<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
-------------
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-23795
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EXODUS COMMUNICATIONS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 77-0403076
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2650 San Tomas Expressway, Santa Clara, CA 95051
-------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(408) 346-2200
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(Registrant's telephone number, including area code)
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 outstanding of the issuer's common stock, par value $0.001,
as of August 7, 1998 was 19,544,057 shares.
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1
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EXODUS COMMUNICATIONS, INC.
INDEX
-----
PART I. FINANCIAL INFORMATION PAGE NO.
--------------------- --------
Item 1. Financial Statements
Condensed Balance Sheets June 30, 1998 and
December 31, 1997 3
Condensed Statements of Operations - Three and
Six Month Periods ended June 30, 1998 and 1997 4
Condensed Statements of Cash Flows Six Month
Period ended June 30, 1998 and 1997 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 26
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings 26
Item 2. Changes in Securities and Use of Proceeds 26
Item 3. Defaults Upon Senior Securities 27
Item 4. Submission of Matters to a Vote of Security Holders 27
Item 5. Other Information 27
Item 6. Exhibits and Reports on Form 8-K 28
Signatures 29
2
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I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EXODUS COMMUNICATIONS, INC.
CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................................... $ 60,720 $ 10,270
Accounts receivable.......................................................... 4,384 1,837
Prepaid expenses and other current assets.................................... 2,082 1,377
------------ ------------
Total current assets....................................................... 67,186 13,484
Property and equipment, net..................................................... 43,105 25,170
Restricted cash equivalents..................................................... 1,938 1,753
Other assets.................................................................... 811 566
------------ ------------
$ 113,040 $ 40,973
============ ============
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Bank borrowings.............................................................. $ - $ 3,000
Current portion of debt...................................................... 7,301 3,777
Current portion of capital lease obligations................................. 3,294 1,143
Accounts payable............................................................. 11,144 6,252
Accrued expenses............................................................. 5,835 2,808
Deferred revenue............................................................. 41 211
------------ ------------
Total current liabilities.................................................. 27,615 17,191
Debt, less current portion...................................................... 21,453 12,693
Capital lease obligations, less current portion................................. 8,461 2,442
------------ ------------
Total liabilities.......................................................... 57,529 32,326
------------ ------------
Redeemable convertible preferred stock and warrants............................. - 39,247
------------ ------------
Stockholders' equity (deficit):
Common stock, $0.001 par value: 50,000,000 and 53,281,579 authorized as
of June 30, 1998 and December 31, 1997, respectively; 19,477,098 and
2,067,253 shares issued and outstanding as of June 30, 1998 and as of
December 31, 1997, respectively............................................ 19 2
Additional paid-in capital................................................... 115,160 2,508
Notes receivable from stockholders........................................... (53) (140)
Deferred stock compensation.................................................. (1,641) (2,393)
Accumulated deficit.......................................................... (57,974) (30,577)
------------ ------------
Total stockholders' equity (deficit)..................................... 55,511 (30,600)
------------ ------------
$ 113,040 $ 40,973
============ ============
</TABLE>
See accompanying notes to condensed financial statements.
3
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EXODUS COMMUNICATIONS, INC.
CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1998 1997 1998 1997
------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 10,071 $ 2,393 $ 17,176 $ 4,062
--------- -------- --------- --------
Costs and expenses:
Cost of revenues 12,983 2,999 22,864 4,898
Marketing and sales 7,163 2,746 13,580 4,376
General and administrative 3,000 1,163 5,657 2,079
Product development 719 385 1,364 588
--------- -------- --------- --------
Total cost and expenses 23,865 7,293 43,465 11,941
--------- -------- --------- --------
Operating loss (13,794) (4,900) (26,289) (7,879)
Net interest expense 282 81 1,108 137
--------- -------- --------- --------
Net loss (14,076) (4,981) (27,397) (8,016)
Cumulative dividends and accretion on
redeemable convertible preferred stock - - (2,014) -
--------- -------- --------- --------
Net loss attributable to common stockholders ($14,076) ($4,981) ($29,411) ($8,016)
========= ======== ========= ========
Basic and diluted net loss per share ($0.73) ($2.59) ($2.57) ($4.16)
========= ======== ========= ========
Shares used in computing basic and diluted net
loss per share 19,412 1,921 11,460 1,927
========= ======== ========= ========
</TABLE>
See accompanying notes to condensed financial statements.
4
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EXODUS COMMUNICATIONS, INC.
CONDENSED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1998 1997
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (27,397) $ (8,016)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization 4,689 962
Loss on disposal of property and equipment 248 -
Non-cash warrant expense 786 -
Amortization of deferred stock compensation 752 -
Amortization of debt issuance costs 198 -
Changes in operating assets and liabilities:
Accounts receivable (2,547) (419)
Prepaid expenses and other assets (1,148) (394)
Accounts payable 4,892 2,478
Accrued expenses 3,027 (55)
Deferred revenue (170) (49)
--------- --------
Net cash used for operating activities (16,670) (5,493)
--------- --------
Cash flows from investing activities:
Purchases of property and equipment (17,842) (5,765)
--------- --------
Net cash used for investing activities (17,842) (5,765)
--------- --------
Cash flows from financing activities:
Proceeds from issuance of redeemable convertible preferred stock and warrants 2,176 17,449
Proceeds from issuance of common stock 70,460 28
Proceeds from issuance of bridge financing convertible notes - 3,975
Notes receivable to stockholders, net - (24)
Repayment of notes receivable from stockholders 87 17
Repayment of bank borrowings (3,000) -
Proceeds from sale-leaseback transactions 4,035 932
Payment on capital lease obligations (895) (570)
Proceeds from debt 14,448 3,383
Repayment of debt (2,164) (1,306)
Restricted cash (185) -
--------- --------
Net cash provided by financing activities 84,962 23,884
--------- --------
Net increase in cash and cash equivalents 50,450 12,626
Cash and cash equivalents at beginning of year 10,270 3,715
--------- --------
Cash and cash equivalents at end of period $ 60,720 $ 16,341
========= ========
Supplemental disclosure of cash flow information:
Cash paid-interest $ 1,016 $ 175
========= ========
Noncash investing and financing activities:
Assets recorded under capital lease $ 6,007 $ 1,532
========= ========
Cumulative dividends and accretion on Series C and D
redeemable convertible preferred stock and warrants $ 2,014 $ -
========= ========
Conversion of redeemable convertible preferred stock to
common stock $ 43,576 $ -
========= ========
Conversion of bridge financing convertible notes to
redeemable convertible preferred stock $ - $ 3,975
========= ========
</TABLE>
See accompanying notes to condensed financial statements.
5
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EXODUS COMMUNICATIONS, INC.
---------------------------
Notes to Condensed Financial Statements
---------------------------------------
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information, the instructions to Form 10Q and Article 10 of
Regulation S-X. Accordingly, they do not contain all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the accompanying unaudited
condensed financial statements have been prepared on the same basis as the
audited financial statements and include all adjustments, consisting only of
normal recurring adjustments, necessary for the fair presentation of the
Company's financial position as of June 30, 1998 and the results of its
operations for the three and six month periods ended June 30, 1998 and 1997
and its cash flows for the six months ended June 30, 1998 and 1997. These
financial statements should be read in conjunction with the Company's audited
financial statements as of December 31, 1997 and 1996 and for each of the
three years in the period ended December 31, 1997, including notes thereto,
included in the Company's final prospectus filed pursuant to Rule 424(b) under
the Securities Act of 1933, as amended, in connection with the Company's
Registration Statement on Form S-1 (File No. 333-44469). Operating results for
the six month period ended June 30, 1998 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1998.
NOTE 2 - NET LOSS PER SHARE
Basic and diluted net loss per share has been computed by dividing the net
loss attributable to common stockholders by the weighted average number of
shares of common stock outstanding. Diluted net loss per share for the six
month periods ended June 30, 1998 and 1997 does not include the effect of (i)
3,259,000 and 832,000 stock options outstanding as of June 30, 1998 and June 30,
1997, respectively, (ii) 247,000 warrants to purchase common stock and 870,000
warrants to purchase common and redeemable convertible preferred stock, as of
June 30, 1998 and June 30, 1997, respectively and, (iii) 11,987,000 shares (up
to the date of the initial public offering) and 10,444,000 shares of redeemable
convertible preferred stock on an "as if converted" basis for the six month
periods ended June 30, 1998 and 1997, respectively as the effect of their
inclusion is antidilutive during each period.
NOTE 3 - INITIAL PUBLIC OFFERING
On March 24, 1998, the Company completed its initial public offering of
5,125,000 shares of its Common Stock (the "IPO"). Net proceeds to the Company,
after deducting underwriting discounts and commissions and offering expenses,
aggregated approximately $69,700,000. At the closing of the IPO, all redeemable
convertible preferred stock was converted to Common Stock on a one-for-three
basis. In connection with the IPO, certain warrant holders exercised their
warrants to purchase preferred stock (which converted into Common Stock), which
resulted in additional proceeds of $1,842,000.
NOTE 4 - REVENUE RECOGNITION
Revenues consist of monthly fees for server hosting, Internet connectivity,
collaborative systems management and Internet technology services, equipment
sales to customers and one-time fees for installation. Revenues (other than
installation fees and equipment sales to customers) are generally billed
6
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and recognized ratably over the term of the contract, generally one year.
Installation fees are typically recognized at the time the installation occurs,
and equipment sales are typically recognized when the equipment is delivered to
the customer.
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------------- -----------------
<S> <C> <C>
Data centers and related equipment........................... $33,332 $16,316
Furniture, fixtures, computer equipment and other............ 14,504 12,815
Construction in progress..................................... 3,729 --
------- -------
51,565 29,131
Less accumulated depreciation and amortization............... 8,460 3,961
------- -------
$43,105 $25,170
======= =======
</TABLE>
Computer equipment and certain data center equipment recorded under
capital leases aggregated $13,436,000 and $4,419,000 as of June 30, 1998 and
December 31, 1997, respectively. Accumulated amortization for the assets
recorded under capital leases aggregated $1,561,000 and $722,000 as of June
30, 1998 and December 31, 1997, respectively.
7
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NOTE 6 - BANK BORROWINGS AND DEBT
The Company has a $7,000,000 bank line of credit bearing interest at the
bank's prime rate, which is collateralized by all of the Company's assets. The
bank line of credit expires in December 1998. No amount was outstanding under
the bank line of credit as of June 30, 1998.
A summary of debt follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
-------- --------
(in thousands)
<S> <C> <C>
$850,000 equipment term loan with a financial institution; prime rate plus 2.5%
(11.0% as of June 30, 1998); principal and interest due monthly for 42
months........................................................................... $ 134 $ 178
$1,800,000 equipment line of credit facility; effective interest rate of
approximately 16.4%; principal and interest due monthly through September
2000; collateralized by equipment................................................ 1,164 1,393
$3,000,000 equipment line of credit facility; effective interest rate of
approximately 12.9%; principal and interest due monthly through July 2001;
collateralized by equipment...................................................... 2,429 2,756
$6,500,000 equipment line of credit facility; effective interest rate of
approximately 15.9%; principal and interest due monthly through July 2001;
collateralized by equipment...................................................... 5,428 6,312
$3,000,000 equipment line of credit facility; effective interest rate of
approximately 16.2%; principal and interest due monthly through May 2001;
collateralized by equipment...................................................... 2,477 2,787
$5,000,000 equipment line of credit facility; effective interest rate of
approximately 16.2%; principal and interest due monthly through September
2001; collateralized by equipment................................................ 3,500 3,044
$10,000,000 equipment line of credit facility; effective interest rate of
approximately 13.8%; principal and interest due monthly through July 2002;
collateralized by equipment...................................................... 5,622 --
$8,000,000 line of credit facility; effective interest rate of approximately
12.8%; principal and interest due monthly through January 2000;
collateralized by all of the Company's assets.................................... 8,000 --
-------- --------
28,754 16,470
Less current portion 7,301 3,777
-------- --------
Debt, less current portion $ 21,453 $ 12,693
======== ========
</TABLE>
8
<PAGE>
NOTE 7 - COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards (SFAS) No. 130, Reporting of Comprehensive
Income. SFAS No. 130 establishes standards for the reporting and display of
comprehensive income and its components in a full set of financial statements.
Comprehensive income includes all changes in equity during a period except those
resulting from the issuance of shares of stock and distributions to
stockholders. There were no material differences between net loss and
comprehensive loss during the three and six months ended June 30, 1998 and 1997.
NOTE 8 - SUBSEQUENT EVENT
On July 1, 1998, the Company issued $200 million of 11.25% Senior Notes
due 2008 for aggregate net proceeds of approximately $194,000,000. The Company
deposited approximately $42,400,000 with an escrow agent that will pay, when
due, the first four semi-annual interest payments on the Notes.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Form 10-Q contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A
of the Securities Act of 1933, as amended. These forward-looking statements
involve a number of risks and uncertainties, including the timely expansion of
the Company's network and opening of additional Internet Centers, the ability of
the Company to execute its current business plan, retain customers, attract new
customers, and other factors described throughout this Form 10-Q, including
under "Revenues" and "Other Factors That May Affect Future Operating Results,"
(referred to herein as "Other Factors") and in the Company's final prospectus
filed pursuant to Rule 424(b) under the Securities Act of 1933, as amended, in
connection with the Company's Registration Statement on Form S-1 (File No. 333-
44469) (the "Final Prospectus"). The actual results that the Company achieves
may differ materially from any forward-looking statements due to such risks and
uncertainties. The forward-looking statements within this Form 10-Q are
identified by words such as "believes," "anticipates," "expects," "intends,"
"will," "may" and other similar expressions. In addition, any statements which
refer to expectations, projections or other characterizations of future events
or circumstances are forward-looking statements. In addition, the section
labeled "Other Factors That May Affect Future Operating Results" consists
primarily of forward-looking statements. The Company undertakes no obligation
to publicly release the results of any revisions to these forward-looking
statements which may be made to reflect events or circumstances occurring
subsequent to the filing of this Form 10-Q with the Securities and Exchange
Commission. Readers are urged to carefully review and consider the various
disclosures made by the Company in this report and in the Company's other
reports filed with the Securities and Exchange Commission, including its Final
Prospectus, that attempt to advise interested parties of the risks and factors
that may affect the Company's business.
OVERVIEW
Exodus is a leading provider of Internet system and network management
solutions for enterprises with mission-critical Internet operations. The
Company's solutions include server hosting, Internet connectivity, collaborative
systems management and Internet technology services, which together provide the
high performance, scalability and expertise that enterprises need to optimize
Internet operations. The Company delivers its services from geographically
distributed, state-of-the-art Internet Data Centers that are connected through a
redundant high-performance national Internet backbone ring.
9
<PAGE>
The Company is the successor to a Maryland Corporation that was formed in
August 1992 to provide computer consulting services. The Company began to offer
Internet connectivity services to enterprises in October 1994 and server hosting
services in late 1995. In August 1996, the Company opened its first dedicated
Internet Data Center and refocused its business strategy on providing Internet
system and network management solutions for enterprises with mission-critical
Internet operations. Since refocusing its business strategy, the Company has
derived most of its revenues (and substantially all of its growth in revenues)
from customers for which it provides these services. Each of the Company's
Internet Data Center customers initially purchases a subset of the Company's
service offerings to address specific departmental or enterprise Internet
computing needs, and some of these customers purchase additional services as the
scale and complexity of their Internet operations increase. The Company sells
its services under contracts that typically have terms of one year. Customers
pay monthly fees for the services utilized, as well as one-time fees for
installation and for any equipment that they choose to purchase from the
Company. Equipment revenue has represented less than 10% of total revenues for
each quarterly period beginning in 1997, and the Company expects equipment
revenues to remain less than 10% of total revenues going forward. However, the
foregoing forward-looking statement is subject to risks and uncertainties, such
as the level of customer equipment demands, which could cause actual results to
differ materially.
The Company opened its first Internet Data Center in the San Francisco
metropolitan area in August 1996. Since that time, the Company has opened six
additional domestic Internet Data Centers in the metropolitan areas of New York
(March 1997), San Francisco (August 1997 and June 1998), Seattle (September
1997), Los Angeles (October 1997) and Washington, D.C. (December 1997) and has a
server hosting facility in London. Additionally, the Company plans to open
Internet Data Centers in the Boston metropolitan area in the third quarter of
1998, the Chicago metropolitan area in the first quarter of 1999 and the London
metropolitan area in the second quarter of 1999 as well as additional Internet
Data Centers in the Washington, D.C. and Seattle metropolitan areas. See "Other
Factors--Risks Associated with Accelerated Business Expansion" for risks related
to the foregoing forward-looking statements. These facilities serve as a base
for the array of solutions offered by the Company, including server hosting,
Internet connectivity, collaborative systems management and Internet technology
services. The building of these Internet Data Centers has required the Company
to obtain substantial equity and debt financing. See "Other Factors--
Substantial Leverage and Debt Service" and "Liquidity and Capital Resources"
below.
Prior to building an Internet Data Center in a new a geographic region, the
Company employs various means to evaluate the market opportunity in a given
location, including the use of focus groups and market research on Internet
usage statistics, the pre-selling of services into the proposed market and
analysis of specific financial criteria. The Company typically requires at least
six months to select the appropriate location for an Internet Data Center,
construct the necessary facilities, install equipment and telecommunications
infrastructure, and hire the operations and sales personnel needed to conduct
business at that site. Expenditures related to an Internet Data Center commence
well before the Internet Data Center opens, and it takes an extended period to
approach break-even capacity utilization at each site. As a result, the Company
expects that individual Internet Data Centers will experience losses in excess
of one year from the time they are opened. The Company experiences further
losses from sales personnel hired to test market the Company's services in
markets where there is no, and may never be an, Internet Data Center. As a
result, the Company expects to make investments in expanding the Company's
business rapidly into new geographic regions which, while potentially increasing
the Company's revenues in the long term, will lead to significant losses for the
foreseeable future. See "Other Factors--Risks Associated with Accelerated
Business Expansion" for risks related to the foregoing forward-looking
statements.
Since the Company began to offer server hosting services in 1995, it has
experienced operating losses and negative cash flows from operations in each
quarterly and annual period. As of June 30, 1998, the Company had an accumulated
deficit of approximately $58.0 million. The revenue and income potential of the
Company's business and market is unproven, and the Company's limited operating
history makes an evaluation of the Company and its prospects difficult.
Currently, the Company anticipates making
10
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significant investments in new Internet Data Centers, product development and
sales and marketing programs and personnel and therefore believes that it will
continue to experience net losses on a quarterly and annual basis for the
foreseeable future. The Company and its prospects must be considered in light of
the risks, expenses and difficulties encountered by companies in the new and
rapidly evolving market for Internet system and network management solutions.
See "Other Factors--Limited Operating History; History of Losses" for risks
related to the foregoing forward-looking statements.
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data as a
percentage of total revenues for the three month and six month periods ended
June 30, 1998 and June 30, 1997. This information has been derived from the
Company's unaudited financial statements, which, in management's opinion, have
been prepared on substantially the same basis as the audited financial
statements and include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the financial information for
the quarters presented. This information should be read in conjunction with the
Financial Statements and Notes thereto included in the Company's Final
Prospectus. The operating results in any quarter are not necessarily indicative
of the results to be expected for any future period.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------------------------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
------------- ------------ ------------ ------------
Cost and expenses:
Cost of revenues 128.9 125.3 133.1 120.6
Marketing and sales 71.1 114.8 79.1 107.7
General and administrative 29.8 48.6 32.9 51.2
Product development 7.2 16.1 8.0 14.5
------------- ------------ ------------ ------------
Total cost and expenses 237.0 304.8 253.1 294.0
------------- ------------ ------------ ------------
Operating loss (137.0) (204.8) (153.1) (194.0)
Net interest expense 2.8 3.3 6.4 3.3
------------- ------------ ------------ ------------
Net loss (139.8)% (208.1)% (159.5)% (197.3)%
============= ============ ============ ============
</TABLE>
Revenues
--------
Revenues consist of (i) monthly fees for server hosting, Internet
connectivity, collaborative systems management and Internet technology services,
(ii) revenues from sales of third-party equipment to customers and (iii) one-
time fees for installation. Currently, substantially all of the Company's
revenue is derived from services fees. Revenues (other than installation fees
and equipment sales to customers) are generally billed and recognized ratably
over the term of the contract, generally one year. Installation fees are
typically recognized at the time the installation occurs, and equipment revenues
are typically recognized when the equipment is delivered to the customer or
placed into service at an Internet Data Center. The Company sells third-party
equipment to its customers as an accommodation to facilitate their purchase of
services.
11
<PAGE>
The Company's revenues increased 321% to $10.1 million for the three months
ended June 30, 1998 from $2.4 million in the same period of the prior year.
Revenues increased 323% to $17.2 million for the six months ended June 30, 1998
from $4.1 in the same period of the prior year. This growth in revenues resulted
primarily from increases in the number of customers, increases in revenues from
existing customers and the opening of new Internet Data Centers.
