<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________ .
COMMISSION FILE NUMBER 0-20803
------------------------
IXC COMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C>
DELAWARE 75-2644120
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1122 CAPITAL OF TEXAS HIGHWAY SOUTH, 78746-6426
AUSTIN, TEXAS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE): (512) 328-1112
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares of Common Stock, $.01 par value, outstanding (the only
class of common stock of the Company outstanding) was 37,399,773 on August 1,
1999.
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<PAGE> 2
IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets June 30, 1999 and
December 31, 1998......................................... 3
Condensed Consolidated Statements of Operations Three and
Six Months Ended
June 30, 1999 and 1998.................................... 4
Condensed Consolidated Statements of Cash Flows Six Months
Ended June 30, 1999
and 1998.................................................. 5
Notes to Condensed Consolidated Financial Statements........ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 12
Item 3. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 17
Item 2. Changes in Securities and Use of Proceeds................... 17
Item 3. Defaults Upon Senior Securities............................. 17
Item 4. Submission of Matters to a Vote of Security Holders......... 17
Item 5. Other Information........................................... 18
Item 6. Exhibits and Reports on Form 8-K............................ 18
SIGNATURES........................................................... 24
</TABLE>
2
<PAGE> 3
IXC COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents................................... $ 98,562 $ 264,826
Accounts and other receivables, net of allowance for
doubtful accounts of $31,047 at June 30, 1999 and $16,664
at December 31, 1998...................................... 95,662 107,558
Current portion of notes receivable......................... -- 63,748
Note receivable from Westel................................. -- 9,421
Other current assets........................................ 22,752 10,965
---------- ----------
Total current assets.............................. 216,976 456,518
Property and equipment...................................... 1,523,344 1,193,655
Less: accumulated depreciation.............................. (272,054) (209,979)
---------- ----------
Property and equipment, net....................... 1,251,290 983,676
Non-current marketable securities........................... 452,553 219,880
Investments in unconsolidated subsidiaries.................. 8,414 9,505
Deferred charges and other non-current assets, net.......... 172,260 78,658
---------- ----------
Total assets...................................... $2,101,493 $1,748,237
========== ==========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
Current portion of long-term debt and capital lease
obligations............................................... $ 12,804 $ 13,984
Accounts payable trade...................................... 97,755 33,558
Accrued service cost........................................ 59,667 43,177
Accrued liabilities......................................... 116,038 72,307
Current portion of unearned revenue......................... 53,453 33,640
---------- ----------
Total current liabilities......................... 339,717 196,666
Long-term debt and capital lease obligations, less current
portion................................................... 760,239 679,016
Unearned revenue -- noncurrent.............................. 532,965 488,395
Other noncurrent liabilities................................ 85,329 8,848
7 1/4% Junior Convertible Preferred Stock; $.01 par value;
3,000,000 shares of all classes of Preferred Stock
authorized; 1,074,500 shares issued and outstanding at
June 30, 1999 and December 31, 1998 (aggregate liquidation
preference of $107,450 at June 30, 1999).................. 103,849 103,623
12 1/2% Junior Exchangeable Preferred Stock; $.01 par value;
3,000,000 shares of all classes of Preferred Stock
authorized; 371,618 and 349,434 shares issued and
outstanding at June 30, 1999 and December 31, 1998
(aggregate liquidation preference of $377,413 at June 30,
1999 including accrued dividends of $5,806)............... 367,263 344,235
Stockholders' deficit:
6 3/4% Cumulative Convertible Preferred Stock, $.01 par
value; 3,000,000 shares of all classes of Preferred
Stock authorized; $155,250 shares issued and
outstanding at June 30, 1999 and December 31, 1998
(aggregate liquidation preference of $155,250 at June
30, 1999).............................................. 2 2
Common Stock, $.01 par value; 100,000,000 shares
authorized; 37,390,765 shares issued and outstanding at
June 30, 1999 and 36,409,709 shares issued and
outstanding at December 31, 1998....................... 374 364
Additional paid-in capital................................ 253,392 253,429
Unrealized gain on marketable securities.................. 141,091 --
Accumulated deficit....................................... (482,728) (326,341)
---------- ----------
Total stockholders' deficit............................... (87,869) (72,546)
---------- ----------
Total liabilities, redeemable preferred stock and
stockholders' deficit.................................. $2,101,493 $1,748,237
========== ==========
</TABLE>
See accompanying notes.
3
<PAGE> 4
IXC COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------------- ----------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net operating revenue:
Private line service...................... $ 73,569 $ 49,232 $ 144,433 $ 92,572
Long distance switched services........... 74,898 105,502 152,645 219,269
Data and Internet services................ 5,353 1,201 10,528 1,677
Other..................................... 4,072 -- 11,644 --
--------- --------- --------- ---------
157,892 155,935 319,250 313,518
Operating expenses:
Cost of services.......................... 108,289 107,593 213,093 215,542
Operations and administration............. 60,948 29,992 112,757 59,328
Restructuring charges..................... 25,826 -- 25,826 --
Depreciation and amortization............. 39,565 22,636 75,843 42,788
Merger and other infrequent costs......... 90 7,681 145 7,645
--------- --------- --------- ---------
Operating loss.................... (76,826) (11,967) (108,414) (11,785)
Interest income............................. 1,839 3,324 7,663 4,921
Interest expense............................ (9,092) (8,530) (20,109) (14,841)
Equity (loss) from unconsolidated
subsidiaries.............................. (13,111) (10,754) (15,982) (22,019)
Other, net.................................. (12,760) 33 (12,725) 176
--------- --------- --------- ---------
Loss before provision for income taxes and
minority interest......................... (109,950) (27,894) (149,567) (43,548)
Provision for income taxes.................. (3,900) (4,551) (6,311) (6,619)
Minority interest........................... (301) (252) (509) (425)
--------- --------- --------- ---------
Loss before extraordinary loss.............. (114,151) (32,697) (156,387) (50,592)
--------- --------- --------- ---------
Extraordinary loss, net..................... -- (69,810) -- (69,810)
--------- --------- --------- ---------
Net loss.................................... (114,151) (102,507) (156,387) (120,402)
--------- --------- --------- ---------
Dividends applicable to preferred stock..... (16,372) (15,471) (32,390) (27,207)
--------- --------- --------- ---------
Net loss applicable to common
stockholders.............................. (130,523) (117,978) (188,777) (147,609)
--------- --------- --------- ---------
Other comprehensive income, net of tax of
$4,252 and $75,972:
Change in unrealized gain on marketable
securities................................ 7,896 -- 141,091 --
--------- --------- --------- ---------
Comprehensive income (loss)................. $(122,627) $(117,978) $ (47,686) $(147,609)
========= ========= ========= =========
Basic and diluted loss per share:
Before extraordinary loss................. $ (3.53) $ (1.35) $ (5.14) $ (2.18)
Extraordinary loss........................ -- (1.95) -- (1.96)
--------- --------- --------- ---------
Net loss.................................. $ (3.53) $ (3.30) $ (5.14) $ (4.14)
========= ========= ========= =========
Weighted average shares outstanding......... 36,946 35,785 36,714 35,653
========= ========= ========= =========
</TABLE>
See accompanying notes.
4
<PAGE> 5
IXC COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
----------------------
1999 1998
--------- ---------
<S> <C> <C>
Net cash provided by operating activities................... $ 105,451 $ 41,311
--------- ---------
Investing activities:
Purchase of property and equipment........................ (261,642) (239,627)
Proceeds from collection of notes receivable.............. 750 --
Acquisitions, net of cash acquired........................ (73,247) (22,699)
Investments in unconsolidated subsidiaries................ (6,220) (12,431)
--------- ---------
Net cash used in investing activities....................... (340,359) (274,757)
--------- ---------
Financing activities:
Proceeds from sale of 9% Senior Notes..................... -- 450,000
Proceeds from sale of 6 3/4% Cumulative Convertible
Preferred Stock........................................ -- 147,213
Net proceeds from issuance of debt........................ 79,156 --
Proceeds from debt and capital lease obligations.......... -- 12,704
Principal payments on debt and capital lease
obligations............................................ (9,112) (353,094)
Redemption of 10% Junior Series 3 Cumulative Preferred
Stock.................................................. -- (708)
Stock option exercises.................................... 5,116 2,842
Payment of dividends on preferred stock................... (6,516) (1,948)
Other financing activities................................ -- (3,186)
--------- ---------
Net cash provided by financing activities................... 68,644 253,823
--------- ---------
Effect of differing year-ends from merged entities.......... -- (1,502)
--------- ---------
Net increase (decrease) in cash and cash equivalents........ (166,264) 18,875
Cash and cash equivalents at beginning of period............ 264,826 155,855
--------- ---------
Cash and cash equivalents at end of period.................. $ 98,562 $ 174,730
========= =========
</TABLE>
See accompanying notes.
5
<PAGE> 6
IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited Condensed Consolidated Financial Statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation for
the periods indicated have been included. Operating results for the three and
six month periods ended June 30, 1999 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1999. The
accompanying unaudited Condensed Consolidated Financial Statements have been
restated for 1998 to include the operations of Eclipse Telecommunications, Inc.,
formerly Network Long Distance, Inc. ("Eclipse"), which was acquired on June 3,
1998, in a transaction accounted for as a pooling of interests. The Condensed
Consolidated Balance Sheet at December 31, 1998 has been derived from our
audited financial statements but does not include all of the information and
notes required by generally accepted accounting principles for complete
financial statements. The accompanying financial statements should be read in
conjunction with our audited consolidated financial statements and notes thereto
for the year ended December 31, 1998. Certain amounts shown in our 1998
financial statements have been reclassified to conform to the 1999 presentation.
2. MARKETABLE SECURITIES
PSINET INVESTMENT
We own approximately 10.2 million shares of common stock of PSINet, Inc.
This investment had a fair market value of approximately $447.6 million as of
June 30, 1999. Of the total fair value, $240.0 million was recorded as unearned
revenue because it represented the sale to PSINet of an agreement for an
indefeasible right to use ("IRU") capacity on our network. We accounted for the
remaining fair value, net of tax, as Unrealized Gain on Marketable Securities
because the PSINet investment is "available-for-sale" as defined in Statement of
Financial Accounting Standards ("SFAS") No. 115. The change in the unrealized
gain amount is included in Other Comprehensive Income on the accompanying
condensed consolidated statement of operations.
The accompanying balance sheet includes approximately $52.0 million
representing amounts received from a financial institution in June 1999 in
connection with a prepaid, forward-sale contract of 1.5 million shares of PSINet
common stock. This amount is accounted for as a note payable and is secured by
the 1.5 million shares of stock. The forward-sale obligation may be settled at a
specified date in the second quarter of 2002 for a maximum amount of 1.5 million
shares of PSINet stock, or, at our option, the equivalent value of PSINet stock
in cash. We are accruing interest expense on this liability at an effective
interest rate of 6.8%.
DCI TELECOMMUNICATIONS
In November 1998 we entered into an agreement to acquire common stock of
DCI Telecommunications, Inc. ("DCI"), as consideration for payment of amounts
due from one of our customers that was also a vendor of DCI. The agreement
provided that DCI was to issue us additional common stock if the market value of
the shares we owned did not reach $17.7 million by June 1, 1999. As of June 1,
1999, and subsequent thereto, the market value of the shares we owned was less
than the $17.7 million guaranteed in the November 1998 agreement. DCI has
publicly disclosed that it does not intend to issue additional shares to us. We
intend to vigorously pursue the remedies to which we are entitled under the
November 1998 agreement. As of June 30, 1999, we have reduced our investment in
DCI as a result of these uncertainties. This writedown is included in "other,
net" in the accompanying statement of operations. The investment in DCI is
included in non-current marketable securities in the accompanying consolidated
balance sheet.
6
<PAGE> 7
IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. INCOME TAXES
The provision for income taxes recorded during interim periods is
calculated based on an estimated annual effective tax rate. For 1999, the
effective tax rate includes the impact of IRU transactions anticipated to occur
during the year. We have applied a valuation allowance against the deferred tax
assets arising during 1999 due to uncertainty regarding their realizability.
4. COMMITMENTS AND CONTINGENCIES
From time to time we are involved in legal proceedings arising in the
ordinary course of business, some of which are covered by insurance. In the
opinion of management, none of the claims relating to such proceedings will have
a material adverse effect on our financial condition or results of operations.
5. SEGMENT REPORTING
Our financial reporting segments are based on the way management organizes
the company for making operating decisions and assessing performance. These
segments are based on the different types of products we offer. The segments
consist of the private line segment, the switched long distance segment, and the
data/ Internet segment. The segments are separately evaluated because the
products or services sold are subject to different market forces and sales
strategies. Management reviews the gross profits of each reporting segment, but
views the costs of the network and administrative functions as supporting all
business segments. Therefore, assets (other than accounts receivable),
liabilities, general and administrative expenses, interest expense and income,
and other expenses are not charged to any one segment. Losses from equity method
subsidiaries are not charged to any one segment because those subsidiaries may
have operations in multiple segments. All operating revenue shown is derived
from sales to external customers. Revenue related to the sale of options in
fibers that are jointly owned with other carriers are not reported in any
segment. The summarized segment data are as follows (in thousands):
<TABLE>
<CAPTION>
PRIVATE SWITCHED DATA &
LINE LONG DISTANCE INTERNET UNALLOCATED TOTAL
------------ ------------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
THREE MONTHS ENDED JUNE 30, 1999
Net operating revenue................... $ 73,569 $ 74,898 $ 5,353 $4,072 $ 157,892
Cost of service......................... 26,130 77,310 4,849 -- 108,289
-------- -------- ------- ------ ---------
Gross profit............................ 47,439 (2,412) 504 4,072 49,603
Operations and administration........... 60,948
Restructuring charges................... 25,826
Depreciation and amortization........... 39,565
Merger and other infrequent costs....... 90
---------
Operating loss.......................... (76,826)
Interest income......................... 1,839
Interest expense........................ (9,092)
Equity (loss) from unconsolidated
subsidiaries.......................... (13,111)
Other, net.............................. (12,760)
---------
Loss before provision for income taxes,
minority interest, and extraordinary
loss.................................. $(109,950)
=========
</TABLE>
7
<PAGE> 8
IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
PRIVATE SWITCHED DATA &
LINE LONG DISTANCE INTERNET UNALLOCATED TOTAL
------------ ------------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
THREE MONTHS ENDED JUNE 30, 1998
Net operating revenue................... $ 49,232 $105,502 $ 1,201 $ -- $ 155,935
Cost of service......................... 22,448 82,342 2,803 -- 107,593
-------- -------- ------- ------- ---------
Gross profit............................ 26,784 23,160 (1,602) -- 48,342
Operations and administration........... 29,992
Depreciation and amortization........... 22,636
Merger and other infrequent costs....... 7,681
---------
Operating loss.......................... (11,967)
Interest income......................... 3,324
Interest expense........................ (8,530)
Equity (loss) from unconsolidated
subsidiaries.......................... (10,754)
Other, net.............................. 33
---------
Loss before provision for income taxes,
minority interest, and extraordinary
loss.................................. $ (27,894)
=========
</TABLE>
<TABLE>
<CAPTION>
PRIVATE SWITCHED DATA &
LINE LONG DISTANCE INTERNET UNALLOCATED TOTAL
------------ ------------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
SIX MONTHS ENDED JUNE 30, 1999
Net operating revenue................... $144,433 $152,645 $10,528 $11,644 $ 319,250
Cost of service......................... 52,233 151,639 9,221 -- 213,093
-------- -------- ------- ------- ---------
Gross profit............................ 92,200 1,006 1,307 11,644 106,157
Operations and administration........... 112,757
Restructuring charges................... 25,826
Depreciation and amortization........... 75,843
Merger and other infrequent costs....... 145
---------
Operating loss.......................... (108,414)
Interest income......................... 7,663
Interest expense........................ (20,109)
Equity (loss) from unconsolidated
subsidiaries.......................... (15,982)
Other, net.............................. (12,725)
---------
Loss before provision for income taxes,
minority interest, and extraordinary
loss.................................. $(149,567)
=========
</TABLE>
8
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IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
PRIVATE SWITCHED DATA &
LINE LONG DISTANCE INTERNET UNALLOCATED TOTAL
------------ ------------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
SIX MONTHS ENDED JUNE 30, 1998
Net operating revenue................... $ 92,572 $219,269 $ 1,677 $ -- $ 313,518
Cost of service......................... 41,637 169,261 4,644 -- 215,542
-------- -------- ------- ------- ---------
Gross profit............................ 50,935 50,008 (2,967) -- 97,976
Operations and administration........... 59,328
Depreciation and amortization........... 42,788
Merger and other infrequent costs....... 7,645
---------
Operating loss.......................... (11,785)
Interest income......................... 4,921
Interest expense........................ (14,841)
Equity (loss) from unconsolidated
subsidiaries.......................... (22,019)
Other, net.............................. 176
---------
Loss before provision for income taxes,
minority interest, and extraordinary
loss.................................. $ (43,548)
=========
</TABLE>
6. ACQUISITION OF COASTAL TELECOM LIMITED COMPANY
On May 10, 1999, we acquired Coastal Telecom Limited Company, and other
related companies under common control ("Coastal"). Coastal is a retail long
distance reseller. The purchase price amounted to approximately $110 million and
was paid with a combination of $73.2 million of cash (including approximately
$10 million paid for working capital items), $10 million of notes payable, $25.0
million of our common stock, and warrants to purchase 75,000 shares of our
common stock. Assets acquired included approximately $103 million of goodwill
and approximately $7 million of property and equipment. In connection with the
acquisition we completed a credit agreement with a commercial bank pursuant to
which Eclipse, our wholly owned subsidiary, borrowed $27 million and used the
proceeds to fund a portion of the Coastal purchase price. The credit agreement
has a three-year term beginning in May 1999, may be extended for successive
one-year terms, and is subject to a borrowing base calculation based on eligible
accounts receivable. Amounts outstanding thereunder bear interest at either the
bank's prime rate or LIBOR plus a 2.25% margin. The credit agreement is secured
by the assets of Eclipse, including the assets acquired in the Coastal
transaction. We must comply with various financial covenants under the credit
agreement, including maintaining certain minimum cash flow ratios.
7. INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES
At December 31, 1998, we were owed $9.4 million by Westel, our partner in
Progress International LLC ("Progress"). The note was secured by Westel's
ownership in Progress, and repayment was due on May 31, 1999. Westel failed to
make scheduled payments on the note and thereby transferred their share rights
to us. As a result of that forfeiture, we now own 65.4% of Progress.
In February 1999 Marca-Tel S.A. de C.V. and its primary creditor agreed to
allow MarcaTel to defer certain payments to the creditor until June 1999. The
creditor was given the right to acquire up to 10% of MarcaTel and the creditor
acquired additional shares which diluted our indirect interest from 32.1% (after
taking into consideration the additional share rights forfeited by Westel) to
30.5%. In June 1999 MarcaTel did not pay the creditor, and a default was
declared on the loan. Management of MarcaTel, IXC and the creditor are
anticipated to meet during the third quarter to attempt to work out the default
provisions. However, there is no assurance that the default provisions will be
waived.
9
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IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
8. RESTRUCTURING CHARGE
In the second quarter of 1999, we recorded a charge of approximately $25.8
million to exit certain operations in the switched wholesale business. This
charge resulted from our plan to reduce traffic, operations, and administrative
headcount by exiting this under-performing business. The restructuring charge
includes costs associated with workforce reduction, asset write-downs, network
decommissioning costs, and fees to terminate certain lease contracts. The
workforce reduction of 94 people includes both employees in the sales
organization and employees contributing to network operations. These employees
were notified of the workforce reduction in June 1999. All of the $2.9 million
associated with the workforce reduction is expected to be paid in cash during
the remainder of 1999. The costs accrued related to network decommissioning
include labor, lease rentals, and other operating costs expected to be paid to
decommission various network assets. We have adjusted the remaining useful lives
of equipment being decommissioned to extend only to the date the asset is
expected to be removed from service. All of the decommissioning costs are
expected to be paid in cash within twelve months. The asset write-downs are
non-cash in nature and include leasehold improvements related to facilities to
be vacated and reserves for accounts receivable related to customers whose
traffic we are removing from our network. We believe that collection of the
identified accounts receivable is unlikely as a direct result of our decision to
unilaterally terminate the affected customers' service under their contracts.
The costs to terminate leases which are being abandoned are expected to be paid
in cash over the next nine months. The restructuring activities are expected to
be substantially complete by June 30, 2000. Activity in the accrued
restructuring liability during the quarter ended June 30, 1999 is as follows (in
thousands):
<TABLE>
<CAPTION>
ACCRUAL
RESTRUCTURING COSTS BALANCE AT
CHARGE PAID JUNE 30, 1999
------------- ----- -------------
<S> <C> <C> <C>
Severance.............................................. $ 2,864 $249 $ 2,615
Network decommissioning................................ 3,872 -- 3,872
Asset write-downs...................................... 12,722 -- 12,722
Terminate contractual obligations and exit
facilities........................................... 6,368 2 6,366
------- ---- -------
Total restructuring costs.................... $25,826 $251 $25,575
======= ==== =======
</TABLE>
9. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards requiring that derivative
instruments be recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS No. 133 is effective for all fiscal years
beginning after June 15, 2000. We have not yet assessed the impact of SFAS No.
133 on our results of operations and financial position.
10. SUBSEQUENT EVENTS
MERGER AGREEMENT WITH CINCINNATI BELL, INC.
On July 20, 1999, we entered into an agreement to merge with Cincinnati
Bell Inc. ("CBI") at a fixed exchange ratio of 2.0976 shares of CBI common stock
for each share of our common stock. Also on July 20, 1999, General Electric
Pension Trust ("GEPT") entered into an agreement with CBI in which CBI agreed to
purchase approximately 5.0 million shares of our common stock from GEPT for $50
per share. Shareholders representing approximately 40% of the outstanding shares
of IXC have committed to vote in favor of the merger. The merger is expected to
close near the end of 1999 and is subject to shareholder and regulatory
approval.
On July 21, July 23, and July 27, 1999, five purported stockholder class
action suits were filed in the Delaware Court of Chancery against us, certain
current and former members of our board of directors, and in
10
<PAGE> 11
IXC COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
two suits, also against CBI. These complaints allege, among other things that
the defendants have breached their fiduciary duties to our stockholders in
establishing the merger consideration in the merger agreement with CBI. The
complaints seek, among other things, a court order enjoining completion of the
merger. We and CBI believe that the complaints are without merit and intend to
vigorously defend against the complaints.
PSINET STOCK SALE
In July 1999 we received $59.8 million from a financial institution in
connection with a prepaid, forward-sale contract of an additional 1.5 million
shares of PSINet common stock. This amount is accounted for as a note payable
and is secured by the additional 1.5 million shares of stock. The forward-sale
obligation may be settled at a specified date in the second quarter of 2002 for
a maximum amount of 1.5 million shares of PSINet stock, or, at our option, the
equivalent value of the PSINet stock in cash.
BUSINESS REORGANIZATION
In connection with the hiring of the new chief executive officer and the
new chief financial officer, we are reviewing plans to streamline our
operations, including reducing the number of middle-management positions and
re-evaluating our information technology initiatives. A restructuring charge
associated with this review is expected to be recorded during the third quarter.
Although the plans are still being formulated, initial projections indicate that
the amount of the charge will be at least $10 million.
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Except for the historical information contained below, the matters
discussed in this item are forward-looking statements that involve a number of
risks and uncertainties. Our actual liquidity needs, capital resources and
results may differ materially from the discussion set forth in the
forward-looking statements. For a discussion of important factors that may cause
our actual results, performance or achievements to be materially different from
those expressed or implied by the forward-looking statements, see
"Business -- Risk Factors" in our Form 10-K for the fiscal year ended December
31, 1998. In light of such risks and uncertainties, there can be no assurance
that the forward-looking information contained in this item will in fact
transpire.
RESULTS OF OPERATIONS
On July 20, 1999, we entered into an agreement to merge with CBI at a fixed
exchange ratio of 2.0976 shares of CBI common stock for each share of our common
stock. Also on July 20, 1999, GEPT entered into an agreement with CBI in which
CBI agreed to purchase approximately 5.0 million shares of our common stock from
GEPT for $50 per share. Shareholders representing approximately 40% of the
outstanding shares of IXC have committed to vote in favor of the merger. The
merger is expected to close near the end of 1999 and is subject to shareholder
and regulatory approval.
Net operating revenue for the quarter and six months increased $2.0 million
(1.3%) and $5.7 million (1.8%), respectively, from the 1998 periods. The current
year's revenue includes the results of Coastal Telephone Company beginning on
its acquisition date on May 10, 1999. These year-over-year increases reflect
significant increases in private line and data/Internet service revenue and an
almost offsetting decline in switched service revenue. Other revenue of $4.1
million for the second quarter of 1999 and $11.6 million for the six-month
period of 1999 relates to the sale of an option of usage rights in fibers that
are owned jointly with another carrier.
Cost of services primarily reflects access charges paid to local exchange
carriers ("LEC's") and transmission lease payments (monetary and nonmonetary) to
other carriers. Cost of services increased $0.7 million (0.6%) over last year
for the quarter and decreased $2.4 million (1.1%) for the year-to-date period.
During the quarter, increases in transmission lease expense and data/Internet
cost of services more than offset the decrease in access costs. For the six
months the decrease in access costs more than offset the increases in
transmission lease expense and data/Internet costs. Access cost as a percentage
of net switched service revenue has increased year-over-year due to price
competition and the impact of the FCC mandated access reform, which became
effective in July 1998. In 1999 access cost was 92.5% and 89.4% of net switched
service revenue for the quarter and six-month period versus 69.8% and 69.1% for
the prior year's comparable periods.
The improved revenue and small change in cost of service resulted in an
increase in the gross profit of $1.3 million for the quarter and $8.2 million
for the six-month period. Gross profit margins increased to 31.4% for the
quarter and 33.3% for the six months versus 31.0% and 31.3% for the comparable
prior year periods. These improvements are mainly driven by the other revenue
included in the current year periods.
Operating and administrative costs increased $31.0 million to $60.9 million
for the current quarter and increased $53.4 million to $112.8 million for the
six-month period. These increases are driven by an increase in headcount from
1,209 at June 1998 to 2,116 at June 1999. The focus of these increased costs is
to build up the retail channel's infrastructure as well as to upgrade our level
of information technology across the company. Costs were also incurred to
operate the larger fiber optic network.
A restructuring charge of $25.8 million was recorded during the current
quarter associated with the costs of exiting a portion of the wholesale-switched
service business. The charge includes severance costs associated with the
termination of 94 employees, a reserve for customers who will be leaving the
network, costs to dismantle switches that will become surplus and costs to
abandon our microwave network that will no longer be needed. There was no such
restructuring charge in the prior year's quarter. In connection with the hiring
of the new chief executive officer and the new chief financial officer, we are
reviewing plans to streamline our
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<PAGE> 13
operations, including reducing the number of middle-management positions and
re-evaluating our information technology initiatives. A restructuring charge
associated with this review is expected to be recorded during the third quarter.
Although the plans are still being formulated, initial projections indicate that
the amount of the charge will be at least $10 million.
Depreciation and amortization expense increased $16.9 million for the
quarter and $33.1 million for the six-month period reflecting our increased
investment in the fiber optic network and other fixed assets and amortization of
goodwill from the Coastal acquisition.
Merger and other infrequent costs decreased $7.6 million for the quarter
and $7.5 million for the year-to-date period, as costs associated with our
merger with Eclipse during 1998 were not repeated in 1999.
Interest income declined $1.5 million for the quarter and increased $2.7
million for the six-month period. The decline between quarters was due to less
cash on hand in 1999. The increase in the six-month period reflects interest
received during the first quarter of 1999 from notes receivable related to IRU
agreements.
Net interest expense rose $0.6 million for the quarter and $5.3 million for
the six-month period reflecting the expense from the $450 million 9% Senior
Subordinated Notes issued in April 1998 and the $200 million borrowed under our
$600 million credit facility in October 1998. The increase in gross interest
expense more than offset higher capitalized interest, which was due to the
increased rate of network construction between periods.
Losses from unconsolidated subsidiaries increased $2.4 million for the
quarter and declined $6.0 million for the six-month period. The current year's
increase mainly relates to a complete writedown of our investment in a joint
venture with Unidial. Losses for the prior year's quarter were related to the
investments in MarcaTel and PSINet. The investment in MarcaTel was written down
to zero in 1998, and no further significant additional funding is required from
us, so no further losses are being recorded. We stopped recognizing PSINet
losses and began accounting for this investment using the cost method during the
second quarter of 1998 because our level of ownership and influence of PSINet
was diminished.
The year-over-year increase in other, net expense of $12.8 million for the
quarter and $12.9 million for the six-month period is mainly due to the
reduction of the DCI investment during the current year as described in footnote
2 to the condensed consolidated financial statements.
Income tax expense decreased $0.7 million for the quarter and $0.3 million
for the six-month period reflecting a lower level of projected fiber sales
during the current year. A valuation allowance is applied against tax assets
arising during the year due to the uncertainty of their realization.
During the second quarter of 1998 we recorded an after-tax extraordinary
charge of $69.8 million relating to the April 1998 redemption of $284.2 million
of the 12 1/2% Senior Notes due 2005. There were no such charges in 1999.
Our net loss applicable to common shareholders increased to $130.5 million
for the quarter and to $188.8 million for the six-month period from $118.0
million and $147.6 million for the prior year comparable periods. These
increases are due to the items listed above plus an increase in the dividends
applicable to preferred stock. Dividends applicable to preferred stock increased
$0.9 million for the quarter and $5.2 million for the six-month period. The
additional dividends were from the 6 3/4% preferred stock issued in March and
April of 1998, and from dividends on the 12 1/2% Exchangeable Preferred Stock
which are paid with additional shares of 12 1/2% Exchangeable Preferred Stock.
SEGMENT INFORMATION
PRIVATE LINE SERVICES
Net private line revenue increased $24.3 million (49.4%) for the quarter
and $51.9 million (56.0%) for the six-month period. These increases are
primarily due to three large contracts including a significant Internet service
provider ("ISP") and Excel Communications. The gross profit for this segment
improved to $47.4 million for the quarter and $92.2 million year-to-date. The
gross margin rate improved from 54.4% to
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<PAGE> 14
64.5% quarter over quarter and from 55.0% to 63.8% in the six-month periods.
These improvements reflect the use of our network to carry most of the
incremental revenue.
SWITCHED SERVICE REVENUE
Switched long distance revenue declined $30.6 million (29.0%) to $74.9
million during the current quarter and $66.6 million (30.4%) to $152.6 million
for the six-month period. These declines are primarily due to the conversion of
Excel Communications, formerly our largest customer, to a private line contract
as it moved traffic to its own network, and an increase of $11.8 million for the
quarter and $19.6 million for the six-month period in disputes and bad debt
expense. Many of these disputes relate to the billing of pass-through charges
and price adjustments. Cost of services declined $5.0 million (6.1%) for the
quarter and $17.6 million (10.4%) for the six-month period due to the reduction
in traffic partially offset by increased fixed access charges. The segment's
gross profit declined $25.6 million for the quarter and $49.0 million
year-to-date due mainly to the decline in net revenue.
DATA/INTERNET
Revenue increased $4.2 million for the quarter and $8.9 million
year-to-date due mainly to the ATM/frame relay and Internet products produced
and sold by the Internet companies we acquired during 1998. These products are
also sold through the retail distribution channel. The segment's gross profit
improved from a negative $1.6 million for the 1998 quarter and a negative $3.0
million for the prior year's six-month period to a positive $.5 million for the
current quarter and a positive $1.3 million for the current six-month period.
This improvement reflects the use of our network in providing these high-value
services.
LIQUIDITY AND CAPITAL RESOURCES
We have financed the expansion of our network through the issuance of debt
and equity securities, the sale of IRU's in capacity and fiber, and through
borrowing against our investment in PSINet.
Cash provided by operating activities increased $64.1 million (155.3%) to
$105.5 million primarily due to increased receipts of cash related to IRU sales
during the current period.
Cash used in investing activities increased $65.6 million (23.9%) over the
prior year to $340.4 million, due to an increase of $22.0 million in capital
expenditures and an increase of $50.5 million for the acquisition of businesses.
Coastal was acquired during the 1999 period versus several small Internet
companies acquired during the prior year. Investments in unconsolidated
subsidiaries decreased $6.2 million between years as we slowed our funding of
MarcaTel.
Cash provided by financing activities decreased $185.2 million to $68.6
million because there was no issuance of public debt in 1999 as there was in
1998. During the first six months of 1998 we issued $450 million in 9% Senior
Subordinated Notes and $155.3 million in 6 3/4% Cumulative Convertible Preferred
Stock and redeemed $284.2 million of the 12 1/2% Senior Notes. The only proceeds
from debt in 1999 related to the borrowing of $52.0 million against a portion of
our PSINet stock and $27.0 million from the line of credit used in the Coastal
acquisition.
As of August 10, 1999, the Company had $93.4 million in cash. We expect
that the primary sources for cash over the next 12 months will be cash on hand,
cash generated by operations, proceeds of IRU sales, and vendor and working
capital financing we may seek. In addition, if necessary, we can sell or borrow
against our investments in the common stock of PSINet and Applied Theory. We
expect that it will be necessary to amend or obtain a waiver of our performance
covenants under our present bank credit facility so that we can meet those
covenants at the end of the third quarter. We are working with our banks to
adjust the covenants so that we can either borrow against the remaining $150
million amount of the facilities or seek alternative debt sources. In the event
the banks do not agree to change or waive the covenants, we would be in default
under the credit facility. In addition, our lead bank has indicated to us that,
subject to certain conditions, it is willing to loan us $150 million (apart from
the $150 million remaining on the existing facility), but the arrangements for
this loan have not yet been finalized. There can be no assurance that we shall
be able to obtain covenant adjustments or waivers under the existing facility or
to finalize and borrow under the additional loan.
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<PAGE> 15
We anticipate that, given the impending merger, we shall be able to meet
our financing needs through the time of the merger through stock sales or these
other sources of cash. However, there can be no assurance that sufficient
additional cash will be obtained or that the banks will agree to amend or waive
the covenants. In the event sufficient cash is not obtained, we shall have to
take steps to conserve cash, possibly including delaying or reducing capital
expenditures and reducing expenses. A default under the bank credit facility or
a failure to obtain sufficient additional cash could have a material adverse
effect on the Company.
We seek to obtain sufficient funding from these sources for the following
major uses of cash:
- Our network expansion and other capital expenditures;
- Debt service;
- Lease payments;
- Working capital;
- Downsizing the wholesale switched service business;
- Funding the third quarter restructuring program; and
- Dividends on preferred stock.
Capital spending in 1999 is projected to be approximately $600 million.
After 1999, capital expenditures are expected to continue to be substantial.
There can be no assurance that we will be successful in obtaining the necessary
financing to meet our needs if the merger with CBI does not occur. A failure to
raise cash would delay or prevent capital expenditures including the
construction of our network expansion.
We are required to make payments under our existing debt and capital lease
arrangements of $6.8 million, $11.3 million, $19.1 million, and $83.6 million
for the remainder of 1999, 2000, 2001, and 2002, respectively. We are required
to make quarterly interest payments on amounts outstanding under our $600
million credit facility, to make semi-annual interest payments on our 9% Senior
Subordinated Notes and the remaining 12 1/2% Senior Notes, and to make interest
payments under the Eclipse line of credit. This line of credit, which is based
upon the eligible accounts receivable, is due on May 1, 2002 and may be extended
for successive one-year terms. We are required to pay quarterly dividends on the
7 1/4% Convertible Preferred Stock. We are required to pay quarterly dividends
on the 12 1/2% Exchangeable Preferred Stock. These dividends must be paid in
cash except that we have the option of paying dividends in additional shares of
12 1/2% Exchangeable Preferred Stock through February 15, 2001. Dividends on our
6 3/4% Preferred Stock are payable quarterly in cash. If we are prohibited from
paying dividends in cash under the terms of our debt agreements, then we may pay
our dividends on this preferred stock in common stock, valued at 95% of the
average price of the common stock for 5 business days prior to the dividend
payment date. We anticipate that such debt and equity service payments during
1999 will be made from cash on hand, except for the dividends on the 12 1/2%
Exchangeable Preferred Stock which are anticipated to be paid-in-kind with stock
dividends.
We are required to make minimum annual lease payments for facilities,
equipment and transmission capacity used in operating our business. In 1999,
2000, 2001 and 2002, these payments are expected to amount to approximately
$35.5 million, $30.3 million, $23.1 million and $16.3 million respectively, on
operating leases. We expect to incur additional operating lease costs in
connection with the expansion of our network and the retail and Internet
operations. Additionally, in connection with our network expansionism from time
to time we enter into various construction and installation agreements with
contractors.
The forward-looking statements set forth above with respect to the
estimated cash requirements relating to capital expenditures, our ability to
meet such cash requirements and our ability to service our debt are based on
certain assumptions as to future events. Important assumptions which if not met,
could adversely affect our ability to achieve satisfactory results include that:
(a) there will be no significant delays with respect to our network expansion;
(b) our contractors and partners in cost-saving arrangements will perform their
obligations; (c) rights-of-way can be obtained on a timely, cost-effective
basis; (d) we will increase traffic on our network; and (e) we will not be in
default under our existing credit arrangements and will be able to obtain vendor
or additional debt financing.
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<PAGE> 16
YEAR 2000 RISKS
The Year 2000 issue is the result of computer software programs being coded
to use two digits rather than four to define the year. It is possible that some
of our existing computer programs that have date-sensitive coding may recognize
a date using "00" as the year 1900 rather than the year 2000. This could result
in system failures or miscalculations causing disruption of operations, which
could have a material adverse effect on our ability to conduct business after
January 1, 2000, including an inability to provide telecommunications services
to our customers or to accurately invoice customers or collect payments.
Substantially all of our network was built in the last three years. As a
result, we believe that we do not have a significant investment in legacy
systems having substantial Year 2000 exposure. However, we have established a
project team to identify, evaluate and address any existing Year 2000 issues.
This Year 2000 effort covers the fiber optic network and supporting
infrastructure related to providing switched, private line and data
telecommunications services, and other operational and financial information
technology ("IT") systems and applications. Also included in this effort are
various other systems such as building operations and individual personal
computers. The project team is reviewing the status of the Year 2000 compliance
effort of key suppliers and other business partners, and is developing business
continuity plans related to Year 2000 issues. While the Year 2000 project team
is evaluating all potentially non-compliant systems, the Year 2000 effort is
structured to give priority to those systems identified as "mission critical."
The project team has identified the following principal phases of the
project: a) assessment and planning, b) remediation, c) testing, and d)
contingency planning. The assessment and planning phase was substantially
complete at December 31, 1998. Substantially all mission-critical systems were
remediated as of June 30, 1999 and are being tested (including those we acquired
from Coastal). Testing on these applications is expected to be completed by
September 30, 1999. In addition, all new components being purchased as part of
the ongoing network and IT infrastructure expansion are being evaluated to
ensure compliance.
There can be no assurances that third parties, including customers,
suppliers, and other business partners, will convert their critical systems and
processes in a timely manner. Such failure by any of these parties could disrupt
our business. Therefore, in addition to evaluating our own internal systems, we
are in the process of evaluating and documenting the status of Year 2000
compliance efforts by key suppliers.
We currently project incurring approximately $3.3 million through the end
of 2000 in connection with the Year 2000 remediation project, of which
approximately $2.3 million was incurred and expensed as of June 30, 1999. Such
amounts are exclusive of amounts which were already anticipated to be spent on
new hardware and software purchases resulting from the expansion of our network
and other business operations. We believe that a portion of the Year 2000
expenses will not be incremental costs, but rather will represent the
redeployment of existing IT resources. This redeployment may cause delays in
making other IT or network upgrades or enhancements; however, the delays are not
expected to have a material adverse effect on our operations.
As part of our Year 2000 initiative, we are evaluating scenarios that may
occur as a result of the century change and are developing contingency and
business continuity plans tailored for Year 2000-related problems. We have
substantially completed an enterprise-wide business contingency plan. Elements
of the plan are already in place, including working disaster recovery documents,
a key supplier/business partner survey campaign, and a risk management program.
The above information regarding cost estimates, risks, and estimated
readiness are forward looking statements based on numerous assumptions of future
events, including the availability and future costs of certain technological and
other resources, third party modification actions and other factors. Given the
complexity of these issues and other unidentified risks, actual results may vary
materially from those anticipated and discussed above. Specific factors that
might cause such differences include, among others, the availability and cost of
personnel trained in this area, the ability to locate and correct all affected
computer code, the timing and success of remedial efforts of our third party
suppliers and similar uncertainties.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We are exposed to market risk related to changes in interest rates because
the interest rate on approximately $225 million of our debt at June 30, 1999 is
indexed to floating interest rates. We monitor the risk associated with interest
rates on an ongoing basis, but we have not entered into any interest rate swaps
or other financial instruments to actively hedge the risk of changes in
prevailing interest rates.
Substantially all of our revenue is derived from domestic operations, so we
believe the risk related to foreign currency exchange rates is minimal.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are aware of five lawsuits filed in the Court of Chancery of the State
of Delaware relating to our merger agreement with CBI. These lawsuits were filed
in July subsequent to our announcement of the merger. The suit brought by Angie
Garone on behalf of herself and others similarly situated, the suit brought by
Robert Bernard, and the suit brought by John D. Crawford each name us, Benjamin
L. Scott (a former director) and all of the directors on our current board as
defendants. The other two suits, brought by Dr. Mark Gross and James Intagliata,
each name us, Benjamin L. Scott, all of the directors on our current board, and
CBI as defendants. Each suit was brought by a purported stockholder,
individually and allegedly as a class action on behalf of all our stockholders.
The complaints allege, among other things, that the defendants have breached
their fiduciary duties to the stockholders in establishing the merger
consideration in the merger agreement. The complaints seek, among other things,
a court order prohibiting the consummation of the merger.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In connection with our acquisition of Coastal we issued and sold warrants
to purchase 75,000 shares of common stock on May 10, 1999 and 698,985 shares of
our common stock on June 2, 1999. We issued the warrants and the stock to the
members of the limited liability companies which collectively operated as
Coastal. In exchange for the warrants and the common stock, among other
consideration, we received all of the outstanding membership interests in the
Coastal entities. Following the acquisition, the Coastal entities were merged
into Eclipse. The warrants are exercisable during the three year period
following May 10, 1999 at an exercise price of $45.00 per share. The warrants
provide no voting rights and contain provisions for adjustment upon the
occurrence of stock dividends, stock splits or similar events. We did not employ
an underwriter or placement agent in connection with the issuance of the common
stock or the warrants.
The sale and issuance of the warrants and the common stock were exempt from
registration under the Securities Act in reliance on Section 4(2), as
transactions not involving a public offering. The four Coastal members acquired
the securities in a private offering. The Coastal members each represented their
intention to acquire the securities for investment only and not with a view to
distribute the securities to the public. Appropriate legends were affixed to the
certificates representing the warrants and the common stock issued in the
Coastal acquisition. The Coastal members had adequate access to sufficient
information about us in order to make an informed investment decision.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We held our Annual Meeting of Stockholders on May 28, 1999. The meeting was
held so that our stockholders could elect our Board of Directors and vote on
four other proposals. The other proposals were:
Proposal 2: Ratify the decision of the board of directors to not
implement an amendment to the Restated Certificate of Incorporation, as
amended (the "Restated Certificate") previously approved by a majority of
our stockholders, which included, among other things, a two-for-one stock
split of our common stock;
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<PAGE> 18
Proposal 3: Amend the Restated Certificate to increase the authorized
number of shares of common stock, create a new class of preferred stock,
and eliminate all matters set forth in the Restated Certificate regarding
two series of preferred stock which were no longer outstanding;
Proposal 4: Amend the Restated Certificate to effect a two-for-one
stock split of the issued and outstanding shares of common stock, such
amendment to take place at the discretion of the board of directors within
one year of stockholder approval;
Proposal 5: Adopt an amendment to our 1998 Stock Plan to increase the
number of shares of common stock available for option and restricted stock
grants.
The number of votes cast for, against, or withheld for each nominee for
director and each proposal, as well as the broker non-votes and the abstentions
are set forth below.
<TABLE>
<CAPTION>
BROKER
FOR AGAINST WITHHELD NON-VOTES ABSTENTION
---------- --------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
Wolfe H. Bragin.................... 32,344,373 0 0 0 260,024
Joe C. Culp........................ 32,360,863 0 0 0 243,534
Richard D. Irwin................... 32,360,863 0 0 0 243,534
Carl W. McKinzie................... 32,360,862 0 0 0 243,535
Benjamin L. Scott.................. 32,343,794 0 0 0 260,603
Ralph J. Swett..................... 32,360,863 0 0 0 243,534
Philip L. Williams................. 32,360,282 0 0 0 244,115
Proposal 2......................... 32,529,996 66,701 0 0 7,700
Proposal 3......................... 20,992,368 1,917,476 0 9,688,973 5,580
Proposal 4......................... 32,495,750 101,893 0 0 6,754
Proposal 5......................... 20,542,257 2,363,857 0 9,688,973 9,310
</TABLE>
Each of the nominees was elected to the board of directors constituting all
of our directors. All of the Proposals were approved by a majority of our
stockholders.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
2.1 Agreement and Plan of Merger dated as of July 20, 1999,
among Cincinnati Bell, Inc., IXC Communications, Inc. and
Ivory Merger Inc. (incorporated by reference to Exhibit 2.1
of Cincinnati Bell, Inc.'s Form 8-K dated July 22, 1999 and
filed with the Commission on July 23, 1999).
3.1+ Restated Certificate of Incorporation of IXC Communications,
Inc., as amended.
3.2 Bylaws of IXC Communications, Inc., as amended (incorporated
by reference to Exhibit 3.2 of the IXC Communications,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 filed with the Commission on November 14,
1997).
</TABLE>
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<PAGE> 19
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
4.1 Indenture dated as of October 5, 1995, by and among IXC
Communications, Inc., on its behalf and as
successor-in-interest to I-Link Holdings, Inc. and IXC
Carrier Group, Inc., each of IXC Carrier, Inc., on its
behalf and as successor-in-interest to I-Link, Inc., CTI
Investments, Inc., Texas Microwave Inc. and WTM Microwave
Inc., Atlantic States Microwave Transmission Company,Central
States Microwave Transmission Company, Telcom Engineering,
Inc., on its behalf and as successor-in-interest to SWTT
Company and Microwave Network, Inc., Tower Communication
Systems Corp., West Texas Microwave Company, Western States
Microwave Transmission Company, Rio Grande Transmission,
Inc., IXC Long Distance, Inc., Link Net International, Inc.
(collectively, the "Guarantors"), and IBJ Schroder Bank &
Trust Company, as Trustee (the "Trustee"), with respect to
the 12 1/2% Series A and Series B Senior Notes due 2005
(incorporated by reference to Exhibit 4.1 of IXC
Communications, Inc.'s and each of the Guarantor's
Registration Statement on Form S-4 filed with the Commission
on April 1, 1996 (File No. 333-2936) (the "S-4")).
4.2 Form of 12 1/2% Series A Senior Notes due 2005 (incorporated
by reference to Exhibit 4.6 of the S-4).
4.3 Form of 12 1/2% Series B Senior Notes due 2005 and
Subsidiary Guarantee (incorporated by reference to Exhibit
4.8 of IXC Communications, Inc.'s Amendment No. 1 to
Registration Statement on Form S-1 filed with the Commission
on June 13, 1996 (File No. 333-4061) (the "S-1 Amendment")).
4.4 Amendment No. 1 to Indenture and Subsidiary Guarantee dated
as of June 4, 1996, by and among IXC Communications, Inc.,
the Guarantors and the Trustee (incorporated by reference to
Exhibit 4.11 of the S-1 Amendment).
4.5 Purchase Agreement dated as of March 25, 1997, by and among
IXC Communications, Inc., Credit Suisse First Boston
Corporation ("CS First Boston") and Dillon Read & Co. Inc.
("Dillon Read") (incorporated by reference to Exhibit 4.12
of IXC Communications, Inc.'s Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997, filed with the
Commission on May 15, 1997 (the "June 30, 1997 10-Q")).
4.6 Registration Rights Agreement dated as of March 25, 1997, by
and among IXC Communications, Inc., CS First Boston and
Dillon Read (incorporated by reference to Exhibit 4.13 of
the June 30, 1997 10-Q).
4.7 Amendment to Registration Rights Agreement dated as of March
25, 1997, by and between IXC Communications, Inc. and
Trustees of General Electric Pension Trust (incorporated by
reference to Exhibit 4.14 of the June 30, 1997 10-Q).
4.8 Registration Rights Agreement dated as of July 8, 1997,
among IXC Communications, Inc. and each of William G. Rodi,
Gordon Hutchins, Jr. and William F. Linsmeier (incorporated
by reference to Exhibit 4.15 of IXC Communications, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended June 30,
1997, as filed with the Commission on August 6, 1997 (the
"June 30, 1997 10-Q")).
4.9 Registration Rights Agreement dated as of July 8, 1997,
among IXC Communications, Inc. and each of William G. Rodi,
Gordon Hutchins, Jr. and William F. Linsmeier (incorporated
by reference to Exhibit 4.16 of the June 30, 1997 10-Q).
4.10 Indenture dated as of August 15, 1997, between IXC
Communications, Inc. and The Bank of New York (incorporated
by reference to Exhibit 4.2 of IXC Communications, Inc.'s
Current Report on Form 8-K dated August 20, 1997, and filed
with the Commission on August 28, 1997 (the "8-K")).
</TABLE>
19
<PAGE> 20
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
4.11 First Supplemental Indenture dated as of October 23, 1997,
among IXC Communications, Inc., the Guarantors, IXC
International, Inc. and IBJ Schroder Bank & Trust Company
(incorporated by reference to Exhibit 4.13 of IXC
Communications, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1997, and filed with the Commission
on March 16, 1998 (the "1997 10-K")).
4.12 Second Supplemental Indenture dated as of December 22, 1997,
among IXC Communications, Inc., the Guarantors, IXC Internet
Services, Inc., IXC International, Inc. and IBJ Schroder
Bank & Trust Company (incorporated by reference to Exhibit
4.14 of the 1997 10-K).
4.13 Third Supplemental Indenture dated as of January 6, 1998,
among IXC Communications, Inc., the Guarantors, IXC Internet
Services, Inc., IXC International, Inc. and IBJ Schroder
Bank & Trust Company (incorporated by reference to Exhibit
4.15 of the 1997 10-K).
4.14 Fourth Supplemental Indenture dated as of April 3, 1998,
among IXC Communications, Inc., the Guarantors, IXC Internet
Services, Inc., IXC International, Inc., and IBJ Schroder
Bank & Trust Company (incorporated by reference to Exhibit
4.15 of IXC Communications, Inc.'s Registration Statement on
Form S-3 filed with the Commission on May 12, 1998 (File No.
333-52433)).
4.15 Purchase Agreement dated as of March 25, 1998, among IXC
Communications, Inc., Goldman Sachs & Co. ("Goldman"), CS
First Boston, Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill") and Morgan Stanley & Co.
Incorporated ("Morgan Stanley") (incorporated by reference
to Exhibit 4.1 IXC Communications, Inc.'s Current Report on
Form 8-K dated March 30, 1998, and filed with the Commission
on April 7, 1998 (the "April 7, 1998 8-K")).
4.16 Registration Rights Agreement dated as of March 30, 1998,
among IXC Communications, Inc., Goldman, CS First Boston,
Merrill and Morgan Stanley (incorporated by reference to
Exhibit 4.2 of the April 7, 1998 8-K).
4.17 Deposit Agreement dated as of March 30, 1998, between IXC
Communications, Inc. and BankBoston N.A. (incorporated by
reference from Exhibit 4.3 of the April 7, 1998 8-K).
4.18 Purchase Agreement dated as of April 16, 1998, by and among
IXC Communications, Inc., CS First Boston, Merrill, Morgan
Stanley and Nationsbanc Montgomery Securities LLC
(incorporated by reference to Exhibit 4.1 of IXC
Communications, Inc.'s Current Report on Form 8-K dated
April 21, 1998, and filed with the Commission on April 22,
1998 (the "April 22, 1998 8-K").
4.19 Registration Rights Agreement dated as of April 16, 1998, by
and among IXC Communications, Inc., Credit Suisse First
Boston Corporation, Merrill, Morgan Stanley and Nationsbanc
Montgomery Securities LLC (incorporated by reference to
Exhibit 4.2 of the April 22, 1998 8-K).
4.20 Indenture dated as of April 21, 1998, between IXC
Communications, Inc. and IBJ Schroder Bank & Trust Company,
as Trustee (incorporated by reference to Exhibit 4.3 of the
April 22, 1998 8-K).
4.21 Rights Agreement dated as of September 9, 1998, between IXC
Communications, Inc. and U.S. Stock Transfer Corporation
(incorporated by reference to Exhibit 4.1 of IXC
Communications, Inc.'s Form 8-K dated September 8, 1998 and
filed with Commission on September 11, 1998).
4.22+ Amendment No. 1 to Rights Agreement dated July 20, 1999, by
and between IXC Communications, Inc. and U.S. Stock Transfer
Corporation.
</TABLE>
20
<PAGE> 21
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
4.23 Form of Registration Rights Agreement among IXC
Communications, Inc. and the Coastal selling stockholders
(incorporated by reference to Exhibit 4.22 of IXC
Communications, Inc.'s Form S-3 dated April 14, 1999 and
filed with the Commission on April 15, 1999 (File No.
333-76349)).
4.24 Form of Warrant for each of the Coastal selling stockholders
(incorporated by reference to Exhibit 4.23 of IXC
Communications, Inc.'s Form S-3 dated April 14, 1999 and
filed with the Commission on April 15, 1999 (File No.
333-76349)).
10.1 Office Lease dated as of June 21, 1989 with USAA Real Estate
Company, as amended (incorporated by reference to Exhibit
10.1 of the S-4).
10.2 Equipment Lease dated as of December 1, 1994, by and between
DSC Finance Corporation and Switched Services
Communications, L.L.C.; Assignment Agreement dated as of
December 1, 1994, by and between Switched Services
Communications, L.L.C. and DSC Finance Corporation; and
Guaranty dated December 1, 1994, made in favor of DSC
Finance Corporation by IXC Communications, Inc.
(incorporated by reference to Exhibit 10.2 of the S-4).
10.3 Amended and Restated 1994 Stock Plan of IXC Communications,
Inc., as amended (incorporated by reference to Exhibit 10.3
of the June 30, 1997 10-Q).
10.4* Form of Non-Qualified Stock Option Agreement under the 1994
Stock Plan of IXC Communications, Inc. (incorporated by
reference to Exhibit 10.4 of the S-4).
10.5 Amended and Restated Development Agreement by and between
Intertech Management Group, Inc. and IXC Long Distance, Inc.
(incorporated by reference to Exhibit 10.7 of IXC
Communications, Inc.'s and the Guarantors' Amendment No. 1
to Registration Statement on Form S-4 filed with the
Commission on May 20, 1996 (File No. 333-2936) ("Amendment
No. 1 to S-4")).
10.6 Third Amended and Restated Service Agreement dated as of
April 16, 1998, among IXC Long Distance, Inc., IXC Carrier,
Inc., IXC Broadband, Inc. and Excel Telecommunications, Inc.
(incorporated by reference to Exhibit 10.6 of IXC
Communications, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998, filed with the Commission on
May 15, 1998 (the "June 30, 1998 10-Q")).
10.7 Equipment Purchase Agreement dated as of January 16, 1996,
by and between Siecor Corporation and IXC Carrier, Inc.
(incorporated by reference to Exhibit 10.9 of the S-4).
10.8* 1996 Stock Plan of IXC Communications, Inc., as amended
(incorporated by reference to Exhibit 10.10 of the IXC
Communications, Inc. Annual Report on Form 10-K for the year
ended December 31, 1996 and filed with the Commission on
March 28, 1997 (the "1996 10-K")).
10.9 IRU Agreement dated as of November 1995 between WorldCom,
Inc. and IXC Carrier, Inc. (incorporated by reference to
Exhibit 10.11 of Amendment No. 1 to the S-4).
10.10* IXC Communications, Inc. Outside Directors' Phantom Stock
Plan 1998 Restatement (incorporated by reference to Exhibit
10.10 of the IXC Communications, Inc.'s Quarterly Report
Form 10-Q for the quarter ended September 30, 1998 filed
with the Commission on November 16, 1998).
10.11 Business Consultant and Management Agreement dated as of
March 1, 1998, by and between IXC Communications, Inc. and
Culp Communications Associates (incorporated by reference to
Exhibit 10.11 of the June 30, 1998 10-Q).
10.12 Employment Agreement dated as of December 28, 1995, by and
between IXC Communications, Inc. and James F. Guthrie
(incorporated by reference to Exhibit 10.14 of the S-1
Amendment).
</TABLE>
21
<PAGE> 22
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.13* Special Stock Plan of IXC Communications, Inc. (incorporated
by reference to Exhibit 10.16 of the 1996 10-K).
10.14 Lease dated as of June 4, 1997, between IXC Communications,
Inc. and Carramerca Realty, L.P. (incorporated by reference
to Exhibit 10.17 of the June 30, 1997 10-Q).
10.15 Loan and Security Agreement dated as of July 18, 1997, among
IXC Communications, Inc., IXC Carrier, Inc. and NTFC Capital
Corporation ("NTFC") (incorporated by reference to Exhibit
10.18 of the June 30, 1997 10-Q).
10.16 IRU and Stock Purchase Agreement dated as of July 22, 1997,
between IXC Internet Services, Inc. and PSINet Inc.
(incorporated by reference to Exhibit 10.19 of IXC
Communications, Inc.'s Amendment No. 1 to Form 10-Q/A for
the quarter ended September 30, 1997 filed with the
Commission on December 12, 1997 (the "September 30, 1997
10-Q/A")).
10.17 Joint Marketing and Services Agreement dated as of July 22,
1997, between IXC Internet Services, Inc. and PSINet Inc.
(incorporated by reference to Exhibit 10.20 of the September
30, 1997 10-Q/A).
10.18 Employment Agreement dated as of September 9, 1997, between
Benjamin L. Scott and IXC Communications, Inc. (incorporated
by reference to Exhibit 10.21 of IXC Communication Inc.'s
Amendment No. 1 to Registration Statement on S-4 filed with
the Commission on December 15, 1997 (File No. 333-37157)
("Amendment No. 1 to the EPS S-4")).
10.19* IXC Communications, Inc. 1997 Special Executive Stock Plan
(incorporated by reference to Exhibit 10.22 of Amendment No.
1 to the EPS S-4).
10.20 First Amendment to Loan and Security Agreement dated as of
December 23, 1997, among IXC Communications, Inc., IXC
Carrier, Inc., NTFC and Export Development Corporation
("EDC") (incorporated by reference to Exhibit 10.21 of the
1997 10-K).
10.21 Second Amendment to Loan and Security Agreement dated as of
January 21, 1998, among IXC Communications, Inc., IXC
Carrier, Inc., NTFC and EDC (incorporated by reference to
Exhibit 10.22 of the 1997 10-K).
10.22*+ IXC Communications, Inc. 1998 Stock Plan, as amended.
10.23+ First Amended and Restated Credit Agreement dated as of June
29, 1999, among IXC Communications Services, Inc., the
Lenders (as defined therein), NationsBank, N.A., as a Lender
and Administrative Agent, and Credit Suisse First Boston, TD
Securities(USA), Inc. and Export Development Corporation,
each as a Lender and Co-Syndication Agents.
10.24*+ Employment Agreement dated April 8, 1999, by and between IXC
Communications, Inc. and Valerie G. Walden.
10.25*+ Employment Agreement dated April 26, 1999, by and between
IXC Communications, Inc. and James F. Guthrie.
10.26*+ Employment Agreement dated May 27, 1999, by and between IXC
Communications, Inc. and John M. Zrno.
10.27*+ Contract for Services dated June 28, 1999, by and between
IXC Communications, Inc. and American Business Development
Corp.
10.28 Stockholders Agreement dated as of July 20, 1999, among
Cincinnati Bell, Inc., Richard D. Irwin and Ralph J. Swett
(incorporated by reference to Exhibit 99.1 of Cincinnati
Bell, Inc.'s Form 8-K dated July 22, 1999 and filed with the
Commission on July 23, 1999).
</TABLE>
22
<PAGE> 23
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.29 Stockholder Agreement dated as of July 20, 1999, between
Cincinnati Bell, Inc. and General Electric Pension Trust
(incorporated by reference to Exhibit 99.2 of Cincinnati
Bell, Inc.'s Form 8-K dated July 22, 1999 and filed with the
Commission on July 23, 1999).
10.30 Stock Option Agreement dated as of July 20, 1999, between
IXC Communications, Inc. and Cincinnati Bell, Inc.
(incorporated by reference to Exhibit 99.3 of Cincinnati
Bell, Inc.'s Form 8-K dated July 22, 1999 and filed with the
Commission on July 23, 1999).
10.31 Stock Option Agreement dated as of July 20, 1999, between
Cincinnati Bell, Inc. and IXC Communications, Inc.
(incorporated by reference to Exhibit 99.4 of Cincinnati
Bell, Inc.'s Form 8-K dated July 22, 1999 and filed with the
Commission on July 23, 1999).
10.32 Stock Purchase Agreement dated July 20, 1999, by and among
Cincinnati Bell, Inc. and General Electric Pension Trust
(incorporated by reference to Exhibit 4 of Cincinnati Bell,
Inc.'s Form 13D dated July 29, 1999 and filed with the
Commission on July 29, 1999).
10.33 Joint Reporting Agreement dated June 15, 1999 among the
Filing Persons (incorporated by reference to Exhibit 1 of
IXC Communications, Inc.'s Amendment No. 1 to Form 13D dated
June 15, 1999 and filed with the Commission on June 17,
1999).
10.34 Master Agreement dated as of June 2, 1999 between Merrill
Lynch International ("MLI") and IXC Internet Services, Inc.
("Internet") (incorporated by reference to Exhibit 2 of IXC
Communications, Inc.'s Amendment No. 1 to Form 13D dated
June 15, 1999 and filed with the Commission on June 17,
1999).
10.35 Securities Loan Agreement dated as of June 2, 1999 between
MLI and Internet (incorporated by reference to Exhibit 3 of
IXC Communications, Inc.'s Amendment No. 1 to Form 13D dated
June 15, 1999 and filed with the Commission on June 17,
1999).
10.36 Confirmation of OTC Transaction dated as of June 3, 1999
between MLI and Internet (incorporated by reference to
Exhibit 4 of IXC Communications, Inc.'s Amendment No. 2 to
Form 13D dated June 25, 1999 and filed with the Commission
on June 29, 1999).
10.37 Confirmation of OTC Transaction dated as of July 6, 1999
between MLI and Internet (incorporated by reference to
Exhibit 1 of IXC Communications, Inc.'s Amendment No. 4 to
Form 13D dated July 31, 1999 and filed with the Commission
on August 5, 1999).
10.38*+ IXC Communications, Inc. Stock Appreciation Rights Plan
dated as of April 8, 1999.
27.1+ Financial Data Schedule.
</TABLE>
- ---------------
* Management contract or executive compensation plan or arrangement required to
be indicated as such and filed as an exhibit pursuant to applicable rules of
the Commission.
+ Filed herewith.
(b) Reports on Form 8-K.
(1) Form 8-K dated April 12, 1999 and filed with the Commission on April
14, 1999 with respect to a press release announcing an agreement with
Electric Lightwave Inc.
(2) Form 8-K dated May 10, 1999 and filed with the Commission on May 17,
1999 with respect to a press release announcing our acquisition of the
entities doing business as Coastal Telephone Company.
(3) Form 8-K dated May 11, 1999 and filed with the Commission on May 17,
1999 with respect to a press release announcing our results of
operations for the quarter ending March 31, 1999.
(4) Form 8-K dated May 28, 1999 and filed with the Commission on June 2,
1999 with respect to a press release announcing the appointment of John
M. Zrno as President and Chief Executive Officer of
23
<PAGE> 24
IXC Communications, Inc. and a press release announcing the election of John M.
Zrno as a member of the Board of Directors of IXC Communications, Inc.
(5) Form 8-K dated June 17, 1999 and filed with the Commission on June 29,
1999 with respect to two Schedules 13D filed with the Commission
relating to the common stock of PSINet Inc.
(6) Form 8-K dated July 21, 1999 and filed with the Commission on July 21,
1999 with respect to a press release announcing the agreement between
IXC Communications, Inc. and Cincinnati Bell, Inc. to an Agreement and
Plan of Merger and a press release reporting on IXC Communications,
Inc.'s anticipated results of operations for the fiscal quarter ending
July 31, 1999.
(7) Form 8-K dated August 3, 1999 and filed with the Commission on August
4, 1999 with respect to a press release announcing IXC Communications,
Inc.'s results of operations for the fiscal quarter ended July 31,
1999.
(8) Form 8-K dated August 6, 1999 and filed with the Commission on August
9, 1999 with respect to two Schedules 13D filed with the Commission
relating to the common stock of PSINet Inc.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
IXC COMMUNICATIONS, INC.
By: /s/ STANLEY W. KATZ
------------------------------------
Stanley W. Katz
Chief Financial Officer
Dated: August 16, 1999
24
<PAGE> 25
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
2.1 Agreement and Plan of Merger dated as of July 20, 1999,
among Cincinnati Bell, Inc., IXC Communications, Inc. and
Ivory Merger Inc. (incorporated by reference to Exhibit 2.1
of Cincinnati Bell, Inc.'s Form 8-K dated July 22, 1999 and
filed with the Commission on July 23, 1999).
3.1+ Restated Certificate of Incorporation of IXC Communications,
Inc., as amended.
3.2 Bylaws of IXC Communications, Inc., as amended (incorporated
by reference to Exhibit 3.2 of the IXC Communications,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 filed with the Commission on November 14,
1997).
4.1 Indenture dated as of October 5, 1995, by and among IXC
Communications, Inc., on its behalf and as
successor-in-interest to I-Link Holdings, Inc. and IXC
Carrier Group, Inc., each of IXC Carrier, Inc., on its
behalf and as successor-in-interest to I-Link, Inc., CTI
Investments, Inc., Texas Microwave Inc. and WTM Microwave
Inc., Atlantic States Microwave Transmission Company,Central
States Microwave Transmission Company, Telcom Engineering,
Inc., on its behalf and as successor-in-interest to SWTT
Company and Microwave Network, Inc., Tower Communication
Systems Corp., West Texas Microwave Company, Western States
Microwave Transmission Company, Rio Grande Transmission,
Inc., IXC Long Distance, Inc., Link Net International, Inc.
(collectively, the "Guarantors"), and IBJ Schroder Bank &
Trust Company, as Trustee (the "Trustee"), with respect to
the 12 1/2% Series A and Series B Senior Notes due 2005
(incorporated by reference to Exhibit 4.1 of IXC
Communications, Inc.'s and each of the Guarantor's
Registration Statement on Form S-4 filed with the Commission
on April 1, 1996 (File No. 333-2936) (the "S-4")).
4.2 Form of 12 1/2% Series A Senior Notes due 2005 (incorporated
by reference to Exhibit 4.6 of the S-4).
4.3 Form of 12 1/2% Series B Senior Notes due 2005 and
Subsidiary Guarantee (incorporated by reference to Exhibit
4.8 of IXC Communications, Inc.'s Amendment No. 1 to
Registration Statement on Form S-1 filed with the Commission
on June 13, 1996 (File No. 333-4061) (the "S-1 Amendment")).
4.4 Amendment No. 1 to Indenture and Subsidiary Guarantee dated
as of June 4, 1996, by and among IXC Communications, Inc.,
the Guarantors and the Trustee (incorporated by reference to
Exhibit 4.11 of the S-1 Amendment).
4.5 Purchase Agreement dated as of March 25, 1997, by and among
IXC Communications, Inc., Credit Suisse First Boston
Corporation ("CS First Boston") and Dillon Read & Co. Inc.
("Dillon Read") (incorporated by reference to Exhibit 4.12
of IXC Communications, Inc.'s Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997, filed with the
Commission on May 15, 1997 (the "June 30, 1997 10-Q")).
4.6 Registration Rights Agreement dated as of March 25, 1997, by
and among IXC Communications, Inc., CS First Boston and
Dillon Read (incorporated by reference to Exhibit 4.13 of
the June 30, 1997 10-Q).
4.7 Amendment to Registration Rights Agreement dated as of March
25, 1997, by and between IXC Communications, Inc. and
Trustees of General Electric Pension Trust (incorporated by
reference to Exhibit 4.14 of the June 30, 1997 10-Q).
4.8 Registration Rights Agreement dated as of July 8, 1997,
among IXC Communications, Inc. and each of William G. Rodi,
Gordon Hutchins, Jr. and William F. Linsmeier (incorporated
by reference to Exhibit 4.15 of IXC Communications, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended June 30,
1997, as filed with the Commission on August 6, 1997 (the
"June 30, 1997 10-Q")).
</TABLE>
<PAGE> 26
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
4.9 Registration Rights Agreement dated as of July 8, 1997,
among IXC Communications, Inc. and each of William G. Rodi,
Gordon Hutchins, Jr. and William F. Linsmeier (incorporated
by reference to Exhibit 4.16 of the June 30, 1997 10-Q).
4.10 Indenture dated as of August 15, 1997, between IXC
Communications, Inc. and The Bank of New York (incorporated
by reference to Exhibit 4.2 of IXC Communications, Inc.'s
Current Report on Form 8-K dated August 20, 1997, and filed
with the Commission on August 28, 1997 (the "8-K")).
4.11 First Supplemental Indenture dated as of October 23, 1997,
among IXC Communications, Inc., the Guarantors, IXC
International, Inc. and IBJ Schroder Bank & Trust Company
(incorporated by reference to Exhibit 4.13 of IXC
Communications, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1997, and filed with the Commission
on March 16, 1998 (the "1997 10-K")).
4.12 Second Supplemental Indenture dated as of December 22, 1997,
among IXC Communications, Inc., the Guarantors, IXC Internet
Services, Inc., IXC International, Inc. and IBJ Schroder
Bank & Trust Company (incorporated by reference to Exhibit
4.14 of the 1997 10-K).
4.13 Third Supplemental Indenture dated as of January 6, 1998,
among IXC Communications, Inc., the Guarantors, IXC Internet
Services, Inc., IXC International, Inc. and IBJ Schroder
Bank & Trust Company (incorporated by reference to Exhibit
4.15 of the 1997 10-K).
4.14 Fourth Supplemental Indenture dated as of April 3, 1998,
among IXC Communications, Inc., the Guarantors, IXC Internet
Services, Inc., IXC International, Inc., and IBJ Schroder
Bank & Trust Company (incorporated by reference to Exhibit
4.15 of IXC Communications, Inc.'s Registration Statement on
Form S-3 filed with the Commission on May 12, 1998 (File No.
333-52433)).
4.15 Purchase Agreement dated as of March 25, 1998, among IXC
Communications, Inc., Goldman Sachs & Co. ("Goldman"), CS
First Boston, Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill") and Morgan Stanley & Co.
Incorporated ("Morgan Stanley") (incorporated by reference
to Exhibit 4.1 IXC Communications, Inc.'s Current Report on
Form 8-K dated March 30, 1998, and filed with the Commission
on April 7, 1998 (the "April 7, 1998 8-K")).
4.16 Registration Rights Agreement dated as of March 30, 1998,
among IXC Communications, Inc., Goldman, CS First Boston,
Merrill and Morgan Stanley (incorporated by reference to
Exhibit 4.2 of the April 7, 1998 8-K).
4.17 Deposit Agreement dated as of March 30, 1998, between IXC
Communications, Inc. and BankBoston N.A. (incorporated by
reference from Exhibit 4.3 of the April 7, 1998 8-K).
4.18 Purchase Agreement dated as of April 16, 1998, by and among
IXC Communications, Inc., CS First Boston, Merrill, Morgan
Stanley and Nationsbanc Montgomery Securities LLC
(incorporated by reference to Exhibit 4.1 of IXC
Communications, Inc.'s Current Report on Form 8-K dated
April 21, 1998, and filed with the Commission on April 22,
1998 (the "April 22, 1998 8-K").
4.19 Registration Rights Agreement dated as of April 16, 1998, by
and among IXC Communications, Inc., Credit Suisse First
Boston Corporation, Merrill, Morgan Stanley and Nationsbanc
Montgomery Securities LLC (incorporated by reference to
Exhibit 4.2 of the April 22, 1998 8-K).
4.20 Indenture dated as of April 21, 1998, between IXC
Communications, Inc. and IBJ Schroder Bank & Trust Company,
as Trustee (incorporated by reference to Exhibit 4.3 of the
April 22, 1998 8-K).
</TABLE>
<PAGE> 27
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
4.21 Rights Agreement dated as of September 9, 1998, between IXC
Communications, Inc. and U.S. Stock Transfer Corporation
(incorporated by reference to Exhibit 4.1 of IXC
Communications, Inc.'s Form 8-K dated September 8, 1998 and
filed with Commission on September 11, 1998).
4.22+ Amendment No. 1 to Rights Agreement dated July 20, 1999, by
and between IXC Communications, Inc. and U.S. Stock Transfer
Corporation.
4.23 Form of Registration Rights Agreement among IXC
Communications, Inc. and the Coastal selling stockholders
(incorporated by reference to Exhibit 4.22 of IXC
Communications, Inc.'s Form S-3 dated April 14, 1999 and
filed with the Commission on April 15, 1999 (File No.
333-76349)).
4.24 Form of Warrant for each of the Coastal selling stockholders
(incorporated by reference to Exhibit 4.23 of IXC
Communications, Inc.'s Form S-3 dated April 14, 1999 and
filed with the Commission on April 15, 1999 (File No.
333-76349)).
10.1 Office Lease dated as of June 21, 1989 with USAA Real Estate
Company, as amended (incorporated by reference to Exhibit
10.1 of the S-4).
10.2 Equipment Lease dated as of December 1, 1994, by and between
DSC Finance Corporation and Switched Services
Communications, L.L.C.; Assignment Agreement dated as of
December 1, 1994, by and between Switched Services
Communications, L.L.C. and DSC Finance Corporation; and
Guaranty dated December 1, 1994, made in favor of DSC
Finance Corporation by IXC Communications, Inc.
(incorporated by reference to Exhibit 10.2 of the S-4).
10.3 Amended and Restated 1994 Stock Plan of IXC Communications,
Inc., as amended (incorporated by reference to Exhibit 10.3
of the June 30, 1997 10-Q).
10.4* Form of Non-Qualified Stock Option Agreement under the 1994
Stock Plan of IXC Communications, Inc. (incorporated by
reference to Exhibit 10.4 of the S-4).
10.5 Amended and Restated Development Agreement by and between
Intertech Management Group, Inc. and IXC Long Distance, Inc.
(incorporated by reference to Exhibit 10.7 of IXC
Communications, Inc.'s and the Guarantors' Amendment No. 1
to Registration Statement on Form S-4 filed with the
Commission on May 20, 1996 (File No. 333-2936) ("Amendment
No. 1 to S-4")).
10.6 Third Amended and Restated Service Agreement dated as of
April 16, 1998, among IXC Long Distance, Inc., IXC Carrier,
Inc., IXC Broadband, Inc. and Excel Telecommunications, Inc.
(incorporated by reference to Exhibit 10.6 of IXC
Communications, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998, filed with the Commission on
May 15, 1998 (the "June 30, 1998 10-Q")).
10.7 Equipment Purchase Agreement dated as of January 16, 1996,
by and between Siecor Corporation and IXC Carrier, Inc.
(incorporated by reference to Exhibit 10.9 of the S-4).
10.8* 1996 Stock Plan of IXC Communications, Inc., as amended
(incorporated by reference to Exhibit 10.10 of the IXC
Communications, Inc. Annual Report on Form 10-K for the year
ended December 31, 1996 and filed with the Commission on
March 28, 1997 (the "1996 10-K")).
10.9 IRU Agreement dated as of November 1995 between WorldCom,
Inc. and IXC Carrier, Inc. (incorporated by reference to
Exhibit 10.11 of Amendment No. 1 to the S-4).
10.10* IXC Communications, Inc. Outside Directors' Phantom Stock
Plan 1998 Restatement (incorporated by reference to Exhibit
10.10 of the IXC Communications, Inc.'s Quarterly Report
Form 10-Q for the quarter ended September 30, 1998 filed
with the Commission on November 16, 1998).
</TABLE>
<PAGE> 28
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.11 Business Consultant and Management Agreement dated as of
March 1, 1998, by and between IXC Communications, Inc. and
Culp Communications Associates (incorporated by reference to
Exhibit 10.11 of the June 30, 1998 10-Q).
10.12 Employment Agreement dated as of December 28, 1995, by and
between IXC Communications, Inc. and James F. Guthrie
(incorporated by reference to Exhibit 10.14 of the S-1
Amendment).
10.13* Special Stock Plan of IXC Communications, Inc. (incorporated
by reference to Exhibit 10.16 of the 1996 10-K).
10.14 Lease dated as of June 4, 1997, between IXC Communications,
Inc. and Carramerca Realty, L.P. (incorporated by reference
to Exhibit 10.17 of the June 30, 1997 10-Q).
10.15 Loan and Security Agreement dated as of July 18, 1997, among
IXC Communications, Inc., IXC Carrier, Inc. and NTFC Capital
Corporation ("NTFC") (incorporated by reference to Exhibit
10.18 of the June 30, 1997 10-Q).
10.16 IRU and Stock Purchase Agreement dated as of July 22, 1997,
between IXC Internet Services, Inc. and PSINet Inc.
(incorporated by reference to Exhibit 10.19 of IXC
Communications, Inc.'s Amendment No. 1 to Form 10-Q/A for
the quarter ended September 30, 1997 filed with the
Commission on December 12, 1997 (the "September 30, 1997
10-Q/A")).
10.17 Joint Marketing and Services Agreement dated as of July 22,
1997, between IXC Internet Services, Inc. and PSINet Inc.
(incorporated by reference to Exhibit 10.20 of the September
30, 1997 10-Q/A).
10.18 Employment Agreement dated as of September 9, 1997, between
Benjamin L. Scott and IXC Communications, Inc. (incorporated
by reference to Exhibit 10.21 of IXC Communication Inc.'s
Amendment No. 1 to Registration Statement on S-4 filed with
the Commission on December 15, 1997 (File No. 333-37157)
("Amendment No. 1 to the EPS S-4")).
10.19* IXC Communications, Inc. 1997 Special Executive Stock Plan
(incorporated by reference to Exhibit 10.22 of Amendment No.
1 to the EPS S-4).
10.20 First Amendment to Loan and Security Agreement dated as of
December 23, 1997, among IXC Communications, Inc., IXC
Carrier, Inc., NTFC and Export Development Corporation
("EDC") (incorporated by reference to Exhibit 10.21 of the
1997 10-K).
10.21 Second Amendment to Loan and Security Agreement dated as of
January 21, 1998, among IXC Communications, Inc., IXC
Carrier, Inc., NTFC and EDC (incorporated by reference to
Exhibit 10.22 of the 1997 10-K).
10.22*+ IXC Communications, Inc. 1998 Stock Plan, as amended.
10.23+ First Amended and Restated Credit Agreement dated as of June
29, 1999, among IXC Communications Services, Inc., the
Lenders (as defined therein), NationsBank, N.A., as a Lender
and Administrative Agent, and Credit Suisse First Boston, TD
Securities(USA), Inc. and Export Development Corporation,
each as a Lender and Co-Syndication Agents.
10.24*+ Employment Agreement dated April 8, 1999, by and between IXC
Communications, Inc. and Valerie G. Walden.
10.25*+ Employment Agreement dated April 26, 1999, by and between
IXC Communications, Inc. and James F. Guthrie.
10.26*+ Employment Agreement dated May 27, 1999, by and between IXC
Communications, Inc. and John M. Zrno.
10.27*+ Contract for Services dated June 28, 1999, by and between
IXC Communications, Inc. and American Business Development
Corp.
</TABLE>
<PAGE> 29
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.28 Stockholders Agreement dated as of July 20, 1999, among
Cincinnati Bell, Inc., Richard D. Irwin and Ralph J. Swett
(incorporated by reference to Exhibit 99.1 of Cincinnati
Bell, Inc.'s Form 8-K dated July 22, 1999 and filed with the
Commission on July 23, 1999).
10.29 Stockholder Agreement dated as of July 20, 1999, between
Cincinnati Bell, Inc. and General Electric Pension Trust
(incorporated by reference to Exhibit 99.2 of Cincinnati
Bell, Inc.'s Form 8-K dated July 22, 1999 and filed with the
Commission on July 23, 1999).
10.30 Stock Option Agreement dated as of July 20, 1999, between
IXC Communications, Inc. and Cincinnati Bell, Inc.
(incorporated by reference to Exhibit 99.3 of Cincinnati
Bell, Inc.'s Form 8-K dated July 22, 1999 and filed with the
Commission on July 23, 1999).
10.31 Stock Option Agreement dated as of July 20, 1999, between
Cincinnati Bell, Inc. and IXC Communications, Inc.
(incorporated by reference to Exhibit 99.4 of Cincinnati
Bell, Inc.'s Form 8-K dated July 22, 1999 and filed with the
Commission on July 23, 1999).
10.32 Stock Purchase Agreement dated July 20, 1999, by and among
Cincinnati Bell, Inc. and General Electric Pension Trust
(incorporated by reference to Exhibit 4 of Cincinnati Bell,
Inc.'s Form 13D dated July 29, 1999 and filed with the
Commission on July 29, 1999).
10.33 Joint Reporting Agreement dated June 15, 1999 among the
Filing Persons (incorporated by reference to Exhibit 1 of
IXC Communications, Inc.'s Amendment No. 1 to Form 13D dated
June 15, 1999 and filed with the Commission on June 17,
1999).
10.34 Master Agreement dated as of June 2, 1999 between Merrill
Lynch International ("MLI") and IXC Internet Services, Inc.
("Internet") (incorporated by reference to Exhibit 2 of IXC
Communications, Inc.'s Amendment No. 1 to Form 13D dated
June 15, 1999 and filed with the Commission on June 17,
1999).
10.35 Securities Loan Agreement dated as of June 2, 1999 between
MLI and Internet (incorporated by reference to Exhibit 3 of
IXC Communications, Inc.'s Amendment No. 1 to Form 13D dated
June 15, 1999 and filed with the Commission on June 17,
1999).
10.36 Confirmation of OTC Transaction dated as of June 3, 1999
between MLI and Internet (incorporated by reference to
Exhibit 4 of IXC Communications, Inc.'s Amendment No. 2 to
Form 13D dated June 25, 1999 and filed with the Commission
on June 29, 1999).
10.37 Confirmation of OTC Transaction dated as of July 6, 1999
between MLI and Internet (incorporated by reference to
Exhibit 1 of IXC Communications, Inc.'s Amendment No. 4 to
Form 13D dated July 31, 1999 and filed with the Commission
on August 5, 1999).
10.38*+ IXC Communications, Inc. Stock Appreciation Rights Plan
dated as of April 8, 1999.
27.1+ Financial Data Schedule.
</TABLE>
- ---------------
* Management contract or executive compensation plan or arrangement required to
be indicated as such and filed as an exhibit pursuant to applicable rules of
the Commission.
+ Filed herewith.
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE
OF
INCORPORATION, AS AMENDED
Fiber Optic Communications, Inc., a corporation organized and existing
under the laws of the State of Delaware, hereby certifies as follows:
1. The name of this corporation is Fiber Optic Communications,
Inc. Fiber Optic Communications, Inc. was originally incorporated under the
same name. The original Certificate of Incorporation of this corporation was
filed with the Secretary of State of the State of Delaware on July 27, 1992.
2. Pursuant to Sections 242 and 245 of the General Corporation
Law of the State of Delaware, this Restated Certificate of Incorporation has
been duly adopted and restates, integrates and further amends the provisions of
the Certificate of Incorporation of this corporation.
3. This Restated Certificate of Incorporation was duly consented
to, and adopted by, the holders of (i) a majority of the outstanding shares of
common stock, par value $.01 per share, of the Corporation and 10% Senior
Series 1 Cumulative Redeemable Preferred Stock, par value $.01 per share, of
this corporation ("Series 1 Preferred Stock"), consenting together as a class
and by (ii) over three-fourths (3/4s) of the outstanding shares of Series 1
Preferred Stock, acting without a meeting by unanimous written consent pursuant
to Section 228 of the General Corporation Law of the State of Delaware.
4. The text of the Restated Certificate of Incorporation as
heretofore amended or supplemented is hereby restated and further amended to
read in its entirety as follows:
FIRST: The name of this corporation (the "Corporation") is "IXC
Communications, Inc."
SECOND: The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle, Delaware 19801. The name of its
registered agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may now or hereafter be organized under the
General Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code.
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is one hundred and three million (103,000,000)
consisting of (i) one
1
<PAGE> 2
hundred million (100,000,000) shares of common stock, par value $.01 per share,
and (ii) three million (3,000,000) shares of preferred stock, par value $.01
per share. The preferred stock may be issued at any time, and from time to
time, in one or more series pursuant hereto or to a resolution or resolutions
providing for such issue duly adopted by the board of directors (the "Board")
of the Corporation (authority to do so being hereby expressly vested in the
Board), and such resolution or resolutions shall also set forth the voting
powers, full or limited, or none, of each such series of preferred stock and
shall fix the designations, preferences and relative, participating, optional
or other special rights and qualifications, limitations or restrictions of each
such series of preferred stock.
Upon the filing of this Second Amendment to Restated
Certificate of Incorporation which amends Article FOURTH to read as set forth
above, and without any further action on the part of the holders thereof, each
issued and outstanding share of common stock will be reclassified and changed
into 0.8083 shares of common stock.
FIFTH: The business and affairs of the Corporation shall be managed
by and under the direction of the Board. The exact number of directors of the
Corporation shall be fixed by or in the manner provided in the Bylaws of the
Corporation (the "Bylaws").
SIXTH: In furtherance and not in limitation of the powers conferred
by statute, the Board is expressly authorized:
(a) to adopt, repeal, rescind, alter or amend in any respect the
Bylaws, and to confer in the Bylaws powers and authorities upon the directors
of the Corporation in addition to the powers and authorities expressly
conferred upon them by statute;
(b) from time to time to set apart out of any funds or assets of
the Corporation available for dividends an amount or amounts to be reserved as
working capital or for any other lawful purpose and to abolish any reserve so
created and to determine whether any, and, if any, what part, of the surplus of
the Corporation or its net profits applicable to dividends shall be declared in
dividends and paid to its stockholders, and all rights of the holders of stock
of the Corporation in respect of dividends shall be subject to the power of the
Board so to do;
(c) subject to the laws of the State of Delaware, from time to
time to sell, lease or otherwise dispose of any part or parts of the properties
of the Corporation and to cease to conduct the business connected therewith or
again to resume the same, as it may deem best; and
(d) in addition to the powers and authorities hereinbefore and by
the laws of the State of Delaware conferred upon the Board, to execute all such
powers and to do all acts and things as may be exercised or done by the
Corporation; subject, nevertheless, to the express provisions of such laws, of
the Restated Certificate of Incorporation of the Corporation and its Bylaws.
2
<PAGE> 3
SEVENTH: Meetings of stockholders of the Corporation may be held
within or without the State of Delaware, as the Bylaws provide. The books
of the Corporation may be kept (subject to any provision of applicable law)
outside the State of Delaware at such place or places as may be designated
from time to time by the Board or in the Bylaws.
EIGHTH: The Corporation reserves the right to adopt, repeal, rescind,
alter or amend in any respect any provision contained in this Restated
Certificate of Incorporation in the manner now or hereafter prescribed by
applicable laws, and all rights conferred on stockholders herein are granted
subject to this reservation.
NINTH: The Corporation is to have perpetual existence.
TENTH: A director of this Corporation shall not be personally liable
to the Corporation or its stockholder for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, as the same exists or hereafter may be amended, or (iv) for
any transaction from which the director derived an improper personal benefit.
If the Delaware General Corporation Law hereafter is amended to authorize the
further elimination or limitation of the liability of directors, then the
liability of a director of the Corporation, in addition to the limitation on
personal liability provided herein, shall be limited to the fullest extent
permitted by the amended Delaware Corporation Law. No amendment to or repeal
of this Article Tenth shall apply to or have any effect on the liability or
alleged liability of any director of the Corporation for or with respect to any
acts or omissions of such director occurring prior to such amendment or repeal.
ELEVENTH:
A. Designation of Two Series of Preferred Stock. There are
hereby provided two series of preferred stock designated and to be known as
"10% Senior Series 1 Cumulative Redeemable Preferred Stock" and "10% Junior
Series 3 Cumulative Redeemable Preferred Stock."
B. Definitions. As used in this Eleventh Article, the following
terms shall have the meanings indicated:
1. "Common Stock" shall mean the common stock, $.01 par
value per share, issued or to be issued by the Corporation.
2. "Original Issue Date" shall mean, with respect to any
share of Series Preferred Stock, the date of the original issuance of such
shares.
3
<PAGE> 4
3. "Preferred Stock" shall mean the preferred stock,
$.01 par value per share, issued or to be issued by the Corporation.
4. "Series 1 Preferred Stock" shall mean the 10% Senior
Series 1 Cumulative Redeemable Preferred Stock, $.01 par value per share,
issued or to be issued by the Corporation.
5. "Series 3 Preferred Stock" shall mean the 10% Junior
Series 3 Cumulative Redeemable Preferred Stock, $.01 par value per share,
issued or to be issued by the Corporation.
6. "Series Preferred Stock" shall mean, collectively,
the Series 1 Preferred Stock and the Series 3 Preferred Stock.
C. Number of Shares. The number of shares constituting the
Series 1 Preferred Stock shall be 2,000. The number of shares constituting the
Series 3 Preferred Stock shall be 12,550.
D. Rights, Preferences, Privileges and Restrictions. The voting
powers and relative rights, preferences, restrictions and other mattes relating
to the Series Preferred Stock are as follows:
1. Dividends.
(a) The holders of shares of Series 1 Preferred
Stock then outstanding shall be entitled to receive, prior to the payment of any
dividend on any other Preferred Stock of the Corporation or the Common Stock of
the Corporation, when, as and if declared by the Board, out of funds legally
available for the payment of dividends, cumulative dividends in an annual amount
equal to $100 per share, plus an amount determined by applying a 10% annual
rate, compounded annually, to any accrued but unpaid dividend amount from the
last day of the period when such dividend accrues to the actual date of payment
of such dividend, and no more. The holders of shares of Series 3 Preferred
Stock then outstanding shall be entitled to receive, prior to the payment of any
dividend on any other Preferred Stock of the Corporation (other than the Series
1 Preferred Stock) or the Common Stock of the Corporation, when as and if
declared by the Board, out of funds legally available for the payment of
dividends, cumulative dividends in an annual amount equal to $100 per share,
plus an amount determined by applying a 10% annual rate, compounded annually, to
any accrued but unpaid dividend amount from the last day of the period when such
dividend accrues to the actual date of payment of such dividend, and no more;
provided, however, that (i) the Corporation may pay dividends on the
Corporation's 7-1/4% Junior Convertible Preferred Stock Due 2007 ("Convertible
Preferred Stock") with additional shares of Convertible Preferred Stock and (ii)
the Corporation may pay dividends on the Corporation's 12-1/2% Junior
Exchangeable Preferred Stock Due 2009 (the "Initial Exchangeable Preferred
Stock") and 12-1/2% Series B Junior Exchangeable Preferred Stock Due 2009 (the
"Series B Stock") with additional shares of Initial Exchangeable Preferred Stock
and Series B Stock, respectively. Such dividends on the outstanding shares of
Series Preferred Stock shall be payable on such date as the Board may from time
to time determine (each such date being a "dividend payment date"). The Board
may fix a record date for the determination of holders of shares of Series
Preferred Stock entitled to receive payment of a dividend declared thereon,
which record date shall not be more than sixty (60) days prior to the date fixed
for
4
<PAGE> 5
the payment thereof. Each such annual dividend shall be fully cumulative and
shall accrue from day to day (whether or not declared) from the first day of
each period in which such dividend may be payable as herein provided, except
that the first annual dividend with respect to each share of Series Preferred
Stock shall accrue from the Original Issue Date of such share or such other
date as determined by the Board, except that dividends with respect to each
share of Series 3 Preferred Stock shall accrue from August 14, 1992.
Dividends, when, as and if declared, shall be payable in cash.
