described in such Registration
Statement or the related prospectus and (ii) in the case of clause (y), the
Company is proceeding promptly and in good faith to amend or supplement such
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
purported Registration Default occurs for a continuous period in excess of 45
days, Additional Amounts shall be payable in accordance with the above paragraph
from the day such Registration Default occurs until the date on which such
Registration Default is cured.
(c) Any Additional Amounts due pursuant to clause (a)(i), (a)(ii) or
(a)(iii) of Section 6 above will be payable in cash, on each scheduled dividend
or interest payment date, as applicable, commencing with the first scheduled
dividend or interest payment date, as applicable, following the applicable
Registration Default. Additional Amounts will be determined by multiplying the
Additional Amounts Rate by the liquidation preference or the principal amount,
as applicable, of such Securities, in each case, multiplied by a fraction (the
"Additional Amounts Fraction"), the numerator of which is the number of days the
Additional Amounts 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 until (i) the
date on which such Security has been exchanged by a person other than a
broker-dealer for a freely transferrable Exchange Security in the Registered
Exchange Offer, (ii) following the exchange by a broker-dealer in the Registered
Exchange Offer of such Security for an Exchange Security, the date on which such
Exchange Security is sold to a purchaser who receives from such broker-dealer on
or prior to the date of such sale a copy of the prospectus contained in the
Exchange Offer Registration Statement, (iii) 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 (iv) the date on which such
<PAGE> 15
15
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.
7. Rules 144 and 144A. 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 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 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 Initial Securities (or Private Exchange Securities) identified to
the Company by the Initial Purchasers upon request. Upon the request of any
Holder of Transfer Restricted Securities, the Company shall deliver to such
Holder a written statement as to whether it has complied with such requirements.
Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to
require the Company to register any of its securities pursuant to the Exchange
Act.
8. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering (the "Managing Underwriters") will be selected
by the Holders of a majority in aggregate liquidation preference or principal
amount, as applicable, of such Transfer Restricted Securities to be included in
such offering; provided that Managing Underwriters must be reasonably
satisfactory to the Company.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents reasonably required
under the terms of such underwriting arrangements.
9. 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 in liquidation preference or principal
amount, as applicable, of the Securities affected by such amendment,
modification, supplement, waiver or consents (taken as a class).
(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 a Holder of the Securities, at the most current address given
by such Holder to the Company in accordance with the provisions of this Section
9(b).
<PAGE> 16
16
(2) if to the Initial Purchasers, at the following address:
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010
Telephone: (212) 325-2107
Telecopy.: (212) 325-8029
Attention: Transactions Advisory Group
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Telephone: (212) 474-1000
Telecopy: (212) 474-3700
Attention: Kris F. Heinzelman, Esq.
(3) if to the Company, at its address as follows:
IXC Communications, Inc.
5000 Plaza on the Lake, Suite 200
Austin, TX 78746
Telephone: (512) 328-1112
Telecopy: (512) 329-4717
Attention: James F. Guthrie
with a copy to:
Riordan & McKinzie
695 Town Center Drive, Suite 1500
Costa Mesa, CA 92626
Telephone: (714) 433-2618
Telecopy: (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.
(c) No Inconsistent Agreements. 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
<PAGE> 17
17
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, 2 or 3 of this Agreement except as expressly provided in Section 5 or
6 hereof; provided, however, in the event that the Company breaches, fails to
comply or violates the provisions of Section 1, 2 or 3 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 be binding upon the
Company and its successors and assigns.
(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.
(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 liquidation preference or principal amount,
as applicable, of Securities is required hereunder, Securities held by the
Company or its affiliates (other than subsequent Holders of Securities if such
subsequent Holders are deemed to be affiliates solely by reason of their
holdings of such Securities, and other than Grumman Hill Investments L.P.,
Grumman Hill Associates, Inc., Trustees of the General Electric Pension Trust
and Richard D. Irwin) shall not be counted in determining whether such consent
or approval was given by the Holders of such required percentage.
<PAGE> 18
18
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 several Initial Purchasers and the Company in accordance with its
terms.
Very truly yours,
IXC COMMUNICATIONS, INC.
By: /s/ JAMES F. GUTHRIE
-----------------------------------
Name: James F. Guthrie
Title: Chief Financial Officer and
Executive Vice President
The foregoing Registration
Rights Agreement is hereby confirmed
and accepted as of the date first
above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
By: CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ PETER BECKETT
---------------------------
Name: Peter Beckett
Title: Director
<PAGE> 19
ANNEX A
Each broker-dealer that receives Exchange Securities for its own
account pursuant to an Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. The Letter
of Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Securities received in exchange for Initial Securities
where such Initial Securities were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date (as defined herein), it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."
A-1
<PAGE> 20
ANNEX B
Each broker-dealer that receives Exchange Securities for its own
account in exchange for Initial Securities, where such Initial Securities were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Securities. See "Plan of
Distribution."
B-1
<PAGE> 21
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own
account pursuant to an Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Securities received in
exchange for Initial Securities where such Initial Securities were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 180 days after the Expiration Date, it will make
this prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until , 199 , all dealers
effecting transactions in the Exchange Securities may be required to deliver a
prospectus. 1/
The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers for
their own account pursuant to an Exchange Offer may be sold from time to time in
one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Securities or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such Exchange
Securities. Any broker-dealer that resells Exchange Securities that were
received by it for its own account pursuant to an Exchange Offer and any broker
or dealer that participates in a distribution of such Exchange Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Securities and any commission or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incidental to the Exchange Offer (including the expenses of one counsel for the
Holders of the Securities) other than commissions or concessions of any brokers
or dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
- --------
1/ In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.
C-1
<PAGE> 22
ANNEX D
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
--------------------------------------------------------
Address:
-----------------------------------------------------
-------------------------------------------------------------
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Initial Securities that were
acquired as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
D-1