Cost of Revenues
----------------
The Company's cost of revenues is comprised primarily of the Company's
costs for its nationwide backbone network and local telco loops, salaries and
benefits for the Company's customer service and operations personnel (including
its network engineers, backbone engineers, network management and systems
personnel and installers), depreciation, rent, repairs and utilities related to
the Company's Internet Data Centers and costs of third-party equipment sold to
customers.
The Company's cost of revenues increased 333% to $13.0 million for the
three month periods ended June 30, 1998 from $3.0 million in the same period
of the prior year. The cost of revenues increased 367% to $22.9 million for
the six months ended June 30, 1998 from $4.9 million in the same respective
period of the prior year. Cost of revenues as a percentage of revenues
increased to 129% and 133% for the three month and six month periods ended
June 30, 1998, from 125% and 121% for the same respective periods of the prior
year. These increases in cost of revenues in absolute dollars and as a
percentage of revenues were primarily the result of costs associated with the
opening of additional Internet Data Centers, including the hiring of
additional employees, and the Company's expansion and increased capacity of
its nationwide backbone network. The Company expects that its cost of revenues
as a percentage of revenues may remain above 100% through at least the
remainder of 1998.
Marketing and Sales
-------------------
The Company's marketing and sales expenses are comprised primarily of
salaries and benefits for the Company's marketing and sales personnel, printing
and advertising costs, public relations costs, consultants' fees and travel and
entertainment expenses. The Company's marketing and sales expenses increased
161% and 210% to $7.2 million and $13.6 million (including a one-time non-cash
charge of $525,000 related to a warrant issued to At Home Corporation in the
first quarter of 1998 in connection with a distribution alliance) for the three
month and six month periods ended June 30, 1998 from $2.7 million and $4.4
million in the same respective periods of the prior year. Marketing and sales
expenses increased as a result of increased marketing and sales personnel,
increased travel and entertainment expenses, increased trade shows and marketing
events, and increased public relations expenses. Marketing and sales expenses as
a percentage of revenues decreased to 71% and 79% for the three month and six
month periods ended June 30, 1998, compared to 115% and 108% for the same
respective periods in the prior year. These declines were due primarily to
increased recurring revenues from existing customers, which tend to have lower
marketing and sales associated with them, as well as the Company's general
significant increase in revenues between the comparison periods. The Company
expects that marketing and sales expenses will continue to increase in absolute
dollars during 1998 but will continue to decline as a percentage of total
revenues as recurring revenues from the existing customers, which tend to have
lower marketing and sales expenses associated with them, become a more
significant percentage of total revenues. However, the foregoing forward-
looking statement is subject to risks and uncertainties which may cause actual
results to differ, such as risks associated with the Company's achievement of
anticipated levels of revenues and expenses, and the impact of competition. See
"Other Factors--Competition"; "Dependence on New Market; Uncertainty of
Acceptance of Services."
12
<PAGE>
General and Administrative
--------------------------
The Company's general and administrative expenses are comprised primarily
of salaries and benefits for the Company's administrative and management
information systems personnel and fees paid for professional services and
recruiting. The Company's general and administrative expenses increased 158% and
172% to $3.0 million and $5.7 million for the for the three month and six month
periods ended June 30, 1998, respectively, from $1.2 million and $2.1 million in
the same respective periods of the prior year. General and administrative
expenses increased as a result of additional personnel and increased
professional and recruiting services. General and administrative expenses as a
percentage of revenues decreased to 30% and 33% for the three months and six
months ended June 30, 1998, respectively, from 49% and 51% in the same
respective periods of the prior year. These declines were due to the Company's
significant increase in revenues between the comparison periods. The Company
expects that general and administrative expenses will continue to increase in
absolute dollars but will continue to decline as a percentage of total revenues
as existing overhead is spread over more substantial operations. However, the
foregoing forward-looking statement is subject to risks and uncertainties which
may cause actual results to differ materially, such as risks associated with the
Company's achievement of anticipated levels of revenues and expenses. See
"Other Factors--Potential Fluctuations in Operating Results."
Product Development
-------------------
The Company's product development expenses are comprised primarily of
salaries and benefits for the Company's product development personnel and fees
paid to consultants, all of whom focus their efforts primarily on the
integration of best-of-breed products and services developed by leading
technology vendors with the Company's services and the development of the
Company's proprietary technologies. The Company's product development expenses
increased 87% and 132% to $719,000 and $1.4 million for the three month and six
month periods ended June 30, 1998, respectively, from $385,000 and $588,000 in
the same respective periods of the prior year. Product development expenses
increased as a result of additional personnel and the increase in fees paid to
consultants. Product development expenses as a percentage of revenues decreased
to 7% and 8% for the three month and six month periods ended June 30, 1998,
respectively, from 16% and 14% in the same respective periods of the prior year.
These declines were due to the Company's significant increase in revenues
between the comparison periods. The Company expects that product development
expenses will continue to increase in absolute dollars as the Company makes
additional investments in developing proprietary technology, particularly
related to its collaborative systems management services, but will decline as a
percentage of total revenues as existing costs are spread over a larger revenue
base. However, the foregoing forward-looking statement is subject to risks and
uncertainties that may cause actual results to differ materially, such as risks
associated with the Company's achievement of anticipated levels of revenues and
expenses. See "Other Factors--Potential Fluctuations in Operating Results."
Net Interest Expense
--------------------
The Company's net interest expense increased to $282,000 and $1.1 million
for the three month and six month periods ended June 30, 1998, respectively,
from $81,000 and $137,000 in the same periods of the prior year. The increase in
net interest expense between the comparison periods was primarily the result of
substantially increased borrowings as the Company entered into equipment loans
and lease agreements to finance the construction of its Internet Data Centers
and working capital lines of credit to finance working capital for its
operations. The Company expects that net interest expense will increase
substantially, as the Company begins to incur interest payment obligations for
the $200 million senior notes which bear interest at 11 1/4% that it
issued on July 1, 1998 (the "Senior Notes"), and as the Company enters into
additional equipment leases and loans and obtains additional borrowings. See
"Part II, Item 5. Other Information" of this Form 10-Q.
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Deferred Compensation Expense
-----------------------------
The Company's deferred compensation expense increased to $635,000 and $1.0
million for the three month and six month periods ended June 30, 1998 from $0 in
the same periods of the prior year. The Company has recorded deferred stock
compensation in connection with the grant of certain stock options and stock
from March 1997 through May 1998. Deferred compensation expense associated with
the grant of stock options is generally being amortized over the 50 month
vesting period of such options. This amortization is being recorded in a manner
consistent with FASB Interpretation No. 28. These amortization amounts are
allocated among the expense categories discussed above.
EBITDA
------
The Company's loss before interest, taxes, depreciation, amortization and
other non-cash charges ("EBITDA") increased to $10.4 million and $20.1 million
for the three month and six month periods ended June 30, 1998, respectively,
from a loss of $4.3 million and $6.9 million in the same respective periods of
the prior year. The increase in the level of EDITDA losses between the
comparison periods was primarily due to increased expenditures needed to
support the Company's growth in operations, including salaries and benefits
for additional employees, network costs, rent, utilities and other costs
related to the increase in the number of Company's Internet Data Centers as
well as increased marketing and sales expenses, consulting fees and
professional services. Although EBITDA should not be used as an alternative to
operating loss or net cash provided by (used for) operating activities,
investing activities or financing activities, each as measured under generally
accepted accounting principles, the Company's management believes that EBITDA
is an additional meaningful measure of performance and liquidity.
LIQUIDITY AND CAPITAL RESOURCES
Since inception and through June 30, 1998, the Company has financed its
operations primarily through private sales of preferred stock, its initial
public offering in March 1998 and through various types of equipment loans and
lease lines and working capital lines of credit. At June 30, 1998, the principal
source of liquidity for the Company was $60.7 million of cash and cash
equivalents. As of that date, the Company also had equipment loans and lease
lines and working capital lines of credit under which it could borrow up to an
additional aggregate of $10.4 million for purchases of equipment and for working
capital. As of June 30, 1998, the Company's total bank borrowings, debt and
capital lease obligations were $40.5 million. On July 1, 1998, the Company
incurred an additional $200 million of indebtedness in connection with the
issuance of the Senior Notes. See Note 8 of Notes to Financial Statements and
"Item 5. Other Information" of this Form 10-Q. In addition, the Company
expects to enter into a credit facility with Goldman Sachs Credit Partners L.P.
(the "Credit Facility"), under which the Company will be permitted to borrow up
to approximately $25.0 million or up to approximately $50.0 million upon meeting
certain financial tests. Loans to the Company will be guaranteed by any future
subsidiaries of the Company. The Credit Facility is expected to be secured by a
first priority lien on substantially all of the Company's assets (subject to
certain exceptions) and the assets and stock of any future subsidiaries. The
Credit Facility is subject to the satisfaction of certain material conditions
precedent and the specific terms of the Credit Facility are subject to change
pursuant to final loan documentation. There can be no assurance as to whether,
or on what terms, the Company will enter into the Credit Facility.
Since the Company began to offer server hosting services in 1995, the
Company has had significant negative cash flows from operating activities. Net
cash used for operating activities for the six months ended June 30, 1998 was
$16.7 million, primarily due to net losses, offset in part by increases in
accounts payable and accrued expenses and depreciation and amortization. This
compares to net cash used for operating activities for the six months ended June
30, 1997 of $5.5 million, primarily due to net losses, offset in part by
increases in accounts payable.
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Net cash used for investing activities for the six months ended June 30,
1998 was $17.8 million compared to $6.2 million for the six months ended June
30, 1997. Net cash used for investing activities was due to capital
expenditures for the continued construction of Internet Data Centers, leasehold
improvements, furniture and fixtures, and computers and other equipment. Cash
provided by financing activities for the six months ended June 30, 1998 was
$85.0 million, primarily due to the proceeds from the Company's initial public
offering. This compares to net cash provided by financing activities for the
six months ended June 30, 1997 of $23.9 million due primarily to the proceeds of
the issuance of preferred stock and warrants.
As of June 30, 1998, the Company had commitments under capital leases and
under noncancellable operating leases of $11.8 million and $31.9 million,
respectively, through 2010. The Company intends to make significant
expenditures during the next 12 months primarily for property and equipment, in
particular equipment needed for existing and future Internet Data Centers, as
well as office equipment, computers and telephones. The Company expects to
finance such capital expenditures primarily through existing and future
equipment loans and lease lines, net proceeds from the Senior Notes and
borrowings under the expected Credit Facility. The Company expects to meet its
working capital and capital expenditure requirements over the next 12 months
with existing cash and cash equivalents and short-term investments, the proceeds
from the Senior Notes, borrowings under the expected Credit Facility, cash from
sales of services and proceeds from existing and future working capital lines of
credit. Currently, the Company is negotiating to enter into additional
equipment loans and capital leases and believes that it will obtain such
facilities on terms that are comparable to its existing facilities. The Company
may also seek to raise additional funds through public or private financing,
strategic relationships or other arrangements. There can be no assurance that
the Company will be successful generating sufficient cash flows from operations
or raising capital in sufficient amounts on terms acceptable to it. See "Risk
Factors--Risks Associated with Accelerated Business Expansion."
OTHER FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
As referenced in the first paragraph of this Item 2, this section consists
primarily of forward-looking statements and accompanying risks. In addition to
the factors set forth above, the following additional factors may affect the
Company's future operating results.
LIMITED OPERATING HISTORY; HISTORY OF LOSSES. While the Company began
operations in 1992, it did not offer server hosting services until 1995 and did
not open its first dedicated Internet Data Center until August 1996, at which
time it refocused its business strategy on providing Internet system and network
management solutions for enterprises' mission-critical Internet operations. As
a result, the Company's business model is still in an emerging state. Since it
began to offer server hosting services in 1995, the Company has experienced
operating losses and negative cash flows from operations in each quarterly and
annual period. The revenue and income potential of the Company's business and
market is unproven, and the Company's limited operating history makes an
evaluation of the Company and its prospects difficult. Currently, the Company
anticipates making significant investments in new Internet Data Centers and
product development and sales and marketing programs and personnel and therefore
believes that it will continue to experience net losses on a quarterly and
annual basis for the foreseeable future. The Company and its prospects must be
considered in light of the risks, expenses and difficulties encountered by
companies in the new and rapidly evolving market for Internet system and network
management solutions. To address these risks, among other things, the Company
must market its brand name effectively, provide scalable, reliable and cost-
effective services, ensure and enhance customer satisfaction, continue to grow
its infrastructure to accommodate new Internet Data Centers and increased
bandwidth use of its network, expand its channels of distribution, retain and
motivate qualified personnel and continue to respond to competitive
developments. Failure of the Company's services to achieve market acceptance
would have a material adverse effect on the Company's business, results of
operations and financial condition. Although the Company has experienced
significant growth in revenues in recent periods, the Company does not believe
that this growth rate necessarily is indicative of future operating results, and
there can be no
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assurance that the Company will ever achieve profitability on a quarterly or an
annual basis or will sustain profitability if achieved.
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS. The Company has experienced
significant fluctuations in its results of operations on a quarterly and an
annual basis. The Company expects to continue to experience significant
fluctuations in its future quarterly and annual results of operations due to a
variety of factors, many of which are outside the Company's control, including:
demand for and market acceptance of the Company's services and enhancements;
introductions of services or enhancements by the Company and its competitors;
capacity utilization of its Internet Data Centers; reliable continuity of
service and network availability; the ability to increase bandwidth as
necessary; the timing of customer installations; providing customer discounts
and credits; the mix of services sold by the Company; customer retention and
satisfaction; the timing and success of marketing efforts and service
introductions by the Company; the timing and magnitude of capital expenditures,
including construction costs relating to the expansion of operations; the timely
expansion of existing Internet Data Centers and completion of new Internet Data
Centers; costs related to the acquisition of backbone capacity; the introduction
by third parties of new Internet and networking technologies; increased
competition in the Company's markets; changes in the pricing policies of the
Company and its competitors; fluctuations in bandwidth used by customers; the
retention of key personnel; economic conditions specific to the Internet
industry; and other general economic factors. In addition, a relatively large
portion of the Company's expenses are fixed in the short-term, particularly with
respect to telecommunications, depreciation, certain substantial interest
expenses, real estate and interest expenses and personnel, and therefore the
Company's operating results are particularly sensitive to fluctuations in
revenues. Also, if the Company's agreement with Computer Associates
International, Inc. ("Computer Associates") were to terminate and the Company
continued to require Computer Associates' software, the license fees paid by the
Company could increase fixed costs significantly. Furthermore, if the Company
were to become unable to continue leveraging third party products in the
Company's services offerings, the Company's product development costs could
increase significantly. Although the Company has not encountered significant
difficulties in collecting upon accounts receivable in the past, many of the
Company's customers are in an emerging stage, and there can be no assurance that
the Company will be able to collect receivables on a timely basis. For these
and other reasons, in some future quarters, the Company's results of operations
may fall below the expectations of securities analysts or investors, which could
have a material adverse effect on the market price of the Company's Common
Stock.
RISKS ASSOCIATED WITH ACCELERATED BUSINESS EXPANSION. A key element of the
Company's business strategy is the expansion of the Company's network through
the opening of additional Internet Data Centers in geographically diverse
locations. The Company currently has seven Internet Data Centers located in
five metropolitan areas: San Francisco (3), New York, Los Angeles, Seattle and
Washington, D.C. and has a server hosting facility in the London metropolitan
area. The Company intends to expand domestically and internationally, including
the expected addition of Internet Data Centers in the Boston metropolitan area
in the third quarter of 1998, the Chicago metropolitan area in the first quarter
of 1999 and the London metropolitan area in the second quarter of 1999 as well
as additional Internet Data Centers in the Washington, D.C. and Seattle
metropolitan areas. The Company intends to apply a portion of the proceeds from
the Senior Notes to complete this accelerated geographic expansion. The
Company's continued expansion and development of its network will depend on,
among other things, the Company's ability to assess markets, identify Internet
Data Center sites, install facilities and establish local peering
interconnections with Internet service providers ("ISPs"), all in a timely
manner, at reasonable costs and on terms and conditions acceptable to the
Company. The Company's ability to manage this expansion effectively will
require it to continue to implement and improve its operational and financial
systems and to expand, train and manage its employee base. The Company's
inability to establish additional Internet Data Centers or manage effectively
its expansion would have a material adverse effect upon the Company's business,
results of operations and financial condition.
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The establishment of each additional Internet Data Center will require the
Company to expend substantial resources for leases of real estate, significant
improvements of such facilities, purchase of equipment, implementation of
multiple telecommunications connections and hiring of network, administrative,
customer support and sales and marketing personnel. The failure to generate
sufficient cash flows from sales of services or to raise sufficient funds from
outside sources may require the Company to delay or abandon some or all of its
development and expansion plans or otherwise forego market opportunities and may
make it difficult for the Company to respond to competitive pressures, any of
which could have a material adverse effect on the Company's business, results of
operations and financial condition. See "--Liquidity and Capital Resources."
The Company expects to make investments in expanding the Company's business
rapidly into new geographic regions which, while potentially increasing the
Company's revenues in the long term, will lead to significant losses for the
foreseeable future. See "Overview." There can be no assurance that the Company
will be able to anticipate accurately the customer demand for such additional
Internet Data Centers or that the Company will be able to attract a sufficient
number of customers to such facilities. The Company's inability to attract
customers to new Internet Data Centers in a timely manner, or at all, would have
a material adverse effect on the Company's business, results of operations and
financial condition.
SUBSTANTIAL LEVERAGE AND DEBT SERVICE. The Company has significant amounts
of outstanding indebtedness and interest cost. The Company's level of
indebtedness presents various risks, including the possibility that the Company
may be unable to generate cash sufficient to pay the principal of and interest
on the indebtedness when due. At June 30, 1998, the Company's total bank
borrowings, debt and capital lease obligations were approximately $40.5 million
and its borrowings available under existing equipment loans and working capital
lines of credit was approximately $10.4 million, subject to the borrowing
conditions contained therein. At June 30, 1998, on an as adjusted basis after
giving effect to the sale of the Senior Notes, the Company would have had
indebtedness of approximately $240.5 million. In addition, the Company will
have the right to issue additional Senior Notes on or prior to July 1, 1999 in
an aggregate principal amount not to exceed $75.0 million. Furthermore, the
Company expects to enter into a new secured Credit Facility, and the Senior
Notes would be effectively subordinated to any borrowings under the Credit
Facility. The Company expects to incur additional equipment loans and lease
lines to finance capital expenditures for its Internet Data Centers and may
obtain additional working capital lines of credit and lease lines.
The Company's ability to make principal and interest payments on the
Senior Notes, and service other existing and future indebtedness, will be
dependent on the Company's future operating performance, which is itself
dependent on a number of factors, many of which are outside of the Company's
control. These factors include prevailing economic conditions and financial,
competitive, legislative, regulatory and other factors affecting the Company's
business and operations, and may be dependent on the availability of
borrowings under the expected Credit Facility or other borrowings. Although
the Company believes, based on current levels of operations, that its cash
flow from operations, together with other sources of liquidity, will be
adequate to make required payments of principal and interest on its debt
(including the Senior Notes), whether at or prior to maturity, finance
anticipated capital expenditures and fund working capital requirements, there
is no assurance in this regard. If the Company is unable to generate
sufficient cash flow from operations, or additional equipment loans or
equipment and working capital lines of credit, in the future to service its
debt, it may be required to sell assets, reduce capital expenditures,
refinance all or a portion of its existing indebtedness or obtain other
sources of financing. There can be no assurance that any such refinancing
would be available on commercially reasonable terms, or at all, or that any
other financing could be obtained, particularly in view of the Company's high
level of indebtedness and the fact that substantially all of the Company's
assets have been pledged to secure obligations under certain existing
indebtedness.
The degree to which the Company is leveraged could have important
consequences to the
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Company's future operations, including but not limited to: (i) increasing the
Company's vulnerability to general adverse economic and industry conditions;
(ii) limiting the Company's ability to obtain additional financing to fund
future working capital, capital expenditures, acquisitions and other general
corporate requirements; (iii) requiring the dedication of a substantial portion
of the Company's cash flow from operations to the payment of principal of, and
interest on, its indebtedness, thereby reducing the availability of such cash
flow to fund working capital, capital expenditures or other general corporate
requirements; (iv) limiting the Company's flexibility in planning for, or
reacting to, changes in its business and the industry in which it competes; and
(v) placing the Company at a competitive disadvantage vis-a-vis less leveraged
or better capitalized competitors. Certain of the Company's indebtedness is
secured by the Company's assets. A default under such indebtedness could result
in the foreclosure on such collateral, which would have a material adverse
effect on the Company's business, results of operations and financial condition.