(b) The holder of each outstanding fractional
share of Series Preferred Stock shall be entitled to a ratably proportionate
amount of all dividends accruing with respect to each outstanding share of
Series Preferred Stock with the same Original Issue Date and all such dividends
with respect to each such outstanding fractional share shall be fully
cumulative and shall accrue (whether or not declared) and shall be payable in
the same manner and at such times as provided for in Section 1(a).
(c) All dividends paid with respect to the
outstanding shares of Series Preferred Stock pursuant to Section 1(a) shall be
paid pro rata to the holders of each class entitled thereto. Each Series 1
Preferred Stock holder's pro rata share of such dividends shall be calculated
by multiplying the total dividends to be paid by the percentage of (i) the
aggregate accrued but unpaid dividends to the date such payment is made on all
issued and outstanding shares of Series 1 Preferred Stock represented by (ii)
the aggregate accrued but unpaid dividends to the date such payment is made on
all shares (including fractional shares) of Series 1 Preferred Stock held by
such holder, and no more. Each Series 3 Preferred Stock holder's pro rata
share of such dividends shall be calculated by multiplying the total dividends
to be paid by the percentage of (i) the aggregate accrued but unpaid dividends
to the date such payment is made on all issued and outstanding shares of Series
3 Preferred Stock represented by (ii) the aggregate accrued but unpaid
dividends to the date such payment is made on all shares (including fractional
shares) of Series 3 Preferred Stock held by such holder, and no more.
2. Liquidation Rights of Series Preferred Stock:
(a) In the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, the holders
of outstanding shares of Series Preferred Stock shall be entitled to be paid
out of the assets of the Corporation available for distribution to its
stockholders, whether such assets are capital, surplus, or earnings, before any
payment or declaration and setting apart for payment of any amount shall be
made in respect of the outstanding shares of any other Preferred Stock of the
Corporation or Common Stock of the Corporation, an amount equal to $1,000 per
share of Series Preferred Stock then outstanding, plus all accrued but unpaid
dividends thereon to the date such payment is actually made, and no more. If
upon any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the assets to be distributed among the holders of the
outstanding shares of Series Preferred Stock shall be insufficient to permit
the payment to such stockholders of the full preferential amounts set forth
above, then
5
<PAGE> 6
the entire assets of the Corporation to be distributed shall be distributed (i)
first, ratably among the holders of outstanding shares of Series 1 Preferred
Stock based on the full preferential amounts for the number of outstanding
shares of Series 1 Preferred Stock held by each holder and (ii) second, ratably
among the holders of outstanding shares of Series 3 Preferred Stock based on
the full preferential amounts for the number of outstanding shares of Series 3
Preferred Stock held by each holder. The Corporation will mail written notice
of such liquidation, dissolution or winding up, not less than sixty (60) days
prior to the payment date stated therein, to each record holder of Series
Preferred Stock.
(b) A consolidation or merger of the Corporation
with or into any other corporation or corporations or a sale of all or
substantially all of the assets of the Corporation shall not be deemed to be a
liquidation, dissolution, or winding up of the Corporation as those terms are
used in this Section 2 unless such consolidation, merger or sale shall be in
connection with a dissolution or winding up of the Corporation.
(c) The payment of preferential amounts pursuant
to this Section 2 with respect to each outstanding fractional share of Series 1
Preferred Stock shall be equal to a ratably proportionate amount of the
preferential amount payable with respect to each outstanding share of Series 1
Preferred Stock with the same Original Issue Date. The payment of preferential
amounts pursuant to this Section 2 with respect to each outstanding fractional
share of Series 3 Preferred Stock shall be equal to the ratably proportionate
amount of the preferential amount payable with respect to each outstanding
share of Series 3 Preferred Stock with the same Original Issue Date.
3. Voluntary Redemption by the Corporation.
(a) The Corporation, at the option of the Board,
may at any time or from time to time redeem the outstanding shares of Series 1
Preferred Stock in whole or in part from any source of funds legally available
therefor. The Corporation, at the option of the Board, may at any time or from
time to time redeem the outstanding shares of Series 3 Preferred Stock in whole
or in part from any source of funds legally available therefor, provided that
there shall then be no outstanding shares of Series 1 Preferred Stock.
(b) The redemption price for each outstanding
share of Series Preferred Stock shall be equal to $1,000 plus an amount equal
to any accrued and unpaid dividends on such share through the Redemption Date
(as defined below), whether or not declared (the "Redemption Price").
(c) In the event of a redemption of only a part
of the outstanding shares of a class of Series Preferred Stock, the Corporation
shall effect such redemption pro rata according to the number of shares held by
each holder of outstanding shares of such class of Series Preferred Stock.
6
<PAGE> 7
(d) At least ten (10) days and not more than
sixty (60) days prior to the date fixed for any redemption of shares of a class
of Series Preferred Stock (the "Redemption Date"), written notice (the
"Redemption Notice," and the class of Series Preferred Stock referenced in such
Redemption Notice shall be referred to herein as the "Redeemed Stock") shall be
sent, by registered mail, to each holder of record of the outstanding shares of
Redeemed Stock at his or her mailing address last shown on the records of the
Corporation. Any notice which is mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the holder
received the notice, and failure duly to give the notice by mail, or any defect
in the notice, to any holder of shares of such class of Series Preferred Stock
designated for redemption shall not affect the validity of the proceedings for
the redemption of any other shares of such class of Series Preferred Stock.
The Redemption Notice shall state:
(i) whether all or less than all of the
outstanding shares of the class of Series Preferred Stock are to be redeemed
and the total number of shares being redeemed;
(ii) the number of outstanding shares of
Redeemed Stock held by the holder which the Corporation intends to redeem;
(iii) the Redemption Date and the
Redemption Price;
(iv) that from and after the Redemption
Date, dividends shall cease to accrue; and
(v) that the holder is to surrender to
the Corporation, in the manner and at the place designated, the certificate or
certificates representing the outstanding shares of Redeemed Stock to be
redeemed.
(e) On or before the Redemption Date, each holder
of outstanding shares of Redeemed Stock shall surrender the certificate or
certificates representing such shares to the Corporation, in the manner and at
the place designated in the Redemption Notice, and thereupon the Redemption
Price for such shares shall be payable to the order of the person whose name
appears on such certificate or certificates as the owner thereof, and each
surrendered certificate shall be cancelled and retired. In the event less than
all of the shares represented by any such certificate or certificates are
redeemed, a new certificate or certificates shall be issued representing the
unredeemed shares. All shares of the class of Series Preferred Stock called
for redemption will cease to accrue dividends as of the Redemption Date. After
the Redemption Date, holders of such class of Series Preferred Stock shall no
longer be treated as stockholders of the Corporation with respect to the shares
of Series Preferred Stock being redeemed, except with respect to the right to
receive the Redemption Price, without interest, upon the surrender of their
respective certificates.
7
<PAGE> 8
(f) The Corporation may, at its option, on or
prior to the Redemption Date, deposit with its transfer agent or other
redemption agent selected by the Board of Directors of the Corporation, as a
trust fund, a sum sufficient to redeem the shares called for redemption, with
irrevocable instructions and authority to such transfer agent or other
redemption agent to give or complete the Redemption Notice and to pay to the
respective holders of such shares, as evidenced by a list of such holders
certified by an officer of the Corporation, the Redemption Price upon
surrender of their respective share certificates. Such deposit shall be
deemed to constitute full payment of such shares to their holders. In case
the holders of any shares shall not, within five (5) years after such deposit,
claim the amount deposited for redemption thereof, such transfer agent or
other redemption agent shall, upon demand, pay over to the Corporation the
balance of such amount so deposited and shall thereupon be relieved of all
responsibility to the holders thereof. Any interest accrued on any funds so
deposited shall belong to the Corporation, and shall be paid to it from time
to time on demand.
(g) All shares of Series 1 Preferred Stock which
shall have been redeemed pursuant to this Section 3 shall thereupon be
restored to the status of authorized but unissued shares of Series 1 Preferred
Stock.
(h) All shares of Series 3 Preferred Stock which
shall have been redeemed pursuant to this Section 3 shall thereupon be
restored to the status of authorized but unissued shares of Series 3 Preferred
Stock.
4. Voting Rights. Except as otherwise provided herein or by the
General Corporation Law of the State of Delaware, holders of outstanding shares
of Series 1 Preferred Stock shall have no voting rights. At all meetings of
the stockholders of the Corporation and in the case of any actions of
stockholders in lieu of a meeting, each share of Series 3 Preferred Stock shall
entitle the holder thereof to one vote. Except as otherwise provided herein or
by the General Corporation Law of the State of Delaware, the holders of Common
Stock and Series 3 Preferred Stock shall vote together as a single class, and
neither the Common Stock nor Series 3 Preferred Stock shall be entitled to vote
as a separate class on any matter to be voted on by shareholders of the
Corporation, except that the holders of the Series 3 Preferred Stock shall be
entitled to vote as a separate class to elect one member of the Board of
Directors of the Corporation.
5. Restrictions and Limitations. Except as otherwise provided by
the General Corporation Law of the State of Delaware, no amendment to this
Restated Certificate of Incorporation shall be made by the Corporation which
would change any of the terms, rights, preferences, privileges or restrictions
provided herein so as to affect adversely any shares of Series Preferred Stock
without the prior written consent of the holders of at least a majority of each
of the Series 1 Preferred Stock and the Series 3 Preferred Stock entitled to
vote thereon and outstanding at the time such action is taken; provided that no
amendment will change (i) the rate or times at which or the manner in which
dividends on any series of the Series Preferred Stock accrue or become payable,
(ii) the preferences with
8
<PAGE> 9
respect to dividends and liquidation payments set forth in Section 1 and 2 or
(iii) the percentage of the holders of the Series Preferred Stock required to
approve any changes described in clauses (i) or (ii) above, without the prior
written consent of the holders of at least three-fourths (3/4s) of each of the
Series 1 Preferred Stock and the Series 3 Preferred Stock, as applicable, then
outstanding; and, provided further, that no change in the terms hereof may be
accomplished by merger or consolidation of the Corporation with another
corporation unless the Corporation has obtained the prior written consent of
the holders of the applicable percentages of the Series 1 Preferred Stock and
the Series 3 Preferred Stock then outstanding.
IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation to be signed and attested by its duly authorized
officers this 31st day of January 1994.
/s/ Ralph J. Swett
-------------------------------
Ralph J. Swett, President
Attest:
/s/ John J. Willingham
- -----------------------------
John J. Willingham, Secretary
9
<PAGE> 10
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
IXC CARRIER GROUP, INC.
INTO
IXC COMMUNICATIONS, INC.
(PURSUANT TO SECTION 253 OF THE GENERAL
CORPORATION LAW OF DELAWARE)
IXC Communications, Inc., a Delaware corporation (the "Corporation"),
does hereby certify:
FIRST: That the Corporation is incorporated pursuant to the General
Corporation Law of the State of Delaware.
SECOND: That the Corporation owns all of the outstanding shares of each
class of the capital stock of IXC Carrier Group, Inc., a Delaware corporation
(the "Merging Corporation").
THIRD: That the Corporation, by the following resolutions of its Board
of Directors, duly adopted on the 6th day of October 1995, determined to merge
into itself the Merging Corporation on the conditions set forth in such
resolutions:
"RESOLVED, that the Corporation merge into itself its
subsidiary, IXC Carrier Group, Inc., a Delaware corporation, and assume
all of said subsidiary's liabilities and obligations;
FURTHER RESOLVED, that the President and Secretary of the
Corporation be, and they hereby are, directed to make, execute and
acknowledge a certificate of ownership and merger setting forth a copy
of the resolutions to merge IXC Carrier Group, Inc. into the
Corporation and to assume said subsidiary's liabilities and obligations
and the date of adoption thereof and to file the same in the office of
the Secretary of State of the State of Delaware and a certified copy
thereof in the Office of the Recorder of Deeds of New Castle County;
and
FURTHER RESOLVED, that the effective date of such merger is
November 30, 1995."
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed and this certificate to be signed by Ralph J. Swett, its President, and
John J. Willingham, its Secretary, this 28th day of November 1995.
IXC COMMUNICATIONS, INC.,
a Delaware corporation
By: /s/ Ralph J. Swett
--------------------------------
Ralph J. Swett, President
ATTEST:
By: /s/ John J. Willingham
---------------------------------
John J. Willingham, Secretary [SEAL]
<PAGE> 11
EXECUTION COPY
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL
AND OTHER SPECIAL RIGHTS OF 7 1/4% JUNIOR
CONVERTIBLE PREFERRED STOCK DUE 2007 AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
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Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
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IXC Communications, Inc. (the "Company"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does
hereby certify that, pursuant to authority conferred upon the board of
directors of the Corporation (the "Board of Directors") by its Restated
Certificate of Incorporation (hereinafter referred to as the "Restated
Certificate of Incorporation"), and pursuant to the provisions of Section 151
of the General Corporation Law of the State of Delaware, said Board of
Directors, at a meeting duly called and held on March 28, 1997, duly approved
and adopted the following resolution (the "Resolution"):
RESOLVED that, pursuant to the authority vested in the Board of Directors by
its Certificate of Incorporation, the Board of Directors does hereby create,
authorize and provide for the issuance of 7 1/4% Junior Convertible Preferred
Stock Due 2007, par value $.01 per share, with a stated value initially of
$100 per share, consisting of up to 1,400,000 shares having the designation,
preferences, relative, participating, optional and other special rights and
the qualifications, limitations and restrictions thereof that are set forth
in the Restated Certificate of Incorporation and in this Resolution as
follows:
(a) Designation. There is hereby created out of the authorized and
unissued shares of Preferred Stock of the Company a series of Preferred Stock
designated as the "7 1/4% Junior Convertible Preferred Stock Due 2007" (the
"Convertible Preferred Stock"). The number of shares constituting the
Convertible Preferred Stock shall be 1,400,000. The liquidation preference of
the Convertible Preferred Stock shall be $100 per share (the "Liquidation
Preference").
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(b) Rank. The Convertible Preferred Stock will, with respect to dividend
rights and rights on liquidation, winding-up and dissolution, rank (i) senior
to all classes of common stock and to each other class of Capital Stock or
series of Preferred Stock established hereafter by the Board of Directors of
the Company, the terms of which do not expressly provide that it ranks senior
to, or on a parity with, the Convertible Preferred Stock as to dividend rights
and rights on liquidation, winding-up and dissolution of the Company
(collectively referred to, together with all classes of common stock of the
Company, as "Junior Stock"); (ii) on a parity with each other class of Capital
Stock or series of Preferred Stock established hereafter by the Board of
Directors of the Company, the terms of which expressly provide that such class
or series will rank on a parity with the Convertible Preferred Stock as to
dividend rights and rights on liquidation, winding-up and dissolution
(collectively referred to as "Parity Stock"); and (iii) junior to each share of
Series 3 Preferred Stock now or hereafter outstanding and junior to each class
of Capital Stock or series of Preferred Stock established hereafter by the
Board of Directors of the Company, the terms of which hereafter established
classes or series expressly provide that such class or series will rank senior
to the Convertible Preferred Stock as to dividend rights or rights on
liquidation, winding-up and dissolution of the Company (collectively referred
to as "Senior Stock"). The Company may not authorize, create or increase the
authorized amount of any class or series of Senior Stock without the approval
of the holders of at least two-thirds of the shares of Convertible Preferred
Stock then outstanding, voting or consenting, as the case may be, as one class.
All claims of the holders of the Convertible Preferred Stock, including claims
with respect to dividend payments, redemption payments, mandatory repurchase
payments or rights upon liquidation, winding-up or dissolution, shall rank
junior to the claims of the holders of any debt of the Company and all other
creditors of the Company.
(c) Dividends. (i) Holders of the outstanding shares of Convertible
Preferred Stock will be entitled to receive, when, as and if declared by the
Board of Directors of the Company, out of funds legally available therefor,
dividends on each share of the Convertible Preferred Stock at a rate per annum
equal to 7 1/4% of the Liquidation
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Preference of such share payable quarterly (each such quarterly period being
herein called a "Dividend Period"). In addition to the dividends described in
the preceding sentence, holders of outstanding shares of Convertible Preferred
Stock which are Transfer Restricted Securities will be entitled to additional
dividends (the "Additional Dividends"), when, as and if declared by the Board
of Directors of the Company, out of funds legally available therefor, with
respect to the shares of Convertible Preferred Stock, which Additional
Dividends shall accrue as follows if any of the following events occur (each
such event in clauses (A) and (B) below being herein called a "Registration
Default"): (A) if by August 31, 1997, the Shelf Registration Statement has not
been declared effective by the Commission; or (B) if after the Shelf
Registration Statement is declared effective (1) the Shelf Registration
Statement thereafter ceases to be effective; or (2) the Shelf Registration
Statement or the related prospectus ceases to be usable (in each case except as
permitted below) in connection with resales of Transfer Restricted Securities
in accordance with and during the periods specified herein because either (I)
any event occurs as a result of which the related prospectus forming part of
such Shelf Registration Statement would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which they were made
not misleading, or (II) it shall be necessary to amend such Shelf Registration
Statement or supplement the related prospectus, to comply with the Securities
Act or the Exchange Act or the respective rules thereunder.
Additional Dividends shall accrue on the shares of Convertible Preferred
Stock which are Transfer Restricted Securities from and including the date on
which any such Registration Default shall occur, to but excluding the date on
which all such Registration Defaults have been cured, at a rate of 7 3/4% per
annum.
A Registration Default referred to in clause (B) of paragraph (c)(i) shall
be deemed not to have occurred and be continuing in relation to the Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to the Shelf Registration Statement to incorporate annual audited
financial information with respect to the Company where such post-effective
amendment is not yet effective and needs to be
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declared effective to permit Holders to use the related prospectus or (y) other
material events with respect to the Company that would need to be described in
the Shelf Registration Statement or the related prospectus and (ii) in the case
of clause (y), the Company proceeds promptly and in good faith to amend or
supplement the Shelf Registration Statement and related prospectus to describe
such events unless the Company has determined in good faith that there are
material legal or commercial impediments in doing so; provided, however, that
in any case if such Registration Default occurs for a continuous period in
excess of 45 days, Additional Dividends shall be payable in accordance with the
immediately preceding paragraphs of this paragraph (c)(i) from the day such
Registration Default initially occurs until such Registration Default is cured.
Any amounts of Additional Dividends due pursuant to clauses (A) or (B) of
this paragraph (c)(i) or pursuant to the proviso contained in the preceding
sentence will be payable on the regular dividend payment dates with respect to
the Convertible Preferred Stock and on the same terms and conditions and
subject to the same limitations as pertain at such time for the payment of
regular dividends. The amount of Additional Dividends will be determined by
multiplying the applicable Additional Dividends rate by the aggregate
liquidation preference of the outstanding shares of Convertible Preferred
Stock, multiplied by a fraction, the numerator of which is the number of days
such Additional Dividend rate was applicable during such period (determined on
the basis of a 360-day year comprised of twelve 30-day months), and the
denominator of which is 360.
All dividends on the Convertible Preferred Stock, including Additional
Dividends, to the extent accrued, shall be cumulative, whether or not earned or
declared, on a daily basis from the Issue Date or, in the case of additional
shares of Convertible Preferred Stock issued in payment of a dividend, from the
date of issuance of such additional shares of Convertible Preferred Stock, and
shall be payable quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year (each a "Dividend Payment Date"), commencing on June
30, 1997 to holders of record on the March 15, June 15, September 15 and
December 15 immediately preceding the relevant Dividend Payment Date. Any
dividend on the Convertible Preferred Stock payable pursuant to this paragraph
(c)(i) on or prior to March 31, 1999 shall be, at the option of the Company,
payable (1) in cash or (2) through the issuance of a number of additional
shares
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(rounded to the nearest whole share) of Convertible Preferred Stock (the
"Additional Shares") equal to the dividend amount divided by the Liquidation
Preference of such Additional Shares. With respect to dividends accrued after
March 31, 1999, all dividends shall be payable in cash; provided, however, that
to the extent and for so long as the Company is prohibited by the terms of any
of its indebtedness then outstanding or by the terms of the Series 3 Preferred
Stock of the Company or any agreement or instrument to which the Company is
then subject, from paying cash dividends on the Convertible Preferred Stock,
such dividends will accrue on each share at the rate per annum equal to 8 3/4%
of the Liquidation Preference per share (instead of the 7 1/4% rate set forth
in the first paragraph of this paragraph (c)(i)) (together with any Additional
Dividends then payable, which for purposes of this paragraph shall be payable
at a rate of 0.50% over and above the 8 3/4% rate) payable through the issuance
of a number of Additional Shares (rounded to the nearest whole share) equal to
the dividend amount on such share divided by the Liquidation Preference of such
Additional Shares on the relevant Dividend Payment Date. Except as provided
herein, accrued and unpaid dividends, if any, will not bear interest or bear
dividends thereon.
(ii) All dividends paid with respect to shares of the Convertible Preferred
Stock pursuant to paragraph (c)(i) shall be paid pro rata to the holders
entitled thereto.
(iii) No full dividends may be declared or paid or set apart for the
payment of dividends by the Company on any Parity Stock for any period unless
full cumulative dividends in respect of each Dividend Period ending on or
before such period shall have been or contemporaneously are declared and paid
(or are deemed declared and paid) in full or declared and, if payable in cash,
a sum in cash sufficient for such payment set apart for such payment on the
Convertible Preferred Stock. If full dividends are not so paid, the
Convertible Preferred Stock will share dividends pro rata with the Parity
Stock.
(iv) The Company will not (A) declare, pay or set apart funds for the
payment of any dividend or other distribution with respect to any Junior Stock
or (B) redeem, purchase or otherwise acquire for consideration any Junior Stock
through a sinking fund or otherwise, unless (1) all accrued and unpaid
dividends with respect to the Convertible Preferred Stock and any Parity Stock
at the time such
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dividends are payable have been paid or funds have been set apart for payment
of such dividends and (2) sufficient funds have been paid or set apart for the
payment of the dividend for the current dividend period with respect to the
Convertible Preferred Stock and any Parity Stock. As used herein, the term
"dividend" does not include dividends payable solely in shares of Junior Stock
on Junior Stock or in options, warrants or rights to holders of Junior Stock to
subscribe or purchase any Junior Stock.
(v) Dividends on account of arrears for any past Dividend Period and
dividends in connection with any optional redemption may be declared and paid
at any time, without reference to any regular Dividend Payment Date, to holders
of record on such date, not more than 45 days prior to the payment thereof, as
may be fixed by the Board of Directors of the Company.
(vi) Dividends payable on the Convertible Preferred Stock for any period
other than a Dividend Period shall be computed on the basis of a 360-day
consisting year of twelve 30-day months and the actual number of days elapsed
in the period for which payable. Dividends payable on the Convertible
Preferred Stock for a full Dividend Period will be computed by dividing the per
annum dividend rate by four.
(vii) Certificates of Common Stock relating to Convertible Preferred Stock
surrendered for conversion by a registered Holder during the period from the
close of business on any regular record date next preceding any Dividend
Payment Date to the opening of business on such Dividend Payment Date (except
Convertible Preferred Shares called for redemption on a Redemption Date within
such period) must be accompanied by payment in cash of an amount equal to the
accrued but unpaid dividends thereon which such registered Holder is to receive
on such Dividend Payment Date with respect to the Convertible Preferred Stock
so surrendered.
(d) Liquidation Preference. (i) Upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, holders of Convertible
Preferred Stock will be entitled to be paid, out of the assets of the Company
available for distribution to its stockholders, the Liquidation Preference of
the outstanding shares of Convertible Preferred Stock, plus, without
duplication, an amount in cash equal to all accumulated and unpaid dividends
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(whether or not earned or declared and including Additional Dividends, if any,)
thereon to the date fixed for liquidation, dissolution or winding-up (including
an amount equal to a prorated dividend for the period from the last Dividend
Payment Date to the date fixed for liquidation, dissolution or winding-up that
would have been payable had the Convertible Preferred Stock been the subject of
an Optional Redemption on such date) before any distribution is made on any
Junior Stock. If, upon any voluntary or involuntary liquidation, dissolution
or winding up of the Company, the amounts payable with respect to the
Convertible Preferred Stock and all Parity Stock are not paid in full, the
Convertible Preferred Stock and the Parity Stock will share equally and ratably
(in proportion to the respective amounts that would be payable on such shares
of Convertible Preferred Stock and the Parity Stock, respectively, if all
amounts payable thereon had been paid in full) in any distribution of assets of
the Company to which each is entitled. After payment of the full amount of the
Liquidation Preference of the outstanding shares of Convertible Preferred Stock
(and, if applicable, an amount equal to a prorated dividend), the holders of
shares of Convertible Preferred Stock will not be entitled to any further
participation in any distribution of assets of the Company.
(ii) For the purposes of this paragraph (d), neither the sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Company nor the consolidation or merger of the Company with or into one or more
other entities shall be deemed to be a liquidation, dissolution or winding-up
of the Company.
(e) Redemption. (i) Optional Redemption. (A) The Convertible Preferred
Stock shall not be redeemable prior to April 3, 2000. On or after April 3,
2000, each share of the Convertible Preferred Stock may be redeemed (subject to
the legal availability of funds therefor) at any time, in whole or in part, at
the option of the Company, at the redemption prices (expressed as a percentage
of the Liquidation Preference of such share) set forth below, plus, without
duplication, an amount in cash equal to all accrued and unpaid Liquidated
Damages and all accrued and unpaid dividends to the date fixed for redemption
(the "Optional Redemption Date") (including an amount in cash equal to a
prorated dividend for the period from the Dividend Payment Date immediately
prior to the Optional Redemption Date) (the
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"Optional Redemption Price"). Notwithstanding the foregoing, prior to April 1,
2002, the Company shall only have the option to redeem shares of Convertible
Preferred Stock if, during the period of 30 consecutive Trading Days ending on
the Trading Day immediately preceding the date that the Redemption Notice is
mailed to holders, the Closing Bid Price for the Common Stock exceeded 150% of
the Conversion Price effective on the date of such Redemption Notice for at
least 20 of such Trading Days. If redeemed during the 12-month period
beginning April 1 of each of the years set forth below (or in the case of the
year 2000, April 3), the Optional Redemption Price per share shall be the
applicable percentage of the Liquidation Preference of such share set forth
below plus, without duplication, in each case, an amount in cash equal to all
accrued and unpaid Liquidated Damages and all accrued and unpaid dividends
(including an amount equal to a prorated dividend from the immediately
preceding Dividend Payment Date to the Optional Redemption Date), if any, to
the Optional Redemption Date:
<TABLE>
<CAPTION>
Year in which redemption occurs Percentage
------------------------------- ----------
<S> <C>
2000 . . . . . . . . . . . . . 104.83%
2001 . . . . . . . . . . . . . 104.03%
2002 . . . . . . . . . . . . . 103.22%
2003 . . . . . . . . . . . . . 102.42%
2004 . . . . . . . . . . . . . 101.61%
2005 . . . . . . . . . . . . . 100.81%
2006 . . . . . . . . . . . . . 100.00%
</TABLE>
(B) In the event of a redemption of only a portion of the then outstanding
shares of Convertible Preferred Stock, the Company shall effect such redemption
on a pro rata basis, except that the Company may redeem all of the shares held
by holders of fewer than 100 shares (or all of the shares held by holders who
would hold less than 100 shares as a result of such redemption), as may be
determined by the Company.
(ii) Mandatory Redemption. Each share of the Convertible Preferred Stock
(if not earlier redeemed or converted) shall be subject to mandatory redemption
in whole (to the extent of lawfully available funds therefor) on March 31, 2007
(the "Mandatory Redemption Date") at a price equal to 100% of the Liquidation
Preference of such share, plus, without duplication, all accrued and unpaid
Liquidated Damages and accrued and unpaid dividends thereon (including
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an amount equal to a prorated dividend thereon from the immediately preceding
Dividend Payment Date to the Mandatory Redemption Date), if any, to the
Mandatory Redemption Date (the "Mandatory Redemption Price").
(iii) Procedure for Redemption. (A) On and after the Optional Redemption
Date or the Mandatory Redemption Date, as the case may be (the "Redemption
Date"), unless the Company defaults in the payment of the applicable redemption
price, dividends will cease to accumulate on shares of Convertible Preferred
Stock called for redemption and all rights of holders of such shares will
terminate except for the right to receive the Optional Redemption Price or the
Mandatory Redemption Price, as the case may be, without interest; provided,
however, that if a notice of redemption shall have been given as provided in
paragraph (iii)(B) and the funds necessary for redemption (including an amount
in respect of all dividends that will accrue to the Redemption Date) shall have
been segregated and irrevocably set apart by the Company, in trust for the
benefit of the holders of the shares called for redemption, then dividends
shall cease to accumulate on the Redemption Date on the shares to be redeemed
and, at the close of business on the day on which such funds are segregated and
set apart, the holders of the shares to be redeemed shall, with respect to the
shares to be redeemed, cease to be stockholders of the Company and shall be
entitled only to receive the Optional Redemption Price or the Mandatory
Redemption Price, as the case may be, for such shares without interest from the
Redemption Date.
(B) With respect to a redemption pursuant to paragraph (e)(i) or (e)(ii),
the Company will send a written notice of redemption by first class mail to
each holder of record of shares of Convertible Preferred Stock, not fewer than
15 days nor more than 60 days prior to the Redemption Date at its registered
address (the "Redemption Notice"); provided, however, that no failure to give
such notice nor any deficiency therein shall affect the validity of the
procedure for the redemption of any shares of Convertible Preferred Stock to be
redeemed except as to the holder or holders to whom the Company has failed to
give said notice or except as to the holder or holders whose notice was
defective. The Redemption Notice shall state:
(1) whether the redemption is pursuant to paragraph (e)(i) or (e)(ii)
hereof;
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(2) the Optional Redemption Price or the Mandatory Redemption Price, as
the case may be;
(3) whether all or less than all the outstanding shares of the Convertible
Preferred Stock are to be redeemed and the total number of shares of the
Convertible Preferred Stock being redeemed;
(4) the Redemption Date;
(5) that the holder is to surrender to the Company, in the manner, at the
place or places and at the price designated, his certificate or certificates
representing the shares of Convertible Preferred Stock to be redeemed; and
(6) that dividends on the shares of the Convertible Preferred Stock to be
redeemed shall cease to accumulate on such Redemption Date unless the Company
defaults in the payment of the Optional Redemption Price or the Mandatory
Redemption Price, as the case may be.
(C) Each holder of Convertible Preferred Stock shall surrender the
certificate or certificates representing such shares of Convertible Preferred
Stock to the Company, duly endorsed (or otherwise in proper form for transfer,
as determined by the Company), in the manner and at the place designated in the
Redemption Notice, and on the Redemption Date the full Optional Redemption
Price or Mandatory Redemption Price, as the case may be, for such shares shall
be payable in cash to the person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall be
canceled and retired. In the event that less than all of the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
(f) Voting Rights. (i) The holders of Convertible Preferred Stock, except
as otherwise required under Delaware law or as set forth in paragraphs (ii) and
(iii) below, shall not be entitled or permitted to vote on any matter required
or permitted to be voted upon by the stockholders of the Company.
(ii) (A) If (1) dividends on the Convertible Preferred Stock are in
arrears and unpaid for six or more Dividend Periods (whether or not
consecutive) (a "Dividend
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Default"); or (2) the Company fails to redeem the Convertible Preferred Stock on
March 31, 2007, or fails to otherwise discharge any redemption obligation with
respect to the Convertible Preferred Stock, then the number of directors
constituting the Board of Directors of the Company will be increased by two and
the Holders of the then outstanding shares of Convertible Preferred Stock
(together with the holders of Parity Stock upon which like rights have been
conferred and are exercisable), voting separately and as a class, shall have the
right and power to elect such two additional directors. Each such event
described in clauses (1) or (2) above is a "Voting Rights Triggering Event". A
Voting Rights Triggering Event shall not be deemed to have occurred if at the
time of such event there are less than 200,000 shares of Convertible Preferred
Stock then outstanding.
(B) The voting rights set forth in subparagraph (f)(ii)(A) above will
continue until such time as (x) in the case of a Dividend Default, all
dividends in arrears on the Convertible Preferred Stock are paid in full in
cash, (y) in all other cases, any failure, breach or default giving rise to
such Voting Rights Triggering Event is remedied or waived by the Holders of at
least two-thirds of the shares of Convertible Preferred Stock then outstanding
or (z) at any time there are less than 200,000 shares of Convertible Preferred
Stock outstanding, at which time the term of any directors elected pursuant to
the provisions of subparagraph (f)(ii)(A) above shall terminate and the number
of directors constituting the Board of Directors shall be decreased by two
(until the occurrence of any subsequent Voting Rights Triggering Event). At
any time after voting power to elect directors shall have become vested and be
continuing in the holders of Convertible Preferred Stock (together with the
holders of Parity Stock upon which like rights have been conferred and are
exercisable) pursuant to subparagraph (f)(ii)(A) hereof, or if vacancies shall
exist in the offices of directors elected by such holders, a proper officer of
the Company may, and upon the written request of the holders of record of at
least 25% of the shares of Convertible Preferred Stock then outstanding or the
holders of 25% of the shares of Parity Stock then outstanding upon which like
rights have been confirmed and are exercisable addressed to the secretary of
the Company shall, call a special meeting of the Holders of Convertible
Preferred Stock and the holders of such Parity Stock for the purpose of
electing the directors which such holders are entitled to elect pursuant to the
terms hereof;
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provided, however, that no such special meeting shall be called if the next
annual meeting of stockholders of the Company is to be held within 60 days
after the voting power to elect directors shall have become vested, in which
case such meeting shall be deemed to have been called for such next annual
meeting. If such meeting shall not be called by a proper officer of the
Company within 20 days after personal service to the secretary of the Company
at its principal executive offices, then the Holders of record of at least 25%
of the outstanding shares of Convertible Preferred Stock or the holders of 25%
of the shares of Parity Stock upon which like rights have been confirmed and
are exercisable may designate in writing one of their members to call such
meeting at the expense of the Company, and such meeting may be called by the
person so designated upon the notice required for the annual meetings of
stockholders of the Company and shall be held at the place for holding the
annual meetings of stockholders. Any holder of Convertible Preferred Stock or
such Parity Stock so designated shall have, and the Company shall provide,
access to the lists of holders of Convertible Preferred Stock and the holders
of such Parity Stock to be called pursuant to the provisions hereof. If no
special meeting of the Holders of Convertible Preferred Stock and the holders
of such Parity Stock is called as provided in this paragraph (f)(ii), then such
meeting shall be deemed to have been called for the next annual meeting of
stockholders of the Company or special meeting of the holders of any other
capital stock of the Company.
(C) At any meeting held for the purposes of electing directors at which the
Holders of Convertible Preferred Stock (together with the holders of Parity
Stock upon which like rights have been conferred and are exercisable) shall
have the right, voting together as a separate class, to elect directors as
aforesaid, the presence in person or by proxy of the holders of at least a
majority in voting power of the outstanding shares of Convertible Preferred
Stock (and such Parity Stock) shall be required to constitute a quorum thereof.
(D) Any vacancy occurring in the office of a director elected by the
Holders of Convertible Preferred Stock (and such Parity Stock) may be filled by
the remaining director elected by the Holders of Convertible Preferred Stock
(and such Parity Stock) unless and until such vacancy shall be filled by the
Holders of Convertible Preferred Stock (and such Parity Stock).
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(iii) (A) So long as any shares of the Convertible Preferred Stock are
outstanding, the Company will not authorize, create or increase the authorized
amount of any class or series of Senior Stock without the affirmative vote or
consent of holders of at least two-thirds of the shares of Convertible
Preferred Stock then outstanding, voting or consenting, as the case may be, as
one class, given in person or by proxy, either in writing or by resolution
adopted at an annual or special meeting (except that no such vote or consent
shall be required for the issuance of additional shares of Series 3 Preferred
Stock to be paid as dividends on such Series 3 Preferred Stock pursuant to the
terms of such Series 3 Preferred Stock).
(B) So long as any shares of the Convertible Preferred Stock are
outstanding, the Company will not amend this Certificate of Designation so as
to affect adversely the specified rights, preferences, privileges or voting
rights of Holders of shares of Convertible Preferred Stock or to authorize the
issuance of any additional shares of Convertible Preferred Stock (except to
authorize the issuance of additional shares of Convertible Preferred Stock to
be paid as dividends on the Convertible Preferred Stock, for which no consent
shall be necessary) without the affirmative vote or consent of Holders of at
least two-thirds of the issued and outstanding shares of Convertible Preferred
Stock, voting or consenting, as the case may be, as one class, given in person
or by proxy, either in writing or by resolution adopted at an annual or special
meeting.
(C) Except as set forth in paragraph (f)(iii)(A) or (B) above, (x) the
creation, authorization or issuance of any shares of any Junior Stock, Parity
Stock or Senior Stock, including the designation of a series of Convertible
Preferred Stock, or (y) the increase or decrease in the amount of authorized
Capital Stock of any class, including Preferred Stock, shall not require the
consent of Holders of Convertible Preferred Stock and shall not be deemed to
affect adversely the rights, preferences, privileges or voting rights of shares
of Convertible Preferred Stock.
(iv) In any case in which the Holders of Convertible Preferred Stock shall
be entitled to vote pursuant to this paragraph (f) or pursuant to Delaware law,
each Holder of Convertible Preferred Stock entitled to vote with respect to
such matters shall be entitled to one vote for each share of Convertible
Preferred Stock held.
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(v) Except as required by law, the Holders of the Convertible Preferred
Stock will not be entitled to vote on any merger or consolidation involving the
Company or a sale of all or substantially all the assets of the Company.
(g) Conversion. (i) At any time after 60 days from the Issue Date, at the
option of the Holder thereof, any share of Convertible Preferred Stock may be
converted at the Liquidation Preference thereof into fully paid and
nonassessable Common Stock (calculated as to each conversion to the nearest
1/100 of a share), at the Conversion Price, determined as hereinafter provided,
in effect at the time of conversion. Such conversion right shall expire at the
close of business on the Mandatory Redemption Date. In case a share of
Convertible Preferred Stock is called for optional redemption, such conversion
right in respect of the share of Convertible Preferred Stock so called shall
expire at the close of business on the applicable Optional Redemption Date,
unless the Company defaults in making the payment due upon redemption.
The price at which Common Stock shall be delivered upon conversion (herein
called the "Conversion Price") shall be initially $23.46 per share of Common
Stock. The Conversion Price shall be adjusted in certain instances as provided
in paragraph (g)(iv) and paragraph (g)(v).
(ii) In order to exercise the conversion privilege, the Holder of any share
of Convertible Preferred Stock to be converted shall surrender the certificate
for such share of Convertible Preferred Stock, duly endorsed or assigned to the
Company or in blank, at the office of the Transfer Agent or at any office or
agency of the Company maintained for that purpose, accompanied by written
notice to the Company in the form of Exhibit B that the Holder elects to
convert such share of Convertible Preferred Stock or, if fewer than all of the
shares of Convertible Preferred Stock represented by a single share certificate
are to be converted, the number of shares represented thereby to be converted.
Except as provided in paragraph (c)(viii), no payment or adjustment shall be
made upon any conversion on account of any dividends accrued on the shares of
Convertible Preferred Stock surrendered for conversion or on account of any
dividends on the Common Stock issued upon conversion. Such notice shall also
contain the office or the address to which the Company should deliver shares of
Common Stock issuable upon conversion (and any other payments or certificates
related thereto). Except as
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provided in paragraph (c)(viii), in no event shall the Company be obligated to
pay any converting Holder any unpaid dividend, whether or not in arrears, on
converted shares or any dividends on the shares of Common Stock issued upon
such conversion.
Shares of Convertible Preferred Stock shall be deemed to have been converted
immediately prior to the close of business on the day of surrender of such
shares of Convertible Preferred Stock for conversion in accordance with the
foregoing provisions, and at such time the rights of the Holders of such shares
of Convertible Preferred Stock as Holders shall cease, and the person or
persons entitled to receive the Common Stock issuable upon conversion shall be
treated for all purposes as the record holder or holders of such Common Stock
at such time. As promptly as practicable on or after the conversion date, the
Company shall issue and shall deliver to such office or agency as the
converting Holder shall have designated in its written notice to the Company a
certificate or certificates for the number of full Common Stock issuable upon
conversion, together with payment in lieu of any fraction of a share, as
provided in paragraph (g)(iii) hereof.
In the case of any conversion of fewer than all the shares of Convertible
Preferred Stock evidenced by a certificate, upon such conversion the Company
shall execute and the Transfer Agent shall authenticate and deliver to the
Holder thereof (at the address designated by such Holder), at the expense of
the Company, a new certificate or certificates representing the number of
unconverted shares of Convertible Preferred Stock.
(iii) No fractional Common Stock shall be issued upon the conversion of a
share of Convertible Preferred Stock. If more than one share of Convertible
Preferred Stock shall be surrendered for conversion at one time by the same
holder, the number of full shares of Common Stock which shall be issuable upon
conversion thereof shall be computed on the basis of the aggregate shares of
Convertible Preferred Stock so surrendered. Instead of any fractional share of
Common Stock which would otherwise be issuable upon conversion of any share of
Convertible Preferred Stock, the Company shall pay a cash adjustment in respect
of such fraction in an amount equal to the same fraction of the closing price
(as defined in paragraph (g)(iv)(7)) per share of Common Stock at the close of
business on the Business Day prior to the day of conversion.
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(iv) The Conversion Price shall be adjusted from time to time by the
Company as follows:
(1) If the Company shall hereafter pay a dividend or make a distribution in
Common Stock to all holders of any outstanding class or series of Common
Stock of the Company, the Conversion Price in effect at the opening of
business on the date following the date fixed for the determination of
shareholders entitled to receive such dividend or other distribution shall be
reduced by multiplying such Conversion Price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the
close of business on the Record Date (as defined in paragraph (g)(iv)(7))
fixed for such determination and the denominator shall be the sum of such
number of outstanding shares and the total number of shares constituting such
dividend or other distribution, such reduction to become effective
immediately after the opening of business on the day following the Record
Date. If any dividend or distribution of the type described in this
paragraph (g)(iv)(i) is declared but not so paid or made, the Conversion
Price shall again be adjusted to the Conversion Price which would then be in
effect if such dividend or distribution had not been declared.
(2) If the Company shall offer or issue rights or warrants to all holders
of its outstanding Common Stock entitling them to subscribe for or purchase
Common Stock at a price per share less than the Current Market Price (as
defined in paragraph (g)(iv)(7)) on the Record Date fixed for the
determination of shareholders entitled to receive such rights or warrants,
the Conversion Price shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect at the opening of
business on the date after such Record Date by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the
close of business on the Record Date plus the number of shares of Common
Stock which the aggregate offering price of the total number of shares of
Common Stock subject to such rights or warrants would purchase at such
Current Market Price and of which the denominator shall be the number of
shares of Common Stock outstanding at the close of business on the Record
Date plus the total number of additional shares of Common Stock subject to
such
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<PAGE> 27
rights or warrants for subscription or purchase. Such adjustment shall
become effective immediately after the opening of business on the day
following the Record Date fixed for determination of shareholders entitled to
purchase or receive such rights or warrants. To the extent that shares of
Common Stock are not delivered pursuant to such rights or warrants, upon the
expiration or termination of such rights or warrants the Conversion Price
shall again be adjusted to be the Conversion Price which would then be in
effect had the adjustments made upon the issuance of such rights or warrants
been made on the basis of delivery of only the number of shares of Common
Stock actually delivered. If such rights or warrants are not so issued, the
Conversion Price shall again be adjusted to be the Conversion Price which
would then be in effect if such date fixed for the determination of
shareholders entitled to receive such rights or warrants had not been fixed.
In determining whether any rights or warrants entitle the holders to
subscribe for or purchase Common Stock at less than such Current Market
Price, and in determining the aggregate offering price of such shares of
Common Stock, there shall be taken into account any consideration received
for such rights or warrants, with the value of such consideration, if other
than cash, to be determined by the Board of Directors.
(3) If the outstanding shares of Common Stock shall be subdivided into a
greater number of shares of Common Stock, the Conversion Price in effect at
the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately reduced, and,
conversely, if the outstanding shares of Common Stock shall be combined into
a smaller number of shares of Common Stock, the Conversion Price in effect at
the opening of business on the day following the day upon which such
combination becomes effective shall be proportionately increased, such
reduction or increase, as the case may be, to become effective immediately
after the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(4) If the Company shall, by dividend or otherwise, distribute to all
holders of its shares of Common Stock shares of any class of capital stock of
the Company (other than any dividends or distributions
17
<PAGE> 28
to which paragraph (g)(iv)(1) applies) or evidences of its indebtedness, cash
or other assets (including securities, but excluding any rights or warrants
of a type referred to in paragraph (g)(iv)(2) and excluding dividends and
distributions paid exclusively in cash and excluding any capital stock,
evidences of indebtedness, cash or assets distributed upon a merger or
consolidation to which paragraph (g)(v) applies) (the foregoing hereinafter
in this paragraph (g)(iv)(4) called the "Distributed Securities"), then, in
each such case, the Conversion Price shall be reduced so that the same shall
be equal to the price determined by multiplying the Conversion Price in
effect immediately prior to the close of business on the Record Date (as
defined in paragraph (g)(iv)(7)) with respect to such distribution by a
fraction of which the numerator shall be the Current Market Price (determined
as provided in paragraph (g)(iv)(7)) of the Common Stock on such date less
the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the Board
of Directors) on such date of the portion of the Distributed Securities so
distributed applicable to one share of Common Stock and the denominator shall
be such Current Market Price, such reduction to become effective immediately
prior to the opening of business on the day following the Record Date;
provided, however, that, in the event the then fair market value (as so
determined) of the portion of the Distributed Securities so distributed
applicable to one share of Common Stock is equal to or greater than the
Current Market Price on the Record Date, in lieu of the foregoing adjustment,
adequate provision shall be made so that each holder of Convertible Preferred
Stock shall have the right to receive upon conversion of a share of
Convertible Preferred Stock (or any portion thereof) the amount of
Distributed Securities such holder would have received had such holder
converted such share of Convertible Preferred Stock (or portion thereof)
immediately prior to such Record Date. If such dividend or distribution is
not so paid or made, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such dividend or
distribution had not been declared. If the Board of Directors determines the
fair market value of any distribution for purposes of this paragraph
(g)(iv)(4) by reference to the actual or when issued trading market for any
securities comprising all
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<PAGE> 29
or part of such distribution, it must in doing so consider the prices in such
market over the same period used in computing the Current Market Price
pursuant to paragraph (g)(iv)(7) to the extent possible.
Rights or warrants distributed by the Company to all holders of Common Stock
entitling the holders thereof to subscribe for or purchase shares of the
Company's capital stock (either initially or under certain circumstances),
which rights or warrants, until the occurrence of a specified event or events
("Dilution Trigger Event"): (i) are deemed to be transferred with such
Common Stock; (ii) are not exercisable; and (iii) are also issued in respect
of future issuances of Common Stock, shall be deemed not to have been
distributed for purposes of this paragraph (g)(iv)(4) (and no adjustment to
the Conversion Price under this paragraph (g)(iv)(4) shall be required) until
the occurrence of the earliest Dilution Trigger Event, whereupon such rights
and warrants shall be deemed to have been distributed and an appropriate
adjustment to the Conversion Price under this paragraph (g)(iv)(4) shall be
made. If any such rights or warrants, including any such existing rights or
warrants distributed prior to the date hereof, are subject to subsequent
events, upon the occurrence of each of which such rights or warrants shall
become exercisable to purchase different securities, evidences of
indebtedness or other assets, then the occurrence of each such event shall be
deemed to be such date of issuance and record date with respect to new rights
or warrants (and a termination or expiration of the existing rights or
warrants without exercise by the holder thereof). In addition, in the event
of any distribution (or deemed distribution) of rights or warrants, or any
Dilution Trigger Event with respect thereto, that was counted for purposes of
calculating a distribution amount for which an adjustment to the Conversion
Price under this paragraph (g)(iv)(4) was made, (1) in the case of any such
rights or warrants which shall all have been redeemed or repurchased without
exercise by any holders thereof, the Conversion Price shall be readjusted
upon such final redemption or repurchase to give effect to such distribution
or Dilution Trigger Event, as the case may be, as though it were a cash
distribution, equal to the per share redemption or repurchase price received
by a holder or holders of Common Stock with respect to such rights or
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<PAGE> 30
warrants (assuming such holder had retained such rights or warrants), made to
all holders of Common Stock as of the date of such redemption or repurchase,
and (2) in the case of such rights or warrants which shall have expired or
been terminated without exercise by any holders thereof, the Conversion Price
shall be readjusted as if such rights and warrants had not been issued.
Notwithstanding any other provision of this paragraph (g)(iv)(4) to the
contrary, capital stock, rights, warrants, evidences of indebtedness, other
securities, cash or other assets (including, without limitation, any rights
distributed pursuant to any shareholder rights plan) shall be deemed not to
have been distributed for purposes of this paragraph (g)(iv)(4) if the
Company makes proper provision so that each holder of shares of Convertible
Preferred Stock who converts a share of Convertible Preferred Stock (or any
portion thereof) after the date fixed for determination of shareholders
entitled to receive such distribution shall be entitled to receive upon such
conversion, in addition to the Common Stock issuable upon such conversion,
the amount and kind of such distributions that such holder would have been
entitled to receive if such holder had, immediately prior to such
determination date, converted such share of Convertible Preferred Stock into
Common Stock.
For purposes of this paragraph (g)(iv)(4) and paragraphs (g)(iv)(1) and (2),
any dividend or distribution to which this paragraph (g)(iv)(4) is
applicable that also includes Common Stock, or rights or warrants to
subscribe for or purchase Common Stock to which paragraph (g)(iv)(2) applies
(or both), shall be deemed instead to be (1) a dividend or distribution of
the evidences of indebtedness, cash, assets, shares of capital stock, rights
or warrants other than (A) such shares of Common Stock or (B) rights or
warrants to which paragraph (g)(iv)(2) applies (and any Conversion Price
reduction required by this paragraph (g)(iv)(4) with respect to such dividend
or distribution shall then be made) immediately followed by (2) a dividend or
distribution of such Common Stock or such rights or warrants (and any further
Conversion Price reduction required by paragraph (g)(iv)(1) and (2) with
respect to such dividend or distribution shall then be made), except that (1)
the Record Date of such
20
<PAGE> 31
dividend or distribution shall be substituted as "the Record Date fixed for
the determination of stockholders entitled to receive such dividend or other
distribution", "Record Date fixed for such determination" and "Record Date"
within the meaning of paragraph (g)(iv)(1) and as "the Record Date fixed for
the determination of shareholders entitled to receive such rights or
warrants", "the date fixed for the determination of the shareholders entitled
to receive such rights or warrants" and "such Record Date" within the meaning
of paragraph (g)(iv)(2), and (2) any share of Common Stock included in such
dividend or distribution shall not be deemed "outstanding at the close of
business on the date fixed for such determination" within the meaning of
paragraph (g)(iv)(1).
(5) If the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock cash (excluding any cash that is distributed upon
a merger or consolidation to which paragraph (g)(v) applies or as part of a
distribution referred to in paragraph (g)(iv)) in an aggregate amount that,
combined together with (1) the aggregate amount of any other such
distributions to all holders of its Common Stock made exclusively in cash
within the 12 months preceding the date of payment of such distribution, and
in respect of which no adjustment pursuant to this paragraph (g)(iv)(5) has
been made, and (2) the aggregate of any cash plus the fair market value (as
determined by the Board of Directors, whose determination shall be conclusive
and described in a resolution of the Board of Directors) of consideration
payable in respect of any tender offer by the Company or a Subsidiary of the
Company for all or any portion of the Common Stock concluded within the 12
months preceding the date of payment of such distribution, and in respect of
which no adjustment pursuant to paragraph (g)(iv)(4) has been made, exceeds
12.5% of the product of the Current Market Price (determined as provided in
paragraph (g)(iv)(7)) on the Record Date with respect to such distribution
times the number of shares of Common Stock outstanding on such date, then,
and in each such case, immediately after the close of business on such date,
the Conversion Price shall be reduced so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the close of business on
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<PAGE> 32
such Record Date by a fraction (i) the numerator of which shall be equal to
the Current Market Price on the Record Date less an amount equal to the
quotient of (x) the excess of such combined amount over such 12.5% amount
divided by (y) the number of shares of Common Stock outstanding on the Record
Date and (ii) the denominator of which shall be equal to the Current Market
Price on such Record Date; provided, however, that, if the portion of the
cash so distributed applicable to one share of Common Stock is equal to or
greater than the Current Market Price of the Common Stock on the Record Date,
in lieu of the foregoing adjustment, adequate provision shall be made so that
each holder of Convertible Preferred Stock shall have the right to receive
upon conversion of a share of Convertible Preferred Stock (or any portion
thereof) the amount of cash such holder would have received had such holder
converted such share of Convertible Preferred Stock (or portion thereof)
immediately prior to such Record Date. If such dividend or distribution is
not so paid or made, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such dividend or
distribution had not been declared.
(6) If a tender or exchange offer made by the Company or any of its
Subsidiaries for all or any portion of the Common Stock expires and such
tender or exchange offer (as amended upon the expiration thereof) requires
the payment to shareholders (based on the acceptance (up to any maximum
specified in the terms of the tender offer) of Purchased Shares (as defined
below)) of an aggregate consideration having a fair market value (as
determined by the Board of Directors, whose determination shall be conclusive
and described in a resolution of the Board of Directors) that, combined
together with (1) the aggregate of the cash plus the fair market value (as
determined by the Board of Directors, whose determination shall be conclusive
and described in a resolution of the Board of Directors), as of the
expiration of such tender offer, of consideration payable in respect of any
other tender offers, by the Company or any of its Subsidiaries for all or any
portion of the Common Stock expiring within the 12 months preceding the
expiration of such tender offer and in respect of which no adjustment
pursuant to this paragraph (g)(iv)(6) has been made and (2) the aggregate
amount of any distributions to all holders of
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<PAGE> 33
the Common Stock made exclusively in cash within 12 months preceding the
expiration of such tender offer and in respect of which no adjustment
pursuant to paragraph (g)(iv)(5) has been made, exceeds 12.5% of the product
of the Current Market Price (determined as provided in paragraph (g)(iv)(7))
as of the last time (the "Expiration Time") tenders could have been made
pursuant to such tender offer (as it may be amended) times the number of
shares of Common Stock outstanding (including any tendered shares) at the
Expiration Time, then, and in each such case, immediately prior to the
opening of business on the day after the date of the Expiration Time, the
Conversion Price shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the close of business on the date of the Expiration Time by a fraction of
which the numerator shall be the number of shares of Common Stock outstanding
(including any tendered shares) at the Expiration Time multiplied by the
Current Market Price of the Common Stock on the Trading Day next succeeding
the Expiration Time and the denominator shall be the sum of (x) the fair
market value (determined as aforesaid) of the aggregate consideration payable
to shareholders based on the acceptance (up to any maximum specified in the
terms of the tender offer) of all shares validly tendered and not withdrawn
as of the Expiration Time (the shares deemed so accepted, up to any such
maximum, being referred to as the "Purchased Shares") and (y) the product of
the number of shares of Common Stock outstanding (less any Purchased Shares)
at the Expiration Time and the Current Market Price of the Common Stock on
the Trading Day next succeeding the Expiration Time, such reduction (if any)
to become effective immediately prior to the opening of business on the day
following the Expiration Time. If the Company is obligated to purchase
shares pursuant to any such tender offer, but the Company is permanently
prevented by applicable law from effecting any such purchases or all such
purchases are rescinded, the Conversion Price shall again be adjusted to be
the Conversion Price which would then be in effect if such tender offer had
not been made. If the application of this paragraph (g)(iv)(6) to any tender
offer would result in an increase in the Conversion Price, no adjustment
shall be made for such tender offer under this paragraph (g)(iv)(6).
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<PAGE> 34
(7) For purposes of this paragraph (g)(iv), the following terms shall have
the meaning indicated:
"closing price" with respect to any securities on any day means the closing
price on such day or, if no such sale takes place on such day, the average of
the reported high and low prices on such day, in each case on The Nasdaq
National Market or the New York Stock Exchange, as applicable, or, if such
security is not listed or admitted to trading on such national market or
exchange, on the principal national securities exchange or quotation system
on which such security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national securities exchange
or quotation system, the average of the high and low prices of such security
on the over-the-counter market on the day in question as reported by the
National Quotation Bureau Incorporated or a similar generally accepted
reporting service, or, if not so available, in such manner as furnished by
any New York Stock Exchange member firm selected from time to time by the
Board of Directors for that purpose, or a price determined in good faith by
the Board of Directors, whose determination shall be conclusive and described
in a resolution of the Board of Directors.
"Current Market Price" means the average of the daily closing prices per
share of Common Stock for the 10 consecutive trading days immediately prior
to the date in question; provided, however, that (A) if the "ex" date (as
hereinafter defined) for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to the Conversion
Price pursuant to paragraphs (g)(iv)(1), (2), (3), (4), (5) or (6) occurs
during such 10 consecutive trading days, the closing price for each trading
day prior to the "ex" date for such other event shall be adjusted by
multiplying such closing price by the same fraction by which the Conversion
Price is so required to be adjusted as a result of such other event, (B) if
the "ex" date for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to the Conversion
Price pursuant to paragraphs (g)(iv)(1), (2), (3), (4), (5) or (6) occurs on
or after the "ex" date for the issuance or distribution requiring such
computation and prior to the day in question, the closing price for each
trading day on and after the
24
<PAGE> 35
"ex" date for such other event shall be adjusted by multiplying such closing
price by the reciprocal of the fraction by which the Conversion Price is so
required to be adjusted as a result of such other event and (C) if the "ex"
date for the issuance or distribution requiring such computation is prior to
the day in question, after taking into account any adjustment required
pursuant to clause (A) or (B) of this proviso, the closing price for each
trading day on or after such "ex" date shall be adjusted by adding thereto
the amount of any cash and the fair market value (as determined by the Board
of Directors in a manner consistent with any determination of such value for
purposes of paragraphs (g)(iv)(4) or (5), whose determination shall be
conclusive and described in a resolution of the Board of Directors) of the
evidence of indebtedness, shares of capital stock or assets being distributed
applicable to one Common Stock as of the close of business on the day before
such "ex" date. For purposes of any computation under paragraph (g)(vi), the
Current Market Price on any date shall be deemed to be the average of the
daily closing prices per share of Common Stock for such day and the next two
succeeding trading days; provided, however, that, if the "ex" date for any
event (other than the tender offer requiring such computation) that requires
an adjustment to the Conversion Price pursuant to paragraph (g)(iv)(1), (2),
(3), (4), (5) or (6) occurs on or after the Expiration Time for the tender or
exchange offer requiring such computation and prior to the day in question,
the closing price for each trading day on and after the "ex" date for such
other event shall be adjusted by multiplying such closing price by the
reciprocal of the fraction by which the Conversion Price is so required to be
adjusted as a result of such other event. For purposes of this paragraph,
the term "ex" date (I) when used with respect to any issuance or
distribution, means the first date on which the Common Stock trades regular
way on the relevant exchange or in the relevant market from which the closing
price was obtained without the right to receive such issuance or
distribution, (II) when used with respect to any subdivision or combination
of Common Stock, means the first date on which the Common Stock trades
regular way on such exchange or in such market after the time at which such
subdivision or combination becomes effective and (III) when used with respect
to any tender or exchange offer means the first date on which the Common
25
<PAGE> 36
Stock trades regular way on such exchange or in such market after the
Expiration Time of such offer. Notwithstanding the foregoing, whenever
successive adjustments to the Conversion Price are called for pursuant to this
paragraph (g)(iv), such adjustments shall be made to the Current Market Price
as may be necessary or appropriate to effectuate the intent of this paragraph
(g)(iv) and to avoid unjust or inequitable results, as determined in good
faith by the Board of Directors.
"fair market value" shall mean the amount which a willing buyer would pay a
willing seller in an arm's-length transaction.
"Record Date" shall mean, with respect to any dividend, distribution or other
transaction or event in which the holders of Common Stock have the right to
receive any cash, securities or other property or in which the Common Stock
(or other applicable security) is exchanged for or converted into any
combination of cash, securities or other property, the date fixed for
determination of shareholders entitled to receive such cash, securities or
other property (whether such date is fixed by the Board of Directors or by
statute, contract or otherwise).
(8) No adjustment in the Conversion Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in such
price; provided, however, that any adjustments which by reason of this
paragraph (g)(iv)(8) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
paragraph (g)(iv)(8) shall be made by the Company and shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the case may be.
No adjustment need be made for a change in the par value or no par value of
the Common Stock.
(9) Whenever the Conversion Price is adjusted as herein provided, the
Company shall promptly file with the Transfer Agent an Officers' Certificate
setting forth the Conversion Price after such adjustment and setting forth a
brief statement of the facts requiring such adjustment. Promptly after
delivery of such certificate, the Company shall prepare a notice of such
adjustment of the Conversion Price setting forth the
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<PAGE> 37
adjusted Conversion Price and the date on which each adjustment becomes
effective and shall mail such notice of such adjustment of the Conversion
Price to each holder of Convertible Preferred Stock at such holder's last
address appearing on the register of holders maintained for that purpose
within 20 days of the effective date of such adjustment. Failure to deliver
such notice shall not affect the legality or validity of any such adjustment.
(10) In any case in which this paragraph (g)(iv) provides that an
adjustment shall become effective immediately after a Record Date for an
event, the Company may defer until the occurrence of such event issuing to
the holder of any share of Convertible Preferred Stock converted after such
Record Date and before the occurrence of such event the additional Common
Stock issuable upon such conversion by reason of the adjustment required by
such event over and above the Common Stock issuable upon such conversion
before giving effect to such adjustment.
(11) For purposes of this paragraph (g)(iv), the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury
of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of Common Stock. The Company shall
not pay any dividend or make any distribution on Common Stock held in the
treasury of the Company.
(v) In case of any consolidation of the Company with, or merger of the
Company into, any other corporation, or in case of any merger of another
corporation into the Company (other than a merger which does not result in
any reclassification, conversion, exchange or cancellation of outstanding
shares of Common Stock of the Company), or in case of any conveyance or
transfer of the properties and assets of the Company substantially as an
entirety, the holder of each share of Convertible Preferred Stock then
outstanding shall have the right thereafter, during the period such
Convertible Preferred Stock shall be convertible as specified in paragraph
(g)(i), to convert such share of Convertible Preferred Stock only into the
kind and amount of securities, cash and other property receivable upon such
consolidation, merger, conveyance or transfer by a holder of the number of
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<PAGE> 38
shares of Common Stock of the Company into which such share of Convertible
Preferred Stock might have been converted immediately prior to such
consolidation, merger, conveyance or transfer, assuming such holder of Common
Stock of the Company failed to exercise his rights of election, if any, as to
the kind or amount of securities, cash and other property receivable upon
such consolidation, merger, conveyance or transfer (provided that, if the
kind or amount of securities, cash and other property receivable upon such
consolidation, merger, conveyance or transfer is not the same for each share
of Common Stock of the Company in respect of which such rights of election
shall not have been exercised ("nonelecting share"), then for the purpose of
this paragraph (g)(v) the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, conveyance or transfer
by each nonelecting share shall be deemed to be the kind and amount so
receivable per share by a plurality of the nonelecting shares). Such
securities shall provide for adjustments which, for events subsequent to the
effective date of the triggering event, shall be as nearly equivalent as may
be practicable to the adjustments provided for in this paragraph (g)(v). The
above provisions of this Section shall similarly apply to successive
consolidations, mergers, conveyances or transfers.
(vi) In case:
(1) the Company shall declare a dividend (or any other distribution) on its
Common Stock payable otherwise than in cash out of its earned surplus; or
(2) the Company shall authorize the granting to all holders of its Common
Stock of rights or warrants to subscribe for or purchase any shares of capital
stock of any class or of any other rights; or
(3) of any reclassification of the Common Stock of the Company (other than a
subdivision or combination of its outstanding Common Stock), or of any
consolidation or merger to which the Company is a party and for which approval
of any shareholders of the Company is required, or the sale or transfer of all
or substantially all the assets of the Company; or
28
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(4) of the voluntary or involuntary dissolution, liquidation or winding up
of the Company;
then the Company shall cause to be filed with the Transfer Agent and at each
office or agency maintained for the purpose of conversion of the Convertible
Preferred Stock, and shall cause to be mailed to all holders at their last
addresses as they shall appear in the Convertible Preferred Stock Register, at
least 20 days (or 10 days in any case specified in clause (1) or (2) above)
prior to the applicable date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of such dividend,
distribution, rights or warrants, or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution, rights or warrants are to be determined or (y) the date
on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up. Failure to give the notice requested
by this Section or any defect therein shall not affect the legality or validity
of any dividend, distribution, right, warrant, reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding up, or the vote
upon any such action.
(vii) The Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued shares of Common Stock
(or out of its authorized shares of Common Stock held in the treasury of the
Company), for the purpose of effecting the conversion of the Convertible
Preferred Stock, the full number of Common Stock then issuable upon the
conversion of all outstanding shares of Convertible Preferred Stock.
(viii) The Company will pay any and all document, stamp or similar issue or
transfer taxes that may be payable in respect of the issue or delivery of
Common Stock on conversion of the Convertible Preferred Stock pursuant hereto.
The Company shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that of the holder of the share of
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Convertible Preferred Stock or the shares of Convertible Preferred Stock to be
converted, and no such issue or delivery shall be made unless and until the
Person requesting such issue has paid to the Company the amount of any such
tax, or has established to the satisfaction of the Company that such tax has
been paid.
(ix) (1) Notwithstanding any other provision in the preceding paragraphs
to the contrary, if any Change in Control occurs then, if the Company does not
elect to make a Change in Control Offer, the Conversion Price in effect shall
be adjusted immediately after such Change in Control as described below. In
addition, in the event of a Common Stock Change in Control (as defined in this
paragraph (g)(ix)), each share of the Convertible Preferred Stock shall be
convertible solely into common stock of the kind received by holders of Common
Stock as the result of such Common Stock Change in Control. For purposes of
calculating any adjustment to be made pursuant to this paragraph in the event
of a Change in Control, immediately after such Change in Control:
(A) in the case of a Non-Stock Change in Control (as defined in this
paragraph (g)(ix)), the Conversion Price shall thereupon become the lower of
(x) the Conversion Price in effect immediately prior to such Non-Stock Change
in Control, but after giving effect to any other prior adjustments, and (y)
the result obtained by multiplying the greater of the Applicable Price (as
defined in this paragraph (g)(ix)) or the then applicable Reference Market
Price (as defined in this paragraph (g)(ix)) by a fraction of which the
numerator shall be $100.00 and the denominator shall be the then current
Optional Redemption Price per share; and
(B) in the case of a Common Stock Change in Control, the Conversion Price in
effect immediately prior to such Common Stock Change in Control, but after
giving effect to any prior adjustments, shall thereupon be adjusted by
multiplying such Conversion Price by a fraction, of which the numerator shall
be the Purchaser Stock Price (as defined in this paragraph (g)(ix)) and the
denominator shall be the Applicable Price; provided, however, that in the
event of a Common Stock Change in Control in which (x) 100% of the value of
the consideration received by a holder of Common Stock is common stock of the
successor, acquiror, or other third
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<PAGE> 41
party (and cash, if any, is paid with respect to any fractional interests in
such common stock resulting from such Common Stock Change in Control) and (y)
all of the Common Stock will have been exchanged for, converted into, or
acquired for, common stock (and cash with respect to fractional interests) of
the successor, acquiror or other third party, the Conversion Price in effect
immediately prior to such Common Stock Change in Control shall thereupon be
adjusted by multiplying such Conversion Price by a fraction, of which the
numerator shall be one (1) and the denominator shall be the number of shares
of common stock of the successor, acquiror, or other third party received by
a holder of one share of Common Stock as a result of such Common Stock Change
in Control.
(3) For purposes of this paragraph (ix), the following terms shall have the
meanings indicated:
"Applicable Price" means (i) in the event of a Non-Stock Change in Control
in which the holders of the Common Stock receive only cash, the amount of
cash received by the holder of one share of Common Stock and (ii) in the
event of any other Non-Stock Change in Control or any Common Stock Change in
Control, the average of the Closing Bid Prices for the Common Stock during
the ten Trading Days prior to and including the record date for the
determination of the holders of Common Stock entitled to receive cash,
securities, property or other assets in connection with such Non-Stock Change
in Control or Common Stock Change in Control or, if there is no such record
date, the date upon which the holders of the Common Stock shall have the
right to receive such cash, securities, property or other assets, in each
case, as adjusted in good faith by the Board of Directors to appropriately
reflect any of the events referred to in paragraph (g)(iv)(1) through (6).
"Common Stock Change in Control" means any Change in Control in which more
than 50% of the value (as determined in good faith by the Board of Directors
of the Company) of the consideration received by holders of Common Stock
consists of common stock that for each of the ten consecutive Trading Days
referred to in the preceding paragraph has been admitted for listing or
admitted for listing subject to notice of issuance on a national securities
exchange or quoted on The Nasdaq
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National Market; provided, however, that a Change in Control shall not be a
Common Stock Change in Control unless either (i) the Company continues to
exist after the occurrence of such Change in Control and the outstanding
shares of Convertible Preferred Stock continue to exist as outstanding shares
of Convertible Preferred Stock, or (ii) not later than the occurrence of such
Change in Control, the outstanding shares of Convertible Preferred Stock are
converted into or exchanged for shares of convertible preferred stock of a
corporation succeeding to the business of the Company, which convertible
preferred stock has powers, preferences and relative, participating, optional
or other rights, and qualifications, limitations and restrictions,
substantially similar to those of the Convertible Preferred Stock.
"Non-Stock Change in Control" means any Change in Control other than a
Common Stock Change in Control.
"Purchaser Stock Price" means, with respect to any Common Stock Change in
Control, the product of (i) the number of shares of common stock received in
such Common Stock Change of Control for each share of Common Stock, and (ii)
the average of the per share Closing Prices for the common stock received in
such Common Stock Change in Control for the ten consecutive Trading Days
prior to and including the record date for the determination of the holders
of Common Stock entitled to receive such common stock, or if there is no such
record date, the date upon which the holders of the Common Stock shall have
the right to receive such common stock, in each case, as adjusted in good
faith by the Board of Directors to appropriately reflect any of the events
referred to in paragraph (g)(iv)(1) through (6); provided, however, that if
no such Closing Prices exist, then the Purchaser Stock Price shall be set at
a price determined in good faith by the Board of Directors of the Company.
"Reference Market Price" shall initially mean $13.50 (which is an amount
equal to 66-2/3% of the reported last sale price for the Common Stock on The
Nasdaq National Market on March 25, 1997), and in the event of any adjustment
to the conversion prices other than as a result of a Change in Control, the
Reference Market Price shall also be adjusted so that the ratio of the
Reference Market Price to the Conversion Price
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after giving effect to any such adjustment shall always be the same as the
ratio of $13.50 to the initial Conversion Price set forth in paragraph
(g)(i).
(h) Change in Control. (i) Upon the occurrence of a Change of Control
(the date of such occurrence being the "Change in Control Date"), the Company
shall be obligated to (1) purchase all or a portion of each holder's
Convertible Preferred Stock in cash pursuant to the offer described in
paragraph (h)(iii) (the "Change of Control Offer") at a purchase price equal to
100% of the Liquidation Preference, plus, without duplication, all accrued and
unpaid Liquidated Damages and all accrued and unpaid dividends, if any, to the
Change of Control Payment Date, including an amount in cash equal to a prorated
dividend for the period from the Dividend Payment Date immediately prior to the
Change of Control Payment Date to the Change of Control Payment Date or (2)
adjust the conversion price as provided under paragraph (g)(ix).
Notwithstanding the foregoing, the Company shall, prior to electing to make a
Change of Control Offer, make an offer to redeem all outstanding shares of
Series 3 Preferred Stock.
(ii) Prior to the mailing of the notice referred to in paragraph (h)(iii),
but in any event within 15 days following the date on which the Company knows
or reasonably should have known that a Change in Control has occurred, the
Company covenants that it shall promptly determine if the purchase of the
Convertible Preferred Stock would violate or constitute a default under the
Indenture or other indebtedness of the Company.
(iii) Within 15 days following the date on which the Company knows or
reasonably should have known that a Change in Control has occurred, the Company
must send, by first-class mail, postage prepaid, a notice to each holder of
Convertible Preferred Stock. Such notice shall state whether the Change of
Control Offer would be permitted under the Indenture or other indebtedness of
the Company, and if permitted, such notice shall contain all instructions and
materials necessary to enable such holders to tender Convertible Preferred
Stock pursuant to the Change of Control Offer. If the Change of Control Offer
would be permitted under the Indenture or other indebtedness of the Company,
such notice shall state:
(A) that a Change of Control has occurred, that the Change of Control Offer
is being made pursuant to
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this paragraph (h) and that all Convertible Preferred Stock validly tendered
and not withdrawn will be accepted for payment;
(B) the purchase price (including the amount of accrued dividends, if any)
and the purchase date (which must be no earlier than 30 days nor later than
75 days from the date such notice is mailed, other than as may be required by
law) (the "Change of Control Payment Date");
(C) that any shares of Convertible Preferred Stock not tendered will
continue to accrue dividends;
(D) that, unless the Company defaults in making payment therefor, any share
of Convertible Preferred Stock accepted for payment pursuant to the Change of
Control Offer shall cease to accrue dividends after the Change of Control
Payment Date;
(E) that holders electing to have any shares of Convertible Preferred Stock
purchased pursuant to a Change of Control Offer will be required to surrender
such shares of Convertible Preferred Stock, properly endorsed for transfer,
together with such other customary documents as the Company and the Transfer
Agent may reasonably request to the Transfer Agent and registrar for the
Convertible Preferred Stock at the address specified in the notice prior to
the close of business on the Business Day prior to the Change of Control
Payment Date;
(F) that holders will be entitled to withdraw their election if the Company
receives, not later than five Business Days prior to the Change of Control
Payment Date, a telegram, a telex, facsimile transmission or letter setting
forth the name of the holder, the number of shares of Convertible Preferred
Stock the holder delivered for purchase and a statement that such holder is
withdrawing his election to have such shares of Convertible Preferred Stock
purchased;
(G) that holders whose shares of Convertible Preferred Stock are purchased
only in part will be issued a new certificate representing the unpurchased
shares of Convertible Preferred Stock; and
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(H) the circumstances and relevant facts regarding such Change of Control.
If the Change of Control Offer would not be permitted under the Indenture
or other indebtedness of the Company, such notice shall state the Conversion
Price as adjusted pursuant to paragraph (g)(ix).
(iv) The Company will comply with any tender offer rules under the Exchange
Act which then may be applicable, including Rules 13e-4 and 14e-1, in
connection with any offer required to be made by the Company to repurchase the
shares of Convertible Preferred Stock as a result of a Change of Control. To
the extent that the provisions of any securities laws or regulations conflict
with provisions of this Certificate of Designation, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Certificate of Designation by virtue
thereof.
(v) On the Change of Control Payment Date the Company shall (A) accept for
payment the shares of Convertible Preferred Stock validly tendered pursuant to
the Change of Control Offer, (B) pay to the holders of shares so accepted the
purchase price therefor in cash and (C) cancel and retire each surrendered
certificate. Unless the Company defaults in the payment for the shares of
Convertible Preferred Stock tendered pursuant to the Change of Control Offer,
dividends will cease to accrue with respect to the shares of Convertible
Preferred Stock tendered and all rights of holders of such tendered shares will
terminate, except for the right to receive payment therefor, on the Change of
Control Payment Date.
(vi) To accept the Change of Control Offer, the holder of a share of
Convertible Preferred Stock shall deliver, on or before the 10th day prior to
the Change of Control Payment Date, written notice to the Company (or an agent
designated by the Company for such purpose) of such holder's acceptance,
together with certificates evidencing the shares of Convertible Preferred Stock
with respect to which the Change of Control Offer is being accepted, duly
endorsed for transfer.
(i) Reissuance of Convertible Preferred Stock. Shares of Convertible
Preferred Stock that have been issued and reacquired in any manner, including
shares purchased or redeemed or exchanged, shall not be reissued as shares of
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Convertible Preferred Stock and shall (upon compliance with any applicable
provisions of the laws of Delaware) have the status of authorized and
unissued shares of Preferred Stock undesignated as to series and may be
redesignated and reissued as part of any series of Preferred Stock; provided,
however, that so long as any shares of Convertible Preferred Stock are
outstanding, any issuance of such shares must be in compliance with the terms
hereof.
(j) Business Day. If any payment, redemption or exchange shall be required
by the terms hereof to be made on a day that is not a Business Day, such
payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
(k) Limitation on Mergers and Asset Sales. The Company may not consolidate
with or merge with or into, or convey, transfer or lease all or substantially
all its assets to, any person unless: (1) the successor, transferee or lessee
(if not the Company) is organized and existing under the laws of the United
States of America or any State thereof or the District of Columbia and the
Convertible Preferred Stock shall be converted into or exchanged for and shall
become shares of such successor, transferee or lessee, having in respect of
such successor, transferee or lessee substantially the same powers, preference
and relative participating, optional or other special rights and the
qualifications, limitations or restrictions thereon, that the Convertible
Preferred Stock had immediately prior to such transaction; and (2) the Company
delivers to the Transfer Agent an Officers' Certificate and an Opinion of
Counsel stating that such consolidation, merger or transfer complies with this
Certificate of Designation. The successor, transferee or lessee will be the
successor company.
(l) Certificates. (i) Form and Dating. The Convertible Preferred Stock
and the Transfer Agent's certificate of authentication shall be substantially
in the form of Exhibit A, which is hereby incorporated in and expressly made a
part of this Certificate of Designation. The Convertible Preferred Stock
certificate may have notations, legends or endorsements required by law, stock
exchange rule, agreements to which the Company is subject, if any, or usage
(provided that any such notation, legend or endorsement is in a form acceptable
to the Company). Each Convertible Preferred Stock certificate shall be dated
the date of its authentication. The terms of the Convertible
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<PAGE> 47
Preferred Stock certificate set forth in Exhibit A are part of the terms of
this Certificate of Designation.
(A) Global Convertible Preferred Stock. The Convertible Preferred Stock
sold in reliance on Rule 144A shall be issued initially in the form of one or
more fully registered global certificates with the global securities legend and
restricted securities legend set forth in Exhibit A hereto (the "Global
Convertible Preferred Stock"), which shall be deposited on behalf of the
purchasers represented thereby with the Transfer Agent, at its New York office,
as custodian for DTC (or with such other custodian as DTC may direct), and
registered in the name of DTC or a nominee of DTC, duly executed by the Company
and authenticated by the Transfer Agent as hereinafter provided. The number of
shares of Convertible Preferred Stock represented by Global Convertible
Preferred Stock may from time to time be increased or decreased by adjustments
made on the records of the Transfer Agent and DTC or its nominee as hereinafter
provided.
(B) Book-Entry Provisions. In the event Global Convertible Preferred Stock
is deposited with or on behalf of DTC, the Company shall execute and the
Transfer Agent shall authenticate and deliver initially one or more Global
Convertible Preferred Stock certificates that (a) shall be registered in the
name of DTC for such Global Convertible Preferred Stock or the nominee of DTC
and (b) shall be delivered by the Transfer Agent to DTC or pursuant to DTC's
instructions or held by the Transfer Agent as custodian for DTC.
Members of, or participants in, DTC ("Agent Members") shall have no rights
under this Certificate of Designation with respect to any Global Convertible
Preferred Stock held on their behalf by DTC or by the Transfer Agent as the
custodian of DTC or under such Global Convertible Preferred Stock, and DTC may
be treated by the Company, the Transfer Agent and any agent of the Company or
the Transfer Agent as the absolute owner of such Global Convertible Preferred
Stock for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Transfer Agent or any agent of the
Company or the Transfer Agent from giving effect to any written certification,
proxy or other authorization furnished by DTC or impair, as between DTC and its
Agent Members, the operation of customary practices of DTC governing the
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exercise of the rights of a holder of a beneficial interest in any Global
Convertible Preferred Stock.
(C) Certificated Convertible Preferred Stock. Convertible Preferred Stock
initially sold to certain "accredited investors" (as defined in Rule 501(a)(1),
(2), (3), (4), (5), (6) or (7) under the Securities Act) or sold in offshore
transactions pursuant to Regulation S under the Securities Act will be issued
in fully registered certificated form ("Certificated Convertible Preferred
Stock").
Except as provided in this paragraph (l)(i) or in paragraph (l)(iii), owners
of beneficial interests in Global Convertible Preferred Stock will not be
entitled to receive physical delivery of Certificated Convertible Preferred
Stock.
After a transfer of any Convertible Preferred Stock during the period of the
effectiveness of a Shelf Registration Statement with respect to such
Convertible Preferred Stock, all requirements pertaining to legends on such
Convertible Preferred Stock will cease to apply, the requirements requiring
that any such Convertible Preferred Stock issued to Holders be issued in global
form will cease to apply, and Certificated Convertible Preferred Stock without
legends will be available to the transferee of the Holder of such Convertible
Preferred Stock upon exchange of such transferring Holder's Convertible
Preferred Stock or directions to transfer such Holder's interest in the Global
Convertible Preferred Stock, as applicable.
(ii) Execution and Authentication. Two Officers shall sign the Convertible
Preferred Stock for the Company by manual or facsimile signature. The
Company's seal shall be impressed, affixed, imprinted or reproduced on the
Convertible Preferred Stock and may be in facsimile form.
If an Officer whose signature is on Convertible Preferred Stock no longer
holds that office at the time the Transfer Agent authenticates the Convertible
Preferred Stock, the Convertible Preferred Stock shall be valid nevertheless.
A Convertible Preferred Stock shall not be valid until an authorized
signatory of the Transfer Agent manually signs the certificate of
authentication on the Convertible Preferred Stock. The signature shall be
conclusive evidence
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that the Convertible Preferred Stock has been authenticated under this
Certificate of Designation.
The Transfer Agent shall authenticate and deliver 1,000,000 shares of
Convertible Preferred Stock for original issue upon a written order of the
Company signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of the Company. In addition, the Transfer
Agent shall authenticate and deliver, from time to time, Additional Shares for
original issue upon order of the Company signed by two Officers or by an
Officer or either an Assistant Treasurer or Assistant Secretary of the Company.
Such orders shall specify the number of shares of Convertible Preferred Stock
to be authenticated and the date on which the original issue of Convertible
Preferred Stock is to be authenticated.
The Transfer Agent may appoint an authenticating agent reasonably acceptable
to the Company to authenticate the Convertible Preferred Stock. Unless limited
by the terms of such appointment, an authenticating agent may authenticate
Convertible Preferred Stock whenever the Transfer Agent may do so. Each
reference in this Certificate of Designation to authentication by the Transfer
Agent includes authentication by such agent. An authenticating agent has the
same rights as the Transfer Agent or agent for service of notices and demands.
(iii) Transfer and Exchange. (A) Transfer and Exchange of Certificated
Convertible Preferred Stock. When Certificated Convertible Preferred Stock is
presented to the Transfer Agent with a request to register the transfer of such
Certificated Convertible Preferred Stock or to exchange such Certificated
Convertible Preferred Stock for an equal number of shares of Certificated
Convertible Preferred Stock of other authorized denominations, the Transfer
Agent shall register the transfer or make the exchange as requested if its
reasonable requirements for such transaction are met; provided, however, that
the Certificated Convertible Preferred Stock surrendered for transfer or
exchange:
(1) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the Transfer
Agent, duly executed by the Holder thereof or its attorney duly authorized in
writing; and
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(2) in the case of Transfer Restricted Securities that are Certificated
Convertible Preferred Stock, are being transferred or exchanged pursuant to
an effective registration statement under the Securities Act or pursuant to
clause (I), (II) or (III) below, and are accompanied by the following
additional information and documents, as applicable:
(I) if such Transfer Restricted Securities are being delivered to the
Transfer Agent by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that effect in
substantially the form of Exhibit C hereto; or
(II) if such Transfer Restricted Securities are being transferred to the
Company or to a "qualified institutional buyer" ("QIB") in accordance with
Rule 144A under the Securities Act or pursuant to an exemption from
registration in accordance with Rule 144 or Regulation S under the
Securities Act, a certification to that effect (in substantially the form of
Exhibit C hereto); or
(III) if such Transfer Restricted Securities are being transferred to an
"accredited investor" as described in Rule 501(a)(1), (2), (3), (4), (5),
(6) or (7) under the Securities Act that is acquiring the Securities for its
own account, or for the account of such an accredited investor, in each case
in a minimum principal amount of $100,000 for investment purposes and not
with a view to, or for offer or sale in connection with, any distribution in
violation of the Securities Act, or in reliance on another exemption from
the registration requirements of the Securities Act: a certification to that
effect in substantially the form of Exhibit C hereto, and if the Company or
the Transfer Agent so requests, evidence reasonably satisfactory to them as
to the compliance with the restrictions set forth in the legend set forth in
paragraph (l)(iii)(G)(1) below.
(B) Restrictions on Transfer of Certificated Convertible Preferred Stock
for a Beneficial Interest in Global Convertible Preferred Stock. Certificated
Convertible Preferred Stock may not be exchanged for a
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beneficial interest in Global Convertible Preferred Stock except upon
satisfaction of the requirements set forth below. Upon receipt by the
Transfer Agent of Certificated Convertible Preferred Stock, duly endorsed or
accompanied by appropriate instruments of transfer, in form satisfactory to
the Transfer Agent, together with:
(1) if such Certificated Convertible Preferred Stock is a Transfer
Restricted Security, certification that such Certificated Convertible
Preferred Stock is being transferred to a QIB in accordance with Rule 144A
under the Securities Act; and
(2) whether or not such Certificated Convertible Preferred Stock is a
Transfer Restricted Security, written instructions directing the Transfer
Agent to make, or to direct DTC to make, an adjustment on its books and
records with respect to such Global Convertible Preferred Stock to reflect an
increase in the number of shares of Convertible Preferred Stock represented
by the Global Convertible Preferred Stock,
then the Transfer Agent shall cancel such Certificated Convertible Preferred
Stock and cause, or direct DTC to cause, in accordance with the standing
instructions and procedures existing between DTC and the Transfer Agent, the
number of shares of Convertible Preferred Stock represented by the Global
Convertible Preferred Stock to be increased accordingly. If no Global
Convertible Preferred Stock is then outstanding, the Company shall issue and
the Transfer Agent shall authenticate, upon written order of the Company in the
form of an Officers' Certificate, a new Global Convertible Preferred Stock
representing the appropriate number of shares.
(C) Transfer and Exchange of Global Convertible Preferred Stock. The
transfer and exchange of Global Convertible Preferred Stock or beneficial
interests therein shall be effected through DTC, in accordance with this
Certificate of Designation (including applicable restrictions on transfer set
forth herein, if any) and the procedures of DTC therefor.
(D) Transfer of a Beneficial Interest in Global Convertible Preferred Stock
for a Certificated Convertible Preferred Stock.
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(1) Any person having a beneficial interest in Convertible Preferred
Stock that is being transferred or exchanged pursuant to an effective
registration statement under the Securities Act or pursuant to clause (I),
(II) or (III) below may upon request, and if accompanied by the information
specified below, exchange such beneficial interest for Certificated
Convertible Preferred Stock representing the same number of shares of
Convertible Preferred Stock. Upon receipt by the Transfer Agent of written
instructions or such other form of instructions as is customary for DTC from
DTC or its nominee on behalf of any person having a beneficial interest in
Global Convertible Preferred Stock and upon receipt by the Transfer Agent of
a written order or such other form of instructions as is customary for DTC
or the person designated by DTC as having such a beneficial interest in a
Transfer Restricted Security only, and upon the following additional
information and documents (all of which may be submitted by facsimile):
(I) if such beneficial interest is being transferred to the person
designated by DTC as being the owner of a beneficial interest in Global
Convertible Preferred Stock, a certification from such person to that
effect (in substantially the form of Exhibit C hereto);
(II) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act or pursuant to an
exemption from registration in accordance with Rule 144 or Regulation S
under the Securities Act, a certification to that effect (in substantially
the form of Exhibit C hereto); or
(III) if such beneficial interest is being transferred to an "accredited
investor" as described in Rule 501(a)(1), (2), (3), (4), (5), (6) or (7)
under the Securities Act that is acquiring the security for its own
account, or for the account of such an accredited investor, in each case in
a minimum principal amount of $100,000 for investment purposes and not with
a view to, or for offer or sale in connection with, any distribution in
violation of the Securities Act, or in reliance on another exemption from
the registration requirements of the Securities Act, a
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certification to that effect from the transferor (in substantially the form
of Exhibit C hereto), and if the Company or the Transfer Agent so requests,
evidence reasonably satisfactory to them as to the compliance with the
restrictions set forth in the legend set forth in paragraph (l)(iii)(G)(1)
below;
then, the Transfer Agent or DTC, at the direction of the Transfer Agent, will
cause, in accordance with the standing instructions and procedures existing
between DTC and the Transfer Agent, the number of shares of Convertible
Preferred Stock represented by Global Convertible Preferred Stock to be reduced
on its books and records and, following such reduction, the Company will
execute and the Transfer Agent will authenticate and deliver to the transferee
Certificated Convertible Preferred Stock.
(2) Certificated Convertible Preferred Stock issued in exchange for a
beneficial interest in a Global Convertible Preferred Stock pursuant to this
paragraph (l)(iii)(D) shall be registered in such names and in such
authorized denominations as DTC, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Transfer Agent. The
Transfer Agent shall deliver such Certificated Convertible Preferred Stock to
the persons in whose names such Convertible Preferred Stock are so registered
in accordance with the instructions of DTC.
(E) Restrictions on Transfer and Exchange of Global Convertible Preferred
Stock. Notwithstanding any other provisions of this Certificate of Designation
(other than the provisions set forth in paragraph (l)(iii)(F)), Global
Convertible Preferred Stock may not be transferred as a whole except by DTC to
a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by
DTC or any such nominee to a successor depository or a nominee of such
successor depository.
(F) Authentication of Certificated Convertible Preferred Stock. If at any
time:
(1) DTC notifies the Company that DTC is unwilling or unable to continue as
depository for the Global Convertible Preferred Stock and a successor
depository for the Global Convertible Preferred Stock is not appointed by the
Company within 90 days after delivery of such notice;
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(2) DTC ceases to be a clearing agency registered under the Exchange Act;
(3) there shall have occurred and be continuing a Voting Rights Triggering
Event; or
(4) the Company, in its sole discretion, notifies the Transfer Agent in
writing that it elects to cause the issuance of Certificated Convertible
Preferred Stock under this Certificate of Designation,
then the Company will execute, and the Transfer Agent, upon receipt of a
written order of the Company signed by two Officers or by an Officer and either
an Assistant Treasurer or an Assistant Secretary of the Company requesting the
authentication and delivery of Certificated Convertible Preferred Stock to the
persons designated by the Company, will authenticate and deliver Certificated
Convertible Preferred Stock equal to the number of shares of Convertible
Preferred Stock represented by the Global Convertible Preferred Stock, in
exchange for such Global Convertible Preferred Stock.
(G) Legend. (1) Except as permitted by the following paragraph (2), each
certificate evidencing the Global Convertible Preferred Stock and the
Certificated Convertible Preferred Stock (and all Convertible Preferred Stock
issued in exchange therefor or substitution thereof) shall bear a legend in
substantially the following form:
"THE SECURITY EVIDENCED HEREBY (OR ITS PREDECESSOR) (AND THE COMMON STOCK
INTO WHICH THIS SECURITY IS CONVERTIBLE) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED IN ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED
HEREBY (OR THE COMMON STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE) IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY (AND OF THE COMMON
STOCK INTO WHICH THIS SECURITY IN CONVERTIBLE) AGREES FOR THE
44
<PAGE> 55
BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY (AND THE COMMON STOCK INTO
WHICH THIS SECURITY IS CONVERTIBLE) MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE), (4) TO THE COMPANY OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES."
(2) Upon any sale or transfer of a Transfer Restricted Security (including
any Transfer Restricted Security represented by Global Convertible Preferred
Stock) pursuant to Rule 144 under the Securities Act or an effective
registration statement under the Securities Act:
(I) in the case of any Transfer Restricted Security that is a Certificated
Convertible Preferred Stock, the Transfer Agent shall permit the Holder
thereof to exchange such Transfer Restricted Security for a Certificated
Convertible Preferred Stock that does not bear the legend set forth above
and rescind any restriction on the transfer of such Transfer Restricted
Security; and
(II) in the case of any Transfer Restricted Security that is represented
by a Global Convertible Preferred Stock, the Transfer Agent shall permit the
Holder thereof to exchange such Transfer Restricted Security for a
Certificated Convertible Preferred Stock Security that does not bear the
legend set forth above and rescind any restriction on the transfer of such
Transfer Restricted Security, if the Holder's request for such exchange was
made in reliance on Rule 144 and the Holder certifies to that effect in
writing to the Transfer Agent (such certification to be in the form set
forth on the reverse of the Transfer Restricted Security).