RISKS ASSOCIATED WITH FINANCING ARRANGEMENTS. Certain of the Company's
existing financing arrangements are secured by substantially all of the
Company's assets. These financing arrangements require that the Company satisfy
certain financial covenants and currently prohibit the payment of dividends and
the repurchase of capital stock of the Company without, in each case, the
lender's consent. The Company's secured lenders would be entitled to foreclose
upon those assets in the event of a default under the financing arrangements and
to be repaid from the proceeds of the liquidation of those assets before the
assets would be available for distribution to the holders of the Senior Notes or
equity securities in the event that the Company is liquidated. In addition, the
collateral security arrangements under the Company's existing financing
arrangements may adversely affect the Company's ability to obtain additional
borrowings.
COMPETITION. The market served by the Company is intensely competitive,
and such competition is increasing. There are few substantial barriers to entry,
and the Company expects that it will face additional competition from existing
competitors and new market entrants in the future. The principal competitive
factors in this market include Internet system engineering expertise, customer
service, network capability, reliability, quality of service and scalability,
broad geographic presence, brand name, technical expertise and functionality,
the variety of services offered, the ability to maintain and expand distribution
channels, customer support, price, the timing of introductions of new services,
network security, financial resources and conformity with industry standards.
The Company's current and potential competitors in the market include: (i)
providers of server hosting services; (ii) national and regional ISPs; (iii)
global, regional and local telecommunications companies and Regional Bell
Operating Companies ("RBOCs"); and (iv) large IT outsourcing firms. Many of the
Company's competitors have substantially greater financial, technical and
marketing resources, larger customer bases, longer operating histories, greater
name recognition and more established relationships in the industry than the
Company. As a result, certain of these competitors may be able to develop and
expand their network infrastructures and service offerings more quickly, adapt
to new or emerging technologies and changes in customer requirements more
quickly, take advantage of acquisition and other opportunities more readily,
devote greater resources to the marketing and sale of their products and adopt
more aggressive pricing policies than can the Company.
Certain of the Company's competitors may be able to provide customers with
additional benefits in connection with their Internet system and network
management solutions, including reduced communications costs, which could reduce
the overall costs of their services relative to the Company's. There can be no
assurance that the Company will be able to offset the effects of any such price
reductions. In addition, the Company believes that the businesses in which the
Company competes are likely to encounter consolidation in the near future, which
could result in increased price and other competition that could have a material
adverse effect on the Company's business, results of operations and financial
condition.
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DEPENDENCE ON NEW MARKET; UNCERTAINTY OF ACCEPTANCE OF SERVICES. The
market for Internet system and network management solutions has only recently
begun to develop, is evolving rapidly and likely will be characterized by an
increasing number of market entrants. There is significant uncertainty
regarding whether this market ultimately will prove to be viable or, if it
becomes viable, that it will grow. The Company's future growth, if any, will be
dependent on the willingness of enterprises to outsource the system and network
management of their mission-critical Internet operations and the Company's
ability to market its services in a cost-effective manner to a sufficiently
large number of customers. In addition, in order to be successful in this
emerging market, the Company must be able to differentiate itself from its
competition through its service offerings, such as its recently introduced
collaborative systems management and Internet technology services. There can be
no assurance that the Company will be successful in differentiating itself or
achieving market acceptance of its services, or that it will not experience
difficulties that could delay or prevent the successful development,
introduction or marketing of these services. If the Company incurs increased
costs or is unable, for technical or other reasons, to develop and introduce new
services or enhancements of existing services in a timely manner, or if new
products or services do not achieve market acceptance in a timely manner or at
all, the Company's business, results of operations and financial condition could
be materially adversely affected.
RISK OF SYSTEM FAILURE. The Company's operations are dependent upon its
ability to protect its network infrastructure and customers' equipment against
damage from human error, fire, earthquakes, floods, power loss,
telecommunications failures, sabotage, intentional acts of vandalism and similar
events. Despite precautions taken by, and planned to be taken by the Company,
the occurrence of a natural disaster or other unanticipated problems at one or
more of the Company's Internet Data Centers could result in interruptions in the
services provided by the Company or significant damage to customer equipment.
In addition, failure of any of the Company's telecommunications providers, such
as WorldCom and Qwest Communications Corporation ("Qwest"), to provide the data
communications capacity required by the Company, as a result of human error, a
natural disaster or other operational disruption, could result in interruptions
in the Company's services. Any damage to or failure of the systems of the
Company or its service providers could result in reductions in, or terminations
of, services supplied to the Company's customers, which could have a material
adverse effect on the Company's business, results of operations and financial
condition. In addition, the Company's reputation could be materially adversely
affected. The Company has from time to time experienced interruptions in
specific circuits within its network resulting from events outside the Company's
control, which interruptions have caused short-term degradation in the level of
performance of the Company's network. Should the Company incur significant
obligations in connection with system downtime in the future, there can be no
assurance that the Company's liability insurance would be adequate to cover such
expenses.
UNPROVEN NETWORK SCALABILITY. The Company must continue to expand and
adapt its network infrastructure as the number of users and the amount of
information they wish to transport increase and to meet changing customer
requirements. The expansion and adaptation of the Company's telecommunications
infrastructure will require substantial financial, operational and management
resources as the Company negotiates telecommunications capacity with its
existing and other network infrastructure suppliers. If the Company is required
to expand significantly and rapidly its network due to increased usage,
additional stress will be placed upon the Company's network hardware and traffic
management systems. Due to the limited deployment of the Company's services to
date, the ability of the Company's network to connect and manage a substantially
larger number of customers at high transmission speeds is as yet unknown, and
the Company faces risks related to the network's ability to be scaled up to its
expected customer levels while maintaining superior performance. As customers'
usage of bandwidth increases, the Company will need to make additional
investments in its infrastructure to maintain adequate downstream data
transmission speeds, the availability of which may be limited or the cost of
which may be significant. In addition, as the Company adds new customers that
have significant bandwidth needs, it may be required
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to increase quickly its network capacity which may be difficult in light of
current lead times within the industry for adding capacity. There can be no
assurance that additional network capacity will be available from third-party
suppliers as it is needed by the Company. As a result, there can be no assurance
that the Company's network will be able to achieve or maintain a sufficiently
high capacity of data transmission, especially if the usage of the Company's
customers increases. The Company's failure to achieve or maintain high capacity
data transmission could significantly reduce consumer demand for its services
and have a material adverse effect on its business, results of operations and
financial condition. In addition, as the Company upgrades its telecommunications
infrastructure to increase bandwidth available to its customers, it is likely to
encounter a certain level of equipment or software incompatibility which may
cause delays in implementation. There can be no assurance that the Company will
be able to expand or adapt its telecommunications infrastructure to meet
additional demand or its customers' changing requirements, including its plans
to add OC-12 circuits, on a timely basis and at a commercially reasonable cost,
or at all.
DEPENDENCE UPON NETWORK INFRASTRUCTURE. The Company's success will depend
upon the capacity, scalability, reliability and security of its network
infrastructure, including the capacity leased from its telecommunications
network suppliers. In particular, the Company is dependent on WorldCom and
Qwest and certain other telecommunications providers for its backbone capacity
(including the Company's dedicated clear channel network and transit access to
ISPs) and is therefore dependent on such companies to maintain the operational
integrity of its backbone. In addition, the Company relies on a number of
public and private peering interconnections to deliver its services. If the
carriers that operate the Internet exchange points ("IXPs") were to discontinue
their support of the peering points and no alternative providers were to emerge,
or such alternative providers were to increase the cost of utilizing the IXPs,
the distribution of content through the IXPs, including content distributed by
the Company, would be significantly constrained. Furthermore, as traffic
through the IXPs increases, if commensurate increases in bandwidth are not
added, the Company's ability to distribute content rapidly and reliably through
these networks will be adversely affected. Many of the operators of the private
peering interconnections are competitors of the Company. Currently, the Company
does not pay a fee for its public and private peering interconnections. The
Company and the operators of these public and private peering interconnections
have mutually agreed not to charge each other a fee for the exchange of traffic
between their respective networks, which is a standard industry practice. If
these organizations were to refuse to continue to peer directly with the
Company, the Company might be required to purchase transit access services from
or to these organizations in order to allow the Company's customers to reach the
customers of these organizations. If the Company chose not to purchase such
access, there would be a lack of communication between the Company's customers
and the customers of such organization. For example, the Company has received
notice from one of its peering partners, GTE Internetworking, that GTE
Internetworking intends to discontinue its peering relationship with the
Company. The Company is working to resolve this situation, but in the event
that no agreement is reached, communication between the Company's customers and
those of GTE Internetworking would cease if neither the Company nor GTE
Internetworking obtained access to the other party's network through a third
party. Any such lack of communication between GTE Internetworking and the
Company could result in customer dissatisfaction. In those cases where the
Company currently purchases backup capacity from other organizations, if these
organizations were to increase the pricing associated with such capacity, the
Company might be required to identify alternative methods through which it can
distribute its customers' content. If the Company were unable to access on a
cost-effective basis alternative networks to distribute its customers' content
or pass through any additional costs of utilizing these networks to its
customers, the Company's business, results of operations and financial
condition could be materially adversely affected.
DEPENDENCE ON THE INTERNET AND INTERNET INFRASTRUCTURE DEVELOPMENT. The
increased use of the Internet for retrieving, sharing and transferring
information among businesses, consumers, suppliers and partners has only
recently begun to develop, and the Company's success will depend in large part
on continued growth in the use of the Internet. Critical issues concerning the
commercial use of the Internet, including security, reliability, cost, ease of
access, quality of service and necessary increases in bandwidth
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availability, remain unresolved and are likely to affect the development of the
market for the Company's services. If the Internet as a commercial or business
medium fails to develop or develops more slowly than expected, the Company's
business, results of operations and financial condition could be materially
adversely affected. The recent growth in the use of the Internet has caused
frequent periods of performance degradation, requiring the upgrade of routers
and switches, telecommunications links and other components forming the
infrastructure of the Internet by ISPs and other organizations with links to the
Internet. Any perceived degradation in the performance of the Internet as a
whole could undermine the benefits of the Company's services.
RAPID TECHNOLOGICAL CHANGE; EVOLVING INDUSTRY STANDARDS. The Company's
future success will depend, in part, on its ability to offer services that
incorporate leading technology, address the increasingly sophisticated and
varied needs of its current and prospective customers and respond to
technological advances and emerging industry standards and practices on a timely
and cost-effective basis. The market for the Company's services is
characterized by rapidly changing and unproven technology, evolving industry
standards, changes in customer needs, emerging competition and frequent new
service introductions. There can be no assurance that future advances in
technology will be beneficial to, or compatible with, the Company's business or
that the Company will be able to incorporate such advances on a cost-effective
and timely basis into its business. Moreover, technological advances may have
the effect of encouraging certain of the Company's current or future customers
to rely on in-house personnel and equipment to furnish the services currently
provided by the Company. In addition, keeping pace with technological advances
in the Company's industry may require substantial expenditures and lead time.
The Company believes that its ability to compete successfully is also
dependent upon the continued compatibility and interoperability of its services
with products, services and architectures offered by various vendors. Although
the Company often works with various vendors in testing newly developed
products, there can be no assurance that such products will be compatible with
the Company's infrastructure or that such products will adequately address
changing customer needs. Although the Company currently intends to support
emerging standards, there can be no assurance that industry standards will be
established or, that if they become established, the Company will be able to
conform to these new standards in a timely fashion and maintain a competitive
position in the market. In addition, there can be no assurance that products,
services or technologies developed by others will not render the Company's
services uncompetitive or obsolete.
SYSTEM SECURITY RISKS. A significant barrier to electronic commerce and
communications is the secure transmission of confidential information over
public networks. Certain of the Company's services rely on encryption and
authentication technology licensed from third parties to provide the security
and authentication necessary to effect secure transmission of confidential
information. Despite the Company's design and implementation of a variety of
network security measures, there can be no assurance that unauthorized access,
computer viruses, accidental or intentional actions and other disruptions will
not occur. The Company's Internet Data Centers have in the past experienced and
may in the future experience delays or interruptions in service as a result of
the accidental or intentional actions of Internet users, current and former
employees or others. Furthermore, such inappropriate use of the network by
third parties could also potentially jeopardize the security of confidential
information, such as credit card and bank account numbers, stored in the
computer systems of the Company and its customers, which could result in
liability to the Company and the loss of existing customers or the deterrence of
potential customers. Although the Company intends to continue to implement
industry-standard security measures, such measures have been circumvented in the
past, and there can be no assurance that any such measures implemented by the
Company will not be circumvented in the future. The costs required to eliminate
computer viruses and alleviate other security problems could be prohibitively
expensive and the efforts to address such problems could result in
interruptions, delays or cessation of service to the Company's customers, which
could have a material adverse effect on the Company's business, results of
operations and financial condition.
21
<PAGE>
DEPENDENCE ON THIRD-PARTY SUPPLIERS. The Company is dependent on other
companies to supply certain key components of its telecommunications
infrastructure and system and network management solutions, including
telecommunications services and networking equipment that, in the quantities and
quality demanded by the Company, are available only from sole or limited
sources. See "--Dependence Upon Network Infrastructure." The routers, switches
and modems used in the Company's telecommunications infrastructure are currently
supplied primarily by Cisco Systems Inc. ("Cisco"). The Company purchases these
components pursuant to purchase orders placed from time to time, does not carry
significant inventories of these components and has no guaranteed supply
arrangements with these vendors. Any failure to obtain required products or
services on a timely basis and at an acceptable cost would have a material
adverse effect on the Company's business, results of operations and financial
condition. In addition, any failure of the Company's sole or limited source
suppliers to provide products or components that comply with evolving Internet
and telecommunications standards or that interoperate with other products or
components used by the Company in its communications infrastructure could have a
material adverse effect on the Company's business, results of operations and
financial condition. In addition, the Company expects to be dependent for a time
on third parties to deliver its services from and manage its international
operations, including its site in London.
The Company has also licensed certain software from Computer Associates
which allows the Company to monitor its customers' Internet operations and
assist in resolving performance issues that arise from time to time. Under the
agreement with Computer Associates, if the Company desires to offer a service
that has a substantially similar functionality to that provided by Computer
Associates' Unicenter(R) TNG(TM) family of software, or its ARCserve or InocuLAN
products (the "CA Products"), the Company must generally utilize the CA
Products, as long as they meet the Company's requirements. In addition, the
Company is a beta test site for new versions of the CA Products and must, upon
commercial deployment, replace existing software with new CA Products if they
are substantially similar in functionality. During the term of the agreement,
the Company is obligated to pay Computer Associates a royalty equal to one
percent of the Company's gross revenues. Either party may terminate this
agreement upon 60 days' prior written notice with no penalties. Should Computer
Associates or the Company decide to terminate this agreement, the Company has
the right to continue licensing software from Computer Associates at a forty
percent discount from Computer Associates' prevailing standard prices for five
years and the Company will no longer be obligated to pay a royalty to Computer
Associates.
MANAGEMENT OF GROWTH. The Company is currently experiencing a period of
rapid growth with respect to the building of its Internet Data Centers,
expansion of its customer base and increase in the number of Company employees.
This growth has placed, and if it continues, will place, a significant strain on
the Company's financial, management, operational and other resources, including
its ability to ensure customer satisfaction. In addition, the Company may be
required to manage multiple relationships with a growing number of third parties
as it seeks to complement its service offerings. There can be no assurance that
the Company's management, personnel, systems, procedures and controls will be
adequate to support the Company's existing and future operations. The Company's
ability to manage its growth effectively will require it to continue to expand
its operating and financial procedures and controls, to replace or upgrade its
operational, financial and management information systems and to attract, train,
motivate, manage and retain key employees. The Company has recently hired many
key employees and officers, including its President, and as a result, the
Company's entire management team has worked together for only a brief time. The
Company also has plans to hire additional executive management personnel in the
near future, including a new Vice President, Marketing to fill the existing
vacancy for that position. If the Company's executives are unable to manage
growth effectively, the Company's business, results of operations and financial
condition could be materially adversely affected.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES. The Company is not
currently subject to direct federal, state or local government regulation, other
than regulations applicable to businesses generally. There is currently only a
small body of laws and regulations directly applicable to access to or commerce
on
22
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the Internet. However, due to the increasing popularity and use of the Internet,
it is possible that a number of laws and regulations may be adopted at the
federal, state and local levels with respect to the Internet, covering issues
such as user privacy, freedom of expression, pricing, characteristics and
quality of products and services, taxation, advertising, intellectual property
rights, information security and the convergence of traditional
telecommunications services with Internet communications. In addition,
applicability to the Internet of existing laws governing issues such as property
ownership, copyrights and other intellectual property issues, taxation, libel,
obscenity and personal privacy is uncertain. The vast majority of such laws were
adopted prior to the advent of the Internet and related technologies and, as a
result, do not contemplate or address the unique issues of the Internet and
related technologies. Changes to such laws intended to address these issues,
including some recently proposed changes, could create uncertainty in the
marketplace which could reduce demand for the services of the Company or
increase the cost of doing business as a result of costs of litigation or
increased service delivery costs, or could in some other manner have a material
adverse effect on the Company's business, results of operations and financial
condition. In addition, as the Company's services are available over the
Internet in multiple states and foreign countries, and as the Company
facilitates sales by its customers to end users located in such states and
foreign countries, such jurisdictions may claim that the Company is required to
qualify to do business as a foreign corporation in each such state or foreign
country. Any such new legislation or regulation, or the application of laws or
regulations from jurisdictions whose laws do not currently apply to the
Company's business, could have a material adverse effect on the Company's
business, results of operations and financial condition.
RISKS ASSOCIATED WITH INFORMATION DISSEMINATED THROUGH THE COMPANY'S
NETWORK. The law relating to the liability of online services companies and
Internet access providers for information carried on or disseminated through
their networks is currently unsettled. It is possible that claims could be made
against online services companies and Internet access providers under both
United States and foreign law for defamation, negligence, copyright or trademark
infringement, or other theories based on the nature and content of the materials
disseminated through their networks. Also, certain businesses, organizations
and individuals have in the past sent unsolicited commercial e-mails from
servers hosted at the Company's facilities to massive numbers of people,
typically to advertise products or services. This practice, known as
"spamming," can lead to complaints against service providers that enable such
activities, particularly where recipients view the materials received as
offensive. In addition, certain ISPs and other online services companies could
deny network access to companies that allow undesired content or spamming to be
transmitted through their networks. The Company has in the past received, and
may in the future receive, letters from recipients of information transmitted by
the Company's customers objecting to such transmission. Although the Company
prohibits its customers by contract from spamming, there can be no assurance
that its customers will not engage in this practice, which could have a material
adverse effect on the Company's business, results of operations and financial
condition.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS. A component of the
Company's long-term strategy is to expand into international markets, and the
Company recently opened a site in the London metropolitan area. If revenue
generated by any current or future international Internet Data Center is not
adequate to offset the expense of establishing and maintaining any such
international operation, the Company's business, results of operations and
financial condition could be materially adversely affected. There can be no
assurance that the Company will be able to market, sell and deliver successfully
its services outside the United States. In order to expand its international
operations, the Company may, among other things, enter into joint ventures or
outsourcing agreements with third parties, acquire rights to high-bandwidth
transmission capability, acquire complementary businesses or operations, or
establish and maintain new operations outside of the United States. In addition,
the rate of development and adoption of the Internet has been slower outside of
the United States, and the cost of bandwidth has been higher, which may
adversely affect the Company's ability to expand its operations and may increase
its cost of operations internationally. In addition to the uncertainty as to
the Company's ability to expand into international markets, there are certain
risks inherent in conducting business internationally, such as unexpected
changes
23
<PAGE>
in regulatory requirements, export restrictions, tariffs and other trade
barriers, challenges in staffing and managing foreign operations, differing
technology standards, employment laws and practices in foreign countries, longer
payment cycles, problems in collecting accounts receivable, political
instability, fluctuations in currency exchange rates, imposition of currency
exchange controls, seasonal reductions in business activity and potentially
adverse tax consequences, any of which could adversely affect the Company's
international operations. Furthermore, certain foreign governments, such as
Germany, have enforced laws and regulations related to content distributed over
the Internet that are more strict than those currently in place in the United
States.
DEPENDENCE ON KEY PERSONNEL. The Company's success depends in significant
part upon the continued services of its key technical, sales and senior
management personnel, including the Company's Chief Executive Officer and
Chairman of the Board of Directors, K.B. Chandrasekhar. The Company's future
success will also depend on its ability to attract, train, retain and motivate
highly qualified technical, marketing, sales and management personnel. The
Company is currently seeking certain additional executive management personnel,
including a Vice President, Marketing. Competition for such personnel is
intense, and there can be no assurance that the Company will be able to attract
and retain key personnel. The loss of the services of one or more of the
Company's key employees or the Company's failure to attract additional qualified
personnel could have a material adverse effect on the Company's business,
results of operations and financial condition.
RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS. The Company believes that
its future growth depends, in part, upon the acquisition of complementary
businesses, products, services or technologies. There can be no assurance that
the Company will successfully identify, acquire on favorable terms or integrate
such businesses, products, services or technologies. The Company may face
competition for acquisition opportunities, which may inhibit the Company's
ability to consummate suitable acquisitions and increase the costs of completing
and the time required to complete such acquisitions. Any such acquisitions will
require the Company to manage and integrate such acquired businesses, products,
services or technologies, coordinate (and possibly change) the diverse operating
structures, policies and practices of the acquired entities and to integrate new
employees into the Company's organization and culture. Failure to integrate and
manage acquired businesses, products, services and technologies successfully
could have a material adverse effect on the Company's business, financial
condition and results of operations. In addition, future acquisitions by the
Company may result in the incurrence of additional debt, large one-time write-
offs and the creation of goodwill or other intangible assets that could result
in amortization expenses. These factors could have a material adverse effect on
the Company's business, results of operations and financial condition.
RISKS ASSOCIATED WITH LEGAL PROCEEDINGS. From time to time the Company has
been, and expects to continue to be, subject to legal proceedings and claims in
the ordinary course of its business, including, among others, contractual
disputes with vendors and customers, claims by employees and claims of alleged
infringement of the trademarks and other intellectual property rights of third
parties by the Company. Such claims, even if not meritorious, could result in
the expenditure of significant financial and managerial resources.
PROTECTION AND ENFORCEMENT OF INTELLECTUAL PROPERTY RIGHTS. The Company
relies on a combination of copyright, trademark, service mark and trade secret
laws and contractual restrictions to establish and protect certain proprietary
rights in its products and services, but there can be no assurance that the
measures taken by the Company will be sufficient to prevent misappropriation of
its technology. The Company currently has no patented technology that would
preclude or inhibit competitors from entering the Company's market. The laws of
certain foreign countries may not protect the Company's products, services or
intellectual property rights to the same extent as do the laws of the United
States. The Company also relies on certain technologies that it licenses from
third parties, such as Computer Associates. There can be no assurance that
these third-party technology licenses will continue to be available to the
24
<PAGE>
Company on commercially reasonable terms. The loss of such technology could
require the Company to obtain substitute technology of lower quality or
performance standards or at greater cost, which could materially adversely
affect the Company's business, results of operations and financial condition.
The Company has determined increasingly to develop or acquire additional
proprietary intellectual property in addition to licensing technologies from
third parties. To date, the Company has not been notified that the Company's
products or services infringe the proprietary rights of third parties, but there
can be no assurance that third parties will not claim infringement by the
Company with respect to current or future products, particularly if such
products or services include one or more of its own proprietary technologies.
The Company expects that participants in its markets will be increasingly
subject to infringement claims as the number of products and services and
competitors in the Company's industry segment grows. Any such claim, whether
meritorious or not, could be time-consuming, result in costly litigation, cause
product installation delays or require the Company to enter into royalty or
licensing agreements.
YEAR 2000 RISKS. Many currently installed computer systems are not capable
of distinguishing 21st century dates from 20th century dates. As a result, in
less than two years, computer systems or applications used by many companies in
a wide variety of industries will experience operating difficulties unless the
systems or applications are modified to process information related to the
century change adequately. Significant uncertainty exists in the software and
other industries concerning the scope and magnitude of problems associated with
the century change. To the extent Year 2000 issues cause significant delay in,
or cancellation of, decisions to purchase the Company's products or product
support, due to the reallocation of resources to address Year 2000 issues or
otherwise, the Company's business, results of operations and financial condition
could be materially adversely affected.
PRODUCTS. Based on its assessment to date, the Company believes that the
current versions of its products are either "Year 2000 compliant" or will not
require substantial effort or cost to make them Year 2000 compliant. However,
many of the Company's customers maintain their Internet operations on servers
which may be impacted by Year 2000 complications. The failure of the Company's
customers to ensure that their servers are Year 2000 compliant could have a
material adverse effect on the Company's customers, which in turn could have a
material adverse effect on the Company's business, results of operations and
financial condition. In addition, the costs of defending and resolving Year
2000 related disputes, and any liability of the Company for Year 2000-related
damages, including consequential damages, could have a material adverse effect
on the Company's business, results of operations and financial condition.
OPERATIONS. The Company has reviewed, and continues to review, its
internal management information and other systems in order to identify and
modify those products, services or systems that may not be Year 2000 compliant.
Based on its assessment to date, the Company believes that its internal
management information and other systems are either Year 2000 compliant or will
not require substantial effort or cost to make them Year 2000 compliant. The
total cost of these Year 2000 compliance activities has not been material to
date. There can be no assurance that the Company will identify and remedy any
Year 2000 problems in a timely fashion, that remedial efforts in this regard
will not involve significant time and expense, or that such problems will not
have a material adverse effect on the Company's business, results of operations
and financial condition. The Company faces additional risk to the extent that
suppliers of products, services and systems purchased by the Company and others
with whom the Company transacts business are not Year 2000 compliant. In the
event that any such third parties cannot provide the Company with products,
services or systems that are Year 2000 compliant on a timely basis (or in the
event that Year 2000 issues prevent such third parties from delivering products,
services or systems required by the Company on a timely basis), the Company's
business, results of operations and financial condition could be materially
adversely affected.
25
<PAGE>
VOLATILITY OF STOCK PRICE. The market price of the shares of Common Stock
is highly volatile and is subject to wide fluctuations in response to factors
such as actual or anticipated variations in the Company's results of operations,
announcements of technological innovations or new Internet Data Centers, new
products or services introduced by the Company or its competitors, changes in
financial estimates by securities analysts, conditions and trends in the
Internet, general market conditions and other factors. Further, the stock
markets, and in particular the Nasdaq National Market, have experienced extreme
price and volume fluctuations that have particularly affected the market prices
of equity securities of many technology companies and that often have been
unrelated or disproportionate to the operating performance of such companies.
The trading prices of many technology companies' stocks are at or near
historical highs and reflect price to earnings ratios substantially above
historical levels. There can be no assurance that these trading prices and
price to earnings ratios will be sustained. These market fluctuations, as well
as general economic, political and market conditions such as recessions,
interest rates or international currency fluctuations, may adversely affect the
market price of the Common Stock.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously disclosed in its Final Prospectus, the Company had been
engaged in litigation with a former consultant, Michael Blackman, regarding
certain compensation matters related to his consulting relationship with the
Company. On June 2, 1998, the Company settled this litigation for an immaterial
amount. Mr. Blackman's suit has since been dismissed with prejudice.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Company's initial public offering of Common Stock was effected through
a Registration Statement on Form S-1 (File No. 333-44469) that was declared
effective by the SEC on March 18, 1998 and pursuant to which the Company sold an
aggregate of 5,125,000 share of its Common Stock.
As of June 30, 1998, the Company had used the estimated aggregate net
proceeds of $69,743,750 from its initial public offering as follows:
Construction of plant, building and facilities: $1.0 million
Purchase and installation of machinery and equipment: $1.7 million
Purchases of real estate: $0
Acquisition of other businesses: $0
Repayment of indebtedness: $2.8 million
Working capital: $7.5 million
Temporary investments (short term, interest bearing
treasury securities): $56.7 million
Other purposes: $0
26
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The foregoing amounts represent the Company's best estimate of its use of
proceeds for the period indicated. No such payments were made to directors or
officers of the Company or their associates, holders of 10% or more of any class
of equity securities of the Company or to affiliates of the Company.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
On July 27, 1998, Mark Bonham's employment relationship with the Company
terminated. Mr. Bonham previously held the position of vice-president,
marketing of the Company. Effective July 28, 1998, Ellen Hancock, the Company's
President, assumed Mr. Bonham's responsibilities and will serve as the acting
vice-president, marketing, until a permanent replacement is hired.
On July 1, 1998, the Company issued $200 million of 11.25% Senior Notes due
2008 for aggregate net proceeds of approximately $194,000,000. The Company
deposited approximately $42,400,000 with an escrow agent that will pay, when
due, the first four semi-annual interest payments on the Notes. In addition,
the Company will have the right to issue additional Senior Notes on or prior to
July 1, 1999 in an aggregate principal amount not to exceed $75.0 million. The
terms and conditions of the Senior Notes are described in, and this summary is
qualified by reference to, the Indenture filed as Exhibit 10.30 hereto, the
Exchange and Registration Rights Agreement filed as Exhibit 10.31 hereto, the
Escrow Agreement filed as Exhibit 10.32 hereto and the Purchase Agreement filed
as Exhibit 10.33 hereto.
27
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8K
a. Exhibits
Exhibit No. Description of Exhibit
----------- ----------------------
10.30 Indenture between Exodus Communications, Inc. as Issuer and
Chase Manhattan Bank and Trust Company, National Association, as
Trustee dated July 1, 1998.
10.31 Exchange and Registration Rights Agreement among Exodus
Communications, Inc., Goldman, Sachs & Co., Donaldson Lufkin &
Jenrette Securities Corporation, BT Alex. Brown Incorporated and
NationsBanc Montgomery Securities LLC dated July 1, 1998.
10.32 Escrow Agreement among Chase Manhattan Bank and Trust Company,
National Association, as escrow agent, Chase Manhattan Bank and
Trust Company, National Association, as trustee, and Exodus
Communications, Inc., dated July 1, 1998.
10.33 Purchase Agreement among Exodus Communications, Inc., Goldman,
Sachs & Co., Donaldson Lufkin & Jenrette Securities Corporation,
BT Alex. Brown Incorporated and NationsBanc Montgomery
Securities LLC dated June 26, 1998.
10.34 Form of Notice of Debt Offering and Waiver of Registration
Rights among the Company and certain holders of stock of the
Company.
10.35 Amended and Restated Master Loan and Security Agreement
between Exodus Communications, Inc. and Transamerica Business
Credit Corporation dated June 30, 1998.
10.36 Agreement between Cisco Systems Capital Corporation and Exodus
Communications, Inc. dated June 1, 1998.
10.37* Qwest Communications Private Line Service Agreement Business
Services, between Qwest Comunications Corporation and the
Registrant, dated as of July 17, 1998.
27.1 Financial Data Schedule
_______
* Confidential treatment has been requested for certain portions of this
document.
b. Reports on Form 8-K
The Company filed reports on Form 8-K dated June 11 and June 26, 1998. Both
reports included information under Items 5 and 7 with respect to the initial
announcement and pricing, respectively, of the Company's privately placed
Senior Note offering.
28
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EXODUS COMMUNICATIONS, INC.
August 14, 1998 /s/ K.B. Chandrasekhar
- ------------------------------ ------------------------------------
Date K.B. Chandrasekhar
Chief Executive Officer and
Chairman of the Board of Directors
August 14, 1998 /s/ Richard S. Stoltz
- ------------------------------ ------------------------------------
Date Richard S. Stoltz
Chief Financial Officer and
Chief Operating Officer
(Duly Authorized Officer and
Chief Accounting Officer)
29
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
----------- ----------------------
10.30 Indenture between Exodus Communications, Inc. as Issuer and
Chase Manhattan Bank and Trust Company, National Association, as
Trustee dated July 1, 1998.
10.31 Exchange and Registration Rights Agreement among Exodus
Communications, Inc., Goldman, Sachs & Co., Donaldson Lufkin &
Jenrette Securities Corporation, BT Alex. Brown Incorporated and
NationsBanc Montgomery Securities LLC dated July 1, 1998.
10.32 Escrow Agreement among Chase Manhattan Bank and Trust Company,
National Association, as escrow agent, Chase Manhattan Bank and
Trust Company, National Association, as trustee, and Exodus
Communications, Inc., dated July 1, 1998.
10.33 Purchase Agreement among Exodus Communications, Inc., Goldman,
Sachs & Co., Donaldson Lufkin & Jenrette Securities Corporation,
BT Alex. Brown Incorporated and NationsBanc Montgomery
Securities LLC dated June 26, 1998.
10.34 Form of Notice of Debt Offering and Waiver of Registration
Rights among the Company and certain holders of stock of the
Company.
10.35 Amended and Restated Master Loan and Security Agreement
between Exodus Communications, Inc. and Transamerica Business
Credit Corporation dated June 30, 1998.
10.36 Agreement between Cisco Systems Capital Corporation and Exodus
Communications, Inc. dated June 1, 1998.
10.37* Qwest Communications Private Line Service Agreement Business
Services, between Qwest Comunications Corporation and the
Registrant, dated as of July 17, 1998.
27.1 Financial Data Schedule
_______
* Confidential treatment has been requested for certain portions of this
document.
<PAGE>
EXHIBIT 10.30
________________________________________________________________________________
EXODUS COMMUNICATIONS, INC.
AS ISSUER
TO CHASE MANHATTAN BANK AND TRUST COMPANY,
NATIONAL ASSOCIATION
AS TRUSTEE
INDENTURE
DATED AS OF JULY 1, 1998
11 1/4% SENIOR NOTES DUE 2008
_______________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Recitals of the Issuer................................................... 1
Article One - Definitions
and Other Provisions of
General Application................................................... 1
Section 101. Definitions.......................................... 1
Section 102. Compliance Certificates and Opinions................ 22
Section 103. Form of Documents Delivered to Trustee.............. 23
Section 104. Acts of Holders; Record Date........................ 23
Section 105. Notices, Etc., to Trustee and Issuer................ 25
Section 106. Notice to Holders; Waiver........................... 25
Section 107. Conflict with Trust Indenture Act................... 26
Section 108. Effect of Headings and Table of Contents............ 26
Section 109. Successors and Assigns.............................. 26
Section 110. Separability Clause................................. 26
Section 111. Benefits of Indenture............................... 26
Section 112. Governing Law....................................... 26
Section 113. Legal Holidays...................................... 27
Article Two - Security Forms.......................................... 27
Section 201. Forms Generally; Initial Forms of Rule 144a
and Regulation S Securities......................... 27
Section 202. Form of Face of Security............................ 28
Section 203. Form of Reverse of Security......................... 31
Section 204. Form of Trustee's Certificate of Authentication..... 35
Article Three - the Securities........................................ 35
Section 301. Title and Terms..................................... 35
Section 302. Denominations....................................... 36
Section 303. Execution, Authentication, Delivery and Dating...... 36
Section 304. Temporary Securities................................ 37
Section 305. Global Securities................................... 38
Section 306. Registration, Registration of Transfer and
Exchange Generally; Restrictions on Transfer
and Exchange; Securities Act Legends................ 39
Section 307. Mutilated, Destroyed, Lost and Stolen
Securities.......................................... 43
Section 308. Payment of Interest; Interest Rights Preserved...... 43
Section 309. Persons Deemed Owners............................... 44
Section 310. Cancellation........................................ 45
Section 311. Cusip Numbers....................................... 45
Section 312. Computation of Interest............................. 45
Article Four - Satisfaction and Discharge............................. 45
Section 401. Satisfaction and Discharge of Indenture............. 45
Section 402. Application of Trust Money.......................... 46
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article Five - Remedies............................................... 47
Section 501. Events of Default................................... 47
Section 502. Acceleration of Maturity; Rescission and
Annulment........................................... 48
Section 503. Collection of Indebtedness and Suits for
Enforcement by Trustee.............................. 49
Section 504. Trustee May File Proofs of Claim.................... 50
Section 505. Trustee May Enforce Claims Without Possession
of Securities....................................... 50
Section 506. Application of Money Collected...................... 51
Section 507. Limitation on Suits................................. 51
Section 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest..................... 52
Section 509. Restoration of Rights and Remedies.................. 52
Section 510. Rights and Remedies Cumulative...................... 52
Section 511. Delay or Omission Not Waiver........................ 52
Section 512. Control by Holders.................................. 52
Section 513. Waiver of past Defaults............................. 53
Section 514. Undertaking for Costs............................... 53
Section 515. Waiver of Stay, or Extension Laws................... 53
Article Six - the Trustee............................................... 54
Section 601. Certain Duties and Responsibilities................. 54
Section 602. Notice of Defaults.................................. 55
Section 603. Certain Rights of Trustee........................... 55
Section 604. Not Responsible for Recitals or Issuance of
Securities.......................................... 56
Section 605. May Hold Securities................................. 56
Section 606. Money Held in Trust................................. 56
Section 607. Compensation and Reimbursement...................... 56
Section 608. Disqualification; Conflicting Interests............. 57
Section 609. Corporate Trustee Required; Eligibility............. 57
Section 610. Resignation and Removal; Appointment of
Successor........................................... 58
Section 611. Acceptance of Appointment by Successor.............. 59
Section 612. Merger, Conversion, Consolidation or
Succession to Business.............................. 59
Section 613. Preferential Collection of Claims Against
Issuer.............................................. 60
Section 614. Appointment of Authenticating Agent................. 60
Article Seven - Holders' Lists and Reports by Trustee and Issuer...... 61
Section 701. Issuer to Furnish Trustee Names and Addresses
of Holders.......................................... 61
Section 702. Preservation of Information; Communications to
Holders............................................. 61
Section 703. Reports by Trustee.................................. 62
Section 704. Reports by the Issuer............................... 62
Article Eight - Consolidation, Merger, Conveyance, Transfer or Lease.. 63
Section 801. Issuer May Consolidate, Etc. Only on Certain
Terms............................................... 63
Section 802. Successor Substituted............................... 64
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
Article Nine - Supplemental Indentures................................ 64
Section 901. Supplemental Indentures Without Consent of Holders.. 64
Section 902. Supplemental Indentures with Consent of Holders..... 64
Section 903. Execution of Supplemental Indentures................ 65
Section 904. Effect of Supplemental Indentures................... 65
Section 905. Conformity with Trust Indenture Act................. 65
Section 906. Reference in Securities to Supplemental
Indentures.......................................... 66
Article Ten - Covenants............................................... 66
Section 1001. Payment of Principal, Premium and Interest.......... 66
Section 1002. Maintenance of Office or Agency..................... 66
Section 1003. Money for Security Payments to Be Held in Trust..... 66
Section 1004. Existence........................................... 67
Section 1005. Maintenance of Properties........................... 68
Section 1006. Payment of Taxes and Other Claims................... 68
Section 1007. Maintenance of Insurance............................ 68
Section 1008. Limitation on Debt.................................. 68
Section 1009. Limitation on Sale-leaseback Transactions........... 70
Section 1010. Limitation on Guarantees of Issuer Debt by
Restricted Subsidiaries............................. 70
Section 1011. Limitation on Restricted Payments................... 71
Section 1012. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries...... 74
Section 1013. Limitation on Liens................................. 75
Section 1014. Limitation on Issuance of Capital Stock of
Restricted Subsidiaries............................. 76
Section 1015. Asset Sales......................................... 77
Section 1016. Change of Control................................... 78
Section 1017. Transactions with Affiliates and Related Persons.... 79
Section 1018. Unrestricted Subsidiaries........................... 79
Section 1019. Provision of Financial Information.................. 80
Section 1020. Deposit of Funds with Escrow Agent.................. 80
Section 1021. Statement by Officers as to Default;
Compliance Certificates............................. 80
Section 1022. Waiver of Certain Covenants......................... 81
Article Eleven - Redemption of Securities............................. 81
Section 1101. Right of Redemption................................. 81
Section 1102. Applicability of Article............................ 82
Section 1103. Election to Redeem; Notice to Trustee............... 82
Section 1104. Selection by Trustee of Securities to Be
Redeemed............................................ 82
Section 1105. Notice of Redemption................................ 82
Section 1106. Deposit of Redemption Price......................... 83
Section 1107. Securities Payable on Redemption Date............... 83
Section 1108. Securities Redeemed in Part......................... 83
</TABLE>
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<TABLE>
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<S> <C>
Article Twelve Defeasance and Covenant Defeasance.................... 84
Section 1201. Issuer's Option to Effect Defeasance or
Covenant Defeasance................................. 84
Section 1202. Defeasance and Discharge............................ 84
Section 1203. Covenant Defeasance................................. 84
Section 1204. Conditions to Defeasance or Covenant Defeasance..... 85
Section 1205. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Other Miscellaneous Provisions. 86
Section 1206. Reinstatement....................................... 87
Article Thirteen - Collateral and Security............................. 87
Section 1301. Escrow Agreement.................................... 87
Section 1302. Recording and Opinions.............................. 88
Section 1303. Release of Collateral............................... 88
Section 1304. Authorization of Actions to Be Taken by the
Trustee under The Escrow Agreement.................. 89
Section 1305. Authorization of Receipt of Funds by the Trustee
under The Escrow Agreement.......................... 89
Section 1306. Termination of Security Interest.................... 89
ANNEX A - Form of Regulation S Certificate.............................. A-1
ANNEX B - Form of Restricted Securities Certificate..................... B-1
ANNEX C - Form of Unrestricted Securities Certificate................... C-1
EXHIBIT A - Form of Exchange and Registration Rights Agreement
</TABLE>
<PAGE>
Exodus Communications, Inc.