45
<PAGE> 56
(H) Cancellation or Adjustment of Global Convertible Preferred Stock. At
such time as all beneficial interests in Global Convertible Preferred Stock
have either been exchanged for Certificated Convertible Preferred Stock,
redeemed, repurchased or canceled, such Global Convertible Preferred Stock
shall be returned to DTC for cancellation or retained and canceled by the
Transfer Agent. At any time prior to such cancellation, if any beneficial
interest in Global Convertible Preferred Stock is exchanged for Certificated
Convertible Preferred Stock, redeemed, repurchased or canceled, the number of
shares of Convertible Preferred Stock represented by such Global Convertible
Preferred Stock shall be reduced and an adjustment shall be made on the books
and records of the Transfer Agent with respect to such Global Convertible
Preferred Stock, by the Transfer Agent or DTC, to reflect such reduction.
(I) Obligations with Respect to Transfers and Exchanges of Convertible
Preferred Stock. (1) To permit registrations of transfers and exchanges, the
Company shall execute and the Transfer Agent shall authenticate Certificated
Convertible Preferred Stock and Global Convertible Preferred Stock as required
pursuant to the provisions of this paragraph (iii).
(2) All Certificated Convertible Preferred Stock and Global Convertible
Preferred Stock issued upon any registration of transfer or exchange of
Certificated Convertible Preferred Stock or Global Convertible Preferred
Stock shall be the valid obligations of the Company, entitled to the same
benefits under this Certificate of Designation as the Certificated
Convertible Preferred Stock or Global Convertible Preferred Stock surrendered
upon such registration of transfer or exchange.
(3) Prior to due presentment for registration of transfer of any shares of
Convertible Preferred Stock, the Transfer Agent and the Company may deem and
treat the person in whose name such shares of Convertible Preferred Stock are
registered as the absolute owner of such Convertible Preferred Stock and
neither the Transfer Agent nor the Company shall be affected by notice to the
contrary.
(4) No service charge shall be made to a Holder for any registration of
transfer or exchange upon surrender of any Convertible Preferred Stock
46
<PAGE> 57
Certificate at the office of the Transfer Agent maintained for that purpose.
However, the Company may require payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Convertible Preferred Stock
Certificates.
(5) Upon any sale or transfer of shares of Convertible Preferred Stock
(including any Convertible Preferred Stock represented by a Global
Convertible Preferred Stock Certificate) pursuant to an effective
registration statement under the Securities Act, pursuant to Rule 144 under
the Securities Act or pursuant to an opinion of counsel reasonably
satisfactory to the Company that no legend is required:
(A) in the case of any Certificated Convertible Preferred Stock, the
Transfer Agent shall permit the holder thereof to exchange such
Convertible Preferred Stock for Certificated Convertible Preferred
Stock that does not bear the legend set forth in paragraph (iii)(G)
above and rescind any restriction on the transfer of such Convertible
Preferred Stock; and
(B) in the case of any Global Convertible Preferred Stock, such
Convertible Preferred Stock shall not be required to bear the legend
set forth in paragraph (iii)(G) above but shall continue to be subject
to the provisions of paragraph (iii)(D) hereof; provided, however,
that with respect to any request for an exchange of Convertible
Preferred Stock that is represented by Global Convertible Preferred
Stock for Certificated Convertible Preferred Stock that does not bear
the legend set forth in paragraph (iii)(G) above in connection with a
sale or transfer thereof pursuant to Rule 144 (and based upon an
opinion of counsel if the Company so requests), the Holder thereof
shall certify in writing to the Transfer Agent that such request is
being made pursuant to Rule 144 (such certification to be
substantially in the form of Exhibit C hereto).
47
<PAGE> 58
(iv) Replacement Certificates. If a mutilated Convertible Preferred
Stock certificate is surrendered to the Transfer Agent or if the Holder of a
Convertible Preferred Stock certificate claims that the Convertible Preferred
Stock certificate has been lost, destroyed or wrongfully taken, the Company
shall issue and the Transfer Agent shall countersign a replacement
Convertible Preferred Stock certificate if the reasonable requirements of the
Transfer Agent and of Section 8-405 of the Uniform Commercial Code as in
effect in the State of New York are met. If required by the Transfer Agent
or the Company, such Holder shall furnish an indemnity bond sufficient in the
judgment of the Company and the Transfer Agent to protect the Company and the
Transfer Agent from any loss which either of them may suffer if a Convertible
Preferred Stock certificate is replaced. The Company and the Transfer Agent
may charge the Holder for their expenses in replacing a Convertible Preferred
Stock certificate.
(v) Temporary Certificates. Until definitive Convertible Preferred Stock
certificates are ready for delivery, the Company may prepare and the Transfer
Agent shall countersign temporary Convertible Preferred Stock certificates.
Temporary Convertible Preferred Stock certificates shall be substantially in
the form of definitive Convertible Preferred Stock certificates but may have
variations that the Company considers appropriate for temporary Convertible
Preferred Stock certificates. Without unreasonable delay, the Company shall
prepare and the Transfer Agent shall countersign definitive Convertible
Preferred Stock certificates and deliver them in exchange for temporary
Convertible Preferred Stock certificates.
(vi) Cancellation. (A) In the event the Company shall purchase or
otherwise acquire Certificated Convertible Preferred Stock, the same shall
thereupon be delivered to the Transfer Agent for cancellation.
(B) At such time as all beneficial interests in Global Convertible
Preferred Stock have either been exchanged for Certificated Convertible
Preferred Stock, redeemed, repurchased or canceled, such Global Convertible
Preferred Stock shall thereupon be delivered to the Transfer Agent for
cancellation.
(C) The Transfer Agent and no one else shall cancel and destroy all
Convertible Preferred Stock certificates surrendered for transfer, exchange,
replacement
48
<PAGE> 59
or cancellation and deliver a certificate of such destruction to the Company
unless the Company directs the Transfer Agent to deliver canceled Convertible
Preferred Stock certificates to the Company. The Company may not issue new
Convertible Preferred Stock certificates to replace Convertible Preferred Stock
certificates to the extent they evidence Convertible Preferred Stock which the
Company has purchased or otherwise acquired.
(m) Additional Rights of Holders. In addition to the rights provided to
Holders under this Certificate of Designation, Holders shall have the rights
set forth in the Registration Rights Agreement.
(o) Certain Definitions. As used in this Certificate of Designation, the
following terms shall have the following meanings (and (1) terms defined in the
singular have comparable meanings when used in the plural and vice versa, (2)
"including" means including without limitation, (3) "or" is not exclusive and
(4) an accounting term not otherwise defined has the meaning assigned to it in
accordance with United States generally accepted accounting principles as in
effect on the Issue Date and all accounting calculations will be determined in
accordance with such principles), unless the content otherwise requires:
"Business Day" means each day which is not a Legal Holiday.
"capital stock" of any person means any and all shares, interests, rights to
purchase, warrants, options, participation or other equivalents of or interests
in (however designated) equity of such person, including any Preferred Stock,
but excluding any debt securities convertible into or exchangeable for such
equity.
49
<PAGE> 60
"Change in Control" or "Change of Control" means: (i) the sale, lease,
transfer, conveyance other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act), (ii) the adoption of a plan relating to the liquidation or dissolution of
the Company, (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), (other than officers, directors and stockholders
of the Company and their affiliates on the date of this Certificate of
Designation), becomes the beneficial owner (as determined in accordance with
Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more
than 50% of the voting stock of the Company or (iv) the first day on which a
majority of the members of the board of directors (excluding the directors
elected pursuant to paragraph (f) are not Continuing Directors.
"Closing Bid Price" means on any day the last reported bid price on such
day, or in case no bid takes place on such day, the average of the reported
closing bid and asked prices, in each case on the Nasdaq National Market or, if
the Common Stock is not quoted on such system, on the principal national
securities exchange on which such stock is listed or admitted to trading, or if
not listed or admitted to trading on any national securities exchange, the
average of the closing bid and asked prices as furnished by any independent
registered broker-dealer firm, selected by the Company for that purpose.
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors who (i) was a member of such Board of Directors on the
date of this Certificate of Designation or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board of Directors at the time of
such nomination or election.
"Default" means any event which is, or after notice or passage of time or
both would be, a Voting Rights Triggering Event.
"DTC" means The Depository Trust Company.
50
<PAGE> 61
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holders" means the registered holders from time to time of the Convertible
Preferred Stock.
"Indenture" means the Indenture dated as of October 5, 1995 between the
Company and IBJ Schroder Bank & Trust Company.
"Issue Date" means the date on which the Convertible Preferred Stock is
initially issued.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York.
"Liquidated Damages" means, with respect to any share of Convertible
Preferred Stock, the Additional Dividends then accrued, if any, on such share
pursuant to paragraph (c).
"Officer" means the Chairman of the Board of Directors, the President, any
Vice President, the Treasurer, the Secretary or any Assistant Secretary of the
Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Transfer Agent. The counsel may be an employee of or counsel
to the Company or the Transfer Agent.
"person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred
as to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
51
<PAGE> 62
"Registration Rights Agreement" means the Registration Rights Agreement
dated March 25, 1997 among the Company, Credit Suisse First Boston Corporation
and Dillon, Read & Co. Inc. with respect to the Convertible Preferred Stock.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933.
"Series 3 Preferred Stock" means the 10% Junior Series 3 Preferred Stock of
the Company.
"Shelf Registration Statement" means a shelf registration statement filed
with the SEC to cover resales of Transfer Restricted Securities by holders
thereof, as required by the Registration Rights Agreement.
"Subsidiary" means any corporation, association, partnership, limited
liability company or other business entity of which more than 50% of the total
voting power of shares of capital stock or other interests entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by the Company, the Company and one or more
Subsidiaries or one or more Subsidiaries and any partnership the sole general
partner or the managing partner of which the Company or any Subsidiary or the
only general partners of which are the Company and one or more Subsidiaries or
one or more Subsidiaries.
"Trading Day" means, in respect of any securities exchange or securities
market, each Monday, Tuesday, Wednesday, Thursday and Friday, other than any
day on which securities are not traded on the applicable securities exchange or
in the applicable securities market.
"Transfer Agent" means the transfer agent for the Convertible Preferred
Stock appointed by the Company, which initially shall be ChaseMellon
Shareholder Services, L.L.C.
"Transfer Restricted Securities" means each share of Convertible Preferred
Stock (or the shares of Common Stock into which such share of Convertible
Preferred Stock is convertible) (including additional shares of Convertible
Preferred Stock issued in payment of dividends on the
52
<PAGE> 63
Convertible Preferred Stock, if any, as permitted in accordance with the terms
hereof) until (i) the date on which such security has been effectively
registered under the Securities Act and disposed of in accordance with the
Shelf Registration Statement or (ii) the date on which such security is
distributed to the public pursuant to Rule 144 under the Securities Act or is
saleable pursuant to Rule 144(k) under the Securities Act (or any successor
rule thereof) or would be saleable pursuant to Rule 144(k) under the Securities
Act had it not been held by, or had it never been held by, an affiliate of the
Company.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
53
<PAGE> 64
IN WITNESS WHEREOF, said IXC Communications, Inc., has caused this
Certificate of Designation to be signed by John J. Willingham, its Senior Vice
President and Chief Financial Officer, this 31st day of March, 1997.
IXC COMMUNICATIONS, INC.,
by /s/ John J. Willingham
----------------------------------
Name: John J. Willingham
Title: Senior Vice President
and Chief Financial Officer
54
<PAGE> 65
EXHIBIT A
FORM OF CONVERTIBLE PREFERRED STOCK
FACE OF SECURITY
[THE SECURITY EVIDENCED HEREBY (OR ITS PREDECESSOR) (AND THE COMMON STOCK
INTO WHICH THIS SECURITY IS CONVERTIBLE) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED IN ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY (OR THE COMMON
STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE) IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY (AND OF THE COMMON STOCK INTO WHICH THIS SECURITY IS
CONVERTIBLE) AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY (AND
THE COMMON STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE) MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE
904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE), (4) TO THE COMPANY OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES.]*
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK,
TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OF PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON
__________________________________
* Subject to removal upon registration under the Securities Act of 1933 or
otherwise when the security shall no longer be a restricted security.
<PAGE> 66
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO. HAS AN INTEREST
HEREIN.]**
[TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
CERTIFICATE OF DESIGNATION REFERRED TO BELOW.]**
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND
TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH REGISTRAR AND
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES
WITH THE FOREGOING RESTRICTIONS.
Number of Shares of Convertible
Certificate Number Preferred Stock
[ ] [ ]
CUSIP NO.: [ ]
7 1/4% Junior Convertible Preferred Stock Due 2007
(par value $0.01) (liquidation preference $100
per share of Convertible Preferred Stock)
of
IXC Communications, Inc.
IXC Communications, Inc., a Delaware corporation (the "Company"), hereby
certifies that [ ] (the "Holder") is the registered owner of fully paid
and non-assessable preferred securities of the Company designated the 7 1/4%
Junior Convertible Preferred Stock Due 2007 (par value $0.01) (liquidation
preference $100 per share of Convertible Preferred Stock) (the "Convertible
Preferred Stock"). The shares of Convertible Preferred Stock are transferable
on the books and records of the Registrar, in person or by a duly authorized
attorney, upon surrender of this certificate duly endorsed and in proper form
for transfer. The designation, rights, privileges,
__________________________________
** Subject to removal if not a global security.
2
<PAGE> 67
restrictions, preferences and other terms and provisions of the Convertible
Preferred Stock represented hereby are issued and shall in all respects be
subject to the provisions of the Certificate of Designation dated March [ ],
1997, as the same may be amended from time to time (the "Certificate of
Designation"). Capitalized terms used herein but not defined shall have the
meaning given them in the Certificate of Designation. The Company will provide
a copy of the Certificate of Designation to a Holder without charge upon
written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Convertible Preferred
Stock set forth on the reverse hereof, and to the Certificate of Designation,
which select provisions and the Certificate of Designation shall for all
purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of
Designation and is entitled to the benefits thereunder.
Unless the Transfer Agent's Certificate of Authentication hereon has been
properly executed, these shares of Convertible Preferred Stock shall not be
entitled to any benefit under the Certificate of Designation or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has executed this certificate this [ ] day
of [ ], [ ].
IXC COMMUNICATIONS, INC.,
By:
-------------------------------
Name:
Title:
[Seal]
By:
-------------------------------
Name:
Title:
3
<PAGE> 68
TRANSFER AGENT'S CERTIFICATE OF AUTHENTICATION
This is one of the Convertible Preferred Stock referred to in the within
mentioned Certificate of Designation.
Dated: [ ], [ ]
CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.
as Transfer Agent,
By:
---------------------------
Authorized Signatory
4
<PAGE> 69
REVERSE OF SECURITY
Dividends on each share of Convertible Preferred Stock shall be payable at a
rate per annum set forth in the face hereof or as provided in the Certificate
of Designation (including Additional Dividends).
The shares of Convertible Preferred Stock shall be redeemable as provided in
the Certificate of Designation. The shares of Convertible Preferred Stock
shall be convertible into the Company's Common Stock in the manner and
according to the terms set forth in the Certificate of Designation.
As required under Delaware law, the Company shall furnish to any Holder upon
request and without charge, a full summary statement of the designations,
voting rights preferences, limitations and special rights of the shares of each
class or series authorized to be issued by the Company so far as they have been
fixed and determined and the authority of the Board of Directors to fix and
determine the designations, voting rights, preferences, limitations and special
rights of the class and series of shares of the Company.
5
<PAGE> 70
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of
Convertible Preferred Stock evidenced hereby to:
------------------------------
- -------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- -------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
agent to transfer the shares of Convertible Preferred Stock evidenced hereby on
the books of the Transfer Agent and Registrar. The agent may substitute
another to act for him or her.
Date:
------------------------------
Signature:
-------------------------
(Sign exactly as your name appears on the other side of this Convertible
Preferred Stock Certificate)
Signature Guarantee:***
------------------------------------------------------
- ------------------------
*** (Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.)
6
<PAGE> 71
EXHIBIT B
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Convertible, Preferred Stock)
The undersigned hereby irrevocably elects to convert (the "Conversion") shares
of 7 1/4% Junior Convertible Preferred Stock (the "Convertible Preferred
Stock"), represented by stock certificate No(s). _______________ (the
"Convertible Preferred Stock Certificates") into shares of common stock
("Common Stock") of IXC Communications, Inc. (the "Company") according to the
conditions of the Certificate of Designations, Preferences and Rights of the
Convertible Preferred Stock (the "Certificate of Designation"), as of the date
written below. If shares are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates. No fee will be
charged to the holder for any conversion, except for transfer taxes, if any. A
copy of each Convertible Preferred Stock Certificate is attached hereto (or
evidence of loss, theft or destruction thereof).
The undersigned represents and warrants that all offers and sales by the
undersigned of the shares of Common Stock issuable to the undersigned upon
conversion of the Convertible Preferred Stock shall be made pursuant to
registration of the Common Stock under the Securities Act of 1933 (the "Act"),
or pursuant to any exemption from registration under the Act.
Any holder, upon the exercise of its conversion rights in accordance with the
terms of the Certificate of Designation and the Convertible Preferred Stock,
agrees to be bound by the terms of the Registration Rights Agreement.
Capitalized terms used but not defined herein shall have the meanings ascribed
thereto in or pursuant to the Certificate of Designation.
Date of Conversion: ________________________
Applicable Conversion Price: _______________
Number of shares of Convertible
Preferred Stock to be Converted: ____________
<PAGE> 72
Number of shares of
Common Stock to be Issued: _________________
Signature: _________________________________
Name: ______________________________________
Address:** _________________________________
Fax No.: ___________________________________
- -----------------------------
* The Company is not required to issue shares of Common Stock until the
original Convertible Preferred Stock Certificate(s) (or evidence of loss,
theft or destruction thereof) to be converted are received by the Company or
its Transfer Agent. The Company shall issue and deliver shares of Common
Stock to an overnight courier not later than three business days following
receipt of the original Convertible Preferred Stock Certificate(s) to be
converted.
** Address where shares of Common Stock and any other payments or certificates
shall be sent by the Company.
2
<PAGE> 73
EXHIBIT C
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF CONVERTIBLE PREFERRED STOCK
Re: 7 1/4% Junior Convertible Preferred Stock Due 2007 (the "Convertible
Preferred Stock") of IXC Communications, Inc. (the "Company")
This Certificate relates to ____ shares of Convertible Preferred Stock held
in [ ] */ book-entry or [ ] */ definitive form by _______________ (the
"Transferor").
The Transferor*:
[ ] has requested the Transfer Agent by written order to deliver in exchange
for its beneficial interest in the Convertible Preferred Stock held by the
depository shares of Convertible Preferred Stock in definitive, registered form
equal to its beneficial interest in such Convertible Preferred Stock (or the
portion thereof indicated above); or
[ ] has requested the Transfer Agent by written order to exchange or
register the transfer of Convertible Preferred Stock.
In connection with such request and in respect of such Convertible Preferred
Stock, the Transferor does hereby certify that the Transferor is familiar with
the Certificate of Designation relating to the above captioned Convertible
Preferred Stock and that the transfer of this Convertible Preferred Stock does
not require registration under the Securities Act of 1933 (the "Securities
Act") because */:
[ ] Such Convertible Preferred Stock is being acquired for the Transferor's
own account without transfer.
[ ] Such Convertible Preferred Stock is being transferred to the Company.
[ ] Such Convertible Preferred Stock is being transferred (i) to a qualified
institutional buyer (as defined in Rule 144A under the Securities Act), in
reliance on Rule 144A or (ii) pursuant to an exemption from registration in
accordance with Rule 904 under the Securities Act (and, in the case of clause
(ii), based on an opinion of counsel if the Company so requests and together
__________________________________
*/Please check applicable box.
<PAGE> 74
with a certification in substantially the form of Exhibit E to the
Certificate of Designation).
[ ] Such Convertible Preferred Stock is being transferred to an accredited
investor within the meaning of Rule 501(a)(1), (2), (3), (4), (5), (6) or (7)
under the Securities Act pursuant to a private placement exemption from the
registration requirements of the Securities Act (together with a certification
in substantially the form of Exhibit D to the Certificate of Designation).
[ ] Such Convertible Preferred Stock is being transferred in reliance on and
in compliance with another exemption from the registration requirements of the
Securities Act (and based on an opinion of counsel if the Company so requests).
-------------------------------
[INSERT NAME OF TRANSFEROR]
Date: By
------------------------------- -------------------------------
2
<PAGE> 75
EXHIBIT D
FORM OF CERTIFICATE
TO BE DELIVERED BY ACCREDITED INVESTORS
_____________, _____
ChaseMellon Shareholder Services, L.L.C.
Attention: [ ]
Ladies and Gentlemen:
In connection with our proposed purchase of certain 7 1/4% Junior
Convertible Preferred Stock Due 2007 (the "Convertible Preferred Stock"), of
IXC Communications, Inc., a Delaware corporation (the "Company"), we represent
that:
(i) we are an "accredited investor" within the meaning of Rule
501(a)(1),(2),(3),(4),(5),(6) or (7) under the Securities Act of 1933 (the
"Securities Act") (an "Accredited Investor"), or an entity in which all of
the equity owners are Accredited Investors;
(ii) any purchase of Convertible Preferred Stock will be for our own account
or for the account of one or more other Accredited Investors as to which we
exercise sole investment discretion;
(iii) we have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of purchasing
Convertible Preferred Stock and we and any accounts for which we are acting
are able to bear the economic risks of our or their investment;
(iv) we are not acquiring Convertible Preferred Stock with a view to any
distribution thereof in a transaction that would violate the Securities Act
or the securities laws of any State of the United States or any other
applicable jurisdiction; provided that the disposition of our property and
the property of any accounts for which we are acting as fiduciary shall
remain at all times without our control; and
(v) we acknowledge that we have had access to such financial and other
information, and have been afforded the opportunity to ask such questions of
representatives of the Company and receive answers
<PAGE> 76
thereto, as we deem necessary in connection with our decision to purchase
Convertible Preferred Stock.
We understand that the Convertible Preferred Stock has not been registered
under the Securities Act, and we agree, on our own behalf and on behalf of each
account for which we acquire any Convertible Preferred Stock, that such
Convertible Preferred Stock may be offered, resold, pledged or otherwise
transferred only (i) to a person whom we reasonably believe to be a qualified
institutional buyer (as defined in Rule 144A under the Securities Act) in a
transaction meeting the requirements of Rule 144A, in a transaction meeting the
requirements of Rule 144 under the Securities Act, outside the United States to
a foreign person in a transaction meeting the requirements of Rule 904 under
the Securities Act (and, unless such transfer occurs in a transaction meeting
the requirements of Rule 144A, based upon an opinion of counsel, if the Company
so requests), (ii) to the Company or (iii) pursuant to an effective
registration statement, and, in each case, in accordance with any applicable
securities laws of any State of the United States or any other applicable
jurisdiction. We understand that the registrar will not be required to accept
for registration of transfer any shares of Convertible Preferred Stock, except
upon presentation of evidence satisfactory to the Company that the foregoing
restrictions on transfer have been complied with. We further understand that
the Convertible Preferred Stock purchased by us will bear a legend reflecting
the substance of this paragraph. We further agree to provide to any person
acquiring any of the Convertible Preferred Stock from us a notice advising such
person that resales of the Convertible Preferred Stock are restricted as stated
herein.
We acknowledge that you, the Company and others will rely upon our
confirmations, acknowledgements and agreements set forth herein, and we agree
to notify you promptly in writing if any of our representations or warranties
herein ceases to be accurate and complete.
2
<PAGE> 77
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
Very truly yours,
-------------------------------
(Name of Transferee)
By:
---------------------------
Name:
Title:
Address:
3
<PAGE> 78
EXHIBIT E
FORM OF CERTIFICATE TO BE DELIVERED IN
CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S
__________, ____
ChaseMellon Shareholder Services, L.L.C.
Attention: [ ]
Ladies and Gentlemen:
In connection with our proposed sale of certain 7 1/4% Junior Convertible
Preferred Stock Due 2007 (the "Convertible Preferred Stock") of IXC
Communications, Inc., a Delaware corporation ("the "Company"), we represent
that:
(i) the offer of the Convertible Preferred Stock was not made to a person
in the United States;
(ii) at the time the buy order was originated, the transferee was outside
the United States or we and any person acting on our behalf reasonably
believed that the transferee was outside the United States;
(iii) no directed selling efforts have been made by us in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S under the Securities Act of 1933 (the "Securities Act"), as
applicable; and
(iv) the transaction is not part of a plan or scheme by us to evade the
registration requirements of the Securities Act.
You and the Company are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with
<PAGE> 79
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
----------------------------------
(Name of Transferor)
By:
-------------------------------
Name:
Title:
Address:
2
<PAGE> 80
IXC COMMUNICATIONS, INC.
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL
AND 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
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
IXC Communications, Inc. (the "Company"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify that (i) pursuant to authority conferred upon the
board of directors of the Company (the "Board of Directors") by its Restated
Certificate of Incorporation (hereinafter referred to as the "Restated
Certificate of Incorporation"), and pursuant to the provisions of Sections
141(c)(2) and 151 of the General Corporation Law of the State of Delaware, said
Board of Directors is authorized to issue Preferred Stock of the Company in one
or more series and has authorized a committee of the Board of Directors (the
"Placement Committee") to adopt the resolution set forth below and (ii) the
Placement Committee duly approved and adopted the following resolution on August
14, 1997 (the "Resolution"):
RESOLVED that, pursuant to the authority vested in the Board
of Directors by its Restated Certificate of Incorporation, and the
authority vested by such Board of Directors in a committee of the Board
(the "Placement Committee"), all the members of which are members of
such Board, the Placement Committee does hereby create, authorize and
provide for the issuance of 12 1/2% Junior Exchangeable Preferred Stock
Due 2009, par value $0.01 per share, with a stated value of $1000 per
share, initially consisting of up to 450,000 shares and 12 1/2% Series
B Junior Exchangeable Preferred Stock Due 2009, par value $0.01 per
share, with a stated value of $1,000
<PAGE> 81
2
per share, initially consisting of up to 450,000 shares (collectively,
the "Exchangeable Preferred Stock") having the designation,
preferences, relative, participating, optional and other special rights
and the qualifications, limitations and restrictions thereof that are
set forth in the Restated Certificate of Incorporation and in this
Resolution as follows:
(a) Designation. There is hereby created out of the authorized
and unissued shares of Preferred Stock of the Company (i) a series of Preferred
Stock designated as the "12 1/2% Junior Exchangeable Preferred Stock Due 2009"
(the "Initial Exchangeable Preferred Stock") and (ii) a series of Preferred
Stock designated as the "12 1/2% Series B Junior Exchangeable Preferred Stock
Due 2009" (the "Series B Stock"). The number of shares constituting the Initial
Exchangeable Preferred Stock shall be 450,000, and the number of shares
constituting the Series B Stock shall be 450,000. The Initial Exchangeable
Preferred Stock and the Series B Stock are referred to as the Exchangeable
Preferred Stock. The liquidation preference of the Exchangeable Preferred Stock
shall be $1000 per share (the "Liquidation Preference").
(b) Rank. The Exchangeable Preferred Stock will, with respect
to dividend rights and rights on liquidation, winding-up and dissolution, rank
(i) senior to all classes of common stock and to each other class of Capital
Stock or series of Preferred Stock established hereafter by the Board of
Directors of the Company, the terms of which do not expressly provide that it
ranks senior to, or on a parity with, the Exchangeable Preferred Stock as to
dividend rights and rights on liquidation, winding-up and dissolution of the
Company (collectively referred to, together with all classes of common stock of
the Company, as "Junior Stock"); (ii) on a parity with each share of Convertible
Preferred Stock now or hereafter outstanding and on a parity with each other
class of Capital Stock or series of Preferred Stock established hereafter by the
Board of Directors of the
<PAGE> 82
3
Company, the terms of which expressly provide that such class or series will
rank on a parity with the Exchangeable Preferred Stock as to dividend rights and
rights on liquidation, winding-up and dissolution (collectively referred to as
"Parity Stock"); and (iii) junior to each share of Series 3 Preferred Stock now
or hereafter outstanding and junior to each class of Capital Stock or series of
Preferred Stock established hereafter by the Board of Directors of the Company,
the terms of which hereafter established classes or series expressly provide
that such class or series will rank senior to the Exchangeable Preferred Stock
as to dividend rights or rights on liquidation, winding-up and dissolution of
the Company (collectively referred to as "Senior Stock"). All claims of the
holders of the Exchangeable Preferred Stock, including claims with respect to
dividend payments, redemption payments, mandatory repurchase payments or rights
upon liquidation, winding-up or dissolution, shall rank junior to the claims of
the holders of any debt of the Company and all other creditors of the Company.
(c) Dividends. (i) Holders of the outstanding shares of
Exchangeable Preferred Stock will be entitled to receive, when, as and if
declared by the Board of Directors of the Company, out of funds legally
available therefor, cumulative preferential dividends on each share of the
Exchangeable Preferred Stock at a rate per annum equal to 12 1/2% of the
Liquidation Preference of such share payable quarterly (each such quarterly
period being herein called a "Dividend Period"). In addition to the dividends
described in the preceding sentence, holders of outstanding shares of
Exchangeable Preferred Stock will be entitled to additional dividends (the
"Additional Dividends"), when, as and if declared by the Board of Directors of
the Company, out of funds legally available therefor, with respect to the shares
of Exchangeable Preferred Stock, which Additional Dividends shall accrue as
follows if any of the following events occur (each such event in clauses (A),
(B) and (C) below being herein called a "Registration Default"): (A) if by
October 6, 1997, neither the Exchange Offer Registration Statement nor the Shelf
Registration Statement has been filed with the SEC; (B) if by January 19, 1998,
neither the Registered Exchange Offer is consummated nor the Shelf
<PAGE> 83
4
Registration Statement declared effective by the SEC; or (C) if after January
19, 1998 and after either the Exchange Offer Registration Statement or the Shelf
Registration Statement is declared effective, such Registration Statement
thereafter ceases to be effective (in each case except as permitted below) in
connection with resales of Exchangeable Preferred Stock in accordance with and
during the periods specified herein.
Additional Dividends shall accrue on the shares of
Exchangeable Preferred Stock from and including the date on which any such
Registration Default shall occur, to but excluding the date on which all such
Registration Defaults have been cured, at a rate of .50% per annum.
A Registration Default referred to in clause (C) of paragraph
(c)(i) shall be deemed not to have occurred and be continuing in relation to a
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to the Registration Statement to incorporate annual audited financial
information with respect to the Company where such post-effective amendment is
not yet effective and needs to be declared effective to permit Holders to use
the related prospectus or (y) other material events with respect to the Company
that would need to be described in the Registration Statement or the related
prospectus and (ii) in the case of clause (y), the Company proceeds promptly and
in good faith to amend or supplement the Registration Statement and related
prospectus to describe such events unless the Company has determined in good
faith that there are material legal or commercial impediments in doing so;
provided, however, that in any case if such Registration Default occurs for a
continuous period in excess of 45 days, Additional Dividends shall be payable in
accordance with the immediately preceding paragraphs of this paragraph (c)(i)
from the day such Registration Default initially occurs until such Registration
Default is cured.
Any amounts of Additional Dividends due pursuant to clauses
(A), (B) or (C) of this paragraph (c)(i) or pursuant to the proviso contained in
the preceding sentence will be payable on the regular dividend payment dates
with
<PAGE> 84
5
respect to the Exchangeable Preferred Stock and on the same terms and
conditions and subject to the same limitations as pertain at such time for the
payment of regular dividends. The amount of Additional Dividends will be
determined by multiplying the applicable Additional Dividends rate by the
aggregate liquidation preference of the outstanding shares of Exchangeable
Preferred Stock, multiplied by a fraction, the numerator of which is the number
of days such Additional Dividend rate was applicable during such period
(determined on the basis of a 360-day year comprised of twelve 30-day months),
and the denominator of which is 360.
All dividends on the Exchangeable Preferred Stock, including
Additional Dividends, to the extent accrued, shall be cumulative, whether or not
earned or declared, on a daily basis from the Issue Date or, in the case of
additional shares of Exchangeable Preferred Stock issued in payment of a
dividend, from the date of issuance of such additional shares of Exchangeable
Preferred Stock, and shall be payable quarterly in arrears on each February 15,
May 15, August 15 and November 15 (each, a "Dividend Payment Date"), commencing
on November 15, 1997, to holders of record on the February 1, May 1, August 1
and November 1 immediately preceding the relevant Dividend Payment Date. Any
dividend on the Exchangeable Preferred Stock payable pursuant to this paragraph
(c)(i) on or prior to February 15, 2001 shall be, at the option of the Company,
payable (1) in cash or (2) through the issuance of a number of additional shares
(including fractional shares) of Exchangeable Preferred Stock (the "Additional
Shares") equal to the dividend amount divided by the Liquidation Preference of
such Additional Shares. With respect to dividends accrued after February 15,
2001, all dividends shall be payable in cash.
Any dividend accruing after February 15, 2001 that is not paid
in cash on the relevant Dividend Payment Date shall accrue interest at a rate
per annum equal to the then applicable dividend rate per annum from such
Dividend Payment Date to the date of payment of such dividend. Such interest, if
any, shall be payable in cash on each Dividend Payment Date. Any accrued
interest not paid on a Dividend Payment Date shall accrue interest on such
interest pursuant to this paragraph. Any references herein to the payment of
<PAGE> 85
6
accrued and unpaid dividends shall be deemed to include any such interest.
(ii) In the event the Company notifies the holders of
Exchangeable Preferred Stock of its election not to make a Change of Control
Offer (as defined in paragraph (h)(i)) pursuant to paragraph (h)(iii), then,
within 60 days of the occurrence of the applicable Change of Control, holders of
a majority of the outstanding shares of the Exchangeable Preferred Stock will
designate an Independent Financial Advisor to determine, within 20 days of such
designation, in the opinion of such firm, 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; provided, however, that no such reset shall be required
to be made if such Independent Financial Advisor determines that the
Exchangeable Preferred Stock has a market value of 101% or greater. If within 5
days of the designation of an Independent Financial Advisor by the Holders, the
Company determines that such Independent Financial Advisor is reasonably
unacceptable to the Company, the Company shall designate a second Independent
Financial Advisor to determine, within 15 days of such designation, in its
opinion, such an appropriate reset dividend rate for the Exchangeable Preferred
Stock. In the event that the two Independent Financial Advisors cannot agree,
within 25 days of the designation of an Independent Financial Advisor by the
Holders of a majority of the outstanding shares of the Exchangeable Preferred
Stock, on the appropriate reset dividend rate, the two Independent Financial
Advisors shall, within 10 days of such 25th day, designate a third Independent
Financial Advisor, which, within 15 days of designation, will determine, in its
opinion, an appropriate reset dividend rate which is between the two rates
selected by the first two Independent Financial Advisors. Upon the 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 or greater than 15% per annum. The reasonable fees and
expenses including reasonable fees and expenses of legal counsel, if any, and
customary
<PAGE> 86
7
indemnification of each of the three above-referenced Independent Financial
Advisors, shall be borne by the Company.
(iii) All dividends paid with respect to shares of the
Exchangeable Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata
to the holders entitled thereto.
(iv) No dividend may be declared or paid or set apart for the
payment of dividends by the Company on any Parity Stock for any period unless
full cumulative dividends in respect of each Dividend Period ending on or before
such period shall have been or contemporaneously are declared and paid (or are
deemed declared and paid) in full or declared and, if payable in cash, a sum in
cash sufficient for such payment set apart for such payment on the Exchangeable
Preferred Stock. If full dividends are not so paid, the Exchangeable Preferred
Stock will share dividends pro rata with the Parity Stock.
(v) The Company will not (A) declare, pay or set apart funds
for the payment of any dividend or other distribution with respect to any Junior
Stock or (B) redeem, purchase or otherwise acquire for consideration any Junior
Stock through a sinking fund or otherwise, unless (1) all accrued and unpaid
dividends with respect to the Exchangeable Preferred Stock and any Parity Stock
at the time such dividends are payable have been paid or funds have been set
apart for payment of such dividends and (2) sufficient funds have been paid or
set apart for the payment of the dividend for the current dividend period with
respect to the Exchangeable Preferred Stock and any Parity Stock. As used
herein, the term "dividend" does not include dividends payable solely in shares
of Junior Stock on Junior Stock or in options, warrants or rights to holders of
Junior Stock to subscribe or purchase any Junior Stock.
(vi) Dividends on account of arrears for any past Dividend
Period and dividends in connection with any optional redemption may be declared
and paid at any time, without reference to any regular Dividend Payment Date, to
holders of record on such date, not more than 45 days prior
<PAGE> 87
8
to the payment thereof, as may be fixed by the Board of Directors of the
Company.
(vii) Dividends payable on the Exchangeable Preferred Stock
for any period other than a Dividend Period shall be computed on the basis of a
360-day consisting year of twelve 30-day months and the actual number of days
elapsed in the period for which payable. Dividends payable on the Exchangeable
Preferred Stock for a full Dividend Period will be computed by dividing the per
annum dividend rate by four.
(d) Liquidation Preference. (i) Upon any voluntary or
involuntary liquidation, dissolution or winding-up of the Company, holders of
Exchangeable Preferred Stock will be entitled to be paid, out of the assets of
the Company available for distribution to its stockholders, the Liquidation
Preference of the outstanding shares of Exchangeable Preferred Stock, plus,
without duplication, an amount in cash equal to all accumulated and unpaid
dividends (whether or not earned or declared and including Additional Dividends,
if any,) thereon to the date fixed for liquidation, dissolution or winding-up
(including an amount equal to a prorated dividend for the period from the last
Dividend Payment Date to the date fixed for liquidation, dissolution or
winding-up that would have been payable had the Exchangeable Preferred Stock
been the subject of an Optional Redemption on such date) before any distribution
is made on any Junior Stock. If, upon any voluntary or involuntary liquidation,
dissolution or winding up of the Company, the amounts payable with respect to
the Exchangeable Preferred Stock and all Parity Stock are not paid in full, the
Exchangeable Preferred Stock and the Parity Stock will share equally and ratably
(in proportion to the respective amounts that would be payable on such shares of
Exchangeable Preferred Stock and the Parity Stock, respectively, if all amounts
payable thereon had been paid in full) in any distribution of assets of the
Company to which each is entitled. After payment of the full amount of the
Liquidation Preference of the outstanding shares of Exchangeable Preferred Stock
(and, if applicable, an amount equal to a prorated dividend), the holders of
shares of Exchangeable Preferred Stock will not be entitled to any
<PAGE> 88
9
further participation in any distribution of assets of the Company.
(ii) For the purposes of this paragraph (d), neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Company nor the consolidation or merger of the Company with or into one or more
other entities shall be deemed to be a liquidation, dissolution or winding-up of
the Company.
(e) Redemption. (i) Optional Redemption. (A) Except as set
forth in clause (B) below, the Exchangeable Preferred Stock shall not be
redeemable at the option of the Company prior to August 15, 2002. On or after
August 15, 2002, each share of the Exchangeable Preferred Stock may be redeemed
(subject to the legal availability of funds therefor) at any time, in whole or
in part, at the option of the Company, at the redemption prices (expressed as a
percentage of the Liquidation Preference of such share) set forth below, plus,
without duplication, an amount in cash equal to all accrued and unpaid dividends
to the date fixed for redemption (the "Optional Redemption Date") (including an
amount in cash equal to a prorated dividend for the period from the Dividend
Payment Date immediately prior to the Optional Redemption Date) (the "Optional
Redemption Price"), if redeemed during the 12-month period beginning August 15
of each of the years set forth below:
<TABLE>
<CAPTION>
Year in which redemption
occurs Percentage
------ ----------
<S> <C>
2002.................................. 106.250%
2003.................................. 105.000
2004.................................. 103.750
2005.................................. 102.500
2006.................................. 101.250
2007 and thereafter................... 100.000
</TABLE>
(B) At any time and from time to time prior to August 15,
2000, the Company may redeem in the aggregate up to 35% of the outstanding
shares of Exchangeable Preferred
<PAGE> 89
10
Stock with the proceeds of one or more Public Equity Offerings at a redemption
price (expressed as a percentage of the Liquidation Preference thereof) of
112.500% plus accrued and unpaid dividends, if any, to the redemption date
(including an amount in cash equal to a prorated dividend for any partial
dividend period); provided, however, that at least $195 million aggregate
Liquidation Preference of the Exchangeable Preferred Stock remains outstanding
after each such redemption.
(C) In the event of a redemption of only a portion of the then
outstanding shares of Exchangeable Preferred Stock, the Company shall effect
such redemption on a pro rata basis, except that the Company may redeem all of
the shares held by holders of fewer than 100 shares (or all of the shares held
by holders who would hold less than 100 shares as a result of such redemption),
as may be determined by the Company.
(ii) Mandatory Redemption. Each share of the Exchangeable
Preferred Stock (if not earlier redeemed or converted) shall be subject to
mandatory redemption in whole (to the extent of lawfully available funds
therefor) on August 15, 2009 (the "Mandatory Redemption Date") at a price equal
to 100% of the Liquidation Preference of such share, plus, without duplication,
all accrued and unpaid dividends thereon (including an amount equal to a
prorated dividend thereon from the immediately preceding Dividend Payment Date
to the Mandatory Redemption Date), if any, to the Mandatory Redemption Date (the
"Mandatory Redemption Price").
(iii) Procedure for Redemption. (A) On and after the Optional
Redemption Date or the Mandatory Redemption Date, as the case may be (the
"Redemption Date"), unless the Company defaults in the payment of the applicable
redemption price, dividends will cease to accumulate on shares of Exchangeable
Preferred Stock called for redemption and all rights of holders of such shares
will terminate except for the right to receive the Optional Redemption Price or
the Mandatory Redemption Price, as the case may be, without interest; provided,
however, that if a notice of redemption shall have been given as provided in
subparagraph (iii)(B) and the funds necessary for redemption (including an
amount
<PAGE> 90
11
in respect of all dividends that will accrue to the Redemption Date) shall have
been segregated and irrevocably set apart by the Company, in trust for the
benefit of the holders of the shares called for redemption, then dividends shall
cease to accumulate on the Redemption Date on the shares to be redeemed and, at
the close of business on the day on which such funds are segregated and set
apart, the holders of the shares to be redeemed shall, with respect to the
shares to be redeemed, cease to be stockholders of the Company and shall be
entitled only to receive the Optional Redemption Price or the Mandatory
Redemption Price, as the case may be, for such shares without interest from the
Redemption Date.
(B) With respect to a redemption pursuant to paragraph (e)(i)
or (e)(ii), the Company will send a written notice of redemption by first class
mail to each holder of record of shares of Exchangeable Preferred Stock, not
fewer than 30 days nor more than 60 days prior to the Redemption Date at its
registered address (the "Redemption Notice"); provided, however, that no failure
to give such notice nor any deficiency therein shall affect the validity of the
procedure for the redemption of any shares of Exchangeable Preferred Stock to be
redeemed except as to the holder or holders to whom the Company has failed to
give said notice or except as to the holder or holders whose notice was
defective. The Redemption Notice shall state:
(1) whether the redemption is pursuant to
paragraph (e)(i) or (e)(ii) hereof;
(2) the Optional Redemption Price or the Mandatory
Redemption Price, as the case may be;
(3) whether all or less than all the outstanding shares of the
Exchangeable Preferred Stock are to be redeemed and the total number of
shares of the Exchangeable Preferred Stock being redeemed;
(4) the Redemption Date;
(5) that the holder is to surrender to the Company, in the
manner, at the place or places and at
<PAGE> 91
12
the price designated, his certificate or certificates representing the
shares of Exchangeable Preferred Stock to be redeemed; and
(6) that dividends on the shares of the Exchangeable Preferred
Stock to be redeemed shall cease to accumulate on such Redemption Date
unless the Company defaults in the payment of the Optional Redemption
Price or the Mandatory Redemption Price, as
the case may be.
(C) Each holder of Exchangeable Preferred Stock shall
surrender the certificate or certificates representing such shares of
Exchangeable Preferred Stock to the Company, duly endorsed (or otherwise in
proper form for transfer, as determined by the Company), in the manner and at
the place designated in the Redemption Notice, and on the Redemption Date the
full Optional Redemption Price or Mandatory Redemption Price, as the case may
be, for such shares shall be payable in cash to the person whose name appears on
such certificate or certificates as the owner thereof, and each surrendered
certificate shall be canceled and retired. In the event that less than all of
the shares represented by any such certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares.
(f) Voting Rights. (i) The holders of Exchangeable Preferred
Stock, except as otherwise required under Delaware law or as set forth in
paragraphs (ii) and (iii) below, shall not be entitled to vote on any matter
required or permitted to be voted upon by the stockholders of the Company.
(ii) (A) If (1) dividends on the Exchangeable Preferred Stock
are in arrears and unpaid for six or more Dividend Periods (whether or not
consecutive) (a "Dividend Default"); (2) the Company fails to redeem the
Exchangeable Preferred Stock on August 15, 2009, or fails to otherwise discharge
any redemption obligation with respect to the Exchangeable Preferred Stock; (3)
a breach or violation of any of the provisions set forth under paragraph (l)
(Certain Additional Provisions) occurs and the breach or violation continues for
a period of 30 days or more after the Company
<PAGE> 92
13
receives notice thereof specifying the default from the holders of at least 25%
of the shares of Exchangeable Preferred Stock then outstanding; or (4) the
Company fails to pay at final maturity (giving effect to any applicable grace
period) the principal amount of any Indebtedness of the Company or any
Significant Subsidiary (other than any Permitted PSINet Non-Recourse Debt) or
the final maturity of any such Indebtedness is accelerated because of a default
and the total amount of such Indebtedness unpaid or accelerated exceeds $5
million, then the number of directors constituting the Board of Directors of the
Company will, subject to paragraph (f)(ii)(E), be increased by two and the
Holders of the then outstanding shares of Exchangeable Preferred Stock (together
with the holders of Parity Stock upon which like rights have been conferred and
are exercisable), voting separately and as a class, shall have the right and
power to elect such two additional directors. Each such event described in
clauses (1),(2),(3) or (4) above is a "Voting Rights Triggering Event".
(B) The voting rights set forth in paragraph (f)(ii)(A) above
will continue until such time as (x) in the case of a Dividend Default, all
dividends in arrears on the Exchangeable Preferred Stock are paid in full in
cash or (y) in all other cases, any failure, breach or default giving rise to
such Voting Rights Triggering Event is remedied or waived by the Holders of at
least a majority of the outstanding shares of Exchangeable Preferred Stock then
outstanding, at which time the term of any directors elected pursuant to the
provisions of paragraph (f)(ii)(A) above (subject to the right of holders of any
other preferred stock to elect directors) shall terminate forthwith and the
number of directors constituting the Board of Directors shall be decreased by
two (until the occurrence of any subsequent Voting Rights Triggering Event). At
any time after voting power to elect directors shall have become vested and be
continuing in the holders of Exchangeable Preferred Stock (together with the
holders of Parity Stock upon which like rights have been conferred and are
exercisable) pursuant to paragraph (f)(ii)(A) hereof, or if vacancies shall
exist in the offices of directors elected by such holders, a proper officer of
the Company may, and upon the written request of the holders of record of at
least 25%
<PAGE> 93
14
of the shares of Exchangeable Preferred Stock then outstanding or the holders of
25% of the shares of Parity Stock then outstanding upon which like rights have
been confirmed and are exercisable addressed to the secretary of the Company
shall, call a special meeting of the Holders of Exchangeable Preferred Stock and
the holders of such Parity Stock for the purpose of electing the directors which
such holders are entitled to elect pursuant to the terms hereof; provided,
however, that no such special meeting shall be called if the next annual meeting
of stockholders of the Company is to be held within 60 days after the voting
power to elect directors shall have become vested, in which case such meeting
shall be deemed to have been called for such next annual meeting. If such
meeting shall not be called by a proper officer of the Company within 20 days
after personal service to the secretary of the Company at its principal
executive offices, then the Holders of record of at least 25% of the outstanding
shares of Exchangeable Preferred Stock or the holders of 25% of the shares of
Parity Stock upon which like rights have been confirmed and are exercisable may
designate in writing one of their members to call such meeting at the expense of
the Company, and such meeting may be called by the person so designated upon the
notice required for the annual meetings of stockholders of the Company and shall
be held at the place for holding the annual meetings of stockholders. Any holder
of Exchangeable Preferred Stock or such Parity Stock so designated shall have,
and the Company shall provide, access to the lists of holders of Exchangeable
Preferred Stock and the holders of such Parity Stock to be called pursuant to
the provisions hereof. If no special meeting of the Holders of Exchangeable
Preferred Stock and the holders of such Parity Stock is called as provided in
this paragraph (f)(ii), then such meeting shall be deemed to have been called
for the next annual meeting of stockholders of the Company or special meeting of
the holders of any other capital stock of the Company.
(C) At any meeting held for the purposes of electing directors
at which the Holders of Exchangeable Preferred Stock (together with the holders
of Parity Stock upon which like rights have been conferred and are exercisable)
shall have the right, voting together as a
<PAGE> 94
15
separate class, to elect directors as aforesaid, the presence in person or by
proxy of the holders of at least a majority in voting power of the outstanding
shares of Exchangeable Preferred Stock (and such Parity Stock) shall be required
to constitute a quorum thereof.
(D) Any vacancy occurring in the office of a director elected
by the Holders of Exchangeable Preferred Stock (and such Parity Stock) may be
filled by the remaining director elected by the Holders of Exchangeable
Preferred Stock (and such Parity Stock) unless and until such vacancy shall be
filled by the Holders of Exchangeable Preferred Stock (and such Parity Stock).
(E) In the event that an event occurs at any time which
results in the holders of any Parity Stock having voting rights to elect
directors to the Board of Directors, holders of Exchangeable Preferred Stock
shall, whether or not such event otherwise constitutes a Voting Rights
Triggering Event pursuant to paragraph (f)(ii)(A), have the voting rights set
forth in paragraphs (f)(ii)(A) and (f)(ii)(B), and such event shall be deemed
(for purposes of this paragraph (f) only) to constitute a Voting Rights
Triggering Event. In addition, in the event that during a time in which
directors elected by the holders of Exchangeable Preferred Stock pursuant to
this paragraph (f)(ii) are serving on the Board of Directors ("Previously-
Elected Directors") an event occurs which results in holders of Parity Stock
having voting rights to elect (voting together with the holders of Exchangeable
Preferred Stock) at least two directors to the Board of Directors, the holders
of Exchangeable Preferred Stock shall vote together with the holders of such
Parity Stock to elect such new directors, and upon the election of the new
directors the Previously-Elected Directors shall (unless such Previously-
Elected Directors are elected as new directors) cease to serve on the Board of
Directors.
(iii) (A) So long as any shares of the Exchangeable Preferred
Stock are outstanding, the Company will not authorize, create or increase the
authorized amount of any class or series of Senior Stock without the affirmative
vote or consent of holders of at least
<PAGE> 95
16
two-thirds of the shares of Exchangeable Preferred Stock then outstanding,
voting or consenting, as the case may be, as one class, given in person or by
proxy, either in writing or by resolution adopted at an annual or special
meeting (except that no such vote or consent shall be required for the issuance
of additional shares of Series 3 Preferred Stock to be paid as dividends on such
Series 3 Preferred Stock pursuant to the terms of such Series 3 Preferred
Stock).
(B) So long as any shares of the Exchangeable Preferred Stock
are outstanding, the Company will not amend this Certificate of Designation so
as to affect adversely the specified rights, preferences, privileges or voting
rights of Holders of shares of Exchangeable Preferred Stock or to authorize the
issuance of any additional shares of Exchangeable Preferred Stock (except to
authorize the issuance of additional shares of Exchangeable Preferred Stock to
be paid as dividends on the Exchangeable Preferred Stock, for which no consent
shall be necessary) without the affirmative vote or consent of Holders of at
least a majority of the issued and outstanding shares of Exchangeable Preferred
Stock, voting or consenting, as the case may be, as one class, given in person
or by proxy, either in writing or by resolution adopted at an annual or special
meeting.
(C) Except as set forth in paragraph (f)(iii)(A) or (B) above,
(x) the creation, authorization or issuance of any shares of any Junior Stock,
Parity Stock or Senior Stock, including the designation of a series of
Exchangeable Preferred Stock, or (y) the increase or decrease in the amount of
authorized Capital Stock of any class, including Preferred Stock, shall not
require the consent of Holders of Exchangeable Preferred Stock and shall not be
deemed to affect adversely the rights, preferences, privileges or voting rights
of shares of Exchangeable Preferred Stock.
(D) Prior to the exchange of Exchangeable Preferred Stock for
Exchange Debentures, the Company shall not amend or modify the Exchange
Indenture (except as expressly provided therein in respect of amendments without
the consent of holders of Exchange Debentures) without
<PAGE> 96
17
the affirmative vote or consent of holders of at least a majority of the shares
of Exchangeable Preferred Stock then outstanding, voting or consenting, as the
case may be, as one class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting.
(iv) In any case in which the Holders of Exchangeable
Preferred Stock shall be entitled to vote pursuant to this paragraph (f) or
pursuant to Delaware law, each Holder of Exchangeable Preferred Stock entitled
to vote with respect to such matters shall be entitled to one vote for each
share of Exchangeable Preferred Stock held.
(g) Exchange. (i) Exchange for Debentures. (A) The Company
may, at its option, on any scheduled Dividend Payment Date, exchange the
Exchangeable Preferred Stock, in whole but not in part, for the Exchange
Debentures; provided however, that (1) on the date of such exchange there are no
accumulated and unpaid dividends on the Exchangeable Preferred Stock (including
the dividends payable on such date) or other contractual impediment to such
exchange; (2) there shall be funds legally available sufficient therefor; (3)
immediately after giving effect to such exchange, no Default (as defined in the
Exchange Indenture) shall have occurred and be continuing, and (iv) the Company
shall have delivered to the Trustee under the Exchange Indenture an opinion of
counsel with respect to the due authorization and issuance of the Exchange
Debentures.
(B) Upon any exchange pursuant to this paragraph (g)(i),
holders of outstanding shares of Exchangeable Preferred Stock will be entitled
to receive $1.00 principal amount of Exchange Debentures for each $1.00 of
liquidation preference of Exchangeable Preferred Stock held by them. Exchange
Debentures issued in exchange for Exchangeable Preferred Stock will be issued in
principal amounts of $1,000 and integral multiples thereof to the extent
possible, and will also be issued in principal amounts less than $1,000 so that
each holder of Exchangeable Preferred Stock will receive certificates
representing the entire amount of Exchange Debentures to which such holder's
shares of Exchangeable Preferred Stock entitle such holder;
<PAGE> 97
18
provided, however, that the Company may pay cash in lieu of issuing an Exchange
Debenture in a principal amount less than $1,000.
(ii) Procedures. (A) The Company will send a written notice of
exchange (the "Exchange Notice") by mail to each holder of record of shares of
Exchangeable Preferred Stock not fewer than 30 days nor more than 60 days before
the date fixed for such exchange (the "Exchange Date"); provided, however, that
no failure to give such notice nor any deficiency therein shall affect the
validity of the procedure for the exchange of any shares of Exchangeable
Preferred Stock to be exchanged except as to the holder or holders to whom the
Company has failed to give said notice or except as to the holder or holders
whose notice was defective. The Exchange Notice shall state:
(1) the Exchange Date;
(2) that the holder is to surrender to the Company, in the
manner and at the place or places designated, his certificate or
certificates representing the shares of Exchangeable Preferred Stock to
be exchanged;
(3) that dividends on the shares of Exchangeable Preferred
Stock to be exchanged shall cease to accrue on such Exchange Date
whether or not certificates for shares of Exchangeable Preferred Stock
are surrendered for exchange on such Exchange Date unless the Company
shall default in the delivery of Exchange Debentures; and
(4) that interest on the Exchange Debentures shall accrue from
the Exchange Date whether or not certificates for shares of
Exchangeable Preferred Stock are surrendered for exchange on such
Exchange Date.
(B) On and after the Exchange Date, dividends will cease to
accrue on the outstanding shares of Exchangeable Preferred Stock, and all rights
of the holders of Exchangeable Preferred Stock (except the right to receive
Exchange Debentures, an amount in cash, to the extent
<PAGE> 98
19
applicable, equal to the accumulated and unpaid dividends to the Exchange Date
and, if the Company so elects, cash in lieu of any Exchange Debenture that is in
a principal amount that is not an integral multiple of $1,000) will terminate.
The person entitled to receive the Exchange Debentures issuable upon such
exchange will be treated for all purposes as the registered holder of such
Exchange Debentures.
(C) On or before the Exchange Date, each holder of
Exchangeable Preferred Stock shall surrender the certificate or certificates
representing such shares of Exchangeable Preferred Stock, in the manner and at
the place designated in the Exchange Notice. The Company shall cause the
Exchange Debentures to be executed on the Exchange Date and, upon surrender in
accordance with the Exchange Notice of the certificates for any shares of
Exchangeable Preferred Stock so exchanged, duly endorsed (or otherwise in proper
form for transfer, as determined by the Company), such shares shall be exchanged
by the Company into Exchange Debentures. The Company shall pay interest on the
Exchange Debentures at the rate and on the dates specified therein from the
Exchange Date.
(iii) No Exchange in Certain Cases. Notwithstanding the
foregoing provisions of this paragraph (g), the Company shall not be entitled to
exchange the Exchangeable Preferred Stock for Exchange Debentures if such
exchange, or any term or provision of the Exchange Indenture or the Exchange
Debentures, or the performance of the Company's obligations under the Exchange
Indenture or the Exchange Debentures, shall materially violate or conflict with
any applicable law or agreement or instrument then binding on the Company or if,
at the time of such exchange, the Company is insolvent or if it would be
rendered insolvent by such exchange.
(iv) Exchange of Initial Exchangeable Preferred Stock for
Series B Stock. The Series B Stock will be issued by the Company only in
connection with an exchange offer, on a share for share basis, for the Initial
Exchangeable Preferred Stock as required pursuant to the Registration Rights
Agreement. Each share of Series B Stock issued in exchange for a share of
Initial Exchangeable Preferred Stock
<PAGE> 99
20
will be deemed to have the same liquidation preference and accrued and unpaid
dividends as the share of Initial Exchangeable Preferred Stock so exchanged.
(h) Change of Control. (i) Upon the occurrence of a Change of
Control (the date of such occurrence being the "Change of Control Date"), the
Company shall either (1) offer to purchase each holder's Exchangeable Preferred
Stock in cash pursuant to the offer described in paragraph (h)(iii) (the "Change
of Control Offer") at a purchase price equal to 101% of the Liquidation
Preference thereof, plus, without duplication, all accrued and unpaid dividends,
if any, to the Change of Control Payment Date, including an amount in cash equal
to a prorated dividend for the period from the Dividend Payment Date immediately
prior to the Change of Control Payment Date to the Change of Control Payment
Date or (2) notify each holder of the Company's election not to make an offer as
described in clause (1) above, in which case the dividend rate on the
Exchangeable Preferred Stock shall be subject to reset pursuant to paragraph
(c)(ii).
(ii) Prior to the mailing of the notice referred to in
paragraph (h)(iii), but in any event within 30 days following the date on which
the Company knows or reasonably should have known that a Change in Control has
occurred, the Company covenants that it shall promptly determine if the purchase
of the Exchangeable Preferred Stock would violate or constitute a default under
the indebtedness of the Company.
(iii) Within 30 days following the date on which the Company
knows or reasonably should have known that a Change in Control has occurred, the
Company must send, by first-class mail, postage prepaid, a notice to each holder
of Exchangeable Preferred Stock. Such notice shall state whether the Company has
elected to make an offer to purchase shares of Exchangeable Preferred Stock and
if it has so elected, such notice shall contain all instructions and materials
necessary to enable such holders to tender Exchangeable Preferred Stock pursuant
to the Change of
<PAGE> 100
21
Control Offer. If the Company has elected to make a Change of Control Offer,
such notice shall state:
(A) that a Change of Control has occurred, that a Change of
Control Offer is being made pursuant to this paragraph (h) and that all
Exchangeable Preferred Stock validly tendered and not withdrawn will be
accepted for payment;
(B) the purchase price (including the amount of accrued
dividends, if any) and the purchase date (which must be no earlier than
30 days nor later than 60 days from the date such notice is mailed,
other than as may be required by law) (the "Change of Control Payment
Date");
(C) that any shares of Exchangeable Preferred Stock not
tendered will continue to accrue dividends;
(D) that, unless the Company defaults in making payment
therefor, any share of Exchangeable Preferred Stock accepted for
payment pursuant to the Change of Control Offer shall cease to accrue
dividends after the Change of Control Payment Date;
(E) that holders electing to have any shares of Exchangeable
Preferred Stock purchased pursuant to a Change of Control Offer will be
required to surrender stock certificates representing such shares of
Exchangeable Preferred Stock, properly endorsed for transfer, together
with such other customary documents as the Company and the Transfer
Agent may reasonably request to the Transfer Agent and registrar for
the Exchangeable Preferred Stock at the address specified in the notice
prior to the close of business on the Business Day prior to the Change
of Control Payment Date;
(F) that holders will be entitled to withdraw their election
if the Company receives, not later than five Business Days prior to the
Change of Control Payment Date, a telegram, a telex, facsimile
transmission or letter setting forth the name of the
<PAGE> 101
22
holder, the number of shares of Exchangeable Preferred Stock the holder
delivered for purchase and a statement that such holder is withdrawing
his election to have such shares of Exchangeable Preferred Stock
purchased;
(G) that holders whose shares of Exchangeable Preferred Stock
are purchased only in part will be issued a new certificate
representing the unpurchased shares of Exchangeable Preferred Stock;
and
(H) 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).
If the Company elects not to make a Change of Control Offer,
such notice shall state that the dividend rate on the Exchangeable Preferred
Stock is subject to adjustment pursuant to paragraph (c)(ii).
(iv) The Company will comply with any tender offer rules under
the Exchange Act which then may be applicable, including Rules 13e-4 and 14e-1,
in connection with any offer made by the Company to repurchase the shares of
Exchangeable Preferred Stock as a result of a Change of Control. To the extent
that the provisions of any securities laws or regulations conflict with
provisions of this Certificate of Designation, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Certificate of Designation by virtue
thereof.
(v) On the Change of Control Payment Date the Company shall
(A) accept for payment the shares of Exchangeable Preferred Stock validly
tendered pursuant to the Change of Control Offer, (B) pay to the holders of
shares so accepted the purchase price therefor in cash and (C) cancel each
surrendered certificate and retire the shares represented thereby. Unless the
Company defaults in the payment for the shares of Exchangeable Preferred Stock
tendered pursuant to the Change of Control Offer, dividends will cease to accrue
with respect to the shares of
<PAGE> 102
23
Exchangeable Preferred Stock tendered and all rights of holders of such tendered
shares will terminate, except for the right to receive payment therefor, on the
Change of Control Payment Date.
(vi) To accept the Change of Control Offer, the holder of a
share of Exchangeable Preferred Stock shall deliver, on or before the 10th day
prior to the Change of Control Payment Date, written notice to the Company (or
an agent designated by the Company for such purpose) of such holder's
acceptance, together with certificates evidencing the shares of Exchangeable
Preferred Stock with respect to which the Change of Control Offer is being
accepted, duly endorsed for transfer.
(i) Conversion or Exchange. Except as otherwise provided
herein, the holders of shares of Exchangeable Preferred Stock shall not have any
rights hereunder to convert such shares into or exchange such shares for shares
of any other class or classes or of any other series of any class or classes of
Capital Stock of the Company.
(j) Reissuance of Exchangeable Preferred Stock. Shares of
Exchangeable Preferred Stock that have been issued and reacquired in any manner,
including shares purchased or redeemed or exchanged, shall not be reissued as
shares of Exchangeable Preferred Stock and shall (upon compliance with any
applicable provisions of the laws of Delaware) have the status of authorized and
unissued shares of Preferred Stock undesignated as to series and may be
redesignated and reissued as part of any series of Preferred Stock; provided,
however, that so long as any shares of Exchangeable Preferred Stock are
outstanding, any issuance of such shares must be in compliance with the terms
hereof.
(k) Business Day. If any payment, redemption or exchange shall
be required by the terms hereof to be made on a day that is not a Business Day,
such payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
<PAGE> 103
24
(l) Certain Additional Provisions. The Company covenants and
agrees for the benefit of the Holders as follows:
(i) SEC Reports. The Company shall file with the Trustee and
provide Holders, 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 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 Holders
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.
(ii) 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
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.
<PAGE> 104
25
(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 Exchange Debentures (including Exchange Debentures
issued in lieu of cash interest payments with respect to Exchange
Debentures);
(4) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (1), (2) or (3) of this paragraph
(l)(ii)(B));
(5) Refinancing Indebtedness in respect of Indebtedness
Incurred pursuant to paragraph (l)(ii)(A) pursuant to clause (3) or (4)
of this paragraph (l)(ii)(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 this Certificate of
Designation.
(7) Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money
<PAGE> 105
26
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 paragraph (l)(ii)(B) and paragraph (l)(ii)(A)),
does not exceed 5% of Consolidated Tangible Assets.
(C) Notwithstanding the foregoing, the Company shall not Incur any
Indebtedness pursuant to paragraph (l)(ii)(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 paragraph (l)(ii),
(1) in the event that an item of Indebtedness 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
(2) an item of Indebtedness may be divided and classified in more than one of
the types of Indebtedness described above.
(iii) Limitation on Restricted Payments. (A) The Company shall
not, and shall not permit any Restricted
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27
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 Voting Rights Triggering Event 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 paragraph (l)(ii)(A); or
(3) the aggregate amount of such Restricted Pay ment and all
other Restricted Payments since the Issue Date would exceed the sum of:
(I) an amount equal to the Cumulative Operating Cash
Flor 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;
(II) the aggregate Net Cash Proceeds received by the
Company from the issuance or sale of its Parity Stock and
Junior Stock (in each case 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 the Company or any of its Subsidiaries for the
benefit of their employees);
(III) 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 Parity Stock or Junior
Stock (in each case other than Disqualified
<PAGE> 107
28
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
(IV) an amount equal to the sum of (x) 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 (y) 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 paragraph (l)(iii)(A) shall not
prohibit:
(1) any Restricted Payment made out of the proceeds of the
substantially concurrent sale of, or any acquisition of any Parity
Stock or Junior Stock of the Company made by exchange for, other Parity
Stock or Junior Stock, as the case may be, of the Company (in each case
other than Disqualified Stock and other than Parity Stock or Junior
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 (I) such Restricted Payment shall be excluded in the
calculation of the amount of Restricted Payments and (II) the Net Cash
Proceeds from such sale shall be excluded from the
<PAGE> 108
29
calculation of amounts under paragraph (l)(iii)(A)(3)(II);
(2) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend would
have complied with paragraph (l)(iii); provided, however, that at the
time of payment of such dividend, no other Voting Rights Triggering
Event 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; or
(3) 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 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.
(iv) 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
<PAGE> 109
30
Company, (B) make any loans or advances to the Company or (C) transfer any of
its property or assets to the Company, except:
(1) any encumbrance or restriction pursuant to an
agreement in effect at or entered into on the Issue
Date;
(2) 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 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;
(3) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an
agreement referred to in clause (1) or (2) of this paragraph (l)(iv) or
this clause (3) or contained in any amendment to an agreement referred
to in clause (1) or (2) of this paragraph (l)(iv) or this clause (3);
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 holders of
Exchangeable Preferred Stock than encumbrances and restrictions with
respect to such Restricted Subsidiary contained in such predecessor
agreements;
(4) 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;
<PAGE> 110
31
(5) 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;
(6) 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
(7) any such encumbrance or restriction contained
in the PSINet Agreement.
(v) 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
(1) 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 (2) the Company delivers to the Transfer
Agent (I) 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 (1) above and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the Board of Directors
and (II) 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.
<PAGE> 111
32
(B) The provisions of the foregoing paragraph (l)(v)(A) shall
not prohibit (1) any Restricted Payment permitted to be paid pursuant to
paragraph (l)(iii), (2) 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, (3) the grant of stock options or similar rights to
employees and directors of the Company pursuant to plans approved by the Board
of Directors, (4) 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, (5) 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, (6) 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, (7) any Affiliate Transaction
between the Company and a Restricted Subsidiary or between Restricted
Subsidiaries, (8) transactions in connection with Permitted Businesses between
the Company and GE Capital Communication, (9) transactions between the Company
or any Restricted Subsidiary specifically contemplated by the PSINet Agreement
and (10) 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, Exchangeable Preferred Stock or 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, Exchangeable Preferred Stock 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, Exchangeable Preferred Stock or Convertible Preferred Stock, as
the case may be, on the same terms and conditions;
<PAGE> 112
33
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, Exchangeable
Preferred Stock 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.
(vi) 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: (1) 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
all the obligations of the Company under the Exchangeable Preferred Stock; (2)
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, (3) immediately after giving
effect to such transaction, the Successor Company would be able to Incur an
additional $1.00 of Indebtedness pursuant to paragraph (l)(ii)(A); (4)
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 (5) the
Company shall have delivered to the Trustee an Officers' Certificate, stating
that such consolidation, merger or transfer and such assumption (if any) comply
with this Certificate of Designation.
<PAGE> 113
34
(m) Certificates. (i) Form and Dating. The Exchangeable
Preferred Stock and the Transfer Agent's certificate of authentication shall be
substantially in the form of Exhibit A, which is hereby incorporated in and
expressly made a part of this Certificate of Designation. The Exchangeable
Preferred Stock certificate may have notations, legends or endorsements required
by law, stock exchange rule, agreements to which the Company is subject, if any,
or usage (provided that any such notation, legend or endorsement is in a form
acceptable to the Company). Each Exchangeable Preferred Stock certificate shall
be dated the date of its authentication. The terms of the Exchangeable Preferred
Stock certificate set forth in Exhibit A are part of the terms of this
Certificate of Designation.
(A) Global Exchangeable Preferred Stock. The Exchangeable
Preferred Stock sold in reliance on Rule 144A shall be issued initially in the
form of one or more fully registered global certificates with the global
securities legend and restricted securities legend set forth in Exhibit A hereto
(the "Global Exchangeable Preferred Stock"), which shall be deposited on behalf
of the purchasers represented thereby with the Transfer Agent, at its New York
office, as custodian for DTC (or with such other custodian as DTC may direct),
and registered in the name of DTC or a nominee of DTC, duly executed by the
Company and authenticated by the Transfer Agent as hereinafter provided. Subject
to the terms hereof and to the requirements of applicable law, the number of
shares of Exchangeable Preferred Stock represented by Global Exchangeable
Preferred Stock may from time to time be increased or decreased by adjustments
made on the records of the Transfer Agent and DTC or its nominee as hereinafter
provided.
(B) Book-Entry Provisions. In the event Global Exchangeable
Preferred Stock is deposited with or on behalf of DTC, the Company shall execute
and the Transfer Agent shall authenticate and deliver initially one or more
Global Exchangeable Preferred Stock certificates that (a) shall be registered in
the name of DTC for such Global Exchangeable Preferred Stock or the nominee of
DTC and (b) shall be delivered by the Transfer Agent to DTC or pursuant to DTC's
<PAGE> 114
35
instructions or held by the Transfer Agent as custodian for DTC.
Members of, or participants in, DTC ("Agent Members") shall
have no rights under this Certificate of Designation with respect to any Global
Exchangeable Preferred Stock held on their behalf by DTC or by the Transfer
Agent as the custodian of DTC or under such Global Exchangeable Preferred Stock,
and DTC may be treated by the Company, the Transfer Agent and any agent of the
Company or the Transfer Agent as the absolute owner of such Global Exchangeable
Preferred Stock for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Transfer Agent or any agent of the
Company or the Transfer Agent from giving effect to any written certification,
proxy or other authorization furnished by DTC or impair, as between DTC and its
Agent Members, the operation of customary practices of DTC governing the
exercise of the rights of a holder of a beneficial interest in any Global
Exchangeable Preferred Stock.
(C) Certificated Exchangeable Preferred Stock. Exchangeable
Preferred Stock initially sold in offshore transactions pursuant to Regulation S
under the Securities Act will be issued in fully registered certificated form
("Certificated Exchangeable Preferred Stock").
Except as otherwise provided by applicable law or as provided
in this paragraph (m)(i) or in paragraph (m)(iii), owners of beneficial
interests in Global Exchangeable Preferred Stock will not be entitled to receive
physical delivery of Certificated Exchangeable Preferred
Stock.
After a transfer of any Initial Exchangeable Preferred Stock
during the period of the effectiveness of a Shelf Registration Statement with
respect to such Initial Exchangeable Preferred Stock, all requirements
pertaining to legends on such Initial Exchangeable Preferred Stock will cease to
apply, the requirements requiring that any such Initial Exchangeable Preferred
Stock issued to Holders be issued in global form will cease to apply, and
Certificated Exchangeable Preferred Stock without legends will be
<PAGE> 115
36
available to the transferee of the Holder of such Initial Exchangeable Preferred
Stock upon exchange of such transferring Holder's Initial Exchangeable Preferred
Stock or directions to transfer such Holder's interest in the Global
Exchangeable Preferred Stock, as applicable. Upon the consummation of a
Registered Exchange Offer with respect to the Initial Exchangeable Preferred
Stock pursuant to which Holders of such Initial Exchangeable Preferred Stock are
offered Series B Stock in exchange for their Initial Exchangeable Preferred
Stock, all requirements that Initial Exchangeable Preferred Stock be issued in
global form will cease to apply and Certificated Exchangeable Preferred Stock
with the restricted securities legend set forth in Exhibit A hereto will be
available to Holders of such Initial Exchangeable Preferred Stock that do not
exchange their Initial Exchangeable Preferred Stock, and Series B Stock in
certificated form will be available to Holders that exchange such Initial
Exchangeable Preferred Stock in such Registered Exchange Offer.
(ii) Execution and Authentication. Two Officers shall sign the
certificates representing Exchangeable Preferred Stock for the Company by manual
or facsimile signature. The Company's seal shall be impressed, affixed,
imprinted or reproduced on the Exchangeable Preferred Stock and may be in
facsimile form.
If an Officer whose signature is on certificates representing
Exchangeable Preferred Stock no longer holds that office at the time the
Transfer Agent authenticates the Exchangeable Preferred Stock evidenced thereby,
the shares of Exchangeable Preferred Stock evidenced thereby shall be valid
nevertheless.
A certificate representing Exchangeable Preferred Stock shall
not be valid until an authorized signatory of the Transfer Agent manually signs
the certificate of authentication on the Exchangeable Preferred Stock. The
signature shall be conclusive evidence that the Exchangeable Preferred Stock has
been authenticated under this Certificate of Designation.
<PAGE> 116
37
The Transfer Agent shall authenticate and deliver: (1) 300,000
shares of Initial Exchangeable Preferred Stock for original issue and (2)
300,000 shares of Series B Stock for issue only in a Registered Exchange Offer
pursuant to the Registration Rights Agreement, in each case upon a written order
of the Company signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of the Company. In addition, the Transfer
Agent shall authenticate and deliver, from time to time, Additional Shares for
original issue upon order of the Company signed by two Officers or by an Officer
or either an Assistant Treasurer or Assistant Secretary of the Company. Such
orders shall specify the number of shares of Exchangeable Preferred Stock to be
authenticated and the date on which the original issue of Exchangeable Preferred
Stock is to be authenticated and whether the Exchangeable Preferred Stock is to
be Initial Exchangeable Preferred Stock or Series B Stock.
The Transfer Agent may appoint an authenticating agent
reasonably acceptable to the Company to authenticate the Exchangeable Preferred
Stock. Unless limited by the terms of such appointment, an authenticating agent
may authenticate Exchangeable Preferred Stock whenever the Transfer Agent may do
so. Each reference in this Certificate of Designation to authentication by the
Transfer Agent includes authentication by such agent. An authenticating agent
has the same rights as the Transfer Agent or agent for service of notices and
demands.
(iii) Transfer and Exchange. (A) Transfer and Exchange of
Certificated Exchangeable Preferred Stock. When Certificated Exchangeable
Preferred Stock is presented to the Transfer Agent with a request to register
the transfer of such Certificated Exchangeable Preferred Stock or to exchange
such Certificated Exchangeable Preferred Stock for an equal number of shares of
Certificated Exchangeable Preferred Stock of other authorized denominations, the
Transfer Agent shall register the transfer or make the exchange as requested if
its reasonable requirements for such transaction are met; provided, however,
that the
<PAGE> 117
38
Certificated Exchangeable Preferred Stock surrendered for transfer or exchange:
(1) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company
and the Transfer Agent, duly executed by the Holder thereof or its
attorney duly authorized in writing; and
(2) in the case of Transfer Restricted Securities that are
Certificated Exchangeable Preferred Stock, are being transferred or
exchanged pursuant to an effective registration statement under the
Securities Act or pursuant to clause (I) or (II) below, and are
accompanied by the following additional information and documents, as
applicable:
(I) if such Transfer Restricted Securities are being
delivered to the Transfer Agent by a Holder for registration
in the name of such Holder, without transfer, a certification
from such Holder to that effect in substantially the form of
Exhibit B hereto; or
(II) if such Transfer Restricted Securities are being
transferred to the Company or to a "qualified institutional
buyer" ("QIB") in accordance with Rule 144A under the
Securities Act or pursuant to an exemption from registration
in accordance with Rule 144 or Regulation S under the
Securities Act, a certification to that effect (in
substantially the form of Exhibit B hereto).
(B) Restrictions on Transfer of Certificated Exchangeable
Preferred Stock for a Beneficial Interest in Global Exchangeable Preferred
Stock. Certificated Exchangeable Preferred Stock may not be exchanged for a
beneficial interest in Global Exchangeable Preferred Stock except upon
satisfaction of the requirements set forth below. Upon receipt by the Transfer
Agent of Certificated Exchangeable Preferred Stock, duly endorsed or accompanied
<PAGE> 118
39
by appropriate instruments of transfer, in form satisfactory to the Transfer
Agent, together with:
(1) if such Certificated Exchangeable Preferred Stock is a
Transfer Restricted Security, certification that such Certificated
Exchangeable Preferred Stock is being transferred to a QIB in
accordance with Rule 144A under the Securities Act; and
(2) whether or not such Certificated Exchangeable Preferred
Stock is a Transfer Restricted Security, written instructions directing
the Transfer Agent to make, or to direct DTC to make, an adjustment on
its books and records with respect to such Global Exchangeable
Preferred Stock to reflect an increase in the number of shares of
Exchangeable Preferred Stock represented by the Global Exchangeable
Preferred Stock,
then the Transfer Agent shall cancel such Certificated Exchangeable Preferred
Stock and cause, or direct DTC to cause, in accordance with the standing
instructions and procedures existing between DTC and the Transfer Agent, the
number of shares of Exchangeable Preferred Stock represented by the Global
Exchangeable Preferred Stock to be increased accordingly. If no Global
Exchangeable Preferred Stock is then outstanding, the Company shall issue and
the Transfer Agent shall authenticate, upon written order of the Company in the
form of an Officers' Certificate, a new Global Exchangeable Preferred Stock
representing the appropriate number of shares.
(C) Transfer and Exchange of Global Exchangeable Preferred
Stock. The transfer and exchange of Global Exchangeable Preferred Stock or
beneficial interests therein shall be effected through DTC, in accordance with
this Certificate of Designation (including applicable restrictions on transfer
set forth herein, if any) and the procedures of DTC therefor.
(D) Transfer of a Beneficial Interest in Global Exchangeable
Preferred Stock for a Certificated Exchangeable Preferred Stock.
<PAGE> 119
40
(1) Any person having a beneficial interest in Exchangeable
Preferred Stock that is being transferred or exchanged pursuant to an
effective registration statement under the Securities Act or pursuant
to clause (I) or (II) below may upon request, and if accompanied by the
information specified below, exchange such beneficial interest for
Certificated Exchangeable Preferred Stock representing the same number
of shares of Exchangeable Preferred Stock. Upon receipt by the Transfer
Agent of written instructions or such other form of instructions as is
customary for DTC from DTC or its nominee on behalf of any person
having a beneficial interest in Global Exchangeable Preferred Stock and
upon receipt by the Transfer Agent of a written order or such other
form of instructions as is customary for DTC or the person designated
by DTC as having such a beneficial interest in a Transfer Restricted
Security only, and upon the following additional information and
documents (all of which may be submitted by facsimile):
(I) if such beneficial interest is being transferred
to the person designated by DTC as being the owner of a
beneficial interest in Global Exchangeable Preferred Stock, a
certification from such person to that effect (in
substantially the form of Exhibit B hereto); or
(II) if such beneficial interest is being transferred
to a QIB in accordance with Rule 144A under the Securities Act
or pursuant to an exemption from registration in accordance
with Rule 144 or Regulation S under the Securities Act, a
certification to that effect (in substantially the form of
Exhibit B hereto);
then, the Transfer Agent or DTC, at the direction of the Transfer Agent, will
cause, in accordance with the standing instructions and procedures existing
between DTC and the Transfer Agent, the number of shares of Exchangeable
Preferred Stock represented by Global Exchangeable Preferred Stock to be reduced
on its books and records and, following such reduction, the Company will execute
and the Transfer
<PAGE> 120
41
Agent will authenticate and deliver to the transferee Certificated Exchangeable
Preferred Stock.
(2) Certificated Exchangeable Preferred Stock issued in
exchange for a beneficial interest in a Global Exchangeable Preferred
Stock pursuant to this paragraph (m)(iii)(D) shall be registered in
such names and in such authorized denominations as DTC, pursuant to
instructions from its direct or indirect participants or otherwise,
shall instruct the Transfer Agent. The Transfer Agent shall deliver
such Certificated Exchangeable Preferred Stock to the persons in whose
names such Exchangeable Preferred Stock are so registered in accordance
with the instructions of DTC.
(E) Restrictions on Transfer and Exchange of Global
Exchangeable Preferred Stock. Notwithstanding any other provisions of this
Certificate of Designation (other than the provisions set forth in paragraph
(m)(iii)(F)), Global Exchangeable Preferred Stock may not be transferred as a
whole except by DTC to a nominee of DTC or by a nominee of DTC to DTC or another
nominee of DTC or by DTC or any such nominee to a successor depository or a
nominee of such successor depository.
(F) Authentication of Certificated Exchangeable
Preferred Stock. If at any time:
(1) DTC notifies the Company that DTC is unwilling or unable
to continue as depository for the Global Exchangeable Preferred Stock
and a successor depository for the Global Exchangeable Preferred Stock
is not appointed by the Company within 90 days after delivery of such
notice;
(2) DTC ceases to be a clearing agency registered
under the Exchange Act;
(3) there shall have occurred and be continuing a
Voting Rights Triggering Event; or
<PAGE> 121
42
(4) the Company, in its sole discretion, notifies the Transfer
Agent in writing that it elects to cause the issuance of Certificated
Exchangeable Preferred Stock under this Certificate of Designation,
then the Company will execute, and the Transfer Agent, upon receipt of a written
order of the Company signed by two Officers or by an Officer and either an
Assistant Treasurer or an Assistant Secretary of the Company requesting the
authentication and delivery of Certificated Exchangeable Preferred Stock to the
persons designated by the Company, will authenticate and deliver Certificated
Exchangeable Preferred Stock equal to the number of shares of Exchangeable
Preferred Stock represented by the Global Exchangeable Preferred Stock, in
exchange for such Global Exchangeable Preferred Stock.
(G) Legend. (1) Except as permitted by the following paragraph
(2), each certificate evidencing the Global Exchangeable Preferred Stock and the
Certificated Exchangeable Preferred Stock (and all Exchangeable Preferred Stock
issued in exchange therefor or substitution thereof) shall bear a legend in
substantially the following form:
"THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES
ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY
BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
"THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE ISSUER THAT
(A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY (i) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(ii) IN AN
<PAGE> 122
43
OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (iv)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR (v) TO THE COMPANY, IN EACH OF CASES (i) THROUGH (iv) IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE
RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.
"BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT") OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S.
(2) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security represented by Global
Exchangeable Preferred Stock) pursuant to Rule 144 under the Securities Act or
an effective registration statement under the Securities Act:
(I) in the case of any Transfer Restricted Security
that is a Certificated Exchangeable Preferred Stock, the
Transfer Agent shall permit the Holder thereof to exchange
such Transfer Restricted Security for a Certificated
Exchangeable Preferred Stock that does not bear the legend set
forth above and rescind any restriction on the transfer of
such Transfer Restricted Security;
(II) in the case of any Transfer Restricted Security
that is represented by a Global Exchangeable Preferred Stock,
the Transfer Agent shall permit the Holder thereof to exchange
such Transfer Restricted Security for a Certificated
Exchangeable Preferred Stock Security that does not bear the
legend set forth above and rescind any restriction on the
transfer of such Transfer Restricted Security, if the Holder's
request for
<PAGE> 123
44
such exchange was made in reliance on Rule 144 and the Holder
certifies to that effect in writing to the Transfer Agent
(such certification to be in the form set forth on the reverse
of the Transfer Restricted Security); and
(III) in the case of any Transfer Restricted Security
that is represented by a Global Exchangeable Preferred Stock,
the Transfer Agent shall permit the Holder thereof to exchange
such Transfer Restricted Security (in connection with the
offer to exchange Series B Stock for Initial Exchangeable
Preferred Stock pursuant to the Registration Rights Agreement)
for another Global Exchangeable Preferred Stock that does not
bear the legend set forth above.
(H) Cancelation or Adjustment of Global Exchangeable Preferred
Stock. At such time as all beneficial interests in Global Exchangeable Preferred
Stock have either been exchanged for Certificated Exchangeable Preferred Stock,
redeemed, repurchased or canceled, such Global Exchangeable Preferred Stock
shall be returned to DTC for cancelation or retained and canceled by the
Transfer Agent. At any time prior to such cancelation, if any beneficial
interest in Global Exchangeable Preferred Stock is exchanged for Certificated
Exchangeable Preferred Stock, redeemed, repurchased or canceled, the number of
shares of Exchangeable Preferred Stock represented by such Global Exchangeable
Preferred Stock shall be reduced and an adjustment shall be made on the books
and records of the Transfer Agent with respect to such Global Exchangeable
Preferred Stock, by the Transfer Agent or DTC, to reflect such reduction.
(I) Obligations with Respect to Transfers and Exchanges of
Exchangeable Preferred Stock. (1) To permit registrations of transfers and
exchanges, the Company shall execute and the Transfer Agent shall authenticate
Certificated Exchangeable Preferred Stock and Global Exchangeable Preferred
Stock as required pursuant to the provisions of this paragraph (iii).
<PAGE> 124
45
(2) All Certificated Exchangeable Preferred Stock and Global
Exchangeable Preferred Stock issued upon any registration of transfer
or exchange of Certificated Exchangeable Preferred Stock or Global
Exchangeable Preferred Stock shall be the valid obligations of the
Company, entitled to the same benefits under this Certificate of
Designation as the Certificated Exchangeable Preferred Stock or Global
Exchangeable Preferred Stock surrendered upon such registration of
transfer or exchange.
(3) Prior to due presentment for registration of transfer of
any shares of Exchangeable Preferred Stock, the Transfer Agent and the
Company may deem and treat the person in whose name such shares of
Exchangeable Preferred Stock are registered as the absolute owner of
such Exchangeable Preferred Stock and neither the Transfer Agent nor
the Company shall be affected by notice to the contrary.
(4) No service charge shall be made to a Holder for any
registration of transfer or exchange upon surrender of any Exchangeable
Preferred Stock Certificate at the office of the Transfer Agent
maintained for that purpose. However, the Company may require payment
of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer or
exchange of Exchangeable Preferred Stock Certificates.
(5) Upon any sale or transfer of shares of Exchangeable
Preferred Stock (including any Exchangeable Preferred Stock represented
by a Global Exchangeable Preferred Stock Certificate) pursuant to an
effective registration statement under the Securities Act, pursuant to
Rule 144 under the Securities Act or pursuant to an opinion of counsel
reasonably satisfactory to the Company that no legend is required:
(A) in the case of any Certificated Exchangeable
Preferred Stock, the Transfer Agent shall
permit the holder thereof to exchange such
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46
Exchangeable Preferred Stock for Certificated
Exchangeable Preferred Stock that does not
bear the legend set forth in
paragraph (iii)(G) above and rescind any
restriction on the transfer of such
Exchangeable Preferred Stock; and
(B) in the case of any Global Exchangeable Preferred
Stock, such Exchangeable Preferred Stock shall not be
required to bear the legend set forth in paragraph
(iii)(G) above but shall continue to be subject to
the provisions of paragraph (iii)(D) hereof;
provided, however, that with respect to any request
for an exchange of Exchangeable Preferred Stock that
is represented by Global Exchangeable Preferred Stock
for Certificated Exchangeable Preferred Stock that
does not bear the legend set forth in paragraph
(iii)(G) above in connection with a sale or transfer
thereof pursuant to Rule 144 (and based upon an
opinion of counsel if the Company so requests), the
Holder thereof shall certify in writing to the
Transfer Agent that such request is being made
pursuant to Rule 144 (such certification to be
substantially in the form of Exhibit B hereto).
(iv) Replacement Certificates. If a mutilated Exchangeable
Preferred Stock certificate is surrendered to the Transfer Agent or if the
Holder of a Exchangeable Preferred Stock certificate claims that the
Exchangeable Preferred Stock certificate has been lost, destroyed or wrongfully
taken, the Company shall issue and the Transfer Agent shall countersign a
replacement Exchangeable Preferred Stock certificate if the reasonable
requirements of the Transfer Agent and of Section 8-405 of the Uniform
Commercial Code as in effect in the State of New York are met. If required by
the Transfer Agent or the Company, such Holder shall furnish an indemnity bond
sufficient in the judgment of the Company and the Transfer Agent to protect the
Company and the Transfer Agent from any loss which
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47
either of them may suffer if a Exchangeable Preferred Stock certificate is
replaced. The Company and the Transfer Agent may charge the Holder for their
expenses in replacing a Exchangeable Preferred Stock certificate.
(v) Temporary Certificates. Until definitive Exchangeable
Preferred Stock certificates are ready for delivery, the Company may prepare and
the Transfer Agent shall countersign temporary Exchangeable Preferred Stock
certificates. Temporary Exchangeable Preferred Stock certificates shall be
substantially in the form of definitive Exchangeable Preferred Stock
certificates but may have variations that the Company considers appropriate for
temporary Exchangeable Preferred Stock certificates. Without unreasonable delay,
the Company shall prepare and the Transfer Agent shall countersign definitive
Exchangeable Preferred Stock certificates and deliver them in exchange for
temporary Exchangeable Preferred Stock certificates.
(vi) Cancelation. (A) In the event the Company shall purchase
or otherwise acquire Certificated Exchangeable Preferred Stock, the same shall
thereupon be delivered to the Transfer Agent for cancelation.
(B) At such time as all beneficial interests in Global
Exchangeable Preferred Stock have either been exchanged for Certificated
Exchangeable Preferred Stock, redeemed, repurchased or canceled, such Global
Exchangeable Preferred Stock shall thereupon be delivered to the Transfer
Agent for cancelation.
(C) The Transfer Agent and no one else shall cancel and
destroy all Exchangeable Preferred Stock certificates surrendered for transfer,
exchange, replacement or cancelation and deliver a certificate of such
destruction to the Company unless the Company directs the Transfer Agent to
deliver canceled Exchangeable Preferred Stock certificates to the Company. The
Company may not issue new Exchangeable Preferred Stock certificates to replace
Exchangeable Preferred Stock certificates to the extent they evidence
Exchangeable Preferred Stock which the Company has purchased or otherwise
acquired.
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48
(m) Additional Rights of Holders. In addition to the rights
provided to Holders under this Certificate of Designation, Holders shall have
the rights set forth in the Registration Rights Agreement.
(n) Certain Definitions. As used in this Certificate of
Designation, the following terms shall have the following meanings (and (1)
terms defined in the singular have comparable meanings when used in the plural
and vice versa, (2) "including" means including without limitation, (3) "or" is
not exclusive and (4) an accounting term not otherwise defined has the meaning
assigned to it in accordance with United States generally accepted accounting
principles as in effect on the Issue Date and all accounting calculations will
be determined in accordance with such principles), unless the content otherwise
requires:
"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 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
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49
correlative to the foregoing. For purposes of paragraphs (l)(iii) and (l)(v)
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 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 rate borne by the Exchangeable Preferred Stock 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 determina tion, 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 multi plied 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.