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of July 1, 1998
Trust Indenture Indenture
Act Section Section
- --------------------------------------------------------------------------------
(S) 310(a)(1)................................................................609
(a)(2)..................................................................609
(a)(3).......................................................Not Applicable
(a)(4).......................................................Not Applicable
(b).....................................................................608
........................................................................610
(S) 311(a)...................................................................613
(b).....................................................................613
(S) 312(a)...................................................................701
......................................................................702
(b).....................................................................702
(c).....................................................................702
(b).....................................................................703
(c).....................................................................703
(d).....................................................................703
(S) 314(a)...................................................................704
(a)(4).................................................................1022
(b)....................................................................1302
(c)(1).................................................................1022
(c)(2).................................................................1020
(c)(3).......................................................Not Applicable
(d)....................................................................1303
(e)....................................................................1020
- -----------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
Trust Indenture Indenture
Act Section Section
- --------------------------------------------------------------------------------
(S) 315(a)...................................................................601
(b).....................................................................602
(c).....................................................................601
(d).....................................................................601
(d)(1)..................................................................514
(e).....................................................................514
(S) 316(a)...................................................................502
(a)(1)(A)...............................................................512
(a)(1)(B)...............................................................513
(a)(2).......................................................Not Applicable
(b).....................................................................508
(S) 317(a)(1)................................................................503
(a)(2)..................................................................504
(b)....................................................................1003
(S) 318(a)...................................................................107
- -------------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
INDENTURE, dated as of July 1, 1998, between Exodus Communications, Inc., a
corporation duly organized and existing under the laws of the State of Delaware,
having its principal executive offices at 2650 San Tomas Expressway, Santa
Clara, California 95051 (the "Issuer"), and Chase Manhattan Bank and Trust
Company, National Association, a national banking association, as Trustee
(herein called the "Trustee") having its principal executive offices at 101
California Street, Suite 2725, San Francisco, CA 94111.
RECITALS OF THE ISSUER
The Issuer has duly authorized the creation of an issue of its 11 1/4%
Senior Notes due 2008 (the "Securities") of substantially the tenor and amount
hereinafter set forth, and to provide therefor the Issuer has duly authorized
the execution and delivery of this Indenture. The Securities may consist of
Original Securities, Additional Securities and/or Exchange Securities, each as
defined herein. The Original Securities, Additional Securities and Exchange
Securities shall rank pari passu with one another and shall together constitute
a single class and series of securities.
All things necessary to make the Securities, when executed by the Issuer
and authenticated and delivered hereunder and duly issued by the Issuer, the
valid obligations of the Issuer, and to make this Indenture a valid agreement of
the Issuer, in accordance with their and its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions. For all purposes of this Indenture, except as
-----------
otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles (whether or not such is indicated herein), and, except as
otherwise herein expressly provided, the term "generally
<PAGE>
accepted accounting principles" with respect to any computation required or
permitted hereunder shall mean such accounting principles as are generally
accepted in the United States as consistently applied by the Issuer at the
Closing Date;
(4) unless otherwise specifically set forth herein, all calculations
or determinations of a Person shall be performed or made on a consolidated
basis in accordance with generally accepted accounting principles but shall
not include the accounts of Unrestricted Subsidiaries, except to the extent
of dividends and distributions actually paid to an Issuer or a Restricted
Subsidiary;
(5) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision;
(6) unless the context otherwise requires, any reference to a
"Clause," an "Article" or a "Section", or to an "Annex" or a "Schedule",
refers to a Clause, an Article or Section of, or to an Annex or a Schedule
attached to, this Indenture, as the case may be; and
(7) unless the context otherwise requires, any reference to a statute,
rule or regulation refers to the same (including any successor statute,
rule or regulation thereto) as it may be amended from time to time.
Certain terms, used principally in Article Six, are defined in that
Article.
"Acquisition Debt" means Debt of a Person existing at the time such Person
becomes a Restricted Subsidiary or assumed in connection with an Asset
Acquisition, and not Incurred in connection with, or in anticipation of, such
Person becoming a Restricted Subsidiary or such Asset Acquisition.
"Additional Securities" means Securities issued by the Issuer after the
Closing Date subject to the terms and conditions of this Indenture in an
aggregate principal amount not to exceed $75.0 million and any Securities of
like terms and tenor issued in exchange therefor (including any Successor
Securities in respect thereof).
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agent Member" means any member of, or participant in, the Depositary.
-2-
<PAGE>
"Applicable Procedures" means, with respect to any transfer or transaction
involving a Global Security or beneficial interest therein, the rules and
procedures of the Depositary for such Security, Euroclear and Cedel, in each
case to the extent applicable to such transaction and as in effect at the time
of such transfer or transaction.
"Asset Acquisition" means an acquisition by the Issuer or any of its
Restricted Subsidiaries of the property and assets of any Person other than the
Issuer or any of its Restricted Subsidiaries that constitute substantially all
of a division or line of business of such Person; provided that the property and
assets acquired are to be used in the System and Network Management Business.
"Asset Sale" by any Person means any transfer, conveyance, sale, lease,
license or other disposition by such Person or any of its Restricted
Subsidiaries (including a consolidation or merger or other sale of any such
Restricted Subsidiary with, into or to another Person in a transaction in which
such Restricted Subsidiary ceases to be a Restricted Subsidiary) (collectively a
"transfer") of (I) shares of Capital Stock (other than directors' qualifying
shares) or other ownership interests of a Restricted Subsidiary of such Person,
(II) all or substantially all of the assets of such Person or any of its
Restricted Subsidiaries, or (III) any other property, assets or rights
(including intellectual property rights) of such Person or any of its Restricted
Subsidiaries outside of the ordinary course of business; provided that "Asset
Sale" shall not include (A) any transfer of all or substantially all of the
assets of the Issuer in a transaction that is made in compliance with the
requirements of provisions of Article Eight of this Indenture (B) any transfer
by the Issuer to any Wholly Owned Restricted Subsidiary or by any Wholly Owned
Restricted Subsidiary to any other Wholly Owned Restricted Subsidiary or to the
Issuer in a manner that does not otherwise violate the terms of this Indenture,
(C) transfers made in compliance with the requirements of Section 1011, (D)
transfers constituting the granting of a Permitted Lien, (E) exchanges of
equipment used in the System and Network Management Business for other equipment
to be used in the System and Network Management Business; provided any such
exchange for equipment with a fair market value in excess of $2.0 million must
be approved by the Issuer's Board of Directors, and (F) transfers of assets,
property or other rights (including intellectual property rights) with a fair
market value of less than $2.0 million.
"Average Life" means, at any date of determination with respect to any
debt security, the quotient obtained by dividing (i) the sum of the products of
(a) the number of years from the date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the amount
of such principal payment, by (ii) the sum of all such principal payments.
"Authenticating Agent" means any Person authorized by the Trustee pursuant
to Section 614 to act on behalf of the Trustee to authenticate Securities.
"Board of Directors" means either the board of directors of the Issuer or
any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the relevant Issuer to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
-3-
<PAGE>
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in The City of New York, New
York and San Francisco, California are authorized or obligated by law or
executive order to close.
"Capital Lease Obligation" of any Person means the obligation to pay rent
or other payment amounts under a lease of (or other Debt arrangements conveying
the right to use) real or personal property of such Person which is required to
be classified and accounted for as a capital lease or a liability on the face of
a balance sheet of such Person in accordance with GAAP. The principal amount of
such obligation shall be the capitalized amount thereof that would appear on the
face of a balance sheet of such Person in accordance with GAAP.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock or
other equity participations, including partnership interests, whether general or
limited, of such Person.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States government or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities of six months from the
date of acquisition, (ii) certificates of deposit with maturities of not more
than six months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any domestic commercial bank having capital and surplus in excess of $500.0
million and a Thompson Bank Watch Rating of "B" or better, (iii) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (i) and (ii) above entered into with any
financial institution meeting the qualifications specified in clause (ii) above,
(iv) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Ratings Group and in each case
maturing within six months after the date of acquisition and (v) money market
funds at least 95% of the assets of which constitute Cash Equivalents of the
kinds described in clauses (i) through (iv) of this definition.
"Cedel" means Cedel, S.A. (or any successor securities clearing agency).
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Issuer and its Subsidiaries, taken as a whole, to any Person or group of related
Persons, as defined in Section 13(d) of the Exchange Act (a "Group"); (ii) the
approval by the holders of capital stock of the Issuer of any plan or proposal
for the liquidation or dissolution of the Issuer (whether or not otherwise in
compliance with the provisions of the applicable Indenture); (iii) any Person or
Group (other than Fleet National Bank or any of its Affiliates) shall become the
owner, directly or indirectly, beneficially or of record, of shares representing
more than 50% of the aggregate ordinary voting power represented by the issued
and outstanding Voting Stock of the Issuer or any successor to all or
substantially all of its assets; or (iv) during any period of two consecutive
years, individuals who at the beginning of such period constituted the Board of
Directors of the Issuer (together with any new directors whose election to
-4-
<PAGE>
the Board of Directors or whose nomination for election by the stockholders of
the Issuer was approved by a vote of a majority of the directors 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.
"Closing Date" means July 1, 1998.
"Collateral" has the meaning specified in the Escrow Agreement.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Consolidated Debt to EBITDA Ratio" means the ratio of (a) the total
consolidated Debt as of the date of calculation (the "Determination Date") to
(b) four times the Consolidated EBITDA for the latest fiscal quarter for which
financial information is available immediately preceding such Determination Date
(the "Measurement Period"). For purposes of calculating Consolidated EBITDA for
the Measurement Period immediately prior to the relevant Determination Date, (i)
any Person that is a Restricted Subsidiary on the Determination Date (or would
become a Restricted Subsidiary on such Determination Date in connection with the
transaction that requires the determination of such Consolidated EBITDA) will be
deemed to have been a Restricted Subsidiary at all times during such Measurement
Period, (ii) any Person that is not a Restricted Subsidiary on such
Determination Date (or would cease to be a Restricted Subsidiary on such
Determination Date in connection with the transaction that requires the
determination of such Consolidated EBITDA) will be deemed not to have been a
Restricted Subsidiary at any time during such Measurement Period, and (iii) if
the Issuer or any Restricted Subsidiary shall have in any manner (x) acquired
(through an acquisition or the commencement of activities constituting such
operating business) or (y) disposed of (by an Asset Sale or the termination or
discontinuance of activities constituting such operating business) any operating
business during such Measurement Period or after the end of such period and on
or prior to such Determination Date, such calculation will be made on a pro
forma basis in accordance with GAAP as if, in the case of an acquisition or the
commencement of activities constituting such operating business, all such
transactions had been consummated prior to the first day of such Measurement
Period (it being understood that in calculating Consolidated EBITDA the
exclusions set forth in clauses (a) through (f) of the definition of
Consolidated Net Income shall apply to any Person acquired as if it were a
Restricted Subsidiary.
"Consolidated EBITDA" means, with respect to any period, Consolidated Net
Income for such period increased (without duplication), to the extent deducted
in calculating such Consolidated
-5-
<PAGE>
Net Income, by (a) Consolidated Income Tax Expense for such period; (b)
Consolidated Interest Expense for such period without regard to the proviso
therein; and (c) depreciation, amortization and any other non-cash items for
such period, less any non-cash items to the extent they increase Consolidated
Net Income (including the partial or entire reversal of reserves taken in prior
periods) for such period, of the Issuer and any Restricted Subsidiary,
including, without limitation, amortization of capitalized debt issuance costs
for such period, all of the foregoing determined on a consolidated basis for the
Issuer and its Restricted Subsidiaries in accordance with GAAP; provided that,
if any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary,
Consolidated EBITDA shall be reduced (to the extent not otherwise reduced in
accordance with GAAP) by an amount equal to (A) the amount of Consolidated
EBITDA attributable to such Restricted Subsidiary multiplied by (B) the
percentage ownership interest in such Restricted Subsidiary not owned on the
last day of such period by the Issuer or any of its Restricted Subsidiaries.
"Consolidated Income Tax Expense" for any period means the consolidated
provision for income taxes of the Issuer and its Restricted Subsidiaries for
such period calculated on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means for any period the consolidated
interest expense included in a consolidated income statement (without deduction
of interest income) of the Issuer and its Restricted Subsidiaries for such
period calculated on a consolidated basis in accordance with GAAP, including
without limitation or duplication (or, to the extent not so included, with the
addition of), (i) the amortization of Debt discounts; (ii) any payments or fees
with respect to letters of credit, bankers' acceptances or similar facilities;
(iii) fees (net of any amounts received) with respect to any Interest Rate or
Currency Protection Agreement; (iv) interest on Debt guaranteed by the Issuer
and its Restricted Subsidiaries, to the extent paid by the Issuer or any
Restricted Subsidiary; and (v) the portion of any Capital Lease Obligation
allocable to interest expense; provided that, if any Restricted Subsidiary is
not a Wholly Owned Restricted Subsidiary, Consolidated Interest Expense shall be
reduced (to the extent not otherwise reduced in accordance with GAAP) by an
amount equal to (A) the amount of Consolidated Interest Expense attributable to
such Restricted Subsidiary multiplied by (B) the percentage ownership interest
in such Restricted Subsidiary not owned on the last day of such period by the
Issuer or any of its Restricted Subsidiaries.
"Consolidated Net Income" for any period means the consolidated net income
(or loss) of the Issuer and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP; provided that there
shall be excluded therefrom (a) the net income (or loss) of any Person acquired
by the Issuer or a Restricted Subsidiary of the Issuer in a pooling-of-interests
transaction for any period prior to the date of such transaction, (b) the net
income (or loss) of any Person that is not a Restricted Subsidiary of the Issuer
except to the extent of the amount of dividends or other distributions actually
paid to the Issuer or a Restricted Subsidiary of the Issuer by such Person
during such period, (c) gains or losses on Asset Sales by the Issuer or its
Restricted Subsidiaries, (d) all extraordinary gains and extraordinary losses,
(e) the cumulative effect of changes in accounting principles and (f) the tax
effect of any of the items described in clauses (a) through (e) above.
-6-
<PAGE>
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
GAAP, less amounts attributable to Disqualified Stock of such Person; provided
that, with respect to the Issuer, adjustments following the date of this
Indenture to the accounting books and records of the Issuer in accordance with
Accounting Principles Board Opinions Nos. 16 and 17 (or successor opinions
thereto), or otherwise resulting from the acquisition of control of the Issuer
by another Person shall not be given effect.
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered,
which is, at the date as of which this Indenture is dated, located at 101
California Street, Suite 2725, San Francisco, CA 94111.
"corporation" means a corporation, association, company, joint-stock
company, limited liability company, partnership or business trust.
"Debt" means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person and whether or not
contingent, (i) every obligation of such Person for money borrowed, (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations incurred in connection with the acquisition
of property, assets or businesses, (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person (including reimbursement
obligations with respect thereto, but excluding obligations with respect to
trade letters of credit securing obligations entered into in the ordinary course
of business to the extent such letters of credit are not drawn upon or, if drawn
upon, to the extent such drawing is reimbursed no later than the third Business
Day following receipt by such Person of a demand for reimbursement), (iv) every
obligation of such Person issued or assumed as the deferred purchase price of
property or services (including securities repurchase agreements), (v) every
Capital Lease Obligation of such Person, (vi) all Disqualified Stock issued by
such Person, (vii) if such Person is a Restricted Subsidiary, all Preferred
Stock issued by such Person, (viii) every obligation under Interest Rate or
Currency Protection Agreements of such Person and (ix) every obligation of the
type referred to in clauses (I) through (ix) of another Person and all dividends
of another Person the payment of which, in either case, such Person has
Guaranteed or is responsible or liable, directly or indirectly, as obligor,
Guarantor or otherwise. The "amount" or "principal amount" of Debt at any time
of determination as used herein represented by (a) any contingent Debt, shall be
the maximum principal amount thereof, (b) any Debt issued at a price that is
less than the principal amount at maturity thereof, shall be the amount of the
liability in respect thereof determined in accordance with GAAP, (c) any
Disqualified Stock, shall be the maximum fixed redemption or repurchase price in
respect thereof, and (d) any Preferred Stock, shall be the maximum voluntary or
involuntary liquidation preference plus accrued and unpaid dividends in respect
thereof, in each case as of such time of determination. In no event shall
"Debt" include any trade payable or accrued expenses arising in the ordinary
course of business.
"Default" has the meaning specified in Section 501.
"Defaulted Interest" has the meaning specified in Section 308.
-7-
<PAGE>
"Depositary" means The Depository Trust Company or, if The Depository
Trust Company shall cease to be a clearing agency registered under the Exchange
Act, any other clearing agency registered under the Exchange Act that is
designated as the successor Depositary in an Issuer Order delivered to the
Trustee.
"Disqualified Stock" of any Person means any Capital Stock of such Person
that by its terms (or by the terms of any security into which it is convertible,
or for which it is exchangeable, at the option of the holder thereof) or
otherwise matures or is required to be redeemed (pursuant to any sinking fund
obligation or otherwise, but other than as a result of the death or disability
of the holder thereof or the termination of the employment with the Issuer of
the holder thereof) or is convertible into or exchangeable for Debt or is
redeemable at the option of the holder thereof, in whole or in part, at any time
prior to the final maturity of the Securities; provided, however, that any
Capital Stock which would not constitute Disqualified Stock but for provisions
thereof giving holders thereof the right to require the Issuer or a Restricted
Subsidiary to repurchase or redeem such Capital Stock upon the occurrence of an
"asset sale" or a "change of control" occurring prior to the final maturity date
of the Securities shall not constitute Disqualified Stock if such provisions
applicable to such Capital Stock are no more favorable to the holders of such
stock than the corresponding provisions applicable to the Securities contained
in this Indenture and such provisions applicable to such Capital Stock
specifically provide that the Issuer and its Restricted Subsidiaries will not
repurchase or redeem any such stock pursuant to such provisions prior to the
repurchase of such Securities as are required to be repurchased pursuant to this
Indenture upon an Asset Sale or a Change of Control.
"Distribution Compliance Period" means the period of 40 consecutive days
commencing on the later of (i) the date Securities are first offered to persons
other than distributors (as defined in Regulation S) in reliance on Regulation S
(the Issuer and Trustee being entitled to rely on written advice from the
Initial Purchasers with respect thereto) and (ii) the Closing Date.
"Dollars" and "$" means such coins or currency of the United States of
America which is legal tender for payment of public and private debts.
"DTC" means The Depository Trust Company, a New York corporation.
"Escrow Account" shall have the meaning specified in the Escrow Agreement.
"Escrow Agent" shall mean the Trustee or any successor Escrow Agent
appointed pursuant to the terms of the Escrow Agreement.
"Escrow Agreement" shall mean that Escrow Agreement among the Escrow Agent,
the Trustee and the Issuer.
"Escrow Funds" shall have the meaning specified in the Escrow Agreement.
-8-
<PAGE>
"Euroclear" means the Euroclear Clearance System (or any successor
securities clearing agency).
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" refers to the Securities Exchange Act of 1934 and any
successor act thereto.
"Exchange and Registration Rights Agreement" means (i) the Exchange and
Registration Rights Agreement, dated as of July 1, 1998, between the Issuer and
the Initial Purchasers, as such agreement may be amended from time to time, the
form of which is attached hereto as Exhibit A, and (ii) any other agreement
entered into by the Issuer in the future that provides for an Exchange Offer or
resale registration with respect to any Additional Securities.
"Exchange Offer" means an offer made by the Issuer pursuant to the
Exchange and Registration Rights Agreement or otherwise under an effective
registration statement under the Securities Act to Exchange Securities for
Original Securities or Additional Securities.
"Exchange Offer Registration Statement" means a registration statement of
the Issuer under the Securities Act registering Exchange Securities for
distribution pursuant to an Exchange Offer.
"Exchange Securities" means any Securities issued pursuant to an Exchange
Offer and their Successor Securities.
"Existing Debt" shall mean Debt of the Issuer and its Restricted
Subsidiaries in existence on the Closing Date.
"Expiration Date" has the meaning specified in Section 104.
"GAAP" means generally accepted accounting principles in the United States
which are in effect on the date of original issuance of the Securities,
consistently applied.
"Global Security" means a Security that is registered in the Security
Register in the name of a Depositary or a nominee thereof.
"Guarantee" by any Person means any obligation, contingent or otherwise,
of such Person guaranteeing, or having the economic effect of guaranteeing, any
Debt of any other Person (the "primary obligor") in any manner, whether directly
or indirectly, and including, without limitation, any obligation of such Person,
(i) 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, (ii) to purchase property, securities
or services for the purpose of assuring the holder of such Debt of the payment
of such Debt, or (iii) to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Debt (and "Guaranteed", "Guaranteeing"
and "Guarantor" shall have meanings correlative to the foregoing); provided,
however, that the Guaranty by any Person shall not
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include endorsements by such Person for collection or deposit, in either case,
in the ordinary course of business.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Debt or other obligation
including by acquisition of Restricted Subsidiaries or the recording, as
required pursuant to GAAP or otherwise, of any such Debt or other obligation on
the balance sheet of such Person (and "Incurrence", "Incurred", "Incurrable" and
"Incurring" shall have meanings correlative to the foregoing); provided,
however, that a change in GAAP that results in an obligation of such Person that
exists at such time becoming Debt shall not be deemed an Incurrence of such
Debt.
"Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof.
"Initial Purchasers" means Goldman, Sachs & Co., Donaldson, Lufkin &
Jenrette Securities Corporation, BT Alex. Brown Incorporated and NationsBanc
Montgomery Securities LLC as purchasers of the Securities from the Issuer
pursuant to the Purchase Agreement.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Interest Rate or Currency Protection Agreement" of any Person means any
forward contract, futures contract, swap, option or other financial agreement or
arrangement (including, without limitation, caps, floors, collars and similar
agreements) relating to, or the value of which is dependent upon, interest rates
or currency exchange rates or indices.
"Internal Revenue Code" means the Internal Revenue Code of 1986 and any
successor thereto.
"Investment" by any Person means any direct or indirect loan, advance or
other extension of credit or capital contribution (by means of transfers of cash
or other property to others or payments for property or services for the account
or use of others, or otherwise) to, or purchase or acquisition of Capital Stock,
bonds, notes, debentures or other securities or evidence of Debt issued by, any
other Person, including any payment on a Guarantee of any obligation of such
other Person.
"Issuer" means the Persons named as the "Issuer" in the first paragraph of
this instrument until a successor Person or Persons shall have become such
pursuant to the applicable provisions of this Indenture and thereafter "Issuer"
shall mean such successor Person.
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"Issuer Request" or "Issuer Order" means a written request or order
signed in the name of the Issuer by the Issuer's Chairman of the Board, its
President or a Vice President, and by its Treasurer, an Assistant Treasurer, its
Secretary or an Assistant Secretary, and delivered to the Trustee.
"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever on or with respect to such property or assets (including, without
limitation, any conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing).
"Liquidated Damages" has the meaning specified in the Exchange and
Registration Rights Agreement.
"Material Restricted Subsidiary" means, at any date of determination, any
Restricted Subsidiary that represents more than 10% of the Issuer's total
consolidated assets at the end of the most recent fiscal quarter for which
financial information is available, or more than 10% of the Issuer's
consolidated net sales or consolidated operating income for the most recent four
quarters for which financial information is available.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Net Cash Proceeds" means (i) with respect to any Asset Sale by any Person,
cash or Cash Equivalents received (including by way of sale or discounting of a
note, installment receivable or other receivable, but excluding any other
consideration received in the form of assumption of Debt or other obligations
relating to such properties or assets) therefrom by such Person, net of (A) all
legal, title and recording tax expenses, commissions and other fees and expenses
Incurred and all federal, state, foreign and local taxes required to be accrued
as a liability as a consequence of such Asset Sale, (B) all payments made by
such Person or its Restricted Subsidiaries on any Debt which is secured by such
assets in accordance with the terms of any Lien upon or with respect to such
assets or which must by the terms of such Lien, or in order to obtain a
necessary consent to such Asset Sale or by applicable law, be repaid out of the
proceeds from such Asset Sale, (C) all distributions and other payments made to
minority interest holders in Restricted Subsidiaries of such Person or joint
ventures as a result of such Asset Sale and (D) appropriate amounts to be
provided by such Person or any Restricted Subsidiary thereof, as the case may
be, as a reserve in accordance with GAAP against any liabilities associated with
such assets and retained by such Person or any Restricted Subsidiary thereof, as
the case may be, after such Asset Sale, including, without limitation,
liabilities under any indemnification obligations and severance and other
employee termination costs associated with such Asset Sale, in each case as
determined by the Board of Directors, in its reasonable good faith judgment
evidenced by a resolution of the Board of Directors filed with the Trustee;
provided, however, that any reduction in such reserve within twelve months
following the consummation of such Asset Sale will be treated for all purposes
of this Indenture and the Securities as a new Asset
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Sale at the time of such reduction with Net Cash Proceeds equal to the amount of
such reduction, (ii) with respect to the issuance or sale of Capital Stock, or
options, warrants or rights to purchase Capital Stock, or debt securities or
Disqualified Stock that has been converted into or exchanged for Capital Stock,
the proceeds of such issuance or sale in the form of cash or Cash Equivalents,
including payments in respect of deferred payment obligations, net of attorney's
fees, accountant's fees and brokerage, consultation, underwriting and other fees
and expenses actually incurred in connection with such issuance or sale,
conversion or exchange and net of any Consolidated Interest Expense attributable
to any debt securities paid to the holders thereof prior to the conversion or
exchange and net of taxes paid or payable as a result thereof.
"Notice of Default" has the meaning specified in Section 602.
"Offer" has the meaning specified in the definition of Offer to Purchase.
"Offer Expiration Date" has the meaning specified in the definition of
Offer to Purchase.
"Offer to Purchase" means a written offer (the "Offer") sent by the Issuer
by first class mail, postage prepaid, to each Holder at his address appearing in
the Securities Register on the date of the Offer offering to purchase up to the
principal amount of Securities specified in such Offer at the purchase price
specified in such Offer (as determined pursuant to this Indenture). Unless
otherwise required by applicable law, the Offer shall specify an expiration date
(the "Offer Expiration Date") of the Offer to Purchase which shall be, subject
to any contrary requirements of applicable law, not less than 30 days or more
than 60 days after the date of such Offer and a settlement date (the "Purchase
Date") for purchase of Securities within five Business Days after the Offer
Expiration Date. The Issuer shall notify the Trustee at least 15 Business Days
(or such shorter period as is acceptable to the Trustee) prior to the mailing of
the Offer of the Issuer's obligation to make an Offer to Purchase, and the Offer
shall be mailed by the Issuer or, at the Issuer's request, by the Trustee in the
name and at the expense of the Issuer. The Offer shall contain information
concerning the business of the Issuer and its Restricted Subsidiaries which the
Issuer in good faith believes will enable such Holders to make an informed
decision with respect to the Offer to Purchase (which at a minimum will include
(i) the most recent annual and quarterly financial statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained in the documents required to be filed with the Trustee pursuant to
this Indenture (which requirements may be satisfied by delivery of such
documents together with the Offer), (ii) a description of material developments
in the Issuer's business subsequent to the date of the latest of such financial
statements referred to in clause (i) (including a description of the events
requiring the Issuer to make the Offer to Purchase), (iii) if applicable,
appropriate pro forma financial information concerning the Offer to Purchase and
the events requiring the Issuer to make the Offer to Purchase and (iv) any other
information required by applicable law to be included therein. The Offer shall
contain all instructions and materials necessary to enable such Holders to
tender Securities pursuant to the Offer to Purchase. The Offer shall also
state:
(1) the Section of this Indenture pursuant to which the Offer to Purchase
is being made;
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(2) the Offer Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the Outstanding Securities offered to
be purchased by the Issuer pursuant to the Offer to Purchase (including, if less
than 100%, the manner by which such has been determined pursuant to the Section
hereof requiring the Offer to Purchase) (the "Purchase Amount");
(4) the purchase price to be paid by the Issuer for each $1,000 aggregate
principal amount of Securities accepted for payment (as specified pursuant to
the Indenture) (the "Purchase Price");
(5) that the Holder may tender all or any portion of the Securities
registered in the name of such Holder and that any portion of a Security
tendered must be tendered in an integral of $1,000 principal amount;
(6) the place or places where Securities are to be surrendered for tender
pursuant to the Offer to Purchase;
(7) that interest on any Securities not tendered or tendered but not
purchased by the Issuer
pursuant to the Offer to Purchase will continue to accrue;
(8) that on the Purchase Date the Purchase Price will become due and
payable upon each Security being accepted for payment pursuant to the Offer to
Purchase and that interest thereon shall cease to accrue on and after the
Purchase Date;
(9) that each Holder electing to tender a Security pursuant to the Offer to
Purchase will be required to surrender such Security at the place or places
specified in the Offer prior to the close of business on the Offer Expiration
Date (such Security being, if the Issuer or the Trustee so requires, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Issuer and the Trustee duly executed by, the Holder thereof
or his attorney duly authorized in writing);
(10) that Holders will be entitled to withdraw all or any portion of
Securities tendered if the Issuer (or their Paying Agent) receives, not later
than the close of business on the Offer Expiration Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Security the Holder tendered, the certificate number of
the Security the Holder tendered and a statement that such Holder is withdrawing
all or a portion of his tender;
(11) that (a) if Securities in an aggregate principal amount less than or
equal to the Purchase Amount are duly tendered and not withdrawn pursuant to the
Offer to Purchase, the Issuer shall purchase all such Securities and (b) if
Securities in an aggregate principal amount in excess of the Purchase Amount are
tendered and not withdrawn pursuant to the Offer to Purchase, the Issuer shall
purchase Securities having an aggregate principal amount equal to the Purchase
Amount on a
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pro rata basis (with such adjustments as may be deemed appropriate so that only
Securities in denominations of $1,000 or integral multiples thereof shall be
purchased); and
(12) that in the case of any Holder whose Security is purchased only in
part, the Issuer shall execute, and the Trustee shall authenticate and deliver
to the Holder of such Security without service charge, a new Security or
Securities, of any authorized denomination as requested by such Holder, in an
aggregate principal amount equal to and in exchange for the unpurchased portion
of the Security so tendered.
Any Offer to Purchase shall be governed by and effected in accordance with
the Offer for such Offer to Purchase.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, Chief Executive Officer, Chief Financial Officer, the President or a Vice
President, and by the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary, of the Issuer and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Issuer, and who shall be acceptable to the Trustee.
"Original Securities" means the Securities issued on the Closing Date and
their Successor Securities.
"Outstanding", when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, except:
(1) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(2) Securities for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent
(other than the Issuer) in trust or set aside and segregated in trust by
the Issuer (if the Issuer shall act as its own Paying Agent) for the
Holders of such Securities; provided that, if such Securities are to be
redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has been made;
and
(3) Securities which have been paid pursuant to Section 307 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the Issuer;
provided, however, that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given any request,
demand, authorization,
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direction, notice, consent or waiver hereunder, Securities owned by the Issuer
or any other obligor upon the Securities or any Affiliate of the Issuer or of
such other obligor shall be disregarded and deemed not to be Outstanding, except
that, in determining whether the Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or waiver, only
Securities which the Trustee knows to be so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Issuer or any other obligor upon the Securities or any Affiliate of
the Issuer or of such other obligor.
"Owner Securities Certification" has the meaning specified in Section 201.
"pari passu", when used with respect to the ranking of any Debt of any
Person in relation to other Debt of such Person, means that each such Debt (a)
either (i) is not subordinated in right of payment to any other Debt of such
Person or (ii) is subordinate in right of payment to the same Debt of such
Person as is the other and is so subordinate to the same extent and (b) is not
subordinate in right of payment to the other or to any Debt of such Person as to
which the other is not so subordinate.
"Paying Agent" means any Person authorized by the Issuer to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Issuer.
"Permitted Interest Rate or Currency Protection Agreement" of any Person
means any Interest Rate or Currency Protection Agreement entered into with one
or more financial institutions that is designed to protect such Person against
fluctuations in interest rates or currency exchange rates with respect to Debt
Incurred and which shall have a notional amount no greater than the payments due
with respect to the Debt being hedged thereby and not for purposes of
speculation.
"Permitted Investment" means (i) an Investment in the Issuer or a Wholly
Owned Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Wholly Owned Restricted Subsidiary or be merged or
consolidated with or into or transfer or convey all or substantially all its
assets to, the Issuer or a Wholly Owned Restricted Subsidiary; provided that
such Person's primary business or the assets to be transferred or conveyed are
related, ancillary or complementary to the System and Network Management
Business; (ii) Cash Equivalents; (iii) payroll, travel, relocation and similar
advances to cover matters that are expected at the time of such advances
ultimately to be treated as expenses in accordance with GAAP; (iv) stock,
obligations or securities received (x) in satisfaction of judgments or (y) in
connection with the sale or disposition of a Person, assets or business; (v)
Investments in prepaid expenses, negotiable instruments held for collection and
lease, utility and worker's compensation, performance and other similar
deposits; (vi) Permitted Interest Rate or Currency Agreements; (vii) Strategic
Investments; (viii) loans or advances to officers or employees of the Issuer or
any Restricted Subsidiary (other than loans or advances made pursuant to clause
(ix) below) that do not in the aggregate exceed $10.0 million at any time
outstanding; (ix) accounts receivable in the ordinary course of business (and
Investments obtained in exchange or settlement of accounts receivable for which
the Issuer has determined that collection is
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not likely); and (x) loans or advances to Persons who own Debt or Capital Stock
(other than any Affiliate of the Issuer or any Restricted Subsidiary) of any
Person if such loans or advances are made as part of, or in connection with, a
transaction pursuant to which such Person becomes a Restricted Subsidiary of the
Issuer or any other Restricted Subsidiary or substantially all of the assets of
such Person are acquired by the Issuer or any Restricted Subsidiary, in an
aggregate amount not to exceed 20% of the total consideration paid in connection
with such acquisition.
"Permitted Lien" means any Lien on the assets of the Issuer or any
Restricted Subsidiary permitted under Section 1013.
"Permitted Senior Bank Debt" means Debt Incurred by Issuer or any
Restricted Subsidiary pursuant to the Senior Loan Facility, or one or more other
senior commercial term loan and/or revolving credit facilities (including any
letter of credit subfacility) entered into principally with commercial banks
and/or other financial institutions typically party to commercial loan
agreements, and any replacement, extension, renewal, refinancing or refunding
thereof; provided that the aggregate principal amount of all Permitted Senior
Bank Debt, at any one time outstanding, shall not exceed $100.0 million plus 85%
of the Issuer's consolidated net accounts receivable.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 307 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Preferred Stock" of any Person means Capital Stock of such Person of any
class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class of such Person.
"Public Equity Offering" means an underwritten primary public offering of
Common Stock of the Issuer pursuant to an effective registration statement under
the Securities Act.
"Purchase Agreement" means the Purchase Agreement, dated June 26, 1998,
between the Issuer and the Initial Purchasers, as such agreement may be amended
from time to time.
"Purchase Amount" has the meaning specified in the definition of Offer to
Purchase.
"Purchase Date" has the meaning specified in the definition of Offer to
Purchase.
"Purchase Money Secured Debt" of any Person means Debt of such Person
secured by a Lien on real or personal property of such Person which Debt (a)
constitutes all or a part of the purchase
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price or construction cost of such property or (b) is Incurred prior to, at the
time of or within 180 days after the acquisition or substantial completion of
such property for the purpose of financing all or any part of the purchase price
or construction cost thereof; provided, however, that (w) the Debt so incurred
does not exceed 100% of the purchase price or construction cost of such property
and related expenses, (x) such Lien does not extend to or cover any property
other than such item of property and any improvements on such item and proceeds
thereof, (y) the purchase price or construction cost for such property is or
should be included in "addition to property, plant and equipment" in accordance
with GAAP, and (z) the purchase or construction of such property is not part of
any acquisition of a Person or business unit or line of business.
"Purchase Price" has the meaning specified in the definition of Offer to
Purchase.
"Qualified Consideration" shall mean: (i) cash; (ii) Cash Equivalents;
(iii) assets that are used or useful in the System and Network Management
Business; (iv) any securities or other obligations that are converted into or
exchanged for cash or Cash Equivalents within six months after the Asset Sale or
(v) liabilities of the Issuer or a Restricted Subsidiary assumed by the
transferee (or its designee) such that the Issuer or such Restricted Subsidiary
has no further liability therefor, the amount of the liability to be determined
in accordance with GAAP.
"Receivables" means receivables, chattel paper, instruments, documents or
intangibles evidencing or relating to the right to payment of money.
"Redemption Date", when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price", when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"Registered Securities" means the Exchange Securities and all other
Securities sold or otherwise disposed of pursuant to an effective registration
statement under the Securities Act, together with its respective Successor
Securities.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the June 15 or December 15 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Certificate" means a certificate substantially in the form
set forth in Annex A.
"Regulation S Global Security" has the meaning specified in Section 201.
"Regulation S Legend" means a legend substantially in the form of the
legend required in the form of Security set forth in Section 202 to be placed
upon Regulation S Securities.
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"Regulation S Securities" means all Securities required pursuant to
Section 306(c) to bear a Regulation S Legend.
"Related Person" of any Person means any other Person directly or
indirectly owning (a) 5% or more of the outstanding Common Stock of such Person
(or, in the case of a Person that is not a corporation, 5% or more of the equity
interest in such Person) or (b) 5% or more of the combined voting power of the
Voting Stock of such Person.
"Required Filing Date" has the meaning specified in Section 1019.
"Resale Registration Statement" means a shelf registration statement under
the Securities Act filed by the Issuer, if required by, and meeting the
requirements of, the Exchange and Registration Rights Agreement, registering
Original Securities or Additional Securities for resale.
"Responsible Officer", when used with respect to the Trustee, means any
vice president, any assistant vice president, any assistant secretary, any
assistant treasurer, any trust officer or assistant trust officer, the
controller or any assistant controller or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Global Security" has the meaning set forth in Section 201.
"Restricted Payments" has the meaning specified in Section 1010.
"Restricted Securities" means all Securities required pursuant to Section
306(c) to bear a Restricted Securities Legend. Such term includes the
Restricted Global Securities.
"Restricted Securities Certificate" means a certificate substantially in
the form set forth in Annex B.
"Restricted Securities Legend" means a legend substantially in the form of
the legend required in the form of Security set forth in Section 202 to be
placed upon a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Issuer, whether
existing on or after the date of this Indenture, unless such Subsidiary is an
Unrestricted Subsidiary.
"Rule 144" means Rule 144 under the Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Securities" means (i) in the case of the Original Securities,
the Securities purchased by the Initial Purchasers from the Issuer pursuant to
the Purchase Agreement, other than
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the Regulation S Securities, and (ii) in the case of Additional Securities, any
Additional Securities purchased from the Issuer for resale pursuant to Rule
144A.
"Secured Debt" means Permitted Senior Bank Debt, Purchase Money Secured
Debt and other Debt secured by a Permitted Lien.
"Securities" has the meaning specified in the first paragraph of the
recitals to this instrument and includes the Exchange Securities and Additional
Securities.
"Securities Act" means the Securities Act of 1933, and any successor act
thereto.
"Securities Act Legend" means a Restricted Securities Legend or a
Regulation S Legend.
"Security Register" and " Security Registrar" have the respective meanings
specified in Section 306.
"Senior Loan Facility" means the loan facility expected to be provided
pursuant to a credit agreement to be entered into by and among the Issuer,
Goldman Sachs Credit Partners L. P., as arranger and syndication agent, certain
lenders from time to time party thereto, and the administrative agent party
thereto, and any credit agreements governing Debt Incurred to refund, replace or
refinance borrowings or commitments then outstanding under or permitted to be
Incurred or outstanding under such facility, and all promissory notes,
guaranties, letters of credit, security agreements, pledge agreements,
mortgages, deeds of trust and other instruments, documents or agreements
executed pursuant to such credit agreements, in each case as the same may be
amended, extended, renewed, supplemented, restated or otherwise modified from
time to time.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 308.
"Stated Maturity", when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable.
"Strategic Investment" means an Investment in any Person (other than an
Unrestricted Subsidiary of the Issuer) whose primary business is related,
ancillary or complementary to the System and Network Management Business, and
such Investment is determined by the Board of Directors of the Issuer to promote
or significantly benefit the businesses of the Issuer and its Restricted
Subsidiaries on the date of such Investment.
"Subordinated Debt" means Debt of the Issuer as to which the payment of
principal of (and premium, if any) and interest and other payment obligations in
respect of such Debt shall be subordinate to the prior payment in full of the
Securities to at least the following extent: (i) no payments of principal of (or
premium, if any) or interest on, or otherwise due in respect of such Debt, may
be permitted for so long as any default in the payment of principal (or premium,
if any) or
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interest on the Securities exists; (ii) in the event that any other default that
with the passing of time or the giving of notice, or both, would constitute an
Event of Default with respect to the Securities, upon notice by 25% or more in
principal amount of the Securities to the Trustee, the Trustee shall have the
fight to give notice to the Issuer and the holders of such Debt (or trustees or
agents therefor) of a payment blockage, and thereafter no payments of principal
of (or premium, if any) or interest on or otherwise due in respect of such Debt
may be made for a period of 179 days from the date of such notice; and (iii)
such Debt may not (x) provide for payments of principal of such Debt at the
Maturity thereof or by way of a sinking fund applicable thereto or by way of any
mandatory redemption, defeasance, retirement or repurchase thereof by the Issuer
(including any redemption, retirement or repurchase which is contingent upon
events or circumstances, but excluding any retirement required by virtue of
acceleration of such Debt upon an event of default thereunder), in each case
prior to the final maturity date of the Securities or (y) permit redemption or
other retirement (including pursuant to an offer to purchase made by the Issuer)
of such other Debt at the option of the holder thereof prior to the final
maturity date of the Securities, other than a redemption or other retirement at
the option of the holder of such Debt (including pursuant to an offer to
purchase made by the Issuer) which is conditioned upon a change of control of
the Issuer pursuant to provisions substantially similar to Section 1016 (and
which shall provide that such Debt will not be repurchased pursuant to such
provisions prior to the Issuer's repurchase of the Securities required to be
repurchased by the Issuer pursuant to Section 1016); provided, however, that any
Debt which would constitute Subordinated Debt but for provisions thereof giving
holders thereof the right to require the Issuer or a Restricted Subsidiary to
repurchase or redeem such Subordinated Debt upon the occurrence of an asset sale
occurring prior to the final maturity of the Securities shall constitute
Subordinated Debt if such provisions applicable to such Subordinated Debt are
nor more favorable to the holders of such Debt than the provisions applicable to
the Securities contained in Section 1015 and such provisions applicable to such
Debt specifically provide that the Issuer and its Restricted Subsidiaries will
not repurchase or redeem any such Debt pursuant to such provisions prior to the
repurchase of such Securities as are required to be repurchased pursuant to
Section 1015.