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50
"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:
(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)),
directly or indirectly, of more than 35% of the voting
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51
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 consideration, securities of the surviving
corporation that represent immediately after such transaction, at
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52
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 Exchangeable Preferred Stock is 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 Certificate of
Designation until a successor replaces it and, thereafter, means the successor.
"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 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
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53
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 Subsidi aries; 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 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;
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54
(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 account
ing principles.
Notwithstanding the foregoing, for the purpose of paragraph (l)(iii) only, there
shall be excluded from Consolidated Net Income any dividends, repayments of
loans or advances or 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 paragraph (l)(iii) (A)(3)(IV) thereof.
"Consolidated Net Worth" means, with respect to any Person as
of any date, the sum of: (i) the consolidated
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55
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 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
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56
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.
"Default" means any event which is, or after notice or passage
of time or both would be, a Voting Rights Triggering Event.
"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
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57
anniversary of the Stated Maturity of the Exchangeable Preferred Stock;
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
comparable provisions of the Exchange Indenture; 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.
"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.
"Exchange Debentures" means the debentures issuable pursuant
to the Exchange Indenture.
"Exchange Offer Registration Statement" means a registration
statement filed with the SEC with respect to a Registered Exchange Offer.
"Exchange Indenture" means the Indenture dated as of August
15, 1997, by and between the Company and The Bank of New York, as Trustee,
governing the Exchange Debentures.
"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.
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58
"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 Certificate of Designation 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 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" means the Person in whose name a share of
Exchangeable Preferred Stock is registered on the Transfer Agent's books.
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59
"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;
(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);
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(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 (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
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61
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.
"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.
"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
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62
instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary," the definition of "Restricted Payment" and paragraph
(l)(iii), (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 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 Initial Exchangeable
Preferred Stock is originally issued.
"IXC Internet Capital Contribution" means the contribution by
the Company to IXC Internet Services, Inc. (so long as IXC Internet Services,
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
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63
presence, in each case as contemplated in connection with the transactions
contemplated by the PSINet Agreement.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions are not required to be open in the State of New York.
"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 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 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
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64
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 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.
<PAGE> 144
65
"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 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) the
IXC Internet Capital Contribution; (ix) 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 (x)
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).
<PAGE> 145
66
"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, 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 any debt 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.
<PAGE> 146
67
"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.
"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 Certificate of Designation,
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
<PAGE> 147
68
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.
"Registered Exchange Offer" means the offer by the Company,
pursuant to the Registration Rights Agreement, to holders of Initial
Exchangeable Preferred Stock to issue and deliver to such holders, in exchange
for the Initial Exchangeable Preferred Stock, a like aggregate liquidation
preference of Series B Stock registered under the Securities Act.
"Registration Rights Agreement" means the Registration Rights
Agreement dated August 14, 1997, among the Company and Credit Suisse First
Boston Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Morgan Stanley and Co. Incorporated.
"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 which consist of such Permitted Holder or such other
Persons referred to in the immediately preceding clause (i).
<PAGE> 148
69
"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, in the case of the Company, any Junior Stock or, in the case of
any Restricted Subsidiary, any 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 such Stock (other than dividends or
distributions payable solely in Junior 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 Junior Stock of the Company or
Capital Stock of any direct or indirect parent of the Company or (iii) 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.
"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.
"Senior Notes" means the Company's 12 1/2% Senior
Notes Due 2005.
<PAGE> 149
70
"Series 3 Preferred Stock" means the Company's 10%
Junior Series 3 Cumulative Redeemable Preferred Stock.
"Shelf Registration Statement" means a registration statement
filed with the SEC covering resales of Exchangeable Preferred Stock.
"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 Exchange Debentures and
any other Indebtedness of the Company that specifically provides that such
Indebtedness is to rank pari passu with the Exchange Debentures 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 (as defined in the
Exchange Debenture).
"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 Exchange Debentures 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
<PAGE> 150
71
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
(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> 151
72
& Poor's Ratings Group or "A" by Moody's Investors Service, Inc.
"Trustee" means the party named as such in the Exchange
Indenture until a successor replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President
or any other 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 paragraph (l)(iii). 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
paragraph (l)(iii)(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 Board of
Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
<PAGE> 152
73
"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.
<PAGE> 153
IN WITNESS WHEREOF, said IXC Communications, Inc., has caused
this Certificate of Designation to be signed by James F. Guthrie, its
Chief Financial Officer and Executive Vice President, this 19th day of
August, 1997.
IXC COMMUNICATIONS, INC.,
By: /s/ JAMES F. GUTHRIE
----------------------------------
Name: James F. Guthrie
Title: Chief Financial Officer and
Executive Vice President
<PAGE> 154
EXHIBIT A
FORM OF EXCHANGEABLE PREFERRED STOCK
FACE OF SECURITY
[THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE
SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF
THIS SECURITY AGREES FOR THE BENEFIT OF THE ISSUER THAT (A) THIS SECURITY MAY BE
OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (i) TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (II) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (iv) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (v) TO THE
ISSUER, IN EACH OF CASES (i) THROUGH (iv) IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY
FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.]*
[BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN
AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S.]*/
- --------
* Subject to removal upon registration under the Securities Act of 1933 or
otherwise when the security shall no longer be a restricted security.
<PAGE> 155
2
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OF PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO. HAS AN INTEREST HEREIN.]**
[TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN THE CERTIFICATE OF DESIGNATION REFERRED TO BELOW.]**
Certificate Number Number of Shares of Convertible
Preferred Stock
[ ] [ ]
CUSIP NO.: [ ]
12 1/2% Junior Exchangeable Preferred Stock Due 2009
(par value $0.01) (liquidation preference $1000
per share)
of
IXC Communications, Inc.
IXC Communications, Inc., a Delaware corporation (the
"Company"), hereby certifies that [ ] (the
- --------
** Subject to removal if not a global security.
<PAGE> 156
3
"Holder") is the registered owner of fully paid and non-assessable preferred
securities of the Company designated the 12 1/2% [Series B] Junior Exchangeable
Preferred Stock Due 2009 (par value $0.01) (liquidation preference $1000 per
share) (the "Exchangeable Preferred Stock"). The shares of Exchangeable
Preferred Stock are transferable on the books and records of the Registrar, in
person or by a duly authorized attorney, upon surrender of this certificate duly
endorsed and in proper form for transfer. The designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Exchangeable
Preferred Stock represented hereby are issued and shall in all respects be
subject to the provisions of the Certificate of Designation dated August [ ],
1997, as the same may be amended from time to time (the "Certificate of
Designation"). Capitalized terms used herein but not defined shall have the
meaning given them in the Certificate of Designation. The ompany will provide a
copy of the Certificate of Designation to a Holder without charge upon written
request to the Company at its principal place of business.
Reference is hereby made to select provisions of the
Exchangeable Preferred Stock set forth on the reverse hereof, and to the
Certificate of Designation, which select provisions and the Certificate of
Designation shall for all purposes have the same effect as if set forth at this
place.
Upon receipt of this certificate, the Holder is bound by the
Certificate of Designation and is entitled to the benefits thereunder.
Unless the Transfer Agent's Certificate of Authentication
hereon has been properly executed, these shares of Exchangeable Preferred Stock
shall not be entitled to any benefit under the Certificate of Designation or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has executed this certificate
this [ ] day of [ ], [ ].
IXC COMMUNICATIONS, INC.,
<PAGE> 157
4
By:
----------------------------------
Name:
Title:
[Seal]
By:
----------------------------------
Name:
Title:
<PAGE> 158
5
TRANSFER AGENT'S CERTIFICATE OF AUTHENTICATION
This is one of the Exchangeable Preferred Stock referred to in
the within mentioned Certificate of Designation.
Dated: [ ], [ ]
THE BANK OF NEW YORK
as Transfer Agent,
By:
----------------------------------
Authorized Signatory
<PAGE> 159
6
REVERSE OF SECURITY
Dividends on each share of Exchangeable Preferred Stock shall
be payable at a rate per annum set forth in the face hereof or as provided in
the Certificate of Designation (including Additional Dividends).
The shares of Exchangeable Preferred Stock shall be redeemable
as provided in the Certificate of Designation. The shares of Exchangeable
Preferred Stock shall be exchangeable at the Company's option into the Company's
12-1/2% Subordinated Exchange Debentures Due 2009 in the manner and according to
the terms set forth in the Certificate of Designation.
As required under Delaware law, the Company shall furnish to
any Holder upon request and without charge, a full summary statement of the
designations, voting rights preferences, limitations and special rights of the
shares of each class or series authorized to be issued by the Company so far as
they have been fixed and determined and the authority of the Board of Directors
to fix and determine the designations, voting rights, preferences, limitations
and special rights of the class and series of shares of the Company.
<PAGE> 160
7
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the
shares of Exchangeable Preferred Stock evidenced hereby to:
---------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
agent to transfer the shares of Exchangeable Preferred Stock evidenced hereby on
the books of the Transfer Agent and Registrar. The agent may substitute another
to act for him or her.
Date:
-----------------------
Signature:
---------------------------------
(Sign exactly as your name appears on the other side of this Exchangeable
Preferred Stock Certificate)
Signature Guarantee:***
--- ---------------------------------------------
- ------------------
*** (Signature must be guaranteed by an "eligible guarantor
institution" that is, a bank, stockbroker, savings and loan association or
credit union meeting the requirements of the Registrar, which requirements
include membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature
<PAGE> 161
8
- ------------
guarantee program" as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of
1934, as amended.)
<PAGE> 162
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF EXCHANGEABLE PREFERRED STOCK
Re: 12 1/2% Junior Exchangeable Preferred Stock Due 2009 (the "Exchangeable
Preferred Stock") of IXC Communications, Inc. (the "Company")
This Certificate relates to ____ shares of Exchangeable
Preferred Stock held in [ ] */ book-entry or [ ] */ definitive form by
_______________ (the "Transferor").
The Transferor*:
[ ] has requested the Transfer Agent by written order to deliver in
exchange for its beneficial interest in the Exchangeable Preferred Stock held by
the depository shares of Exchangeable Preferred Stock in definitive, registered
form equal to its beneficial interest in such Exchangeable Preferred Stock (or
the portion thereof indicated above); or
[ ] has requested the Transfer Agent by written order to exchange or
register the transfer of Exchangeable Preferred Stock.
In connection with such request and in respect of such
Exchangeable Preferred Stock, the Transferor does hereby certify that the
Transferor is familiar with the Certificate of Designation relating to the above
captioned Exchangeable Preferred Stock and that the transfer of this
Exchangeable Preferred Stock does not require registration under the Securities
Act of 1933 (the "Securities Act") because */:
[ ] Such Exchangeable Preferred Stock is being acquired for the
Transferor's own account without transfer.
[ ] Such Exchangeable Preferred Stock is being transferred to the
Company.
- -------- * /Please check applicable box.
<PAGE> 163
2
[ ] Such Exchangeable Preferred Stock is being transferred (i) to a
qualified institutional buyer (as defined in Rule 144A under the Securities
Act), in reliance on Rule 144A or (ii) pursuant to an exemption from
registration in accordance with Rule 904 under the Securities Act (and, in the
case of clause (ii), based on an opinion of counsel if the Company so requests
and together with a certification in substantially the form of Exhibit C to the
Certificate of Designation).
[ ] Such Exchangeable Preferred Stock is being transferred in reliance
on and in compliance with another exemption from the registration requirements
of the Securities Act (and based on an opinion of counsel if the Company so
requests).
[INSERT NAME OF TRANSFEROR]
Date: by
------------------ -----------------------------------
<PAGE> 164
EXHIBIT C
FORM OF CERTIFICATE TO BE DELIVERED IN
CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S
----------, ----
The Bank of New York
Attention: [ ]
Ladies and Gentlemen:
In connection with our proposed sale of certain 12 1/2% Junior
Exchangeable Preferred Stock Due 2009 (the "Exchangeable Preferred Stock") of
IXC Communications, Inc., a Delaware corporation ("the "Company"), we represent
that:
(i) the offer of the Exchangeable Preferred Stock was not made
to a person in the United States;
(ii) at the time the buy order was originated, the transferee
was outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States;
(iii) no directed selling efforts have been made by us in the
United States in contravention of the requirements of Rule 903(b) or
Rule 904(b) of Regulation S under the Securities Act of 1933 (the
"Securities Act"), as applicable; and
(iv) the transaction is not part of a plan or scheme by us to
evade the registration requirements of the Securities Act.
You and the Company are entitled to rely upon this letter and
you are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with
<PAGE> 165
4
respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
---------------------------------------------
(Name of Transferor)
by
------------------------------------------
Name:
Title:
Address:
<PAGE> 166
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL
AND OTHER SPECIAL RIGHTS OF
6 3/4% CUMULATIVE
CONVERTIBLE PREFERRED STOCK AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
- --------------------------------------------------------------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
- --------------------------------------------------------------------------------
IXC Communications, Inc. (the "Company"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify that (i) pursuant to authority conferred upon the
board of directors of the Company (the "Board of Directors") by its Restated
Certificate of Incorporation (hereinafter referred to as the "Restated
Certificate of Incorporation"), and pursuant to the provisions of Sections
141(c)(2) and 151 of the General Corporation Law of the State of Delaware, said
Board of Directors is authorized to issue Preferred Stock of the Company in one
or more series and has authorized a committee of the Board of Directors (the
"Finance Committee") to adopt the resolution set forth below and (ii) the
Finance Committee duly approved and adopted the following resolution on March
25, 1998 (the "Resolution"):
RESOLVED that, pursuant to the authority vested in the Board of
Directors by its Restated Certificate of Incorporation, and the
authority vested by such Board of Directors in a committee of the Board
(the "Finance Committee"), all the members of which are members of such
Board, the Finance Committee does hereby create, authorize and provide
for the issuance of 6 3/4% Cumulative Convertible Preferred Stock, par
value $.01 per share, with a stated value of $1000 per share, initially
consisting of up to 155,250 shares having the designation, preferences,
relative, participating, optional and other special rights and the
qualifications, limitations and restrictions thereof that are set forth
in the Restated Certificate of Incorporation and in this Resolution as
follows:
1. Designation. There is hereby created out of the authorized and
unissued shares of Preferred Stock of the Company a series of Preferred Stock
designated as the "6 3/4% Cumulative Convertible Preferred Stock" (the
"Cumulative Convertible Preferred Stock"). The number of shares constituting the
Cumulative Convertible Preferred Stock shall be 155,250, and such shares shall
be represented by stock certificates substantially in the form set forth in
Exhibit A hereto. The liquidation preference of the Cumulative Convertible
Preferred Stock shall be $1,000
<PAGE> 167
per share (the "Liquidation Preference"). The date the Cumulative Convertible
Preferred Stock is first issued is referred to as the "Issue Date".
2. Rank. The Cumulative Convertible Preferred Stock will, rank
(i) pari passu in right of payment with the Company's 7 1/4% Junior Convertible
Preferred Stock Due 2007 (the "7 1/4% Preferred Stock"), the Company's 12 1/2%
Junior Exchangeable Preferred Stock Due 2009 and 12 1/2% Series B Junior
Exchangeable Preferred Stock Due 2009 (collectively, the "Exchangeable Preferred
Stock") 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 ranks on a parity with the Cumulative
Convertible Preferred Stock as to dividend rights and rights on liquidation,
dissolution and winding up of the Company (collectively referred to, as "Parity
Securities"); (ii) junior in right of payment to any Senior Securities (as
defined) as to dividends and upon liquidation, dissolution or winding up of the
Company and (iii) senior in right of payment as to dividend rights and upon
liquidation, dissolution or winding up of the Company to the Common Stock and
any Capital Stock of the Company that expressly provides that it will rank
junior to the Cumulative Convertible Preferred Stock as to dividend rights or
rights on liquidation, winding up and dissolution of the Company (collectively
referred to as "Junior Securities"). The Company may not authorize, create (by
way of reclassification or otherwise) or issue any class or series of Capital
Stock of the Company ranking senior in right of payment as to dividend rights or
upon liquidation, dissolution or winding up of the Company to the Cumulative
Convertible Preferred Stock ("Senior Securities") or any obligation or security
convertible or exchangeable into, or evidencing a right to purchase, shares of
any class or series of Senior Securities without the affirmative vote or consent
of the holders of at least 66-2/3% of the outstanding shares of Cumulative
Convertible Preferred Stock.
3. Dividends. The Holders of shares of the Cumulative Convertible
Preferred Stock will be entitled to receive, when, as and if dividends are
declared by the Board of Directors out of funds of the Company legally available
therefor, cumulative preferential dividends from the Issue Date of the
Cumulative Convertible Preferred Stock accruing at the rate of $67.50 per share
of Cumulative Convertible Preferred Stock per annum, or $16.875 per share of
Cumulative Convertible Preferred Stock per quarter, payable quarterly in arrears
on January 1, April 1, July 1, and October 1 of each year or, if any such date
is not a Business Day, on the next succeeding business day (each, a "Dividend
Payment Date"), to the Holders of record as of the next preceding December 15,
March 15, June 15, and September 15 (each, a "Record Date"). Accrued but unpaid
dividends, if any, may be paid on such dates as determined by the Board of
Directors. Dividends will be payable in cash except as set forth below.
Dividends payable on the Cumulative Convertible Preferred Stock will be computed
on the basis of a 360-day year of twelve 30-day months and will be deemed to
accrue on a daily basis. Dividends may, at the option of the Company, be paid in
Common Stock if, and only if, the documents governing the Company's indebtedness
that exists on the Issue Date then prohibit the payment of such dividends in
cash. If the Company elects to pay dividends in shares of Common Stock, the
number of shares of Common Stock to be distributed will be calculated by
dividing the amount of such dividend otherwise payable in cash by 95% of the
arithmetic average of the Closing Price (as defined) for the five Trading Days
(as defined) preceding the Dividend Payment Date. The Cumulative Convertible
Preferred Stock will not be redeemable unless all dividends accrued through such
redemption date shall have been paid in full.
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<PAGE> 168
Notwithstanding anything to the contrary herein contained, the Company shall not
be required to declare or pay a dividend if another person (including, without
limitation, any of its subsidiaries) pays an amount to the Holders equal to the
amount of such dividend on behalf of the Company and, in such event, the
dividend will be deemed paid for all purposes.
Dividends on the Cumulative Convertible Preferred Stock will
accrue whether or not the Company has earnings or profits, whether or not there
are funds legally available for the payment of such dividends and whether or not
dividends are declared. Dividends will accumulate to the extent they are not
paid on the Dividend Payment Date for the quarter to which they relate.
Accumulated unpaid dividends will accrue and cumulate at a rate of 6.75% per
annum. The Company will take all reasonable actions required or permitted under
Delaware law to permit the payment of dividends on the Cumulative Convertible
Preferred Stock.
No dividend whatsoever shall be declared or paid upon, or any sum
set apart for the payment of dividends upon, any outstanding share of the
Cumulative Convertible Preferred Stock with respect to any dividend period
unless all dividends for all preceding dividend periods have been declared and
paid upon, or declared and a sufficient sum set apart for the payment of such
dividend upon, all outstanding shares of Cumulative Convertible Preferred Stock.
Unless full cumulative dividends on all outstanding shares of Cumulative
Convertible Preferred Stock due for all past dividend periods shall have been
declared and paid, or declared and a sufficient sum for the payment thereof set
apart, then: (i) no dividend (other than a dividend payable solely in shares of
Junior Securities or options, warrants or rights to purchase Junior Securities)
shall be declared or paid upon, or any sum set apart for the payment of
dividends upon, any shares of Junior Securities; (ii) no other distribution
shall be declared or made upon, or any sum set apart for the payment of any
distribution upon, any shares of Junior Securities; (iii) no shares of Junior
Securities shall be purchased, redeemed or otherwise acquired or retired for
value (excluding an exchange for shares of other Junior Securities or a
purchase, redemption or other acquisition from the proceeds of a substantially
concurrent sale of Junior Securities) by the Company or any of its subsidiaries;
and (iv) no monies shall be paid into or set apart or made available for a
sinking or other like fund for the purchase, redemption or other acquisition or
retirement for value of any shares of Junior Securities by the Company or any of
its subsidiaries. Holders of the Cumulative Convertible Preferred Stock will not
be entitled to any dividends, whether payable in cash, property or stock, in
excess of the full cumulative dividends as herein described.
4. Liquidation Preference. Upon any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company after
payment in full of the liquidation preference (and any accrued and unpaid
dividends) on any Senior Securities, each Holder of shares of the Cumulative
Convertible Preferred Stock shall be entitled, on an equal basis with the
holders of the 7 1/4% Preferred Stock, the Exchangeable Preferred Stock and any
other outstanding Parity Securities, to payment out of the assets of the Company
available for distribution of the Liquidation Preference per share of the
Cumulative Convertible Preferred Stock held by such Holder, plus an amount equal
to the accrued and unpaid dividends on the Cumulative Convertible Preferred
Stock and Liquidated Damages (as defined) (if any) to the date fixed for
liquidation, dissolution, or winding up before any distribution is made on any
Junior Securities, including, without limitation, Common Stock of the Company.
After payment in full of the Liquidation Preference and an amount
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<PAGE> 169
equal to the accrued and unpaid dividends and Liquidated Damages (if any), to
which Holders of Cumulative Convertible Preferred Stock are entitled, such
Holders will not be entitled to any further participation in any distribution of
assets of the Company. However, neither the voluntary sale, conveyance, exchange
or transfer (for cash, shares of stock, securities or other consideration) of
all or substantially all of the property or assets of the Company nor the
consolidation or merger of the Company with or into one or more corporations
will be deemed to be a voluntary or involuntary liquidation, dissolution or
winding up of the Company, unless such sale, conveyance, exchange, transfer,
consolidation or merger shall be in connection with a liquidation, dissolution
or winding up of the affairs of the Company or reduction or decrease in capital
stock.
5. Redemption. The Cumulative Convertible Preferred Stock may not
be redeemed at the option of the Company on or prior to April 5, 2000. After
April 5, 2000 the Company may redeem the Cumulative Convertible Preferred Stock.
Notwithstanding the foregoing, prior to April 1, 2002, the Company shall only
have the option to redeem shares of the Cumulative Convertible Preferred Stock
if, during the period of 30 consecutive Trading Days ending on the Trading Day
immediately preceding the date that the notice of redemption is mailed to
Holders, the Closing Price for the Common Stock exceeded $75 divided by the
Conversion Rate effective on the date of such notice for at least 20 of such
Trading Days. Subject to the immediately preceding sentence, the Cumulative
Convertible Preferred Stock may be redeemed, in whole or in part, at the option
of the Company after April 5, 2000, at the redemption prices specified below
(expressed as percentages of the Liquidation Preference thereof), in each case,
together with an amount equal to accrued and unpaid dividends on the Cumulative
Convertible Preferred Stock (excluding any declared dividends for which the
Record Date has passed) and Liquidated Damages (if any), to the date of
redemption, upon not less than 15 nor more than 60 days' prior written notice,
if redeemed during the period commencing on April 5, 2000 to March 31, 2001 at
105.40%, and thereafter during the 12-month period commencing on April 1 of each
of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR RATE
- ---- -------
<S> <C>
2001................................................ 104.73%
2002................................................ 104.05%
2003................................................ 103.38%
2004................................................ 102.70%
2005................................................ 102.03%
2006................................................ 101.35%
2007................................................ 100.68%
2008 and thereafter................................. 100.00%
</TABLE>
Except as provided in the preceding sentence, no payment or
allowance will be made for accrued dividends on any shares of Cumulative
Convertible Preferred Stock called for redemption.
On and after any date fixed for redemption (the "Redemption
Date"), provided that the Company has made available at the office of the
Transfer Agent a sufficient amount of cash to effect the redemption, dividends
will cease to accrue on the Cumulative Convertible
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<PAGE> 170
Preferred Stock called for redemption (except that, in the case of a Redemption
Date after a dividend payment Record Date and prior to the related Dividend
Payment Date, holders of Cumulative Convertible Preferred Stock on the dividend
payment Record Date will be entitled on such Dividend Payment Date to receive
the dividend payable on such shares), such shares shall no longer be deemed to
be outstanding and all rights of the holders of such shares as holders of
Cumulative Convertible Preferred Stock shall cease except the right to receive
the cash deliverable upon such redemption, without interest from the Redemption
Date.
In the event of a redemption of only a portion of the then
outstanding shares of Cumulative Convertible Preferred Stock, the Company shall
effect such redemption on a pro rata basis, except that the Company may redeem
all of the shares held by Holders of fewer than 100 shares (or all of the shares
held by Holders who would hold less than 100 shares as a result of such
redemption), as may be determined by the Company.
With respect to a redemption pursuant hereto, the Company will
send a written notice of redemption by first class mail to each holder of record
of shares of Cumulative Convertible Preferred Stock, not fewer than 15 days nor
more than 60 days prior to the Redemption Date at its registered address (the
"Redemption Notice"); provided, however, that no failure to give such notice nor
any deficiency therein shall affect the validity of the procedure for the
redemption of any shares of Cumulative Convertible Preferred Stock to be
redeemed except as to the holder or holders to whom the Company has failed to
give said notice or except as to the holder or holders whose notice was
defective. The Redemption Notice shall state:
a. the redemption price;
b. whether all or less than all the outstanding shares of
the Cumulative Convertible Preferred Stock are to be redeemed and the total
number of shares of the Cumulative Convertible Preferred Stock being redeemed;
c. the Redemption Date;
d. that the holder is to surrender to the Company, in the
manner, at the place or places and at the price designated, his certificate or
certificates representing the shares of Cumulative Convertible Preferred Stock
to be redeemed; and
e. that dividends on the shares of the Cumulative
Convertible Preferred Stock to be redeemed shall cease to accumulate on such
Redemption Date unless the Company defaults in the payment of the redemption
price.
Each holder of Cumulative Convertible Preferred Stock shall
surrender the certificate or certificates representing such shares of Cumulative
Convertible Preferred Stock to the Company, duly endorsed (or otherwise in
proper form for transfer, as determined by the Company), in the manner and at
the place designated in the Redemption Notice, and on the Redemption Date the
full redemption price for such shares shall be payable in cash to the person
whose name appears on such certificate or certificates as the owner thereof, and
each surrendered certificate shall be canceled and retired. In the event that
less than all of the shares represented by any such certificate are redeemed, a
new certificate shall be issued representing the unredeemed shares.
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<PAGE> 171
6. Voting Rights. Holders of record of shares of the Cumulative
Convertible Preferred Stock will have no voting rights, except as required by
law and as provided in this Section 6 and in Sections 2, 8 and 13 hereof. Upon
the accumulation of accrued and unpaid dividends on the outstanding Cumulative
Convertible Preferred Stock in an amount equal to six full quarterly dividends
(whether or not consecutive) (together with any event with a similar effect
pursuant to the terms of any other series of Preferred Stock upon which like
rights have been conferred, a "Voting Rights Triggering Event"), the number of
members of the Company's Board of Directors will be immediately and
automatically increased by two (unless previously increased pursuant to the
terms of any other series of Preferred Stock upon which like rights have been
conferred), and the Holders of a majority of the outstanding shares of
Cumulative Convertible Preferred Stock, voting together as a class (pro rata,
based on liquidation preference) with the holders of any other series of
Preferred Stock upon which like rights have been conferred and are exercisable,
will be entitled to elect two members to the Board of Directors of the Company.
Voting rights arising as a result of a Voting Rights Triggering Event will
continue until such time as all dividends in arrears on the Cumulative
Convertible Preferred Stock are paid in full. Notwithstanding the foregoing,
however, such voting rights to elect directors will expire when the number of
shares of Cumulative Convertible Preferred Stock outstanding is reduced to
13,500 or less.
In the event such voting rights expire or are no longer
exercisable because dividends in arrears have been paid in full, the term of any
directors elected pursuant to the provisions of this paragraph 6 above shall
terminate forthwith and the number of directors constituting the Board of
Directors shall be immediately and automatically decreased by two (until the
occurrence of any subsequent Voting Rights Triggering Event). At any time after
voting power to elect directors shall have become vested and be continuing in
the holders of Cumulative Convertible Preferred Stock (together with the holders
of any other series of Preferred Stock upon which like rights have been
conferred and are exercisable) pursuant to this paragraph 6, or if vacancies
shall exist in the offices of directors elected by such holders, a proper
officer of the Company may, and upon the written request of the holders of
record of at least 25% of the shares of Cumulative Convertible Preferred Stock
then outstanding or the holders of 25% of the shares of any other series of
Preferred Stock then outstanding upon which like rights have been conferred and
are exercisable addressed to the secretary of the Company shall, call a special
meeting of the Holders of Cumulative Convertible Preferred Stock and the holders
of such other series of Preferred Stock for the purpose of electing the
directors which such holders are entitled to elect pursuant to the terms hereof;
provided, however, that no such special meeting shall be called if the next
annual meeting of stockholders of the Company is to be held within 60 days after
the voting power to elect directors shall have become vested (or such vacancies
arise, as the case may be), in which case such meeting shall be deemed to have
been called for such next annual meeting. If such meeting shall not be called,
pursuant to the provision of the immediately preceding sentence, by a proper
officer of the Company within 20 days after personal service to the secretary of
the Company at its principal executive offices, then the Holders of record of at
least 25% of the outstanding shares of Cumulative Convertible Preferred Stock or
the holders of 25% of the shares of any other series of Preferred Stock upon
which like rights have been conferred and are exercisable may designate in
writing one of their members to call such meeting at the expense of the Company,
and such meeting may be called by the person so designated upon the notice
required for the annual meetings of stockholders of the Company and shall be
held at the place for holding the annual meetings of stockholders. Any Holder of
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<PAGE> 172
Cumulative Convertible Preferred Stock or such other series of Preferred Stock
so designated shall have, and the Company shall provide, access to the lists of
Holders of Cumulative Convertible Preferred Stock and the holders of such other
series of Preferred Stock for any such meeting of the holders thereof to be
called pursuant to the provisions hereof. If no special meeting of the Holders
of Cumulative Convertible Preferred Stock and the holders of such other series
of Preferred Stock is called as provided in this paragraph 6, then such meeting
shall be deemed to have been called for the next meeting of stockholders of the
Company.
At any meeting held for the purposes of electing directors at
which the Holders of Cumulative Convertible Preferred Stock (together with the
holders of any other series of Preferred Stock upon which like rights have been
conferred and are exercisable) shall have the right, voting together as a
separate class, to elect directors as aforesaid, the presence in person or by
proxy of the Holders of at least a majority in voting power of the outstanding
shares of Cumulative Convertible Preferred Stock (and such other series of
Preferred Stock) shall be required to constitute a quorum thereof.
Any vacancy occurring in the office of a director elected by the
Holders of Cumulative Convertible Preferred Stock (and such other series of
Preferred Stock) may be filled by the remaining director elected by the Holders
of Cumulative Convertible Preferred Stock (and such other series of Preferred
Stock) unless and until such vacancy shall be filled by the Holders of
Cumulative Convertible Preferred Stock (and such other series of Preferred
Stock).
Except as set forth above and otherwise required by applicable
law, the creation, authorization or issuance of any shares of any Junior
Securities, Parity Securities or Senior Securities, or the increase or decrease
in the amount of authorized Capital Stock of any class, including Preferred
Stock, shall not require the affirmative vote or consent of Holders of
Cumulative Convertible Preferred Stock and shall not be deemed to affect
adversely the rights, preferences, privileges or voting rights of shares of
Cumulative Convertible Preferred Stock.
In any case in which the Holders of Cumulative Convertible
Preferred Stock shall be entitled to vote pursuant hereto or pursuant to
Delaware law, each Holder of Cumulative Convertible Preferred Stock entitled to
vote with respect to such matters shall be entitled to one vote for each share
of Cumulative Convertible Preferred Stock held.
Except as required by law, the Holders of the Cumulative
Convertible Preferred Stock will not be entitled to vote on any merger or
consolidation involving the Company or a sale of all or substantially all the
assets of the Company.
7. Conversion Rights. The Cumulative Convertible Preferred Stock
will be convertible at the option of the Holder, into shares of Common Stock at
any time, unless previously redeemed or repurchased, at a conversion rate of
13.748 shares of Common Stock per share of the Cumulative Convertible Preferred
Stock) (as adjusted pursuant to the provisions hereof, the "Conversion Rate")
(subject to the adjustments described below). The right to convert a share of
the Cumulative Convertible Preferred Stock called for redemption or delivered
for repurchase will
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<PAGE> 173
terminate at the close of business on the Redemption Date for such Cumulative
Convertible Preferred Stock or at the time of the repurchase, as the case may
be.
The right of conversion attaching to any share of Cumulative
Convertible Preferred Stock may be exercised by the Holder thereof by delivering
the share to be converted to the office of the Transfer Agent, or any agency or
office of the Company maintained for that purpose, accompanied by a duly signed
and completed notice of conversion in form reasonably satisfactory to the
Transfer Agent of the Company, such as that which is set forth in Exhibit B
hereto. The conversion date will be the date on which the share and the duly
signed and completed notice of conversion are so delivered. As promptly as
practicable on or after the conversion date, the Company will issue and deliver
to the Transfer Agent a certificate or certificates for the number of full
shares of Common Stock issuable upon conversion, with any fractional shares
rounded up to full shares or, at the Company's option, payment in cash in lieu
of any fraction of a share, based on the Closing Price of the Common Stock on
the Trading Day preceding the conversion date. Such certificate or certificates
will be delivered by the Transfer Agent to the appropriate Holder on a
book-entry basis or by mailing certificates evidencing the additional shares to
the Holders at their respective addresses set forth in the register of Holders
maintained by the Transfer Agent. All shares of Common Stock issuable upon
conversion of the Cumulative Convertible Preferred Stock will be fully paid and
nonassessable and will rank pari passu with the other shares of Common Stock
outstanding from time to time. Any shares of Cumulative Convertible Preferred
Stock surrendered for conversion during the period from the close of business on
any Record Date to the opening of business on the next succeeding Dividend
Payment Date must be accompanied by payment of an amount equal to the dividends
payable on such Dividend Payment Date on the shares of Cumulative Convertible
Preferred Stock being surrendered for conversion. No other payment or adjustment
for dividends, or for any dividends in respect of shares of Common Stock, will
be made upon conversion. Holders of Common Stock issued upon conversion will not
be entitled to receive any dividends payable to holders of Common Stock as of
any record time before the close of business on the conversion date.
The Conversion Rate shall be adjusted from time to time by the
Company as follows:
a. If the Company shall hereafter pay a dividend or make a
distribution in Common Stock to all holders of any outstanding class or series
of Common Stock of the Company, the Conversion Rate in effect at the opening of
business on the date following the date fixed for the determination of
shareholders entitled to receive such dividend or other distribution shall be
increased by multiplying such Conversion Rate by a fraction of which the
denominator shall be the number of shares of Common Stock outstanding at the
close of business on the Record Date (as defined below) fixed for such
determination and the numerator shall be the sum of such number of outstanding
shares and the total number of shares constituting such dividend or other
distribution, such increase to become effective immediately after the opening of
business on the day following the Record Date. If any dividend or distribution
of the type described in this provision (a) is declared but not so paid or made,
the Conversion Rate shall again be adjusted to the Conversion Rate which would
then be in effect if such dividend or distribution had not been declared.
b. If the outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the Conversion Rate
in effect at the opening of
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<PAGE> 174
business on the day following the day upon which such subdivision becomes
effective shall be proportionately increased and, conversely, if the outstanding
shares of Common Stock shall be combined into a smaller number of shares of
Common Stock, the Conversion Rate in effect at the opening of business on the
day following the day upon which such combination becomes effective shall be
proportionately reduced, such increase or reduction, as the case may be, to
become effective immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes effective.
c. If the Company shall offer or issue rights, options or
warrants to all holders of its outstanding Common Stock entitling them to
subscribe for or purchase Common Stock at a price per share less than the
Current Market Price (as defined below) on the Record Date fixed for the
determination of shareholders entitled to receive such rights or warrants, the
Conversion Rate shall be adjusted so that the same shall equal the rate
determined by multiplying the Conversion Rate in effect at the opening of
business on the date after such Record Date by a fraction of which the
denominator shall be the number of shares of Common Stock outstanding at the
close of business on the Record Date plus the number of shares of Common Stock
which the aggregate offering price of the total number of shares of Common Stock
subject to such rights, options or warrants would purchase at such Current
Market Price and of which the numerator shall be the number of shares of Common
Stock outstanding at the close of business on the Record Date plus the total
number of additional shares of Common Stock subject to such rights, options or
warrants for subscription or purchase. Such adjustment shall become effective
immediately after the opening of business on the day following the Record Date
fixed for determination of shareholders entitled to purchase or receive such
rights or warrants. To the extent that shares of Common Stock are not delivered
pursuant to such rights, options or warrants, upon the expiration or termination
of such rights or warrants the Conversion Rate shall again be adjusted to be the
Conversion Rate which would then be in effect had the adjustments made upon the
issuance of such rights or warrants been made on the basis of delivery of only
the number of shares of Common Stock actually delivered. If such rights or
warrants are not so issued, the Conversion Rate shall again be adjusted to be
the Conversion Rate which would then be in effect if such date fixed for the
determination of shareholders entitled to receive such rights or warrants had
not been fixed. In determining whether any rights or warrants entitle the
holders to subscribe for or purchase Common Stock at less than such Current
Market Price, and in determining the aggregate offering price of such shares of
Common Stock, there shall be taken into account any consideration received for
such rights or warrants, with the value of such consideration, if other than
cash, to be determined by the Board of Directors.
d. If the Company shall, by dividend or otherwise,
distribute to all holders of its shares of Common Stock shares of any class of
capital stock of the Company (other than any dividends or distributions to which
provision (a) of this Section applies) or evidences of its indebtedness, cash or
other assets (including securities, but excluding any rights or warrants of a
type referred to in paragraph (c) of this Section) (the foregoing hereinafter
called the "Distributed Securities"), then, in each such case, the Conversion
Rate shall be increased so that the same shall be equal to the rate determined
by multiplying the Conversion Rate in effect immediately prior to the close of
business on the Record Date (as defined below) with respect to such distribution
by a fraction of which the denominator shall be the Current Market Price
(determined as provided in provision g(ii) of this Section) of the Common Stock
on such date less the Fair Market Value (as
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<PAGE> 175
defined below) on such date of the portion of the Distributed Securities so
distributed applicable to one share of Common Stock and the numerator shall be
such Current Market Price, such increase to become effective immediately prior
to the opening of business on the day following the Record Date; provided,
however, that, in the event the then Fair Market Value (as so determined) of the
portion of the Distributed Securities so distributed applicable to one share of
Common Stock is equal to or greater than the Current Market Price on the Record
Date, in lieu of the foregoing adjustment, adequate provision shall be made so
that each Holder of Cumulative Convertible Preferred Stock shall have the right
to receive upon conversion of a share of Cumulative Convertible Preferred Stock
(or any portion thereof) the amount of Distributed Securities such holder would
have received had such holder converted such share of Cumulative Convertible
Preferred Stock (or portion thereof) immediately prior to such Record Date. If
such dividend or distribution is not so paid or made, the Conversion Rate shall
again be adjusted to be the Conversion Rate which would then be in effect if
such dividend or distribution had not been declared. If the Board of Directors
determines the Fair Market Value of any distribution for purposes hereof by
reference to the actual or when issued trading market for any securities
comprising all or part of such distribution, it must in doing so consider the
prices in such market over the same period used in computing the Current Market
Price pursuant to provision g(ii) of this section to the extent possible.
Rights or warrants distributed by the Company to all holders of
Common Stock entitling the holders thereof to subscribe for or purchase shares
of the Company's Capital Stock (either initially or under certain
circumstances), which rights or warrants, until the occurrence of a specified
event or events ("Dilution Trigger Event"): (i) are deemed to be transferred
with such Common Stock; (ii) are not exercisable; and (iii) are also issued in
respect of future issuances of Common Stock, shall be deemed not to have been
distributed for purposes of this provision (d) (and no adjustment to the
Conversion Rate under this provision (d) shall be required) until the occurrence
of the earliest Dilution Trigger Event, whereupon such rights and warrants shall
be deemed to have been distributed and an appropriate adjustment to the
Conversion Rate under this provision (d) shall be made. If any such rights or
warrants, including any such existing rights or warrants distributed prior to
the date hereof, are subject to subsequent events, upon the occurrence of each
of which such rights or warrants shall become exercisable to purchase different
securities, evidences of indebtedness or other assets, then the occurrence of
each such event shall be deemed to be such date of issuance and record date with
respect to new rights or warrants (and a termination or expiration of the
existing rights or warrants without exercise by the holder thereof). In
addition, in the event of any distribution (or deemed distribution) of rights or
warrants, or any Dilution Trigger Event with respect thereto, that was counted
for purposes of calculating a distribution amount for which an adjustment to the
Conversion Rate under this provision (d) was made, (1) in the case of any such
rights or warrants which shall all have been redeemed or repurchased without
exercise by any holders thereof, the Conversion Rate shall be readjusted upon
such final redemption or repurchase to give effect to such distribution or
Dilution Trigger Event, as the case may be, as though it were a cash
distribution, equal to the per share redemption or repurchase price received by
a holder or holders of Common Stock with respect to such rights or warrants
(assuming such holder had retained such rights or warrants), made to all holders
of Common Stock as of the date of such redemption or repurchase, and (2) in the
case of such rights or warrants which shall have expired or been terminated
without exercise by any holders thereof, the Conversion Rate shall be readjusted
as if such rights and warrants had not been issued.
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Notwithstanding any other provision of this provision (d) to the
contrary, Capital Stock, rights, warrants, evidences of indebtedness, other
securities, cash or other assets (including, without limitation, any rights
distributed pursuant to any shareholder rights plan) shall be deemed not to have
been distributed for purposes of this provision (d) if the Company makes proper
provision so that each Holder of shares of Cumulative Convertible Preferred
Stock who converts a share of Cumulative Convertible Preferred Stock (or any
portion thereof) after the date fixed for determination of shareholders entitled
to receive such distribution shall be entitled to receive upon such conversion,
in addition to the Common Stock issuable upon such conversion, the amount and
kind of such distributions that such holder would have been entitled to receive
if such holder had, immediately prior to such determination date, converted such
share of Cumulative Convertible Preferred Stock into Common Stock.
For purposes of this provision (d), provision (a) and provision
(b), any dividend or distribution to which this provision (d) is applicable that
also includes Common Stock, or rights or warrants to subscribe for or purchase
Common Stock to which provision (b) applies (or both), shall be deemed instead
to be (1) a dividend or distribution of the evidences of indebtedness, cash,
assets, shares of capital stock, rights or warrants other than (A) such shares
of Common Stock or (B) rights or warrants to which provision (b) applies (and
any Conversion Rate increase required by this provision (d) with respect to such
dividend or distribution shall then be made) immediately followed by (2) a
dividend or distribution of such Common Stock or such rights or warrants (and
any further Conversion Rate increase required by provisions (a) and (b) with
respect to such dividend or distribution shall then be made), except that (1)
the Record Date of such dividend or distribution shall be substituted as "the
Record Date fixed for the determination of stockholders entitled to receive such
dividend or other distribution", "Record Date fixed for such determination" and
"Record Date" within the meaning of provision (a) and as "the Record Date fixed
for the determination of shareholders entitled to receive such rights or
warrants", "the date fixed for the determination of the shareholders entitled to
receive such rights or warrants" and "such Record Date" within the meaning of
provision (b), and (2) any share of Common Stock included in such dividend or
distribution shall not be deemed "outstanding at the close of business on the
date fixed for such determination" within the meaning of provision (a).
e. If the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock cash (excluding any cash that is
part of a distribution referred to in provision (d)) in an aggregate amount
that, combined together with (1) the aggregate amount of any other such
distributions to all holders of its Common Stock made exclusively in cash within
the 12 months preceding the date of payment of such distribution, and in respect
of which no adjustment pursuant to this provision (e) has been made, and (2) the
aggregate of any cash plus the Fair Market Value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a resolution
of the Board of Directors) of consideration payable in respect of any tender
offer by the Company or a Subsidiary of the Company for all or any portion of
the Common Stock concluded within the 12 months preceding the date of payment of
such distribution, and in respect of which no adjustment pursuant to provision
(d) has been made, exceeds 10% of the product of the Current Market Price
(determined as provided below) on the Record Date with respect to such
distribution times the number of shares of Common Stock outstanding on such
date, then, and in each such case, immediately after the close of business on
such date, the Conversion Rate shall be
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increased so that the same shall equal the price determined by multiplying the
Conversion Rate in effect immediately prior to the close of business on such
Record Date by a fraction (i) the denominator of which shall be equal to the
Current Market Price on the Record Date less an amount equal to the quotient of
(x) the excess of such combined amount over such 10% amount divided by (y) the
number of shares of Common Stock outstanding on the Record Date and (ii) the
numerator of which shall be equal to the Current Market Price on such Record
Date; provided, however, that, if the portion of the cash so distributed
applicable to one share of Common Stock is equal to or greater than the Current
Market Price of the Common Stock on the Record Date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each holder of Cumulative
Convertible Preferred Stock shall have the right to receive upon conversion of a
share of Cumulative Convertible Preferred Stock (or any portion thereof) the
amount of cash such holder would have received had such holder converted such
share of Cumulative Convertible Preferred Stock (or portion thereof) immediately
prior to such Record Date. If such dividend or distribution is not so paid or
made, the Conversion Rate shall again be adjusted to be the Conversion Rate
which would then be in effect if such dividend or distribution had not been
declared.
f. If a tender or exchange offer made by the Company or
any of its subsidiaries for all or any portion of the Common Stock expires and
such tender or exchange offer (as amended upon the expiration thereof) requires
the payment to shareholders (based on the acceptance (up to any maximum
specified in the terms of the tender offer) of Purchased Shares (as defined
below)) of an aggregate consideration having a Fair Market Value that, combined
together with (1) the aggregate of the cash plus the Fair Market Value, as of
the expiration of such tender offer, of consideration payable in respect of any
other tender offers, by the Company or any of its subsidiaries for all or any
portion of the Common Stock expiring within the 12 months preceding the
expiration of such tender offer and in respect of which no adjustment pursuant
to this provision (f) has been made and (2) the aggregate amount of any
distributions to all holders of the Common Stock made exclusively in cash within
12 months preceding the expiration of such tender offer and in respect of which
no adjustment pursuant to provision (e) has been made, exceeds 10% of the
product of the Current Market Price as of the last time (the "Expiration Time")
tenders could have been made pursuant to such tender offer (as it may be
amended) times the number of shares of Common Stock outstanding (including any
tendered shares) at the Expiration Time, then, and in each such case,
immediately prior to the opening of business on the day after the date of the
Expiration Time, the Conversion Rate shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Rate in effect
immediately prior to the close of business on the date of the Expiration Time by
a fraction of which the denominator shall be the number of shares of Common
Stock outstanding (including any tendered shares) at the Expiration Time
multiplied by the Current Market Price of the Common Stock on the Trading Day
next succeeding the Expiration Time and the numerator shall be the sum of (x)
the Fair Market Value of the aggregate consideration payable to shareholders
based on the acceptance (up to any maximum specified in the terms of the tender
offer) of all shares validly tendered and not withdrawn as of the Expiration
Time (the shares deemed so accepted, up to any such maximum, being referred to
as the "Purchased Shares") and (y) the product of the number of shares of Common
Stock outstanding (less any Purchased Shares) at the Expiration Time and the
Current Market Price of the Common Stock on the Trading Day next succeeding the
Expiration Time, such reduction (if any) to become effective immediately prior
to the opening of business on the day following the Expiration Time. If the
Company is obligated to
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purchase shares pursuant to any such tender offer, but the Company is
permanently prevented by applicable law from effecting any such purchases or all
such purchases are rescinded, the Conversion Rate shall again be adjusted to be
the Conversion Rate which would then be in effect if such tender offer had not
been made. If the application of this provision (f) to any tender offer would
result in a decrease in the Conversion Rate, no adjustment shall be made for
such tender offer under this provision (f).
The Company may make voluntary increases in the Conversion Rate
in addition to those required in the foregoing provisions, provided that each
such increase is in effect for at least 20 calendar days.
In addition, in the event that any other transaction or event
occurs as to which the foregoing Conversion Rate adjustment provisions are not
strictly applicable but the failure to make any adjustment would adversely
affect the conversion rights represented by the Cumulative Convertible Preferred
Stock in accordance with the essential intent and principles of such provisions,
then, in each such case, either (i) the Company will appoint an investment
banking firm of recognized national standing, or any other financial expert that
does not (or whose directors, officers, employees, affiliates or stockholders do
not) have a direct or material indirect financial interest in the Company or any
of its subsidiaries, who has not been, and, at the time it is called upon to
give independent financial advice to the Company, is not (and none of its
directors, officers, employees, affiliates or stockholders are) a promoter,
director or officer of the Company or any of its subsidiaries, which will give
their opinion upon or (ii) the Board of Directors shall, in its sole discretion,
determine consistent with the Board of Directors' fiduciary duties to the
holders of the Company's Common Stock, the adjustment, if any, on a basis
consistent with the essential intent and principles established in the foregoing
Conversion Rate adjustment provisions, necessary to preserve, without dilution,
the conversion rights represented by the Cumulative Convertible Preferred Stock.
Upon receipt of such opinion or determination, the Company will promptly mail a
copy thereof to the Holders of the Cumulative Convertible Preferred Stock and
will, subject to the fiduciary duties of the Board of Directors, make the
adjustments described therein.
The Company will provide to Holders of the Cumulative Convertible
Preferred Stock reasonable notice of any event that would result in an
adjustment to the Conversion Rate pursuant to this section so as to permit the
Holders to effect a conversion of Cumulative Convertible Preferred Stock into
shares of Common Stock prior to the occurrence of such event.
g. For purposes of this section, the following terms shall
have the meaning indicated:
i. "Current Market Price" means the average of the
daily closing prices per share of Common Stock for the 10 consecutive trading
days immediately prior to the date in question.
ii. "Fair Market Value" shall mean the amount which
a willing buyer would pay a willing seller in an arm's-length transaction, under
usual and ordinary circumstances and after consideration of all available uses
and purposes without any compulsion
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upon the seller to sell or the buyer to buy, as determined by the Board of
Directors, whose determination shall be made in good faith and shall be
conclusive and described in a resolution of the Board of Directors.
iii. "Record Date" shall mean, with respect to any
dividend, distribution or other transaction or event in which the holders of
Common Stock have the right to receive any cash, securities or other property or
in which the Common Stock (or other applicable security) is exchanged for or
converted into any combination of cash, securities or other property, the date
fixed for determination of shareholders entitled to receive such cash,
securities or other property (whether such date is fixed by the Board of
Directors or by statute, contract or otherwise).
h. No adjustment in the Conversion Rate shall be required
unless such adjustment would require an increase or decrease of at least 1% in
such rate; provided, however, that any adjustments which by reason of this
paragraph are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this paragraph
shall be made by the Company and shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be. No adjustment need be made
for a change in the par value or no par value of the Common Stock.
i. Whenever the Conversion Rate is adjusted as herein
provided, the Company shall promptly file with the Transfer Agent an Officers'
Certificate setting forth the Conversion Rate after such adjustment and setting
forth a brief statement of the facts requiring such adjustment. Promptly after
delivery of such certificate, the Company shall prepare a notice of such
adjustment of the Conversion Rate setting forth the adjusted Conversion Rate and
the date on which each adjustment becomes effective and shall mail such notice
of such adjustment of the Conversion Rate to each holder of Cumulative
Convertible Preferred Stock at such holder's last address appearing on the
register of holders maintained for that purpose within 20 days of the effective
date of such adjustment. Failure to deliver such notice shall not affect the
legality or validity of any such adjustment.
j. In any case in which this paragraph provides that an
adjustment shall become effective immediately after a Record Date for an event,
the Company may defer until the occurrence of such event issuing to the holder
of any share of Cumulative Convertible Preferred Stock converted after such
Record Date and before the occurrence of such event the additional Common Stock
issuable upon such conversion by reason of the adjustment required by such event
over and above the Common Stock issuable upon such conversion before giving
effect to such adjustment.
k. For purposes of this paragraph, the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of Common Stock. The Company shall not
pay any dividend or make any distribution on Common Stock held in the treasury
of the Company.
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8. Certain Covenants.
a. Transactions with Affiliates
Without the affirmative vote or consent of the holders of
a majority of the outstanding shares of Cumulative Convertible Preferred Stock,
the Company will not, and will not permit any of its subsidiaries to, make any
payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that
are no less favorable to the Company or the relevant subsidiary than those that
would have been obtained in a comparable transaction by the Company or such
subsidiary with an unrelated Person and (ii) the Company files in its minute
books with respect to any Affiliate Transaction or series of related Affiliate
Transaction involving aggregate consideration in excess of $1.0 million, 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 members
of the Board of Directors that are disinterested as to such Affiliate
Transaction.
As used herein, "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 purposes of
this definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise; provided that beneficial ownership of 10% or more of the voting
securities of a Person shall be deemed to be control.
The provisions of the foregoing paragraph shall not
prohibit (i) 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, (ii) the grant of stock options or similar rights to employees and
directors of the Company pursuant to plans approved by the Board of Directors,
(iii) any employment or consulting arrangement or agreement entered into by the
Company or any of its subsidiaries in the ordinary course of business and
consistent with the past practice of the Company or such subsidiary, (iv) the
payment of reasonable fees to directors of the Company and its subsidiaries who
are not employees of the Company or its subsidiaries, (v) any Affiliate
Transaction between the Company and a subsidiary thereof or between such
subsidiaries (for purposes of this paragraph, "subsidiary" includes any entity
deemed to be an Affiliate because the Company or any of its subsidiaries own
securities in such entity or controls such entity), or (vi) transactions between
the Company or any subsidiary thereof specifically contemplated by the PSINet
Agreement dated as of July 22, 1997 between a subsidiary of the Company and
PSINet, as amended as of the date hereof.
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b. Payments for Consent
The Company nor any of its subsidiaries will, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
dividend or other distribution, fee or otherwise, to any Holder of shares of the
Cumulative Convertible Preferred Stock for or as an inducement to any consent,
waiver or amendment of any of the terms or provisions of the Certificate of
Designations or the Cumulative Convertible Preferred Stock unless such
consideration is offered to be paid and is paid to all Holders of the Cumulative
Convertible Preferred Stock that consent, waive or agree to amend in the time
frame set forth in the solicitation documents relating to such consent, waiver
or agreement.
c. Reports
Whether or not required by the rules and regulations of
the Commission, so long as any shares of the Cumulative Convertible Preferred
Stock are outstanding, the Company will furnish to the Holders of the Cumulative
Convertible Preferred Stock (i) all quarterly and annual financial information
that would be required to be contained in a filing with the Commission on Forms
10-Q and 10-K if the Company were required to file such Forms, including
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants and (ii) all information that
would be required to be contained in a current report on Form 8-K if the Company
were required to file such reports. In the event the Company has filed any such
report with the Commission, it will not be obligated to separately finish the
report to any Holder unless and until such Holder requests a copy of the report.
In addition, whether or not required by the rules and regulations of the
Commission, the Company will file a copy of all such information and reports
with the Commission for public availability (unless the Commission will not
accept such a filing) and make such information available to securities analysts
and prospective investors upon request.
9. Merger, Consolidation or Sale of Assets of the Company
In the event that the Company is party to any Fundamental Change
or transaction (including, without limitation, a merger other than a merger that
does not result in a reclassification, conversion, exchange or cancellation of
Common Stock), consolidation, sale of all or substantially all of the assets of
the Company, recapitalization or reclassification of Common Stock (other than a
change in par value, or from par value to no par value, or from no par value to
par value or as a result of a subdivision or combination of Common Stock) or any
compulsory share exchange (each of the foregoing, including any Fundamental
Change, being referred to as a "Transaction"), the Company will be obligated,
subject to applicable provisions of state law and the restrictions of the
Indenture, either to offer (a "Repurchase Offer") to purchase all of the shares
of Cumulative Convertible Preferred Stock on the date (the "Repurchase Date")
that is 75 days after the date the Company gives notice of the Transaction, at a
price (the "Repurchase Price") equal to $1,000.00 per share of Cumulative
Convertible Preferred Stock, together with an amount equal to accrued and unpaid
dividends on the Cumulative Convertible Preferred Stock through the Repurchase
Date or to adjust the Conversion Rate as described below. If a Repurchase Offer
is made, the Company shall deposit, on or prior to the Repurchase Date, with a
paying agent an amount of money sufficient to
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pay the aggregate Repurchase Price of the Cumulative Convertible Preferred Stock
which is to be paid on the Repurchase Date.
On or before the 15th day after the Company knows or reasonably
should know that a Transaction has occurred, the Company will be required to
mail to all Holders a notice of the occurrence of such Transaction and whether
or not the documents governing the Company's indebtedness permit at such time a
Repurchase Offer, and, as applicable, either the new Conversion Rate (as
adjusted at the option of the Company) or the date by which the Repurchase Offer
must be accepted, the Repurchase Price for the Cumulative Convertible Preferred
Stock and the procedures which the holder must follow to accept the Repurchase
Offer. To accept the Repurchase Offer, the Holder of a share of Cumulative
Convertible Preferred Stock will be required to deliver, on or before the 10th
day prior to the Repurchase Date, written notice to the Company (or an agent
designated by the Company for such purpose) of the holder's acceptance, together
with the certificates evidencing the Cumulative Convertible Preferred Stock with
respect to which the offer is being accepted, duly endorsed for transfer.
In the event the Company does not make a Repurchase Offer with
respect to a Transaction and such Transaction results in shares of Common Stock
being converted into the right to receive, or being exchanged for, (i) in the
case of any Transaction other than a Transaction involving a Common Stock
Fundamental Change (as defined below) (and subject to funds being legally
available for such purpose under applicable law at the time of such conversion),
securities, cash or other property, each share of the Cumulative Convertible
Preferred Stock shall thereafter be convertible into the kind and, in the case
of a Transaction which does not involve a Fundamental Change (as defined below),
amount of securities, cash and other property receivable upon the consummation
of such Transaction by a holder of that number of shares of Common Stock into
which a share of the Cumulative Convertible Preferred Stock was convertible
immediately prior to such Transaction, or (ii) in the case of a Transaction
involving a Common Stock Fundamental Change, common stock, each share of the
Cumulative Convertible Preferred Stock shall thereafter be convertible (in the
manner described therein) into common stock of the kind received by holders of
Common Stock (but in each case after giving effect to any adjustment discussed
below relating to a Fundamental Change if such Transaction constitutes a
Fundamental Change), other than as required by Delaware law.
If any Fundamental Change occurs, then the Conversion Rate in
effect will be adjusted immediately after such Fundamental Change as described
below. In addition, in the event of a Common Stock Fundamental Change, each
share of Cumulative Convertible Preferred Stock shall be convertible solely into
common stock of the kind received by holders of Common Stock as a result of such
Common Stock Fundamental Change.
The Conversion Rate in the case of any Transaction involving a
Fundamental Change will be adjusted immediately after such Fundamental Change:
(i) in the case of a Non-Stock Fundamental Change
(as defined below), the Conversion Rate will thereupon become the higher of (A)
the Conversion Rate in effect immediately prior to such Non-Stock Fundamental
Change, but after giving effect to any other prior
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adjustments effected, and (B) a fraction, the numerator of which is (x) the
redemption rate for one share of the Cumulative Convertible Preferred Stock if
the redemption date were the date of such Non-Stock Fundamental Change (or, for
the period commencing on the first date of original issuance of the Cumulative
Convertible Preferred Stock and through April 1, 1999, and the twelve-month
period commencing April 1, 1999, the product of 106.75% and 106.075%,
respectively), multiplied by $1000 plus (y) the amount of any then-accrued and
unpaid dividends on one share of the Cumulative Convertible Preferred Stock, and
the denominator of which is the greater of the Applicable Price or the then
applicable Reference Market Price; and
(ii) in the case of a Common Stock Fundamental
Change, the Conversion Rate in effect immediately prior to such Common Stock
Fundamental Change, but after giving effect to any other prior adjustments
effected, will thereupon be adjusted by multiplying such Conversion Rate by a
fraction of which the denominator will be the Purchaser Stock Price (as defined
below) and the numerator will be the Applicable Price; provided, however, that
in the event of a Common Stock Fundamental Change in which (A) 100% of the value
of the consideration received by a holder of Common Stock is common stock of the
successor, acquirer, or other third party (and cash, if any, is paid only with
respect to any fractional interests in such common stock resulting from such
Common Stock Fundamental Change) and (B) all Common Stock will have been
exchanged for, converted into, or acquired for common stock (and cash with
respect to fractional interests) of the successor, acquirer, or other third
party, the Conversion Rate in effect immediately prior to such Common Stock
Fundamental Change will thereupon be adjusted by multiplying such Conversion
Rate by the number of shares of common stock of the successor, acquirer, or
other third party received by a holder of one share of Common Stock as a result
of such Common Stock Fundamental Change.
The term "Applicable Price" means (i) in the case of a Non-Stock
Fundamental Change in which the holders of Common Stock receive only cash, the
amount of cash received by the holder of one share of Common Stock and (ii) in
the event of any other Non-Stock Fundamental Change or any Common Stock
Fundamental Change, the average of the Closing Price (as defined below) for
Common Stock during the ten Trading Days prior to the record date for the
determination of the holders of Common Stock entitled to receive such
securities, cash, or other property in connection with such Non-Stock
Fundamental Change or Common Stock Fundamental Change or, if there is no such
record date, the date upon which the holders of Common Stock shall have the
right to receive such securities, cash, or other property (such record date or
distribution date being hereinafter referred to as the "Entitlement Date") in
each case as adjusted in good faith by the Company to appropriately reflect any
of the events referred to above.
The term "Common Stock Fundamental Change" means any Fundamental
Change in which more than 50% of the value (as determined in good faith by the
Board of Directors of the Company) of the consideration received by holders of
Common Stock consists of common stock that for each of the ten consecutive
Trading Days prior to the Entitlement Date has been admitted for listing or
admitted for listing subject to notice of issuance on a national securities
exchange or quoted on the Nasdaq National Market; provided, however, that a
Fundamental Change shall not be a Common Stock Fundamental Change unless either
(i) the Company continues to exist after the occurrence of such Fundamental
Change and the outstanding Cumulative Convertible Preferred
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Stock continues to exist as outstanding Cumulative Convertible Preferred Stock
or (ii) not later than the occurrence of such Fundamental Change, the
outstanding Cumulative Convertible Preferred Stock is converted into or
exchanged for shares of convertible Preferred Stock of an entity succeeding to
the business of the Company or a subsidiary thereof, which convertible Preferred
Stock has powers, preferences, and relative, participating, optional, or other
rights and qualifications, limitations, and restrictions, substantially similar
to those of the Cumulative Convertible Preferred Stock.
The term "Fundamental Change" means the occurrence of any
Transaction or event in connection with a plan pursuant to which all or
substantially all Common Stock shall be exchanged for, converted into, acquired
for, or constitute solely the right to receive securities, cash, or other
property (whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization, or
otherwise), provided, that, in the case of a plan involving more than one such
Transaction or event, for purposes of adjustment of the Conversion Rate, such
Fundamental Change shall be deemed to have occurred when substantially all
Common Stock shall be exchanged for, converted into, or acquired for or
constitute solely the right to receive securities, cash, or other property, but
the adjustment shall be based upon the consideration that a holder of Common
Stock received in such Transaction or event as a result of which more than 50%
of Common Stock shall have been exchanged for, converted into, or acquired for
or constitute solely the right to receive securities, cash, or other property.
The term "Non-Stock Fundamental Change" means any Fundamental Change other than
a Common Stock Fundamental Change.
The term "Purchaser Stock Price" means, with respect to any
Common Stock Fundamental Change, the average of the Closing Prices for the
common stock received in such Common Stock Fundamental Change for the ten
consecutive Trading Days prior to and including the Entitlement Date, as
adjusted in good faith by the Company to appropriately reflect any of the events
referred to above.
The term "Reference Market Price" shall initially mean $38.79
(which is an amount equal to 66 2/3% of the reported last sales price for Common
Stock on the Nasdaq National Market on March 25, 1998) and in the event of any
adjustment of the Conversion Rate other than as a result of a Non-Stock
Fundamental Change, the Reference Market Price shall also be adjusted so that
the ratio of the Reference Market Price to the Conversion Rate after giving
effect to any such adjustment shall always be the same as the ratio of the
initial Reference Market Price to the initial Conversion Rate.
In case (1) the Company shall declare a dividend (or any other
distribution) on its Common Stock payable otherwise than in cash out of its
earned surplus; (2) the Company shall authorize the granting to all holders of
its Common Stock of rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any other rights; (3) of any
reclassification of the Common Stock of the Company (other than a subdivision or
combination of its outstanding Common Stock); (4) of any consolidation or merger
to which the Company is a party and for which approval of any shareholders of
the Company is required; (5) the sale or transfer of all or substantially all
the assets of the Company; or (6) of the voluntary or involuntary dissolution,
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liquidation or winding up of the Company; then the Company shall cause to be
filed with the Transfer Agent and at each office or agency maintained for the
purpose of conversion of the Cumulative Convertible Preferred Stock, and shall
cause to be mailed to all holders at their last addresses as they shall appear
in the Cumulative Convertible Preferred Stock Register, at least 20 days (or 10
days in any case specified in clause (1) or (2) above) prior to the applicable
date hereinafter specified, a notice stating (x) the date on which a record is
to be taken for the purpose of such dividend, distribution, rights or warrants,
or, if a record is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distribution, rights or
warrants are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up. Failure to give the notice requested by this Section
or any defect therein shall not affect the legality or validity of any dividend,
distribution, right, warrant, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up, or the vote upon any such
action.
The Company shall at all times reserve and keep available, free
from preemptive rights, out of its authorized but unissued shares of Common
Stock (or out of its authorized shares of Common Stock held in the treasury of
the Company), for the purpose of effecting the conversion of the Cumulative
Convertible Preferred Stock, the full number of shares of Common Stock then
issuable upon the conversion of all outstanding shares of Cumulative Convertible
Preferred Stock.
The Company will pay any and all document, stamp or similar issue
or transfer taxes that may be payable in respect of the issue or delivery of
Common Stock on conversion of the Cumulative Convertible Preferred Stock
pursuant hereto. The Company shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that of the Holder of
the share of Cumulative Convertible Preferred Stock or the shares of Cumulative
Convertible Preferred Stock to be converted, and no such issue or delivery shall
be made unless and until the Person requesting such issue has paid to the
Company the amount of any such tax, or has established to the satisfaction of
the Company that such tax has been paid.
10. Reissuance of Cumulative Convertible Preferred Stock. Shares
of Cumulative Convertible Preferred Stock redeemed for or converted into Common
Stock or that have been reacquired in any manner shall not be reissued as shares
of Cumulative Convertible Preferred Stock and shall (upon compliance with any
applicable provisions of the laws of Delaware) have the status of authorized and
unissued shares of Preferred Stock undesignated as to series and may be
redesignated and reissued as part of any series of Preferred Stock; provided,
however, that so long as any shares of Cumulative Convertible Preferred Stock
are outstanding, any issuance of such shares must be in compliance with the
terms hereof.
11. Business Day. If any payment, redemption or exchange shall be
required by the terms hereof to be made on a day that is not a Business Day,
such payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
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12. Additional Rights of Holders. In addition to the rights
provided to Holders under this Certificate of Designation, Holders shall have
the rights set forth in the Registration Rights Agreement.
13. Amendment, Supplement and Waiver. The Company may amend this
Certificate of Designation with the affirmative vote or consent of the holders
of a majority of the shares of Cumulative Convertible Preferred Stock then
outstanding, (including votes or consents obtained in connection with a tender
offer or exchange offer for the Cumulative Convertible Preferred Stock) and,
except as otherwise provided by applicable law, any past default or failure to
comply with any provision of this Certificate of Designation may also be waived
with the consent of such holders. Notwithstanding the foregoing, however,
without the consent of each Holder affected, an amendment or waiver may not
(with respect to any shares of the Cumulative Convertible Preferred Stock held
by a non-consenting Holder): (i) alter the voting rights with respect to the
Cumulative Convertible Preferred Stock or reduce the number of shares of the
Cumulative Convertible Preferred Stock whose Holders must consent to an
amendment, supplement or waiver, (ii) reduce the Liquidation Preference of any
share of the Cumulative Convertible Preferred Stock or adversely alter the
provisions with respect to the redemption of the Cumulative Convertible
Preferred Stock, (iii) reduce the rate of or change the time for payment of
dividends on any share of the Cumulative Convertible Preferred Stock, (iv) waive
a default in the payment of dividends or Liquidated Damages (if any) on the
Cumulative Convertible Preferred Stock, (v) make any share of the Cumulative
Convertible Preferred Stock payable in money other than United States dollars,
(vi) make any change in the provisions of the Certificate of Designation
relating to waivers of the rights of Holders of the Cumulative Convertible
Preferred Stock to receive the Liquidation Preference, dividends or Liquidated
Damages (if any) on the Cumulative Convertible Preferred Stock, or (vii) make
any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder
of the Cumulative Convertible Preferred Stock, the Company may (to the extent
permitted by, and subject to the requirements of, Delaware law) amend or
supplement this Certificate of Designation to cure any ambiguity, defect or
inconsistency, to provide for uncertificated shares of the Cumulative
Convertible Preferred Stock in addition to or in place of certificated shares of
the Cumulative Convertible Preferred Stock, to make any change that would
provide any additional rights or benefits to the Holders of the Cumulative
Convertible Preferred Stock or to make any change that the Board of Directors
determines, in good faith, is not materially adverse to Holders of the
Cumulative Convertible Preferred Stock.
14. Shelf Registration; Liquidated Damages. Pursuant to the
Registration Rights Agreement, the Company will agree to file a Shelf
Registration Statement with the Commission on the appropriate form under the
Securities Act with respect to the Cumulative Convertible Preferred Stock, any
depositary shares issued in connection with the Cumulative Convertible Preferred
Stock (the "Depositary Shares"), and Common Stock issuable upon conversion
thereof or paid as dividends thereon, to cover resales of the Depositary Shares,
the Cumulative Convertible Preferred Stock or such Common Stock by the Holders
thereof who satisfy certain conditions relating to the provision of information
in connection with the Shelf Registration Statement. The Company will use its
best efforts to cause the Shelf Registration Statement to be declared effective
as promptly as possible by
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<PAGE> 187
the Commission. For purposes hereof, "Transfer Restricted Securities" means each
Depositary Share or share of the Cumulative Convertible Preferred Stock or
Common Stock issuable upon conversion thereof or paid as dividends thereon until
the earlier of (i) the date on which such Depositary Share or share of
Cumulative Convertible Preferred Stock or Common Stock has been effectively
registered under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (ii) the date on which such Depositary Share or share
of Cumulative Convertible Preferred Stock or Common Stock is eligible to be
distributed to the public pursuant to Rule 144(k) under the Securities Act.
The Registration Rights Agreement will provide that the Company
will (i) file the Shelf Registration Statement with the Commission on or prior
to 45 days after the Issue Date, (ii) use its best efforts to cause the Shelf
Registration to be declared effective by the Commission on or prior to June 26,
1998 and (iii) use its best efforts to maintain the effectiveness of the Shelf
Registration Statement until all Depositary Shares, shares of Cumulative
Convertible Preferred Stock and shares of Common Stock issued upon conversion
thereof or as dividends thereon that are not held by affiliates of the Company
(A) may be resold without restriction under Rule 144(k) under the Securities Act
or (B) have been sold pursuant to the Shelf Registration Statement (subject to
the Company's right to notify Holders that the Prospectus contained therein
ceases to be accurate and complete as a result of material business developments
for up to 120 days during such three-year period, provided that (A) no single
period may exceed 45 days and (B) such periods in the aggregate may not exceed
60 days in any calendar year). If (a) the Company fails to file the Shelf
Registration Statement required by the Registration Rights Agreement on or
before the date specified for such filing, (b) such Shelf Registration Statement
is not declared effective by the Commission on or prior to the date specified
for such effectiveness (the "Effectiveness Target Date") or (c) the Shelf
Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted Securities
during the periods specified in the Registration Rights Agreement (each such
event referred to in clauses (a) through (c) above a "Registration Default"),
then the Company will pay Liquidated Damages as required by the Registration
Rights Agreement to each Holder of shares of the Cumulative Convertible
Preferred Stock which are Transfer Restricted Securities (and the corresponding
Depositary Shares), with respect to the first 45-day period immediately
following the occurrence of such Registration Default in an amount equal to
$0.25 per year per Depositary Share ($5.00 per year per $1,000 in Liquidation
Preference of the Cumulative Convertible Preferred Stock) held by such Holder.
The amount of the Liquidated Damages will increase by an additional $2.50 per
year per $1,000 in Liquidation Preference of the Cumulative Convertible
Preferred Stock with respect to any subsequent period until all Registration
Defaults have been cured. In addition, holders of shares of the Cumulative
Convertible Preferred Stock which are Transfer Restricted Securities may receive
Liquidated Damages with respect to Common Stock which are Transfer Restricted
Securities issued in lieu of paying dividends in cash. The Liquidated Damages
amount per share of Common Stock will be equal to the Liquidated Damages per
share of Cumulative Convertible Preferred Stock, divided by the Conversion Rate.
All accrued Liquidated Damages will be paid by the Company, to the extent
permitted by applicable law, on each Dividend Payment Date and, to the extent
the net dividend payable on such date may be paid through the issuance of Common
Stock, may be paid in Common Stock (valued on the same basis as for the dividend
then payable). Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease. Notwithstanding anything to
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<PAGE> 188
the contrary herein contained, during any period, the Company will not be
required to pay Liquidated Damages with respect to more than one Registration
Default.
The summary herein of certain provisions of the Registration
Rights Agreement does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the
Registration Rights Agreement, a copy of which is available upon request to the
Company.
15. Transfer and Exchange. When Cumulative Convertible Preferred
Stock is presented to the Transfer Agent with a request to register the transfer
of such Cumulative Convertible Preferred Stock or to exchange such Cumulative
Convertible Preferred Stock for an equal number of shares of Cumulative
Convertible Preferred Stock of other authorized denominations, the Transfer
Agent shall register the transfer or make the exchange as requested if its
reasonable requirements for such transaction are met and such transfer or
exchange is in compliance with applicable laws or regulations.
16. Certain Definitions. As used in this Certificate of
Designation, the following terms shall have the following meanings (and (1)
terms defined in the singular have comparable meanings when used in the plural
and vice versa, (2) "including" means including without limitation, (3) "or" is
not exclusive and (4) an accounting term not otherwise defined has the meaning
assigned to it in accordance with United States generally accepted accounting
principles as in effect on the Issue Date and all accounting calculations will
be determined in accordance with such principles), unless the content otherwise
requires:
"Board of Directors" mean the Board of Directors of the Company
or any committee thereof duly authorized to act on behalf of the Board.
"Business Day" means each day which is not a legal holiday.
"Capital Stock" of any person means any and all shares,
interests, rights to purchase, warrants, options, participation or other
equivalents of or interests in (however designated) equity of such person,
including any Preferred Stock, but excluding any debt securities convertible
into or exchangeable for such equity.
"Closing Price" means on any day the reported last bid price on
such day, or in case no sale takes place on such day, the average of the
reported closing bid and asked prices on the principal national securities
exchange on which such stock is listed or admitted to trading, or if not listed
or admitted to trading on any national securities exchange, the average of the
closing bid and asked prices as furnished by any independent registered
broker-dealer firm, selected by the Company for that purpose, in each case
adjusted for any stock split during the relevant period.
"Commission" means the Securities and Exchange Commission.
"Default" means any event which is, or after notice or passage of
time or both would be, a Voting Rights Triggering Event.
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"Holders" means the registered holders from time to time of the
Cumulative Convertible Preferred Stock.
"Indenture" means the Indenture dated as of October 5, 1995, as
supplemented and amended, between the Company and IBJ Schroder Bank & Trust
Company.
"Liquidated Damages" means, with respect to any share of
Cumulative Convertible Preferred Stock, the additional amounts payable pursuant
to Section 14 hereof.
"Officers' Certificate" means a certificate signed by two
officers of the Company.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however designated)
which is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Registration Rights Agreement" means the Registration Rights
Agreement among the Company, Goldman, Sachs & Co., Credit Suisse First Boston
Corporation, Merrill Lynch & Company and Morgan Stanley Dean Witter with respect
to the Cumulative Convertible Preferred Stock.
"Securities Act" means the Securities Act of 1933.
"Shelf Registration Statement" means a shelf registration
statement filed with the Commission to cover resales of Transfer Restricted
Securities by holders thereof, as required by the Registration Rights Agreement.
"Subsidiary" means any corporation, association, partnership,
limited liability company or other business entity of which more than 50% of the
total voting power of shares of capital stock or other interests entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by the Company, the Company and one or more Subsidiaries
or one or more Subsidiaries and any partnership the sole general partner or the
managing partner of which the Company or any Subsidiary or the only general
partners of which are the Company and one or more Subsidiaries or one or more
Subsidiaries.
"Trading Day" means, in respect of any securities exchange or
securities market, each Monday, Tuesday, Wednesday, Thursday and Friday, other
than any day on which securities are not traded on the applicable securities
exchange or in the applicable securities market.
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<PAGE> 190
"Transfer Agent" means the transfer agent for the Cumulative
Convertible Preferred Stock appointed by the Company, which initially shall be
BankBoston, N.A.
"Transfer Restricted Securities" means each share of Cumulative
Convertible Preferred Stock (or the shares of Common Stock into which such share
of Cumulative Convertible Preferred Stock is convertible) until (i) the date on
which such security has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement or (ii) the date
on which such security is distributed to the public pursuant to Rule 144 under
the Securities Act or is saleable pursuant to Rule 144(k) under the Securities
Act (or any successor rule thereof) or would be saleable pursuant to Rule 144(k)
under the Securities Act had it not been held by, or had it never been held by,
an affiliate of the Company.
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<PAGE> 191
IN WITNESS WHEREOF, said IXC Communications, Inc., has caused
this Certificate of Designation to be signed by James F. Guthrie, its Executive
Vice President and Chief Financial Officer, this 30th day of March, 1998.
IXC COMMUNICATIONS, INC.,
by /s/ JAMES F. GUTHRIE
---------------------------------------
Name: James F. Guthrie
Title: Executive Vice President
and Chief Financial Officer
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<PAGE> 192
EXHIBIT A
FORM OF CONVERTIBLE PREFERRED STOCK
FACE OF SECURITY
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE
903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) TO AN INSTITUTION
THAT IS AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3)
OR (7) UNDER THE SECURITIES ACT IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE), OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, AND IN EACH CASE, IN ACCORDANCE WITH ALL APPLICABLE SECURITIES
LAWS OF THE STATES OF THE UNITED STATES.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH
REGISTRAR AND TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER
COMPLIES WITH THE FOREGOING RESTRICTIONS.
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<PAGE> 193
Certificate Number Number of Shares of Convertible
Preferred Stock
[ ] [ ]
CUSIP NO.: 450713870
6 3/4% Cumulative Convertible Preferred Stock (par
value $0.01) (liquidation preference $1,000
per share of Convertible Preferred Stock)
of
IXC Communications, Inc.
IXC Communications, Inc., a Delaware corporation (the "Company"),
hereby certifies that [ ] (the "Holder") is the registered owner of fully paid
and non-assessable preferred securities of the Company designated the 6 3/4%
Cumulative Convertible Preferred Stock (par value $0.01) (liquidation preference
$1,000 per share of Cumulative Convertible Preferred Stock) (the "Cumulative
Convertible Preferred Stock"). The shares of Cumulative Convertible Preferred
Stock are transferable on the books and records of the Registrar, in person or
by a duly authorized attorney, upon surrender of this certificate duly endorsed
and in proper form for transfer. The designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Cumulative
Convertible Preferred Stock represented hereby are issued and shall in all
respects be subject to the provisions of the Certificate of Designation dated
March [ ], 1998, as the same may be amended from time to time (the "Certificate
of Designation"). Capitalized terms used herein but not defined shall have the
meaning given them in the Certificate of Designation. The Company will provide a
copy of the Certificate of Designation to a Holder without charge upon written
request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Cumulative
Convertible Preferred Stock set forth on the reverse hereof, and to the
Certificate of Designation, which select provisions and the Certificate of
Designation shall for all purposes have the same effect as if set forth at this
place.
Upon receipt of this certificate, the Holder is bound by the
Certificate of Designation and is entitled to the benefits thereunder.
Unless the Transfer Agent's Certificate of Authentication hereon
has been properly executed, these shares of Cumulative Convertible Preferred
Stock shall not be entitled to any benefit under the Certificate of Designation
or be valid or obligatory for any purpose.
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<PAGE> 194
IN WITNESS WHEREOF, the Company has executed this certificate
this [ ] day of [ ], [ ].
IXC COMMUNICATIONS, INC.,
By:
----------------------------------
Name:
Title:
[Seal]
By:
----------------------------------
Name:
Title:
TRANSFER AGENT'S CERTIFICATE OF AUTHENTICATION
This is one of the Cumulative Convertible Preferred Stock
referred to in the within mentioned Certificate of Designation.
Dated: [ ], [ ]
BankBoston, N.A.
as Transfer Agent,
By:
---------------------------------
Authorized Signatory
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<PAGE> 195
REVERSE OF SECURITY
Dividends on each share of Cumulative Convertible Preferred Stock
shall be payable at a rate per annum set forth in the face hereof or as provided
in the Certificate of Designation.
The shares of Cumulative Convertible Preferred Stock shall be
redeemable as provided in the Certificate of Designation. The shares of
Cumulative Convertible Preferred Stock shall be convertible into the Company's
Common Stock in the manner and according to the terms set forth in the
Certificate of Designation.
As required under Delaware law, the Company shall furnish to any
Holder upon request and without charge, a full summary statement of the
designations, voting rights preferences, limitations and special rights of the
shares of each class or series authorized to be issued by the Company so far as
they have been fixed and determined and the authority of the Board of Directors
to fix and determine the designations, voting rights, preferences, limitations
and special rights of the class and series of shares of the Company.
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<PAGE> 196
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the
shares of Cumulative Convertible Preferred Stock evidenced hereby to:
- --------------------------------------------------------------------
- --------------------------------------------------------------------
- --------------------------------------------------------------------
- ----------------------------
(Insert assignee's social security or tax identification number)
- --------------------------------------------------------------------
- --------------------------------------------------------------------
- --------------------------------------------------------------------
- --------------------------------------------------------------------
- --------------------------------------------------------------------
- --------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints:
--------------------------------------------
- --------------------------------------------------------------------
- --------------------------------------------------------------------
- --------------------------------------------------------------------
__________agent to transfer the shares of Cumulative Convertible Preferred Stock
evidenced hereby on the books of the Transfer Agent and Registrar. The agent may
substitute another to act for him or her.
Date:
-----------------------
Signature:
-----------------------------------
(Sign exactly as your name appears on the other side of this Cumulative
Convertible Preferred Stock Certificate)
Signature Guarantee:*
------------------------------------------------
- --------
*
----- (Signature must be guaranteed by an "eligible guarantor
institution" that is, a bank, stockbroker, savings and loan association or
credit union meeting the requirements of the Registrar, which requirements
include membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for, STAMP, all
in accordance with the Securities Exchange Act of 1934, as amended.)
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<PAGE> 197
EXHIBIT B
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Convertible, Preferred Stock)
The undersigned hereby irrevocably elects to convert (the "Conversion") shares
of [ ]% Cumulative Convertible Preferred Stock (the "Cumulative Convertible
Preferred Stock"), represented by stock certificate No(s). ___ (the "Cumulative
Convertible Preferred Stock Certificates") into shares of common stock ("Common
Stock") of IXC Communications, Inc. (the "Company") according to the conditions
of the Certificate of Designation of the Powers, Preferences and Relative,
Participating, Optional and Other Special Rights of the Cumulative Convertible
Preferred Stock and Qualifications, Limitations and Restrictions Thereof (the
"Certificate of Designation"), as of the date written below. If shares are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto and is delivering herewith
such certificates. No fee will be charged to the holder for any conversion,
except for transfer taxes, if any. A copy of each Cumulative Convertible
Preferred Stock Certificate is attached hereto (or evidence of loss, theft or
destruction thereof).
The undersigned represents and warrants that all offers and sales by the
undersigned of the shares of Common Stock issuable to the undersigned upon
conversion of the Cumulative Convertible Preferred Stock shall be made pursuant
to registration of the Common Stock under the Securities Act of 1933 (the
"Act"), or pursuant to any exemption from registration under the Act.
Any holder, upon the exercise of its conversion rights in accordance with the
terms of the Certificate of Designation and the Cumulative Convertible Preferred
Stock, agrees to be bound by the terms of the Registration Rights Agreement.
Capitalized terms used but not defined herein shall have the meanings ascribed
thereto in or pursuant to the Certificate of Designation.
Date of Conversion:
----------------------------------
Applicable Conversion Rate:
--------------------------
Number of shares of Convertible
Preferred Stock to be Converted:
---------------------
Number of shares of
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<PAGE> 198
Common Stock to be Issued:
----------------------------
Signature:
--------------------------------------------
Name:
-------------------------------------------------
Address:**
----------------------------------------------
Fax No.:
----------------------------------------------
* The Company is not required to issue shares of Common Stock until the
original Cumulative Convertible Preferred Stock Certificate(s) (or
evidence of loss, theft or destruction thereof) to be converted are
received by the Company or its Transfer Agent. The Company shall issue
and deliver shares of Common Stock to an overnight courier not later
than three business days following receipt of the original Cumulative
Convertible Preferred Stock Certificate(s) to be converted.
** Address where shares of Common Stock and any other payments or
certificates shall be sent by the Company.
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<PAGE> 199
CERTIFICATE OF DESIGNATION
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
IXC COMMUNICATIONS, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
IXC Communications, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware, in accordance with the
provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors in
accordance with the provisions of the Certificate of Incorporation of the said
Corporation, the said Board of Directors on September 4, 1998 adopted the
following resolution creating a series of 55,000 shares of Preferred Stock
designated as "Series A Junior Participating Preferred Stock":
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of the
Certificate of Incorporation, a series of Preferred Stock, par value
$.01 per share, of the Corporation be and hereby is created, and that
the designation and number of shares thereof and the voting and other
powers, preferences and relative, participating, optional or other
rights of the shares of such series and the qualifications, limitations
and restrictions thereof are as follows:
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
1. Designation and Amount. There shall be a series of Preferred Stock
that shall be designated as "Series A Junior Participating Preferred Stock," and
the number of shares constituting such series shall be 55,000. Such number of
shares may be increased or decreased by resolution of the Board of Directors;
provided, however, that no decrease shall reduce the number of shares of Series
A Junior Participating Preferred Stock to less than the number of shares then
issued and outstanding plus the number of shares issuable upon exercise of
outstanding rights, options or warrants or upon conversion of outstanding
securities issued by the Corporation.
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<PAGE> 200
2. Dividends and Distribution.
(A) Subject to the prior and superior rights of the holders of
any shares of any class or series of stock of the Corporation ranking prior and
superior to the shares of Series A Junior Participating Preferred Stock with
respect to dividends, the holders of shares of Series A Junior Participating
Preferred Stock, in preference to the holders of shares of any class or series
of stock of the Corporation ranking junior to the Series A Junior Participating
Preferred Stock in respect thereof, shall be entitled to receive, when, as and
if declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the 15th day of January, April,
July and October, in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Junior Participating Preferred Stock, in an amount per share (rounded
to the nearest cent) equal to the greater of (a) $10.00 or (b) the Adjustment
Number (as defined below) times the aggregate per share amount of all cash
dividends, and the Adjustment Number times the aggregate per share amount
(payable in kind) of all non-cash dividends or other distributions other than a
dividend payable in shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise), declared on the
Common Stock, par value $.01 per share, of the Corporation (the "Common Stock")
since the immediately preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series A Junior Participating Preferred
Stock. The "Adjustment Number" shall initially be 1000. In the event the
Corporation shall at any time after September 20, 1998 (i) declare and pay any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the Adjustment Number in effect
immediately prior to such event shall be adjusted by multiplying such Adjustment
Number by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Corporation shall declare a dividend or distribution on
the Series A Junior Participating Preferred Stock as provided in paragraph (A)
above immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Junior Participating Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such shares
of Series A Junior Participating Preferred Stock, unless the date of issue of
such shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Series A Junior Participating Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in either of
which events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment
2
<PAGE> 201
Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on
the shares of Series A Junior Participating Preferred Stock in an amount less
than the total amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series A Junior Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 60 days prior to the
date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series A Junior Participating
Preferred Stock shall have the following voting rights:
(A) Each share of Series A Junior Participating Preferred Stock
shall entitle the holder thereof to a number of votes equal to the Adjustment
Number on all matters submitted to a vote of the stockholders of the
Corporation.
(B) Except as required by law, by Section 3(C) and by Section 10
hereof, holders of Series A Junior Participating Preferred Stock shall have no
special voting rights and their consent shall not be required (except to the
extent they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
(C) If, at the time of any annual meeting of stockholders for the
election of directors, the equivalent of six quarterly dividends (whether or not
consecutive) payable on any share or shares of Series A Junior Participating
Preferred Stock are in default, the number of directors constituting the Board
of Directors of the Company shall be increased by two. In addition to voting
together with the holders of Common Stock for the election of other directors of
the Company, the holders of record of the Series A Junior Participating
Preferred Stock, voting separately as a class to the exclusion of the holders of
Common Stock, shall be entitled at said meeting of stockholders (and at each
subsequent annual meeting of stockholders), unless all dividends in arrears on
the Series A Junior Participating Preferred Stock have been paid or declared and
set apart for payment prior thereto, to vote for the election of two directors
of the Company, the holders of any Series A Junior Participating Preferred Stock
being entitled to cast a number of votes per share of Series A Junior
Participating Preferred Stock as is specified in paragraph (A) of this Section
3. Until the default in payments of all dividends which permitted the election
of said directors shall cease to exist, any director who shall have been so
elected pursuant to the next preceding sentence may be removed at any time,
without cause, only by the affirmative vote of the holders of the shares of
Series A Junior Participating Preferred Stock at the time entitled to cast a
majority of the votes entitled to be cast for the election of any such director
at a special meeting of such holders called for that purpose, and any vacancy
thereby created may be filled by the vote of such holders. If and when such
default shall cease to exist, the holders of the Series A Junior Participating
Preferred Stock shall be divested of the foregoing special voting rights,
subject to revesting in the event of each and every subsequent like default in
payments of dividends. Upon the termination of the foregoing special voting
rights, the terms of office of all persons who may have been elected directors
pursuant to said special voting rights shall forthwith terminate, and the number
of directors constituting the Board of Directors shall
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be reduced by two. The voting rights granted by this Section 3(c) shall be in
addition to any other voting rights granted to the holders of the Series A
Junior Participating Preferred Stock in this Section 3.
4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Junior Participating Preferred Stock as
provided in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares of Series
A Junior Participating Preferred Stock outstanding shall have been paid in full,
the Corporation shall not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for consideration
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Stock, except dividends paid ratably on the Series A
Junior Participating Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled; or
(iii) purchase or otherwise acquire for consideration any
shares of Series A Junior Participating Preferred Stock, or any shares of stock
ranking on a parity with the Series A Junior Participating Preferred Stock,
except in accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of Series A Junior
Participating Preferred Stock, or to such holders and holders of any such shares
ranking on a parity therewith, upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
5. Reacquired Shares. Any shares of Series A Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired promptly after the acquisition thereof. All such
shares shall upon their retirement become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred
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<PAGE> 203
Stock to be created by resolution or resolutions of the Board of Directors,
subject to any conditions and restrictions on issuance set forth herein.
6. Liquidation, Dissolution or Winding Up. (A) Upon any
liquidation, dissolution or winding up of the Corporation, voluntary or
otherwise, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating Preferred Stock
shall have received an amount per share (the "Series A Liquidation Preference")
equal to the greater of (i) $10.00 plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, or (ii) the Adjustment Number times the per share amount of all
cash and other property to be distributed in respect of the Common Stock upon
such liquidation, dissolution or winding up of the Corporation.
(B) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series A Liquidation
Preference and the liquidation preferences of all other classes and series of
stock of the Corporation, if any, that rank on a parity with the Series A Junior
Participating Preferred Stock in respect thereof, then the assets available for
such distribution shall be distributed ratably to the holders of the Series A
Junior Participating Preferred Stock and the holders of such parity shares in
proportion to their respective liquidation preferences.