"Subsidiary" of any Person means (i) a corporation more than 50% of the
combined voting power of the outstanding Voting Stock of which is owned,
directly or indirectly, by such Person or by one or more other Subsidiaries of
such Person or by such Person and one or more Restricted Subsidiaries thereof,
or (ii) any other Person (other than a corporation) in which such Person, or one
or more other Subsidiaries of such Person or such Person and one or more other
Subsidiaries thereof, directly or indirectly, has at least a majority ownership
and power to direct the policies, management and affairs thereof.
"Successor Security" of any particular Security means every Security
issued after, and evidencing all or a portion of the same debt as that evidenced
by, such particular Security; and, for the purpose of this definition, any
Security authenticated and delivered under Section 307 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.
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"System and Network Management Business" means (i) server and other
hardware hosting, (ii) connectivity, data networking, telecommunications or
content for computer or data networks or systems; (iii) management of computer
or data networks or systems; (iv) technology services, equipment sales or
leasing or software licensing for computer or data networks or systems
(including Internet Protocol and any successor protocol(s) based networks); and
(v) businesses reasonably related, complementary or incidental thereto.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date as of which this instrument was executed, except as provided in Section
905; provided, however, that in the event the Trust Indenture Act of 1939 is
amended after such date, "Trust Indenture Act" means, to the extent required by
any such amendment, the Trust Indenture Act of 1939 as so amended.
"Trustee" means the Person named as the "Trustee" in the first paragraph
of this instrument until a successor Trustee shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall mean
such successor Trustee.
"Unregistered Security" means any Security that is not a Registered
Security.
"Unrestricted Securities Certificate" means a certificate substantially in
the form set forth in
Annex C.
"Unrestricted Subsidiary" has the meaning set forth in Section 1018.
"U.S. Government Securities" means securities that are direct obligations
of the United States of America, direct obligations of the Federal Home Loan
Mortgage Corporation, direct obligations of the Federal National Mortgage
Association, securities which the timely payment of whose principal and interest
is unconditionally guaranteed by the full faith and credit of the United States
of America, trust receipts or other evidence of a direct claim upon the
instruments described above and money market mutual funds that invest solely in
such securities.
"U.S. Person" means (i) any natural person resident in the United States,
(ii) any partnership or corporation organized or incorporated under the laws of
the United States, (iii) any estate of which an executor or administrator is a
U.S. Person (other than an estate governed by foreign law and of which at least
one executor or administrator is a non-U.S. Person who has sole or shared
investment discretion with respect to its assets), (iv) any trust of which any
trustee is a U.S. Person (other than a trust of which at least one trustee is a
non-U.S. Person who has sole or shared investment discretion with respect to its
assets and no beneficiary of the trust (and no settlor if the trust is
revocable) is a U.S. Person), (v) any agency or branch of a foreign entity
located in the United States, (vi) any non-discretionary or similar account
(other than an estate or trust) held by a dealer or other fiduciary for the
benefit or account of a U.S. Person, (vii) any discretionary or similar account
(other than an estate or trust) held by a dealer or other fiduciary organized,
incorporated or (if an individual) resident in the United States (other than
such an account held for the benefit or account of a non-U.S. Person) and (viii)
any partnership or corporation organized or incorporated under the laws of a
foreign jurisdiction and formed by a U.S. Person principally for the purpose of
investing in securities
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not registered under the Securities Act (unless it is organized or incorporated,
and owned, by accredited investors within the meaning of Rule 501(a) under the
Securities Act who are not natural persons, estates or trusts); provided,
however, that the term a "U.S. Person" does not include (A) a branch or agency
of a U.S. Person that is located and operating outside the United States for
valid business purposes as a locally regulated branch or agency engaged in the
banking or insurance business, (B) any employee benefit plan established and
administered in accordance with the law, customary practices and documentation
of a foreign country and (C) the international organizations set forth in
Section 902(k)(2) of Regulation S under the Securities Act and any other similar
international organizations, and its agencies, affiliates and pension plans.
"Vice President", when used with respect to the Issuer, means any vice
president, whether or not designated by a number or a word or words added before
or after the title "vice president".
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) at such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person or by such Person and one or more Wholly Owned
Restricted Subsidiaries of such Person.
SECTION 102. Compliance Certificates and Opinions. Upon any application
------------------------------------
or request by the Issuer to the Trustee to take any action under any provision
of this Indenture, the Issuer shall furnish to the Trustee such certificates and
opinions as may be required under the Trust Indenture Act. Each such
certificate or opinion shall be given in the form of an Officers' Certificate,
if to be given by an officer of the Issuer, or an Opinion of Counsel, if to be
given by counsel, and shall comply with the requirements of the Trust Indenture
Act and any other requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include (in form reasonably
satisfactory to the Trustee)
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with (which, in the case of
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an Opinion of Counsel and if permitted under the Trust Indenture Act, may
be limited to reliance on an Officers' Certificate as to matters of fact);
and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee. In any case where
--------------------------------------
several matters are required to be certified by, or covered by an opinion of,
any specified Person, it is not necessary that all such matters be certified by,
or covered by the opinion of, only one such Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such eligible and
qualified Persons as to other matters, and any such Person may certify or give
an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Issuer may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Issuer stating the information
on which counsel is relying unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders; Record Date. Any request, demand,
----------------------------
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Holders may be embodied in and evidenced
by one or more instruments of substantially similar tenor signed by such Holders
in person or by an agent duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Trustee in accordance with
Section 105 hereof, and, where it is hereby expressly required, to the Issuer.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Issuer, if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such instrument or
writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a
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signer acting in a capacity other than his individual capacity, such certificate
or affidavit shall also constitute sufficient proof of his authority. The fact
and date of the execution of any such instrument or writing, or the authority of
the Person executing the same, may also be proved in any other manner which the
Trustee deems sufficient.
The ownership of Securities shall be proved by the Security Register. Any
request, demand, authorization, direction, notice, consent, waiver or other Act
of the Holder of any Security shall bind every future Holder of the same
Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Issuer in
reliance thereon, whether or not notation of such action is made upon such
Security.
The Issuer may set any day as a record date for the purpose of determining
the Holders of Outstanding Securities entitled to give, make or take any
request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this Indenture to be given, made or taken by
Holders of Securities, provided that the Issuer may not set a record date for,
and the provisions of this paragraph shall not apply with respect to, the giving
or making of any notice, declaration, request or direction referred to in the
next paragraph. If not set by the Issuer prior to the first solicitation of a
Holder made by any Person in respect of any such matter referred to in the
foregoing sentence, the record date for any such matter shall be the 30th day
(or, if later, the date of the most recent list of Holders required to be
provided pursuant to Section 701) prior to such first solicitation. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities on such record date, and no other Holders, shall be entitled to take
the relevant action, whether or not such Holders remain Holders after such
record date; provided that no such action shall be effective hereunder unless
taken on or prior to the applicable Expiration Date by Holders of the requisite
principal amount of Outstanding Securities on such record date. Nothing in this
paragraph shall be construed to prevent the Issuer from setting a new record
date for any action for which a record date has previously been set pursuant to
this paragraph (whereupon the record date previously set shall automatically and
with no action by any Person be cancelled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities on the date such
action is taken. Promptly after any record date is set pursuant to this
paragraph, the Issuer, at its own expense, shall cause notice of such record
date, the proposed action by Holders and the applicable Expiration Date to be
given to the Trustee in writing and to each Holder of Securities in the manner
set forth in Section 106.
The Trustee may set any day as a record date for the purpose of determining
the Holders of Outstanding Securities entitled to join in the giving or making
of (i) any Notice of Default, (ii) any declaration of acceleration referred to
in Section 502, (iii) any request to institute proceedings referred to in
Section 507(2) or (iv) any direction referred to in Section 512. If any record
date is set pursuant to this paragraph, the Holders of Outstanding Securities on
such record date, and no other Holders, shall be entitled to join in such
notice, declaration, request or direction, whether or not such Holders remain
Holders after such record date; provided that no such action shall be effective
hereunder unless taken on or prior to the applicable Expiration Date by Holders
of the requisite
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principal amount of Outstanding Securities on such record date. Nothing in this
paragraph shall be construed to prevent the Trustee from setting a new record
date for any action for which a record date has previously been set pursuant to
this paragraph (whereupon the record date previously set shall automatically and
with no action by any Person be cancelled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities on the date such
action is taken. Promptly after any record date is set pursuant to this
paragraph, the Trustee, at the Issuer's expense, shall cause notice of such
record date, the proposed action by Holders and the applicable Expiration Date
to be given to the Issuer in writing and to each Holder of Securities in the
manner set forth in Section 106.
With respect to any record date set pursuant to this Section, the party
hereto which sets such record dates may designate any day as the "Expiration
Date" and from time to time may change the Expiration Date to any earlier or
later day; provided that no such change shall be effective unless notice of the
proposed new Expiration Date is given to the other party hereto in writing, and
to each Holder of Securities in the manner set forth in Section 106, on or prior
to the existing Expiration Date. If an Expiration Date is not designated with
respect to any record date set pursuant to this Section, the party hereto which
set such record date shall be deemed to have initially designated the 180th day
after such record date as the Expiration Date with respect thereto, subject to
its right to change the Expiration Date as provided in this paragraph.
Notwithstanding the foregoing, no Expiration Date shall be later than the 180th
day after the applicable record date.
Without limiting the foregoing, a Holder entitled hereunder to take any
action hereunder with regard to any particular Security may do so with regard to
all or any part of the principal amount of such Security or by one or more duly
appointed agents each of which may do so pursuant to such appointment with
regard to all or any part of such principal amount.
SECTION 105. Notices, Etc., to Trustee and Issuer. Any request, demand,
------------------------------------
authorization, direction, notice, consent, waiver or Act of Holders or other
document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with,
(1) the Trustee by any Holder or by the Issuer shall be sufficient for
every purpose hereunder if made, given, furnished or filed in writing, to
or with the Trustee at its Corporate Trust Office, Attention: Corporate
Trust Administration, or
(2) the Issuer by the Trustee or by any Holder shall be sufficient for
every purpose hereunder (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, or delivered to the Issuer
addressed to it at the address of its principal office specified in the
first paragraph of this instrument, unless the Issuer shall notify the
Trustee in writing of any other address, in which case at such other
address.
SECTION 106. Notice to Holders; Waiver. Where this Indenture provides
-------------------------
for notice to Holders of any event, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed, first-
class postage prepaid, to each Holder affected by such event, at his address as
it appears in the Security Register, not later than the latest date (if any),
and not
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<PAGE>
earlier than the earliest date (if any), prescribed for the giving of such
notice, with a copy to the Trustee at the same time mailed or delivered in
accordance with Section 105(1) hereof. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by reason of
any other cause it shall be impracticable to give such notice by mail, then such
notification as shall be made with the approval of the Trustee shall constitute
a sufficient notification for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act. If any provision hereof
---------------------------------
limits, qualifies or conflicts with a provision of the Trust Indenture Act that
is required under such Act to be part of and govern this Indenture, the latter
provision shall control. If any provision of this Indenture modifies or
excludes any provision of the Trust Indenture Act that may be so modified or
excluded, the latter provision shall be deemed to apply to this Indenture as so
modified or to be excluded, as the case may be. Until such time as this
Indenture shall be qualified under the Trust Indenture Act, this Indenture, the
Issuer and the Trustee shall be deemed for all purposes hereof to be subject to
and governed by the Trust Indenture Act to the same extent as would be the case
if this Indenture were so qualified on the date hereof.
SECTION 108. Effect of Headings and Table of Contents. The Article and
----------------------------------------
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 109. Successors and Assigns. All covenants and agreements in
----------------------
this Indenture by the Issuer shall bind its respective successors and assigns,
whether so expressed or not.
SECTION 110. Separability Clause. In case any provision in this
-------------------
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 111. Benefits of Indenture. Nothing in this Indenture or in the
---------------------
Securities, express or implied, shall give to any Person, other than the parties
hereto and its successors hereunder and the Holders of Securities, any benefit
or any legal or equitable right, remedy or claim under this Indenture.
SECTION 112. Governing Law. THIS INDENTURE AND THE SECURITIES SHALL BE
-------------
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
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SECTION 113. Legal Holidays. In any case where any Interest Payment
--------------
Date, Redemption Date, Purchase Date or Stated Maturity of any Security shall
not be a Business Day, then (notwithstanding any other provision of this
Indenture or of the Securities) payment of interest or principal (and premium,
if any) need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the Interest Payment
Date, Redemption Date or Purchase Date, or at the Stated Maturity, provided that
no interest shall accrue for the period from and after such Interest Payment
Date, Redemption Date or Purchase Date or Stated Maturity, as the case may be.
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally; Initial Forms of Rule 144A and Regulation S
------------------------------------------------------------
Securities. The Securities and the Trustee's certificates of authentication
- ----------
shall be in substantially the forms set forth in this Article, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture, and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon as
may be required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by its execution of the Securities.
The definitive Securities shall be printed, lithographed or engraved or
produced by any combination of these methods on steel engraved borders or may be
produced in any other manner provided that such manner is permitted by the rules
of any securities exchange on which the Securities may be listed, all as
determined by the officers executing such Securities, as evidenced by its
execution of such Securities.
Upon their original issuance, Rule 144A Securities shall be issued in the
form of one or more Global Securities registered in the name of DTC, as
Depositary, or its nominee and deposited with the Trustee, as custodian for DTC,
for credit by DTC to the respective accounts of beneficial owners of the
Securities represented thereby (or such other accounts as they may direct).
Such Global Securities, together with its Successor Securities which are Global
Securities other than the Regulation S Global Security, are collectively herein
called the "Restricted Global Security".
Upon their original issuance, Regulation S Securities (herein called
"Regulation S Global Security") shall be issued in the form of a single Global
Security registered in the name of DTC, as Depositary, or its nominee and
deposited with the Trustee at its Corporate Trust Office, as custodian for DTC,
for credit to Morgan Guaranty Trust Company of New York, Brussels Office, as
operator of Euroclear and Cedel, in turn for credit to the respective accounts
of beneficial owners of the Securities represented thereby (or such other
accounts as such beneficial owners may direct) in accordance with the rules
thereof.
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Beneficial interests in the Regulation S Global Security may only be held
through Euroclear and Cedel until the expiration of the Distribution Compliance
Period as provided in Section 306(b)(4).
SECTION 202. Form of Face of Security. [IF THE SECURITY IS A RESTRICTED
------------------------
SECURITY, THEN INSERT -- THE SECURITIES EVIDENCED HEREBY 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 (A)(1) TO
A PERSON WHOM THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT ACQUIRING 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 INSTITUTIONAL ACCREDITED INVESTOR (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) OF REGULATION D 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 (B) IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS.]
[IF THIS SECURITY IS A GLOBAL SECURITY, THEN INSERT -- THIS SECURITY IS A
GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND
IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY
MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO
TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF
ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.]
[IF THIS SECURITY IS A GLOBAL SECURITY AND THE DEPOSITORY TRUST COMPANY IS
TO BE THE DEPOSITARY THEREFOR, THEN INSERT -- UNLESS THIS SECURITY IS PRESENTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR IN 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.]
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[IF THIS SECURITY IS A REGULATION S SECURITY, THEN INSERT -- THE SECURITIES
EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT
OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD OR DELIVERED IN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON, UNLESS
SUCH SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS THEREOF IS AVAILABLE.]
EXODUS COMMUNICATIONS, INC.
11 1/4% Senior Notes due 2008
[If Restricted Security CUSIP No. [_____ _____]
[If Regulation S Security -- ISIN No. [___________]
No. __________ $________
Exodus Communications, Inc., a corporation duly organized and existing
under the laws of Delaware (herein called the "Issuer", which term includes any
successor Person under the Indenture hereinafter referred to), for value
received, hereby promise to pay to __________________, or registered assigns,
the principal sum of _____________________ Dollars (such amount the "principal
amount" of this Security) [IF THE SECURITY IS A GLOBAL SECURITY, THEN INSERT --
, or such other principal amount (which, when taken together with the principal
amounts of all other Outstanding Securities, shall not exceed $200,000,000 in
the aggregate at any time) as may be set forth in the records of the Trustee as
referred to in accordance with the Indenture,] on July 1, 2008 and to pay
interest thereon from July 1, 1998 or from the most recent Interest Payment Date
to which interest has been paid or duly provided for, payable in arrears semi-
annually on January 1 and July 1 in each year, commencing January 1, 1999 at the
rate of 11 1/4% per annum, until the principal hereof is paid or made available
for payment. The interest so payable, and punctually paid or duly provided for,
on any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the June 15 or December 15 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for will forthwith cease to be
payable to the Holder on the relevant Regular Record Date and may either be paid
to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee in accordance
with Section 308 of the Indenture, notice whereof shall be given to Holders of
Securities not less than 10 days prior to such Special Record Date, or be paid
at any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Securities
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may be listed, and upon such notice as may be required by such exchange, all as
more fully provided in said Indenture. Interest on this Security shall be
computed on the basis set forth in the Indenture.
Payment of the principal of (and premium, if any) and any such interest on
this Security will be made at the office or agency of the Issuer in the Borough
of Manhattan, The City of New York, New York, maintained for such purpose and at
any other office or agency maintained by the Issuer for such purpose, in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts; provided, however, that at
the option of the Issuer payment of interest may be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register; provided further that all payments of the principal (and
premium, if any) and interest on Securities, the Holders of which hold more than
$5.0 million in principal amount and have given wire transfer instructions to
the Issuer or its agent at least 10 Business Days prior to the applicable
payment date, will be required to be made by wire transfer of immediately
available funds to the accounts specified by such Holders in such instructions.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed.
EXODUS COMMUNICATIONS, INC.
By:________________________________________
Name:
Title:
Attest:_____________________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned Indenture.
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Dated: July 1, 1998
Chase Manhattan Bank and Trust Company,
National Association,
as Trustee
By:___________________________________________
Authorized Signatory
SECTION 203. Form of Reverse of Security. This Security is one of a duly
---------------------------
authorized issue of Securities of the Issuer designated as its 11 1/4% Senior
Notes due 2008 (herein called the "Securities"), issued and to be issued under
an Indenture, dated as of July 1, 1998 (herein called the "Indenture", which
term shall have the meaning assigned to it in such instrument), among the Issuer
and Chase Manhattan Bank and Trust Company, National Association, as Trustee
(herein called the "Trustee", which term includes any successor trustee under
the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Issuer, the Trustee and the
Holders of the Securities and of the terms upon which the Securities are, and
are to be, authenticated and delivered.
Prior to or concurrently with the issuance of this Security, the Issuer
shall have deposited funds with the Escrow Agent in the Escrow Account held by
the Escrow Agent for the benefit of the holders in accordance with an Escrow
Agreement. The funds in the Escrow Account will be sufficient to pay, when due,
the first four semi-annual interest payments on all Securities. The Escrow
Agreement will provide, among other things, that funds may be disbursed from the
Escrow Account for interest payments the Issuer makes on the Securities. The
Escrow Agent will be instructed to cause all funds in the Escrow Account to be
invested, pending disbursement, in U.S. Government Securities.
The Securities are subject to redemption, at the option of the Issuer, in
whole or in part, at any time on or after July 1, 2003 and prior to maturity,
upon not less than 30 nor more than 60 days' notice mailed to each Holder of
Securities to be redeemed at such Holder's address appearing in the Security
Register, in amounts of $1,000 or an integral multiple of $1,000, at the
following Redemption Prices (expressed as percentages of the principal amount)
plus accrued and unpaid interest and Liquidated Damages, if any, to but
excluding the Redemption Date (subject to the right of Holders of record on the
immediately preceding Record Date to receive interest due on an Interest Payment
Date that is on or prior to the Redemption Date), if redeemed during the 12-
month period beginning July 1 of the years indicated below:
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<PAGE>
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ---------
<S> <C>
2003 ........................................................... 105.625%
2004 ........................................................... 103.750%
2005 ........................................................... 101.875%
2006 and thereafter ............................................ 100.000%
</TABLE>
In addition, at any time prior to July 1, 2001, the Issuer may redeem up to
35% of the aggregate Outstanding principal amount of the Securities with the Net
Cash Proceeds of one or more sales of Capital Stock (other than Disqualified
Stock) at a Redemption Price equal to 111.25% of the aggregate principal amount
thereof, plus accrued and unpaid interest thereon and Liquidated Damages, if
any, to the date of redemption; provided that at least 65% of the original
principal amount of the Securities remains Outstanding immediately following
such redemption. In order to effect the foregoing redemption, the Issuer must
mail a notice of redemption no later than 45 days after the related sale of
Capital Stock and must consummate such redemption within 60 days of the closing
of the sale of Capital Stock.