(C) Neither the merger or consolidation of the Corporation
into or with another corporation nor the merger or consolidation of any other
corporation into or with the Corporation shall be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of this Section
6.
7. Consolidation, Merger, Etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the outstanding shares of Common Stock are exchanged for or changed into other
stock or securities, cash and/or any other property, then in any such case each
share of Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share equal to the Adjustment
Number times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged.
8. No Redemption. Shares of Series A Junior Participating
Preferred Stock shall not be subject to redemption by the Company.
9. Ranking. The Series A Junior Participating Preferred Stock
shall rank junior to all other series of the Preferred Stock as to the payment
of dividends and as to the distribution of assets upon liquidation, dissolution
or winding up, unless the terms of any such series shall provide otherwise, and
shall rank senior to the Common Stock as to such matters.
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10. Amendment. At any time that any shares of Series A Junior
Participating Preferred Stock are outstanding, the Certificate of Incorporation
of the Corporation shall not be amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of two-thirds of the outstanding shares of
Series A Junior Participating Preferred Stock, voting separately as a class.
11. Fractional Shares. Series A Junior Participating Preferred
Stock may be issued in fractions of a share that shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Junior Participating Preferred Stock.
IN WITNESS WHEREOF, the undersigned has executed this Certificate
this 16th day of September, 1998.
IXC COMMUNICATIONS, INC.
By: /s/ Benjamin L. Scott
-------------------------
Name: Benjamin L. Scott
Title: Chairman of the Board,
President and Chief
Executive Officer
6
<PAGE> 205
FIFTH AMENDMENT TO
RESTATED
CERTIFICATE OF INCORPORATION
OF
IXC COMMUNICATIONS, INC.
The undersigned corporation, organized and existing under and by virtue
of the General Corporation Law of the State of Delaware does hereby certify:
1. That Stuart K. Coppens is the duly elected and acting Vice President
of Finance and Chief Accounting Officer of IXC Communications, Inc., a Delaware
corporation (the "Corporation").
2. Article FOURTH of the Restated Certificate of Incorporation of the
Corporation is amended to read in full as follows:
"FOURTH:
A. Classes of Stock.
The Corporation is authorized to issue three classes of stock
to be designated "Common Stock," "Preferred Stock" and "Class B
Preferred Stock." The total number of shares of stock that the
Corporation shall have authority to issue is 320,000,000 consisting of:
(i) 300,000,000 shares of Common Stock, par value $.01 per share; (ii)
3,000,000 shares of Preferred Stock, par value $.01 per share; and
(iii) 17,000,000 shares of Class B Preferred Stock, par value $.01 per
share.
B. Rights, Preferences, Privileges and Restrictions of Preferred Stock.
The Preferred Stock may be issued at any time, and from time
to time, in one or more series pursuant hereto or to a resolution or
resolutions providing for such issue duly adopted by the board of
directors (the "Board") of the Corporation (authority to do so being
hereby expressly vested in the Board), and such resolution or
resolutions shall also set forth the voting powers, full or limited, or
none, of each such series of Preferred Stock and shall fix the
designations, preferences and relative, participating, optional or
other special rights and qualifications, limitations or restrictions of
each such series of Preferred Stock.
C. Rights, Preferences, Privileges and Restrictions of Class B
Preferred Stock.
The Class B Preferred Stock may be issued at any time, and
from time to time, in one or more series pursuant hereto or to a
resolution or resolutions
<PAGE> 206
providing for such issue duly adopted by the Board. Such resolution or
resolutions shall set forth the voting powers, full or limited, or
none, of each such series of Class B Preferred Stock and shall fix the
number of shares constituting any such series and the designations,
preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions of each such
series of Class B Preferred Stock. Subject to the rights of the holders
of any series of Class B Preferred Stock pursuant to the terms of this
Restated Certificate of Incorporation or any resolution or resolutions
providing for the issuance of such series of stock adopted by the
Board, the number of authorized shares of Class B Preferred Stock may
be increased or decreased (but not below the number of shares thereof
then outstanding) by the affirmative vote of the holders of a majority
of the stock of the Corporation entitled to vote generally in the
election of directors irrespective of the provisions of Section
242(b)(2) of the General Corporation Law of the State of Delaware."
3. Article ELEVENTH of the Restated Certificate of Incorporation is
deleted in its entirety.
4. This Fifth Amendment to the Restated Certificate of Incorporation
has been duly adopted and approved in accordance with the applicable provisions
of Sections 228 and 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Stuart K. Coppens, its Vice President of Finance and Chief Accounting
Officer this 19th day of July, 1999.
By: /s/ Stuart K. Coppens
---------------------------------
Stuart K. Coppens
Vice President of Finance and
Chief Accounting Officer
<PAGE> 1
EXHIBIT 4.22
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
This Amendment No. 1 to Rights Agreement (this "Amendment") is entered
into as of July 20, 1999, by and between IXC COMMUNICATIONS, INC., a Delaware
corporation (the "Company"), and U.S. Stock Transfer Corporation (the "Rights
Agent"), dated as of September 9, 1998, between the Company and the Rights Agent
(the "Rights Agreement").
WHEREAS the Company has duly authorized the execution and delivery of
this Amendment and all things necessary to make this Amendment a valid agreement
of the Company have been done. This Amendment is entered into pursuant to
Section 27 of the Rights Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
1. Defined Terms. Terms defined in the Rights Agreement and used and
not otherwise defined herein shall have the meanings given to them in the Rights
Agreement.
2. Amendment of Section 1. Section 1 of the Rights Agreement is
amended to add the following at the end thereof:
"(gg) Notwithstanding anything in this Agreement to the contrary,
neither Parent nor any of its Affiliates or Associates shall be deemed to be the
Beneficial Owner or to have Beneficial Ownership of any of the shares of Common
Stock subject to the Stockholders Agreements or the Option Agreement, and
neither Parent nor any of its Affiliates or Associates shall be deemed to be an
Acquiring Person, each by the reason of the approval, execution, delivery or
performance of the Merger Agreement, the Stockholders Agreements or the Option
Agreement or the consummation of the transactions contemplated by the Merger
Agreement, the Stockholders Agreements or the Option Agreement.
"Merger Agreement" shall mean the Agreement and Plan of Merger dated
as of July 20, 1999, among Parent, Ivory Merger Inc., a Delaware corporation and
a wholly owned
<PAGE> 2
2
subsidiary of Parent, and the Company, as amended from time to time in
accordance with its terms;
"Merger" shall have the meaning assigned to such term in the Merger
Agreement;
"Option Agreement" shall mean the Stock Option Agreement dated as of
July 20, 1999, between the Company, as issuer, and Parent, as grantee;
"Parent" shall mean CINCINNATI BELL INC., an Ohio Corporation; and
"Stockholders Agreements" shall have the meaning assigned to such term
in the Merger Agreement."
3. Amendment of Section 3(a). Section 3(a) of the Rights Agreement is
amended to add the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the contrary,
neither a Distribution Date a Flip-In Event, a Flip-Over Event nor a Stock
Acquisition Date shall be deemed to have occurred solely as the result of the
approval, execution, delivery or performance of the Merger Agreement, the
Stockholders Agreements or the Option Agreement or the consummation of the
transactions contemplated by the Merger Agreement, the Stockholders Agreements
or the Option Agreement."
4. Amendment of Section 7(a). Section 7(a) of the Rights Agreement is
amended by deleting the word "or" in the penultimate line of that section and
substituting in its place "," and inserting immediately after the word "hereof"
in the last line of that section the following clause: "or (iv) immediately
prior to the Effective Time of the Merger. Upon the Expiration Date, the Rights
shall expire."
5. Effectiveness. This Amendment shall be deemed effective as of July
20, 1999, as if executed on such date. Except as amended hereby, the Rights
Agreement shall remain in full force and effect and shall be otherwise
unaffected hereby.
6. Miscellaneous. This Amendment shall be deemed to be a contract made
under the laws of the State of Delaware and for all purposes shall be governed
by and construed in accordance with the laws of such state. This Amendment may
be executed in any number of counterparts, each of such counterparts shall for
all purposes be deemed an original and all such counterparts shall together
constitute but one and the same instrument.
<PAGE> 3
3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and attested, all as of the day and year first above written.
Attest: IXC COMMUNICATIONS, INC.,
/s/ Jeffrey C. Smith by /s/ John M. Zrno
- ------------------------------- ------------------------------------------
Name: Jeffrey C. Smith Name: John M. Zrno
Title: Senior Vice President Title: President
Attest: U.S. STOCK TRANSFER CORPORATION,
/s/ Richard C. Brown by /s/ William Garza
- ------------------------------- ------------------------------------------
Name: Richard C. Brown Name: William Garza
Title: Vice-President Title: Assistant Vice-President
<PAGE> 1
EXHIBIT 10.22
1998 STOCK PLAN
1. Purpose. The purpose of the IXC Communications, Inc. 1998 Stock Plan
("Plan") is to promote the interests of IXC Communications, Inc. ("Company") and
its shareholders by enabling it to offer grants of stock to better attract,
retain, and reward its employees, directors, and other persons providing
services to it and, accordingly, to strengthen the mutuality of interests
between those persons and the Company's shareholders by providing those persons
with a proprietary interest in pursuing the Company's long-term growth and
financial success.
2. Definitions. For purposes of this Plan, the following terms shall have
the meanings set forth below.
(a) "Board" means the Board of Directors of IXC Communications, Inc.
(b) "Code" means the Internal Revenue Code of 1986. Reference to any
specific section of the Code shall be deemed to be a reference to any
successor provision.
(c) "Committee" means the administrative Committee of this Plan that
is provided in Section 3 of this Plan.
(d) "Common Stock" means the common stock of the Company or any
security issued in substitution, exchange, or in lieu thereof.
(e) "Company" means IXC Communications, Inc., a Delaware corporation,
or any successor corporation. Except where the context indicates otherwise,
the term "Company" shall include its Parent and Subsidiaries.
(f) "Disabled" means permanent and total disability, as defined in
Code Section 22(e)(3).
(g) "Exchange Act" means the Securities Exchange Act of 1934.
(h) "Fair Market Value" of Common Stock for any day shall be
determined in accordance with the following rules.
(i) If the Common Stock is admitted to trading or listed on a
national securities exchange, the last reported sale price on that day
regular way, or if no such reported sale takes place on that day, the
average of the last reported bid and ask prices on that day regular way,
in either case on the principal national securities exchange on which
the Common Stock is admitted to trading or listed.
(ii) If not listed or admitted to trading on any national
securities exchange, the last sale price regular way on that day
reported on the Nasdaq National Market ("Nasdaq National Market") of the
Nasdaq Stock Market ("NSM") or, if no such reported sale takes place on
that day, the average of the closing bid and ask prices regular way on
that day.
(iii) If not traded or listed on a national securities exchange or
included in the Nasdaq National Market, the last reported sale price on
that day regular way, or if no such reported sale takes place on that
day, the average of the closing bid and ask prices regular way on that
day reported by the NSM, or any comparable system on that day.
(iv) If the Common Stock is not included in (i), (ii) or (iii)
above, the last reported sale price on that day regular way, or if no
such reported sale takes place on that day, the closing bid and ask
prices regular way on that day as furnished by any member of the
National Association of Securities Dealers, Inc. ("NASD") selected from
time to time by the Company for that purpose.
If the national securities exchange, Nasdaq National Market, NSM, or
NASD as applicable, are closed on such date, the "Fair Market Value"
shall be determined as of the last preceding day on which the Common
Stock was traded or for which bid and ask prices are available. In the
case of an Incentive Stock Option, "Fair Market Value" shall be
determined without reference to any restriction other than one that, by
its terms, will never lapse.
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<PAGE> 2
(i) "Incentive Stock Option" means an option to purchase Common Stock
that is an incentive stock option within the meaning of Code Section 422.
(j) "Insider" means a person who is subject to Section 16 of the
Exchange Act.
(k) "Non-Qualified Stock Option" means any option to purchase Common
Stock that is not an Incentive Stock Option.
(l) "Option" means an Incentive Stock Option or a Non-Qualified Stock
Option.
(m) "Parent" shall mean any corporation (other than IXC
Communications, Inc.) in an unbroken chain of corporations ending with IXC
Communications, Inc. if each of the corporations (other than IXC
Communications, Inc.) owns stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one of the other
corporations in the chain, as determined in accordance with the rules of
Code Section 424(e).
(n) "Participant" means a person who was been granted an Option or
Restricted Stock under the Plan.
(o) "Plan" means this IXC Communications, Inc. 1998 Stock Plan, as it
may be amended from time to time.
(p) "Restricted Stock" means shares of Common Stock issued under
Section 9 of this Plan below that are subject to restrictions upon
assignment or alienation prior to vesting.
(q) "Severance" means, with respect to a Participant, the termination
of the Participant's provision of services to the Company as an employee,
director, or independent contractor, whether by reason of death,
disability, or any other reason. For purposes of determining the
exercisability of an Incentive Stock Option, a Participant who is on a
leave of absence that exceeds ninety (90) days will be considered to have
incurred a Severance on the ninety-first (91st) day of the leave of
absence, unless the Participant's rights to reemployment are guaranteed by
statute or contract. However, a Participant will not be considered to have
incurred a Severance because of a transfer of employment between the
Company and a Subsidiary or Parent (or vice versa).
(r) "Subsidiary" means any corporation or entity in which IXC
Communications, Inc., directly or indirectly, controls fifty percent (50%)
or more of the total voting power of all classes of its stock having voting
power, as determined in accordance with the rules of Code Section 424(f).
(s) "Ten Percent Shareholder" means any person who owns (after taking
into account the constructive ownership rules of Code Section 424(d)) more
than ten percent (10%) of the stock of the IXC Communications, Inc. or of
any of its Parents or Subsidiaries.
3. Administration.
(a) This Plan shall be administered by a Committee appointed by the
Board; provided, however, that the Board may administer the Plan for any
grants to Participants who are not subject to Code Section 162(m). The
Board may remove members from, or add members to, the Committee at any
time. To the extent possible and advisable, the Committee shall be composed
of individuals that satisfy Rule 16b-3 under the Exchange Act and Code
Section 162(m). Notwithstanding anything herein to the contrary, any action
which may be taken by the Committee may also be taken by the Board.
(b) The Committee may conduct its meetings in person or by telephone.
A majority of the members of the Committee shall constitute a quorum, and
any action shall constitute the action of the Committee if it is authorized
by:
(i) A majority of the members present at any meeting conducted in
accordance with the Company's bylaws; or
(ii) The unanimous consent of all of the members in writing without
a meeting.
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<PAGE> 3
(c) The Committee is authorized to interpret this Plan and to adopt
rules and procedures relating to the administration of this Plan. All
actions of the Committee in connection with the interpretation and
administration of this Plan shall be binding upon all parties.
(d) Subject to the limitations of Sections 10 and 14 of this Plan, the
Committee is expressly authorized to make such modifications to this Plan
and to the grants of Options and Restricted Stock hereunder as are
necessary to effectuate the intent of this Plan as a result of any changes
in the tax, accounting, or securities laws treatment of Participants, the
Company and the Plan.
(e) The Committee may delegate its responsibilities to others under
such conditions and limitations as it may prescribe, except that the
Committee may not delegate its authority with regard to the granting of
Options or Restricted Stock to Insiders if that would cause such grants to
fail to satisfy Rule 16b-3 under the Exchange Act or Code Section 162(m).
4. Duration of Plan.
(a) This Plan shall be effective as of July 30, 1998, provided it is
approved by the majority of the Company's shareholders, in accordance with
the provisions of Code Section 422, within twelve (12) months before or
after the date of its adoption by the Board.
(b) In the event that this Plan is not so approved, this Plan shall
terminate and any Options granted under this Plan shall be void.
(c) This Plan shall terminate on July 29, 2008, except with respect to
Options then outstanding.
5. Number of Shares.
(a) The aggregate number of shares of Common Stock which may be issued
pursuant to this Plan shall be Three Million One Hundred Fifty Thousand
(3,150,000). Effective [ ], 1999, this amount is increased to Five
Million Six Hundred Fifty Thousand (5,650,000). The maximum number of
shares that may be issued to a single Participant is Three Hundred Thousand
(300,000).
(b) Upon the expiration or termination of an outstanding Option which
shall not have been exercised in full, the shares of Common Stock remaining
unissued under the Option shall again become available for use under the
Plan.
(c) Upon the forfeiture of shares of Restricted Stock, the forfeited
shares of Common Stock shall again become available for use under the Plan.
6. Eligibility.
(a) Persons eligible for Options under this Plan shall consist of
employees, directors, and other persons providing services to the Company.
However, Incentive Stock Options may only be granted to employees.
(b) Notwithstanding anything in this Plan to the contrary, in the
event that the Company acquires another entity, the Committee may authorize
the issuance of Options ("Substitute Options") to individuals or entities
in substitution of stock options previously granted to those individuals or
entities in connection with their performance of services for such acquired
entity upon such terms and conditions as the Committee shall determine but
which shall not be contrary to applicable law, taking into account the
limitations of Code Section 424(a) in the case of a Substitute Option that
is intended to be an Incentive Stock Option.
7. Form of Options.
(a) Options shall be granted under this Plan on such terms and in such
form as the Committee may approve, which shall not be inconsistent with the
provisions of this Plan; provided, however, that in the event a grant of
any Options by the Committee would not be exempt under Section 16b-3 of the
Exchange Act, the Board may grant such Options under this Plan on such
terms and in such form as the Board may approve, which shall not be
otherwise inconsistent with the provisions of this Plan.
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<PAGE> 4
(b) The exercise price per share of Common Stock purchasable under an
Option shall be set forth in the Option, which in all cases shall be at
least equal to the Fair Market Value of the Common Stock on the date of the
grant.
(c) The exercise price of an Incentive Stock Option granted to a Ten
Percent Shareholder shall be no less than one hundred ten percent (110%) of
the Fair Market Value of the Common Stock on the date of the grant.
8. Exercise of Options.
(a) Unless otherwise determined by the Board or the Committee, each
Option shall be exercisable in four equal annual installments to begin in
most instances with the start date of a Participant's employment with the
Company and be subject to such other terms and conditions as may be set
forth in the Option. Any Option shall be exercisable following the date of
the Participant's Severance only to the extent (if at all) such Option was
exercisable on the date of Severance.
(b) The aggregate Fair Market Value (determined as of the date of
grant) of the number of shares of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by a Participant
during any calendar year shall not exceed one hundred thousand dollars
($100,000) or such other limit as may be required by Section 422 of the
Code. To the extent this limit is exceeded, the surplus shares shall be
treated as acquired upon the exercise of a Non-Qualified Stock Option. For
this purpose, the shares will be taken into account in the order in which
the underlying Options were granted.
(c) Options shall only be exercisable for whole numbers of shares.
(d) Options are exercised by payment of the full amount of the
purchase price to the Company.
(i) The payment shall be in the form of cash or such other forms of
consideration as the Committee shall deem acceptable, such as the
surrender of outstanding shares of Common Stock owned by the Participant
(that have been held a sufficient period of time (if any) to avoid
adverse accounting treatment) or by withholding shares that would
otherwise be issued upon the exercise of the Option.
(ii) If the payment is made by means of the surrender of Restricted
Stock, a number of shares issued upon the exercise of the Option equal
to the number of shares of Restricted Stock surrendered shall be subject
to the same restrictions as the Restricted Stock that was surrendered.
(iii) After giving due considerations to the consequences under
Rule 16b-3 under the Exchange Act and under the Code, the Committee may
also authorize the exercise of Options by the delivery to the Company or
its designated agent of an irrevocable written notice of exercise form
together with irrevocable instructions to a broker-dealer to sell or
margin a sufficient portion of the shares of Common Stock and to deliver
the sale or margin loan proceeds directly to the Company to pay the
exercise price of the Option.
9. Restricted Stock.
(a) The Committee may issue grants of Restricted Stock upon such terms
and conditions as it may deem appropriate, which need not be the same for
each such grant.
(b) Restricted Stock may not be sold to Participants for less than
Fair Market Value.
(c) A Participant shall not have a vested right to the shares subject
to the grant of Restricted Stock until satisfaction of the vesting
requirements specified in the grant. The Participant may not assign or
alienate the Participant's interest in the shares of Restricted Stock prior
to vesting.
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<PAGE> 5
(d) The following rules apply with respect to events that occur prior
to the date on which the Participant obtains a vested right to the
Restricted Stock.
(i) Stock dividends, shares resulting from stock splits, etc. that
are issued with respect to the shares covered by a grant of Restricted
Stock shall be treated as additional shares received under the grant of
Restricted Stock.
(ii) Cash dividends constitute taxable compensation to the
Participant that is deductible by the Company.
10. Modification of Grants.
(a) The Committee may modify an existing Option, including the right
to:
(i) Accelerate the right to exercise it;
(ii) Extend or renew it; or
(iii) Cancel it and issue a new Option.
However, no modification may be made to an Option that would impair the
rights of the Participant holding the Option without the Participant's
consent. Similar modifications can be made to grants of Restricted Stock.
(b) Whether a modification of an existing Incentive Stock Option will
be treated as the issuance of a new Incentive Stock Option will be
determined in accordance with the rules of Code Section 424(h).
(c) Whether a modification of an existing grant of Restricted Stock or
of an Option granted to an Insider will be treated as a new grant will be
determined in accordance with Rule 16b-3 under the Exchange Act.
11. Termination of Options.
(a) Except to the extent the terms of an Option require its prior
termination, each Option shall terminate on the earliest of the following
dates.
(i) The date which is ten (10) years from the date on which the
Option is granted or five (5) years in the case of an Incentive Stock
Option granted to a Ten Percent Shareholder.
(ii) The date which is one (1) year from the date of the Severance
of the Participant to whom the Option was granted, if the Participant
was Disabled at the time of Severance.
(iii) The date which is one (1) year from the date of the Severance
of the Participant to whom the Option was granted, if the Participant's
death occurs:
(A) While the Participant is employed by the Company; or
(B) Within three (3) months following the Participant's
Severance.
(iv) In the case of any Severance other than one described in
Subparagraphs (ii) or (iii) above, the date that is three (3) months
from the date of the Participant's Severance.
12. Non-transferability of Grants.
(a) No Option under this Plan shall be assignable or transferable
except by will or the laws of descent and distribution.
(b) Grants of Restricted Stock shall be subject to such restrictions
on transferability as may be imposed in such grants.
5
<PAGE> 6
13. Adjustments
(a) In the event of any change in the capitalization of the Company
affecting its Common Stock (e.g., a stock split, reverse stock split, stock
dividend, recapitalization, combination, or reclassification), the
Committee shall authorize such adjustments as it may deem appropriate with
respect to:
(i) The maximum number of shares of Common Stock that may be issued
under this Plan;
(ii) The number of shares of Common Stock covered by each
outstanding Option;
(iii) The exercise price per share in respect of each outstanding
Option; and
(iv) The maximum number of shares that may be issued to a single
individual.
(b) The Committee may also make such adjustments in the event of a
spin-off or other distribution of Company assets to shareholders, other
than normal cash dividends.
14. Amendment and Termination.
(a) The Board may at any time amend or terminate this Plan. However,
no modification may be made to the Plan that would impair the rights of the
Participant holding an Option without the Participant's consent.
(b) Without the approval of the majority of the shareholders of the
Company, the Board may not amend the provisions of this Plan regarding:
(i) The class of individuals entitled to receive Incentive Stock
Options; or
(ii) The maximum number of shares of Common Stock that may be
issued under the Plan, except as provided in Section 13 of this Plan.
15. Notice of Disqualifying Disposition. A Participant must notify the
Company if the Participant disposes of stock acquired pursuant to the exercise
of an Incentive Stock Option issued under the Plan prior to the expiration of
the holding periods required to qualify for long-term capital gains treatment on
the disposition.
16. Tax Withholding.
(a) The Company shall have the right to take such actions as may be
necessary to satisfy its tax withholding obligations relating to the
operation of this Plan.
(b) If Common Stock that was surrendered by the Participant is used to
satisfy the Company's tax withholding obligations, the stock shall be
valued based on its Fair Market Value when the tax withholding is required
to be made.
17. No Additional Rights.
(a) Neither the adoption of this Plan nor the granting (or exercise)
of any Option or Restricted Stock shall:
(i) Affect or restrict in any way the power of the Company to
undertake any corporate action otherwise permitted under applicable law;
or
(ii) Confer upon any Participant the right to continue performing
services for the Company, nor shall it interfere in any way with the
right of the Company to terminate the services of any Participant at any
time, with or without cause.
(b) No Participant shall have any rights as a shareholder with respect
to any shares covered by an Option granted to the Participant or subject to
a grant of Restricted Stock until the date a certificate for such shares
has been issued to the Participant.
6
<PAGE> 7
18. Securities Law Restrictions.
(a) No shares of Common Stock shall be issued under this Plan unless
the Committee shall be satisfied that the issuance will be in compliance
with applicable federal and state securities laws.
(b) The Committee may require certain investment (or other)
representations and undertakings by the Participant (or other person
exercising an Option or purchasing Restricted Stock by reason of the death
of the Participant) in order to comply with applicable law.
(c) Certificates for shares of Common Stock delivered under this Plan
may be subject to such restrictions as the Committee may deem advisable.
The Committee may cause a legend to be placed on the certificates to refer
to these restrictions.
19. Indemnification. To the maximum extent permitted by law, the Company
shall indemnify each member of the Board, as well as any other employee of the
Company with duties under this Plan, against expenses (including any amount paid
in settlement) reasonably incurred by the individual in connection with any
claims against him or her by reason of the performance of the individual's
duties under this Plan, unless the losses are due to the individual's gross
negligence or lack of good faith.
20. Governing Law. This Plan and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Delaware.
7
<PAGE> 1
EXHIBIT 10.23
- --------------------------------------------------------------------------------
$600,000,000
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
AMONG
IXC COMMUNICATIONS SERVICES, INC.
AND
NATIONSBANK, N.A.
AS ADMINISTRATIVE AGENT
CREDIT SUISSE FIRST BOSTON
TD SECURITIES (USA), INC.
EXPORT DEVELOPMENT CORPORATION
AS CO-SYNDICATION AGENTS
AND
LENDERS
DATED AS OF JUNE 29, 1999
WITH
BANC OF AMERICA SECURITIES LLC
AS SOLE LEAD ARRANGER AND SOLE BOOK RUNNER
- --------------------------------------------------------------------------------
<PAGE> 2
IXC COMMUNICATIONS SERVICES, INC.
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I. DEFINITIONS
1.01. Definitions............................................................1
1.02. Accounting and Other Terms............................................27
ARTICLE II. THE LOAN FACILITY
2.01. Loans.................................................................28
2.02. Making Advances.......................................................29
2.03. Evidence of Debt for Borrowed Money...................................30
2.04. Optional Prepayments..................................................31
2.05. Mandatory Prepayments.................................................31
2.06. Repayment.............................................................32
2.07. Interest..............................................................32
2.08. Default Interest......................................................33
2.09. Continuation and Conversion Elections.................................33
2.10. Fees..................................................................34
2.11. Reduction of Commitments..............................................35
2.12. Funding Losses........................................................37
2.13. Computations and Manner of Payments...................................37
2.14. Yield Protection; Changed Circumstances...............................39
2.15. Use of Proceeds.......................................................41
2.16. Collateral and Collateral Call........................................42
2.17. Conditions Precedent to the Making of the Special Purpose Loan........43
ARTICLE III. LETTERS OF CREDIT
3.01. Issuance of Letters of Credit.........................................46
3.02. Letters of Credit Fee.................................................46
3.03. Reimbursement Obligations.............................................47
3.04. Lenders' Obligations..................................................48
3.05. Administrative Agent's Obligations....................................48
ARTICLE IV. CONDITIONS PRECEDENT
4.01. Conditions Precedent to the Initial Rollover Advance, the
Issuance of the Initial Letter of Credit and the Effectiveness of
this Agreement........................................................49
4.02. Conditions Precedent to All Advances and Letters of Credit............51
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE V. REPRESENTATIONS AND WARRANTIES
5.01. Representations and Warranties........................................52
5.02. Survival of Representations and Warranties............................60
ARTICLE VI. GENERAL COVENANTS
6.01. Preservation of Existence and Similar Matters.........................60
6.02. Business; Compliance with Applicable Law. ............................61
6.03. Maintenance of Properties.............................................61
6.04. Accounting Methods and Financial Records..............................61
6.05. Insurance.............................................................61
6.06. Payment of Taxes and Claims...........................................61
6.07. Visits and Inspections................................................61
6.08. Payment of Debt for Borrowed Money....................................62
6.09. Use of Proceeds.......................................................62
6.10. Indemnity.............................................................62
6.11. Environmental Law Compliance..........................................63
6.12. Acquisitions, Generally...............................................64
6.13. Subsidiary Designation................................................64
6.14. Subsidiary Creation or Acquisition....................................64
6.15. Year 2000 Compliance..................................................64
6.16. Post Closing UCC Searches.............................................64
6.17. Post Closing Acquisition of Assets, Properties and
Contractual Arrangements..............................................65
6.18. Post Closing Grant of Liens...........................................65
ARTICLE VII. INFORMATION COVENANTS
7.01. Quarterly Financial Statements and Information........................65
7.02. Annual Financial Statements and Information...........................66
7.03. Compliance Certificates...............................................66
7.04. Copies of Other Reports and Notices...................................66
7.05. Notice of Litigation, Default and Other Matters.......................67
7.06. ERISA Reporting Requirements..........................................68
ARTICLE VIII. NEGATIVE COVENANTS
8.01. Financial Covenants...................................................69
8.02. Debt for Borrowed Money...............................................71
8.03. Liens.................................................................72
8.04. Investments...........................................................72
8.05. Liquidation, Disposition or Acquisition of Assets, Merger,
New Subsidiaries......................................................75
8.06. Guaranties; Contingent Liabilities....................................76
8.07. Restricted Payments...................................................76
8.08. Affiliate Transactions................................................78
8.09. Compliance with ERISA.................................................79
8.10. Capital Stock.........................................................79
8.11. Sale and Leaseback....................................................79
8.12. Sale or Discount of Receivables.......................................79
8.13. Limitation on Restrictive Agreements..................................79
8.14. Amendment of Material Agreements. ...................................80
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
8.15. Name Changes, Changes Affecting Pledged Stock. ......................80
8.16. Unrestricted Subsidiaries and Mutual Signal. ........................80
8.17. Limitation on IRU Agreements..........................................81
8.18. Limitation on Unrestricted Subsidiaries. ............................81
ARTICLE IX. EVENTS OF DEFAULT
9.01. Events of Default.....................................................81
9.02. Remedies upon Default.................................................85
9.03. Cumulative Rights.....................................................86
9.04. Waivers...............................................................86
9.05. Performance by Administrative Agent or any Lender.....................86
9.06. Expenditures..........................................................87
9.07. Control...............................................................87
ARTICLE X. THE ADMINISTRATIVE AGENT
10.01. Authorization and Action..............................................87
10.02. Administrative Agent's Reliance, Etc..................................87
10.03. NationsBank, N.A. and Affiliates......................................88
10.04. Lender Credit Decision................................................88
10.05. Indemnification by Lenders............................................88
10.06. Successor Administrative Agent........................................89
ARTICLE XI. MISCELLANEOUS
11.01. Amendments and Waivers................................................89
11.02. Notices...............................................................90
11.03. Parties in Interest...................................................92
11.04. Assignments and Participations........................................92
11.05. Sharing of Payments...................................................93
11.06. Right of Set-off......................................................93
11.07. Costs, Expenses, and Taxes............................................94
11.08. Rate Provision........................................................94
11.09. Severability..........................................................95
11.10. Exceptions to Covenants...............................................95
11.11. Counterparts..........................................................95
11.12. GOVERNING LAW; WAIVER OF JURY TRIAL...................................95
11.13. ENTIRE AGREEMENT......................................................96
11.14. Amendment, Restatement, Extension, Renewal and Increase...............96
</TABLE>
iii
<PAGE> 5
TABLE OF SCHEDULES AND EXHIBITS
SCHEDULES
<TABLE>
<S> <C>
Schedule 1.01 - Description of PSINet Shares
Schedule 1.02 - Unrestricted Subsidiaries as of the Closing Date
Schedule 1.03 - Certain Owners of Capital Stock of the Parent
Schedule 1.04 - Restricted Subsidiaries as of the Closing Date
Schedule 5.01(a) - Jurisdictions of Qualification, Ownership and Capital Structure - the
Parent, the Borrower and their Subsidiaries
Schedule 5.01(f) - Non-Compliance with FCC or any applicable PUC
Schedule 5.01(h) - Existing Litigation of the Borrower, the Parent and their Subsidiaries
Schedule 5.01(r) - Description of Pledged Stock
Schedule 8.02 - Existing Debt and Liabilities of the Borrower, the Parent and the
Restricted Subsidiaries
Schedule 8.03 - Existing Liens of the Borrower, the Parent and the Restricted
Subsidiaries
Schedule 8.04 - Existing Investments of the Borrower, the Parent and their Restricted
Subsidiaries
Schedule 8.07 - Permitted Consulting Fee Payments
Schedule 8.08 - Permitted Affiliate Non-Market Transactions
Schedule 8.16 - Permitted Transactions among the Borrower, the Parent and the
Restricted Subsidiaries and the Unrestricted Subsidiaries
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
Exhibit A - Form of Revolver Note
Exhibit B - Form of Term Loan Note
Exhibit C - Form of Compliance Certificate
Exhibit D - Form of Borrowing Notice
Exhibit E - Form of Conversion/Continuation Notice
Exhibit F - Form of Assignment and Acceptance
Exhibit G - Form of Unlimited Guaranty
Exhibit H - Form of Pledge Agreement
</TABLE>
vii
<PAGE> 6
$600,000,000
IXC COMMUNICATIONS SERVICES, INC.
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDED AND RESTATED CREDIT AGREEMENT is dated as of June
29, 1999, among IXC COMMUNICATIONS SERVICES, INC., a Delaware corporation (the
"Borrower"), the Lenders (as defined below), NATIONSBANK, N.A., as a Lender and
Administrative Agent, and CREDIT SUISSE FIRST BOSTON, TD SECURITIES(USA), INC.
and EXPORT DEVELOPMENT CORPORATION, each as a Lender and Co-Syndication Agents.
BANC OF AMERICA SECURITIES LLC is Sole Lead Arranger and Sole Book Runner.
BACKGROUND.
WHEREAS, the Borrower, the Administrative Agent and the Lenders entered
into a Credit Agreement, dated October 27, 1998 (the "Original Credit
Agreement") providing for a $600,000,000 credit facility that had 1) one
revolving loan facility in the amount of $150,000,000 (which such loan facility
shall also include a letter of credit availability of not more than
$20,000,000), 2) one term loan facility in the amount of $200,000,000, and 3)
one uncommitted special purpose loan facility that can under certain terms and
conditions increase up to an amount of $250,000,000),
WHEREAS, the Borrower, the Administrative Agent and the Lenders hereby
agree to make the following amendments and changes to the Original Credit
Agreement,
WHEREAS, the amendments to the Original Credit Agreement are agreed to
by the Majority Lenders in accordance with the terms of Section 11.01 of the
Original Credit Agreement,
AGREEMENT.
NOW, THEREFORE, for valuable consideration hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I. DEFINITIONS
1.01. Definitions. As used in this Agreement, the following terms have
the respective meanings indicated below (such meanings to be applicable equally
to both the singular and plural forms of such terms):
"Administrative Agent" means NationsBank, N.A., in its capacity as
Administrative Agent hereunder, or any successor Administrative Agent appointed
pursuant to Section 10.06 hereof.
1
<PAGE> 7
"Advance" means an advance made by a Lender to the Borrower pursuant to
Section 2.01 hereof, which shall include Revolver Advances, Special Purpose
Advances (if any), Term Loan Advances and Refinancing Advances.
"Affiliate" means a Person that directly, or indirectly through one or
more intermediaries, Controls or is Controlled By or is Under Common Control
with another Person.
"Agreement" means this First Amended and Restated Credit Agreement, as
hereafter amended, modified, increased, extended, restated or supplemented from
time to time.
"Amortized Existing Fiber IRU Proceeds" means for any period of
determination, the amortized amount of the Existing Fiber IRU Proceeds for such
period in accordance with the original amortization schedule established by the
Parent, the Borrower and the Restricted Subsidiaries in accordance with each
such Existing Fiber IRU when such IRU Agreement was executed, in each case
consistent with the accounting practices of the Parent, the Borrower and the
Restricted Subsidiary at the time such Existing Fiber IRU was executed.
"Annualized Operating Cash Flow" means the product of (a) Operating
Cash Flow minus, to the extent included in Operating Cash Flow, New Fiber IRU
Proceeds, for the most recently completed two fiscal quarters, times (b) two,
provided that, notwithstanding the foregoing, (i) the definition of "Annualized
Operating Cash Flow" shall include (without duplication), Existing Fiber IRU
Proceeds received by the Parent, the Borrower and the Restricted Subsidiaries
for the most recently completed 12 month period without regard to any
amortization schedule established in connection with each such Existing Fiber
IRU, and New Fiber IRU Proceeds received by the Parent, the Borrower and the
Restricted Subsidiaries for the most recently completed 12 month period, and
(ii) notwithstanding the immediately foregoing subparagraph (i), fiber sale and
IRU proceeds from Existing Fiber IRUs included in the definition of Annualized
Operating Cash Flow shall be the following quarterly amounts for Annualized
Operating Cash Flow determinations made at the following fiscal quarter ends:
(i) September 30, 1998 - $23,220,000, (ii) December 31, 1998 - $25,140,000 and
March 31, 1999 - $50,957,000.
"Applicable Law" means (a) in respect of any Person, all provisions of
Laws of Tribunals applicable to such Person, and all orders and decrees of all
courts and arbitrators in proceedings or actions to which the Person in question
is a party and (b) in respect of contracts made or performed in the State of
Texas, "Applicable Law" also means the laws of the United States of America,
including, without limiting the foregoing, 12 USC Sections 85 and 86, as amended
to the date hereof and as the same may be amended at any time and from time to
time hereafter, and any other statute of the United States of America now or at
any time hereafter prescribing the maximum rates of interest on loans and
extensions of credit, and the laws of the State of Texas, including, without
limitation, Article 5069-1H, Title 79, Revised Civil Statutes of Texas, 1925,
("Art. 1H"), as amended, if applicable, and if Art. 1H is not applicable,
Article 5069-1D, Title 79, Revised Civil Statutes of Texas, 1925, ("Art. 1D"),
as amended, and any other statute of the State of Texas now or at any time
hereafter prescribing maximum rates of interest on loans and extensions of
credit; provided however, that the Borrower agrees that the provisions of
Chapter 346 of the Texas Finance Code, as amended, shall not apply to Advances
hereunder.
2
<PAGE> 8
"Applicable Margin" means, (a) with respect to LIBOR Advances, 3.00%
per annum, and (b) with respect to Base Advances, 1.750% per annum provided
that, after the date which the Administrative Agent and the Lenders receive a
Compliance Certificate required to be delivered in accordance with the terms of
Section 7.03 hereof using the 1999 fourth calendar quarter financials of the
Borrower and the Parent, the Applicable Margin for Advances will be adjusted as
set forth in the last paragraph of this definition to the following per annum
percentages applicable in the following situations:
<TABLE>
<CAPTION>
REVOLVER ADVANCES TERM LOAN ADVANCES
AND SPECIAL PURPOSE ADVANCES ONLY
--------------------------- -----------------------------
LIBOR Advance Base Advance LIBOR Advance Base Advance
Applicability Percentage Percentage Percentage Percentage
- ------------- ---------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
(i) If the Total 3.000% 1.750% 3.000% 1.750%
Leverage Ratio is
greater than or equal to
4.50 to 1.00
(ii) If the Total 2.500% 1.250% 3.000% 1.750%
Leverage Ratio is less
than 4.50 to 1.00 but
is greater than or equal to
to 3.50 to 1.00
(iii) If the Total 2.250% 1.000% 2.750% 1.500%
Leverage Ratio is less
than 3.50 to 1.00
but is greater than or equal
to 2.50 to 1.00
(iv) If the Total 2.000% 0.750% 2.750% 1.500%
Leverage Ratio is less
than 2.50 to 1.00
</TABLE>
After the date which the Administrative Agent and the Lenders receive a
Compliance Certificate in accordance with the terms of Section 7.01 using the
fourth calendar quarter financials of the Borrower and the Parent, the
Applicable Margin payable by the Borrower on Revolver Advances only shall be
subject to reduction or increase, as applicable and as set forth in the table
above, on a quarterly basis according to the performance of the Borrower, the
Parent and the Restricted Subsidiaries as tested by the Total Leverage Ratio.
Except as set forth in the following sentence, any such increase or reduction in
the Applicable Margin provided for herein for Revolver Advances shall be
effective three Business Days after receipt by Administrative Agent of the
applicable financial statements and corresponding Compliance Certificate. If
financial statements and a Compliance Certificate of the Borrower setting forth
the Total Leverage Ratio are not received by the Administrative Agent by the
date required pursuant to Section 7.01 or 7.02 hereof, the Applicable Margin for
Revolver Advances shall be determined as if the Total Leverage Ratio exceeds
4.50 to 1.00 until such time as such financial statements and Compliance
Certificate are received. For the final quarter of any fiscal year of the
Borrower, the Borrower may provide the unaudited financial statements of the
Borrower and
3
<PAGE> 9
the Parent, subject only to year-end adjustments, for the purpose of adjusting
the Applicable Margin for Revolver Advances.
"Applicable Specified Percentage" means with respect to any Lender, in
the case of the Revolver Loan, such Lender's Revolver Specified Percentage, in
the case of the Special Purpose Loan, such Lender's Special Purpose Specified
Percentage and in the case of the Term Loan, such Lender's Term Loan Specified
Percentage.
"Application" means any stand-by letter of credit application delivered
to Administrative Agent for or in connection with any stand-by Letter of Credit
pursuant to Article III hereof, in Administrative Agent's standard form for
stand-by letters of credit.
"Art. 1D" has the meaning specified in the definition herein of
"Applicable Law".
"Art. 1H" has the meaning specified in the definition herein of
"Applicable Law".
"Assignment and Acceptance" means an assignment and acceptance entered
into by a Lender and an assignee in accordance with the terms and conditions of
Section 11.04 hereof, and accepted by Administrative Agent, in the form of
Exhibit F hereto.
"Auditor" means Ernst & Young or other independent certified public
accountants selected by the Borrower and acceptable to Administrative Agent.
"Authorized Officer" means, with respect to the Parent, the Borrower
and their Subsidiaries respectively, any of the Chief Executive Officer, the
President, the Chief Financial Officer, Chief Accounting Officer, the Vice
President of Finance, the General Counsel or the Treasurer of the Borrower.
"Backbone Fiber" means a fiber connecting Los Angeles, CA and New York,
New York.
"Bank Affiliate" means the holding company of any Lender, or any wholly
owned direct or indirect subsidiary of such holding company or of such Lender.
"Base Advance" means an Advance under the Revolver Loan, the Special
Purpose Loan or the Term Loan, as applicable, bearing interest at the Base Rate.
"Base Rate" means a per annum interest rate equal to the lesser of (a)
the Highest Lawful Rate, and (b) the sum of the Applicable Margin plus the
higher of (i) a fluctuating rate per annum as shall be in effect from time to
time announced or published by NationsBank, N.A. as its prime rate, and which
may not necessarily be the lowest interest rate charged by NationsBank, N.A.,
and (ii) the Federal Funds Rate in effect at such time plus .50%.
"Board of Directors" means the Board of Directors of the Parent or any
committee thereof duly authorized to act on behalf of such Board.
"Borrower Deposit Account" means that certain deposit account of the
Borrower at the Dallas, Texas Main Street location of NationsBank, N.A. on which
the Administrative Agent, on behalf of the Lenders, has a first and prior Lien
and security interest to secure the Obligations hereunder.
4
<PAGE> 10
"Borrowing" means all Advances borrowed on the same day of the same
Type.
"Borrowing Notice" has the meaning set forth in Section 2.02(a) hereof.
"Business Day" means a day on which banks are open for the transaction
of business as required by this Agreement in Dallas, Texas and Toronto, Ontario
and, with respect to any LIBOR Advance, a domestic business day in London,
England and a day on which commercial banks are open for international business
in London, England (including dealings in United States dollar deposits), and as
otherwise relevant to the determination to be made or the action to be taken.
"Capital Expenditures" means capital expenditures, as defined in
accordance with GAAP.
"Capital Leases" means capital leases and subleases, as defined in
accordance with GAAP.
"Capital Stock" means, as to any Person, the equity interests in such
Person, including, without limitation, the shares of each class of capital stock
of any Person that is a corporation, each class of partnership interests
(including without limitation, general, limited and preference units) in any
Person that is a partnership, and each membership interest in any Person that is
a limited liability company.
"Closing Date" means the date hereof.
"Change of Control" means the occurrence of any one or more of the
following events: (i) any Person that is not a Present Holder acquires Control
of the Parent, (ii) any event which constitutes a Designated Change of Control,
(iii) any event which constitutes any "change of control" as defined in the any
of the Existing Financing Documentation, (iv) any event which results in the
Parent's failure to own and control, directly or indirectly, 100% of the Capital
Stock of the Borrower, or (v) any event which results in the Parent's and/or the
Borrower's failure to own and control 100% of the Capital Stock of the
Restricted Subsidiaries, except Mutual Signal which must remain at least 85%
owned, the Subsidiaries of Mutual Signal, and Capital Stock of Restricted
Subsidiaries sold pursuant to an asset sale permitted by the terms of this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, and any
reference to any provision of the Code shall include all successor provisions
thereto.
"Collateral" has the meaning ascribed thereto in Section 2.16(a)
hereof.
"Commitment" means the Revolver Commitment and the Special Purpose
Commitment, if any.
"Commitment Fee" means the Revolver Commitment Fee and, if the Special
Purpose Loan is a revolving loan, any commitment fee agreed to in accordance
with the terms of Section 2.17 hereof.
"Communications Act" means, collectively, the Communications Act of
1934, as amended through the date hereof (including without limitation, by the
Telecommunications Act of 1996), and as further amended, and the rules and
regulations promulgated thereunder, as from time to time in effect.
5
<PAGE> 11
"Compliance Certificate" means a certificate of an Authorized Officer
in the form of Exhibit C hereto, (a) certifying that such individual has no
knowledge that a Default or Event of Default has occurred and is continuing, or
if a Default or Event of Default has occurred and is continuing, a statement as
to the nature thereof and the action being taken or proposed to be taken with
respect thereto, (b) setting forth detailed calculations with respect to the
covenants described in Section 8.01 hereof and (c) certifying to the appropriate
Applicable Margin.
"Consequential Loss" with respect to (a) the Borrower's payment of all
or any portion of the then-outstanding principal amount of a LIBOR Advance on a
day other than the last day of the related Interest Period, including, without
limitation, payments made as a result of the acceleration of the maturity of a
Note, (b) subject to Administrative Agents' prior consent, a LIBOR Advance made
on a date other than the date on which the Advance is to be made according to
Section 2.02(a) or Section 2.09 hereof to the extent such Advance is made on
such other date at the request of the Borrower, or (c) any of the circumstances
specified in Sections 2.04, 2.05, 2.06 and 2.11 hereof on which a LIBOR Advance
or a Letter of Credit may cause a Consequential Loss to be incurred, means any
loss, cost or expense determined in accordance with the formula set forth below
incurred by any Lender as a result of the timing of the payment or Advance or in
liquidating, redepositing, redeploying or reinvesting the principal amount so
paid or affected by the timing of the Advance or the circumstances described in
Sections 2.04, 2.05, 2.06 or 2.11 hereof, which amount shall be the sum of (i)
the interest that, but for the payment or timing of Advance, such Lender would
have earned in respect of that principal amount, reduced, if such Lender is able
to redeposit, redeploy, or reinvest the principal amount, by the interest earned
by such Lender as a result of redepositing, redeploying or reinvesting the
principal amount plus (ii) any expense or penalty incurred by such Lender by
reason of liquidating, redepositing, redeploying or reinvesting the principal
amount. Each determination by each Lender of any Consequential Loss is, in the
absence of manifest error, presumptive evidence of the validity of such claim.
"Contingent Liability" means, as to any Person, any obligation or
Guaranty, contingent or otherwise, of such Person guaranteeing or having the
economic effect of guaranteeing any Debt or obligation of any other Person in
any manner, whether directly or indirectly, including without limitation any
obligation of such Person, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Debt or to purchase
(or to advance or supply funds for the purchase of) any security for the payment
of such Debt, (b) to purchase Property or services for the purpose of assuring
the owner of such Debt of its payment, or (c) to maintain the solvency, working
capital, equity, cash flow, fixed charge or other coverage ratio, or any other
financial condition of the primary obligor so as to enable the primary obligor
to pay any Debt or to comply with any agreement relating to any Debt or
obligation, but excluding endorsement of checks, drafts and other instruments in
the ordinary course of business, provided that this definition of "Contingent
Liability" shall not include Guaranties by the Parent, the Borrower or any
Subsidiary of the Borrower and/or the Parent of any obligations of the Borrower
or any wholly owned Subsidiary of the Borrower or the Parent that has executed
an Unlimited Guaranty.
"Continue," "Continuation" and "Continued" each refer to the
continuation pursuant to Section 2.09 hereof of a LIBOR Advance from one
Interest Period to the next Interest Period.
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<PAGE> 12
"Control" or "Controlled By" or "Under Common Control" mean possession,
direct or indirect, of power to direct or cause the direction of management or
policies (whether through ownership of voting securities, by contract or
otherwise).
"Controlled Group" means, as to any Person, all members of a controlled
group of corporations and all trades or businesses (whether or not incorporated)
which are under common control with such Person and which, together with such
Person, are treated as a single employer under Section 414(b), (c), (m) or (o)
of the Code.
"Conversion or Continuance Notice" has the meaning set forth in Section
2.09(b) hereof.
"Cumulative Convertible" means that certain $155,000,000 6 and 3/4%
Cumulative Convertible Preferred Stock issued by the Parent, including all such
Capital Stock issued in lieu of the payment of dividends.
"Cumulative Convertible Documentation" means that certain Certificate
of Designation with respect to the Cumulative Convertible, and all other
agreements and other documentation relating to the Cumulative Convertible.
"Debt" means all obligations, contingent or otherwise, which in
accordance with GAAP are required to be classified on the balance sheet as
liabilities, and in any event including (without duplication) (a) Capital
Leases, (b) Contingent Liabilities that are required to be recorded in
accordance with GAAP (including, without limitation, letters of credit and
reimbursement obligations with respect to letters of credit), (c) liabilities
secured by any Lien on any Property, regardless of whether such secured
liability is with or without recourse, and (d) installment payment non-compete
agreements.
"Debt for Borrowed Money" means, with respect to the Parent, the
Borrower and the Restricted Subsidiaries, at any date, without duplication, all
Debt of the Borrower, the Parent and the Restricted Subsidiaries that
constitutes (a) all obligations of the Borrower, the Parent and such Restricted
Subsidiaries for borrowed money, letters of credit (or applications for letters
of credit) or other similar instruments, (b) all obligations of the Borrower,
the Parent and the Restricted Subsidiaries evidenced by bonds, debentures, notes
or other similar instruments, (c) all obligations of the Borrower, the Parent
and the Restricted Subsidiaries to pay the deferred purchase price of property
or services, except trade accounts payable arising in the ordinary course of
business, (d) all obligations under Capital Leases of the Borrower, the Parent
and the Restricted Subsidiaries, (e) installment payment non-compete agreements
for the Borrower, the Parent and each Restricted Subsidiary, and (f) all
Contingent Liabilities relating to obligations of another Person (other than a
wholly owned Restricted Subsidiary of the Borrower or the Parent that has
executed an Unlimited Guaranty, with respect to Debt of another wholly owned
Restricted Subsidiary or the Borrower or the Parent that has executed an
Unlimited Guaranty) of the type described in (a) through (e) above.
"Debtor Relief Laws" means applicable bankruptcy, reorganization,
moratorium, or similar Laws, or principles of equity affecting the enforcement
of creditors' rights generally.
"Default" means any event specified in Section 9.01 hereof, whether or
not any requirement in connection with such event for the giving of notice,
lapse of time, or happening of any further condition has been satisfied.
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<PAGE> 13
"Designated Change of Control" means the occurrence of any of the
following events (each a "Designated 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)(i) 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 Parent (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)),
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
Parent was approved by a vote of a majority of the directors of the
Parent 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 Parent 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 Parent with or into
another Person or the merger of another Person with or into the Parent,
or the sale of all or substantially all the assets of the Parent 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 Parent that are outstanding immediately prior to such
transaction and which represent 100% of the aggregate voting power of
the Voting Stock of the Parent 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
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.
"Designated Restricted Subsidiaries" means those Subsidiaries of the
Parent from time to time defined as Restricted Subsidiaries by the Junior
Exchangeable Documentation.
8
<PAGE> 14
"Distribution" means, as to any Person, (a) any declaration or payment
of any distribution or dividend (other than a common stock dividend) on, or the
making of any pro rata distribution, loan, advance, or investment to or in any
holder of, any partnership interest or shares of Capital Stock or other equity
interest of such Person (or the establishment of a sinking fund or otherwise
setting aside of funds for any such purpose), or (b) any purchase, redemption,
or other acquisition or retirement for value of any shares of partnership
interest or Capital Stock or other equity interest of such Person (or the
establishment of a sinking fund or otherwise setting aside of funds for any such
purpose).
"Environmental Claim" means any written notice by any Tribunal alleging
liability for damage to the environment, or by any Person alleging liability for
personal injury (including sickness, disease or death), resulting from or based
upon (a) the presence or release (including sudden or non-sudden, accidental or
non-accidental, leaks or spills) of any Hazardous Material at, in or from
property, whether or not owned by the Parent, the Borrower or any of its
Subsidiaries, or (b) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law.
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. ss.9601 et seq.) ("CERCLA"), the
Hazardous Material Transportation Act (49 U.S.C. ss.1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. ss.6901 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. ss.1251 et seq.), the Clean Air Act (42 U.S.C.
ss.7401 et seq.), the Toxic Substances Control Act (15 U.S.C. ss.2601 et seq.),
and the Occupational Safety and Health Act (29 U.S.C. ss.651 et seq.) ("OSHA"),
as such laws have been or hereafter may be amended or supplemented, and any and
all analogous future federal, or present or future state or local, Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rulings and regulations issued thereunder, as from time to time
in effect.
"ERISA Affiliate" means any Person that for purposes of Title IV of
ERISA is a member of the controlled group of the Borrower or any Obligor or any
Unrestricted Subsidiary, or is under common control with Borrower or any Obligor
or any Unrestricted Subsidiary, within the meaning of Section 414(c) of the
Code, and the regulations and rulings issued thereunder.
"ERISA Event" means (a) a reportable event, within the meaning of
Section 4043 of ERISA, unless the 30-day notice requirement with respect thereto
has been waived by the PBGC, (b) the issuance by the administrator of any Plan
of a notice of intent to terminate such Plan, pursuant to Section 4041(a)(2) of
ERISA (including any such notice with respect to a plan amendment referred to in
Section 4041(e) of ERISA), (c) the withdrawal by the Parent, the Borrower, any
Subsidiary of the Parent, or an ERISA Affiliate from a Multiple Employer Plan
during a Plan year for which it was a substantial employer, as defined in
Section 4001(a)(2) of ERISA, (d) the failure by the Borrower, the Parent, any
Subsidiary of the Parent, or any ERISA Affiliate to make a payment to a Plan
required under Section 302 of ERISA, (e) the adoption of an amendment to a Plan
requiring the provision of security to such Plan, pursuant to Section 307 of
ERISA, or (f) the institution by the PBGC of proceedings to terminate a Plan,
pursuant to Section 4042 of ERISA, or the occurrence of any event or condition
that constitutes grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, a Plan.
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<PAGE> 15
"Event of Default" means any of the events specified in Section 9.01 of
this Agreement, provided there has been satisfied any requirement in connection
therewith for the giving of notice, lapse of time, or happening of any further
condition.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Excluded Stock" means (i) 15% of the Capital Stock of Mutual Signal,
(ii) all of the Capital Stock of the Subsidiaries of Mutual Signal, (iii) 34% of
the Capital Stock of IXC Communications Services Europe Limited, (iv) all of the
Capital Stock of the Subsidiaries of Unrestricted Subsidiaries, and (v) 100% of
the Capital Stock of Switched Services Communications, L.L.C.
"Existing Financing" means collectively, the Junior Exchangeable, the
Junior Convertible, the Cumulative Convertible, the Subordinated Notes and the
Senior Notes.
"Existing Financing Documentation" means collectively, the Junior
Exchangeable Documentation, the Junior Convertible Documentation, the Cumulative
Convertible Documentation, the Subordinated Notes Documentation, and the Senior
Notes Documentation.
"Existing Fiber IRUs" means fiber IRU Agreements entered into prior to
June 30, 1999.
"Existing Fiber IRU Proceeds" means, for any period of determination,
the net cash proceeds (in each case, minus costs of sales) received by the
Parent, the Borrower and the Restricted Subsidiaries from Existing Fiber IRUs
for such period.
"FCC" means the Federal Communications Commission, or any governmental
agency succeeding to the functions thereof.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of Dallas, or, if such rate is not so published for any day
which is a Business Day, the average of the quotations for such date on such
transactions received by Administrative Agent from three federal funds brokers
of recognized standing selected by it.
"Fee Letters" means that certain Fee Letter, dated October 27, 1998,
between the Parent, the Borrower and the Administrative Agent, that certain Fee
Letter, dated as of June 28,1999 between the Parent, the Borrower and the
Administrative Agent and all other fee letters executed among the Borrower and
any Lender from time to time, as such letters may be amended, modified,
substituted, replaced, or increased from time to time.
"GAAP" means United States of America generally accepted accounting
principles applied on a consistent basis. Application on a consistent basis
shall mean that the accounting principles observed in a current period are
comparable in all material respects to those applied in a preceding period,
except for new developments or statements promulgated by the Financial
Accounting Standards Board and other changes in accounting methods permitted by
generally accepted accounting principles.
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<PAGE> 16
"Guarantors" means the Parent, each Restricted Subsidiary of the
Borrower and the Parent existing on the Closing Date or formed or acquired by
the Borrower and the Parent after the date hereof, and any direct or indirect
Restricted Subsidiary of the Borrower and the Parent from time to time
thereafter, provided that (a) Mutual Signal and the Subsidiaries of Mutual
Signal shall not be Guarantors hereunder, and (b) this definition shall not
include any Person who was a Guarantor at one time but was subsequently released
by the Administrative Agent and the Lenders in accordance with the terms of
Section 8.05 hereof.
"Guaranty" means a guaranty executed by any Person of the obligations
of another Person, or any agreement by which such Person assumes, guarantees,
endorses, contingently agrees to purchase or provide funds for the payment of,
or otherwise becomes liable upon, the obligation of any other Person, or agrees
to maintain the net worth or working capital or other financial condition of any
other Person, or otherwise assures any creditor or such other Person against
loss, including, without limitation, any comfort letter, or take-or-pay contract
and shall include without limitation, the contingent liability of such Person in
connection with any application for a letter of credit.
"Hazardous Materials" means all materials subject to regulation under
any Environmental Law, including without limitation materials listed in 49
C.F.R. Section 172.101, Hazardous Substances, explosive or radioactive
materials, hazardous or toxic wastes or substances, petroleum or petroleum
distillates, asbestos, or material containing asbestos.
"Hazardous Substances" means hazardous waste as defined in the Clean
Water Act, 33 U.S.C. Section 1251 et seq., the Comprehensive Environmental
Response Compensation and Liability Act as amended by the Superfund Amendments
and Reauthorization Act, 42 U.S.C. Section 9601 et seq., the Resource
Conservation Recovery Act, 42 U.S.C. Section 6901 et seq., and the Toxic
Substances Control Act, 15 U.S.C. Section 2601 et seq.
"Highest Lawful Rate" means at the particular time in question the
maximum rate of interest which, under Applicable Law, any Lender is then
permitted to charge on the Obligations. If the maximum rate of interest which,
under Applicable Law, any Lender is permitted to charge on the Obligations shall
change after the date hereof, the Highest Lawful Rate shall be automatically
increased or decreased, as the case may be, from time to time as of the
effective time of each change in the Highest Lawful Rate without notice to the
Borrower. For purposes of determining the Highest Lawful Rate under Applicable
Law, the applicable rate ceiling shall be (a) the weekly ceiling described in
and computed in accordance with the provisions of Art. 1H, or (b) either the
annualized ceiling or quarterly ceiling computed pursuant to Section .008 of
Art. 1D; provided, however, that at any time the weekly ceiling, the annualized
ceiling or the quarterly ceiling, as applicable, shall be less than 18% per
annum or more than 24% per annum, the provisions of Sections .009(a), .009(b) or
.009(c) of said Art. 1D shall control for purposes of such determination, as
applicable.
"Income Tax Expense" means the aggregate income Taxes accrued by the
Parent, the Borrower and the Restricted Subsidiaries for the relevant period of
determination.
"Insufficiency" means, with respect to any Plan, the amount, if any, of
its unfunded benefit liabilities within the meaning of Section 4001(a)(18) of
ERISA.
"Interest Coverage Ratio" means, on any date of determination for the
Parent, the Borrower and the Restricted Subsidiaries, the ratio of (a) Operating
Cash Flow for the most recently completed
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<PAGE> 17
12 month period to (b) the aggregate amount of cash Interest Expense actually
paid during the most recently completed 12 month period.
"Interest Expense" means, for the Parent, the Borrower and the
Restricted Subsidiaries on a consolidated basis for any period of determination,
the gross interest expense for any period on Total Debt, determined in
accordance with GAAP, minus the sum of (a) interest income for such period, plus
(b) to the extent included in the determination of such gross interest expense,
upfront costs or fees expended during such period in connection with the
execution and delivery of documentation relating to the Loan Papers.
"Interest Period" means, with respect to any LIBOR Advance, the period
beginning on the date the Advance is made or continued as a LIBOR Advance and
ending one, two, three, six or, to the extent available as determined by
Administrative Agent, twelve months thereafter (as the Borrower shall select),
provided, however, that:
(a) the Borrower may not select any Interest Period that ends
after any principal repayment date unless, after giving effect to such
selection, the aggregate principal amount of LIBOR Advances having
Interest Periods that end on or prior to such principal repayment date,
shall be at least equal to the principal amount of Advances due and
payable on and prior to such date;
(b) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next succeeding
Business Day, provided, however, that if such extension would cause the
last day of such Interest Period to occur in the next following
calendar month, the last day of such Interest Period shall occur on the
next preceding Business Day; and
(c) whenever the first day of any Interest Period occurs on a
day of an initial calendar month for which there is no numerically
corresponding day in the calendar month that succeeds such initial
calendar month by the number of months equal to the number of months in
such Interest Period, such Interest Period shall end on the last
Business Day of such succeeding calendar month.
"Interest Rate Protection Agreement" means an interest rate swap, cap,
collar or similar interest rate protection agreement between the Borrower and
any Lender.
"Investment" means any acquisition of all or substantially all of the
assets of any Person, or any direct or indirect purchase or other acquisition
of, or a beneficial interest in, any Capital Stock or other securities of any
other Person, or any direct or indirect loan, advance, or capital contribution
to or investment in any other Person, including without limitation the
incurrence or sufferance of Debt or accounts receivable of any other Person that
are not current assets or do not arise from sales to that other Person in the
ordinary course of business.
"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.
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<PAGE> 18
"Junior Convertible" means that certain $100,000,000 7 and 1/4% Junior
Convertible Preferred Stock issued by the Parent, including all such Capital
Stock issued in lieu of the payment of dividends.
"Junior Convertible Documentation" means that certain Certificate of
Designation with respect to the Junior Convertible, and all other agreements and
other documentation relating to the Junior Convertible.
"Junior Exchangeable" means that certain $300,000,000 12 and 1/2%
Junior Exchangeable Preferred Stock issued by the Parent, and all such Capital
Stock issued in lieu of the payment of dividends.
"Junior Exchangeable Documentation" means that certain Certificate of
Designation with respect to the Junior Exchangeable, and all other agreements
and other documentation relating to the Junior Exchangeable.
"Law" means any constitution, statute, law, ordinance, regulation,
rule, order, writ, injunction, or decree of any Tribunal.
"Lenders" means the lenders listed on the signature pages of this
Agreement, and each transferee which hereafter becomes a party to this Agreement
pursuant to Section 11.04 hereof or pursuant to an amendment to this Agreement,
so long as each is owed any portion of the Obligation or is obligated to make
any Advance hereunder.
"Lending Office" means, with respect to each Lender, its branch or
affiliate, (a) initially, the office of each Lender, branch or affiliate
identified on each Lender's signature page hereto, and (b) subsequently, such
other office of each Lender, branch or affiliate as each Lender may designate to
the Borrower and Administrative Agent as the office from which the Advances of
each Lender will be made and maintained and for the account of which all
payments of principal and interest on the Advances and the Commitment Fee will
thereafter be made. Lenders may have more than one Lending Office for the
purpose of making Base Advances and LIBOR Advances.
"Letter of Credit Commitment" means, on any date of determination, an
amount equal to the lesser of (a) $20,000,000 and (b) the Revolver Commitment
minus all outstanding Revolver Advances under the Revolver Loan.
"Letters of Credit" means the irrevocable standby letters of credit
issued by Administrative Agent under and pursuant to Article III hereof, and
under and pursuant to Article III of the Original Credit Agreement, as each may
be amended, modified, substituted, increased, replaced, renewed or extended from
time to time.
"LIBOR Advance" means an Advance under the Revolver Loan, the Special
Purpose Loan or the Term Loan, bearing interest at the LIBOR Rate.
"LIBOR Lending Office" means, with respect to each Lender, the office
designated as its "LIBOR Lending Office" on each Lender's signature page hereto,
or such other office of Lender or any of its affiliates hereafter designated by
notice to the Borrower and Administrative Agent.
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<PAGE> 19
"LIBOR Rate" means, for any LIBOR Advance for any Interest Period
therefore, a rate per annum equal to the lesser of (a) the Highest Lawful Rate
and (b) the sum of (i) the Applicable Margin, plus (ii) the rate per annum
(rounded upwards, if necessary, to the nearest one-one hundredth (1/100th) of
one percent (1%)) appearing on Telerate Page 3750 (or any successor page) as the
London interbank offered rate for deposits in United States dollars at
approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period. If for any reason such rate is not available, the term
"LIBOR Rate" shall mean, for any LIBOR Advance for any Interest Period therefor,
the rate per annum (rounded upwards, if necessary, to the nearest one-one
hundredth (1/100th) of one percent (1%)) appearing on Reuters Screen LIBO page
as the London interbank offered rate for deposits in United States dollars at
approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period for a term comparable to such Interest Period; provided,
however, if more than one rate is specified on Reuters Screen LIBO Page, the
applicable rate shall be the arithmetic mean of all such rates.
"License" means, as to the Parent, the Borrower, or any Subsidiary of
the Borrower and/or the Parent, any license, permit, consent, certificate of
need, authorization, certification, accreditation, franchise, approval, or grant
of rights by, or any filing or registration with, any Tribunal or third Person
(including without limitation, the FCC or any applicable PUC) necessary for such
Person to own, build, maintain, or operate its business or Property.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien, or charge of any kind, including without limitation any agreement to give
or not to give any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement or other similar form of public notice
under the Laws of any jurisdiction (except for the filing of a financing
statement or notice in connection with an (a) operating lease or (b) the true
consignment of goods to the Parent, the Borrower or any Restricted Subsidiary as
consignee).
"Litigation" means any proceeding, claim, lawsuit, arbitration, and/or
investigation conducted by or before any Tribunal or arbitrator, including
without limitation proceedings, claims, lawsuits, and/or investigations under or
pursuant to any environmental, occupational, safety and health, antitrust,
unfair competition, securities, Tax, or other Law, or under or pursuant to any
contract, agreement, or other instrument.
"Loans" means all three of the Revolver Loan, the Special Purpose Loan,
if any, and the Term Loan, and "Loan" means any one of the Revolver Loan, the
Special Purpose Loan or the Term Loan, as applicable in the context used.
"Loan Papers" means this Agreement, the Notes, the Pledge Agreement,
the Unlimited Guaranties, the Fee Letters, all agreements related to the
Borrower Deposit Account and the Parent Deposit Account, financing statements,
any Interest Rate Protection Agreement and related documents entered into by the
Borrower with any Lender or any Bank Affiliate, all Letters of Credit, all
Applications and all other agreements between the Parent, the Borrower or any
Restricted Subsidiary and the Administrative Agent related to any Letter of
Credit, other fee letters, Assignment and Acceptances, post-closing letters, all
security agreements, pledges, mortgages, deeds of trust, assignments, leasehold
mortgages, leasehold deeds of trust, collateral assignments and other agreements
and documentation relating to the Liens securing the Obligations, and all other
documents, instruments, agreements, or certificates executed or delivered from
time to time by any
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<PAGE> 20
Person in connection with this Agreement or as security for the Obligations
hereunder, granting Collateral or otherwise, as each such agreement may be
amended, modified, substituted, replaced or extended from time to time.
"Majority Lenders" means any combination of Lenders having at least
51.00% of the aggregate amount of the sum of (a) outstanding Commitments plus
(b) outstanding Term Loan Advances, plus (c) if the Special Purpose Loan is a
term loan, the aggregate amount of outstanding Special Purpose Advances,
provided, however, that (i) if the Revolver Commitment has been terminated, then
(a) above will be the amount of the outstanding Revolver Advances and (ii) if
the Special Purpose Loan is a revolving loan but the Special Purpose Commitment
has been terminated, then (a) above will include the amount of the outstanding
Special Purpose Advances.
"Material Adverse Change" means any circumstance or event that is or
could reasonably be expected to (a) be material and adverse to the financial
condition, business, operations, prospects, or Properties of the Parent, the
Borrower and the Restricted Subsidiaries on a consolidated basis, (b) materially
and adversely affect the validity or enforceability of any Loan Paper or (c)
cause a Default or Event of Default.
"Maturity Date" means the earlier of October 24, 2003, or such earlier
date on which the total amount of outstanding Obligations are due and payable
(including, without limitation, whether by acceleration, scheduled reduction of
the Commitment to zero, mandatory or voluntary commitment reduction of the
Commitment to zero, installment payments or otherwise).
"Maximum Amount" means the maximum amount of interest which, under
Applicable Law, a Lender is permitted to charge on the Obligations.
"Multiemployer Plan" means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, to which the Parent, the Borrower, any Subsidiary of the
Parent or the Borrower, or any ERISA Affiliate is making or accruing an
obligation to make contributions, or has within any of the preceding five plan
years made or accrued an obligation to make contributions, such plan being
maintained pursuant to one or more collective bargaining agreements.
"Multiple Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the
Parent, the Borrower, any Subsidiary of the Parent or the Borrower, or any ERISA
Affiliate and at least one Person other than the Borrower, the Parent, any
Subsidiary of the Borrower or the Parent, and any ERISA Affiliate, or (b) was so
maintained and in respect of which the Borrower, the Parent, any Subsidiary of
the Borrower or the Parent, or any ERISA Affiliate could have liability under
Section 4064 or 4069 of ERISA in the event such plan has been or were to be
terminated.
"Mutual Signal" means Mutual Signal Holding Corporation, a Subsidiary
of the Borrower the common stock of which is 85% owned by the Borrower and 15%
owned by Frontier Corporation.
"Net Proceeds" means the gross cash proceeds received by the Borrower,
the Parent or any Restricted Subsidiary in connection with or as a result of any
asset sale not in the ordinary course of business, minus (so long as each of the
following are estimated in good faith by the management of the Parent and
certified to the Lenders in reasonable detail by an Authorized Officer) (a)
actual taxes estimated in good faith by the Board of Directors incurred as a
result of such sale (after giving effect
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to all tax benefits available to the Parent, the Borrower or such Restricted
Subsidiary), and (b) reasonable and customary transaction costs payable by the
Parent, the Borrower or any Restricted Subsidiary that are related to such sale
and payable to a Person other than an Affiliate of the Parent, the Borrower and
its Subsidiaries.
"New Fiber IRU Proceeds" means, for any period of determination, the
net cash proceeds (in each case, minus costs of sales) received by the Parent,
the Borrower and the Restricted Subsidiaries from sales and IRUs of fiber that
are not Existing Fiber IRUs during such period, in each case as accounted for by
the Parent, the Borrower and the Restricted Subsidiaries consistently applied
after June 30, 1999.
"Notes" means each of the Revolver Notes, Special Purpose Notes (if
any) and Term Loan Notes, and "Note" means any of the Revolver Note, the Special
Purpose Note or the Term Loan Note, as applicable in the context used, and in
each case, with any extension, renewal or amendment thereof, or substitution
therefor.
"Obligations" means all present and future obligations, indebtedness
and liabilities, and all renewals and extensions of all or any part thereof, of
the Borrower and each other Obligor to Lenders and Administrative Agent arising
from, by virtue of, or pursuant to this Agreement, any of the other Loan Papers
and any and all renewals and extensions thereof or any part thereof, or future
amendments thereto, all interest accruing on all or any part thereof and
reasonable attorneys' fees incurred by the Administrative Agent for the
preparation of this Agreement and consummation of this credit facility,
execution of waivers, amendments and consents, and in connection with the
enforcement or the collection of all or any part thereof, and reasonable
attorneys' fees incurred by the Lenders in connection with the enforcement or
the collection of all or any part of the Obligations during the continuance of
an Event of Default, in each case whether such obligations, indebtedness and
liabilities are direct, indirect, fixed, contingent, joint, several or joint and
several. Without limiting the generality of the foregoing, "Obligations"
includes all amounts which would be owed by the Borrower, each other Obligor and
any other Person (other than Administrative Agent or Lenders) to Administrative
Agent or Lenders under any Loan Paper, but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Borrower, any other Obligor
or any other Person (including all such amounts which would become due or would
be secured but for the filing of any petition in bankruptcy, or the commencement
of any insolvency, reorganization or like proceeding of the Borrower, any other
Obligor or any other Person under any Debtor Relief Law).
"Obligor" means (a) the Borrower, (b) the Parent, (c) each Restricted
Subsidiary, (d) each other Person liable for performance of any of the
Obligations and (e) each other Person the Property of which secures the
performance of any of the Obligations.
"Operating Cash Flow" means, for the Parent, the Borrower and the
Restricted Subsidiaries, for any period, the consolidated net income (loss) for
such period taken as a single accounting period (including, without limitation
and duplication, New Fiber IRU Proceeds during such period, and revenue
recognized during such period from the Williams Agreement), plus the sum of the
following amounts for such period to the extent included in the determination of
such consolidated net income or loss, without duplication: (a) depreciation
(including any non cash impairment charges) expense, (b) amortization expense
and other non-cash charges, expenses or losses reducing income, (c) Interest
Expense, (d) Income Tax Expense and (e) extraordinary losses, minus the sum of
(i) extraordinary
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gains and (ii) non-cash income (including, without limitation, the sum of
Amortized Existing Fiber IRU Proceeds), provided that, notwithstanding the
foregoing, the calculation of Operating Cash Flow hereunder shall include
(without duplication) (i) for the fiscal quarter ending June 30, 1999, the
following restructuring and other infrequent charges, but only to the extent any
of such charges were previously deducted and not added back pursuant to any
other provision of this definition: (A) up to $18,400,000 in cash and non-cash
restructuring charges related to the downsizing of the Parent's wholesale
switched business segment and (B) up to $10,800,000 in cash and non-cash charges
that are related to five DSC switches and (ii) infrequent charges relating to
the rehoming of minutes of use from the five DSC switches to the other switches
totaling up to $9,700,000 for the three fiscal quarters ending March 31, 2000,
but in each of the three fiscal quarters only to the extent any portion of such
amount was deducted during such fiscal quarter.
"Original Credit Agreement" has the meaning ascribed thereto in the
BACKGROUND section at the beginning of this Agreement.
"Parent" means IXC Communications, Inc., a Delaware corporation, and
the owner of 100% of the Capital Stock of the Borrower.
"Parent Deposit Account" means that certain deposit account of the
Parent at the Dallas, Texas Main Street location of NationsBank, N.A. on which
the Administrative Agent, on behalf of the Lenders, has a first and prior Lien
and security interest to secure the Obligations hereunder.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
agency or entity performing substantially the same functions.
"Permitted Acquisition" means acquisitions made by the Parent, the
Borrower or any Restricted Subsidiary of telecommunications or internet
businesses or related businesses, so long as in each case (a) there exists no
Default or Event of Default both before and after giving effect to any such
acquisition, (b) such acquired entity becomes a Restricted Subsidiary and
executes an Unlimited Guaranty of the Obligations, or such acquired assets are
acquired by a Restricted Subsidiary, and (c) the Borrower provides the
Administrative Agent and each Lender with information demonstrating pro forma
compliance with the terms of this Agreement through the Maturity Date, after
giving effect to such Permitted Acquisition, including, without limitation, each
provision of Section 8.01 hereof and Section 8.18 hereof, provided that (i) if
the Total Leverage Ratio is greater than or equal to 3.00 to 1.00, and the
aggregate purchase price for any such acquisition is in excess of $25,000,000,
then, in addition to the foregoing requirements either (A) any such acquired
entity or assets must have positive cash flow for the immediately preceding two
full fiscal quarters annualized of such acquired entity, or (B) the Borrower
must obtain the prior written consent of the Majority Lenders, and (ii)
notwithstanding any of the foregoing limitations and requirements, if there
exists no Default or Event of Default both before and after giving effect
thereto and the Borrower complies with Section 8.04(j) hereof, the Borrower may
acquire Unrestricted Subsidiaries.
"Permitted Asset Sales" means (a) assets sales in the ordinary course
of business, (b) assets sales of equipment that is worn out, obsolete, damaged
or otherwise unsuitable for use in the business, (c) so long as there exists no
Default or Event of Default both before and after giving effect to any such
asset sale, (i) sales of dark fiber or IRU's in dark fiber or capacity and (ii)
sales with respect to any asset used exclusively in connection with the
Borrower's microwave relay system or 100% of the Capital Stock of any Subsidiary
of the Parent or the Borrower exclusively engaged in the microwave business.
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"Permitted Holders" means the officers and directors of the Parent, 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 Investments" means, so long as there exists no Default or
Event of Default both before and after giving effect to any such Investment
(a) Investments made by the Parent, the Borrower or any
Restricted Subsidiary in Unrestricted Subsidiaries not to exceed an
amount over the term of this Agreement equal to the sum of (i)
$50,000,000 plus (ii) net equity proceeds raised subsequent to the
Closing Date that were not used to make Permitted Acquisitions or to
redeem the Junior Exchangeable in accordance with the terms of this
Agreement and
(b) so long as the Parent, the Borrower and the Restricted
Subsidiaries are in compliance with Section 2.05 hereof and Section
2.11 hereof, other Investments not to exceed in initial purchase price
$50,000,000 in the aggregate outstanding at any one time.
Notwithstanding the foregoing, (I) to the extent and at the time that any series
of investments permitted under the preceding sections (a) and/or (b) constitutes
a Permitted Acquisition (such acquired entity becoming a Restricted Subsidiary
and executing an Unlimited Guaranty), the applicable investment basket (a) or
(b) above shall be replenished by the amount of such initial investment, (II) so
long as there exists no Default or Event of Default both before and after giving
effect thereto, in addition to the foregoing permitted minority Investments, the
Borrower may (A) sell microwave and/or DSC equipment for a purchase price
constituting or including minority Investments, and (B) use the proceeds from
the issuance of Capital Stock of the Parent to invest in Unrestricted
Subsidiaries, but only in accordance with the terms of Section 8.04(j)(i) and
(ii) hereof.
"Permitted Liens" means, as applied to any Person:
(a) any Lien in favor of the Lenders to secure the Obligations
hereunder;
(b) (i) Liens on real estate for real estate Taxes not yet delinquent,
(ii) Liens created by lease agreements, statute or common law to secure the
payments of rental amounts and other sums not yet due thereunder, (iii) Liens on
leasehold interests created by the lessor in favor of any mortgagee of the
leased premises, and (iv) Liens for Taxes, assessments, governmental charges,
levies or claims that are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves shall have been set
aside on such Person's books, but only so long as no foreclosure, restraint,
sale or similar proceedings have been commenced with respect thereto;
(c) Liens of carriers, warehousemen, mechanics, laborers and
materialmen and other similar Liens incurred in the ordinary course of business
for sums not yet due or being contested in good faith, if such reserve or
appropriate provision, if any, as shall be required by GAAP shall have been made
therefor;
(d) Liens incurred in the ordinary course of business in connection
with worker's compensation, unemployment insurance or similar legislation;
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<PAGE> 24
(e) Easements, right-of-way, matters of public record, restrictions and
other similar encumbrances on the use of real property which do not materially
interfere with the ordinary conduct of the business of such Person as currently
conducted;
(f) Liens in respect of judgments or awards for which appeals or
proceedings for review are being prosecuted and in respect of which a stay of
execution upon any such appeal or proceeding for review shall have been secured,
provided that (i) such Person shall have established adequate reserves for such
judgments or awards, (ii) such judgments or awards shall be fully insured and
the insurer shall not have denied coverage, or (iii) such judgments or awards
shall have been bonded to the satisfaction of the Majority Lenders; and
(g) Any Liens existing on the Closing Date which are described on
Schedule 8.03 hereto and not otherwise described elsewhere in the definition of
Permitted Liens, and Liens resulting from the refinancing of the related Debt
for Borrowed Money, provided that the Debt for Borrowed Money secured thereby
shall not be increased and the Liens shall not cover additional assets of the
Parent, the Borrower or any such Restricted Subsidiary.
"Permitted Refinancing Indebtedness" means Debt of the applicable
Obligor to the extent all of the proceeds thereof are used to refinance Debt of
such Obligor (plus any premium thereon reasonably acceptable to the
Administrative Agent), provided that after giving effect to the incurrence of
such Debt, the Borrower is in pro forma compliance with the terms of this
Agreement, and provided further that (i) the terms of such new Debt are no more
restrictive than the Loans, (ii) the maturity of such new Debt is no shorter
than the Debt being refinanced, (iii) the only Person obligated on such
refinanced Debt is the original Person obligated on such Debt, (iv) the priority
of any such new Debt shall remain unchanged (if such Debt to be refinanced is
subordinated, the subordination provisions remain unchanged in the new
refinanced Debt), and (v) the parties obligated on such Debt remain the same.
"Person" means an individual, partnership, joint venture, corporation,
limited liability company, trust, Tribunal, unincorporated organization, and
government, or any department, agency, or political subdivision thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
"Pledge Agreement" means the Pledge Agreement of even date herewith,
executed by the Parent, the Borrower and any Subsidiary of the Borrower,
granting a Lien on Capital Stock of the Borrower and each of the Subsidiaries of
the Parent and the Borrower (except Excluded Stock) as security for the
Obligations, substantially in the form of Exhibit H hereto, as such agreement
may be amended, modified, renewed or extended from time to time, and "Pledge
Agreement" shall also include each such pledge agreement pledging the Capital
Stock of all other Subsidiaries of the Parent and the Borrower created or
acquired from time to time (except Subsidiaries of Unrestricted Subsidiaries),
and all amendments, modifications, renewals and extensions to any thereof.
"Pledged Stock" means all of the Capital Stock of the Borrower and of
each of the Subsidiaries of the Borrower (except Excluded Stock).
"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
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<PAGE> 25
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.
"Present Holder" means those owners of common Capital Stock of the
Parent set forth on Schedule 1.03 hereto and their Related Persons.
"Prohibited Transaction" has the meaning specified in Section 4975 of
the Code or Section 406 of Title I of ERISA.
"Property" means all types of real, personal, tangible, intangible, or
mixed property, whether owned or hereafter acquired in fee simple or leased by
the Parent, the Borrower and the Restricted Subsidiaries.
"PSINet Shares" means the Capital Stock of PSINet Inc. owned by IXC
Internet Services, Inc. on the Closing Date and described on Schedule 1.01
hereto.
"PUC" means any state regulatory agency or body that exercises
jurisdiction over the rates or services or the ownership, construction or
operation of any network facility or long distance telecommunications systems or
over Persons who own, construct or operate a network facility or long distance
telecommunications systems, in each case by reason of the nature or type of the
business subject to regulation and not pursuant to laws and regulations of
general applicability to Persons conducting business in such state.
"Quarterly Date" means the last Business Day of each March, June,
September and December during the term of this Agreement.
"Refinancing Advance" means any Advance which is used to pay the
principal amount (or any portion thereof) of an Advance at the end of its
Interest Period and which, after giving effect to such application, does not
result in an increase in the aggregate amount of outstanding Advances.
"Related Party" with respect to any Permitted Holder means (i) any
controlling stockholder, of an 80% (or more) owned Subsidiary, or spouse or
immediate family member (in the case of an individual) of such Permitted Holder
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 which consist of such Permitted Holder or such other
Persons referred to in the immediately preceding clause (i).
"Related Person" means with respect to Schedule 1.03 hereto, any
individual, (i) such individual's spouse (past or current), descendants (natural
or adoptive, of the whole or half blood) of the parents of such individual, such
individual's grandparents and parents (natural or adoptive), and the
grandparents, parents and descendants of parents (natural or adoptive, of the
whole of half blood) of such individual's spouse (past or current); or (ii) a
trust, corporation, partnership or other entity, whose beneficiaries, trustees,
donors, shareholders, partners or owners, or other persons or entities holding a
controlling interest in such entity, consist of such individual and/or such
other persons or entities referred to in the immediately preceding clause (i).
"Release Date" means the date on which the Notes have been paid, all
other Obligations due and owing have been paid and performed in full, and the
Commitment has been terminated.
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"Restricted Payments" means, for the Borrower, the Parent and the
Restricted Subsidiaries of the Borrower, (a) any direct or indirect
Distribution, dividend or other payment on account of any equity interest in, or
shares of, Capital Stock or other securities of the Parent, the Borrower and its
Restricted Subsidiaries (or the establishment of any sinking fund or otherwise
the setting aside of any funds with respect thereto), except such dividends that
are paid with common equity securities of the Parent; (b) any management,
consulting or other similar fees, or any interest thereon, payable by the
Borrower, the Parent or any of the Restricted Subsidiaries to Unrestricted
Subsidiary and/or any other Affiliate of the Parent and/or the Borrower (or the
establishment of any sinking fund or otherwise the setting aside of any funds
with respect thereto), but specifically excluding any consulting fees payable by
the Parent, the Borrower or any Restricted Subsidiary to a Person that is not an
Affiliate of the Parent and/or the Borrower, (c) loans or advances to employees
and/or shareholders of the Borrower, the Parent and the Subsidiaries of the
Borrower and the Parent, except advances to employees of the Borrower and its
Restricted Subsidiaries for moving and travel expenses in the ordinary course of
business; (d) payments of principal and/or interest, or the setting aside of
funds with respect thereto, of any Total Debt except the Obligations; (e)
dividends, distributions, redemptions, repurchases or defeasance of any
preferred stock issuance (or the setting aside of any funds to do so); (f)
payments of any amounts, fees, advances, loans, investments or otherwise to any
Unrestricted Subsidiary; and (g) any payment out of the Borrower Deposit Account
or the Parent Deposit Account.
"Restricted Subsidiary" means all those Subsidiaries of the Parent
and/or the Borrower that are not Unrestricted Subsidiaries, provided that,
notwithstanding the foregoing (a) all Subsidiaries designated by the Borrower as
Restricted Subsidiaries on the Closing Date shall remain Restricted Subsidiaries
until the Obligations have been repaid in full and the Commitments terminated,
(b) all Designated Restricted Subsidiaries shall be at all times Restricted
Subsidiaries hereunder, and (c) no Person may be included as a Restricted
Subsidiary hereunder that has not executed an Unlimited Guaranty that is at the
time of determination in full force and effect, except Mutual Signal and the
Subsidiaries of Mutual Signal. All Restricted Subsidiaries as of the Closing
Date are listed on Schedule 1.04 hereto.
"Revolver Commitment" means, with respect to the Revolver Loan,
$150,000,000 as reduced from time to time pursuant to Section 2.11 hereof.
"Revolver Advance" means any advance made under the Revolver Loan.
"Revolver Commitment Fee" means the fee described in Section 2.10(a)
hereof.
"Revolver Loan" means the loan made by a Lender pursuant to Section
2.01(a) of this Agreement.
"Revolver Note" means each Note of the Borrower evidencing Revolver
Advances under the Revolver Loan hereunder, substantially in the form of Exhibit
A hereto, together in each case, with any extension, renewal or amendment
thereof, or substitution therefor.
"Revolver Specified Percentage" means, as to any Lender, the percentage
indicated beside its name on the signature pages hereof designated as its
Revolver Specified Percentage, or as adjusted or specified (i) in any Assignment
and Acceptance or (ii) in any amendment to this Agreement.
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"Rights" means rights, remedies, powers, and privileges.
"Senior Debt" means, on any date of determination, Total Debt on such
date minus the sum of (a) the aggregate outstanding principal amount of the
Subordinated Notes, plus (b) to the extent included in Total Debt, accrued and
unpaid interest on the Subordinated Notes.
"Senior Leverage Ratio" means, on any date of determination, the ratio
of (a) Senior Debt on such date to (b) Annualized Operating Cash Flow, provided
that, for purposes of this calculation, Operating Cash Flow shall be calculated
as if all assets (including Capital Stock of Restricted Subsidiaries of the
Borrower and the Parent) acquired on any date during the period of determination
were acquired on the first day in such period of determination, and all assets
sold (including Capital Stock of Restricted Subsidiaries of the Borrower and the
Parent) on any date during the period of determination were sold on the first
day in such period of determination.
"Senior Notes" means those certain 12 and 1/2% Senior Notes Due 2005
issued by the Parent.
"Senior Notes Documentation" means that certain Indenture with respect
to the Senior Notes, and all other agreements and other documentation relating
to the Senior Notes, including, without limitation, that certain First
Supplemental Indenture, dated as of October 23, 1997, that certain Second
Supplemental Indenture, dated as of December 22, 1997, that certain Third
Supplemental Indenture, dated as of January 6, 1998 and that certain Fourth
Supplemental Indenture, dated as of April 3, 1998.
"Single Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, other than a Multiple Employer Plan of the Parent
or the Borrower.
"Solvent" means, with respect to any Person, that on such date (a) the
fair value of the Property of such Person is greater than the total amount of
liabilities, including without limitation Contingent Liabilities of such Person,
(b) the present fair salable value of the assets of such Person on a going
concern basis is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature, and (d) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person's Property would constitute an unreasonably small capital.
"Special Counsel" means the law firm of Donohoe, Jameson & Carroll,
P.C., Dallas, Texas, or such other individual or firm acting as special counsel
to Administrative Agent, as designated by Administrative Agent from time to
time.
"Special Purpose Advance" means any advance made under the Special
Purpose Loan.
"Special Purpose Commitment" means on any date of determination, the
aggregate commitment for the Special Purpose Loan, if the Special Purpose Loan
is a revolving loan, as determined in accordance with the terms of Section 2.17
hereof.
"Special Purpose Loan" means the loan, if any, made by a Lender
pursuant to Section 2.01(c) of this Agreement.
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"Special Purpose Note" means each Note of the Borrower evidencing
Special Purpose Advances hereunder, if any, substantially in the form agreed to
in accordance with the terms and conditions of Section 2.17 hereof, and
evidencing Special Purpose Advances made under the Special Purpose Loan,
together in each case, with any extension, renewal or amendment thereof, or
substitution therefor.
"Special Purpose Specified Percentage" means, as to any Lender, the
percentage indicated or specified in (i) any amendment to this Agreement or in
any amendment and restatement of this Agreement, either in accordance with the
terms and conditions of Section 2.17 hereof or otherwise and (ii) in any
Assignment and Acceptance.
"Subordinated Indebtedness" means Debt of the Parent that is unsecured
and subordinated to the Obligations, such Debt in each case (a) to be pursuant
to documentation containing terms and conditions no more onerous than this
Agreement and the Loan Papers, (b) to have a maturity not less than one year
after the Maturity Date, and (c) to be subordinated on terms and conditions no
less favorable to the Administrative Agent and the Lenders than the
subordination terms contained in the Subordinated Notes Documentation.
"Subordinated Notes" means those certain $450,000,000 9% Senior
Subordinated Notes Due 2008 issued by the Parent.
"Subordinated Notes Documentation" means that certain Indenture with
respect to the Subordinated Notes, and all other agreements and other
documentation relating to the Subordinated Notes.
"Subsidiary" of any Person means any corporation, limited liability
company, partnership, joint venture, trust or estate of which (or in which) 50%
or more of:
(a) the outstanding Capital Stock having voting power to elect
a majority of the board of directors of such corporation (irrespective
of whether at the time Capital Stock of any other class or classes of
such corporation shall or might have voting power upon the occurrence
of any contingency),
(b) the interest in the capital or profits of such partnership
or joint venture, or
(c) the beneficial interest of such trust or estate,
is at the time directly or indirectly owned by such Person, by such Person and
one or more of its Subsidiaries or by one or more of such Person's Subsidiaries.
"Taxes" means all taxes, assessments, imposts, fees, or other charges
at any time imposed by any Laws or Tribunal.
"Term Loan Advance" means the initial advance and any of the
Refinancing Advances made under the Term Loan.
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"Term Loan" means the term loan made by the Lenders pursuant to Section
2.01(b) of this Agreement.
"Term Loan Note" means each Note of the Borrower evidencing Term Loan
Advances hereunder, substantially in the form of Exhibit B hereto with respect
to Term Loan Advances made under the Term Loan, together with any extension,
renewal or amendment thereof, or substitution therefor.
"Term Loan Specified Percentage" means, as to any Lender, (a) prior to
the initial Term Loan Advance, the percentage indicated beside its name on the
signature pages hereof designated as its Term Loan Specified Percentage, or as
adjusted or specified (i) in any Assignment and Acceptance or (ii) in any
amendment to this Agreement, and (b) after the initial Term Loan Advance, the
percentage of the outstanding portion of the Term Loan held by such Lender on
any date of determination (after giving effect to assignments in accordance with
the terms of Section 11.04 hereof).
"Total Debt" means all Debt for Borrowed Money which would be shown on
a consolidated balance sheet in accordance with GAAP, including, without
limitation for the Parent, the Borrower and the Restricted Subsidiaries, (a)
Capital Lease obligations, (b) Debt of any other Person secured by a Lien on the
property of the Parent, the Borrower or any Restricted Subsidiary of the
Borrower in an amount equal to the lesser of (i) such Debt of such Person and
(ii) the value of such pledged property, (c) Contingent Liabilities, (d)
Withdrawal Liability and (e) overdue interest on any Debt for Borrowed Money
(but not accrued interest that is not overdue).
"Total Leverage Ratio" means, on any date of determination, the ratio
of (a) Total Debt on such date to (b) Annualized Operating Cash Flow, provided
that for purposes of this calculation, Operating Cash Flow shall be calculated
as if all assets (including Capital Stock of Restricted Subsidiaries of the
Borrower and the Parent) acquired on any date during the period of determination
were acquired on the first day in such period of determination, and all assets
(including Capital Stock of Restricted Subsidiaries of the Borrower and the
Parent) sold on any date during the period of determination were sold on the
first day in such period of determination.
"Total Specified Percentage" means, as to any Lender on any date of
determination, the percentage that such Lender's outstanding Advances (all
Revolver Advances, Special Purpose Advances (if any) and Term Loan Advances)
bears to the aggregate outstanding amount of Advances (all Revolver Advances,
Special Purpose Advances (if any), and Term Loan Advances) made by all Lenders
hereunder, provided that, if there are no outstanding Advances hereunder, "Total
Specified Percentage" shall mean for such Lender the percentage that the sum of
its (a) Revolver Specified Percentage of the Revolver Commitment plus (b) if the
Special Purpose Loan is a revolving loan as determined in accordance with
Section 2.17 hereof, Special Purpose Specified Percentage of the Special Purpose
Commitment, bears to the aggregate Commitments of all Lenders on such date.
"Tribunal" means any state, commonwealth, federal, foreign,
territorial, or other court or government body, subdivision, agency, department,
commission, board, bureau, or instrumentality of a governmental body.
"Type" refers to the distinction between Advances bearing interest at
the Base Rate and LIBOR Rate.
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"UCC" means the Uniform Commercial Code as adopted in the State of
Texas on the Closing Date.
"Unlimited Guaranty" means the Guaranty, executed in substantially
similar form by the Parent and each Restricted Subsidiary of the Parent and the
Borrower, guarantying payment and performance of the Obligations, substantially
in the form of Exhibit G attached hereto, as such agreement may be amended,
modified, renewed or extended from time to time, and each subsequent unlimited
Guaranty in the form of Exhibit G hereto executed by any newly acquired or
created Restricted Subsidiary of the Borrower and the Parent, as each such
agreement may be amended, modified, renewed or extended from time to time.
"Unrestricted Subsidiary" means those Subsidiaries of the Parent and
the Borrower that are not less than 50% owned and are designated in writing to
the Administrative Agent and each Lender by the Borrower as Unrestricted
Subsidiaries, including, without limitation, Eclipse (formerly Network Long
Distance, Inc.), IXC Internet and IXC International, Inc., provided that (a) no
Restricted Subsidiary existing on the Closing Date may be designated as an
Unrestricted Subsidiary and no Designated Restricted Subsidiary may be an
Unrestricted Subsidiary and (b) no Restricted Subsidiary may be owned by an
Unrestricted Subsidiary. Unrestricted Subsidiaries as of the Closing Date are
listed on Schedule 1.02 hereto. The Borrower may designate any Unrestricted
Subsidiary as a Restricted Subsidiary from time to time at its election, so long
as prior to the effectiveness of such designation, such new Restricted
Subsidiary has executed an Unlimited Guaranty of the Obligations, and executed
security agreements, pledge agreements, mortgages, deeds of trust and other
collateral documents (including corporate opinions, local counsel opinions,
surveys, and otherwise) satisfactory to the Administrative Agent to effectively
grant a Lien and security interest to the Administrative Agent on behalf of the
Lenders on all of such new Restricted Subsidiary's assets and Properties to
secure the Obligations, each such document and agreement to be in form, and on
terms and conditions acceptable to the Administrative Agent. Each newly formed
or acquired Unrestricted Subsidiary shall be effective as of the date of
formation or acquisition, respectively. Each (i) Restricted Subsidiary hereafter
designated by the Borrower as an Unrestricted Subsidiary from time to time after
the Closing Date in accordance with the terms hereof and (ii) Unrestricted
Subsidiary hereafter designated by the Borrower as a Restricted Subsidiary from
time to time after the Closing Date in accordance with the terms hereof, will be
effective as an Unrestricted Subsidiary or Restricted Subsidiary, respectively,
commencing the beginning of the next succeeding calendar quarter after notice is
delivered to the Lenders in accordance with the terms of Section 11.02 hereof,
provided that, if the next succeeding calendar quarter commences sooner than 10
days following such notice, the effectiveness of the designation as an
Unrestricted Subsidiary or Restricted Subsidiary, respectively, will commence on
the beginning of the second succeeding calendar quarter following such notice.
"Unused Facility Amount" means the Commitment minus the sum of (a) all
outstanding Revolver Advances, plus (b) all outstanding Special Purpose
Advances, if any, but only if the Special Purpose Loan is a revolving loan as
determined in accordance with the terms of Section 2.17 hereof, plus (c) all
issued and outstanding Letters of Credit, plus (d) all reimbursement obligations
with respect to any draws under any Letters of Credit.
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"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.
"Williams Agreement" means that certain IRU Agreement dated December
12, 1996 among the Borrower, Vyvx, Inc. (now known as Williams Communications,
Inc.), and The WilTech Group (now known as Williams Communications Group, Inc.),
as amended by Amendment No. 1 dated November 25, 1997 and as further amended
from time to time.
"Withdrawal Liability" has the meaning given such term under Part I of
Subtitle E of Title IV of ERISA.
"Year 2000 Compliant" means, with respect to a Person, that all
computer hardware and software that are material to the business and operations
of such Person will on a timely basis be able to perform properly date-sensitive
functions for all dates before and after January 1, 2000, including functions
with respect to any leap year.
1.02. Accounting and Other Terms . All accounting terms used in this
Agreement which are not otherwise defined herein shall be construed in
accordance with GAAP on a consolidated basis for the Parent, the Borrower and
its Restricted Subsidiaries, unless otherwise expressly stated herein.
References herein to one gender shall be deemed to include all other genders.
Except where the context otherwise requires, (a) definitions imparting the
singular shall include the plural and vice versa and (b) all references to time
are deemed to refer to Dallas time. In any calculation made hereunder,
including, without limitation, calculations made under Section 8.01 hereof,
Section 8.18 hereof and the definition of Applicable Margin hereof, to the
extent that any such calculations are made in reliance upon financial
information supplied to the Administrative Agent and the Lenders in accordance
with the terms hereof and such information is later corrected or changed in any
manner (pursuant to an audited statement or otherwise), all such calculations
made in accordance with the terms hereof shall be changed and effective
retroactively as if the correct information had been delivered originally.
ARTICLE II. THE LOAN FACILITY
2.01. Loans.
(a) Revolver Loans. Each Lender severally agrees, on the terms
and subject to the conditions hereinafter set forth, to make Revolver
Advances to the Borrower on a Business Day during the period from the
Closing Date to the Maturity Date, in an aggregate principal amount
outstanding not to exceed at any time such Lender's Revolver Specified
Percentage of the difference between the Revolver Commitment and the
sum of the undrawn face amount of all outstanding Letters of Credit,
plus reimbursement obligations under Article III hereof. Subject to the
terms and conditions of this Agreement, the Borrower may borrow, repay
and reborrow the Revolver Advances; provided, however, that at no time
shall the sum of (i) all outstanding Revolver Advances, plus (ii) the
undrawn face amount of all outstanding Letters of Credit, plus (iii)
reimbursement obligations under Article III hereof exceed the Revolver
Commitment.
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(b) Term Loan. Each Lender severally agrees, on the terms and
subject to the conditions hereinafter set forth, to continue the Term
Loan it made available to the Borrower on the "Closing Date" as defined
in the Original Credit Agreement, in an aggregate principal amount
equal to such Lender's Term Loan Specified Percentage of $200,000,000.
Once repaid, no Term Loan Advance may be reborrowed.
(c) Uncommitted Special Purpose Loans. Each Lender agrees, on
the terms and subject to the conditions hereinafter set forth, that
until December 31, 2000, this Agreement may be amended from time to
time in accordance with the terms of Section 2.17 hereof to permit the
Lenders, if any, or such new creditors in accordance with the terms of
Section 2.17 hereof, to make Special Purpose Advances under the Special
Purpose Loan, whether such loan is a term loan or revolving loan, to
the Borrower in an aggregate principal amount outstanding not to exceed
at any time $250,000,000, all in accordance with, and subject to the
terms of, Section 2.17 hereof.
(d) Maximum Aggregate Borrowings. Notwithstanding the
foregoing provisions and all other provisions of this Agreement and the
Loan Papers, until the Administrative Agent and the Lenders are in
receipt of an executed Compliance Certificate evidencing compliance
with all terms and conditions of this Agreement using the Borrower
prepared financial statements for the 1998 year end and fiscal quarter
ending December 31, 1998, the sum of (i) the maximum aggregate Advances
outstanding under the Loans (the Revolver Loan, the Special Purpose
Loan, if any, and the Term Loan) and (ii) the face amount of all
outstanding Letters of Credit, shall not exceed $275,000,000 at any one
time.
2.02. Making Advances.
(a) Each Borrowing of Advances shall be made upon the written
notice of the Borrower, received by Administrative Agent not later than
(i) 10:00 a.m. three Business Days prior to the date of the proposed
Borrowing, in the case of Advances which are LIBOR Advances and (ii)
3:00 p.m. one Business Day prior to the date of the proposed Borrowing,
in the case of Advances which are Base Advances. Each such notice of a
Borrowing (a "Borrowing Notice") shall be by telecopy or telephone,
promptly confirmed by letter, in substantially the form of Exhibit D
hereto specifying therein:
(i) the date of such proposed Borrowing, which shall be a
Business Day, and whether such Borrowing will be under the Revolver
Loan or the Special Purpose Loan;
(ii) the Type of Advances of which the Borrowing is to be
comprised;
(iii) the amount of such proposed Borrowing which, (A) with
respect to Advances drawn under (I) the Revolver Loan, shall not
exceed the unused portion of the Revolver Commitment less outstanding
Letters of Credit and reimbursement obligations and (II) the Special
Purpose Loan, shall not exceed the unused portion of the Special
Purpose Commitment, if any, and (B) shall (I) in the case of a
Borrowing of Base Advances, be in an amount of not less than
$2,000,000 or an integral multiple of $1,000,000 in excess thereof (or
any lesser amount if such amount is the remaining undrawn portion
under the Revolver Commitment or Special Purpose Commitment,
respectively), and (II) in the case of a
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Borrowing of LIBOR Advances, be in an amount of not less than
$5,000,000 or an integral multiple of $1,000,000 in excess thereof;
and
(iv) if the Borrowing is to be comprised of LIBOR Advances,
the duration of the initial Interest Period applicable to such
Advances.
If the Borrowing Notice fails to specify (a) whether such Borrowing is
under the Revolver Loan or the Special Purpose Loan, then such Borrowing shall
be deemed to be made under the Revolver Loan, (b) the duration of the initial
Interest Period for any Borrowing or Refinancing Advance, as applicable,
comprised of LIBOR Advances, such Interest Period shall be three months.
Administrative Agent shall promptly notify Lenders of each such notice. Each
Lender shall, before 1:00 p.m. on the date of each Advance under the Revolver
Loan and the Special Purpose Loan hereunder (other than a Refinancing Advance),
make available to Administrative Agent, at its office at NationsBank Plaza, 901
Main Street, Dallas, Texas 75202, such Lender's Revolver Specified Percentage or
Special Purpose Specified Percentage, as applicable, of the aggregate Advances
under the Revolver Loan or Special Purpose Loan, as applicable, to be made on
that day in immediately available funds.
(b) Unless any applicable condition specified in Article IV has not
been satisfied, Administrative Agent will make the funds promptly available to
the Borrower (other than with respect to a Refinancing Advance) by either (i)
wiring such amounts pursuant to any wiring instructions, or (ii) depositing such
amount in the account of the Borrower at the Administrative Agent, in each case
as specified by the Borrower to the Administrative Agent in writing.
(c) After giving effect to any Borrowing, (i) there shall not be more
than seven different Interest Periods in effect and (ii) the aggregate principal
amount of outstanding Advances under (A) the Revolver Loan, plus the sum of the
outstanding face amount of the Letters of Credit, and reimbursement obligations
under Article III shall not exceed the Revolver Commitment and (B) the Special
Purpose Loan shall not exceed the Special Purpose Commitment.
(d) No Interest Period applicable to any Advance shall extend beyond
the Maturity Date.
(e) Unless a Lender shall have notified Administrative Agent prior to
the date of any Advance that it will not make available its Applicable Specified
Percentage of any Advance, Administrative Agent may assume that such Lender has
made the appropriate amount available in accordance with Section 2.02(a) hereof,
and Administrative Agent may, in reliance upon such assumption, make available
to the Borrower a corresponding amount. If and to the extent any Lender shall
not have made such amount available to Administrative Agent, such Lender and the
Borrower severally agree to repay to Administrative Agent immediately on demand
such corresponding amount together with interest thereon, from the date such
amount is made available to the Borrower until the date such amount is repaid to
Administrative Agent, at (i) in the case of the Borrower, the Base Rate, and
(ii) in the case of such Lender, the Federal Funds Rate.
(f) The failure by any Lender to make available its Applicable
Specified Percentage of any Advance hereunder shall not relieve any other Lender
of its obligation, if any, to make available its Applicable Specified Percentage
of any Advance. In no event, however, shall any Lender be responsible for the
failure of any other Lender to make available any portion of any Advance.
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(g) The Borrower and the Parent shall indemnify each Lender against any
Consequential Loss incurred by each Lender as a result of (i) any failure to
fulfill, on or before the date specified for an Advance, the conditions to the
Advance set forth herein (including a Refinancing Advance) or (ii) the
Borrower's requesting that an Advance (including a Refinancing Advance) not be
made on the date specified in the Borrowing Notice.
2.03. Evidence of Debt for Borrowed Money.
(a) The Advances made by each Lender under the Revolver Loan shall be
evidenced by a Revolver Note in the amount of such Lender's Revolver Specified
Percentage of the Revolver Commitment in effect on the Closing Date.
(b) The Advances made by each Lender under the Special Purpose Loan
shall be evidenced by a Special Purpose Note as determined in accordance with
the terms of Section 2.17 hereof.
(c) The Advances made by each Lender under the Term Loan shall be
evidenced by a Term Loan Note in the amount of such Lender's Term Loan Specified
Percentage of $200,000,000.
(d) Administrative Agent's and each Lender's records shall be
presumptive evidence as to amounts owed Administrative Agent and such Lender
under the Notes and this Agreement.
2.04. Optional Prepayments.
(a) The Borrower may, upon at least two Business Days prior written
notice to Administrative Agent stating the proposed date and aggregate principal
amount of the prepayment, prepay the outstanding principal amount of any
Advances in whole or in part, together with accrued interest to the date of such
prepayment on the principal amount prepaid without premium or penalty other than
any Consequential Loss; provided, however, that in the case of a prepayment of a
Base Advance, the notice of prepayment may be given by telephone by 3:00 p.m.
upon at least one Business Day prior written notice. Each partial prepayment
shall, in the case of Base Advances under the Loans, be in an aggregate
principal amount of not less than $100,000 or a larger integral multiple of
$50,000 in excess thereof and, in the case of LIBOR Advances under the Loans, be
in an aggregate principal amount of not less than $500,000 or a larger integral
multiple of $100,000 in excess thereof. If any notice of prepayment is given,
the principal amount stated therein, together with accrued interest on the
amount prepaid and the amount, if any, due under Section 2.12 and Section 2.14
hereof, shall be due and payable on the date specified in such notice unless the
Borrower revokes its notice, provided that, if the Borrower revokes its notice
of prepayment prior to such date specified, the Borrower shall reimburse the
Administrative Agent for the account of all Lenders for all Consequential Losses
suffered by each Lender as a result of the Borrower's failure to prepay. A
certificate of each Lender claiming compensation under this Section 2.04(a),
setting forth in reasonable detail the calculation of the additional amount or
amounts to be paid to it hereunder shall be presumptive evidence of the validity
of such claim.
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(b) The application of prepayments made under this Section 2.04 as
between the Revolver Loan, the Special Purpose Loan and the Term Loan shall be
determined in accordance with the provisions of Section 2.13(f) hereof. All
prepayments made pursuant to this Section 2.04 shall be first applied to Base
Advances then to LIBOR Advances, all without premium or penalty, except the
Borrower must pay together with any such prepayments, any Consequential Losses.
2.05. Mandatory Prepayments.
(a) Asset Sales, PSINet Shares and Investments. To the extent that (i)
the Parent, the Borrower or any of the Restricted Subsidiaries consummates any
sale, transfer, conveyance or other divestiture of any asset or any of its
Properties other than Permitted Asset Sales (this provision in and of itself not
constituting permission to effectuate any such transactions), and/or (ii) the
Parent, the Borrower or any Restricted Subsidiary receives proceeds from the
sale of all or any portion of the PSINet Shares, and/or (iii) the Parent, the
Borrower or any of the Restricted Subsidiaries consummates any sale of all or
any portion of any Investment made under subsection (b) of the definition of
"Permitted Investments", then the Borrower shall immediately use 100% of the Net
Proceeds of any such transaction to repay the Obligations under the Loans.
(b) Public or Private Issuance of Equity. To the extent that the
Parent, the Borrower or any of the Restricted Subsidiaries consummates any
public or private issuance of equity (this provision in and of itself not
constituting permission to do so), then the Borrower shall immediately use the
net proceeds to repay the Obligations under the Loans.
(c) Mandatory Prepayments, Generally. The application of prepayments
made under this Section 2.05 as between the Revolver Loan, the Special Purpose
Loan and the Term Loan shall be determined in accordance with the provisions of
Section 2.13(f) hereof. All prepayments made pursuant to this Section 2.05 shall
be first applied to Base Advances then to LIBOR Advances, all without premium or
penalty, except the Borrower must pay together with any such prepayments, any
Consequential Losses.
2.06. Repayment.
(a) LIBOR Advances. The principal amount of each LIBOR Advance is due
and payable on the last day of the applicable Interest Period, which principal
payment may be made by means of a Refinancing Advance in accordance with the
terms of Section 2.09 hereof (and subject to the other provisions of this
Agreement).
(b) Commitment Reduction. On the date of a reduction of the Commitment
pursuant to Section 2.11 hereof, the aggregate amount of outstanding (i)
Revolver Advances in excess of the Revolver Commitment as reduced, and (ii) if
the Special Purpose Loan is a revolving loan as determined in accordance with
Section 2.17 hereof, the Special Purpose Advances in excess of the Special
Purpose Commitment as reduced, shall be immediately due and payable (which such
principal repayments may not be made by means of Refinancing Advances).
(c) Term Loan Repayment. The Term Loan shall be due and payable in full
on the Maturity Date, and all Term Loan Advances and other Obligations shall be
due and payable in full on the Maturity Date.
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(d) Maturity Date. All outstanding Advances under the Loans and all
other Obligations shall be due and payable in full on the Maturity Date.
(e) Repayments, Generally. All outstanding Advances and other
Obligations shall be due and payable in full on the Maturity Date. Any
repayments made pursuant to this Section shall be without premium or penalty,
except the Borrower must pay together with any such prepayments, any
Consequential Losses. Repayment of Advances shall be applied to Base Advances
first, and then to LIBOR Advances.
2.07. Interest. Subject to Section 2.08 and Section 11.08 hereof, the
Borrower shall pay interest on the unpaid principal amount of each Advance from
the date of such Advance until such principal shall be paid in full, at either
the Base Rate or the LIBOR Rate, as set forth in subsection (i) or (ii) below,
as selected by the Borrower in accordance with Section 2.02 hereof and as
follows:
(i) Base Advances. Base Advances shall bear interest at a rate
per annum equal to the Base Rate as in effect from time to time. If the
amount of interest payable in respect of any interest computation
period is reduced to the Highest Lawful Rate and the amount of interest
payable in respect of any subsequent interest computation period would
be less than the Maximum Amount, then the amount of interest payable in
respect of such subsequent interest computation period shall be
automatically increased to the Maximum Amount; provided that at no time
shall the aggregate amount by which interest paid has been increased
pursuant to this sentence exceed the aggregate amount by which interest
has been reduced pursuant to this sentence.
(ii) LIBOR Advances. LIBOR Advances shall bear interest at the
rate per annum equal to the LIBOR Rate applicable to such Advance.
(iii) Payment Dates. Accrued and unpaid interest on Base
Advances shall be paid quarterly in arrears on each Quarterly Date and
on the Maturity Date. Accrued and unpaid interest in respect of each
LIBOR Advance shall be paid on the last day of the appropriate Interest
Period, on the Maturity Date and on the date of any prepayment or
repayment of such Advance; provided, however, that if any Interest
Period for a LIBOR Advance exceeds three months, interest shall also be
paid on the date which falls three, six, and nine months after the
beginning of such Interest Period.
2.08. Default Interest. During the continuation of (a) any Default
under Section 9.01(a) hereof (the three day grace period for interest, fees and
other amounts payable) and (b) any Event of Default, the Borrower shall pay, on
demand, interest (after as well as before judgment to the extent permitted by
Law) on the principal amount of all Advances outstanding and on all other
Obligations due and unpaid hereunder at a per annum rate equal to the lesser of
the (a) the Highest Lawful Rate and (b) the Base Rate plus 2%. LIBOR Advances
shall not be available for selection by the Borrower during the continuance of
an Event of Default.
2.09. Continuation and Conversion Elections.
(a) The Borrower may upon irrevocable written notice to Administrative
Agent and subject to the terms of this Agreement:
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(i) elect to convert, on any Business Day, all or any portion
of outstanding Advances which are Base Advances (in an aggregate amount
not less than $500,000 or an integral multiple of $100,000 in excess
thereof) into LIBOR Advances; or
(ii) elect to convert at the end of any Interest Period
therefor, all or any portion of outstanding Advances which are LIBOR
Advances comprised in the same Borrowing (in an aggregate amount not
less than $100,000 or an integral multiple of $50,000 in excess
thereof) into Base Advances; or
(iii) elect to continue, at the end of any Interest Period
therefor, any Advances which are LIBOR Advances;
provided, however, that if the aggregate amount of outstanding LIBOR
Advances comprised in the same Borrowing shall have been reduced as a result of
any payment, prepayment or conversion of part thereof to an amount less than
$500,000, the LIBOR Advances comprised in such Borrowing shall automatically
convert into Base Advances at the end of each respective Interest Period.
(b) The Borrower shall deliver a notice of conversion or continuation
(a "Conversion or Continuation Notice"), in substantially the form of Exhibit E
hereto, to Administrative Agent not later than (i) 10:00 a.m. three Business
Days prior to the proposed date of conversion or continuation, if the Advances
(or any portion of either thereof) are to be converted into or continued as
LIBOR Advances; and (ii) 3:00 p.m. one Business Day prior to the proposed date
of conversion or continuation, if the Advances (or any portion thereof) are to
be converted into Base Advances.
Each such Conversion or Continuation Notice shall be by telecopy or
telephone, promptly confirmed by letter, specifying therein:
(i) the proposed date of conversion or continuation;
(ii) the aggregate amount of Advances to be converted or
continued, and whether the Advances are Revolver Advances, Special
Purpose Advances or Term Loan Advances;
(iii) the nature of the proposed conversion or continuation;
and
(iv) the duration of the applicable Interest Period.
(c) If, upon the expiration of any Interest Period applicable to LIBOR
Advances, the Borrower shall have failed to select a new Interest Period to be
applicable to such LIBOR Advances or if an Event of Default shall then have
occurred and be continuing, the Borrower shall be deemed to have elected to
convert such LIBOR Advances into Base Advances effective as of the expiration
date of such current Interest Period.
(d) Notwithstanding any other provision contained in this Agreement,
after giving effect to any conversion or continuation of any Advances, there
shall not be outstanding Advances with more than seven different Interest
Periods.
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2.10. Fees.
(a) Revolver Commitment Fee. Subject to Section 11.08 hereof, the
Borrower shall pay to Administrative Agent for the account of Lenders pro rata
in accordance with each Lender's Revolver Specified Percentage, a commitment fee
(the "Revolver Commitment Fee") equal to 0.500% per annum on the average daily
amount of the difference between (i) the Revolver Commitment and (ii) the sum of
(A) all outstanding Revolver Advances and (B) the face amount of all outstanding
Letters of Credit, payable in arrears on each Quarterly Date commencing with the
first Quarterly Date after the Closing Date, and continuing until the Maturity
Date.
(b) Other Fees. Borrower shall pay to Administrative Agent and the
Lenders such other fees as set forth in any Fee Letters addressed to the
Administrative Agent or any Lender.
2.11. Reduction of Commitments.
(a) Mandatory Termination of the Revolver Commitment and the Special
Purpose Commitment. The Revolver Commitment and, if the Special Purpose Loan is
a revolving loan in accordance with the terms of Section 2.17 hereof, the
Special Purpose Commitment, shall both automatically be reduced to zero and
terminate on the Maturity Date.
(b) Mandatory Reduction of Commitment Due to Asset Sales. The
Commitment shall be reduced immediately and automatically in an amount equal to
any amount required by Section 2.05(a) hereof to prepay the Loans as a result of
(i) any sales, transfers, conveyances or other divestitures of assets and
Properties of the Borrower, the Parent or any of the Restricted Subsidiaries
(this provision in and of itself not constituting permission to effectuate any
such transactions) and (ii) the receipt by the Parent, the Borrower or any
Restricted Subsidiary of proceeds from the sale of all or any portion of the
PSINet Shares, provided that, so long as there exists no Default or Event of
Default both before and after giving effect to such asset sales or Property
sales and both before and after any permitted reinvestment and so long as the
aggregate amount of Permitted Investments outstanding at any one time does not
exceed in initial purchase price $50,000,000, the Commitment shall not be
automatically and immediately reduced if the Borrower in good faith intends to
reinvest, and such proceeds are ultimately reinvested within a 12 month period
after any such asset sale, in telecommunications assets, internet assets,
Permitted Acquisitions or Permitted Investments.
(c) Mandatory Reduction of Commitment Due to Issuances of Public or
Private Equity. If at the time of any issuance of public or private equity by
the Borrower, the Parent or any of the Restricted Subsidiaries (this provision
in and of itself not constituting permission to effectuate any such
transaction), the Total Leverage Ratio is in excess of 3.00 to 1.00, from the
period from the date hereof and thereafter, the Commitment shall be reduced
immediately and automatically in an amount equal to 50% of any amount required
by Section 2.05(b) hereof to prepay outstanding Advances under the Loans
(regardless of whether there are actually any outstanding Advances) as a result
of any issuances of public or private equity (this provision in and of itself
not constituting permission to effectuate any issuances of public or private
equity), provided that, notwithstanding the foregoing, (A) if there exists any
Event of Default at such time 100% of the net proceeds shall be used to reduce
the Commitment, (B) if (I) there exists no Default or Event of Default both
before and after giving effect to any
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such issuance and (II) the proceeds of any such issuance are invested within a
12 month period in (x) Permitted Acquisitions and/or (y) Permitted Investments
and/or (z) telecommunications or internet assets, the Commitment shall not be
automatically and immediately reduced by any such amount, (C) if (I) there
exists no Default or Event of Default both before and after giving effect to any
such issuance, (II) the Parent has issued common stock and (III) the proceeds of
any such issuance of common stock are used within a 12 month period to
repurchase not more than 35% of the outstanding Junior Exchangeable in
accordance with the terms of the Junior Exchangeable Documentation, the
Commitment shall not be automatically and immediately reduced by any such
amount, and (D) if there exists no Default or Event of Default both before and
after giving effect to any such issuance, the Commitment shall not be
automatically and immediately reduced by the net proceeds of any Preferred Stock
issued by the Parent in accordance with the terms of Section 8.02(f)(i) hereof.
(d) Change of Control. If any Change of Control shall have occurred,
each of the Revolver Commitment and the Special Purpose Commitment (if the
Special Purpose Loan is a revolving loan as determined in accordance with
Section 2.17 hereof) shall immediately and automatically be reduced to zero,
provided that, except with respect to the Subordinated Notes as provided in
subsection (e) below, if the Loans are rated at least BBB or above, or any
equivalent thereto, by Standard & Poor's Ratings Group, a Division of
McGraw-Hill, Inc. or Moody's Investors Service, Inc. on the 30th day following
the event that otherwise would constitute a Change of Control (the "Change of
Control Determination Date"), neither the Revolver Commitment or the Special
Purpose Commitment shall be reduced to zero as a result of this Section,
provided, however, that to the extent there is a "rating watch" with respect to
the Loans 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 Loans are not subject to a "rating watch" or other rating agency review
rating by either Standard & Poor's Ratings Group, a Division of McGraw-Hill,
Inc. or Moody's Investors Service, Inc.
(e) Redemption, Repurchase of the Subordinated Notes. Upon any binding
request or demand for redemption (whether mandatory or otherwise, or defeasance
with respect to either thereof) of the Subordinated Notes (whether pursuant to a
Change of Control or otherwise), the Revolver Commitment and the Special Purpose
Commitment (if the Special Purpose Loan is a revolving loan as determined in
accordance with Section 2.17 hereof) shall immediately and automatically be
reduced to zero.
(f) Voluntary Commitment Reductions. The Borrower may from time to
time, upon notice to Administrative Agent not later than 1:00 p.m., three
Business Days in advance, terminate in whole or reduce in part the Commitment,
as designated by the Borrower; provided, however, that the Borrower shall pay
the accrued interest and the applicable accrued Commitment Fee on the amount of
such reduction and all amounts due, and any partial reduction shall be in an
aggregate amount which is an integral multiple of $5,000,000.
(g) Commitment Reduction and Repayments, Generally. Application of both
voluntary and mandatory reductions of the Commitments as between the Revolver
Commitment and the Special Purpose Commitment (if the Special Purpose Loan is a
revolving loan, as determined in accordance with the terms of Section 2.17
hereof) shall be determined in accordance with the terms of Section 2.13(f)
hereof. To the extent outstanding Revolver Advances exceed the Revolver
Commitment after any reduction thereof, the Borrower shall repay, on the date of
such reduction, any such excess amount and all accrued interest thereon, the
applicable Revolver Commitment Fee on the amount of such reduction and all
amounts due. If the Special Purpose Loan is a revolving loan as determined in
accordance with the terms of Section 2.17 hereof, to the extent outstanding
Special Purpose Advances exceed the Special Purpose Commitment after any
reduction thereof, the Borrower shall repay, on the date of such reduction, any
such excess amount and all accrued interest thereon, the applicable Special
Purpose Commitment Fee on the amount of such reduction and all amounts due.
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Once reduced or terminated, none of the Revolver Commitment or the Special
Purpose Commitment may be increased or reinstated (except the Special Purpose
Commitment, in accordance with the terms of Section 2.17 hereof). No reduction
of the Commitment, either voluntary or mandatory shall relieve or alter the
mandatory reduction and termination of the Revolver Commitment and the Special
Purpose Commitment (if the Special Purpose Loan is a revolving loan as
determined n accordance with the terms of Section 2.17 hereof) pursuant to
Section 2.11 hereof.
2.12. Funding Losses . The Borrower may prepay the outstanding
principal balance of any Advance, in full at any time or in part from time to
time in accordance with the terms of Section 2.04 hereof, provided, that as a
condition precedent to the Borrower's right to make, and any Lender's obligation
to accept, any such prepayment, each such prepayment shall be in the amount of
100% of the principal amount to be prepaid, plus accrued unpaid interest thereon
to the date of prepayment, plus any other sums which have become due to
Administrative Agent and Lenders under the Loan Papers on or before the
prepayment date but have not been paid, plus (subject to Section 11.08 hereof)
any Consequential Loss.
The Borrower agrees that each Lender is not obligated to actually
reinvest the amount prepaid in any specific obligation as a condition to
receiving any Consequential Loss, or otherwise.
2.13. Computations and Manner of Payments.
(a) The Borrower shall make each payment hereunder and under the other
Loan Papers not later than 1:00 p.m. on the day when due in same day funds (by
wire transfer or otherwise) to Administrative Agent, for the account of Lenders
unless otherwise specifically provided herein, at Administrative Agent's office
at NationsBank Plaza, 901 Main Street, Dallas, Texas 75202, referencing IXC
Communications Services, Inc. in payment of its Obligations. No later than the
end of each day when each payment hereunder is made, the Borrower shall notify
Loan Operations at (214) 209-9192 or such other Person as Administrative Agent
may from time to time specify.
(b) Unless Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due hereunder that the
Borrower will not make payment in full, Administrative Agent may assume that
such payment is so made on such date and may, in reliance upon such assumption,
make distributions to Lenders. If and to the extent the Borrower shall not have
made such payment in full, each Lender shall repay to Administrative Agent
forthwith on demand the applicable amount distributed, together with interest
thereon at the Federal Funds Rate, from the date of distribution until the date
of repayment. The Borrower hereby authorizes each Lender, if and to the extent
payment is not made when due hereunder, to charge the amount so due against any
account of the Borrower with such Lender.
(c) Subject to Section 11.08 hereof, interest on LIBOR Advances under
the Loan Papers shall be calculated on the basis of actual days elapsed but
computed as if each year consisted of 360 days. Subject to Section 11.08 hereof,
interest on Base Advances, the Commitment Fee and other amounts due under the
Loan Papers shall be calculated on the basis of actual days elapsed but computed
as if each year consisted of 365 or 366 days, as applicable. Such computations
shall be made including the first day but excluding the last day occurring in
the period for which such interest, payment or Commitment Fee is payable. Each
determination by Administrative Agent or a Lender of an interest rate, fee or
commission hereunder shall be presumptive evidence of the validity of such
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claim. All payments under the Loan Papers shall be made in United States
dollars, and without setoff, counterclaim, or other defense.
(d) Whenever any payment to be made hereunder or under any other Loan
Papers shall be stated to be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day, and such extension of
time shall be included in the computation of interest or fees, if applicable;
provided, however, if such extension would cause payment of interest on or
principal of LIBOR Advances to be made in the next following calendar month,
such payment shall be made on the next preceding Business Day.
(e) Reference to any particular index or reference rate for determining
any applicable interest rate under this Agreement is for purposes of calculating
the interest due and is not intended as and shall not be construed as requiring
any Lender to actually obtain funds for any Advance at any particular index or
reference rate.
(f) Notwithstanding anything to the contrary herein or in any Loan
Paper, to the extent the Borrower makes any voluntary prepayment, or voluntary
reduction of the Commitment under Sections 2.04 or 2.11 hereof, or any mandatory
prepayment, or mandatory reduction of the Commitment under Sections 2.05 and
2.11 hereof, then such reduction of Commitment or such prepayment shall be
applied as follows:
(i) so long as there exists no Default or Event of Default,
all voluntary Commitment reductions and all voluntary repayments and
prepayments shall be applied as directed by the Borrower, and in the
absence of direction by the Borrower, shall be deemed to prepay and
reduce, respectively, (1) the Revolver Loan and the Revolver Commitment
until the Revolver Commitment has been reduced to zero and the
outstandings under the Revolver Loan have been repaid in full, then (2)
if the Special Purpose Loan is a revolving loan as determined in
accordance with Section 2.17 hereof, the Special Purpose Advances and
the Special Purpose Commitment until the Special Purpose Commitment has
been reduced to zero and the outstandings under the Special Purpose
Loan have been repaid in full, then (3) if the Special Purpose Loan is
a term loan as determined in accordance with Section 2.17 hereof, the
Special Purpose Loan until the Special Purpose Advances have been
repaid in full, then (4) the Term Loan until the Term Loan Advances
have been repaid in full and then (5) to all remaining outstanding and
unpaid Obligations; and
(ii) if there exists a Default or Event of Default, all
mandatory and voluntary Commitment reductions shall be applied (A) to
the Revolver Commitment and to the Special Purpose Commitment, pro
rata, if the Special Purpose Loan is a revolving loan as determined in
accordance with the terms of Section 2.17 hereof or (B) to the Revolver
Commitment, if the Special Purpose Loan is a term loan as determined in
accordance with the terms of Section 2.17 hereof; and
(iii) if there exists a Default or Event of Default, all
mandatory and voluntary prepayments shall be applied to Advances
outstanding under the Special Purpose Loan (if any), the Revolver Loan
and the Term Loan, pro rata, until the Advances outstanding under each
of the Special Purpose Loan, the Revolver Loan and the Term Loan have
been repaid in full, and then to all remaining outstanding Obligations.
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2.14. Yield Protection; Changed Circumstances.
(a) If any Lender determines that either (i) the adoption of any
Applicable Law, rule, regulation or guideline regarding capital adequacy and
applicable to commercial banks or financial institutions generally or any change
therein, or any change, after the date hereof, in the interpretation or
administration thereof by any Tribunal, central bank or comparable agency
charged with the interpretation or administration thereof, or (ii) compliance by
any Lender (or Lending Office of any Lender) with any request or directive
applicable to commercial banks or financial institutions generally regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency has the effect of reducing the rate of return
on such Lender's capital as a consequence of its obligations hereunder to a
level below that which such Lender could have achieved but for such adoption,
change or compliance (taking into consideration such Lender's policies with
respect to capital adequacy) by an amount reasonably deemed by such Lender to be
material, then from time to time, within fifteen days after demand by such
Lender, the Borrower shall pay to such Lender such additional amount or amounts
as will adequately compensate such Lender for such reduction. Each Lender will
notify the Borrower of any event occurring after the date of this Agreement
which will entitle such Lender to compensation pursuant to this Section 2.14(a)
as promptly as practicable after such Lender obtains actual knowledge of such
event; provided, no Lender shall be liable for its failure or the failure of any
other Lender to provide such notification. A certificate of such Lender claiming
compensation under this Section 2.14(a), setting forth in reasonable detail the
calculation of the additional amount or amounts to be paid to it hereunder shall
be presumptive evidence of the validity of such claim. If such Lender demands
compensation under this Section 2.14(a), the Borrower may at any time, on at
least five Business Days' prior notice to such Lender (i) repay in full the then
outstanding principal amount of LIBOR Advances, of such Lender, together with
accrued interest thereon, or (ii) convert the LIBOR Advances to Base Advances in
accordance with the provisions of this Agreement; provided, however, that the
Borrower shall be liable for the Consequential Loss arising pursuant to those
actions.
(b) If, after the date hereof, any Tribunal, central bank or other
comparable authority, at any time imposes, modifies or deems applicable any
reserve (including, without limitation, any imposed by the Board of Governors of
the Federal Reserve System), special deposit or similar requirement against
assets of, deposits with or for the amount of, or credit extended by, any
Lender, or imposes on any Lender any other condition affecting a LIBOR Advance,
the Notes, or its obligation to make a LIBOR Advance, or imposes on any Lender
any other condition affecting a Letter of Credit; and the result of any of the
foregoing is to increase the cost to such Lender of making or maintaining its
Letter of Credit, LIBOR Advances, or to reduce the amount of any sum received or
receivable by such Lender under this Agreement or under the Notes, the Letters
of Credit or reimbursement obligations by an amount deemed by such Lender, to be
material, then, within five days after demand by such Lender, the Borrower shall
pay to such Lender such additional amount or amounts as will compensate such
Lender for such increased cost or reduction. Each Lender will (i) notify the
Borrower of any event occurring after the date of this Agreement that entitles
such Lender to compensation pursuant to this Section 2.14(b), as promptly as
practicable after such Lender obtains actual knowledge of the event; provided,
no Lender shall be liable for its failure or the failure of any other Lender to
provide such notification and (ii) use good faith and reasonable efforts to
designate a different Lending Office for LIBOR Advances, of such Lender if the
designation will avoid the need for, or reduce the amount of, the compensation
and will not, in the sole opinion of such Lender, be disadvantageous to such
Lender. A certificate of such Lender claiming compensation under this Section
2.14(b), setting forth in reasonable detail the computation of the additional
amount or
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amounts to be paid to it hereunder shall be presumptive evidence of the validity
of such claim. If such Lender demands compensation under this Section 2.14(b),
the Borrower may at any time, on at least five Business Days' prior notice to
such Lender (i) repay in full the then outstanding principal amount of LIBOR
Advances, of such Lender, together with accrued interest thereon, or (ii)
convert the LIBOR Advances to Base Advances in accordance with the provisions of
this Agreement; provided, however, that the Borrower shall be liable for the
Consequential Loss arising pursuant to those actions.
(c) Notwithstanding any other provision of this Agreement, if the
introduction of or any change in or in the interpretation or administration of
any Law shall make it unlawful, or any central bank or other Tribunal shall
assert that it is unlawful, for a Lender to perform its obligations hereunder to
issue or maintain Letters of Credit, make LIBOR Advances, to continue to fund or
maintain LIBOR Advances hereunder, make Base Rase Advances or otherwise perform
any of such Lender's obligations hereunder, then, on notice thereof and demand
therefor by such Lender to the Borrower, such Lender may take any of the
following actions: (i) each LIBOR Advance will automatically, upon such demand,
convert into a Base Advance, (ii) the obligation of such Lender to make, or to
convert Advances into, LIBOR Advances or Base Rate Advances, or both, shall be
suspended until such Lender notifies Administrative Agent and the Borrower that
such Lender has determined that the circumstances causing such suspension no
longer exist, and (iii) the obligation of such Lender to make or maintain
Letters of Credit shall be suspended until such Lender notifies Administrative
Agent and the Borrower that such Lender has determined that the circumstances
causing such suspension no longer exist.
(d) Upon the occurrence and during the continuance of any Default or
Event of Default, (i) each LIBOR Advance will automatically, on the last day of
the then existing Interest Period therefor, convert into a Base Advance and (ii)
the obligation of each Lender to make, or to convert Advances into, LIBOR
Advances shall be suspended.
(e) If any Lender notifies Administrative Agent that the LIBOR Rate for
any Interest Period for any LIBOR Advances will not adequately reflect the cost
to such Lender of making, funding or maintaining LIBOR Advances for such
Interest Period, Administrative Agent shall promptly so notify the Borrower,
whereupon (i) each such LIBOR Advance will automatically, on the last day of the
then existing Interest Period therefor, convert into a Base Advance and (ii) the
obligation of such Lender to make, or to convert Advances into, LIBOR Advances
shall be suspended until such Lender notifies Administrative Agent that such
Lender has determined that the circumstances causing such suspension no longer
exist and Administrative Agent notifies the Borrower of such fact.
(f) Failure on the part of any Lender to demand compensation for any
increased costs, increased capital or reduction in amounts received or
receivable or reduction in return on capital pursuant to this Section 2.14 with
respect to any period shall not constitute a waiver of any Lender's right to
demand compensation with respect to such period or any other period, subject,
however, to the limitations set forth in this Section 2.14.
(g) The obligations of the Borrower under this Section 2.14 shall
survive any termination of this Agreement, provided that, in no event shall the
Borrower be required to make a payment under this Section 2.14 with respect to
any event of which the Lender making such claim had knowledge more than 12
months prior to demand for such payment.
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(h) Determinations by Lenders for purposes of this Section 2.14 shall
be presumptively correct. Any certificate delivered to the Borrower by a Lender
pursuant to this Section 2.14 shall include in reasonable detail the basis for
such Lender's demand for additional compensation and a certification that the
claim for compensation is consistent with such Lender's treatment of similar
customers having similar provisions generally in their agreements with such
Lender.
(i) Notwithstanding any other provision of this Agreement, no Lender
not organized under the Laws of the United States or any State (or which has a
Bank Affiliate not organized under the Laws of the United States or any State)
shall be entitled to compensation pursuant to this Section 2.14 with respect to
any amount which would otherwise be due under this Section 2.14 but which is the
result of an act of a Tribunal of the country in which such Lender or Bank
Affiliate is organized, provided that, Lenders organized under the Laws of
Canada will be entitled to the benefits of this Section as a result of an act of
a Tribunal of Canada.
2.15. Use of Proceeds.
(a) Revolver Advances. The proceeds of the Revolver Advances
shall be available (and the Borrower shall use such proceeds) solely
(a) for Permitted Acquisitions consummated by the Parent, the Borrower
and the Designated Restricted Subsidiaries, (b) for Capital
Expenditures made by the Parent, the Borrower and the Designated
Restricted Subsidiaries and permitted under the terms of this
Agreement, (c) for working capital of the Parent, the Borrower and the
Designated Restricted Subsidiaries and (d) for other lawful corporate
purposes of the Parent, the Borrower and the Designated Restricted
Subsidiaries.
(b) Special Purpose Advances and the Initial Term Loan
Advance. The proceeds of the Special Purpose Advances and the initial
Term Loan Advance shall be available (and the Borrower shall use such
proceeds) solely to finance 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
Parent, the Borrower or any Designated Restricted Subsidiary.
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2.16. Collateral and Collateral Call.
(a) Collateral. Payment of the Obligations will be secured by (i) a
first perfected security interest in 100% of the Capital Stock of the Borrower
and each of the Subsidiaries of the Parent and the Borrower, except Excluded
Stock, (ii) Unlimited Guaranties of the Obligations by each Guarantor, (iii) a
first perfected security interest (except for Permitted Liens) in accounts,
inventory, non-fixture equipment of the Borrower, the Parent and each of the
Restricted Subsidiaries, inter-company loans among the Parent, the Borrower, and
the Subsidiaries (except loans between Unrestricted Subsidiaries), the Borrower
Deposit Account and the Parent Deposit Account, but excluding (A) all tangible
and intangible assets of Mutual Signal and the Subsidiaries of Mutual Signal,
(B) fiber and other related assets subject to an IRU, (C) microwave assets of
the Parent, the Borrower and the Restricted Subsidiaries, (D) intellectual
property of the Parent, the Borrower and the Restricted Subsidiaries, (E) motor
vehicles, and (F) assets subject to Liens permitted under Section 8.03(b)
hereof, and (iv) certain real estate sites and contract rights of the Parent,
the Borrower and the Restricted Subsidiaries (except Mutual Signal and its
Subsidiaries) (collectively, together with all other Properties or assets of the
Parent, the Borrower, Subsidiaries and other Persons securing the Obligations
from time to time, the "Collateral"). The Borrower agrees that it will, and will
cause the Parent and the Restricted Subsidiaries to execute and deliver, or
cause to be executed and delivered, such documents as the Administrative Agent
may from time to time reasonably request to create and perfect a first Lien
(subject to Permitted Liens) for the benefit of the Administrative Agent and the
Lenders in the Collateral, subject to the terms of Section 6.18 hereof.
(b) Collateral Call. The Borrower agrees upon the creation, formation
or acquisition of any direct or indirect Restricted Subsidiary of the Borrower
and/or the Parent, to immediately pledge 100% of the Capital Stock of any such
Restricted Subsidiary to secure the Obligations, pursuant to a pledge agreement
substantially in the form of Exhibit H hereto, and to promptly deliver to the
Administrative Agent all certificates or other documentation evidencing 100% of
such Capital Stock and, if such Capital Stock is stock of a corporation,
together with stock powers executed in blank. The Borrower agrees,
notwithstanding (a) above, promptly upon request by the Administrative Agent, to
use its best efforts to take all actions necessary or advisable to promptly
grant the Administrative Agent on behalf of the Lenders a Lien and/or security
interest in all or any portion of the tangible and intangible assets and
Properties of the Parent, the Borrower and the Restricted Subsidiaries (whether
through Capital Stock or otherwise), including to immediately pledge/mortgage or
grant a first priority security interest in real property to secure the
Obligations, provided that under no circumstances shall the Borrower be required
to grant a Lien and/or security interest in the microwave assets, motor
vehicles, and other Properties and assets of the Parent, the Borrower and the
Restricted Subsidiaries subject to a Permitted Lien or a Lien permitted by
Section 8.03(b) hereof, or other assets which are prohibited by law or
prohibited contractually on the date hereof from being subject to Liens. The
Borrower agrees to use its best efforts to (and cause the Parent and the
Restricted Subsidiaries to use their best efforts to), upon the request of the
Majority Lenders, grant the Administrative Agent on behalf of Lenders a first
priority Lien or security interest (subject to Permitted Liens) in any asset of
the Borrower, the Parent or any of their Restricted Subsidiaries.
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2.17. Conditions Precedent to the Making of the Special Purpose Loan.
Upon written request by the Borrower to Lenders of its choice
(including, as set forth below, other lenders not initially party to this
Agreement or the other Loan Papers), and only so long as each Lender determines
in its sole discretion in writing to make such Special Purpose Loan available to
the Borrower, or increase the amount of the Special Purpose Loan, the Special
Purpose Loan shall be made to the Borrower under the terms hereof, or increased
under the terms hereof, in an aggregate outstanding amount not to exceed
$250,000,000, in accordance with, and subject to, each of the terms and
conditions set forth below:
(a) The Special Purpose Loan, or any increase to the Special
Purpose Loan must be effective prior to December 31, 2000. The Borrower
and the Administrative Agent may request any or all of the Lenders and
any new creditors to participate in the making of the Special Purpose
Loan. No Lender shall be required to participate. The Borrower, the
Administrative Agent and the participating Lenders, and any new
creditors participating in the making of the Special Purpose Loan,
shall agree as to whether the Special Purpose Loan is a revolving loan
or a term loan, and shall further agree on all terms and conditions in
connection with such loan, including facility fees, commitment fees,
administrative fees, underwriting fees and other fees and amounts,
interest, amortization and other terms and conditions, provided that,
notwithstanding the foregoing, the Maturity Date shall be the same for
the Special Purpose Loan. Each such Lender electing to participate in
such Special Purpose Loan shall commit to an amount not less than
$10,000,000, but shall accept any allocation amount designated by the
Borrower and the Administrative Agent that is equal to or less than its
proposed portion of the Special Purpose Loan. The amount of the Special
Purpose Loan (or the Special Purpose Commitment, if the Special Purpose
Loan is a revolving loan) shall be in excess of $50,000,000, but not in
an amount in excess of $250,000,000.
(b) Notwithstanding any other provision of this Agreement and
the Loan Papers, it is expressly agreed by each Lender that any
provision of Article II and Section 4.02(g) of this Agreement, and each
of the definitions used therein, may be amended, or amended and
restated, to effectuate the intent of this Section 2.17 by an agreement
of the new lenders for the Special Purpose Loan representing 51% or
more of the aggregate amount of the Special Purpose Loan, provided
that, notwithstanding the foregoing (i) no such amendment will (A)
increase the Revolver Commitment, (B) reduce any principal, interest,
fees, or other amounts payable hereunder, or waive or result in the
waiver of any Event of Default under Section 9.01(a) hereof, (C)
postpone any date fixed for any payment of principal, interest, fees,
or other amounts payable hereunder, (D) release or impair any
Collateral or guaranties securing any Obligor's obligations hereunder,
other as contemplated hereby and by the other Loan Papers or (E) change
the meaning of "Total Specified Percentage", "Revolver Specified
Percentage", "Term Loan Specified Percentage", except to adjust them to
effectuate the intent of Section 2.17 hereof, or the number of Lenders
required to take any action hereunder, (F) change the definitions of
"Commitment", "Revolver Commitment", "Maturity Date", "Majority
Lenders", or "Letter of Credit Commitment", without the consent of all
Lenders, and (ii) this Agreement and the Loan Papers will only be
amended in order to effectuate the intent of this Section 2.17.
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(c) Upon satisfaction of each of the conditions precedent in
this Section 2.17, after the making of the Special Purpose Loan, and if
the Special Purpose Loan is a revolving loan, the Borrower shall be
entitled to increase the amount of the Special Purpose Commitment from
time to time in an aggregate amount for all such increases not to
exceed $200,000,000, and in each case by not less than $10,000,000 (or
$5,000,000 multiples thereof), provided that the Special Purpose
Commitment may not exceed $250,000,000 in the aggregate at any time.
Each Lender specified by the Borrower shall have received not less than
ten days' prior written notice from the Borrower (or such lesser notice
as acceptable to each specified Lender) requesting such Special Purpose
Commitment increase. Each such Lender electing to participate in such
Special Purpose Commitment increase shall commit to an amount not less
than $10,000,000, but shall accept any allocation amount designated by
the Borrower and the Administrative Agent that is equal to or less than
its proposed portion of the Special Purpose Commitment increase. If the
Special Purpose Loan is a term loan, the Borrower shall not be entitled
to increase the Special Purpose Loan.
(d) On any date of proposed making of a Special Purpose Loan
or increase to the Special Purpose Commitment, the representations and
warranties contained in Article V hereof must be true and correct on
such date, as though made on and as of such date, except to the extent
expressly made only as of a prior date.
(e) On any date of proposed making of a Special Purpose Loan
or increase to the Special Purpose Commitment, no Default or Event of
Default shall exist, and no Default or Event of Default would result
from the making of such Special Purpose Loan or such increase to the
Special Purpose Commitment, and, with respect to any increase to such
Special Purpose Commitment, the sum of all Special Purpose Advances
outstanding shall not exceed the Special Purpose Commitment.
(f) The Borrower shall have paid all such Lenders (including
new lenders) agreeing to provide any portion of the Special Purpose
Loan all facility fees and other upfront fees prior to the making of
the Special Purpose Loan. For any increase from time to time to the
Special Purpose Commitment, the Borrower and such Lenders (including
the new lenders) shall have agreed to an upfront facility fee for each
such increase, such fees to be negotiated at the time of access of each
such increase, which such fees in each case shall be paid prior to or
on the date of such increase.
(g) Notwithstanding anything herein or in any other Loan Paper
to the contrary, the Borrower and the Administrative Agent may agree to
add other creditors in connection with the making of the Special
Purpose Loan or any proposed increase to the Special Purpose
Commitment.
(h) With respect to the making of the Special Purpose Loan and
each increase to the Special Purpose Commitment, the Administrative
Agent shall have received a pro-forma Compliance Certificate in form
and substance acceptable to the Lenders and demonstrating compliance
with the terms of this Agreement and the Loan Papers for one full year
after the date of the making of any Special Purpose Loan and each
increase to the Special Purpose Commitment.
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(i) With respect to the making of the Special Purpose Loan and
each increase to the Special Purpose Commitment, the Administrative
Agent shall have received financial projections in form and substance
acceptable to the Lenders and demonstrating compliance with the
financial covenants set forth in Section 8.01 hereof throughout the
term of this Agreement.
(j) With respect to the making of the Special Purpose Loan and
each increase to the Special Purpose Commitment, the Administrative
Agent shall have received a certificate from the Borrower to the effect
that (i) such making of the Special Purpose Loan or such increase has
received all required regulatory approvals, if necessary, and is in
compliance with all applicable Laws, and (ii) no other approvals or
consents from any Person are required by any such Person except to the
extent they have been received.
(k) With respect to the making of the Special Purpose Loan and
each increase to the Special Purpose Commitment, the Administrative
Agent and each Lender (including any new Lenders party hereto) shall
have received new Special Purpose Notes evidencing the Special Purpose
Loan, and any increase in the Special Purpose Commitment, and the
Borrower, each Lender and each new Lender agrees to execute any and all
such documents deemed necessary by the Administrative Agent in order to
effectuate this Section 2.17 (and for no other purpose), whether
UCC-1s, new documentation relating to any Collateral, Unlimited
Guaranty or otherwise.
(l) Promptly after making the Special Purpose Loan and
promptly after any increase of the Special Purpose Commitment, the
Administrative Agent shall deliver to each Lender evidence of new
Special Purpose Specified Percentages and Total Specified Percentages
adjusted to give effect to the Special Purpose Loan or any increase in
the Special Purpose Commitment.
(m) With respect to the making of the Special Purpose Loan and
each increase to the Special Purpose Commitment, on or prior to the
date of making of such loan or increase, each new lender being added to
the credit facility shall deliver to the Borrower and the
Administrative Agent documentation acceptable to the Administrative
Agent evidencing such new Lender's acceptance of this Agreement and all
the other Loan Papers in form and substance reasonably acceptable to
the Administrative Agent (and making such lender a party to this
Agreement and the other Loan Papers).
(n) With respect to the making of the Special Purpose Loan and
each increase to the Special Purpose Commitment, on the date of making
of such loan or any such increase, the Administrative Agent shall
deliver to the Borrower notice of the cost of any LIBOR breakage or
other Consequential Loss incurred by any Lender as a result of such
increase and reallocation to the Lenders, and the Borrower shall pay
such costs on the date of increase in immediately available funds to
the Administrative Agent on behalf of such Lenders.
In connection with the making of any Special Purpose Loan and any
increase to the Special Purpose Commitment in accordance with the terms of this
Section 2.17, each existing Lender (regardless of whether such Lender is
participating in such increase) agrees to execute any and all agreements
requested by the Administrative Agent to effectuate the intent of this Section
2.17.
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ARTICLE III. LETTERS OF CREDIT
3.01. Issuance of Letters of Credit. Letters of Credit issued under the
Original Credit Agreement shall be deemed, for the purposes of this Agreement,
to be issued hereunder, and each such Letter of Credit shall be treated in
accordingly. The Borrower shall give the Administrative Agent not less than five
Business Days prior written notice of a request for the issuance of a Letter of
Credit, and the Administrative Agent shall promptly notify each Lender of such
request. Upon receipt of the Borrower's properly completed and duly executed
Applications, and subject to the terms of such Applications and to the terms of
this Agreement, the Administrative Agent agrees to issue Letters of Credit on
behalf of the Borrower in an aggregate face amount not in excess of the lesser
of (a) Letter of Credit Commitment and (b) the remainder of the Revolver
Commitment minus the sum of all outstanding Revolver Advances plus the aggregate
face amount of all outstanding Letters of Credit. No Letter of Credit shall have
a maturity extending beyond the earliest of (i) the Maturity Date, or (ii) one
year from the date of its issuance, or (iii) such earlier date as may be
required to enable the Borrower to satisfy its repayment obligations under
Section 2.06 hereof. Subject to such maturity limitations and so long as no
Default or Event of Default has occurred and is continuing or would result from
the renewal of a Letter of Credit, the Letters of Credit may be renewed by the
Administrative Agent in its discretion. The Lenders shall participate ratably in
any liability under the Letters of Credit and in any unpaid reimbursement
obligations of the Borrower with respect to any Letter of Credit in their
Revolver Specified Percentages. The amount of the Letters of Credit issued and
outstanding and the unpaid reimbursement obligations of the Borrower for such
Letters of Credit shall reduce the amount of Revolver Commitment available, so
that at no time shall the sum of (i) all outstanding Revolver Advances in the
aggregate, plus (ii) the aggregate face amount of all outstanding Letters of
Credit, plus (iii) (without duplication) all outstanding reimbursement
obligations related to Letters of Credit, exceed the Revolver Commitment, and at
no time shall the sum of all Revolver Advances by any Lender made plus its
ratable share of amounts available to be drawn under the Letters of Credit and
the unpaid reimbursement obligations of the Borrower in respect of such Letters
of Credit exceed its Revolver Specified Percentage of the Revolver Commitment.
3.02.Letters of Credit Fee . In consideration for the issuance of each
Letter of Credit, the Borrower shall pay to (a) the Administrative Agent for its
sole account, an application and processing fee in the amount of the higher of
(i) $350.00 and (ii) the product of 1/8th of 1% multiplied by the face amount of
such Letter of Credit on each Letter of Credit, due and payable on the date of
issuance of each Letter of Credit, and (b) the Administrative Agent for the
account of the Lenders in accordance with their Revolver Specified Percentages,
a per annum fee for each Letter of Credit equal to the higher of (i) $350.00 and
(ii) the product of the Applicable Margin for a LIBOR Advance in effect on the
date of calculation multiplied by the face amount of each such Letter of Credit.
Each fee for each Letter of Credit under subsection (b) above shall be due and
payable to the Administrative Agent quarterly as it accrues, on each Quarterly
Date during the term of the Letter of Credit and on the expiration or renewal of
each such Letter of Credit, beginning with the first such Quarterly Date after
the issuance of each Letter of Credit and ending on the expiration date of each
such Letter of Credit.
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3.03. Reimbursement Obligations.
(a) The Borrower hereby agrees to reimburse Administrative Agent
immediately upon demand by Administrative Agent, and in immediately available
funds, for any payment or disbursement made by Administrative Agent under any
Letter of Credit. Payment shall be made by the Borrower with interest on the
amount so paid or disbursed by Administrative Agent from and including the date
payment is made under any Letter of Credit to and including the date of payment,
at the lesser of (i) the Highest Lawful Rate, and (ii) the sum of the Base Rate
in effect from time to time plus 2% per annum; provided, however, that if the
Borrower would be permitted under the terms of Section 2.01, Section 2.02 and
Section 4.02 to borrow Revolver Advances in amounts at least equal to their
reimbursement obligation for a drawing under any Letter of Credit, a Base
Advance by each Lender, in an amount equal to such Lender's Revolver Specified
Percentage, shall automatically be deemed made on the date of any such payment
or disbursement made by Administrative Agent in the amount of such obligation
and subject to the terms of this Agreement.
(b) The Borrower hereby also agrees to pay to Administrative Agent
immediately upon demand by Administrative Agent and in immediately available
funds, as security for their reimbursement obligations in respect of the Letters
of Credit under Section 3.03(a) hereof and any other amounts payable hereunder
and under the Notes, an amount equal to the aggregate amount available to be
drawn under Letters of Credit then outstanding, irrespective of whether the
Letters of Credit have been drawn upon, upon an Event of Default. Any such
payments shall be deposited in a separate account designated "IXC Communications
Services Special Account" or such other designation as Administrative Agent
shall elect. All such amounts deposited with Administrative Agent shall be and
shall remain funds of the Borrower on deposit with Administrative Agent and may
be invested by Administrative Agent as Administrative Agent shall determine.
Such amounts may not be used by Administrative Agent to pay the drawings under
the Letters of Credit; however, such amounts may be used by Administrative Agent
as reimbursement for Letter of Credit drawings which Administrative Agent has
paid. During the existence of an Event of Default but after the expiration of
any Letter of Credit that was not drawn upon, the Borrower may direct the
Administrative Agent to use any cash collateral for any such expired Letter of
Credit, if any, to reduce the amount of the Obligations. Any amounts remaining
in the IXC Communications Services Special Account, after the date of the
expiration of all Letters of Credit and after all Obligations have been paid in
full, shall be repaid to the Borrower promptly after such expiration and such
payment in full.
(c) The obligations of the Borrower under this Section 3.03 will
continue until all Letters of Credit have expired and all reimbursement
obligations with respect thereto have been paid in full by the Borrower and
until all other Obligations shall have been paid in full.
(d) The Borrower shall be obligated to reimburse Administrative Agent
upon demand for all amounts paid under the Letters of Credit as set forth in
Section 3.03(a) hereof; provided, however, if the Borrower for any reason fails
to reimburse Administrative Agent in full upon demand, whether by failing to or
not being permitted to borrow Revolver Advances to pay such reimbursement
obligations or otherwise, the Lenders shall reimburse Administrative Agent in
accordance with each Lender's Revolver Specified Percentage for amounts due and
unpaid from the Borrower as set forth in Section 3.04 hereof; provided, however,
that no such reimbursement made by the Lenders shall discharge the Borrower's
obligations to reimburse Administrative Agent.
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(e) The Borrower and the Parent shall indemnify and hold Administrative
Agent or any Lender, its officers, directors, representatives and employees
harmless from loss for any claim, demand or liability which may be asserted
against Administrative Agent or such indemnified party in connection with
actions taken under the Letters of Credit or in connection therewith (INCLUDING
LOSSES RESULTING FROM THE NEGLIGENCE OF ADMINISTRATIVE AGENT OR SUCH INDEMNIFIED
PARTY), and shall pay Administrative Agent for reasonable fees of attorneys (who
may be employees of Administrative Agent) and legal costs paid or incurred by
Administrative Agent in connection with any matter related to the Letters of
Credit, except for losses and liabilities incurred as a direct result of the
gross negligence or wilful misconduct of Administrative Agent or such
indemnified party. If the Borrower for any reason fails to indemnify or pay
Administrative Agent or such indemnified party of Administrative Agent as set
forth herein in full, the Lenders shall indemnify and pay Administrative Agent
upon demand, in accordance with each Lender's Revolver Specified Percentage of
such amounts due and unpaid from the Borrower. The provisions of this Section
3.03(e) shall survive the termination of this Agreement.
3.04. Lenders' Obligations. Each Lender agrees, unconditionally and
irrevocably to reimburse Administrative Agent on demand for such Lender's
Revolver Specified Percentage of each draw paid by Administrative Agent under
any Letter of Credit. All amounts payable by any Lender under this subsection
shall include interest thereon at the Federal Funds Rate, from the date of the
applicable draw to the date of reimbursement by such Lender. No Lender shall be
liable for the performance or nonperformance of the obligations of any other
Lender under this Section. The obligations of the Lenders under this Section
shall continue after the Maturity Date and shall survive termination of any Loan
Papers.
3.05. Administrative Agent's Obligations.
(a) Administrative Agent makes no representation or warranty, and
assumes no responsibility with respect to the validity, legality, sufficiency or
enforceability of any Application or any document relative thereto or to the
collectibility thereunder. Administrative Agent assumes no responsibility for
the financial condition of the Borrower and its Subsidiaries or for the
performance of any obligation of the Borrower. Administrative Agent may use its
discretion with respect to exercising or refraining from exercising any rights,
or taking or refraining from taking any action which may be vested in it or
which it may be entitled to take or assert with respect to any Letter of Credit
or any Application.
(b) Administrative Agent shall be under no liability to any Lender,
with respect to anything the Administrative Agent may do or refrain from doing
in the exercise of its judgment, the sole liability and responsibility of
Administrative Agent being to handle each Lender's share on as favorable a basis
as Administrative Agent handles its own share and to promptly remit to each
Lender its share of any sums received by Administrative Agent under Article III
or any Application. Administrative Agent shall have no duties or
responsibilities except those expressly set forth herein and those duties and
liabilities shall be subject to the limitations and qualifications set forth
herein.
(c) Neither Administrative Agent nor any of its directors, officers, or
employees shall be liable for any action taken or omitted (whether or not such
action taken or omitted is expressly set forth herein) under or in connection
herewith or any other instrument or document in connection herewith, except for
gross negligence or willful misconduct, and no Lender waives its right to
institute legal action against Administrative Agent for wrongful payment of any
Letter of Credit due to
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Administrative Agent's gross negligence or willful misconduct. Administrative
Agent shall incur no liability to any Lender, the Borrower or any Affiliate of
the Borrower or Lender in acting upon any notice, document, order, consent,
certificate, warrant or other instrument reasonably believed by Administrative
Agent to be genuine or authentic and to be signed by the proper party.
ARTICLE IV. CONDITIONS PRECEDENT
4.01. Conditions Precedent to the Initial Rollover Advance, the
Issuance of the Initial Letter of Credit and the Effectiveness of this
Agreement. The obligation of each Lender to make the initial rollover Advance
under the Loans, or issue the initial Letter of Credit, is subject to receipt by
the Administrative Agent of each of the following, in form and substance
satisfactory to the Administrative Agent, with a copy (except for the Notes) for
each Lender:
(a) a loan certificate of the Borrower certifying as to the accuracy of
its representations and warranties in the Loan Papers, certifying that no
Default or Event of Default has occurred under the terms of this Agreement, and
including a certificate of incumbency with respect to each Authorized Officer,
and containing a representation that each of the following items that were
attached to the loan certificate delivered pursuant to Section 4.01(a) of the
Original Credit Agreement remains unchanged and valid therefrom, except as shown
on the attachments: (i) copies of the Articles of Incorporation or other charter
documents of the Borrower, the Parent and each of the Restricted Subsidiaries,
certified to be true, complete and correct by the secretary of state of each
such Person's respective state of incorporation, (ii) copies of the By-Laws of
the Borrower, the Parent and each of the Restricted Subsidiaries and (iii)
copies of a certificate of good standing and a certificate of existence for the
Parent in Delaware and Texas, the Borrower in Delaware, Texas and California,
each of the Restricted Subsidiaries' state of incorporation, and each state
where each Restricted Subsidiary is qualified;
(b) a loan certificate of the Borrower certifying that a copy of the
resolutions of the Borrower, the Parent and each of the Restricted Subsidiaries
authorizing them to execute, deliver and perform this Agreement and the other
Loan Papers to which each of them is a party is attached and is a true and
accurate copy;
(c) in form and substance acceptable to the Administrative Agent, duly
executed and completed affirmation of the following Loan Papers delivered in
connection with the Original Credit Agreement: (i) the Notes, (ii) pledge
agreements by the Borrower and the Parent, and, to the extent applicable, each
Restricted Subsidiary, (iii) Unlimited Guaranties executed by the Parent and
each of the Restricted Subsidiaries except Mutual Signal and Subsidiaries of
Mutual Signal, and (iv) all security agreements, mortgages, deeds of trust,
assignment agreements, and (v) other Loan Papers and collateral agreements
executed by the Borrower, the Parent and any Restricted Subsidiary, as
appropriate;
(d) all other Loan Papers (if any) necessary to be delivered on the
Closing Date duly executed and completed, dated the Closing Date;
(e) opinions addressed to Administrative Agent on behalf of the Lenders
of corporate counsel to the Borrower, the Parent and each Restricted Subsidiary
with respect to organizational
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matters, authorization, execution, etc., in form and substance acceptable to the
Administrative Agent and Lenders;
(f) reimbursement for Administrative Agent of its reasonable fees and
expenses and for Special Counsel's reasonable fees and expenses rendered through
the Closing Date;
(g) payment of an amendment and restatement fees (i) in the amount of
25 basis points on the sum of each Lender's Commitment plus each Lender's Term
Loan Specified Percentage of the Term Loan (including the Administrative Agent
and the Co-Syndication Agents), but in each case, only to such Lenders signatory
to this Agreement, and (ii) pursuant to any Fee Letters;
(h) a designation from the Borrower and the Parent that the Loans (and
the Unlimited Guaranties of the Loans by the Parent) constitute "Senior
Indebtedness" and "Designated Senior Indebtedness" as defined in, and in
accordance with the terms of, the Subordinated Notes Documentation and the
Junior Exchangeable Documentation, and a certificate of the Borrower and the
Parent that this Agreement is a "Credit Agreement" as defined in the
Subordinated Notes Documentation;
(i) evidence that all corporate proceedings of the Parent, the Borrower
and each Restricted Subsidiary taken in connection with the transactions
contemplated by this Agreement and the other Loan Papers, shall be reasonably
satisfactory in form and substance to the Lenders and Special Counsel; and the
Lenders shall have received copies of all documents or other evidence which the
Administrative Agent, Special Counsel or any Lender may reasonably request in
connection with such transactions;
(j) a certificate from the Borrower stating that there has been no
material adverse change in the financial condition, business, operations, or
prospects of the Parent, the Borrower and its Subsidiaries since December 31,
1998;
(k) in form and substance satisfactory to the Lenders and Special
Counsel, an executed copy of a written confirmation of the Auditor regarding
that certain change in the accounting treatment of fiber IRUs used by the
Parent, the Borrower and its Subsidiaries, which such change will be effective
June 30, 1999; and
(l) in form and substance satisfactory to the Lenders and Special
Counsel, such other documents, instruments and certificates as the
Administrative Agent or any Lender may reasonably require in connection with the
transactions contemplated hereby, including without limitation the status,
organization or authority of the Parent, the Borrower or any Restricted
Subsidiary, and the enforceability of and security for the Obligations.
4.02. Conditions Precedent to All Advances and Letters of Credit. The
obligation of each Lender to make each Advance hereunder (excluding each
Refinancing Advance), and the obligation of the Administrative Agent to issue
any Letter of Credit shall be subject to the further conditions precedent that
on the date of such Advance or such issuance of such Letter of Credit:
(a) All of the representations and warranties of the Borrower under
this Agreement shall be true and correct at such time in all material respects,
both before and after giving effect to the
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application of the proceeds of the Advance or the issuance of the Letter of
Credit, except those representations and warranties that specifically speak as
of a particular date;
(b) The incumbency of the Authorized Officers shall be as stated in the
certificate of incumbency delivered in the Borrower's loan certificate pursuant
to Section 4.01(a) or as subsequently modified and reflected in a certificate of
incumbency delivered to the Administrative Agent. The Lenders may, without
waiving this condition, consider it fulfilled and a representation by the
Borrower made to such effect if no written notice to the contrary, dated on or
before the date of such Advance or the issuance of such Letter of Credit, is
received by the Administrative Agent from the Borrower prior to the making of
such Advance or such Letter of Credit;
(c) There shall not exist a Default or an Event of Default hereunder
and none shall exist as a result of making any such Advance or such Letter of
Credit, and the Administrative Agent shall have received written or telephonic
certification thereof by an Authorized Officer (which certification, if
telephonic, shall be followed promptly by written certification);
(d) No event shall have occurred that could reasonably be expected to
cause a Material Adverse Change since June 30, 1998;
(e) In the case of each Letter of Credit, Borrower shall have delivered
to the Administrative Agent a duly executed and complete Application acceptable
to Administrative Agent;
(f) In the case of any Revolver Advance, the aggregate outstanding
Revolver Advances after giving effect to such proposed Revolver Advance, plus
the sum of the face amount of all outstanding Letters of Credit plus all
reimbursement obligations under Article III hereof, shall not exceed the
Revolver Commitment;
(g) In the case of any Special Purpose Advance, (i) if the Special
Purpose Loan is a revolving loan as determined in accordance with Section 2.17
hereof, the aggregate outstanding Special Purpose Advances after giving effect
to such proposed Special Purpose Advance shall not exceed the Special Purpose
Commitment, (ii) the Borrower shall represent and warrant that the use of the
proceeds of the Special Purpose Advance complies with Section 2.15(b) hereof
(and the delivery of a Borrowing Notice shall constitute such representation)
and (c) such Special Purpose Advance is permitted Debt under the Existing
Financing Documentation, including, without limitation, Section 4.03(b)(5) of
the Indenture with respect to the Subordinated Notes and Section (l)(ii)(B)(7)
of the Certificate of Designation with respect to the Junior Exchangeable; and
(h) Until the Administrative Agent and the Lenders are in receipt of an
executed Compliance Certificate evidencing compliance with all terms and
conditions of this Agreement using the Borrower prepared financial statements
for the 1998 year end and fiscal quarter ending December 31, 1998, the Borrower
shall have delivered evidence satisfactory to the Administrative Agent that the
sum of (i) the maximum aggregate Advances outstanding under the Loans and (ii)
the face amount of all outstanding Letters of Credit, shall not exceed
$275,000,000 at any one time.
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ARTICLE V. REPRESENTATIONS AND WARRANTIES
5.01. Representations and Warranties. The Borrower hereby represents
and warrants to each Lender as follows:
(a) The respective jurisdictions of incorporation and percentage
ownership of the Subsidiaries of the Borrower and the Parent on the Closing Date
and listed on Schedule 5.01(a) hereto are true and correct. Each of the Borrower
and the Restricted Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its state of organization. Each
of the Borrower, the Parent and the Restricted Subsidiaries has the corporate
power and corporate authority to own its properties and to carry on its business
as now being conducted. Each of the Borrower, the Parent and the Restricted
Subsidiaries is duly qualified, in good standing and authorized to do business
in each jurisdiction in which the character of its Properties or the nature of
its business requires such qualification or authorization, except where the
failure to so qualify could not reasonably be expected to cause a Material
Adverse Change.
(b) The Borrower has corporate power and has taken all necessary
corporate action to authorize it to borrow hereunder. Each of the Parent, the
Borrower and the Restricted Subsidiaries has corporate power and has taken all
necessary corporate action to execute, deliver and perform the Loan Papers to
which it is party in accordance with the terms thereof, and to consummate the
transactions contemplated thereby. Each Loan Paper has been duly executed and
delivered by the Borrower, the Parent or such Restricted Subsidiary executing
it. Each of the Loan Papers to which the Borrower, the Parent and the Restricted
Subsidiaries are party is a legal, valid and binding obligation of the Borrower,
the Parent or such Restricted Subsidiary, as applicable, enforceable in
accordance with its terms, subject, to enforcement of remedies, to the following
qualifications: (i) equitable principles generally, and (ii) bankruptcy,
insolvency, liquidation, reorganization, reconstruction and other similar laws
affecting enforcement of creditors' rights generally (insofar as any such law
relates to the bankruptcy, insolvency or similar event of the Borrower, the
Parent or any Subsidiary of the Borrower or the Parent).
(c) The execution, delivery and performance by the Borrower, the Parent
and the Restricted Subsidiaries of the other Loan Papers to which they are
respectively a party, and the consummation of the transactions contemplated
thereby, do not and will not (i) require any consent or approval not already
obtained, (ii) violate any Applicable Law, (iii) conflict with, result in a
breach of, or constitute a default under the articles of incorporation or
by-laws of the Borrower, the Parent or any Restricted Subsidiary, or under any
material License, indenture, agreement or other instrument, to which the
Borrower, the Parent or any Restricted Subsidiary is a party or beneficiary of,
or by which they or their respective Properties may be bound, or (iv) result in
or require the creation or imposition of any Lien upon or with respect to any
property now owned or hereafter acquired by the Borrower, the Parent or any
Restricted Subsidiary, except Permitted Liens.
(d) The Borrower, the Parent and the Restricted Subsidiaries are
primarily engaged in the operation of telecommunications, internet and pursuing
activities related thereto.
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(e) On the Closing Date, all material Licenses of the Parent, the
Borrower and the Restricted Subsidiaries have been duly authorized and obtained,
and are in full force and effect. The Parent, the Borrower and the Restricted
Subsidiaries are in compliance in all material respects with all provisions
thereof. On the Closing Date, no material License is the subject of any pending
or, to the best of the Borrower's knowledge, threatened challenge or revocation.
On each date after the Closing Date on which this representation is deemed to be
made, no material License is the subject of any pending or, to the best of the
Borrower's knowledge, threatened challenge or revocation, which such event could
reasonably be expected to cause a Material Adverse Change. The Borrower, the
Parent and the Restricted Subsidiaries are not required to obtain any material
License that has not already been obtained from, or effect any material filing
or registration that has not already been effected with, the FCC, any applicable
PUC or any other federal, state or local regulatory authority in connection with
the execution and delivery of this Agreement or any other Loan Paper, or the
performance thereof (other than any enforcement of remedies by the
Administrative Agent on behalf of the Lenders), in accordance with their
respective terms, including any borrowings hereunder.
(f) The Parent, the Borrower and the Restricted Subsidiaries are in
compliance in all material respects with all material Applicable Laws. The
Parent, the Borrower and the Restricted Subsidiaries have duly and timely filed
all reports, statements and filings that are required to be filed by any of them
under the Communications Act, and are in all material respects in compliance
therewith, including without limitation the rules and regulations of the FCC and
each applicable PUC. Except as set forth on Schedule 5.01(f) hereto, as of the
Closing Date, the Borrower is not aware of any event or circumstance
constituting noncompliance (or any Person alleging noncompliance) with any rule
or regulation of the FCC or any applicable PUC. On each date after the Closing
Date on which this representation is deemed to be made, the Borrower is not
aware of any event or circumstance constituting noncompliance (or any Person
alleging noncompliance) with any rule or regulation of the FCC or any applicable
PUC, which such event or circumstance could reasonably be expected to cause a
Material Adverse Change.
(g) On the Closing Date, the Parent, the Borrower and the Restricted
Subsidiaries have good and indefeasible title to, or a valid leasehold interest
in, all of their material assets and Properties. On each date after the Closing
Date on which this representation is deemed to be made, the Parent, the Borrower
and the Restricted Subsidiaries have good and indefeasible title to, or a valid
leasehold interest in, all of their material assets and Properties, in which any
such failure could reasonably be expected to cause a Material Adverse Change.
None of the assets of the Parent, the Borrower and the Restricted Subsidiaries
is subject to any Liens, except Permitted Liens and Liens permitted under
Section 8.03(b) hereof. No financing statement or other Lien filing authorized
by the Parent, the Borrower or any Restricted Subsidiary (except relating to
Permitted Liens and Liens permitted by Section 8.03(b) hereof) is on file in any
state or jurisdiction that names the Borrower, the Parent or any of the
Restricted Subsidiaries as debtor or covers (or purports to cover) any assets of
the Parent, the Borrower or any of the Restricted Subsidiaries. The Parent, the
Borrower and the Restricted Subsidiaries have not signed any such financing
statement or filing, nor any security agreement authorizing any Person to file
any such financing statement or filing.
(h) On the Closing Date, except as reflected on Schedule 5.01(h)
hereto, there is no action, suit, proceeding or any other Litigation pending
against, or, to the best of the Borrower's knowledge, threatened against the
Parent, the Borrower or any of their Subsidiaries, or in any other manner
relating directly and materially adversely to the Parent, the Borrower, any of
their Subsidiaries, or any of their material Properties, in any court or before
any arbitrator of any kind or before or by any
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governmental body. On each date after the Closing Date on which this
representation is deemed to be made, there is no action, suit, proceeding or any
other Litigation pending against, or, to the best of the Borrower's knowledge,
threatened against the Parent, the Borrower or any of their Subsidiaries, or in
any other manner relating to the Borrower, the Parent or any of their
Subsidiaries, or any of their Properties, in any court or before any arbitrator
of any kind or before or by any governmental body, which could reasonably be
expected to cause a Material Adverse Change.
(i) All federal, state and other Tax returns of the Borrower, the
Parent and their Subsidiaries required by law to be filed have been duly filed
and all federal, state and other Taxes, assessments and other governmental
charges or levies upon the Borrower, the Parent, their Subsidiaries or any of
their Properties, income, profits and assets, which are due and payable, have
been paid, except those that are diligently contested in good faith by the
Borrower and for which a reserve has been established in accordance with GAAP,
and no Lien (other than a Permitted Lien) has attached and no foreclosure,
distraint, sale or similar proceedings have been commenced.
(j) The Borrower has furnished or caused to be furnished to the Lenders
copies of its financial statements at June 30, 1998 which are prepared in good
faith and complete in all material respects. Each such statement presents fairly
in all material respects and in accordance with GAAP, the financial position of
the Parent, the Borrower and the Restricted Subsidiaries as at such dates, and
the results of operations for the periods then ended (except that such financial
statements may be subject to year-end audit adjustments). The Borrower, the
Parent and the Restricted Subsidiaries have no material liabilities, contingent
or otherwise, nor material losses, except as disclosed in writing to the Lenders
prior to the Closing Date or as disclosed on any subsequent financial
statements. On the Closing Date after giving effect to the Advances made on such
date, the Borrower, the Parent and each of the Restricted Subsidiaries is
Solvent.
(k) On the Closing Date, since the date of the most recent financial
statements delivered to the Lenders, no event or circumstances have occurred or
arisen that could reasonably be expected to cause a Material Adverse Change.
(l) None of the Borrower, the Parent or their Controlled Group
maintains or contributes to any Plan other than those disclosed to the
Administrative Agent in writing. Each such Plan is in compliance in all material
respects with the applicable provisions of ERISA, the Code, and any other
applicable Federal or state law, rule or regulation. With respect to each Plan
of the Borrower and the Parent, and each member of its Controlled Group (other
than a Multiemployer Plan), all reports required under ERISA or any other
Applicable Law to be filed with any governmental authority, the failure of which
to file could reasonably result in liability of the Borrower, the Parent or any
member of its Controlled Group in excess of $100,000, have been duly filed. All
such reports are true and correct in all material respects as of the date given.
No such Plan of the Borrower, the Parent or any member of its Controlled Group
has any accumulated funding deficiency (as defined in Section 412(a) of the
Code) (without regard to any waiver granted under Section 412 of the Code), nor
has any funding waiver from the Internal Revenue Service been received or
requested. None of the Borrower, the Parent, or any member of its Controlled
Group has failed to make any contribution or pay any amount due or owing as
required by Section 412 of the Code or Section 302 of ERISA or the terms of any
such Plan prior to the due date under Section 412 of the Code and Section 302 of
ERISA. There has been no ERISA Event or any event requiring disclosure under
Section 4041(c)(3)(C), 4068(f), 4063(a) or 4043(b) of ERISA with respect to any
Plan or trust of the Borrower, the Parent or any member of its Controlled Group
since the effective date of ERISA. The
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value of the assets of each Plan (other than a Multiemployer Plan) of the
Borrower, the Parent and each member of its Controlled Group equaled or exceeded
the present value of the benefit liabilities, as defined in Title IV of ERISA,
of each such Plan as of the most recent valuation date using Plan actuarial
assumptions at such date. There are no pending or, to the best of the Borrower's
knowledge, threatened claims, lawsuits or actions (other than routine claims for
benefits in the ordinary course) asserted or instituted against, and neither the
Borrower, the Parent, nor any member of its Controlled Group has knowledge of
any threatened Litigation or claims against, (i) the assets of any Plan or trust
or against any fiduciary of a Plan with respect to the operation of such Plan,
or (ii) the assets of any employee welfare benefit plan within the meaning of
Section 3(1) or ERISA, or against any fiduciary thereof with respect to the
operation of any such plan. None of the Borrower, the Parent or any member of
its Controlled Group has engaged in any non-exempt prohibited transactions,
within the meaning of Section 406 or Section 4.08 of ERISA or Section 4975 of
the Code, in connection with any Plan. None of the Borrower, the Parent or any
member of its Controlled Group has incurred or reasonably expects to incur (A)
any liability under Title IV of ERISA (other than premiums due under Section
4007 of ERISA to the PBGC), (B) any withdrawal liability (and no event has
occurred which with the giving of notice under Section 4219 of ERISA would
result in such liability) under Section 4201 of ERISA as a result of a complete
or partial withdrawal (within the meaning of Section 4203 or 4205 of ERISA) from
a Multiemployer Plan, or (C) any liability under Section 4062 of ERISA to the
PBGC or to a trustee appointed under Section 4042 of ERISA. None of the
Borrower, the Parent, any member of its Controlled Group, or any organization to
which the Borrower, the Parent, or any member of its Controlled Group is a
successor or parent corporation within the meaning of ERISA Section 4069(b), has
engaged in a transaction within the meaning of ERISA Section 4069. None of the
Borrower, the Parent or any member of its Controlled Group maintains or has
established any welfare benefit plan within the meaning of Section 3(1) of ERISA
which provides for continuing benefits or coverage for any participant or any
beneficiary of any participant after such participant's termination of
employment except as may be required by the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA") and the regulations thereunder,
and at the expense of the participant or the beneficiary of the participant, or
retiree medical liabilities. Each of the Borrower, the Parent and its Controlled
Group which maintains a welfare benefit plan within the meaning of Section 3(1)
of ERISA has complied in all material respects with any applicable notice and
continuation requirements of COBRA and the regulations thereunder.
(m) The Borrower is not, nor is the Parent or any of the Restricted
Subsidiaries, engaged principally or as one of its important activities in the
business of extending credit for the purpose of purchasing or carrying any
margin stock within the meaning of Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System, and no part of the proceeds of the
Advances will be used to purchase or carry any margin stock (as defined by
Regulation U) or to extend credit to others for the purpose of purchasing or
carrying any margin stock. Not more than 25% of the assets of any of the Parent,
the Borrower or any of their Subsidiaries are margin stock (as defined by
Regulation U), and none of the Pledged Stock or other Capital Stock of the
Borrower, the Parent and their Subsidiaries is margin stock. None of the Parent,
the Borrower and their Subsidiaries, nor any agent acting on their behalf, have
taken or will knowingly take any action which might cause this Agreement or any
Loan Papers to violate any regulation of the Board of Governors of the Federal
Reserve System or to violate the Exchange Act, in each case as in effect now or
as the same may hereafter be in effect.
(n) The Parent, the Borrower and the Restricted Subsidiaries are in
compliance with all of the provisions of their articles of incorporation. The
Parent, the Borrower and the Restricted
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Subsidiaries are in material compliance with all of the provisions of their
by-laws. As of the Closing Date, no event has occurred or failed to occur, which
has not been remedied or waived, the occurrence or non-occurrence of which
constitutes, or which with the passage of time or giving of notice or both would
constitute, (i) an Event of Default or (ii) a default by the Parent, the
Borrower or any of the Restricted Subsidiaries under any material contract, or
other material indenture, agreement or other instrument, or any judgment, decree
or order to which the Parent, the Borrower or any of the Restricted Subsidiaries
is a party or by which they or any of their material Properties is bound. On
each date after the Closing Date on which this representation is deemed to be
made, no event has occurred or failed to occur, which has not been remedied or
waived, the occurrence or non-occurrence of which constitutes, or which with the
passage of time or giving of notice or both would constitute, (i) an Event of
Default or (ii) a default by the Parent, the Borrower or any of the Restricted
Subsidiaries under any material contract or other material indenture, agreement
or other instrument, or any judgment, decree or order to which the Parent, the
Borrower or any of Restricted Subsidiaries is a party or by which they or any of
their material Properties is bound, that could reasonably be expected to cause a
Material Adverse Change.
(o) The Borrower is not, nor is the Parent or any of their
Subsidiaries, required to register under the provisions of the Investment
Company Act of 1940, as amended. Neither the entering into or performance by the
Borrower of this Agreement nor the issuance of the Notes, nor the execution,
delivery and performance of the obligations under the Loan Papers by the Parent
and their Subsidiaries, violates any provision of such act or requires any
consent, approval, or authorization of, or registration with, the Securities and
Exchange Commission or any other governmental or public body of authority
pursuant to any provisions of such act.
(p) On the Closing Date, none of the Parent, the Borrower nor any or
their Subsidiaries has any actual knowledge or reason to believe that any
substance deemed hazardous by any applicable Environmental Law, has been
installed on any real property now owned by the Parent, the Borrower or any of
their Subsidiaries, except (i) for hazardous substances the presence of which is
not in violation of law and (ii) as disclosed in writing to the Lenders. On each
date after the Closing Date on which this representation is deemed to be made,
none of the Parent, the Borrower nor any Restricted Subsidiary has any actual
knowledge or reason to believe that any substance deemed hazardous by any
applicable Environmental Law, has been installed in violation of law on any real
property now owned by the Parent, the Borrower or any of the Restricted
Subsidiaries except as disclosed to the Lenders in writing, and which could not,
in the reasonable judgment of the Borrower, cause a Material Adverse Change. As
of the Closing Date, the Parent, the Borrower and the Restricted Subsidiaries
are not in violation of or subject to any existing, pending or, to the best of
the Borrower's knowledge, threatened investigation or inquiry by any
governmental authority or to any material remedial obligations under any
applicable Environmental Laws, and this representation and warranty would
continue to be true and correct following disclosure to the applicable
governmental authorities of all relevant facts, conditions and circumstances, if
any, pertaining to any real property of the Parent, the Borrower and the
Restricted Subsidiaries. On each date after the Closing Date on which this
representation is deemed to be made, the Borrower, the Parent and the Restricted
Subsidiaries are not in violation of or subject to any existing, pending or, to
the best of the Borrower's knowledge, threatened investigation or inquiry by any
governmental authority or to any material remedial obligations under any
applicable Environmental Laws which could cause a Material Adverse Change, and
this representation and warranty would continue to be true and correct following
disclosure to the applicable governmental authorities of all relevant facts,
conditions and circumstances, if any, pertaining to any real property of the
Parent, the Borrower and the Restricted
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Subsidiaries. The Borrower, the Parent and the Restricted Subsidiaries are not
required to obtain any permits, Licenses or similar authorizations to construct,
occupy, operate or use any buildings, improvements, fixtures, and equipment
forming a part of any real property of the Borrower, the Parent or any
Restricted Subsidiary by reason of any applicable Environmental Laws, except
those that have been obtained. As of the Closing Date, the Parent, the Borrower
and the Restricted Subsidiaries have no actual knowledge or reason to believe,
after reasonable investigation, that any hazardous substances or solid wastes
have been disposed of or otherwise released on or to the real property of the
Borrower or any of its Restricted Subsidiaries in violation of any applicable
Environmental Law. On each date after the Closing Date on which this
representation is deemed to be made, the Borrower, the Parent and the Restricted
Subsidiaries have no actual knowledge or reason to believe, that any hazardous
substances or solid wastes have been disposed of or otherwise released on or to
the real property of the Borrower, the Parent or any of the Restricted
Subsidiaries, within the meaning of the applicable Environmental Laws, except as
disclosed to the Lenders and which such disposal or release could not cause a
Material Adverse Change.
(q) On the Closing Date, there is no Litigation, or, to the best of the
Borrower's knowledge, threatened Litigation or pending or threatened claim of
breach or default, with respect to any material contract, or any loan agreement
or document evidencing any Debt for Borrowed Money of the Borrower, the Parent
or any of their Subsidiaries that has not been disclosed in writing to the
Lenders.
(r) All Pledged Stock has been duly authorized and validly issued, and
is fully paid and nonassessable. The Capital Stock described on Schedule 5.01(r)
hereto constitutes all the issued and outstanding Capital Stock of the Borrower
and the Subsidiaries of the Parent and the Borrower, or the Subsidiaries of
another Subsidiary of the Borrower, except such shares that have been issued
after the Closing Date, and 100% of the Capital Stock of the Borrower and the
Subsidiaries of the Borrower and the Parent (except Excluded Stock) is pledged
to the Administrative Agent to secure the Obligations (and was delivered to the
Administrative Agent together with stock powers executed in blank). No Person
has conversion rights with respect to, or any subscription rights, calls,
commitments or claims of any character for, or any repurchase or redemption
options relating to, the Pledged Stock, other than those that have been waived
and those in the Existing Financing Documentation. The Pledged Stock when issued
or sold, was either (i) registered or qualified under applicable federal or
state securities laws, or (ii) exempt therefrom.
(s) No broker's, finder's or other fee or commission will be payable by
the Borrower (other than to the Lenders hereunder) with respect to the making of
the Commitment or the Advances hereunder. The Borrower agrees to indemnify and
hold harmless the Administrative Agent and each Lender from and against any
claims, demand, liability, proceedings, costs or expenses asserted with respect
to or arising in connection with any such fees or commissions.
(t) No event has occurred which permits (or with the passage of time
would permit) the revocation or termination of any material License, which could
reasonably be expected to cause a Material Adverse Change.
(u) To the best knowledge of the Borrower, as of the Closing Date, the
Borrower, the Parent and their Subsidiaries have obtained all material patents,
trademarks, service-marks, trade names, copyrights, Licenses and other rights,
free from burdensome restrictions, that are necessary for the operation of their
business as presently conducted and as proposed to be conducted. On each
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date after the Closing Date on which this representation is deemed to be made,
the Borrower, the Parent and the Restricted Subsidiaries have obtained all
patents, trademarks, service-marks, trade names, copyrights, Licenses and other
rights, free from burdensome restrictions, that are necessary for the operation
of their business as presently conducted and as proposed to be conducted, except
those, the failure of which to obtain could not be reasonably expected to cause
a Material Adverse Change. Nothing has come to the attention of the Borrower,
the Parent or any of the Restricted Subsidiaries to the effect that (i) any
process, method, part or other material presently contemplated to be employed by
the Parent, the Borrower or any Restricted Subsidiary may infringe any patent,
trademark, service-mark, trade name, copyright, License or other right owned by
any other Person, or (ii) there is pending or overtly threatened any claim or
Litigation against or affecting the Borrower, the Parent or any Restricted
Subsidiary contesting its right to sell or use any such process, method, part or
other material, which could reasonably be expected to cause a Material Adverse
Change.
(v) Neither this Agreement nor any other document, certificate or
statement which has been furnished to any Lender by or on behalf of the Parent,
the Borrower or any of their Subsidiaries in connection herewith contained any
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statement contained herein and therein not
misleading at the time it was furnished. On the Closing Date, there is no fact
known to the Borrower and not known to the public generally that could
reasonably be expected to be both material and adverse to the interests of the
Lenders, which has not been set forth in this Agreement or in the documents,
certificates and statements furnished to the Lenders by or on behalf of the
Borrower prior to the date hereof in connection with the transaction
contemplated hereby. On each date after the Closing Date on which this
representation is deemed to be made, there is no fact known to the Borrower, the
Parent or any of their Subsidiaries, and not known to the public generally, that
could reasonably be expected to cause a Material Adverse Change, which has not
been disclosed to the Lenders in writing.
(w) The Borrower is not, nor is the Parent or any Restricted
Subsidiary, a party to any contractual relationship which is breached or in
default solely as a result of any change in the ownership or management of the
Parent or the Borrower, or the Board of Directors, unless the Borrower has
agreed to a substantially similar provision in this Agreement.
(x) Year 2000 Compliance.
(i) The Borrower has (A) undertaken a detailed review and
assessment of all areas within its business and operations that could
be adversely affected by the "Year 2000 Problem" (that is, the risk
that computer hardware and software used by the Borrower, the Parent
and their Subsidiaries may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date
after December 31, 1999 (including recognizing and performing properly
date-sensitive functions in leap years)), (B) developed a detailed
plan, timeline and budget for addressing the Year 2000 Problem on a
timely basis, and (C) to date implemented that plan in accordance with
that timetable and budget. The aggregate costs to and charges by the
Borrower related to the Year 2000 Problem and being Year 2000 Compliant
shall not exceed an amount which could result in a Material Adverse
Change.
(ii) Each of the Borrower, the Parent and their Subsidiaries
is in the process of making inquiry of each of its key suppliers,
vendors and customers as to whether such Person will on a timely basis
be Year 2000 Compliant in all material respects. "Key suppliers,
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vendors and customers" refers to those suppliers, vendors and customers
of the Borrower, the Parent and their Subsidiaries, the business
failure of which could result in a Material Adverse Change.
(y) The Loans and the Unlimited Guaranties of the Loans and all
Obligations are senior in priority to all Existing Financing, except the Senior
Notes which will rank pari passu with the Obligations. The Loans and the
Unlimited Guaranties of the Loans and all Obligations constitute "Senior
Indebtedness" and "Designated Senior Indebtedness" under each of the
Subordinated Notes, the Subordinated Notes Documentation, the Junior
Exchangeable and the Junior Exchangeable Documentation. This Agreement is a
"Credit Agreement" as defined in the Subordinated Notes Documentation. Nothing
in this Agreement and the other Loan Papers violates any provision of the
Existing Financing Documentation, and no consent is required in connection with
any of the Existing Financing Documentation in order to execute, deliver and
perform under this Agreement and the other Loan Papers. There exists no breach,
default or event of default under any of the Existing Financing Documentation.
All notices required by any Existing Financing Documentation regarding the
execution, delivery or performance by the Borrower, the Parent or any Restricted
Subsidiary, or any action or agreement in connection with any of the Loan
Papers, has been given in accordance with the terms of the Existing Financing
Documentation.
5.02. Survival of Representations and Warranties. All representations
and warranties made under this Agreement and the other Loan Papers shall be
deemed to be made at and as of the Closing Date and at and as of the date of
each Advance, and each shall be true and correct in all material respects when
made. All such representations and warranties shall survive, and not be waived
by, the execution hereof by any Lender, any investigation or inquiry by any
Lender, or by the making of any Advance under this Agreement.
ARTICLE VI. GENERAL COVENANTS
So long as any of the Obligations are outstanding and unpaid or the
Commitment or any Letter of Credit is outstanding (whether or not the conditions
to borrowing have been or can be fulfilled):
6.01. Preservation of Existence and Similar Matters.
(a) The Borrower and the Parent shall, and shall cause each Restricted
Subsidiary to, preserve and maintain, or timely obtain and thereafter preserve
and maintain (i) material rights, franchises, authorizations, consents,
privileges and all other material Licenses from federal, state and local
governmental bodies and any Tribunal (regulatory or otherwise) which the
Borrower, the Parent or such Restricted Subsidiary deems reasonably necessary or
advisable to conduct its business in the ordinary course, and (ii) its existence
(except as permitted by Section 8.05 hereof); and
(b) The Borrower and the Parent shall, and shall cause each Restricted
Subsidiary to, qualify and remain qualified and authorized to do business in
each jurisdiction in which the character of its Properties or the nature of its
business requires such qualification or authorization, except where the failure
to do so could not cause a Material Adverse Change.
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6.02. Business; Compliance with Applicable Law. The Borrower and the
Parent shall, and shall cause each Restricted Subsidiary to (a) engage primarily
in the business of telecommunications and internet, and activities related
thereto, and (b) comply in all material respects with the requirements of all
Applicable Law.
6.03. Maintenance of Properties. The Borrower and the Parent shall, and
shall cause each Restricted Subsidiary to, maintain or cause to be maintained
all their material Properties necessary to the conduct of their business
(whether owned or held under lease) in reasonably good repair, working order and
condition, taken as a whole, and from time to time make or cause to be made all
appropriate repairs, renewals, replacements, additions, betterments and
improvements thereto.
6.04. Accounting Methods and Financial Records. The Borrower and the
Parent shall, and shall cause each Restricted Subsidiary to, maintain a system
of accounting established and administered in accordance with GAAP, keep
adequate records and books of account in which complete entries will be made and
all transactions reflected in accordance with GAAP, and keep accurate and
complete records of its respective assets. The Borrower and the Parent shall,
and shall cause each Restricted Subsidiary to, maintain a fiscal year ending on
December 31.
6.05. Insurance. The Borrower and the Parent shall, and shall cause
each Restricted Subsidiary to, maintain insurance from responsible companies in
such amounts and against such risks as shall be customary and usual in the
industry for companies of similar size and capability, but in no event less than
the amount and types insured as of the Closing Date. Each insurance policy shall
name the Administrative Agent as additional insured, or loss payee, as
appropriate, and provide for at least 30 days' prior notice to the
Administrative Agent of any proposed termination or cancellation of such policy,
whether on account of default or otherwise.
6.06. Payment of Taxes and Claims. The Borrower and the Parent shall,
and shall cause each Restricted Subsidiary to, pay and discharge all Taxes,
assessments and governmental charges or levies imposed upon it or its income or
Properties prior to the date on which penalties attach thereto, and all lawful
material claims for labor, materials and supplies which, if unpaid, might become
a Lien upon any of their Properties or assets except those Taxes, assessments
and charges contested by the Borrower diligently in good faith, and for which
adequate reserves have been established in accordance with GAAP. The Borrower
and the Parent shall, and shall cause each of their Subsidiaries to, timely file
all information returns required by federal, state or local Tax authorities.
6.07. Visits and Inspections. The Borrower and the Parent shall, and
shall cause each Restricted Subsidiary to, promptly, permit representatives of
the Administrative Agent or any Lender from time to time, upon prior notice
reasonable under the circumstances, to (a) visit and inspect the Properties of
the Borrower, the Parent and each Restricted Subsidiary as often as the
Administrative Agent or any Lender shall deem advisable, (b) inspect and make
extracts from and copies of the Borrower's, the Parent's and each Restricted
Subsidiary's books and records, and (c) discuss with the Borrower's, the
Parent's and each Restricted Subsidiary's directors, officers, employees and the
auditors of the Borrower, the Parent and each Restricted Subsidiary, its
business, assets, liabilities, financial positions, results of operations and
business prospects.
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6.08. Payment of Debt for Borrowed Money. The Borrower and the Parent
shall, and shall cause each Restricted Subsidiary to, pay its Debt for Borrowed
Money when and as the same becomes due.
6.09. Use of Proceeds.
(a) Revolver Advances. The Borrower shall use the proceeds of
the Revolver Advances exclusively (a) on the Closing Date, to refinance
existing indebtedness of the Parent, the Borrower and the Designated
Restricted Subsidiaries, (b) for Permitted Acquisitions consummated by
the Parent, the Borrower and the Designated Restricted Subsidiaries,
(c) for Capital Expenditures made by the Parent, the Borrower and the
Designated Restricted Subsidiaries and permitted under the terms of
this Agreement, (d) for working capital of the Parent, the Borrower and
the Designated Restricted Subsidiaries and (e) for other lawful
corporate purposes of the Parent, the Borrower and the Designated
Restricted Subsidiaries.
(b) Special Purpose Advances and the Initial Term Loan
Advance. The Borrower shall use the proceeds of the Special Purpose
Advances and the initial Term Loan Advance exclusively to finance
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 Parent, the Borrower or any
Designated Restricted Subsidiary.
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6.10. Indemnity.
(a) Each of the Parent and the Borrower agrees, and shall cause each
Restricted Subsidiary to agree, to defend, protect, indemnify and hold harmless
the Administrative Agent, each Lender, each of their respective Affiliates, and
each of their respective (including such Affiliates') officers, directors,
employees, agents, attorneys, shareholders and consultants (including, without
limitation, those retained in connection with the satisfaction or attempted
satisfaction of any of the conditions set forth herein) of each of the foregoing
(collectively, "Indemnitees") from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including,
without limitation, the reasonable fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceeding, whether or not such Indemnitees shall be designated a party
thereto), imposed on, incurred by, or asserted against such Indemnitees (whether
direct, indirect or consequential and whether based on any federal, state, or
local laws and regulations), under common law or at equitable cause, or on
contract, tort or otherwise, arising from or connected with the past, present or
future operations of the Borrower, the Parent or any of their Subsidiaries, or
any of their predecessors in interest, in any manner relating to or arising out
of this Agreement, the Loan Papers, or any act, event or transaction or alleged
act, event or transaction relating or attendant thereto, the making of any
participations in the Advances and the management of the Advances, INCLUDING IN
CONNECTION WITH, OR AS A RESULT, IN WHOLE OR IN PART, OF ANY NEGLIGENCE OF
ADMINISTRATIVE AGENT OR ANY LENDER (other than those matters raised exclusively
by a participant against the Administrative Agent or any Lender and not the
Borrower), or the use or intended use of the proceeds of the Advances hereunder,
or in connection with any investigation of any potential matter covered hereby,
but excluding any claim or liability that arises as the result of the gross
negligence or willful misconduct of any Indemnitee, as finally judicially
determined by a court of competent jurisdiction (collectively, the "Indemnified
Matters").
(b) In addition, the Borrower and the Parent shall, and shall cause
each Restricted Subsidiary to, periodically, upon request, reimburse each
Indemnitee for its reasonable legal and other actual expenses (including the
cost of any investigation and preparation) incurred in connection with any
Indemnified Matter. If for any reason the foregoing indemnification is
unavailable to any Indemnitee or insufficient to hold any Indemnitee harmless
with respect to Indemnified Matters, then the Borrower and the Parent and the
Restricted Subsidiaries shall contribute to the amount paid or payable by such
Indemnitee as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect not only the relative benefits received
by the Borrower and the Parent and the Restricted Subsidiaries, and the
Borrower's stockholders, the Parent's stockholders and the Restricted
Subsidiaries' stockholders, on the one hand and such Indemnitee on the other
hand but also the relative fault of the Borrower, the Parent, the Restricted
Subsidiaries and such Indemnitee, as well as any other relevant equitable
considerations. The reimbursement, indemnity and contribution obligations under
this Section shall be in addition to any liability which the Borrower may
otherwise have, shall extend upon the same terms and conditions to each
Indemnitee, and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Borrower, the
Parent, the Restricted Subsidiaries, the Administrative Agent, the Lenders and
all other Indemnitees. This Section shall survive any termination of this
Agreement and payment of the Obligations.
6.11. Environmental Law Compliance. The Borrower and the Parent agree,
and shall cause each Restricted Subsidiary to agree, that the use which the
Borrower, the Parent or any of their Subsidiaries intends to make of any real
Property owned by it will not result in the disposal or other release of any
hazardous substance or solid waste on or to such real Property in violation of
any
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Environmental Law. As used herein, the terms "hazardous substance" and "release"
as used in this Section shall have the meanings specified in CERCLA (as defined
in the definition of applicable Environmental Laws), and the terms "solid waste"
and "disposal" shall have the meanings specified in RCRA (as defined in the
definition of applicable Environmental Laws); provided, however, that if CERCLA
or RCRA is amended so as to broaden the meaning of any term defined thereby,
such broader meaning shall apply subsequent to the effective date of such
amendment; and provided further, to the extent that any other law applicable to
the Borrower, the Parent, any of their Subsidiaries or any of their properties
and assets establishes a meaning for "hazardous substance," "release," "solid
waste," or "disposal" which is broader than that specified in either CERCLA or
RCRA, such broader meaning shall apply. Each of the Parent, the Borrower and
each Restricted Subsidiary agrees to indemnify and hold the Administrative Agent
and each Lender harmless from and against, and to reimburse them with respect
to, any and all claims, demands, causes of action, loss, damage, liabilities,
costs and expenses (including reasonable attorneys' fees and courts costs) of
any kind or character, known or unknown, fixed or contingent, asserted against
or incurred by any of them at any time and from time to time by reason of or
arising out of (a) the failure of the Parent, the Borrower or any of their
Subsidiaries to perform any obligation hereunder regarding asbestos or
applicable Environmental Laws, (b) any violation on or before the Release Date
of any applicable Environmental Law in effect on or before the Release Date, and
(c) any act, omission, event or circumstance existing or occurring on or prior
to the Release Date (including without limitation the presence on such real
Property or release from such real Property of hazardous substances or solid
wastes disposed of or otherwise released on or prior to the Release Date),
resulting from or in connection with the ownership of the real Property,
regardless of whether the act, omission, event or circumstance constituted a
violation of any applicable Environmental Law at the time of its existence or
occurrence, or whether the act, omission, event or circumstance is caused by or
relates to the negligence of any indemnified Person; provided, that the Borrower
shall not be under any obligation to indemnify the Administrative Agent or any
Lender to the extent that any such liability arises as the result of the gross
negligence or willful misconduct of such Person, as finally judicially
determined by a court of competent jurisdiction. The provisions of this
paragraph shall survive the Release Date and shall continue thereafter in full
force and effect.
6.12. Acquisitions, Generally. In connection with any Permitted
Acquisition made by the Parent, the Borrower or any Restricted Subsidiary during
the term of this Agreement, the Borrower and the Parent shall and shall cause
each Restricted Subsidiary to, (a) not less than ten Business Days prior to the
proposed acquisition date, deliver to Administrative Agent a detailed written
description of the proposed Permitted Acquisition in form reasonably acceptable
to the Administrative Agent, and (b) prior to the consummation of the
acquisition a statement certified by an Authorized Officer that (i) the proposed
transaction complies with the definition of Permitted Acquisition set forth in
Article I hereof and with the terms and conditions set forth in Section 8.05(b)
hereof and/or, to the extent applicable, Section 8.05(d) hereof, and (ii) no
Default or Event of Default exists prior to or after giving effect to any
requested Advance or the consummation of such acquisition, or will exist upon
consummation of the proposed acquisition and related borrowings and
transactions, together with a Compliance Certificate computed after giving
effect to such acquisition and borrowings.
6.13. Subsidiary Designation. The Borrower agrees that each Restricted
Subsidiary on the Closing Date will remain a Restricted Subsidiary until the
Obligations have been repaid in full and the Commitment has been terminated.
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6.14. Subsidiary Creation or Acquisition. The Borrower and the Parent
shall, and shall cause each Restricted Subsidiary to, give written notice to the
Administrative Agent in accordance with the terms of Section 11.02 hereof 20
days prior to the creation or acquisition of any Subsidiary.
6.15. Year 2000 Compliance. The Borrower will promptly notify the
Administrative Agent in the event the Borrower discovers or determines that any
computer application (including those of its suppliers and vendors) that is
material to its or any of the Parent's, or any of the Borrower's and/or the
Parent's Subsidiaries' business and operations will not be Year 2000 Compliant
on a timely basis, except to the extent that such failure could not be
reasonably expected to cause a Material Adverse Change.
6.16. Post Closing UCC Searches. The Borrower will provide the
Administrative Agent with UCC-11 searches in all States in which the Parent, the
Borrower or any Restricted Subsidiary has any operations, but only to the extent
such searches were not provided after the "Closing Date" of the Original Credit
Agreement, in accordance with the terms and conditions of the Section 6.16 of
the "Original Credit Agreement, in each case any such searches to be conducted
not earlier than 60 days after the Closing Date and not later than 90 days after
the Closing Date.
6.17. Post Closing Acquisition of Assets, Properties and Contractual
Arrangements. The Borrower and the Parent shall, and shall cause the Parent and
each Restricted Subsidiary to, use their best efforts to insure that all assets
and Properties acquired by any such Person after the Closing Date be in a form
and substance permitting the Administrative Agent on behalf of Lenders to have
the benefit of a first and prior Lien (subject to Permitted Liens and Liens
under Section 8.03(b) hereof) securing the Obligations. The Borrower will
promptly notify the Administrative Agent and Lenders in writing of any material
asset or Property acquired by the Borrower, the Parent or any Restricted
Subsidiary after the Closing Date, or any material contractual arrangement
entered into by the Parent, the Borrower or any Restricted Subsidiary after the
Closing Date, that will not permit Administrative Agent on behalf of Lenders to
be granted a Lien securing the Obligations.
6.18. Post Closing Grant of Liens. The Borrower and the Parent shall,
and shall cause each Restricted Subsidiary to (a) use its best efforts to grant
a Lien to the Administrative Agent on behalf of the Lenders in all fee owned
real Property of the Borrower, the Parent and the Restricted Subsidiaries by
December 31, 1998, and (b) use its reasonable efforts after the Closing Date to
grant a leasehold mortgage or deed of trust, as applicable, to the
Administrative Agent on behalf of the Lenders in all 20 leasehold properties
held by the Borrower, the Parent and the Restricted Subsidiaries upon which the
Administrative Agent, prior to the Closing Date, requested a Lien.
ARTICLE VII. INFORMATION COVENANTS
So long as any of the Obligations are outstanding and unpaid or the
Commitment or any Letter of Credit is outstanding (whether or not the conditions
to borrowing have been or can be fulfilled), the Borrower shall furnish or cause
to be furnished to each Lender:
7.01. Quarterly Financial Statements and Information . Within 45 days
after the end of each fiscal quarter, (a) consolidated and consolidating balance
sheets of the Parent, the Borrower and the Restricted Subsidiaries, (b)
consolidated balance sheets of the Parent, the Borrower and their Subsidiaries,
each as at the end of such quarter, (c) the related consolidated and
consolidating
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statements of income and consolidated statements of changes in cash for such
quarter and for the elapsed portion of the year ended with the last day of such
quarter for the Parent, the Borrower and the Restricted Subsidiaries and (d) the
related consolidated and consolidating statements of income and consolidated
statements of changes in cash for such quarter and for the elapsed portion of
the year ended with the last day of such quarter for the Parent, the Borrower
and their Subsidiaries, all of which shall be certified by the Chief Executive
Officer or the Chief Financial Officer to, in his or her opinion, present fairly
in all material respects, in accordance with GAAP, the financial position and
results of operations of (i) the Parent, the Borrower and the Restricted
Subsidiaries, and (ii) the Parent, the Borrower and their Subsidiaries,
respectively, as at the end of and for such period, and for the elapsed portion
of the year ended with the last day of such period, and (c) a schedule in form
and substance, and in acceptable detail, itemizing (i) the transactions between
the Restricted Subsidiaries and Unrestricted Subsidiaries during such fiscal
quarter and (ii) reconciling the balance sheets, statements of income and
consolidated statements of changes between the Restricted Subsidiaries and the
Unrestricted Subsidiaries for such quarter.
7.02. Annual Financial Statements and Information .
(a) Within 90 days after the end of each fiscal year, a copy of (i) the
consolidated and consolidating balance sheets of the Parent, the Borrower and
the Restricted Subsidiaries, and (ii) the consolidated balance sheets of the
Parent, the Borrower and their Subsidiaries, each as of the end of the current
and prior fiscal years, (iii) consolidated and consolidating statements of
earnings, statements of changes in shareholders' equity, and statements of
changes in cash as of and through the end of such fiscal year for the Parent,
the Borrower and the Restricted Subsidiaries and the Parent, the Borrower and
their Subsidiaries, respectively, all of which are prepared in accordance with
GAAP, and certified by independent certified public accountants acceptable to
the Lenders, whose opinion shall be in scope and substance in accordance with
generally accepted auditing standards and shall be unqualified, and (iv) a
schedule in form and substance, and in acceptable detail, itemizing (A) the
transactions between the Restricted Subsidiaries and Unrestricted Subsidiaries
during such period and (B) reconciling the balance sheets, statements of income
and consolidated statements of changes between the Restricted Subsidiaries and
the Unrestricted Subsidiaries for such period.
(b) As soon as available, but in any event within 45 days following the
end of each fiscal year, a copy of the annual consolidated operating budget of
the Parent, the Borrower and the Restricted Subsidiaries for the succeeding
fiscal year.
7.03. Compliance Certificates . At the time financial statements are
furnished pursuant to Section 7.01 and Section 7.02 hereof, a duly completed
Compliance Certificate evidencing no Default or Event of Default.
7.04. Copies of Other Reports and Notices .
(a) Promptly upon their becoming available, a copy of (i) all material
reports or letters submitted to the Parent, the Borrower or any Restricted
Subsidiary by accountants in connection with any annual, interim or special
audit, including without limitation any report prepared in connection with the
annual audit referred to in Section 7.02 hereof, and any other comment letter
submitted to management in connection with any such audit, (ii) each financial
statement, report, notice or proxy statement sent by the Parent, the Borrower or
any Restricted Subsidiary to stockholders generally, (iii) each regular or
periodic report and any registration statement or prospectus (or material
written
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communication in respect of any thereof) filed by the Parent, the Borrower or
any Restricted Subsidiary with any securities exchange, with the Securities and
Exchange Commission or any successor agency, and (iv) all press releases
concerning material financial aspects of the Parent, the Borrower or any
Restricted Subsidiary.
(b) Promptly upon becoming aware (i) that the holder(s) of any note(s)
or other evidence of indebtedness or other security of the Borrower, the Parent
or any Restricted Subsidiary in excess of $250,000 in the aggregate has given
notice or taken any action with respect to a breach, failure to perform, claimed
default or event of default thereunder, (ii) of any occurrence or non-occurrence
of any event which constitutes or which with the passage of time or giving of
notice or both could constitute a material breach by the Parent, the Borrower or
any Restricted Subsidiary under any material agreement or instrument other than
this Agreement to which the Parent, the Borrower or any Restricted Subsidiary is
a party or by which any of their Properties may be bound, or (iii) of the
occurrence of any event, circumstance or condition which could reasonably be
expected to cause a Material Adverse Change, a written notice specifying the
details thereof (or the nature of any claimed default or event of default) and
what action is being taken or is proposed to be taken with respect thereto;
(c) Promptly upon receipt thereof, information with respect to and
copies of any notices received from the FCC, any applicable PUC or any other
federal, state or local regulatory agencies or any tribunal relating to any
order, ruling, law, information or policy that relates to a breach of or
noncompliance with the Communications Act or any law, rule or regulation of any
applicable PUC, or might result in the payment of money by the Borrower, the
Parent or any Restricted Subsidiary in an amount of $250,000 or more in the
aggregate, or otherwise cause a Material Adverse Change, or result in the loss
or suspension of any material License or any material contract;
(d) Promptly upon the knowledge of an Authorized Officer of receipt by
the Parent, the Borrower or any Restricted Subsidiary from any governmental
agency, or any government, political subdivision or other entity, of any
material notice, correspondence, hearing, proceeding or order regarding or
affecting the Parent, the Borrower, any Restricted Subsidiary, or any of their
Properties or businesses not in the ordinary course of business, a copy of such
notice, correspondence, hearing, proceeding or order; and
(e) From time to time and promptly upon each request, such data,
certificates, reports, statements, documents or further information regarding
the assets, business, liabilities, financial position, projections, results of
operations or business prospects of the Parent, the Borrower and the Restricted
Subsidiaries, as the Administrative Agent or any Lender may reasonably request.
7.05. Notice of Litigation, Default and Other Matters . Prompt notice
of the following events after the Borrower has knowledge or notice thereof:
(a) The commencement of all proceedings and investigations by or before
the FCC, any applicable PUC, or any other governmental body, and all other
actions and proceedings in any court or before any arbitrator involving claims
for damages (including punitive damages) in excess of either $1,000,000 for any
one proceeding or investigation, or $5,000,000 in the aggregate for all such
proceedings and investigations (after deducting the amount with respect to the
Borrower, the Parent or any of their Subsidiaries is insured), against or in any
other way relating directly to the Borrower, the Parent, any of their
Subsidiaries, or any of their properties, assets or businesses;
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(b) Promptly upon the happening of any condition or event which
constitutes a Default or Event of Default, a written notice specifying the
nature and period of existence thereof and what action is being taken or is
proposed to be taken with respect thereto; and
(c) Any event which could cause a Material Adverse Change with respect
to the business, assets, liabilities, financial position, results of operations
or prospective business of the Parent, the Borrower or any of their
Subsidiaries.
7.06. ERISA Reporting Requirements .
(a) Promptly and in any event (i) within 30 days after the Borrower,
the Parent or any member of their Controlled Group knows or has reason to know
that any ERISA Event described in clause (a) of the definition of ERISA Event or
any event described in Section 4063(a) of ERISA with respect to any Plan of the
Parent or the Borrower or any member of their Controlled Group has occurred, and
(ii) within 10 days after the Borrower, the Parent or any member of their
Controlled Group knows or has reason to know that any other ERISA Event with
respect to any Plan of the Parent, the Borrower or any member of their
Controlled Group has occurred or a request for a minimum funding waiver under
Section 412 of the Code with respect to any Plan of the Borrower, the Parent or
any member of their Controlled Group, a written notice describing such event and
describing what action is being taken or is proposed to be taken with respect
thereto, together with a copy of any notice of event that is given to the PBGC;
(b) Promptly and in any event within two Business Days after receipt
thereof by the Parent, the Borrower or any member of their Controlled Group from
the PBGC, copies of each notice received by the Parent or the Borrower or any
member of their Controlled Group of the PBGC's intention to terminate any Plan
or to have a trustee appointed to administer any Plan;
(c) Promptly and in any event within 30 days after the filing thereof
by the Borrower, the Parent or any member of its Controlled Group with the
United States Department of Labor, the Internal Revenue Service or the PBGC,
copies of each annual and other report (including Schedule B thereto) with
respect to each Plan;
(d) Promptly and in any event within 30 days after receipt thereof, a
copy of any notice, determination letter, ruling or opinion the Borrower or any
member of its Controlled Group receives from the PBGC, the United States
Department of Labor or the Internal Revenue Service with respect to any Plan;
(e) Promptly, and in any event within 10 Business Days after receipt
thereof, a copy of any correspondence the Borrower or any member of their
Controlled Group receives from the Plan Sponsor (as defined by Section
4001(a)(10) of ERISA) of any Plan concerning potential withdrawal liability
pursuant to Section 4219 or 4202 of ERISA, and a statement from the chief
financial officer of the Parent, the Borrower or such member of its Controlled
Group setting forth details as to the events giving rise to such potential
withdrawal liability and the action which the parent, the Borrower or such
member of their Controlled Group is taking or proposes to take with respect
thereto;
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(f) Notification within 30 days of any material increases in the
benefits of any existing Plan which is not a Multiemployer Plan, or the
establishment of any new Plans, or the commencement of contributions to any Plan
to which the Borrower, the Parent or any member of their Controlled Group was
not previously contributing;
(g) Notification within three Business Days after the Borrower, the
Parent or any member of their Controlled Group knows or has reason to know that
the Borrower, the Parent or any such member of their Controlled Group has or
intends to file a notice of intent to terminate any Plan under a distress
termination within the meaning of Section 4041(c) of ERISA and a copy of such
notice; and
(h) Promptly after receipt of written notice of commencement thereof,
notice of all actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting the Borrower, the Parent or any member of their Controlled
Group with respect to any Plan.
ARTICLE VIII. NEGATIVE COVENANTS
So long as any of the Obligations are outstanding and unpaid or the
Commitment or any Letter of Credit is outstanding (whether or not the conditions
to borrowing have been or can be fulfilled):
8.01. Financial Covenants.
(a) TOTAL LEVERAGE RATIO. Commencing the date hereof and continuing at
all times until the Obligations have been repaid in full, the Borrower shall not
permit the Total Leverage Ratio to be more than the following ratios during the
following time periods:
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
From the date hereof through March 30, 2000 6.00 to 1.00
From March 31, 2000 through March 30, 2001 5.50 to 1.00
From March 31, 2001 through March 30, 2002 5.00 to 1.00
From March 31, 2002 through June 30, 2002 4.50 to 1.00
From July 1, 2002 through December 31, 2002 4.00 to 1.00
From January 1, 2003 and thereafter 3.50 to 1.00
</TABLE>
(b) SENIOR LEVERAGE RATIO. Commencing the date hereof and continuing at
all times until the Obligations have been repaid in full, the Borrower shall not
permit the Senior Leverage Ratio to be more than the following ratios during the
following time periods:
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
From the date hereof through March 30, 2000 2.50 to 1.00
From March 31, 2000 through March 30, 2001 2.00 to 1.00
From March 31, 2001 and thereafter 1.50 to 1.00
</TABLE>
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(c) INTEREST COVERAGE RATIO. Commencing the date hereof and continuing
at all times until the Obligations have been repaid in full, the Borrower shall
not permit the Interest Coverage Ratio to be less than the following ratios
during the following time periods:
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
From the date hereof through December 31, 1999 1.50 to 1.00
From January 1, 2000 and thereafter 2.00 to 1.00
</TABLE>
(d) CAPITAL EXPENDITURES. The Borrower shall not permit Capital
Expenditures made by the Parent, the Borrower and the Restricted Subsidiaries
for each fiscal year of the Borrower to exceed the amounts set forth below for
each fiscal year; provided that, to the extent that less than such amount set
forth below was used by the Parent, the Borrower and the Restricted Subsidiaries
for Capital Expenditures for any fiscal year, the Borrower, the Parent or the
Restricted Subsidiaries may increase the limitation on Capital Expenditures for
the succeeding fiscal year (and such succeeding fiscal year only), provided that
such increases in the aggregate do not exceed the amount of such unused amount.
<TABLE>
<CAPTION>
PERIOD AMOUNT
------ -----
<S> <C>
For the Fiscal Year 1998 $425,000,000
For the Fiscal Year 1999 $475,000,000
For the Fiscal Year 2000 and each fiscal year thereafter $200,000,000
</TABLE>
provided that, for the fiscal year 2000 only, such prescribed amount shall be
added to the sum of (i) cash dividends (or payments with respect to any
agreement related to the PSINet Shares), in each case received by the Borrower
and the Restricted Subsidiaries from Unrestricted Subsidiaries during such
fiscal year, plus (ii) cash equity contributed to the Parent and downstreamed to
the Borrower during such fiscal year (in each case net of any equity proceeds
used to redeem, repurchase or retire any Debt for Borrowed Money of the Parent,
the Borrower or any Subsidiary of the Parent and the Borrower, except any
repayment of Revolver Advances) plus (iii) the net cash proceeds of any Debt for
Borrowed Money issued by the Borrower, which such Debt for Borrowed Money is
subordinated to the Obligations on terms and conditions, and pursuant to
documentation, in each case on comparable terms to the Subordinated Indebtedness
(and in each case net of any proceeds of the issuance of Debt for Borrowed Money
used to redeem, repurchase or retire any Debt for Borrowed Money of the Parent,
the Borrower or any Subsidiary of the Parent and the Borrower, except any
repayment of Revolver Advances), provided that, to the extent that the Borrower
receives the net cash proceeds of equity or Debt for Borrowed Money during the
fiscal year 1999 in excess of $250,000,000, such additional amounts received in
1999 may be used to increase the limitation on Capital Expenditures for the
fiscal year 2000.
(e) INTENTIONALLY DELETED.
(f) MINIMUM OPERATING CASH FLOW MINUS FIBER PROCEEDS. Operating Cash
Flow minus New Fiber IRU Proceeds for the Parent, the Borrower and the
Restricted Subsidiaries may not be less than the amounts set forth below for the
fiscal quarters set forth below:
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<TABLE>
<CAPTION>
PERIOD AMOUNT
------ -----
<S> <C>
Fiscal Quarter Ending June 30, 1999 $ 10,000,000
Two Fiscal Quarters Ending September 30, 1999 $ 32,000,000
Three Fiscal Quarters Ending December 31, 1999 $ 64,000,000
Four Fiscal Quarters Ending March 31, 2000 $ 95,000,000
Four Fiscal Quarters Ending June 30, 2000 $120,000,000
Four Fiscal Quarters Ending September 30, 2000 $140,000,000
Four Fiscal Quarters Ending December 31, 2000 $155,000,000
</TABLE>
8.02. Debt for Borrowed Money . The Borrower and the Parent shall not,
and shall not permit any Restricted Subsidiary to, create, assume, incur or
otherwise become or remain obligated in respect of, or permit to be outstanding,
or suffer to exist any Debt for Borrowed Money or issue any Preferred Stock,
except:
(a) with respect to the Borrower, the Parent and the Restricted
Subsidiaries, Debt for Borrowed Money under the Loan Papers;
(b) with respect to the Parent, the Borrower and its Restricted
Subsidiaries, Debt for Borrowed Money in existence on the Closing Date described
on Schedule 8.02 hereto and not otherwise permitted pursuant to the terms of
this Section 8.02, including without limitation, the Existing Financing, in each
case only in the principal amounts and as such Debt for Borrowed Money exists as
of the Closing Date, provided that, existing Debt of the Parent not in excess of
the amount of $49,000,000 shall be included in Section 8.02(g) below;
(c) provided that no Default or Event of Default exists or would result
from the incurrence thereof, with respect to the Parent, the Borrower and the
wholly owned Restricted Subsidiaries, Debt owed to each other;
(d) so long as there exists no Default or Event of Default both before
and after giving effect thereto, Debt of the Borrower in respect to Interest
Rate Protection Agreements;
(e) so long as there exists no Default or Event of Default both before
and after giving effect thereto, Debt of the Borrower and the Parent in respect
of Permitted Refinancing Indebtedness;
(f) commencing no earlier than March 31, 1999, so long as there exists
no Default or Event of Default both before and after giving effect thereto,
(i) either (A) unsecured Debt of the Parent which (I) is
pursuant to terms and conditions no more onerous than the terms and
provisions of the Loans and (II) has a maturity of at least one year
beyond the Maturity Date OR (B) Preferred Stock issued by the Parent
which (I) is pursuant to terms and conditions no more onerous than the
terms and provisions of the Loans and (II) has a maturity of at least
one year beyond the Maturity Date, in either case of (A) or (B) above
(or any combination of either), in an aggregate amount not in excess of
$300,000,000, and, when added to the Debt for Borrowed Money of the
Parent and the Borrower permitted by subsections (ii) and (iii) below,
does not exceed in an aggregate amount outstanding at any one time
$600,000,000; or
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(ii) unsecured Subordinated Debt of the Parent which does not
exceed an aggregate amount outstanding at any one time of $200,000,000
and, when added to the Debt for Borrowed Money and the Borrower and
Preferred Stock of the Parent permitted to be incurred by subsections
(i) and (iii) above and below, does not exceed in an aggregate amount
outstanding at any one time $600,000,000; or
(iii) unsecured Subordinated Indebtedness of the Borrower not
in excess of $600,000,000, so long as such Subordinated Indebtedness of
the Borrower when aggregated with Debt for Borrowed Money of the Parent
and the Borrower, or Preferred Stock of the Parent, (or both) permitted
to be incurred in (i) and (ii) above does not exceed in an aggregate
amount outstanding at any one time $600,000,000; and
(g) so long as there exists no Default or Event of Default both before
and after giving effect to the incurrence thereof, Debt of the Borrower and the
Parent (including obligations with respect to Capital Leases and acquired Debt
of the Borrower) in an aggregate amount outstanding at any one time of
$78,000,000 (which such $78,000,000 includes Debt existing on the Closing Date
in an amount not in excess of $49,000,000), provided that, notwithstanding the
foregoing, $10,000,000 in the aggregate of the $78,000,000 basket may be
acquired Debt of one or more Restricted Subsidiaries.
8.03. Liens. The Borrower and the Parent shall not, and shall not
permit any Restricted Subsidiary to, create, assume, incur, permit or suffer to
exist, directly or indirectly, any Lien on any of its assets or Properties,
whether now owned or hereafter acquired, except (a) Permitted Liens, and (b) so
long as no Default or Event of Default exists or would result from the
incurrence of such Lien, Liens securing Debt permitted to be incurred by Section
8.02(g) hereof (and any Permitted Refinancing Indebtedness of such Debt), but
only so long as such Debt secured thereby shall not be increased and the Liens
shall cover Properties of the Borrower and the Parent purchased with the
proceeds of such Debt and shall not cover additional assets of the Borrower, the
Parent or any such Restricted Subsidiary. Except to the extent that any such
provision is contained in the Existing Financing Documentation, the Borrower and
the Parent shall not, and shall not permit any Restricted Subsidiary to, agree
with any other Person that it shall not create, assume, incur, permit or suffer
to exist or to be created, assumed, incurred or permitted to exist, directly or
indirectly, any Lien on any of its assets or Properties.
8.04. Investments. The Borrower and the Parent shall not, and shall
not permit any Restricted Subsidiary to, make any Investment, except that the
Borrower and the Parent may purchase or otherwise acquire and own:
(a) Marketable, direct obligations of, or guaranteed by, the United
States of America and maturing within 365 days of the date of purchase;
(b) Commercial paper maturing not more than 90 days after the date of
acquisition, issued by U.S. corporations (other than Affiliates of the Borrower
and the Parent) that have a rating of A-1/P-1 or better by Standard & Poor's
Ratings Group, a Division of McGraw-Hill, Inc.
or Moody's Investors Service, Inc.;
(c) 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
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recognized by the United States of America, and which bank or trust company has
a 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
Exchange Act);
(d) 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 an political subdivision or taxing
authority thereof, and rated at least "A" by Standard & Poor's Ratings Group, a
Division of McGraw-Hill, Inc. or "A" by Moody's Investors Service, Inc.;
(e) Investments in acquisitions permitted by Section 8.05(b) hereof, so
long as (i) the Capital Stock of each new Subsidiary is pledged to the Lenders
to secure the Obligations pursuant to a pledge agreement substantially identical
in form and substance to the Pledge Agreement, and (ii) each new Restricted
Subsidiary of the Borrower or the Parent (A) is subject to the provisions
hereof, (B) immediately becomes a party to an Unlimited Guaranty and (C) grants
a Lien and security interest in all such assets and Properties of such new
Subsidiary of the type already constituting Collateral hereunder and as
requested by the Majority Lenders, except assets subject to Permitted Liens and
Liens permitted by Section 8.03(b) hereof, pursuant to security documents
required by the Administrative Agent substantially in the form of those already
constituting Loan Papers;
(f) Accounts receivable that arise in the ordinary course of business
and are payable on standard terms;
(g) Investments in existence on the Closing Date described on Schedule
8.04 hereto and Investments disclosed on Schedule 8.16 hereto;
(h) Investments in the PSINet Shares, in accordance with the
transaction described on Schedule 8.16 hereto (and any debt or equity securities
received by the Borrower, the Parent or any Restricted Subsidiary in exchange
for all or any portion of the PSINet Shares);
(i) Permitted Investments;
(j) Investments in 100% of the Capital Stock of Unrestricted
Subsidiaries so long as:
(i) there exists no Default or Event of Default both before
and after giving effect to such Investment,
(ii) the aggregate revenues of the Unrestricted Subsidiaries
does not exceed 30% of the consolidated revenues of the Parent, the
Borrower and all of the Subsidiaries of the Parent and the Borrower,
and
(iii) the purchase price of any such interest in Unrestricted
Subsidiaries is paid in (i) Capital Stock of the Parent, (ii) cash from
Unrestricted Subsidiaries, (iii)debt securities or Preferred Stock of
Unrestricted Subsidiaries or (iv) equity securities of Subsidiaries of
Unrestricted Subsidiaries, or any combination of the foregoing;
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(k) receivables owing to the Parent, the Borrower 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 Parent,
the Borrower or any such Restricted Subsidiary deems reasonable under the
circumstances;
(l) 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;
(m) loans or advances to employees made in the ordinary course of
business consistent with past practices of the Parent, the Borrower or such
Restricted Subsidiary;
(n) stock, obligations or securities received in settlement of debts
created in the ordinary course of business and owing to the Parent, the Borrower
or any Restricted Subsidiary or in satisfaction of judgments;
(o) any Person primarily engaged in a business similar to the Parent to
the extent the Investment represents a minority equity interest in such Person
which is received as the consideration for the disposition by the Parent, the
Borrower or any Restricted Subsidiary of a fiber IRU (which does not require
significant additional capital expenditures for optronics or electronic
equipment) which the Board of Directors has determined in good faith is excess
out the reasonable requirements of the Parent, the Borrower or such Restricted
Subsidiary;
(p) any Person to the extent such Investment is dividended or otherwise
distributed to the Parent, the Borrower or a Restricted Subsidiary by an
Unrestricted Subsidiary (and in connection therewith there exists no payment of
any kind to such Unrestricted Subsidiary); and
(q) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in subparagraph (a) above entered
into with a bank meeting the qualifications described in subparagraph (c) above.
8.05. Liquidation, Disposition or Acquisition of Assets, Merger, New
Subsidiaries. The Borrower and the Parent shall not, and shall not permit any
Restricted Subsidiary of the Borrower to, at any time:
(a) liquidate or dissolve itself (or suffer any liquidation or
dissolution) or otherwise wind up; or sell, lease, abandon, transfer or
otherwise dispose of all or any part of its assets, Properties or business other
than (i) so long as the Borrower complies with Section 2.05 and Section 2.11
hereof, Permitted Asset Sales, (ii) so long as there exists no Default or Event
of Default both before and after giving effect to any such sale and the Borrower
complies with Section 2.05 and Section 2.11 hereof, (A) sales of assets with a
sales price of less than $5,000,000 for any one sale and less than $10,000,000
in the aggregate for all such sales from the Closing Date through the Maturity
Date, (B) sales of accounts receivable in accordance with the terms of Section
8.12 hereof, (C) and after delivery of prior written notice to the
Administrative Agent, any Restricted Subsidiary of the Borrower can be dissolved
so long as a wholly owned Restricted Subsidiary of the Borrower that has
executed an Unlimited Guaranty or the Borrower acquires all such Restricted
Subsidiary's assets (and such Restricted Subsidiary may be released from its
Unlimited Guaranty), (D) after delivery of prior
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written notice to the Administrative Agent, any wholly owned direct or indirect
Restricted Subsidiary of the Borrower that has executed an Unlimited Guaranty of
the Obligations hereunder may sell or transfer assets, Property or business to
the Borrower or any other wholly owned indirect or indirect Restricted
Subsidiary of the Borrower that has executed an Unlimited Guaranty of the
Obligations hereunder, and (E) the Borrower may sell all or any portion of the
PSINet Shares.
(b) acquire any assets, Property or business of any other Person, or
participate in any joint venture, except (i) assets and Property acquired in the
ordinary course of business, (ii) provided that the Borrower complies fully with
Sections 6.12, 8.04(e) and 8.05(d) hereof, Permitted Acquisitions may be
consummated, (iii) after delivery of prior written notice to the Administrative
Agent, the Borrower or any wholly owned direct or indirect Restricted Subsidiary
of the Borrower that has executed an Unlimited Guaranty of the Obligations
hereunder may acquire assets, Property or business from any other wholly owned
direct or indirect Restricted Subsidiary of the Borrower that has executed an
Unlimited Guaranty of the Obligations hereunder, (iv) assets acquired
constituting wholly owned Unrestricted Subsidiaries in accordance with the terms
of Section 8.04(j) hereof, (v) assets acquired in connection with transactions
described on Schedule 8.16 hereto and (vi) Investments permitted by Section 8.04
hereof;
(c) enter into any merger or consolidation, except that, so long as
there exists no Default or Event of Default and none is caused thereby (i) after
delivery of prior written notice to the Administrative Agent, any wholly owned
Restricted Subsidiary of the Borrower can merge or consolidate into any other
wholly owned Restricted Subsidiary of the Borrower, or so long as such
transaction is in connection with a Permitted Acquisition, into another Person,
so long as a wholly owned Restricted Subsidiary of the Borrower which has
executed an Unlimited Guaranty is a survivor, or into the Borrower so long as
the Borrower is the surviving corporation or (ii) after delivery of prior
written notice to the Administrative Agent, another Person may be merged into
the Borrower or any wholly owned Restricted Subsidiary of the Borrower that has
executed an Unlimited Guaranty in connection with a Permitted Acquisition, so
long as the Borrower or such wholly owned Restricted Subsidiary is the surviving
corporation; and
(d) create or acquire any Subsidiary, except (a) as permitted by
Section 8.04(e) hereof and Section 8.05(b) above, (b) Unrestricted Subsidiaries
in accordance with the terms and conditions of Section 8.04(i) or (j) hereof,
and (c) so long as (i) there exists no Default or Event of Default both before
and after giving effect to the creation of any new wholly owned Restricted
Subsidiary and the transfer of any assets to such wholly owned Restricted
Subsidiary, (ii) immediately upon the creation of any new wholly owned
Restricted Subsidiary, such Restricted Subsidiary shall become a signatory to an
Unlimited Guaranty of the Obligations delivered to the Administrative Agent,
(iii) the Borrower immediately delivers all shares of Capital Stock of the new
wholly owned Restricted Subsidiary to the Administrative Agent together with
stock powers executed in blank, and (iv) the Borrower or any Restricted
Subsidiary of the Borrower owning any portion of the Capital Stock of any such
new wholly owned Restricted Subsidiary executes and delivers to the
Administrative Agent a pledge agreement pledging all such Capital Stock to
secure the Obligations in form substantially similar to the pledge agreement
executed by the Borrower in connection with this Agreement, the Borrower may
create a new wholly owned Restricted Subsidiary of the Borrower. Nothing in this
Section 8.05(d) shall permit the Borrower or any Restricted Subsidiary of the
Borrower to create any Subsidiary that is not wholly owned.
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In connection with any asset sale permitted by this Section 8.05 or otherwise
consented to by the Lenders in accordance with the terms of this Agreement, the
Administrative Agent is hereby authorized by each Lender to (i) execute any and
all releases deemed appropriate by it to release such assets of the Parent, the
Borrower and the Restricted Subsidiaries (including, without limitation, Capital
Stock owned by the Parent, the Borrower and the Restricted Subsidiaries)
constituting Collateral from all Liens and security interests securing all or
any portion of the Obligations, (ii) return to the Borrower any such Collateral
in the possession of the Administrative Agent, (iii) after the permitted sale by
any Restricted Subsidiary of all of its assets and Properties (including without
limitation, the sale of the microwave assets), release any such Person who has
executed an Unlimited Guaranty from the terms and conditions of its Unlimited
Guaranty and (iv) take such other action as the Administrative Agent deems
necessary or appropriate in connection with such transaction and in furtherance
of the effectuation thereof.
8.06. Guaranties; Contingent Liabilities . The Borrower and the Parent
shall not, and shall not permit any Restricted Subsidiary to, at any time make
or issue any Guaranty, or assume, be obligated with respect to, or permit to be
outstanding any Contingent Liabilities, except pursuant to the Loan Papers.
8.07. Restricted Payments. The Borrower and the Parent shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly declare,
make or pay any Restricted Payment; provided, however
(a) any Subsidiary of the Borrower or the Parent may declare,
make and pay Restricted Payments to the Borrower, the Parent or any
other wholly owned Restricted Subsidiary that has executed an Unlimited
Guaranty of the Obligations hereunder (or any Subsidiary of Mutual
Signal may declare, make and pay Restricted Payments to Mutual Signal);
(b) the Borrower may make or declare, make and pay
Distributions, or make loans and advances, in each case to the Parent,
so long as, in each case:
(i) the Administrative Agent is notified in writing
not less than two Business Days or more than 10 Business Days
prior to such Distribution or loan or advance (provided that
no such notice shall be required with respect to any such
Distribution, loan or advance paid by the Borrower prior to
June 30, 1999), of (A) the amount of such Distribution, loan
or advance, (B) the date the amount of such Distribution, loan
or advance will be transferred into the Borrower Deposit
Account, and (C) the date the amount of such Distribution,
loan or advance will be paid to the Parent by transfer into
the Parent Deposit Account, and
(ii) the full amount of each such Distribution, loan
or advance is first deposited by the Borrower into the
Borrower Deposit Account, and
(iii) each such Distribution, loan or advance is made
only from the Borrower Deposit Account and transferred
pursuant to the instructions of the Parent;
(c) so long as there exists no Default or Event of Default
both before and after giving effect to any such payment, after two
Business Days prior notice to the Administrative
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Agent and the Lenders (provided that no such notice shall be required
with respect to any such Distribution, loan or advance paid by the
Parent prior to June 30, 1999) of the amount of such payment and the
date of payment thereof, the Parent may make Distributions out of the
Parent Deposit Account to
(i) make scheduled dividend payments on the Junior
Convertible and the Cumulative Convertible,
(ii) if the Total Leverage Ratio is less than or
equal to 3.00 to 1.00 both before and after making any such
Restricted Payment, make scheduled dividend payments on the
Junior Exchangeable,
(iii) make Distributions or other Restricted Payments
from time to time over the term of this Agreement not to
exceed an aggregate amount at the time of such payment equal
to the net amount of cash distributions received by the Parent
from Unrestricted Subsidiaries and not used for other
purposes, and
(iv) so long as (A) such Restricted Payment is made
prior to August 15, 2000 and (B) such Restricted Payment does
not exceed an amount in excess of the difference between (I)
net proceeds from the issuance of common Capital Stock of the
Parent minus (II) the amount of net proceeds from the issuance
of common Capital Stock of the Parent used to make Permitted
Acquisitions or Permitted Investments, or other acquisitions
and investments permitted by this Agreement, the Parent may
repurchase up to 35% of its Junior Exchangeable in accordance
with the terms of the Junior Exchangeable Documentation;
(d) so long as there exists no Default or Event of Default
both before and after giving effect to any such payment, the Borrower
and the Parent may make annual consulting fee payments to the Persons
and in such amounts as set forth on Schedule 8.07 hereto;
(e) so long as there exists no Default or Event of Default
both before and after giving effect to any such payment, the Borrower
and the Parent may make payments to Unrestricted Subsidiaries in
connection with such transactions and in such amounts as set forth on
Schedule 8.16 hereto;
(f) the Borrower, the Parent and the Restricted Subsidiaries
may make Investments permitted by Sections 8.04(i), (j), (l), (m) and
(p) hereof;
(g) Mutual Signal may make pro rata Distributions to its
shareholders;
(h) so long as there exists no Default or Event of Default
both before and after giving effect to any such payment, the Borrower,
the Parent or any Restricted Subsidiary may make scheduled interest
payments on Debt for Borrowed Money permitted to be incurred under
Sections 8.02(c), (d), (f) and (g) hereof;
(i) so long as there exists no Default or Event of Default
both before and after giving effect to any such payment, the Parent may
make payment in kind payments on (i)
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Preferred Stock issued in accordance with the provisions of Section
8.02(f)(i) hereof and (ii) any of the Existing Financing;
(j) so long as there exists no Default or Event of Default
both before and after giving effect to any such payment, (i) any
Restricted Subsidiary may make principal payments on Debt for Borrowed
Money owed to the Borrower that is permitted to be incurred under
Section 8.02(c) hereof and (ii) the Borrower may make principal
payments on Debt for Borrowed Money that is permitted to be incurred
under Section 8.02(g) hereof; and
(k) so long as there exists no Default or Event of Default
both before and after giving effect to any such payment, (i) after
October 2000 the Borrower or the Parent may repurchase the Senior Notes
pursuant to the call provision set forth in the Senior Notes
Documentation, provided that the purchase price in the aggregate for
all such Senior Notes shall not exceed $1,000,000, (ii) the Borrower,
the Parent or any Restricted Subsidiary may repurchase its Capital
Stock from any terminated employee of such entity, in the aggregate for
all such repurchases for all such entities not to exceed $1,000,000 for
each fiscal year, and (iii) the Parent may pay cash dividends or
Distributions in lieu of the issuance of fractional shares, provided
that all such cash paid in lieu of fractional shares shall not exceed
in the aggregate $1,000,000 over the term of this Agreement.
8.08. Affiliate Transactions . The Borrower and the Parent shall not,
and shall not permit any Restricted Subsidiary to, at any time engage in any
transaction with an Affiliate, nor make an assignment or other transfer of any
of its assets or Properties to any Affiliate, on terms materially less
advantageous to the Parent, the Borrower or any such Restricted Subsidiary than
would be the case if such transaction had been effected with a non-Affiliate,
except those transactions described on Schedule 8.08 hereof and to the extent
applicable, Schedule 8.16 hereof.
8.09. Compliance with ERISA . The Borrower and the Parent shall not,
and shall not permit any of their Subsidiaries to, directly or indirectly, or
permit any member of its Controlled Group to directly or indirectly, (a)
terminate any Plan so as to result in any material (in the opinion of the
Majority Lenders) liability to the Borrower or any member of its Controlled
Group, (b) permit to exist any ERISA Event, or any other event or condition
which presents the risk of liability of the Borrower or any member of its
Controlled Group, (c) make a complete or partial withdrawal (within the meaning
of Section 4201 of ERISA) from any Multiemployer Plan so as to result in any
liability to the Borrower or any member of its Controlled Group, (d) enter into
any new Plan or modify any existing Plan so as to increase its obligations
thereunder except in the ordinary course of business consistent with past
practice which could result in any liability to the Borrower or the Parent, or
any member of their Controlled Group, or (e) permit the present value of all
benefit liabilities, as defined in Title IV of ERISA, under each Plan of the
Borrower or the Parent, or any member of their Controlled Group (using the
actuarial assumptions utilized by the PBGC upon termination of a plan) to exceed
the fair market value of Plan assets allocable to such benefits all determined
as of the most recent valuation date for each such Plan.
8.10. Capital Stock . The Borrower and the Parent shall not, and shall
not permit any Restricted Subsidiary to (a) make or permit any transfer,
assignment, distribution, mortgage, pledge or gift of any shares of Pledged
Stock, except (i) to the Borrower or another wholly owned direct or indirect
Restricted Subsidiary of the Borrower that has executed an Unlimited Guaranty of
the Obligations, and (ii) for asset sales permitted by Section 8.05(a) hereof,
and (b) issue any Capital
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Stock other than common Capital Stock issued by the Parent, Preferred Stock of
the Parent in accordance with the terms of Section 8.02(f) hereof, and payments
in kind described in Section 8.07(i) hereof.
8.11. Sale and Leaseback. The Borrower and the Parent shall not, and
shall not permit any Restricted Subsidiary to, enter into any arrangement
whereby it sells or transfers any of its assets, and thereafter rents or leases
such assets.
8.12. Sale or Discount of Receivables. The Borrower and the Parent
shall not, and shall not permit any Restricted Subsidiary to, directly or
indirectly sell, with or without recourse, for discount or otherwise, any notes
or accounts receivable, provided that, so long as there exists no Default or
Event of Default both before and after giving effect to each such sale, the
Borrower or the Parent may sell accounts receivable on a non recourse basis and
on other terms acceptable to the Administrative Agent, in an aggregate amount
not to exceed $100,000,000 in accounts sold and outstanding at any one time.
8.13. Limitation on Restrictive Agreements. Except those written
agreements entered into in connection with the Existing Financing Documentation
or other Debt in effect on the Closing Date, the Borrower and the Parent shall
not, and shall not permit any Restricted Subsidiary to, enter into any
indenture, agreement, instrument, financing document or other arrangement which,
directly or indirectly, prohibits or restrains, or has the effect of prohibiting
or restraining, or imposes materially adverse conditions upon: (a) the
incurrence of indebtedness, (b) the granting of Liens, (c) the making or
granting of Guarantees, (d) the payment of dividends or Distributions, (e) the
purchase, redemption or retirement of any Capital Stock of the Parent, the
Borrower or any Subsidiary of the Parent and/or the Borrower, (f) the making of
loans or advances, (g) transfers or sales of Property or assets (including
Capital Stock) by the Borrower, the Parent or any of the Restricted
Subsidiaries, (h) the making of Investments, (i) any change of control or
management, (j) the making of changes or amendments to this Agreement or any
other Loan Paper, or (k) the acceptance of a waiver or consent with respect to
any term or provision of this Agreement or any other Loan Paper, provided that,
notwithstanding the foregoing, in connection with (i) any Preferred Stock
issuance or debt issuance in accordance with the terms of Section 8.02(f)(i)
hereof and any new capital lease in connection with Section 8.02(g) hereof, the
Parent may agree to restrictive provisions so long as such provisions are no
more restrictive than the provisions in this agreement and such provisions shall
not in any case restrict, limit or prohibit the Parent, the Borrower or any
Restricted Subsidiary from (A) granting the Administrative Agent and the Lenders
any Lien to secure the Obligations hereunder (except Liens on assets subject to
Permitted Liens and Liens permitted under Section 8.03(b) hereof), (B)
guaranteeing any portion of the Obligations, (C) amending any provision of this
Agreement or any Loan Paper or (D) accepting any waiver or consent with respect
to any provision of this Amendment or the Loan Papers and (ii) any Subordinated
Indebtedness issuance in accordance with the terms of Section 8.02(f)(ii)
hereof, the Parent may agree to restrictive provisions so long as such
provisions are no more restrictive than the provisions in the Subordinated Notes
Documentation and such provisions shall not in any case restrict, limit or
prohibit the Parent, the Borrower or any Restricted Subsidiary from (A) granting
the Administrative Agent and the Lenders any Lien to secure the Obligations
hereunder (except Liens on assets subject to Permitted Liens and Liens permitted
under Section 8.03(b) hereof), (B) guaranteeing any portion of the Obligations,
(C) amending any provision of this Agreement or any Loan Paper or (D) accepting
any waiver or consent with respect to any provision of this Amendment or the
Loan Papers.
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8.14. Amendment of Material Agreements. The Borrower and the Parent
shall not, and shall not permit any Restricted Subsidiary to, amend, waive or
consent to any deviation from any provision of any documentation or agreements
of the (i) Existing Financing Documentation, (ii) articles of incorporation of
the Parent, the Borrower and the Restricted Subsidiaries, and (iii) by laws and
other organizational documents (other than the Articles of Incorporation) in any
manner that is both material and adverse to the interests of the Lenders.
Notwithstanding the foregoing, the Parent is permitted to amend its Articles of
Incorporation to increase the outstanding shares of common or preferred Capital
Stock or to effect a common Capital Stock split.
8.15. Name Changes, Changes Affecting Pledged Stock. The Borrower and
the Parent shall not, and shall not permit any Subsidiary of the Borrower or the
Parent to, change its name. The Borrower and the Parent shall not, and shall not
permit any Subsidiary of the Borrower or the Parent to, take any action or make
any change in its organization or otherwise that would in any manner hinder or
impair the Lien of the Lenders on the Pledged Stock.
8.16. Unrestricted Subsidiaries and Mutual Signal. Except as
specifically permitted by the terms of this Agreement or listed on Schedule 8.16
hereto, the Borrower and the Parent shall not, and shall not permit any
Restricted Subsidiary to, contribute any equity, make any loan, advance or other
investment in, or otherwise conduct any business with, any Unrestricted
Subsidiary and/or Mutual Signal.
8.17. Limitation on IRU Agreements. Except as set forth on Schedule
8.16 hereto, the Borrower and the Parent shall not, and shall not permit any
Restricted Subsidiary to, enter into an IRU Agreement granting an IRU to any
Person other than to the Parent, the Borrower or any Restricted Subsidiary,
provided that the Parent, the Borrower or any Restricted Subsidiary may enter
into an IRU Agreement granting an IRU to any Person (other than the Borrower,
the Parent or any Restricted Subsidiary) so long as, in each case (a) there
exists no Default or Event of Default at the time such IRU Agreement is made,
(b) such IRU Agreement would not result in the Parent, the Borrower and the
Restricted Subsidiaries having the cumulative indefeasible right to use the
telecommunications capacity on less than 12 Backbone Fibers, (c) under no
circumstances shall the Parent, the Borrower or any Restricted Subsidiary grant
an IRU on any "lit" fiber, provided that, notwithstanding the foregoing, so long
as there exists no Default or Event of Default both before and after giving
effect to any such transaction, the Parent, the Borrower and its Subsidiaries
may grant IRUs on "lit" fiber so long as (i) the term of each such IRU does not
exceed five years, (ii) the gross revenues of all such IRUs by the Parent, the
Borrower and its Subsidiaries in the aggregate in any fiscal year do not exceed
$25,000,000, and (iii) the Liens and security interests of the Administrative
Agent to secure the Obligations remain unaffected, in full force and effect, (d)
the Board of Directors has determined in good faith that the disposition of the
fiber capacity involved in such IRU Agreement would not cause a shortage of
fiber capacity to the Parent, the Borrower or any Restricted Subsidiary which
would interfere with (i) the Parent's, the Borrower's or any Restricted
Subsidiary's ability to continue providing telecommunications services at the
then current level; or (ii) the Parent's, the Borrower's or any Restricted
Subsidiary's business plan.
8.18. Limitation on Unrestricted Subsidiaries. The Borrower and the
Parent shall not, and shall not permit any Restricted Subsidiary to, permit the
aggregate revenues of the Unrestricted Subsidiaries to exceed 30% of the
consolidated revenues of the Parent, the Borrower and all of the Subsidiaries of
the Parent and the Borrower.
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ARTICLE IX. EVENTS OF DEFAULT
9.01. Events of Default. Any one or more of the following shall be an
"Event of Default" hereunder, if the same shall occur for any reason whatsoever,
whether voluntary or involuntary, by operation of Law, or otherwise:
(a) The Borrower shall fail to pay any (i) principal payable under any
Loan Paper on the date due; or (ii) any interest, fees or other amounts payable
within three days of the date due;
(b) Any representation or warranty made or deemed made by any Obligor
(or any of its officers or representatives) under or in connection with any Loan
Paper shall prove to have been incorrect or misleading in any material respect
when made or deemed made;
(c) The Borrower shall fail to perform or observe any term or covenant
contained in Section 7.05 hereof or in Article VIII hereof;
(d) Any Obligor shall fail to perform or observe any other term or
covenant contained in this Agreement or any other Loan Paper, other than those
described in Sections 9.01(a), (b) and (c) above, and such failure shall not be
remedied within thirty days following the earlier of the Borrower's knowledge of
such failure or notice from any Lender of the occurrence of such failure;
(e) Any of the following shall occur: (i) Any Loan Paper or material
provision thereof shall, for any reason, not be valid and binding on the Obligor
signatory thereto, or not be in full force and effect, or shall be declared to
be null and void; or (ii) the validity or enforceability of any Loan Paper shall
be contested by any Obligor, any Unrestricted Subsidiary or any Affiliate of the
Borrower and its Subsidiaries; or (iii) any Obligor shall deny in writing that
it has any or further liability or obligation under its respective Loan Papers;
or (iv) any default or breach under any provision of any Loan Papers shall
continue after the applicable grace period, if any, specified in such Loan
Paper;
(f) Any of the following shall occur: (i) the Parent, the Borrower or
any of their Subsidiaries shall make an assignment for the benefit of creditors
or be unable to pay its debts generally as they become due; (ii) the Parent, the
Borrower or any of their Subsidiaries shall petition or apply to any Tribunal
for the appointment of a trustee, receiver, or liquidator of it, or of any
substantial part of its assets, or shall commence any proceedings relating to
the Parent, the Borrower or any of their Subsidiaries under any Debtor Relief
Laws; (iii) any such petition or application shall be filed, or any such
proceedings shall be commenced, against the Parent, the Borrower or any of their
Subsidiaries, or an order, judgment or decree shall be entered appointing any
such trustee, receiver, or liquidator, or approving the petition in any such
proceedings, and such petition or application shall be consented to or
uncontested by the Parent, the Borrower or such Subsidiary, or if contested by
the Parent, the Borrower or such Subsidiary, shall not be dismissed within 60
days following the filing of such petition or application; (iv) any final order,
judgment, or decree shall be entered in any proceedings against the Parent, the
Borrower or any of their Subsidiaries decreeing its dissolution; or (v) any
final order, judgment, or decree shall be entered in any proceedings against the
Parent, the Borrower or any of their Subsidiaries decreeing its split-up which
requires the divestiture of a substantial part of its assets;
(g) Any of the following shall occur: (i) The Borrower, the Parent or
any Subsidiary of the Borrower or the Parent shall fail to pay any Debt (other
than Debt under the Loan Papers) in an
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aggregate amount of $1,000,000 or more when due (whether by scheduled maturity,
required prepayment, acceleration, demand, or otherwise), and such failure shall
continue after the applicable grace period, if any, specified in the agreement
or instrument relating to such Debt; or (ii) the Borrower, the Parent or any
Subsidiary of the Borrower or the Parent shall fail to perform or observe any
term or covenant contained in any agreement or instrument relating to any such
Debt, when required to be performed or observed, and such failure shall continue
after the applicable grace period, if any, specified in such agreement or
instrument, and can result in acceleration of the maturity of such Debt; or
(iii) any such Debt shall be declared to be due and payable, or required to be
prepaid, mandatorily redeemed or repurchased (other than by a regularly
scheduled required prepayment), prior to the stated maturity thereof; or (iv)
there shall exist a breach by any the Borrower, the Parent or any of their
Subsidiaries under one or more material contracts the effect of which could
reasonably be expected to cause a Material Adverse Change;
(h) Any Obligor shall have any final judgment(s) outstanding against
it, and such judgment(s) shall remain unstayed, in effect, and unpaid for the
period of time after which the judgment holder may cause the creation of Liens
against or seizure of any of its Property;
(i) Any of the following shall have occurred: (i) Any ERISA Event shall
have occurred with respect to a Plan of the Borrower or the Parent or any
Subsidiary of the Borrower or the Parent, and the sum of the Insufficiency of
such Plan and liabilities relating thereto is equal to or greater than
$1,000,000 or (ii) the Borrower, the Parent, the Subsidiaries of the Borrower
and the Parent or any ERISA Affiliate of any of them shall have committed a
failure described in Section 302(f)(l) of ERISA, and the amount determined under
Section 302(f)(3) of ERISA is equal to or greater than $1,000,000;
(j) The Borrower or the Parent, or any ERISA Affiliate of the Borrower
or the Parent shall have been notified by the sponsor of a Multiemployer Plan
that (A) it has incurred Withdrawal Liability to such Plan in an amount that
exceeds $1,000,000 or requires payments exceeding $1,000,000 per annum, or (B)
such Plan is in reorganization or is being terminated, within the meaning of
Title IV of ERISA, if as a result thereof the aggregate annual contributions to
all Multiemployer Plans in reorganization or being terminated is increased over
the amounts contributed to such Plans for the preceding Plan year by an amount
exceeding $1,000,000;
(k) Any of the Borrower, the Parent or any of their Subsidiaries shall
be required under any Environmental Law (i) to implement any remedial,
neutralization, or stabilization process or program, the cost of which could
reasonably be expected to cause a Material Adverse Change, or (ii) to pay any
penalty, fine, or damages in an aggregate amount which could reasonably be
expected to cause a Material Adverse Change;
(l) Any of the following shall have occurred: (i) Any property or
assets (whether leased or owned), or the operations conducted thereon by any of
the Borrower, the Parent or any of their Subsidiaries, or any current or prior
owner or operator thereof (in the case of real Property), shall violate or have
violated any applicable Environmental Law, if such violation could reasonably be
expected to cause a Material Adverse Change; or (ii) the Borrower or the Parent
or such Subsidiary shall not obtain or maintain any License required to be
obtained or filed under any Environmental Law in connection with the use of such
Property and assets, including without limitation past or present treatment,
storage, disposal, or release of Hazardous Materials into the environment, if
the
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failure to obtain or maintain the same could reasonably be expected to cause a
Material Adverse Change;
(m) Any of the following shall have occurred:
(i) Any Loan Paper shall for any reason (other than pursuant
to the terms thereof) cease to create a valid and perfected first
priority Lien in the Collateral purported to be covered thereby (except
as permitted by the terms of this Agreement or consented to by the
Lenders); or
(ii) Less than 100% of the Capital Stock of the Borrower or
any Subsidiary of the Parent or the Borrower shall be subject to a
first priority perfected pledge to the Administrative Agent to secure
the Obligations, except the Excluded Stock;
(n) Any of the following shall have occurred: (i) A final
non-appealable order is issued by any Tribunal, including, but not limited to,
the FCC, any applicable PUC, or the United States Justice Department, requiring
any Obligor to divest a substantial portion of its assets pursuant to any
antitrust, restraint of trade, unfair competition, industry regulation, or
similar Laws, or (ii) any Tribunal shall condemn, seize, or otherwise
appropriate, or take custody or control of all or any substantial portion of the
assets of the Parent, the Borrower or any of their Subsidiaries;
(o) Any of the following shall have occurred if the effect thereof
could be reasonably expected to cause a Material Adverse Change; (i) Any License
whether presently existing or hereafter granted to or obtained by the Borrower,
the Parent or any of their Subsidiaries shall expire without renewal or be
suspended or revoked, or (ii) the Parent, the Borrower or any of their
Subsidiaries shall become subject to any injunction or other order affecting or
which may affect the Parent's, the Borrower's or any of their Subsidiary's
present or proposed operations under any such License;
(p) Any civil action, suit or proceeding shall be commenced against the
Borrower, the Parent or any of their Subsidiaries under any federal or state
racketeering statute (including, without limitation, the Racketeer Influenced
and Corrupt Organization Act of 1970)("RICO") and such suit shall be adversely
determined by a court of applicable jurisdiction, and which is either
non-appealable or which the Parent, the Borrower or such Subsidiary has elected
not to appeal; or any criminal action or proceeding shall be commenced against
the Borrower, the Parent or any of their Subsidiaries under any federal or state
racketeering statute (including, without limitation, RICO);
(q) There shall occur a Change of Control, provided that, if the Loans
are rated at least BBB or above, or any equivalent thereto, by Standard & Poor's
Ratings Group, a Division of McGraw-Hill, Inc. or Moody's Investors Service,
Inc. on the 30th day following the event that otherwise would constitute a
Change of Control (the "Change of Control Determination Date"), there shall
exist no Event of Default under this Section 9.01(q), provided, however, that to
the extent there is a "rating watch" with respect to the Loans 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 Loans are not subject to
a "rating watch" or other rating agency review rating by either Standard &
Poor's Ratings Group, a Division of McGraw-Hill, Inc. or Moody's Investors
Service, Inc.;
(r) Any Litigation commenced against the Borrower, the Parent or any of
their Subsidiaries is adversely determined by a court of applicable
jurisdiction, which such Litigation is
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either non-appealable or which such Obligor has elected not to appeal, and in
either case, is reasonably expected to cause a Material Adverse Change;
(s) The Parent, the Borrower or any Subsidiary of the Borrower or the
Parent shall fail to comply in any respect with the Communications Act, or any
rule or regulation promulgated by the FCC or any applicable PUC, and such
failure could reasonably be expected to cause a Material Adverse Change; or any
License or authorization constituting authorizations, permits or licenses of the
Parent, the Borrower or any of their Subsidiaries material to the operation of
the business of the Parent, the Borrower and any of their Subsidiaries, has
expired or shall expire without having been renewed or shall be canceled or
impaired, and such expiration, cancellation or impairment could reasonably be
expected to cause a Material Adverse Change;
(t) The Parent, the Borrower or any of their Subsidiaries shall fail to
operate its business for any period of time which, in the aggregate, could
reasonably be expected to cause a Material Adverse Change;
(u) Any Substantial Portion shall not, for any reason (including,
without limitation, loss of FCC License, fiber network or otherwise) be
operating for a period in excess of 30 days. For purposes of this Section
9.01(u), "Substantial Portion" means any portion of the telecommunications
system of the Parent, the Borrower and the Restricted Subsidiaries that has
generated, for the most recently completed twelve month period, in excess of
five percent of the Operating Cash Flow;
(v) Any of the Parent, the Borrower or any of their Subsidiaries shall
fail to be Year 2000 Compliant;
(w) Any breach, default under, redemption, repurchase or defeasance, or
other comparable event shall occur with respect to any of the Subordinated
Notes; or
(x) Any breach or default under any provision of, or redemption,
repurchase or defeasance with respect to, or other comparable event as a result
of any change of control provision shall occur with respect to, any of the
Junior Exchangeable, Junior Convertible or the Cumulative Convertible, provided
that, if the Loans are rated at least BBB or above, or any equivalent thereto,
by Standard & Poor's Ratings Group, a Division of McGraw-Hill, Inc. or Moody's
Investors Service, Inc. on the 30th day following the event that otherwise would
constitute a Change of Control (the "Change of Control Determination Date"),
there shall exist no Event of Default under this Section 9.01(x), provided,
however, that to the extent there is a "rating watch" with respect to the Loans
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 Loans
are not subject to a "rating watch" or other rating agency review rating by
either Standard & Poor's Ratings Group, a Division of McGraw-Hill, Inc. or
Moody's Investors Service, Inc.
9.02. Remedies upon Default. If an Event of Default described in
Section 9.01(f) shall occur, the aggregate unpaid principal balance of and
accrued interest on all Advances shall, to the extent permitted by Applicable
Law, thereupon become due and payable concurrently therewith, without any action
by Administrative Agent or any Lender, and without diligence, presentment,
demand, protest, notice of protest or intent to accelerate, or notice of any
other kind, all of which are hereby expressly waived. Subject to the foregoing
sentence, if any Event of Default shall occur and be continuing, Administrative
Agent may at its election, do any one or more of the following:
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(a) Declare the entire unpaid balance of all Obligations immediately
due and payable, whereupon it shall be due and payable without diligence,
presentment, demand, protest, notice of protest or intent to accelerate, or
notice of any other kind (except notices specifically provided for under Section
9.01 hereof), all of which are hereby expressly waived (except to the extent
waiver of the foregoing is not permitted by Applicable Law);
(b) Terminate either the Revolver Commitment or, if the Special Purpose
Loan is a revolving loan as determined in accordance with the terms of Section
2.17 hereof, the Special Purpose Commitment, or terminate both of the
Commitments;
(c) Reduce any claim of Administrative Agent and Lenders to judgment;
(d) Demand (and the Borrower shall pay to Administrative Agent)
immediately upon demand and in immediately available funds, the amount equal to
the aggregate amount of the Letters of Credit then outstanding, irrespective of
whether such Letters of Credit have been drawn upon, all as set forth and in
accordance with the terms of provisions of Article III hereof. The
Administrative Agent shall promptly advise the Borrower of any such declaration
or demand but failure to do so shall not impair the effect of such declaration
or demand; and
(e) Exercise any Rights afforded under any Loan Papers, by Law,
including but not limited to the UCC, at equity, or otherwise.
9.03. Cumulative Rights. All Rights available to Administrative Agent
and Lenders under the Loan Papers shall be cumulative of and in addition to all
other Rights granted thereto at Law or in equity, whether or not amounts owing
thereunder shall be due and payable, and whether or not Administrative Agent or
any Lender shall have instituted any suit for collection or other action in
connection with the Loan Papers.
9.04. Waivers. The acceptance by Administrative Agent or any Lender at
any time and from time to time of partial payment of any amount owing under any
Loan Papers shall not be deemed to be a waiver of any Default or Event of
Default then existing. No waiver by Administrative Agent or any Lender of any
Default or Event of Default shall be deemed to be a waiver of any Default or
Event of Default other than such Default or Event of Default. No delay or
omission by Administrative Agent or any Lender in exercising any Right under the
Loan Papers shall impair such Right or be construed as a waiver thereof or an
acquiescence therein, nor shall any single or partial exercise of any such Right
preclude other or further exercise thereof, or the exercise of any other Right
under the Loan Papers or otherwise.
9.05. Performance by Administrative Agent or any Lender. Should any
covenant of any Obligor fail to be performed in accordance with the terms of the
Loan Papers, Administrative Agent may, at its option, perform or attempt to
perform such covenant on behalf of such Obligor. Notwithstanding the foregoing,
it is expressly understood that neither Administrative Agent nor any Lender
assumes, and shall not ever have, except by express written consent of
Administrative Agent or such Lender, any liability or responsibility for the
performance of any duties or covenants of any Obligor.
9.06. Expenditures. The Borrower shall reimburse Administrative Agent
and each Lender for any reasonable sums spent by it in connection with the
exercise of any Right under Section 9.05
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hereof. Such sums shall bear interest at the lesser of (a) the Base Rate
(whether or not in effect), plus 2.00% per annum and (b) the Highest Lawful
Rate, from 15 days after the date any Lender makes demand to the Borrower for
reimbursement of such amount until the date of repayment by the Borrower.
9.07. Control. None of the covenants or other provisions contained in
this Agreement shall, or shall be deemed to, give Administrative Agent or any
Lender any Rights to exercise control over the affairs and/or management of any
Obligor, the power of Administrative Agent and each Lender being limited to the
Rights to exercise the remedies provided in this Article; provided, however,
that if Administrative Agent or any Lender becomes the owner of any partnership,
stock or other equity interest in any Person, whether through foreclosure or
otherwise, it shall be entitled to exercise such legal Rights as it may have by
being an owner of such stock or other equity interest in such Person.
ARTICLE X. THE ADMINISTRATIVE AGENT
10.01. Authorization and Action. Each Lender hereby appoints and
authorizes Administrative Agent to take such action as Administrative Agent on
its behalf and to exercise such powers under this Agreement and the other Loan
Papers as are delegated to the Administrative Agent by the terms of the Loan
Papers, together with such powers as are reasonably incidental thereto. As to
any matters not expressly provided for by this Agreement and the other Loan
Papers (including without limitation enforcement or collection of the Notes),
Administrative Agent shall not be required to exercise any discretion or take
any action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
Majority Lenders (or all Lenders, if required under Section 11.01 hereof), and
such instructions shall be binding upon all Lenders; provided, however, that
Administrative Agent shall not be required to take any action which exposes
Administrative Agent to personal liability or which is contrary to any Loan
Papers or Applicable Law. Administrative Agent agrees to give to each Lender
notice of each notice given to it by the Borrower pursuant to the terms of this
Agreement, and to distribute to each applicable Lender in like funds all amounts
delivered to Administrative Agent by the Borrower for the individual account of
any Lender pro rata in accordance with the Applicable Specified Percentage, as
set forth in this Agreement. Functions of the Administrative Agent are
administerial in nature and in no event shall the Administrative Agent have a
fiduciary or trustee relationship in respect of any Lender by reason of this
Agreement or any other Loan Paper.
10.02. Administrative Agent's Reliance, Etc. Neither Administrative
Agent, nor any of its directors, officers, agents, employees, or representatives
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement or any other Loan Paper, except for its or
their own gross negligence or willful misconduct. Without limitation of the
generality of the foregoing, Administrative Agent (a) may treat the payee of any
Note as the holder thereof until Administrative Agent receives written notice of
the assignment or transfer thereof signed by such payee and in form satisfactory
to Administrative Agent; (b) may consult with legal counsel (including counsel
for the Parent, the Borrower or any of the Restricted Subsidiaries), independent
public accountants, and other experts selected by it, and shall not be liable
for any action taken or omitted to be taken in good faith by it in accordance
with the advice of such counsel, accountants, or experts; (c) makes no warranty
or representation to any Lender and shall not be responsible to any Lender for
any statements, warranties, or representations made in or in connection with
this Agreement or any other Loan Papers; (d) shall not have any duty to
ascertain or to inquire as to the performance or
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observance of any of the terms, covenants, or conditions of this Agreement or
any other Loan Papers on the part of the Parent, the Borrower or the Restricted
Subsidiaries or to inspect the Property (including the books and records) of the
Parent, the Borrower or their Subsidiaries; (e) shall not be responsible to any
Lender for the due execution, legality, validity, enforceability, genuineness,
sufficiency, or value of this Agreement, any other Loan Papers, or any other
instrument or document furnished pursuant hereto; and (f) shall incur no
liability under or in respect of this Agreement or any other Loan Papers by
acting upon any notice, consent, certificate, or other instrument or writing
believed by it to be genuine and signed or sent by the proper party or parties.
10.03. NationsBank, N.A. and Affiliates. With respect to its Revolver
Commitment, Special Purpose Commitment, its Advances, and any Loan Papers,
NationsBank, N.A. has the same Rights under this Agreement as any other Lender
and may exercise the same as though it were not Administrative Agent.
NationsBank, N.A. and its Affiliates may accept deposits from, lend money to,
act as trustee under indentures of, and generally engage in any kind of business
with, any Obligor, any Affiliate thereof, and any Person who may do business
therewith, all as if NationsBank, N.A. were not Administrative Agent and without
any duty to account therefor to any Lender.
10.04. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon Administrative Agent or any other
Lender, and based on the financial statements referred to in Section 5.01(j),
Section 7.01 and Section 7.02 hereof and such other documents and information as
it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each Lender also acknowledges that it will, independently
and without reliance upon Administrative Agent or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement and the other Loan Papers.
10.05. Indemnification by Lenders. Lenders shall indemnify
Administrative Agent, pro rata in accordance with each Lender's Total Specified
Percentage, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses, or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against Administrative Agent in any way relating to or arising out of
any Loan Papers or any action taken or omitted by Administrative Agent
thereunder, including any negligence of Administrative Agent; provided, however,
that no Lender shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses, or
disbursements resulting from Administrative Agent's gross negligence or willful
misconduct. Without limitation of the foregoing, Lenders shall reimburse
Administrative Agent, pro rata in accordance with each Lender's Total Specified
Percentage, promptly upon demand for any out-of-pocket expenses (including
reasonable attorneys' fees) incurred by Administrative Agent in connection with
the preparation, execution, delivery, administration, modification, amendment,
or enforcement (whether through negotiation, legal proceedings or otherwise) of,
or legal and other advice in respect of rights or responsibilities under, the
Loan Papers. The indemnity provided in this Section 10.05 shall survive the
termination of this Agreement.
10.06. Successor Administrative Agent. Administrative Agent may resign
at any time by giving written notice thereof to Lenders and the Borrower, and
may be removed at any time with or without cause by the action of all Lenders
(other than Administrative Agent, if it is a Lender). Upon any such resignation
or removal, Majority Lenders shall have the right to appoint a successor
Administrative Agent with the prior written consent of the Borrower (which shall
not be unreasonably
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withheld), provided that, if there exists an Event of Default that is
continuing, no consent of the Borrower shall be required. If no successor
Administrative Agent shall have been so appointed and shall have accepted such
appointment within thirty days after the retiring Administrative Agent's giving
of notice of resignation, then the retiring Administrative Agent may, on behalf
of Lenders, appoint a successor Administrative Agent, which shall be a
commercial bank organized under the Laws of the United States of America or of
any State thereof and having a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all the Rights and
duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations under the Loan Papers,
provided that if the retiring or removed Administrative Agent is unable to
appoint a successor Administrative Agent, Administrative Agent shall, after the
expiration of a sixty day period from the date of notice, be relieved of all
obligations as Administrative Agent hereunder. Notwithstanding any
Administrative Agent's resignation or removal hereunder, the provisions of this
Article shall continue to inure to its benefit as to any actions taken or
omitted to be taken by it while it was Administrative Agent under this
Agreement.
ARTICLE XI. MISCELLANEOUS
11.01. Amendments and Waivers. Except as set forth in Section 2.17
hereof, no amendment or waiver of any provision of this Agreement or any other
Loan Papers, nor consent to any departure by the Borrower or any Obligor
therefrom, shall be effective unless the same shall be in writing and signed by
the Borrower and the Administrative Agent with the consent of the Majority
Lenders, and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that no amendment, waiver, or consent shall (and the result of action
or failure to take action shall not) unless in writing and signed by all of
Lenders and Administrative Agent, (a) increase the Revolver Commitment or the
Special Purpose Commitment (except in accordance with the terms of Section 2.17
hereof), (b) reduce any principal, interest, fees, or other amounts payable
hereunder, or waive or result in the waiver of any Event of Default under
Section 9.01(a) hereof, (c) postpone any date fixed for any payment of
principal, interest, fees, or other amounts payable hereunder, (d) release or
impair any Collateral or guaranties securing any Obligor's obligations
hereunder, other than releases contemplated hereby and by the other Loan Papers,
(e) change the meaning of "Total Specified Percentage", "Revolver Specified
Percentage", "Term Loan Specified Percentage" or "Special Purpose Specified
Percentage" (except in accordance with the terms of Section 2.17 hereof), or the
number of Lenders required to take any action hereunder, change the definitions
of "Commitment", "Revolver Commitment", "Special Purpose Commitment" (except in
accordance with the terms of Section 2.17 hereof), "Maturity Date", "Majority
Lenders", or "Letter of Credit Commitment", or (f) amend this Section 11.01 or
Section 11.03 hereof. No amendment, waiver, or consent shall affect the Rights
or duties of Administrative Agent under any Loan Papers, unless it is in writing
and signed by Administrative Agent in addition to the requisite number of
Lenders.
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11.02. Notices.
(a) Manner of Delivery. All notices communications and other materials
to be given or delivered under the Loan Papers shall, except in those cases
where giving notice by telephone is expressly permitted, be given or delivered
in writing. All written notices, communications and materials shall be sent by
registered or certified mail, postage prepaid, return receipt requested, by
telecopier, or delivered by hand. In the event of a discrepancy between any
telephonic notice and any written confirmation thereof, such written
confirmation shall be deemed the effective notice except to the extent
Administrative Agent, any Lender or the Borrower has acted in reliance on such
telephonic notice.
(b) Addresses. All notices, communications and materials to be given
or delivered pursuant to this Agreement shall be given or delivered at the
following respective addresses and telecopier and telephone numbers and to the
attention of the following individuals or departments:
(i) If to the Borrower, the Parent or any Restricted Subsidiary:
IXC Communications Services, Inc.
1122 Capital of Texas Highway South
Austin, Texas 78746
Telephone No.: (512) 427-3713
Telecopier No.: (512) 328-0239
Attention: Mr. James F. Guthrie
Executive Vice President and Chief
Financial Officer
With copies to (which is not required for effective delivery as set
forth above):
Riordan & McKinzie
A Professional Corporation
695 Town Center Drive, Suite 1500
Costa Mesa, CA 92626
Telephone No.: (714) 433-2618
Facsimile No.: (714) 549-3244
Attention: Michael P. Whalen
(ii) If to Administrative Agent:
NationsBank, N.A.
NationsBank Plaza
901 Main Street, 64th Floor
Dallas, Texas 75202
Telephone No.: (214) 209-0988
Telecopier No.: (214) 209-9390
Attention: Ms. Roselyn M. Drake
Principal
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With a copy to (which is not required for effective delivery as
set forth above):
Donohoe, Jameson & Carroll, P.C.
3400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Telephone No.: (214) 698-3814
Telecopier No.: (214) 744-0231
Attention: Melissa Ruman Stewart
(iii) If to any Lender, to its address shown opposite its signature
block on the signature pages hereto, or on any Assignment and Acceptance, or in
any other notice to the Borrower and the Administrative Agent,
or at such other address or, telecopier or telephone number or to the attention
of such other individual or department as the party to which such information
pertains may hereafter specify for the purpose in a notice to the other
specifically captioned "Notice of Change of Address".
(c) Effectiveness. Each notice, communication and any material to be
given or delivered to any party pursuant to this Agreement shall be effective or
deemed delivered or furnished (i) if sent by mail, on the fifth day after such
notice, communication or material is deposited in the mail, addressed as above
provided, (ii) if sent by telecopier, when such notice, communication or
material is transmitted to the appropriate number, (iii) if sent by hand
delivery or overnight courier, when left at the address of the addressee
addressed as above provided, and (iv) if given by telephone, when communicated
to the individual or any member of the department specified as the individual or
department to whose attention notices, communications and materials are to be
given or delivered except that notices of a change of address, telecopier or
telephone number or individual or department to whose attention notices,
communications and materials are to be given or delivered shall not be effective
until received; provided, however, that notices to Administrative Agent pursuant
to Article II shall be effective when received. The Borrower agrees that
Administrative Agent shall have no duty or obligation to verify or otherwise
confirm telephonic notices given pursuant to Article II, and agrees to indemnify
and hold harmless Administrative Agent and Lenders for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, and expenses resulting, directly or indirectly, from acting upon any such
notice.
11.03. Parties in Interest. All covenants and agreements contained in
this Agreement and all other Loan Papers shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto. Each Lender may
from time to time assign or transfer its interests hereunder pursuant to Section
11.04 hereof. The Borrower may not assign or transfer its Rights or obligations
hereunder without the prior written consent of the Administrative Agent and each
Lender.
11.04. Assignments and Participations.
(a) Each Lender (an "Assignor") may assign its Rights and obligations
as a Lender under the Loan Papers to one or more transferees pursuant to an
Assignment and Acceptance, so long as (i) each assignment shall be of a
constant, and not a varying percentage of all Rights and obligations thereunder,
provided that any assignment may assign a non-pro rata portion of any of the
Revolver
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Loan, Term Loan or Special Purpose Loan, (ii) each Assignor shall obtain in each
case the prior written consent of Administrative Agent and the Borrower, in each
case such consent of the Borrower and the Administrative Agent not to be
unreasonably withheld or delayed, provided that (A) in the event there exists an
Event of Default that is continuing, no consent of the Borrower shall be
required to make an assignment and (B) no consent of the Borrower shall be
required for any Lender to assign all or any portion of its Loan to an Affiliate
or another existing Lender, (iii) each Assignor shall in each case pay a $3,500
processing fee to Administrative Agent, (iv) no such assignment is for an amount
less than $5,000,000 and in increments $1,000,000, provided that, if any such
assignment is to an existing Lender, such minimum assignment amounts shall not
be required and (v) if any such assignment is a partial assignment, no Lender
shall hold less than $5,000,000 immediately after giving effect to any
assignment. Assignments and other transfers (except participations) with respect
to each Lender's participation in a given Letter of Credit may only be made with
the prior written consent of the Administrative Agent. Within five Business Days
after Administrative Agent receives notice of any such assignment, the Borrower
shall execute and deliver to Administrative Agent, in exchange for the Notes
issued to Assignor, new Notes to the order of such Assignor and its assignee in
amounts equal to their respective Applicable Specified Percentages of the
Revolver Commitment and/or the Special Purpose Commitment, and/or the
outstanding amount of the Term Loan, as applicable. Such new Notes shall be
dated the effective date of the assignment. It is specifically acknowledged and
agreed that on and after the effective date of each assignment, the assignee
shall be a party hereto and shall have the Rights and obligations of a Lender
under the Loan Papers. It is specifically agreed by all parties hereto that
Lenders may have different percentages for each of the Loans.
(b) Each Lender may sell participations to one or more Persons in all
or any of its Rights and obligations under the Loan Papers; provided, however,
that (i) such Lender's obligations under the Loan Papers shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations, (iii) such Lender shall remain the holder
of its Notes for all purposes of the Loan Papers, (iv) the participant shall be
granted the Right to vote on or consent to only those matters described in
Sections 11.01(a), (b), (c) and (d) hereof, (v) Obligors, the Administrative
Agent, and other Lenders shall continue to deal solely and directly with such
Lender in connection with their respective Rights and obligations under the Loan
Papers and (vi) no such participation is for an amount less than $5,000,000.
(c) Any Lender may, in connection with any assignment or participation,
or proposed assignment or participation, disclose to the assignee or
participant, or proposed assignee or participant, any information relating to
the Parent, the Borrower and their Subsidiaries furnished to such Lender by or
on behalf of the Parent, the Borrower and their Subsidiaries.
(d) Notwithstanding any other provision set forth in this Agreement,
(i) any Lender may at any time create a security interest in all or any portion
of its Rights under this Agreement (including, without limitation, the Advances
owing to it and the Notes held by it) in favor of any Federal Reserve Bank in
accordance with Regulation A of the Board of Governors of the Federal Reserve
System and (ii) no participant of any Lender may further assign or participate
any of its interest in the Loan Papers to any Person (except as may be required
by Law or a Tribunal having authority over such participant).
11.05. Sharing of Payments. If, after and during the continuance of
any Event of Default, any Lender shall obtain any payment (whether voluntary,
involuntary, through the exercise of any Right
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of set-off, or otherwise) on account of its Advances in excess of its pro rata
share of payments made by the Borrower in accordance with such Lender's Total
Specified Percentage, such Lender shall forthwith purchase participations in
Advances made by the other Lenders as shall be necessary to share the excess
payment pro rata in accordance with each Lender's Total Specified Percentage
with each of them; provided, however, that if any of such excess payment is
thereafter recovered from the purchasing Lender, its purchase from each Lender
shall be rescinded and each Lender shall repay the purchase price to the extent
of such recovery together with a pro rata share of any interest or other amount
paid or payable by the purchasing Lender in respect of the total amount so
recovered. The Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to this Section 11.05 may, to the fullest extent
permitted by Law, exercise all its Rights of payment (including the Right of
set-off) with respect to such participation as fully as if such Lender were the
direct creditor of the Borrower in the amount of such participation.
11.06. Right of Set-off. Upon the occurrence and during the continuance
of any Event of Default, each Lender is hereby authorized (after prior written
noticed to the Administrative Agent) at any time and from time to time, to the
fullest extent permitted by Law, to set-off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Lender to or for the credit or the
account of the Borrower, the Parent or any of their Subsidiaries against any and
all of the obligations of the Borrower now or hereafter existing under this
Agreement and the other Loan Papers, whether or not Administrative Agent or any
Lender shall have made any demand under this Agreement or the other Loan Papers,
and even if such obligations are unmatured. Each Lender shall promptly notify
the Borrower after any such set-off and application, provided that the failure
to give such notice shall not affect the validity of such set-off and
application. The Rights of each Lender under this Section 11.06 are in addition
to other Rights (including, without limitation, other Rights of set-off) which
such Lender may have.
11.07. Costs, Expenses, and Taxes.
(a) Notwithstanding anything to the contrary in the Loan Papers, the
Borrower agrees to pay on demand (i) all costs and expenses of Administrative
Agent in connection with the preparation and negotiation of all Loan Papers,
including without limitation the reasonable fees and out-of-pocket expenses of
Special Counsel, FCC counsel, PUC counsel and local counsel, as appropriate,
(ii) all costs and expenses (including reasonable attorneys' fees and expenses)
of Administrative Agent in connection with any interpretation, grant and
perfection of any Lien, modification, amendment, waiver, release of any Loan
Papers, restructuring or work-out and (iii) all costs and expenses (including
reasonable attorneys' fees and expenses) of Administrative Agent and each Lender
in connection with any collection of any portion of the Obligations or the
enforcement of any Loan Papers during the continuance of an Event of Default.
(b) In addition, notwithstanding anything to the contrary in the Loan
Papers, the Borrower shall pay any and all stamp, debt, and other Taxes payable
or determined to be payable in connection with any payment hereunder (other than
Taxes on the overall net income of Administrative Agent or any Lender or
franchise Taxes or Taxes on capital or capital receipts of Administrative Agent
or any Lender), or the execution, delivery, or recordation of any Loan Papers,
and agrees to save Administrative Agent and each Lender harmless from and
against any and all liabilities with respect to, or resulting from any delay in
paying or omission to pay any Taxes in accordance with this Section 11.07,
including any penalty, interest, and expenses relating thereto. All payments by
the Borrower or any Restricted
89
<PAGE> 95
Subsidiary of the Borrower under any Loan Papers shall be made free and clear of
and without deduction for any present or future Taxes (other than Taxes on the
overall net income of Administrative Agent or any Lender of any nature now or
hereafter existing, levied, or withheld, or franchise Taxes or Taxes on capital
or capital receipts of Administrative Agent or any Lender), including all
interest, penalties, or similar liabilities relating thereto. If the Borrower
shall be required by Law to deduct or to withhold any Taxes from or in respect
of any amount payable hereunder (i) the amount so payable shall be increased to
the extent necessary so that, after making all required deductions and
withholdings (including Taxes on amounts payable to Administrative Agent or any
Lender pursuant to this sentence), Administrative Agent or any Lender receives
an amount equal to the sum it would have received had no such deductions or
withholdings been made, (ii) the Borrower shall make such deductions or
withholdings, and (iii) the Borrower shall pay the full amount deducted or
withheld to the relevant taxing authority in accordance with Applicable Law.
Without prejudice to the survival of any other agreement of the Borrower
hereunder, the agreements and obligations of the Borrower contained in this
Section 11.07 shall survive the execution of this Agreement, termination of the
Commitment, repayment of the Obligations, satisfaction of each agreement
securing or assuring the Obligations and termination of this Agreement and each
other Loan Paper.
11.08. Rate Provision. It is not the intention of any party to any Loan
Papers to make an agreement violative of the Laws of any applicable jurisdiction
relating to usury. In no event shall any Obligor or any other Person be
obligated to pay any amount in excess of the Maximum Amount. If Administrative
Agent or any Lender ever receives, collects or applies, as interest, any such
excess, such amount which would be excessive interest shall be deemed a partial
repayment of principal and treated hereunder as such; and if principal is paid
in full, any remaining excess shall be paid to the Borrower or the other Person
entitled thereto. In determining whether or not the interest paid or payable,
under any specific contingency, exceeds the Maximum Amount, each Obligor,
Administrative Agent and each Lender shall, to the maximum extent permitted
under Applicable Laws, (a) characterize any nonprincipal payment as an expense,
fee or premium rather than as interest, (b) exclude voluntary prepayments and
the effect thereof, and (c) amortize, prorate, allocate and spread in equal
parts, the total amount of interest throughout the entire contemplated term of
the Obligations so that the interest rate is uniform throughout the entire term
of the Obligations; provided that if the Obligations are paid and performed in
full prior to the end of the full contemplated term thereof, and if the interest
received for the actual period of existence thereof exceeds the Maximum Amount,
Administrative Agent or Lenders, as appropriate, shall refund to the Borrower
the amount of such excess or credit the amount of such excess against the total
principal amount owing, and, in such event, neither Administrative Agent nor any
Lender shall be subject to any penalties provided by any Laws for contracting
for, charging or receiving interest in excess of the Maximum Amount. This
Section 11.08 shall control every other provision of all agreements among the
parties to the Loan Papers pertaining to the transactions contemplated by or
contained in the Loan Papers.
11.09. Severability. If any provision of any Loan Papers is held to be
illegal, invalid, or unenforceable under present or future Laws during the term
thereof, such provision shall be fully severable, the appropriate Loan Paper
shall be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part thereof, and the remaining provisions
thereof shall remain in full force and effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by its severance therefrom.
Furthermore, in lieu of such illegal, invalid, or unenforceable provision there
shall be added automatically as a part of such Loan Paper a legal, valid, and
enforceable provision as similar in terms to the illegal, invalid, or
unenforceable provision as may be possible.
90
<PAGE> 96
11.10. Exceptions to Covenants. No Obligor shall be deemed to be
permitted to take any action or to fail to take any action that is permitted as
an exception to any covenant in any Loan Papers, or that is within the
permissible limits of any covenant, if such action or omission would result in a
violation of any other covenant in any Loan Papers.
11.11. Counterparts. This Agreement and the other Loan Papers may be
executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument. In making proof of any such agreement,
it shall not be necessary to produce or account for any counterpart other than
one signed by the party against which enforcement is sought.
11.12. GOVERNING LAW; WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT AND ALL OTHER LOAN PAPERS SHALL BE DEEMED TO BE
CONTRACTS MADE IN DALLAS, TEXAS, AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO
CONFLICTS OF LAWS) AND THE UNITED STATES OF AMERICA. WITHOUT EXCLUDING ANY OTHER
JURISDICTION, THE BORROWER AGREES THAT THE FEDERAL COURTS OF TEXAS LOCATED IN
DALLAS, TEXAS, WILL HAVE JURISDICTION OVER PROCEEDINGS IN CONNECTION HEREWITH.
TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE BORROWER HEREBY WAIVES ANY RIGHT
THAT IT MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE (WHETHER A CLAIM IN TORT,
CONTRACT, EQUITY, OR OTHERWISE) ARISING UNDER OR RELATING TO THIS AGREEMENT, THE
OTHER LOAN PAPERS, OR ANY RELATED MATTERS, AND AGREES THAT ANY SUCH DISPUTE
SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
(b) THE BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY LEGAL PROCESS
UPON IT. THE BORROWER AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT BY
REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO THE BORROWER AT ITS
ADDRESS DESIGNATED FOR NOTICE UNDER THIS AGREEMENT AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED FIVE DAYS AFTER DEPOSIT IN THE UNITED STATES MAIL.
NOTHING IN THIS SECTION 11.12 SHALL AFFECT THE RIGHT OF ADMINISTRATIVE AGENT OR
ANY LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
11.13. ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN PAPERS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENT OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
11.14. Amendment, Restatement, Extension, Renewal and Increase. This
Agreement is a renewal and amendment and restatement of the Original Credit
Agreement, and, as such, except for the "Obligation" as defined in the Original
Credit Agreement (which shall survive, be renewed and restated by the terms of
this Agreement), all other terms and provisions supersede in their entirety the
Original Credit Agreement. This Agreement is being restated and amended by the
Majority Lenders in accordance with the terms of Section 11.01 of the Original
Credit Agreement. All subordination agreements, security agreements, pledge
agreements, mortgages, deeds of trust and other documents
91
<PAGE> 97
and instruments granting any security interest or assigning any interest in any
assets of the Borrower or any Subsidiary to secure the Obligation executed and
delivered in connection with this Agreement that restate any previously granted
interest shall supersede any subordination agreements, security agreements,
pledge agreements, mortgages, deeds of trust and other documents and instruments
granting any security interest or assigning any interest in any assets of the
Borrower or any Subsidiary that were executed and delivered in connection with
the Original Credit Agreement (the "Original Security Documents"), except for
the Liens created under the Original Security Documents which shall remain
valid, binding and enforceable Liens against the Borrower, the Subsidiaries and
each of the other Persons granting any such Liens. All other Original Security
Documents shall continue to secure the Obligations as herein defined, and shall
be in full force and effect.
================================================================================
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
================================================================================
92
<PAGE> 98
IN WITNESS WHEREOF, this First Amended and Restated Credit Agreement is
executed as of the date first set forth above.
THE BORROWER:
IXC COMMUNICATIONS SERVICES, INC.
/s/ James F. Guthrie
----------------------------------------
By: James F. Guthrie
Its: Executive Vice President and Chief
Financial Officer
<PAGE> 99
Agreed and Accepted:
THE PARENT:
IXC COMMUNICATIONS, INC.
/s/ James F. Guthrie
----------------------------------------
By: James F. Guthrie
Its: Executive Vice President and Chief
Financial Officer
<PAGE> 100
ADMINISTRATIVE AGENT:
NATIONSBANK, N.A., as Administrative Agent
/s/ Roselyn M. Drake
----------------------------------------
By: Roselyn M. Drake
Its: Principal
<PAGE> 101
CO-SYNDICATION AGENTS: CREDIT SUISSE FIRST
BOSTON, as Co-Syndication Agent
/s/ Todd C. Morgan
----------------------------------------
By: Todd C. Morgan
-----------------------------------
Its: Director
-----------------------------------
/s/ Bill O'Daly
----------------------------------------
By: Bill O'Daly
-----------------------------------
Its: Vice President
-----------------------------------
<PAGE> 102
TD SECURITIES (USA), INC.,
as Co-Syndication Agent
/s/ David Perlman
----------------------------------------
By: David Perlman
-----------------------------------
Its:
-----------------------------------
<PAGE> 103
EXPORT DEVELOPMENT CORPORATION,
as Co-Syndication Agent
/s/ Bruce Dunlop
----------------------------------------
By: Bruce Dunlop
-----------------------------------
Its: Financial Services Manager
-----------------------------------
/s/ Stephen Davies
----------------------------------------
By: Stephen Davies
-----------------------------------
Its: Financial Services Manager
-----------------------------------
<PAGE> 104
LENDERS:
NATIONSBANK, N.A., individually as a Lender
Address:
901 Main Street
64th Floor
Dallas, Texas 75202 /s/ Roselyn M. Drake
------------------------------------------
By: Roselyn M. Drake
Its: Principal
Attn.: Roselyn M. Drake
Telephone: (214) 209-0988
Telecopy: (214) 209-9390
Revolver Specified Percentage: 21.42857142750%
Term Loan Specified Percentage: 21.42857142750%
Total Specified Percentage: 21.42857142750%
<PAGE> 105
EXPORT DEVELOPMENT CORPORATION,
as a Lender
Address:
151 O'Connor Street, 10th Floor
Ottawa, ON K1A 1K3
/s/ Bruce Dunlop
----------------------------------------
By: Bruce Dunlop
-----------------------------------
Its: Financial Services Manager
-----------------------------------
Attn: Bruce Dunlop
Telephone: (613) 598-3034
Telecopy: (613) 598-6858 /s/ Stephen Davies
----------------------------------------
By: Stephen Davies
-----------------------------------
Its: Financial Services Manager
-----------------------------------
Revolver Specified Percentage: 21.42857142750%
Term Loan Specified Percentage: 21.42857142750%
Total Specified Percentage: 21.42857142750%
<PAGE> 106
CREDIT SUISSE FIRST
BOSTON, as a Lender
Address:
11 Madison Avenue
New York, New York 10010
/s/ Todd C. Morgan
----------------------------------------
By: Todd C. Morgan
-----------------------------------
Its: Director
-----------------------------------
Attn: Jeffrey Howe
Telephone: (212) 325-9102
Telecopy: (212) 325-6695
/s/ Bill O'Daly
----------------------------------------
By: Bill O'Daly
-----------------------------------
Its: Vice President
-----------------------------------
Revolver Specified Percentage: 10.00000000000%
Term Loan Specified Percentage: 10.00000000000%
Total Specified Percentage: 10.00000000000%
<PAGE> 107
TORONTO DOMINION (TEXAS), INC., as a
Lender
Address:
909 Fannin Street, Suite 1700
Houston, Texas 77010
/s/ Carol Brandt
----------------------------------------
By: Carol Brandt
-----------------------------------
Its: Vice President
-----------------------------------
Attn: Carol Brandt
Telephone: (713) 653-8204
Telecopy: (713) 951-9921
Revolver Specified Percentage: 11.42857143000%
Term Loan Specified Percentage: 11.42857143000%
Total Specified Percentage: 11.42857143000%
<PAGE> 108
THE BANK OF NEW YORK, as a Lender
Address:
One Wall Street, 16th Floor
New York, New York 10286
/s/ Gary Granovsky
----------------------------------------
By: Gary Granovsky
-----------------------------------
Its: Vice President
-----------------------------------
Attn: Gerry Grenovsky
Telephone: (212) 635-8615
Telecopy: (212) 635-8593
Revolver Specified Percentage: 7.14285714500%
Term Loan Specified Percentage: 7.14285714500%
Total Specified Percentage: 7.14285714500%
<PAGE> 109
BANK OF MONTREAL, as a Lender
Address:
430 Park Avenue
New York, New York 10022
/s/ Ola Anderssen
----------------------------------------
By: Ola Anderssen
-----------------------------------
Its: Director
-----------------------------------
Attn: Ola Anderssen
Telephone: (212) 605-1453
Telecopy: (212) 605-1648
Revolver Specified Percentage: 4.28571428500%
Term Loan Specified Percentage: 4.28571428500%
Total Specified Percentage: 4.28571428500%
<PAGE> 110
BANK OF NOVA SCOTIA, as a Lender
Address:
One Liberty Plaza, 26th Floor
New York, New York 10006
/s/ Vincent J. Fitzgerald
----------------------------------------
By: Vincent J. Fitzgerald
-----------------------------------
Its: Authorized Secretary
-----------------------------------
Attn: Steve Levi
Telephone: (212) 225-5039
Telecopy: (212) 225-5091
Revolver Specified Percentage: 4.28571428500%
Term Loan Specified Percentage: 4.28571428500%
Total Specified Percentage: 4.28571428500%
<PAGE> 111
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC., as a Lender
Address:
Two Ravinia Drive, Suite 1680
Atlanta, Georgia 30346
/s/ Gary Andresen
----------------------------------------
By: Gary Andresen
-----------------------------------
Its: Associate
-----------------------------------
Attn: Carl Drake
Telephone: (770) 390-1850
Telecopy: (770) 390-1851
/s/ Robert M. Biringer
----------------------------------------
By: Robert M. Biringer
-----------------------------------
Its: Executive Vice President
-----------------------------------
Revolver Specified Percentage: 4.28571428500%
Term Loan Specified Percentage: 4.28571428500%
Total Specified Percentage: 4.28571428500%
<PAGE> 112
NATIONAL WESTMINSTER BANK PLC, as a
Lender
Address:
c/o Greenwich Capital Markets By: Natwest Capital Markets Ltd., its
600 Steamboat Road agent
Greenwich, CT 06830
By: Greenwich Capital Markets, Inc., its
agent
/s/ Richard J. Jacoby
----------------------------------------
By: Richard J. Jacoby
-----------------------------------
Its: Assistant Vice President
-----------------------------------
Attn: Rick Jacoby
Telephone: (203) 618-2510
Telecopy: (203) 618-2520
Revolver Specified Percentage: 2.85714285500%
Term Loan Specified Percentage: 2.85714285500%
Total Specified Percentage: 2.85714285500%
<PAGE> 113
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, NEW YORK BRANCH, as a Lender
Address:
1251 Avenue of the Americas
New York, New York 10020-1104 /s/ William Kennedy
----------------------------------------
By: William Kennedy
-----------------------------------
Its: Senior Vice President
-----------------------------------
Attn: Christian Giordano
Telephone: (212) 282-3515
Telecopy: (212) 282-4486
Revolver Specified Percentage: 4.28571428500%
Term Loan Specified Percentage: 3.21428571500%
Total Specified Percentage: 5.71428571500%
<PAGE> 114
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY, as a Lender
Address:
1251 Avenue of the Americas
New York, New York 10020-1104 /s/ Emile Elnems
----------------------------------------
By: Emile Elnems
-----------------------------------
Its: Vice President
-----------------------------------
Attn: Emile Elnems
Telephone: (212) 782-4310
Telecopy: (212) 782-5650
Revolver Specified Percentage: 4.28571428500%
Term Loan Specified Percentage: 4.28571428500%
Total Specified Percentage: 4.28571428500%
<PAGE> 115
BANK OF HAWAII, as a Lender
Address:
1850 North Central Avenue
Suite 400
Phoenix, Arizona 85004 /s/ Eric N. Pelletier
----------------------------------------
By: Eric N. Pelletier
-----------------------------------
Its: Vice President
-----------------------------------
Attn: Eric Pelletier
Telephone: (602) 257-2485
Telecopy: (602) 257-2235
Revolver Specified Percentage: 2.85714286000%
Term Loan Specified Percentage: 2.85714286000%
Total Specified Percentage: 2.85714286000%
<PAGE> 116
KZH CNC LLC, as a Lender
Address:
c/o The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001 /s/ Virginia Conway
----------------------------------------
By: Virginia Conway
-----------------------------------
Its: Authorized Agent
-----------------------------------
Attn: Virginia Conway
Telephone: (212) 946-7575
Telecopy: (212) 946-7776
Revolver Specified Percentage: 0.00000000000%
Term Loan Specified Percentage: 2.50000000000%
Total Specified Percentage: 1.42857142950%
<PAGE> 1
EXHIBIT 10.24
EMPLOYMENT AGREEMENT
This employment agreement ("Agreement") is made as of April 8,
1999, by and between IXC Communications, Inc., a Delaware corporation (the
"Company"), and Valerie G. Walden ("Employee").
BACKGROUND
Employee is now, and has been, employed by the Company as an "at
will" employee. The Company and Employee now desire to enter into a formal
employment contract with a fixed term and certain non-compete and other
provisions, all as set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties hereto, intending to be
legally bound, hereby agree as follows:
SECTION 1. CAPACITY AND DUTIES
1.1 Employment; Acceptance of Employment. Effective April 8,
1999, the Company employs Employee as Senior Vice President Customer Operations
and Corporate Marketing, and Employee hereby accepts such employment with the
Company, for the period and upon the terms and conditions hereinafter set forth.
1.2 Capacity and Duties.
(a) Employee shall be employed by the Company as Senior Vice
President Customer Operations and Corporate Marketing, and shall perform such
duties and shall have such authority, consistent with her position, as may from
time to time reasonably be specified by the Company or the Board of Directors of
the Company (the "Board").
(b) Employee shall devote Employee's full-time attention,
energies, skills, learning and best efforts to the business of the Company and,
during the term of this Agreement, shall not be engaged, directly or indirectly,
in any other business activity or render services of a business, professional or
commercial nature to any other person, firm or corporation, in competition with
the Company, except as otherwise agreed to in writing by the Company.
SECTION 2. TERM OF EMPLOYMENT
2.1 Term. The term of Employee's employment hereunder shall
commence on April 8, 1999, and shall continue until August 7, 2001, unless
earlier terminated as hereinafter provided. Upon the expiration of such term,
Employees employment with the Company shall continue on an at will employment
basis until terminated by either party.
<PAGE> 2
SECTION 3. COMPENSATION
3.1 Basic Compensation. As compensation for Employee's services
hereunder, the Company shall pay to Employee a salary at the annual rate of
$215,792.00 payable in periodic installments in accordance with the Company's
regular payroll practices in effect from time to time, or at such higher annual
rate as the Board shall from time to time determine in its sole discretion. The
Board shall review Employee's salary no less frequently than annually.
3.2 Incentive Compensation. In addition to the base salary
provided in Section 3.1 hereof, Employee shall be eligible to receive an annual
bonus in accordance with the Company's policy, targeted at the same percentage
of base salary as other senior executives of the Company, upon meeting the
defined corporate objectives set by the Board and the personal objectives set by
the CEO.
3.3 Health and Dental Benefits. In addition to the compensation
provided for in Section 3.1 and Section 3.2 hereof, Employee shall be entitled
to all rights and benefits for which Employee is eligible under any health and
dental insurance policies that IXC provides to its employees or officers in
comparable positions during the term of this Agreement.
3.4 Vacation. Employee shall be entitled to paid vacation during
the term of her employment hereunder in accordance with the Company's vacation
policy.
3.5 Reimbursement of Business Expenses. The Company will, upon
submission of appropriate documentation, promptly reimburse employee for
reasonable and authorized business expenses (including travel, entertainment,
business meetings, telephone and similar items) incurred by Employee during the
term of this Agreement in accordance with the Company's policy.
3.7 Other benefits. In addition to the benefits set forth in
this Section 3, Employee shall be entitled to all other rights and benefits that
IXC provides to its employees or officers in comparable positions during the
term of this Agreement.
SECTION 4. TERMINATION OF EMPLOYMENT
4.1 Death of Employee. Employee's employment hereunder shall
immediately terminate upon her death.
4.2 Disability of Employee. If Employee, in the reasonable
opinion of a physician selected by the Board, is materially unable, due to a
physical, mental or emotional illness or condition, to perform her duties
hereunder for a period of three consecutive months, the Board shall have the
right to terminate Employee's employment upon 30 days' prior written notice to
Employee at any time during the continuation of such inability.
-2-
<PAGE> 3
4.3 Termination for Cause. The Board may terminate Employee's
employment hereunder for "cause" immediately upon written notice to Employee. As
used herein, "cause" shall mean the following:
(a) fraud committed in connection with Employee's
employment, or theft, misappropriation or embezzlement of the Company's funds or
property;
(b) conviction of any felony, crime involving fraud or
misrepresentation, or any other crime the effect of which is likely to
materially adversely affect the Company;
(c) failure to follow a reasonable lawful directive of the
Board or an authorized Company officer or director following two business days'
notice that such failure shall constitute grounds for termination for cause; or
(d) abuse of alcohol or other drugs which materially
interferes with the performance by Employee of her duties hereunder, provided
that Employee has been given 30 days' prior written notice by the Board of its
intent to terminate Employee pursuant to this provision during which time
Employee has not demonstrated the cessation of such abuse to the reasonable
satisfaction of the Board.
4.4 Termination Without Cause. If the Employee's employment is
terminated by the Company for any reason other than as set forth above,
Employee's termination shall be considered "without cause".
4.5 Payments upon Termination.
(a) If Employee's employment is terminated as a result of
her death, the Company shall not thereafter be obligated to make any further
payments under this Agreement other than amounts payable hereunder accrued as of
the date of Employee's death in accordance with generally accepted accounting
principles.
(b) If Employee's employment is terminated by the Company
pursuant to Section 4.2 (disability), the Company shall not thereafter be
obligated to make any further payments under this Agreement other than amounts
payable hereunder accrued as of the date of Employee's termination in accordance
with generally accepted accounting principles.
(c) If Employee's employment is terminated by the Company
pursuant to Section 4.3 (cause), the Company shall not thereafter be obligated
to make any further payments under this Agreement other than amounts payable
hereunder accrued as of the date of Employee's termination in accordance with
generally accepted accounting principles.
(d) If Employee's employment is terminated by the Company
pursuant to Section 4.4 (without cause) the Company shall not thereafter be
obligated to make any further payments under this Agreement other than (i)
amounts payable hereunder accrued as of the date of Employee's termination in
accordance with generally accepted accounting principles, (ii) a
-3-
<PAGE> 4
severance payment in an amount equal to the sum of the payments and obligations
set forth in Section 3.1 from the date of such termination until August 7, 2001,
but in no event shall such payment exceed one years payments under Sections 3.1,
and (iii) COBRA payments, if applicable, for Employee's health benefits for a
maximum of six months. Moreover, if Employee's employment is terminated by the
Company pursuant to Section 4.4 (without cause), it is understood that solely
for purposes of Employee's Stock Option Agreements 7, Employee's termination
shall be deemed to have occurred on August 7, 2001.
4.6 No Mitigation. There shall be no requirement on the part of
Employee to seek other employment or otherwise mitigate damages in order to be
entitled to the full amount of any payments or benefits to be made pursuant to
this Agreement and payments due in respect of periods following the termination
of employment shall not be diminished by any amounts earned by Employee from any
other employment.
SECTION 5. MISCELLANEOUS
5.1 Noncompetition. During the term of Employee's employment
hereunder, and continuing until the earliest to occur of the following: (i)
February 7, 2002 provided that Employee continues to be employed by the Company
on such date (ii) six months after termination of Employees employment hereunder
in the event that employee resigns on or before August 7, 2001 (iii) a Change of
Control as defined in Employee's Stock Option Agreement dated as of 12/29/1997,
or (iv) a termination of Employees employment by the Company pursuant to Section
4.4 (without cause), Employee shall not, directly or indirectly, engage in,
render services of any nature to, provide financial support for, plan for, be
connected in any manner with or organize any business which is competitive with
or similar to the business of the Company if such other business has operations
or planned operations anywhere in the world where the Company or its
subsidiaries has or plans to have operations, by becoming an owner, officer,
director, shareholder (except for less than 2% of a publicly traded stock for
investment purposes only), partner, creditor, associate, employee, agent,
representative or consultant or serve in any other capacity in connection with
such other business without the Company's prior written consent. Each of the
parties hereto acknowledges that the restrictions, prohibitions and other
provisions hereof are reasonable, fair and equitable in scope, terms and
duration, are necessary to protect the legitimate business interests of the
Company given the current scope of the Companies business and Employees
expertise, and are a material inducement to the Company to enter into this
Agreement. The provisions of this section shall survive the termination of this
Agreement.
5.2 Nonsolicitation. During the term of Employee's employment
and continuing for one year thereafter, Employee shall not, directly or
indirectly; (i) hire or solicit any employee, consultant, sales representative,
sales agent or advisor of the Company or any of its affiliates or encourage any
such employee, consultant, sales representative, sales agent or advisor to leave
such employment for any business whether or not a competitor of the Company; or
(ii) solicit or divert or attempt to divert to any competitor any business of
the Company or solicit or divert or attempt to divert any customers or suppliers
of the Company.
-4-
<PAGE> 5
5.3 Confidentiality/Trade Secrets. Since the work for which
Employee is employed and upon which Employee will be engaged will include
knowledge and information of a confidential nature to, and the secret property
of, the Company, or persons, firms, entities or corporations with whom the
Company is affiliated, or customers of the Company or its affiliates (including
but not limited to inventions, improvements, designs systems, ideas, financial
and technical data, trade secrets, business plans, financing systems and
techniques, sales techniques and approaches, and customer and supplier
information), Employee shall receive all knowledge and information in
confidence, and shall not at any time (during or after employment with the
Company) except as required in the conduct of the Company business, or
authorized in writing by the Company, publish, disclose or use or authorize
anyone else to publish, disclose or make use of any such information or
knowledge unless and until such information or knowledge shall have ceased to be
secret or confidential as evidenced by general public knowledge. In the event
that Employee's employment with the Company shall cease, Employee authorizes the
Company to send a copy of this section in its sole discretion, to any and all
future employers which Employee may have and to any and all persons, firms,
entities and corporations with whom Employee may become affiliated in a business
or commercial enterprise, and inform any and all such employers, persons, firms,
entities or corporations that the Company intends to exercise its legal rights
should Employee breach the terms of this Agreement or should another party
induce a breach by Employee. The provisions of this section shall survive the
termination of this Agreement.
5.4 Property. All results and proceeds of Employee's services
hereunder, and all inventions, improvements, systems, designs, ideas, business
plans, sales techniques and approaches which Employee made or conceived or which
Employee may make or conceive, at any time after the commencement of Employee's
employment with the Company and until the termination thereof, either
individually or jointly with others, or which Employee utilizes in carrying out
Employee's duties hereunder (hereinafter "Property"), shall be the exclusive
property of the Company as a "work for hire", and Employee hereby assigns and
agrees to assign to the Company all of Employee's rights in and to all such
Property, and to all copyrights (statutory and common law), covering any or all
of the Property. The provisions of this section shall survive the termination of
this Agreement.
5.5 Injunction; Confidential Materials. Employee hereby consents
and agrees that for any violation of any of the provisions of Section 5.3
(Confidentiality/Trade Secrets), or Section 5.4 (Property) of this Agreement, a
restraining order and/or an injunction may issue against Employee in addition to
any other rights the Company may have at law or in equity. Employee agrees that
records containing secret or confidential knowledge and information prepared by
Employee or which come into Employee's possession during Employee's employment
by the Company, are and remain the property of the Company, and if and when
Employee's employment with the Company terminates, all such records and all
copies thereof shall be left with the Company.
5.6 Remedies. Employee acknowledges and agrees that the services
to be rendered by Employee hereunder and the rights and privileges herein
granted to the Company are by reason of Employee's skill and experience, of a
special, unique, unusual, extraordinary and
-5-
<PAGE> 6
intellectual character which gives them a peculiar value, the loss of which
cannot reasonably or adequately be compensated in damages in an action at law,
and that a breach by Employee of any of the provisions contained herein,
including, without limitation, the provisions of Section 5.1 (Noncompetition),
will cause the Company irreparable injury and damage. Employee expressly agrees
that the Company shall be entitled as a matter of right to injunctive or other
equitable relief to prevent a breach of this Agreement by Employee. Resort to
such equitable relief, however, shall not be construed as a waiver of any other
rights or remedies which the Company may have for damages or otherwise
hereunder. Employee specifically agrees that the Company may recover by
appropriate action the amount of the actual damage caused the Company by any
failure, refusal or neglect of Employee to keep and perform all of the
agreements and warranties herein contained.
5.7 Prior Employment. Employee represents and warrants that he
is not a party to any other employment, non-competition or other agreement or
restriction which could interfere with her employment with the Company or her or
the Company's rights and obligations hereunder; and that her acceptance of
employment with the Company and the performance of her duties hereunder will not
breach the provisions of any contract, agreement, or understanding to which he
is party or any duty owed by him to any other person.
5.8 Severability. The invalidity or unenforceability of any
particular provision or part of any provision of this Agreement shall not affect
the other provisions or parts hereof.
5.9 Assignment. This Agreement shall not be assignable by
Employee, and shall be assignable by the Company only to any person or entity
which may become a successor in interest (by purchase of assets or stock, or by
merger, or otherwise) to the Company. Subject to the foregoing, this Agreement
and the rights and obligations set forth herein shall inure to the benefit of,
and be binding upon, the parties hereto and each of their respective permitted
successors, assigns, heirs, executors and administrators.
5.10 Notices. All notices hereunder shall be in writing and shall
be sufficiently given if hand-delivered, sent by documented overnight delivery
service or registered or certified mail, postage prepaid, return receipt
requested or by facsimile (confirmed by U.S. mail), confirmation received,
addressed as set forth below or to such other person and/or at such other
address as may be furnished in writing by any party hereto to the other. Any
such notice shall be deemed to have been given as of the date received, in the
case of personal delivery, or on the date shown on the receipt of confirmation
therefor, in all other cases. Any and all service of process and any other
notice in any action, suite or proceeding shall be effective against any party
if given as provided in this Agreement; provided that nothing herein shall be
deemed to affect the right of any party to serve process in any other manner
permitted by law.
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<PAGE> 7
(a) If to the Company:
IXC Communications, Inc.
1122 South Capital of Texas Highway
Austin, TX 78746
Attention: General Counsel
Tel: 512-427-3959
Fax: 512-328-7902
.
(b) If to Employee:
Valerie G. Walden
11 Pascal Lane
Austin, TX 78746
Tel: 512-347-0586
Fax: 512-347-0587
5.11 Entire Agreement and Modification. This Agreement
constitutes the entire agreement between the parties hereto with respect to the
matters contemplated herein and supersedes all prior agreements and
understandings with respect thereto. Any amendment, modification or waiver of
this Agreement shall not be effective unless in writing. Neither the failure nor
any delay on the part of any party to exercise any right, remedy, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or any other right, remedy, power or privilege with
respect to any occurrence be construed as a waiver of any right, remedy, power
or privilege with respect to any other occurrence.
5.12 Binding Arbitration. The parties hereby consent to the
resolution by binding arbitration of all claims or controversies in any way
arising out of, relating to or associated with this Agreement. Any arbitration
required by this Agreement shall be conducted before a single arbitrator in
Austin, Texas in accordance with the commercial arbitration rules of the
American Arbitration Association then existing, and any award, order or judgment
pursuant to such arbitration may be enforced in any court of competent
jurisdiction. The arbitrator shall apply rules of Texas law and the parties
expressly waive any claim or right to an award of punitive damages. All such
arbitration proceedings shall be conducted on a confidential basis.
Notwithstanding the foregoing, either party may seek injunctive or other
equitable relief in a court of law without proceeding through arbitration.
5.13 Amendment. This Agreement may only be amended by an
agreement in writing signed by the Company and Employee.
5.14 Governing Law. This Agreement is made pursuant to, and shall
be construed and enforce in accordance with, the internal laws of the State of
Texas, without giving effect to otherwise applicable principles of law.
-7-
<PAGE> 8
5.15 Headings; Counterparts. The headings of paragraphs in this
Agreement are for convenience only and shall not affect its interpretation. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed to be an original an all of which, when taken together, shall be deemed
to constitute but one and the same Agreement.
5.16 Further Assurances. Each of the parties hereto shall execute
such further instruments and take such other actions as any other party shall
reasonably request in order to effectuate the purposes of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
IXC Communications, Inc.
By: /s/ Benjamin L. Scott
------------------------------------
Name: Benjamin L. Scott
Title: Chairman
Employee: /s/ Valerie G. Walden
------------------------------
Valerie G. Walden
-8-
<PAGE> 1
EXHIBIT 10.25
EMPLOYMENT AGREEMENT
This employment agreement ("Agreement") is made as of April
26, 1999 by and between IXC Communications, Inc., a Delaware corporation (the
"Company"), and James F. Guthrie ("Employee").
BACKGROUND
Employee is now, and has been for several years, employed by
the Company. As an inducement for Employee to remain with the Company through
and beyond December 31, 1999, the Company and Employee now desire to enter into
a formal employment contract all as set forth herein.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein, the parties hereto, intending
to be legally bound, hereby agree as follows:
SECTION 1. CAPACITY AND DUTIES
1.1 Employment; Acceptance of Employment. Effective April 26,
1999, the Company employs Employee as Executive Vice President, Chief Financial
Officer, and Employee hereby accepts such employment with the Company, for the
period and upon the terms and conditions hereinafter set forth.
1.2 Capacity and Duties.
(a) Employee shall be employed by the Company as
Executive Vice President, Chief Financial Officer, and shall be responsible for
all financial operations and M&A activities of the Company and its subsidiaries,
and shall perform such duties and shall have such authority, consistent with his
position, as may from time to time reasonably be specified by the Board of
Directors of the Company (the "Board"). While not a member of the Board,
Employee will be included in all applicable Board of Directors meetings,
teleconferences, etc.
(b) Employee shall devote Employee's full-time
attention, energies, skills, learning and best efforts to the business of the
Company and, during the term of this Agreement, shall not be engaged, directly
or indirectly, in any other business activity or render services of a business,
professional or commercial nature to any other person, firm or corporation, in
competition with the Company, except as otherwise agreed to in writing by the
Company.
SECTION 2. TERM OF EMPLOYMENT
2.1 Term. The term of Employee's employment hereunder shall
commence on April 26, 1999, and shall continue until October 7, 2002, unless
earlier terminated as hereinafter provided. Upon the expiration of such term,
Employees employment with the Company shall continue on an at will employment
basis until terminated by either party.
<PAGE> 2
2.2 Notwithstanding section 2.1 above, Employee may terminate
this Agreement at any time upon giving no less than 90 days notice to the
Company.
SECTION 3. COMPENSATION
3.1 Basic Compensation. As compensation for Employee's
services hereunder, the Company shall pay to Employee a salary at the annual
rate of $278K payable in periodic installments in accordance with the Company's
regular payroll practices in effect from time to time, or at such higher annual
rate as the Board shall from time to time determine in its sole discretion. The
Board shall review Employee's salary no less frequently than annually.
3.2 Incentive Compensation. In addition to the base salary
provided in Section 3.1 hereof, Employee shall be eligible to receive an annual
bonus in accordance with the Company's policy, at the same level as other senior
executives of the Company, upon meeting the defined corporate objectives set by
the Board and the personal objectives set by the CEO.
3.3 Health and Dental Benefits. In addition to the
compensation provided for in Section 3.1 and Section 3.2 hereof, Employee shall
be entitled to all rights and benefits for which Employee is eligible under any
health and dental insurance policies that IXC provides to its employees or
officers in comparable positions during the term of this Agreement.
3.4 Vacation. Employee shall be entitled to paid vacation
during the term of his employment hereunder in accordance with the Company's
vacation policy.
3.5 Reimbursement of Business Expenses. The Company will, upon
submission of appropriate documentation, promptly reimburse employee for
reasonable and authorized business expenses (including travel, entertainment,
business meetings, telephone and similar items) incurred by Employee during the
term of this Agreement in accordance with the Company's policy.
3.6 Special payments.
(a) Provided Employee remains an active employee of
the Company beyond December 31, 1999, or should he be terminated by the Company
for reasons other than cause, as defined in section 4.3, including change of
title or a decrease in his responsibilities (excepting the title and
responsibilities as CFO which both parties agree may be changed or deleted after
the date hereof) prior to December 31, 1999, employee shall be entitled to: a
special one-time payment of $556K on January 20, 2000; a payout of his 1999
bonus target at a minimum of 50% of base pay, on the normal bonus payment date
regardless of whether he is an employee on such date; and, upon termination, a
cash payment equivalent to the value of the acceleration of his then unvested
options scheduled on Exhibit A calculated at the market price as of such
termination date, less his exercise price, multiplied by the number of unvested
shares at the time of such termination. In addition, Employee and the Company
agree that: (i) should Employee be terminated by the Company for reasons other
than cause as defined in section 4.3, or (ii) should Employee terminate this
Agreement in accordance with section 2.2 above prior to
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<PAGE> 3
October 7, 2002, Employee and the Company, at no additional cost to the Company
other than the value of actual services performed, agree to allow Employee to
enter into an independent contractor relationship with the Company for
consulting services, such that Employee shall have a minimum of one year from
his termination date, but not beyond October 7, 2002, to exercise any then
vested stock options granted prior to April 26, 1999, in accordance with the
terms of the applicable Stock Plan.
(b) Any options granted after the effective date of this
agreement shall not be subject to the provisions of paragraph 3.6 (a) above.
3.7 Other benefits. In addition to the benefits set forth in
this Section 3, Employee shall be entitled to all other rights and benefits that
IXC provides to its employees or officers in comparable positions during the
term of this Agreement.
SECTION 4. TERMINATION OF EMPLOYMENT
4.1 Death of Employee. Employee's employment hereunder shall
immediately terminate upon his death.
4.2 Disability of Employee. If Employee, in the reasonable
opinion of a physician selected by the Board, is materially unable, due to a
physical, mental or emotional illness or condition, to perform his duties
hereunder for a period of three consecutive months, the Board shall have the
right to terminate Employee's employment upon 30 days' prior written notice to
Employee at any time during the continuation of such inability.
4.3 Termination for Cause. The Board may terminate Employee's
employment hereunder for "cause" immediately upon written notice to Employee. As
used herein, "cause" shall mean the following:
(a) fraud committed in connection with Employee's
employment, or theft, misappropriation or embezzlement of the Company's funds or
property;
(b) conviction of any felony, crime involving fraud
or misrepresentation, or any other crime the effect of which is likely to
materially adversely affect the Company;
(c) failure to follow a reasonable lawful directive
of the Board or an authorized Company officer or director following two business
days' notice that such failure shall constitute grounds for termination for
cause; or
(d) abuse of alcohol or other drugs which materially
interferes with the performance by Employee of his duties hereunder, provided
that Employee has been given 30 days' prior written notice by the Board of its
intent to terminate Employee pursuant to this provision during which time
Employee has not demonstrated the cessation of such abuse to the reasonable
satisfaction of the Board.
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<PAGE> 4
4.4 Termination Without Cause. If the Employee's employment is
terminated by the Company for any reason other than as set forth above,
Employee's termination shall be considered "without cause."
4.5 Payments upon Termination.
(a) If Employee's employment is terminated as a
result of his death, the Company shall not thereafter be obligated to make any
further payments under this Agreement other than amounts payable hereunder
accrued as of the date of Employee's death in accordance with generally accepted
accounting principles.
(b) If Employee's employment is terminated by the
Company pursuant to Section 4.2 (disability), the Company shall not thereafter
be obligated to make any further payments under this Agreement other than
amounts payable hereunder accrued as of the date of Employee's termination in
accordance with generally accepted accounting principles.
(c) If Employee's employment is terminated by the
Company pursuant to Section 4.3 (cause), the Company shall not thereafter be
obligated to make any further payments under this Agreement other than amounts
payable hereunder accrued as of the date of Employee's termination in accordance
with generally accepted accounting principles.
(d) If Employee's employment is terminated by the
Company pursuant to Section 4.4 (without cause) the Company shall not thereafter
be obligated to make any further payments under this Agreement other than (i)
amounts payable hereunder accrued as of the date of Employee's termination in
accordance with generally accepted accounting principles, and (ii) severance
payments in an amount equal to the sum of the payments and obligations set forth
in Sections 3.1, 3.3, and, with respect to any payments not yet made, 3.6, from
the date of such termination through the end of the term, but in no event to
exceed a period of one year.
4.6 No Mitigation. There shall be no requirement on the part
of Employee to seek other employment or otherwise mitigate damages in order to
be entitled to the full amount of any payments or benefits to be made pursuant
to this Agreement and payments due in respect of periods following the
termination of employment shall not be diminished by any amounts earned by
Employee from any other employment.
SECTION 5. MISCELLANEOUS
5.1 Noncompetition. During the term of Employee's employment
hereunder, and continuing until one year after termination of Employees
employment hereunder or (iii) a Change of Control as defined in paragraph 3.7.2,
Employee shall not, directly or indirectly, engage in, render services of any
nature to, provide financial support for, plan for, be connected in any manner
with or organize any business which is competitive with or similar to the
business of the Company if such other business has operations or planned
operations anywhere in the
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<PAGE> 5
world where the Company or its subsidiaries has or plans to have operations, by
becoming an owner, officer, director, shareholder (except for less than 2% of a
publicly traded stock for investment purposes only), partner, creditor,
associate, employee, agent, representative or consultant or serve in any other
capacity in connection with such other business without the Company's prior
written consent. Each of the parties hereto acknowledges that the restrictions,
prohibitions and other provisions hereof are reasonable, fair and equitable in
scope, terms and duration, are necessary to protect the legitimate business
interests of the Company given the current scope of the Companies business and
Employees expertise, and are a material inducement to the Company to enter into
this Agreement. The provisions of this section shall survive the termination of
this Agreement.
5.2 Nonsolicitation. During the term of Employee's employment
and continuing for one year thereafter, Employee shall not, directly or
indirectly; (i) hire or solicit any employee, consultant, sales representative,
sales agent or advisor of the Company or any of its affiliates or encourage any
such employee, consultant, sales representative, sales agent or advisor to leave
such employment for any business whether or not a competitor of the Company; or
(ii) solicit or divert or attempt to divert to any competitor any business of
the Company or solicit or divert or attempt to divert any customers or suppliers
of the Company.
5.3 Confidentiality/Trade Secrets. Since the work for which
Employee is employed and upon which Employee will be engaged will include
knowledge and information of a confidential nature to, and the secret property
of, the Company, or persons, firms, entities or corporations with whom the
Company is affiliated, or customers of the Company or its affiliates (including
but not limited to inventions, improvements, designs systems, ideas, financial
and technical data, trade secrets, business plans, financing systems and
techniques, sales techniques and approaches, and customer and supplier
information), Employee shall receive all knowledge and information in
confidence, and shall not at any time (during or after employment with the
Company) except as required in the conduct of the Company business, or
authorized in writing by the Company, publish, disclose or use or authorize
anyone else to publish, disclose or make use of any such information or
knowledge unless and until such information or knowledge shall have ceased to be
secret or confidential as evidenced by general public knowledge. In the event
that Employee's employment with the Company shall cease, Employee authorizes the
Company to send a copy of this section in its sole discretion, to any and all
future employers which Employee may have and to any and all persons, firms,
entities and corporations with whom Employee may become affiliated in a business
or commercial enterprise, and inform any and all such employers, persons, firms,
entities or corporations that the Company intends to exercise its legal rights
should Employee breach the terms of this Agreement or should another party
induce a breach by Employee. The provisions of this section shall survive the
termination of this Agreement.
5.4 Property. All results and proceeds of Employee's services
hereunder, and all inventions, improvements, systems, designs, ideas, business
plans, sales techniques and approaches which Employee made or conceived or which
Employee may make or conceive, at any time after the commencement of Employee's
employment with the Company and until the termination thereof, either
individually or jointly with others, or which Employee utilizes in
-5-
<PAGE> 6
carrying out Employee's duties hereunder (hereinafter "Property"), shall be the
exclusive property of the Company as a "work for hire", and Employee hereby
assigns and agrees to assign to the Company all of Employee's rights in and to
all such Property, and to all copyrights (statutory and common law), covering
any or all of the Property. The provisions of this section shall survive the
termination of this Agreement.
5.5 Injunction; Confidential Materials. Employee hereby
consents and agrees that for any violation of any of the provisions of Section
5.3 (Confidentiality/Trade Secrets), or Section 5.4 (Property) of this
Agreement, a restraining order and/or an injunction may issue against Employee
in addition to any other rights the Company may have at law or in equity.
Employee agrees that records containing secret or confidential knowledge and
information prepared by Employee or which come into Employee's possession during
Employee's employment by the Company, are and remain the property of the
Company, and if and when Employee's employment with the Company terminates, all
such records and all copies thereof shall be left with the Company.
5.6 Remedies. Employee acknowledges and agrees that the
services to be rendered by Employee hereunder and the rights and privileges
herein granted to the Company are by reason of Employee's skill and experience,
of a special, unique, unusual, extraordinary and intellectual character which
gives them a peculiar value, the loss of which cannot reasonably or adequately
be compensated in damages in an action at law, and that a breach by Employee of
any of the provisions contained herein, including, without limitation, the
provisions of Section 5.1 (Noncompetition), will cause the Company irreparable
injury and damage. Employee expressly agrees that the Company shall be entitled
as a matter of right to injunctive or other equitable relief to prevent a breach
of this Agreement by Employee. Resort to such equitable relief, however, shall
not be construed as a waiver of any other rights or remedies which the Company
may have for damages or otherwise hereunder. Employee specifically agrees that
the Company may recover by appropriate action the amount of the actual damage
caused the Company by any failure, refusal or neglect of Employee to keep and
perform all of the agreements and warranties herein contained.
5.7 Prior Employment. Employee represents and warrants that he
is not a party to any other employment, non-competition or other agreement or
restriction which could interfere with his employment with the Company or his or
the Company's rights and obligations hereunder; and that his acceptance of
employment with the Company and the performance of his duties hereunder will not
breach the provisions of any contract, agreement, or understanding to which he
is party or any duty owed by him to any other person.
5.8 Severability. The invalidity or unenforceability of any
particular provision or part of any provision of this Agreement shall not affect
the other provisions or parts hereof.
5.9 Assignment. This Agreement shall not be assignable by
Employee, and shall be assignable by the Company only to any person or entity
which may become a successor in interest (by purchase of assets or stock, or by
merger, or otherwise) to the Company. Subject to the foregoing, this Agreement
and the rights and obligations set forth herein shall inure to the
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<PAGE> 7
benefit of, and be binding upon, the parties hereto and each of their respective
permitted successors, assigns, heirs, executors and administrators.
5.10 Notices. All notices hereunder shall be in writing and
shall be sufficiently given if hand-delivered, sent by documented overnight
delivery service or registered or certified mail, postage prepaid, return
receipt requested or by facsimile (confirmed by U.S. mail), confirmation
received, addressed as set forth below or to such other person and/or at such
other address as may be furnished in writing by any party hereto to the other.
Any such notice shall be deemed to have been given as of the date received, in
the case of personal delivery, or on the date shown on the receipt of
confirmation therefor, in all other cases. Any and all service of process and
any other notice in any action, suite or proceeding shall be effective against
any party if given as provided in this Agreement; provided that nothing herein
shall be deemed to affect the right of any party to serve process in any other
manner permitted by law.
(a) If to the Company:
IXC Communications, Inc.
1122 South Capital of Texas Highway
Austin, TX 78746
Attention: General Counsel
Tel: 512-427-3959
Fax: 512-328-7902
(b) If to Employee:
Mr. James F. Guthrie
3100 Sweetgum Cove
Austin, TX 78735
Tel: 512-347-0193
Fax: 512-347-1668
-7-
<PAGE> 8
5.11 Entire Agreement and Modification. This Agreement
constitutes the entire agreement between the parties hereto with respect to the
matters contemplated herein and supersedes all prior agreements and
understandings with respect thereto. Any amendment, modification or waiver of
this Agreement shall not be effective unless in writing. Neither the failure nor
any delay on the part of any party to exercise any right, remedy, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or any other right, remedy, power or privilege with
respect to any occurrence be construed as a waiver of any right, remedy, power
or privilege with respect to any other occurrence.
5.12 Binding Arbitration. The parties hereby consent to the
resolution by binding arbitration of all claims or controversies in any way
arising out of, relating to or associated with this Agreement. Any arbitration
required by this Agreement shall be conducted before a single arbitrator in
Austin, Texas in accordance with the commercial arbitration rules of the
American Arbitration Association then existing, and any award, order or judgment
pursuant to such arbitration may be enforced in any court of competent
jurisdiction. The arbitrator shall apply rules of Texas law and the parties
expressly waive any claim or right to an award of punitive damages. All such
arbitration proceedings shall be conducted on a confidential basis.
Notwithstanding the foregoing, either party may seek injunctive or other
equitable relief in a court of law without proceeding through arbitration.
5.13 Amendment. This Agreement may only be amended by an
agreement in writing signed by the Company and Employee.
5.14 Governing Law. This Agreement is made pursuant to, and
shall be construed and enforce in accordance with, the internal laws of the
State of Texas, without giving effect to otherwise applicable principles of law.
5.15 Headings; Counterparts. The headings of paragraphs in
this Agreement are for convenience only and shall not affect its interpretation.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed to be an original an all of which, when taken together, shall be
deemed to constitute but one and the same Agreement.
5.16 Further Assurances. Each of the parties hereto shall
execute such further instruments and take such other actions as any other party
shall reasonably request in order to effectuate the purposes of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
IXC Communications, Inc.
By: /s/ Benjamin L. Scott
-------------------------------
Benjamin L. Scott
Employee:
/s/ James F. Guthrie
----------------------------------
James F. Guthrie
Date: 5/18/99
--------------------
-8-
<PAGE> 9
Exhibit A
James F. Guthrie
Employment Agreement
<TABLE>
<CAPTION>
Number Remaining
Grant Date of Options Grant Price Vesting Dates
<S> <C> <C> <C>
o 10/29/1996 100,000 $22.50 10/29/1999
10/29/2000
o 9/9/1997 50,000 $27.50 9/9/1999
9/9/2000
9/9/2001
o 10/7/1998 37,000 $22.00 10/7/1999
10/7/2000
10/7/2001
10/7/2002
</TABLE>
-9-
<PAGE> 1
EXHIBIT 10.26
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of May 27,
1999 by and between IXC Communications, Inc., a Delaware corporation
("Company"), and John M. Zrno ("Employee").
ARTICLE I
EMPLOYMENT
The Company hereby employs Employee and Employee hereby accepts
employment with the Company upon the terms and conditions set forth below.
1.1 TERM.
(a) The term of this Agreement will commence on
May 27, 1999 (the "Commencement Date") and, unless
terminated earlier under the terms hereof, will
terminate on May 27, 2003.
(b) This Agreement will terminate prior to May 27,
2003, upon the earliest to occur of any of the
following events:
(i) Upon written notice to Employee that
the Board of Directors has determined that
Employee should be terminated for "Cause,"
as that term is defined in Section 2.4(h)
of this Agreement; or
(ii) Upon the Employee's death, "Disability"
(as that term is defined in Internal
Revenue Code ("Code") Section 22(e)(3)), or
voluntary termination of employment by
Employee.
1.2 DUTIES.
(a) Employee agrees to serve as President and Chief
Executive Officer of the Company as well as of its
major subsidiaries or in such other capacity or
capacities as the Board of Directors may reasonably
require that are consistent with his position,
provided that the duties and responsibilities of
Employee are not materially diminished and there is
no change in his title or reporting
responsibilities.
(b) Employee will report directly to the Board of
Directors of the Company ("Board of Directors").
<PAGE> 2
ARTICLE II
COMPENSATION AND BENEFITS
2.1 COMPENSATION.
(a) As compensation for the services to be rendered
under this Agreement, Employee will be entitled to
receive from the Company an annual base salary of
three hundred eighty-five thousand dollars
($385,000), payable bi-weekly.
(b) Bonuses, if any, are awarded by, and at the sole
discretion of, the Board of Directors.
(c) Employee's base salary may be increased from time
to time in accordance with the Company's policies
and procedures.
2.2 BENEFITS. The Company will make available to Employee the
fringe benefits provided to its senior executive officers,
including group-term life insurance coverage, medical
benefits, (including dental insurance), participation in the
Company's 401(k) Plan, reimbursement of reasonable and
appropriate business expenses, an annual car allowance of
Eight Thousand Dollars ($8,000) payable in monthly
installments, and vacations, all in accordance with the
Company's stated policies and procedures.
2.3 RELOCATION COSTS. The Company will reimburse Employee for the
reasonable costs of (i) living accommodations in Austin
(e.g., hotel or apartment accommodations) for a reasonable
period and (ii) transporting such of Employee's household
goods as he may designate from Dallas, Texas to Austin,
Texas.
2.4 STOCK OPTION.
(a) The Company will grant a nonqualified stock
option to Employee allowing Employee to purchase
five hundred thousand (500,000) shares of common
stock of the Company ("Option"). The term of the
Option will be for ten (10) years.
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<PAGE> 3
(b) The exercise price per share under the Option
will be thirty-three dollars and ninety-three and
three-fourths cents ($33.9375), which was the NASDAQ
closing price of the stock on May 27, 1999.
(c) The Option will vest as follows: (i) the Option
with respect to the right to acquire 350,000 shares
of common stock vests immediately on May 27, 1999;
and (ii) the Option with respect to the right to
acquire the remaining 150,000 shares of common stock
will vest in equal installments over a four (4) year
period on the first, second, third and fourth
anniversaries of the Commencement Date. Except as
otherwise expressly provided in this Agreement, in
no event will Employee vest upon any anniversary of
the Commencement Date unless Employee is employed by
the Company on such date.
(d) If Employee voluntarily resigns or is terminated
for Cause (as that term is defined in Paragraph (h)
below) prior to the expiration of this Agreement,
Employee can exercise the vested portion of the
Option not later than the ninetieth (90th) day
following the effective date of his resignation or
termination, at which time the unexercised portion
of the Option (whether vested or not) will be
forfeited.
(e) If Employee is terminated for a reason that does
not constitute Cause prior to the expiration of this
Agreement, the entire Option will become immediately
exercisable and remain exercisable for ninety (90)
days following the effective date of his
termination, at which time the unexercised portion
of the Option will be forfeited.
(f) Upon the death or Disability of the Employee,
Employee (or his personal representative or estate,
whichever is applicable) can exercise the vested
portion of the Option not later than one (1) year
following the date of his death or Disability, at
which time the unexercised portion of the Option
(whether vested or not) will be forfeited.
(g) If there is a "Change in Control" of the Company
after May 27, 2000, the Option with respect to the
right to acquire any shares of common stock that
have not vested will become immediately vested.
Notwithstanding that acceleration in the vesting
of the Option would be available, Employee may elect
not to have the vesting accelerated. For purposes of
this Agreement, the term "Change in Control" means
any of the following:
(A) A successful tender offer for greater
than fifty percent (50%) of the outstanding
capital stock of the Company;
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<PAGE> 4
(B) A sale of all or substantially all of
the assets of the Company; or
(C) A merger or consolidation of the
Company with any other corporation in
which the stockholders of the Company
immediately preceding such merger or
consolidation will not hold at least
fifty-one percent (51%) of the
outstanding capital stock of the
surviving corporation (whether or not the
Company is the surviving corporation)
immediately after such merger or
consolidation.
(h) For purposes of this Agreement, the term "Cause"
means any of the following:
(i) Employee's failure or refusal to:
(A) Materially perform his duties and
responsibilities as set forth in Section
1.2 of this Agreement; or
(B) Devote all of his business time and
attention exclusively to the business and
affairs of the Company in accordance with
the terms of this Agreement; provided,
however, that Employee may, at his
discretion, continue to serve on the
Boards of Directors of Teleglobe, Inc.,
FaxNet, Inc. and such other boards as the
directors of the Company shall approve;
in each case if such failure or refusal is not cured within
thirty (30) days after written notice thereof to Employee by
the Company;
(ii) The willful misappropriation by Employee of
the funds or property of the Company;
(iii) The use of alcohol or drugs, materially
interfering with the performance of Employee's
obligations under this Agreement, continuing
after written warning;
(iv) Conviction of Employee in a court of law of,
or entering a plea of guilty or no contest to,
any felony or any other crime involving moral
turpitude, dishonesty, or theft;
(v) The commission in bad faith by the Employee
of any act which materially injures or could
reasonably be expected to materially injure the
reputation, business, or business relationships
of the Company; or
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<PAGE> 5
(vi) Any material breach (not covered by any of
Subparagraphs (i) through (v) of this Paragraph
(h)) of any term, provision, or condition of this
Agreement, if such breach is not cured within
thirty (30) days after written notice thereof to
Employee by the Company.
2.5 WITHHOLDING. Any amounts includible in Employee's income as a
result of this Agreement will be subject to all applicable
legal requirements with respect to the withholding of federal,
state, and local taxes and other normal withholdings.
ARTICLE III
FIDELITY
For purposes of this Article III, the term "Company" shall
include IXC Communications, Inc. and its subsidiaries and affiliates.
3.1 CONFIDENTIAL INFORMATION.
(a) Employee agrees not to disclose any Confidential
Information (as that term is defined in Paragraph
(e) below) of the Company, including information
received in confidence from the Company or from
others, whether before, during, or after Employee's
employment with the Company, except upon the prior
written consent of the Company.
(b) Employee acknowledges that the Confidential
Information of the Company includes matters
conceived or developed by Employee, as well as
matters learned by Employee from other employees or
agents of the Company.
(c) Any Confidential Information that Employee may
prepare, use, or come into contact with will be and
remain the Company's sole property and will not be
removed from the Company's premises without its
written consent, except as required in accordance
with Employee's performance of Employee's duties
hereunder, and will be returned to the Company,
together with all copies, summaries, and extracts
thereof, upon termination of this Agreement.
(d) Except as the Company may otherwise consent or
direct in writing, Employee will not, sell, use,
lecture upon, or publish any Confidential
Information or authorize anyone else to do those
things at any time either before or after the
expiration of this Agreement.
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<PAGE> 6
(e) For purposes of this Agreement, the term
"Confidential Information" means information (i)
disclosed to or known by Employee as a consequence
of or through Employee's employment by the Company,
(ii) not generally known outside the Company, and
(iii) that relates to the Company. Confidential
Information will also include the Company's
proprietary information (such as trade secrets).
(f) This Section 3.1 will continue in full force and
effect after the expiration of this Agreement.
3.2 COMPETITION.
(a) The provisions of Paragraph (c) below will apply
from the Commencement Date until the earliest to
occur of the following events:
(i) Until May 27, 2003; or
(ii) The maximum period during which the
provisions of this Section 3.2 can be enforced
under Texas law.
(b) The provisions of Paragraph (c) below will not
apply if the Company terminates the employment of
Employee for a reason that does not constitute
"Cause" under Section 2.4(h) of this Agreement.
(c) Except in furtherance of the execution of
Employee's duties under this Agreement, Employee
expressly covenants and agrees that Employee will
not, without the prior written consent of the Board
of Directors, either acting alone or in conjunction
with others, directly or indirectly:
(i) Engage in any competition with the Company
with respect to those products or services of a
type for which Employee had responsibility for
at the Company;
(ii) Solicit business of any type engaged in by
the Company (or by any subsidiary or affiliate
of Company) with respect to those products or
services of a type for which Employee had
responsibility for at the Company from any
person or business which is an account,
customer, or client of the Company;
(iii) Induce or attempt to influence any such
account, customer, or client to curtail or
cancel his or its business with the Company; or
(iv) Induce or attempt to influence any employee
to terminate his or her employment with the
Company.
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<PAGE> 7
3.3 ENFORCEMENT. Because the remedy at law for any breach of the
provisions of this Article III would be inadequate, Employee
hereby consents to the granting of an injunction or other
equitable relief enjoining any breach of these provisions by
any court having jurisdiction without the necessity of proving
actual monetary loss. In addition to such injunctive relief,
the Company may pursue at law any remedies available to it.
ARTICLE IV
MISCELLANEOUS MATTERS
4.1 BINDING ON SUCCESSOR. The Company will not enter into any
merger, acquisition, or other business combination with any
other party in which the Company will not be the surviving
entity unless the other party to that agreement consents to be
bound by the terms of this Agreement.
4.2 NO ASSIGNMENT. Except as required by law, Employee may not
assign or alienate (voluntarily or involuntarily) any right to
receive payments under this Agreement.
4.3 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas
without reference to the conflict of laws provisions thereof.
4.4 CAPTIONS. The captions of this Agreement are included solely
for convenience of reference and have no force or effect.
4.5 AMENDMENTS. This Agreement may not be amended, modified, or
waived in any manner other than by a written agreement
executed by the parties to this Agreement. The waiver by
either party of compliance with any provision of this
Agreement by the other party will not operate or be construed
as a waiver of any other provision of this Agreement, or of
any subsequent breach by the other party of any provision of
this Agreement.
4.6 NOTICES. All notices and other communications hereunder will
be sufficient if in writing and either hand-delivered or
mailed by registered or certified mail, return receipt
requested, with postage prepaid, to the parties at the
following addresses (or to such other address or addresses as
either party shall have designated in writing to the other
party in accordance with the provisions of this Section 4.6):
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<PAGE> 8
IF TO THE COMPANY:
IXC Communications, Inc.
1122 Capital of Texas Highway South
Austin, Texas 78746-6426
Attn: Chairman
IF TO EMPLOYEE:
John M. Zrno
c/o IXC Communications, Inc.
1122 Capital of Texas Highway South
Austin, Texas 78746-6426
4.7 SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement will not affect the validity or
enforceability of any other provision of this Agreement.
4.8 ENTIRE AGREEMENT AND MODIFICATION. This Agreement constitutes
the full and complete understanding and agreement of the
parties and supersedes all prior understandings and agreements
between the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year indicated above.
JOHN M. ZRNO, an individual IXC COMMUNICATIONS, INC.
/s/ By: /s/ Jeffrey C. Smith
- --------------------------------- ------------------------------
Jeffrey C. Smith
Senior Vice President
-8-
<PAGE> 1
EXHIBIT 10.27
[GRAPHIC]
CONTRACT FOR SERVICES
Whereas, American Business Development Corporation ("ABDC"), whose principal
office is located at 9330 LBJ Freeway, Suite 900, Dallas, Texas 75243, provides
consulting services to the telecommunications industry.
Whereas, IXC Communications, Inc. ("Client"), whose principal office is located
at 1122 Capital of Texas Highway South, Austin, Texas 78746, provides
telecommunications products and services to various customers.
Whereas, Client has requested the consulting services of ABDC as described
herein (the "Services").
Now therefore, ABDC has been engaged by the Client for a period of one (1) year
(the "Term") commencing on the Effective Date hereof for the purpose of
rendering the Services generally described as follows. For purposes of this
Agreement, the Effective Date shall be June 14, 1999.
1. The Services shall include, but not be limited to, the following:
General Description of the Services:
A. Consultation and assistance provided to management regarding
telecommunications issues.
B. Consultation and assistance regarding financial matters relating to the
Client and the telecommunications industry, including, if so asked, to
perform all of the functions and responsibilities of acting CFO of
Client.
C. Any other professional consultation and assistance reasonably requested
by the Client and accepted by ABDC.
2. All services to be performed pursuant to this Agreement shall be performed by
Stanley W. Katz personally. While Mr. Katz shall be permitted to perform some
services for other clients during the term of this Agreement, Mr. Katz shall
devote substantially all of his full time and effort to the performance of
this Agreement. This Agreement may not be assigned by ABDC, nor may others
provide services without the prior written consent of Client. This Agreement
shall terminate upon the death or disability (for more than 45 days) of Mr.
Katz.
<PAGE> 2
CONTRACT FOR SERVICES BETWEEN IXC COMMUNICATIONS, INC. AND ABDC (CONTINUED):
3. ABDC shall report to and follow the direction of Mr. John M. Zrno (or his
designee) of Client. Upon mutual agreement, this Contract may be changed by
the Client from time to time upon written notice to ABDC.
4. ABDC shall receive a monthly cash Retainer in the amount of fifty thousand
dollars ($50,000.00) in consideration for the Services performed. In addition
to the Retainer set forth in Paragraph 3, ABDC will be reimbursed for all
reasonable and necessary expenses incurred in performing the Services. If
major expenses (e.g. travel, lodging, etc.) are to be incurred, if
practicable, ABDC will notify and receive prior approval from the Client.
5. In addition to the Retainers set forth in Paragraph 3, provided that ABDC is
continuing to perform services in accordance with this Agreement, ABDC shall
receive Non-Recurring Cash Payment ("NRCP") in the total amount of five
hundred thousand dollars ($500,000.00), payable, subject to paragraph 7, as
follows:
a. Two hundred and fifty thousand dollars ($250,000.00) will be payable
January 13, 2000.
b. Two hundred and fifty thousand dollars ($250,000.00) will be payable June
13, 2000.
6. Provided that ABDC is continuing to perform services in accordance with this
Agreement, if Client terminates this Agreement prior to the end of the Term,
Client will pay to ABDC immediately upon such termination all Retainers,
NRCP, and expenses owed and yet unpaid to ABDC through the Term of the
Contract. The Aggregate Value of all cash payments (absent expense
reimbursements) is one million one hundred thousand U.S. dollars
($1,100,000.00). Provided that ABDC is continuing to perform services in
accordance with this Agreement, subject to paragraph 7, this Contract may
not be cancelled by the Client without immediate payment of the then unpaid
Aggregate Value to ABDC.
7. This Contract will terminate upon Change In Control of the Client. At that
time, the then unpaid portion of the Aggregate Value shall immediately
become due and payable to ABDC.
(a) For the purposes of this Agreement, "Change in Control", means any of
the following:
(i) A successful tender offer for greater than fifty percent (50%) of
the outstanding capital stock of the Company;
(ii) A sale of all or substantially all of the assets of the Company;
or
(iii) A merger or consolidation of the Company with any other
corporation in which the stockholders of the Company immediately
preceding such merger or consolidation will not hold a majority of
the outstanding capital stock of the
<PAGE> 3
CONTRACT FOR SERVICES BETWEEN IXC COMMUNICATIONS, INC. AND ABDC (CONTINUED):
surviving corporation (whether or not the Company is the surviving
corporation) immediately after such merger or consolidation.
8. At any point during the Term of this Contract, the Client may offer to ABDC
an option ("Stock Option") to purchase IXC Communications, Inc. common
stock. If such Stock Option is accepted by ABDC, it will replace the then
unpaid portion of the NRCP as compensation to ABDC.
9. Independent Contractor. In the performance of Consultant's duties and
obligations under this Agreement, Consultant shall at all times act in the
capacity of an independent contractor. Consultant shall be fully and solely
responsible to report all sums received under this Agreement and to pay all
taxes accruing as a result of the sums received in a manner consistent with
being an independent contractor as contemplated by this Agreement. Client
shall not withhold any sums from the amounts paid to the Consultant for any
tax purpose whatsoever. Consultant further understands and agrees that
Consultant and Consultant shall not be entitled to any benefits available to
Client's employees including, without limitation, medical, dental,
unemployment, disability, vacation and pension benefits, and that Consultant
is solely responsible for providing workers' compensation coverage, and all
other legally required benefits, to any persons performing services for
Consultant who are entitled to such benefits under applicable state or
federal law.
10. Confidential Information. The Confidential Information (as such term is
defined below) shall be kept confidential and shall not be disclosed by
Consultant in whole or in part, to any third party without Client's prior
written consent. The Confidential Information (as such term is defined
below) shall be kept confidential and shall not be disclosed by Consultant
except for disclosures: (i) to those employees, advisors and agents
(collectively "Representatives") who need to know such information in
connection with performing its obligations to clients (it being understood
that those Representatives will be informed of, and will be bound by the
confidential nature of the confidential information and the terms of this
Agreement), and (ii) as otherwise permitted by this Agreement. "Confidential
Information" shall mean all of the following, whether oral or written: all
analyses, business and financial reports, compilations, excerpts, forecasts,
summaries, studies, statements, and other information, cost data, customer
or investor lists, data, developments, documentation, experience,
information concerning benefits, customers, contracts, investors,
operations, sales, salaries, personnel, products or suppliers, "know-how,"
knowledge, marketing information, methods, models, plans, policies,
practices, price data, procedures, products, programs, strategies, supplier
lists, trade secrets, owned by, generated by, or disclosed by, Client or of
any affiliate of Client, and any other information normally understood to be
or designated as confidential or proprietary by Client, including, without
limitation, information concerning matters conceived or developed by
Consultant or its Representatives for Client, except to the extent publicly
known other than by breach hereof, in the public domain, obtained from any
<PAGE> 4
CONTRACT FOR SERVICES BETWEEN IXC COMMUNICATIONS, INC. AND ABDC (CONTINUED):
person not in breach of any obligation to Client or any of its affiliates,
or independently developed by Consultant. All analyses, compilations,
studies or other documents prepared by Consultant and its Representatives
using Confidential Information shall also be deemed to be Confidential
Information. Notwithstanding anything herein to the contrary, this section
shall survive the termination of this Agreement for any reason and shall
remain in force and effect forever.
11. Required Disclosure. In the event that Consultant is requested pursuant to,
or required by, applicable law, regulation, or legal or administrative
process to disclose any of the Confidential Information, Consultant will
notify Client in writing so that Client may seek a protective order or other
appropriate remedy or, in its discretion, to waive compliance with the terms
of this Confidentiality Agreement. In the event that no such protective
order or other remedy is obtained, or if Client does not waive compliance
with the terms of this Confidentiality Agreement, Consultant agrees to
furnish only that portion of the Confidential Information which Consultant
is advised by counsel is legally required, and Consultant will use
reasonable efforts to obtain reliable assurances that confidential treatment
will be accorded to the Confidential Information.
12. Insurance. Consultant shall self insure or shall maintain in full force and
effect applicable workers' compensation insurance and comprehensive general
liability insurance policy protecting Consultant and Client and their
respective officers and employees against loss, liability or expense
relating to personal injury, death or property damage or otherwise arising
out of, or occurring in connection with the business of Consultant.
13. Indemnification. Consultant shall indemnify, defend, release and hold
harmless Client and all of its affiliates, agents, clients, consultants,
customers, employees, subcontractors, invitees or licensees from and against
any action, claim, court cost, damage, demand, expense, liability, loss,
penalty, proceeding or suit, (collectively, together with related attorneys'
fees, including costs and disbursements, "Claims") imposed upon Client by
reason of damages to property or injuries, including death, as a result of
an act (whether intentional, negligent or otherwise) or omission on the part
of Consultant or any of its affiliates, agents, clients, consultants,
customers, employees, subcontractors, invitees or licensees in connection
with Consultant's performance under this Agreement. In the event any action
shall be brought against Client, Client shall immediately notify Consultant
in writing, and Consultant, upon the request of Client, shall assume the
defense thereof on behalf of Client and its affiliates and shall pay all
expenses and satisfy all judgments which may be incurred by or rendered
against Client or its affiliates in connection therewith, provided that
Client and its affiliates shall not be liable for any settlement of any such
action effected without its written consent. Notwithstanding anything herein
to the contrary, this section shall survive the termination of this
Agreement for any reason and shall remain in force and effect forever.
<PAGE> 5
CONTRACT FOR SERVICES BETWEEN IXC COMMUNICATIONS, INC. AND ABDC (CONTINUED):
14. Binding Arbitration and Fees. The parties hereby consent to the resolution
by binding arbitration of all claims or controversies in any way arising out
of, relating to or associated with this Agreement. Any arbitration required
by this Agreement shall be conducted before a single arbitrator in Austin,
Texas in accordance with the commercial arbitration rules of the American
Arbitration Association then existing, any award, order or judgment pursuant
to such arbitration may be enforced in any court of competent jurisdiction.
The arbitrator shall apply rules of Texas law and the parties expressly
waive any claim or right to an award of punitive damages. All such
arbitration proceedings shall be conducted on a confidential basis.
Notwithstanding the foregoing, either party may seek injunctive or other
equitable relief in a court of law without proceeding through arbitration.
15. Invoices submitted to the Client for all Retainers, NRCPs, and expense
reimbursements are payable upon receipt and will be considered overdue if
not paid within thirty (30) days of receipt of invoice.
16. This Contract may be extended or renegotiated by mutual agreement of the
parties.
17. Any and all work performed and materials prepared pursuant to this Contract
shall be the exclusive property of the Client.
18. This Contract constitutes the entire agreement between ABDC and the Client.
No other commitments, obligations or duties expressed or implied are valid
outside of the Contract or amendments thereto. This Contract supersedes any
and all agreements existing between ABDC and the Client.
19. This Contract shall be governed by the substantive laws of the State of
Texas.
ALL TERMS AND CONDITIONS AGREED TO:
IXC COMMUNICATIONS, INC. AMERICAN BUSINESS DEVELOPMENT CORP.
By: /s/ John M. Zrno By: /s/ Stanley W. Katz
-------------------------------- --------------------------------------
John M. Zrno, CEO Stanley W. Katz, President
Date: June 28, 1999
-----------------------------------
<PAGE> 1
EXHIBIT 10.38
IXC COMMUNICATIONS, INC.
1999 STOCK APPRECIATION RIGHTS PLAN
1. PURPOSE. The purpose of the IXC Communications, Inc. 1999 Stock
Appreciation Rights Plan is to provide stock-based compensation payable in the
form of cash to a select group of senior executives of IXC Communications, Inc.
2. EFFECTIVE DATE. The effective date of the Plan is April 8, 1999.
3. DEFINITIONS. For purposes of this Plan, the following terms shall
have the meanings set forth below:
(a) "Base Price" means the Fair Market Value of the Common Stock
on the date on which the Stock Appreciation Right was granted.
(b) "Board of Directors" means the Board of Directors of the
Company.
(c) "Cap" means the maximum amount of the Fair Market Value of
the Common Stock that may be taken into account in determining the
amount of the benefit payable upon the exercise of the Participant's
Stock Appreciation Right.
(d) A "Change in Control" will be deemed have transpired upon the
occurrence of any of the following events:
(i) The date of consummation of the sale of all or
substantially all of the assets of the Company;
(ii) The date of completion of a successful tender offer for
greater than fifty percent (50%) of the outstanding capital stock
of the Company; or
(iii) The date of consummation of a merger or consolidation
of the Company with any other corporation in which the parties
who were the stockholders of the Company immediately preceding
such merger or consolidation will not hold a majority of the
outstanding capital stock of the surviving corporation (whether
or not the Company is the surviving corporation) immediately
after such merger or consolidation.
(e) "Committee" means the committee designated in accordance with
Section 4 below that is responsible for the administration of the
Plan.
(f) "Common Stock" means the common stock of the Company or any
security issued in substitution, exchange, or in lieu thereof.
(g) "Company" means IXC Communications, Inc., a Delaware
corporation, or any successor corporation.
<PAGE> 2
(h) A "Constructive Discharge" of a Participant will be deemed to
have occurred if there is (i) any material reduction in the
Participant's compensation, (ii) any material reduction in the level
or scope of job responsibility or status of the Participant occurring
without the consent of the Participant, or (iii) any relocation to an
office of the Company which is more than thirty (30) miles from the
office where the Participant was previously located to which the
Participant has not agreed.
(i) The "Fair Market Value" of Common Stock shall be determined
in accordance with the general rules stated in Subparagraph (i) below
and the special rule contained in Subparagraph (ii) below.
(i) The following general rules shall apply for valuation
purposes.
(A) If the Common Stock is admitted to trading or
listed on a national securities exchange, its Fair Market
Value shall be the last reported sale price on that day
regular way, or if no such reported sale takes place on that
day, the average of the last reported bid and ask prices on
that day regular way, in either case on the principal
national securities exchange on which the Common Stock is
admitted to trading or listed.
(B) If the Common Stock is not listed or admitted to
trading on any national securities exchange, its Fair Market
Value shall be the last sale price regular way on that day
reported on the Nasdaq National Market ("Nasdaq National
Market") of the Nasdaq Stock Market ("NSM") or, if no such
reported sale takes place on that day, the average of the
closing bid and ask prices regular way on that day.
(C) If the Common Stock is not traded or listed on a
national securities exchange or included in the Nasdaq
National Market, its Fair Market Value shall be the last
reported sale price on that day regular way, or if no such
reported sale takes place on that day, the average of the
closing bid and ask prices regular way on that day reported
by the NSM, or any comparable system on that day.
(D) If the Common Stock is not described in (A), (B),
or (C) above, its Fair Market Value shall be the last
reported sale price on that day regular way, or if no such
reported sale takes place on that day, the average of the
closing bid and ask prices regular way on that day as
furnished by any member of the National Association of
Securities Dealers, Inc. ("NASD") selected from time to time
by the Company for that purpose.
If the national securities exchange, Nasdaq National Market, NSM, or
NASD (whichever is applicable) is closed on such date, the "Fair
Market Value" shall be
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<PAGE> 3
determined as of the last preceding day on which the Common Stock was
traded or for which bid and ask prices are available.
(ii) Notwithstanding the provisions of Subparagraph (i)
above, in the case of a Change in Control, the Fair Market Value
of the Common Stock shall be the value of the consideration paid
for it in the transaction that effects the Change in Control.
(j) "Participant" means an employee of the Company who has been
granted a Stock Appreciation Right.
(k) "Plan" means this IXC Communications, Inc. 1999 Stock
Appreciation Rights Plan, as it may be amended from time to time.
(l) "Related Stock Option" means the stock option previously
granted to the Participant for the same number of shares as to which
the Participant's Stock Appreciation Right applies.
(m) "Stock Appreciation Right" means the right to receive the
difference between the (i) Base Price and (ii) the Fair Market Value
of the Common Stock on the date that the right is exercised. However,
in no event will the portion of the Fair Market Value of the Common
Stock in excess of the Cap (if applicable) be taken into account in
determining the amount payable to the Participant.
4. ADMINISTRATION.
(a) This Plan shall be administered by the Board or a committee
appointed by the Board. (In either case, the responsible entity shall
be referred to as the "Committee.") It is expressly intended that this
Plan be treated as a formula plan for purposes of Rule 16b-3
promulgated by the Securities and Exchange Commission so that the
approval of the Plan by the Board of Directors constitutes the
approval of all grants under the Plan.
(b) The Committee may conduct its meetings in person or by
telephone. A majority of the members of the Committee shall constitute
a quorum, and any action shall constitute the action of the Committee
if it is authorized by:
(i) A majority of the members present at any meeting
conducted in accordance with the Company's bylaws; or
(ii) The unanimous consent of all of the members in writing
without a meeting.
(c) The Committee is authorized to interpret this Plan and to
adopt rules and procedures relating to the administration of this
Plan. All actions of the Committee in
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<PAGE> 4
connection with the interpretation and administration of this Plan
shall be binding upon all parties.
(d) The Committee is authorized to make such modifications to
this Plan as are necessary to effectuate the intent of this Plan as a
result of any changes in the tax, accounting, or securities laws
treatment of the Participants, the Plan, or of the Company.
5. PARTICIPATION AND BENEFITS. Schedule A contains a list of (a) those
senior executives of the Company who have been granted Stock Appreciation Rights
as of the Effective Date of this Plan ("Initial Participants"), (b) the number
of shares of Common Stock subject to each Stock Appreciation Right, (c) the Base
Price of each Stock Appreciation Right, and (d) the Cap for each Stock
Appreciation Right, and (e) the date of the Related Stock Option. The terms of
any additional grants (whether to Initial Participants or to new Participants)
shall be set forth in additional Schedules.
6. VESTING.
(a) Except as otherwise provided in the grant, each Participant
shall earn a vested right to exercise the number of shares subject to
his or her Stock Appreciation Right at the rate of twenty-five percent
(25%) on each anniversary of the date of the grant.
(b) The termination of the Participant's employment (whether by
reason of death or otherwise) shall not accelerate the number of
shares with respect to which this Stock Appreciation Right may be
exercised. Also, this Stock Appreciation Right shall be exercisable
following termination of employment only to the extent (if at all) it
was exercisable at the time of termination of employment.
(c) In the event there is a Change in Control of the Company and
(i) a Participant's employment is terminated without cause by the
Company (or its successor) or (ii) a Participant is Constructively
Discharged by the Company (or its successor), in each case during the
one (1) year period immediately following the consummation of the
Change in Control ("Employee Termination Date"), the Stock
Appreciation Right shall fully vest on the Employee Termination Date,
provided that it had not previously been terminated. A Change in
Control without the occurrence of an event described in (i) or (ii) of
the immediately preceding sentence during the one (1) year period
immediately following the consummation of the Change in Control will
not in any way change the vesting schedule set forth in Paragraph (a)
of this Section 6.
7. EXERCISE OF RIGHTS. A Stock Appreciation Right may be exercised by
the Participant by delivering to the Committee written notice specifying the
number of full shares with respect to which it is to be exercised. Participants
may not exercise their Stock Appreciation Rights with respect to a fractional
share. Except as otherwise provided in the grant, if the Stock Appreciation
Right is granted in tandem with a stock option, the Participant may exercise his
or her Stock Appreciation Right only at the same time and with respect to the
same number of shares as to which the Participant exercises his or her Related
Stock Option.
-4-
<PAGE> 5
8. TERMINATION OF RIGHTS. Except as otherwise specified in the grant,
all Stock Appreciation Rights will end on the tenth (10th) anniversary of the
date of the grant. If the Stock Appreciation Right is granted in tandem with a
stock option, the Stock Appreciation Right will remain exercisable following the
termination of the Participant's employment (whether by reason of death,
disability, or otherwise) only to the extent (if at all) that the Participant
could exercise his or her Related Stock Option following termination of
employment.
9. FORM OF BENEFIT PAYMENTS. Benefits will be paid in the form of a
lump sum distribution of cash equal to the difference between (a) the Fair
Market Value of the Common Stock (but not to exceed the Participant's Cap, if
applicable) on the date that the Participant exercises the Stock Appreciation
Right and (b) the Base Price of the Stock Appreciation Right.
10. DESIGNATION OF BENEFICIARY. In the event of the death of a
Participant prior to the date on which the Participant's entire benefit under
the Plan is paid, the benefit (or the remaining portion thereof) shall be paid
to the Participant's estate, unless the Participant has designated a beneficiary
in accordance with such rules and procedures as the Committee may prescribe.
11. PAYEES UNDER A LEGAL DISABILITY. If any payee is a minor, or if the
Committee reasonably believes that any payee is legally incapable of giving a
valid receipt and discharge for any payment due the payee, the Committee may
have the payment made to the person (or persons or institution) whom it believes
is caring for or supporting the payee. Any such payment shall be a payment for
the benefit of the payee and shall be a complete discharge of any liability
under the Plan to the payee.
12. PAYMENT OF BENEFITS. All payments under the Plan shall be delivered
in person or mailed to the last address of the Participant (or, in the case of
the death of the Participant, to that of the Participant's estate or of the
Participant's designated beneficiary, whichever is applicable). Each Participant
shall be responsible for furnishing the Committee with his or her current
address and that of his or her beneficiary (if applicable).
13. CHANGES IN CAPITALIZATION. In the event of any change in the
capitalization of the Company affecting its Common Stock (e.g., a stock split,
reverse stock split, stock dividend, recapitalization, combination, or
reclassification), the Committee shall make such adjustments as it may deem
appropriate to each Stock Appreciation Right relating to (a) the number of
shares of Common Stock to which it applies, (b) the Base Price, and (c) the Cap
(if applicable).
14. NON-TRANSFERABILITY OF GRANTS. Stock Appreciation Rights are not
assignable or transferable except by will or the laws of descent and
distribution.
15. AMENDMENT AND TERMINATION. The Board may amend or terminate this
Plan at any time.
16. NO ADDITIONAL RIGHTS. Neither the adoption of this Plan nor the
participation of any Employee in this Plan shall (a) affect or restrict in any
way the power of the Company to
-5-
<PAGE> 6
undertake any corporate action otherwise permitted under applicable law, (b)
confer upon any Participant the right to continue performing services for the
Company, or (c) interfere in any way with the right of the Company to terminate
the services of any Participant at any time, with or without cause, subject to
the terms of any applicable employment agreement.
17. SECURITIES LAW RESTRICTIONS. No Participant will be allowed to
exercise a Stock Appreciation right if the Company determines that such exercise
would violate (a) applicable federal or state securities law, (b) the rules of
any stock exchange (or other securities market) on which the Common Stock is
traded, or (c) the IXC Communications, Inc. Statement of Policy regarding
Securities Transactions and Confidentiality (or any successor document).
18. WITHHOLDINGS. Any payments from the Plan may be subject to
withholding for taxes as may be required by any applicable federal or state law.
19. INDEMNIFICATION. To the maximum extent permitted by law, the
Company shall indemnify each member of the Board of Directors, as well as any
other employee of the Company with duties under this Plan, against any and all
liabilities and expenses (including any amount paid in judgment or settlement)
reasonably incurred by the individual in connection with any claims against the
individual by reason of the performance of the individual's duties under this
Plan, unless the losses are due to the individual's gross negligence or lack of
good faith.
-6-
<PAGE> 7
20. GOVERNING LAW. This Plan and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Delaware.
-7-
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-01-1999
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471,112
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<SALES> 0
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<INCOME-PRETAX> (149,567)
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