The Securities do not have the benefit of any sinking fund obligations.
In the event of redemption or purchase pursuant to an Offer to Purchase of
this Security in part only, a new Security or Securities for the unredeemed or
unpurchased portion hereof will be issued in the name of the Holder hereof upon
the cancellation hereof.
If an Event of Default shall occur and be continuing, there may be declared
due and payable the principal amount of (together with accrued and unpaid
interest on) the Securities, in the manner and with the effect provided in the
Indenture.
[IF SECURITY IS A RESTRICTED SECURITY, THEN INSERT -- The Holder of this
Security (and any Person that has a beneficial interest in this Security) is
entitled to the benefits of an Exchange and Registration Rights Agreement, dated
as of July 1, 1998, and as the same may be amended from time to time (the
"Exchange and Registration Rights Agreement"), executed by the Issuer. The
Exchange and Registration Rights Agreement provides that Liquidated Damages will
be payable by the Issuer on the Securities for specified periods if the Issuer
does not comply with certain of its obligations thereunder. Issuer agrees to pay
Liquidated Damages, if any, accruing on this Security.]
The Indenture provides that, subject to certain conditions, if (i) certain
Net Cash Proceeds are available to the Issuer as a result of an Asset Sale or
(ii) a Change of Control occurs, the Issuer shall be required to make an Offer
to Purchase for all or a specified portion of the Securities.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Securities under the Indenture at
any time by the Issuer and the Trustee with the consent of the
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<PAGE>
Holders of a majority in aggregate principal amount of the Securities at the
time Outstanding. The Indenture also contains provisions permitting the Holders
of specified percentages in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Issuer with certain provisions of the Indenture and certain
past defaults under the Indenture and its consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.
As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities, the Holders of not less than 25% in principal amount of the
Securities at the time Outstanding shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default as Trustee
and offered the Trustee reasonable indemnity and the Trustee shall not have
received from the Holders of a majority in principal amount of Securities at the
time Outstanding a direction inconsistent with such request and shall have
failed to institute any such proceeding for 60 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not apply to
certain suits described in the Indenture, including any suit instituted by the
Holder of this Security for the enforcement of any payment of principal hereof
or any premium or interest hereon on or after the respective due dates expressed
herein (or, in the case of redemption, on or after the Redemption Date or, in
the case of any purchase of this Security required to be made pursuant to an
Offer to Purchase, on the Purchase Date).
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Issuer in the Borough of Manhattan, The City of New York, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Issuer and the Security Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Securities, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like aggregate principal amount of Securities of a different
authorized denomination, as requested by the Holder surrendering the same.
-33-
<PAGE>
No service charge shall be made for any such registration of transfer or
exchange, but the Issuer may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Issuer, the
Trustee nor any such agent shall be affected by notice to the contrary.
Interest on this Security shall be computed on the basis of a 360-day year
of twelve 30-day months.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
The Indenture and this Security shall be governed by and construed in
accordance with the laws of the State of New York.
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased in its entirety by the
Issuer pursuant to Section 1015 or 1016 of the Indenture, check the box:
[_]
If you want to elect to have only a part of this Security purchased by the
Issuer pursuant to Section 1015 or 1016 of the Indenture, state the amount:
$_____________
Dated: Your Signature:_________________________________________________
(Sign exactly as name appears on the other side of this Security)
Signature Guarantee:_________________________________________________
(Signature must be guaranteed by an eligible Guarantor
Institution (banks, stockbrokers, savings and loan
associations and credit unions) with membership in an
approved signature medallion program pursuant to
Securities and Exchange Commission Rule 17Ad-15.)
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<PAGE>
SECTION 204. Form of Trustee's Certificate of Authentication. The
-----------------------------------------------
Trustee's Certificate of Authentication shall be in substantially the following
form:
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated:
Chase Manhattan Bank and Trust Company,
National Association
as Trustee
By ____________________________________
Authorized Signatory
ARTICLE THREE
The Securities
SECTION 301. Title and Terms. The aggregate principal amount of
---------------
Securities which may be authenticated and delivered under this Indenture is
limited to $275,000,000, except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other Securities
pursuant to Section 304, 305, 306, 307, 906 or 1108 or in connection with an
Offer to Purchase pursuant to Section 1015 or 1016 (all Securities referred to
in this exception being deemed "Substitute Securities"). On the Closing Date
the Issuer shall not issue in excess of $200 million in aggregate principal
amount of Securities). The Issuer may from time to time issue Additional
Securities, in each case pursuant to a Board Resolution and subject to Section
303. The Issuer may issue Exchange Securities from time to time pursuant to an
Exchange Offer, in each case pursuant to a Board Resolution and subject to
Section 303, in authorized denominations in exchange for a like principal amount
of Original Securities or Additional Securities. Upon any such exchange the
Original Securities or Additional Securities, as the case may be, shall be
cancelled in accordance with Section 310 and shall no longer be deemed
Outstanding for any purpose.
The Securities (including Additional Securities) shall be known and
designated as the "11 1/4% Senior Notes due 2008" of the Issuer. Their final
maturity date shall be July 1, 2008 and they shall bear interest at the rate of
11 1/4% per annum, from July 1, 1998 or from the most recent Interest Payment
Date to which interest has been paid or duly provided for, as the case may be,
regardless of when issued, payable semi-annually in arrears on July 1 and
January 1, commencing January 1, 1999, until the principal thereof is paid or
made available for payment. Notwithstanding the foregoing, Liquidated Damages
shall be payable on the Securities under the circumstances and in the manner
specified in the Exchange and Registration Rights Agreement. Accrued Liquidated
Damages, if any, shall be paid in cash in arrears semi-annually on January 1 and
July 1 in each year. Whenever in this
-35-
<PAGE>
Indenture there is mentioned, in any context, interest on, or in respect of, any
Security, such mention shall be deemed to include mention of Liquidated Damages
to the extent that, in such context, Liquidated Damages is, was or would be
accrued or payable in respect thereof and express mention of Liquidated Damages
in any provisions hereof shall not be construed as excluding Liquidated Damages
in those provisions hereof where such express mention is not made.
The principal of (and premium, if any) and interest on the Securities shall
be payable at the office or agency of the Issuer in the Borough of Manhattan,
The City of New York maintained for such purpose and at any other office or
agency maintained by the Issuer for such purpose; provided, however, that at the
option of the Issuer payment of interest may be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register.
The Securities shall be subject to repurchase by the Issuer pursuant to an
Offer to Purchase as provided in Sections 1015 and 1016.
The Securities shall be redeemable as provided in Article Eleven.
The Securities shall be subject to defeasance and covenant defeasance as
provided in Article Twelve.
The Securities shall not have the benefit of any sinking fund obligation.
Unless the context otherwise requires, the Original Securities, the
Additional Securities and the Exchange Securities shall constitute one class and
series of securities for all purposes under this Indenture, including with
respect to any amendment, waiver, acceleration or other Act of Holders,
redemption or Offer to Purchase.
SECTION 302. Denominations. The Securities shall be issuable only in
-------------
registered form without coupons and only in denominations of $1,000 and any
integral multiples thereof.
SECTION 303. Execution, Authentication, Delivery and Dating. The
----------------------------------------------
Securities shall be executed on behalf of the Issuer by any two of the Chairman
of the Board, Chief Executive Officer, the President, any Vice President, the
Secretary, any Assistant Secretary, the Chief Financial Officer, the Treasurer
or any Assistant Treasurer. The signature of any of these officers on the
Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of an Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices at the time of the authentication and delivery of such Securities or did
not hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of this
Indenture, the Issuer may deliver Original Securities executed by the Issuer to
the Trustee for authentication, together with an Issuer Order for the
authentication and delivery of such Original Securities; and the
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<PAGE>
Trustee in accordance with the Issuer order shall authenticate and make
available for delivery such Original Securities as provided in this Indenture
and not otherwise.
At any time and from time to time after the execution and delivery of this
Indenture and on or prior to July 1, 1999, the Issuer may, pursuant to a Board
Resolution, deliver Additional Securities executed by the Issuer to the Trustee
for authentication, together with an Issuer Order for the authentication and
delivery of such Additional Securities, an Officers' Certificate stating that
the issuance of such Additional Securities will not result in a breach or
violation of any of the covenants contained in this Indenture or in the Escrow
Agreement and that all conditions precedent to such issuance, authentication and
delivery of Additional Securities in this Indenture and the Escrow Agreement
have been fully complied with and satisfied, and the Trustee in accordance with
the Issuer Order shall authenticate and deliver such Securities. Prior to
authenticating such Additional Securities, and accepting any additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall be entitled to receive, if requested, and (subject to Section 601)
shall be fully protected in relying upon, an Opinion of Counsel stating in
substance that the issuance of such Additional Securities will not result in a
breach or violation of any of the covenants contained in this Indenture and as
to the due authorization, execution and delivery of the Additional Securities,
the enforceability of the Additional Securities, and the duly incorporated
status and good standing of the Issuer.
At any time and from time to time after the execution and delivery of this
Indenture and after the effectiveness of a registration statement under the
Securities Act with respect to such Securities, the Issuer may deliver Exchange
Securities executed by the Issuer to the Trustee for authentication, together
with an Issuer Order for the authentication and delivery of such Exchange
Securities and a like principal amount of Original Securities for cancellation
in accordance with Section 310 of this Indenture, and the Trustee in accordance
with the Issuer Order shall authenticate and make available for delivery such
Securities. Prior to authenticating such Exchange Securities, and accepting any
additional responsibilities under this Indenture in relation to such Securities,
the Trustee shall be entitled to receive, if requested, and (subject to Section
601) shall be fully protected in relying upon, an Opinion of Counsel as to the
due authorization, execution and delivery of the Exchange Securities, the
enforceability of the Exchange Securities, and the duly incorporated status and
good standing of the Issuer.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder.
SECTION 304. Temporary Securities. Pending the preparation of definitive
--------------------
Securities, the Issuer may execute, and upon Issuer Order, the Trustee shall
authenticate and deliver, temporary Securities, which Securities are printed,
lithographed, typewritten, mimeographed or otherwise
-37-
<PAGE>
produced, in any authorized denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Securities may determine, as evidenced by their execution
thereof.
If temporary Securities are issued, the Issuer will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency of the Issuer designated pursuant to Section 1002, without charge to
the Holder. Upon surrender for cancellation (which cancellation shall be only by
the Trustee) of any one or more temporary Securities, the Issuer shall execute
and the Trustee shall authenticate and deliver in exchange therefor a like
principal amount of definitive Securities of authorized denominations. Until so
exchanged, the temporary Securities shall in all respects be entitled to the
same rights and benefits under this Indenture as definitive Securities.
SECTION 305. Global Securities. (a) Each Global Security authenticated
-----------------
under this Indenture shall be registered in the name of the Depositary
designated by the Issuer for such Global Security or a nominee thereof and
delivered to such Depositary or a nominee thereof or custodian therefor, and
each such Global Security shall constitute a single Security for all purposes of
this Indenture.
(b) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Securities registered, and no
transfer of a Global Security in whole or in part may be registered, in the name
of any Person other than the Depositary for such Global Security or a nominee
thereof unless (i) such Depositary (A) has notified the Issuer that it is
unwilling or unable to continue as Depositary for such Global Security or (B)
has ceased to be a clearing agency registered as such under the Exchange Act,
and in either case the Issuer fails to appoint a successor Depositary within 120
days of such notice, (ii) the Issuer executes and delivers to the Trustee an
Issuer Order stating that it elects to cause the issuance of the Securities in
certificated form and that all Global Securities shall be exchanged in whole for
Securities that are not Global Securities (in which case such exchange shall be
effected by the Trustee) or (iii) there shall have occurred and be continuing an
Event of Default with respect to the Securities.
(c) If any Global Security is to be exchanged for other Securities or
cancelled in whole, it shall be surrendered by or on behalf of the Depositary or
its nominee to the Trustee, as Security Registrar, for exchange or cancellation
as provided in this Article Three. If any Global Security is to be exchanged
for other Securities or cancelled in part, or if another Security is to be
exchanged in whole or in part for a beneficial interest in any Global Security,
then either (i) such Global Security shall be so surrendered for exchange or
cancellation as provided in this Article Three or (ii) the principal amount
thereof shall be reduced or increased by an amount equal to the portion thereof
to be so exchanged or cancelled, or equal to the principal amount of such other
Security to be so exchanged for a beneficial interest therein, as the case may
be, by means of an appropriate adjustment made on the records of the Trustee, as
Security Registrar, whereupon the Trustee, in accordance with the Applicable
Procedures, shall instruct the Depositary or its authorized
-38-
<PAGE>
representative to make a corresponding adjustment to its records. Upon any such
surrender or adjustment of a Global Security, the Trustee shall, subject to
Section 306(b) and as otherwise provided in this Article Three, authenticate and
deliver any Securities issuable in exchange for such Global Security (or any
portion thereof) to or upon the order of, and registered in such names as may be
directed by, the Depositary or its authorized representative. Upon the request
of the Trustee in connection with the occurrence of any of the events specified
in the preceding paragraph, the Issuer shall promptly make available to the
Trustee a reasonable supply of Securities that are not in the form of Global
Securities. The Trustee shall be entitled to rely upon any order, direction or
request of the Depositary or its authorized representative which is given or
made pursuant to this Article Three if such order, direction or request is given
or made in accordance with the Applicable Procedures and in accordance with all
applicable laws.
(d) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any portion
thereof, whether pursuant to this Article Three or otherwise, shall be
authenticated and delivered in the form of, and shall be, a Global Security,
unless such Security is registered in the name of a Person other than the
Depositary for such Global Security or a nominee thereof.
(e) The Depositary or its nominee, as registered owner of a Global
Security, shall be the Holder of such Global Security for all purposes under
this Indenture and the Securities and owners of beneficial interests in a Global
Security shall hold such interests pursuant to the Applicable Procedures.
Accordingly, any such owner's beneficial interest in a Global Security will be
shown only on, and the transfer of such interest shall be effected only through,
records maintained by the Depositary or its nominee or its Agent Members.
SECTION 306. Registration, Registration of Transfer and Exchange
---------------------------------------------------
Generally; Restrictions on Transfer and Exchange; Securities Act Legends.
- ------------------------------------------------------------------------
(a) Registration, Registration of Transfer and Exchange Generally. The
-------------------------------------------------------------
Issuer shall cause to be kept at the Corporate Trust Office of the Trustee a
register (the register maintained in such office and in any other office or
agency of the Issuer designated pursuant to Section 1002 being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Issuer shall provide for the
registration of Securities and of transfers and exchanges of Securities. The
Trustee is hereby appointed "Security Registrar" for the purpose of registering
Securities and transfers and exchanges of Securities as herein provided. Such
Security Register shall distinguish between Original Securities, Additional
Securities and Exchange Securities.
Subject to the other provisions of this Indenture regarding restrictions on
transfer, upon surrender for registration of transfer of any Security at an
office or agency of the Issuer designated pursuant to Section 1002 for such
purpose, the Issuer shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denominations, of a like aggregate principal
amount and bearing such restrictive legends as may be required by this
Indenture.
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<PAGE>
At the option of the Holder, and subject to the other provisions of this
Section 306, Securities may be exchanged for other Securities of any authorized
denominations, of a like aggregate principal amount and bearing such restrictive
legends as may be required by this Indenture upon surrender of the Securities to
be exchanged at any such office or agency. Whenever any Securities are so
surrendered for exchange, the Issuer shall execute, and the Trustee shall
authenticate and make available for delivery, the Securities which the Holder
making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Issuer, evidencing the same
debt, and (except for the differences between Original Securities and Exchange
Securities provided for herein) entitled to the same benefits under this
Indenture, as the Securities surrendered upon such registration of transfer or
exchange.
Every Security presented or surrendered for registration of transfer or for
exchange shall (if so required by the Issuer or the Security Registrar) be duly
endorsed, or be accompanied by a written instrument of transfer, in form
satisfactory to the Issuer and the Security Registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Issuer 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 Securities, other than
exchanges pursuant to Sections 304, 305, 306, 906, 1015, 1016 or 1108 not
involving any transfer.
The Issuer and the Trustee shall not be required (i) to issue, register the
transfer of, or exchange any Security during a period beginning at the opening
of business 15 days before the day of the mailing of a notice of redemption of
Securities selected for redemption under Section 1104 and ending at the close of
business on the day of such mailing, or (ii) to register the transfer of or
exchange any Security so selected for redemption, in whole or in part, except
the unredeemed portion of any Security being redeemed in part.
(b) Certain Transfers and Exchanges. Notwithstanding any other provision
-------------------------------
of this Indenture or the Securities, transfers and exchanges of Securities and
beneficial interests in a Global Security of the kinds specified in this Section
306(b) shall be made only in accordance with this Section 306(b). Transfers and
exchanges subject to this Section 306(b) shall also be subject to the other
provisions of this Indenture that are not inconsistent with this Section 306(b).
(1) Restricted Global Security to Regulation S Global Security. If
----------------------------------------------------------
the owner of a beneficial interest in the Restricted Global Security wishes at
any time to transfer such interest to a Person who is required or permitted to
acquire the same in the form of a beneficial interest in the Regulation S Global
Security (if before the expiration of the Distribution Compliance Period, such
Regulation S Global Security shall be held only in or through accounts
maintained at the Depositary by Euroclear or Cedel, and if thereafter, such
transfer may be effected only in accordance with the provisions of this Clause
(b)(1) subject to the Applicable Procedures. Upon receipt by the Trustee, as
Security Registrar, of (A) an order given by the Depositary or its authorized
representative directing
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<PAGE>
that a beneficial interest in the Regulation S Global Security in a specified
principal amount be credited to a specified Agent Member's account and that a
beneficial interest in the Restricted Global Security in an equal principal
amount be debited from another specified Agent Member's account and (B) a
Regulation S Certificate, satisfactory to the Trustee and duly executed by the
owner of such beneficial interest in the Restricted Global Security or his
attorney duly authorized in writing, then the Trustee, as Security Registrar but
subject to Clause (b)(4) below, shall reduce the principal amount of the
Restricted Global Security and increase the principal amount of the Regulation S
Global Security by such specified principal amount as provided in Section
305(c).
(2) Regulation S Global Security to Restricted Global Security. If
----------------------------------------------------------
the owner of a beneficial interest in the Regulation S Global Security wishes at
any time to transfer such interest to a Person who is required or permitted to
acquire the same in the form of a beneficial interest in the Restricted Global
Security, such transfer may be effected only in accordance with this Clause
(b)(2) and subject to the Applicable Procedures. Upon receipt by the Trustee, as
Security Registrar, of (A) an order given by the Depositary or its authorized
representative directing that a beneficial interest in the Restricted Global
Security in a specified principal amount be credited to a specified Agent
Member's account and that a beneficial interest in the Regulation S Global
Security in an equal principal amount be debited from another specified Agent
Member's account and (B) if such transfer is to occur during the Distribution
Compliance Period, a Restricted Securities Certificate, satisfactory to the
Trustee and duly executed by the owner of such beneficial interest in the
Regulation S Global Security or his attorney duly authorized in writing, then
the Trustee, as Security Registrar, shall reduce the principal amount of the
Regulation S Global Security and increase the principal amount of the Restricted
Global Security by such specified principal amount as provided in Section
305(c).
(3) Exchanges between Global Security and Non-Global Security. A
---------------------------------------------------------
beneficial interest in a Global Security may be exchanged for a Security that is
not a Global Security as provided in Section 305, provided that, if such
interest is a beneficial interest in the Restricted Global Security, then such
interest shall be exchanged for a Restricted Security (subject in each case to
Section 306(c).
(4) Regulation S Global Security to be Held Through Euroclear or Cedel
------------------------------------------------------------------
during Distribution Compliance Period. The Issuer shall use its best efforts to
- -------------------------------------
cause the Depositary to ensure that beneficial interests in the Regulation S
Global Security may be held only in or through accounts maintained at the
Depositary by Euroclear or Cedel (or by Agent Members acting for the account
thereof) until the expiration of the Distribution Compliance Period, and no
person shall be entitled to effect any transfer or exchange that would result in
any such interest being held otherwise than in or through such an account until
the expiration of the Distribution Compliance Period; provided that this Clause
(b)(4) shall not prohibit any transfer or exchange of such an interest in
accordance with Clause (b)(2) above.
(c) Securities Act Legends. Rule 144A Securities and their respective
----------------------
Successor Securities shall bear a Restricted Securities Legend, and Regulation S
Securities and their Successor Securities shall bear a Regulation S Legend,
subject to the following:
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<PAGE>
(1) subject to the following Clauses of this Section 306(c), a
Security or any portion thereof which is exchanged, upon transfer or otherwise,
for a Global Security or any portion thereof shall bear the Securities Act
Legend borne by such Global Security while represented thereby;
(2) subject to the following Clauses of this Section 306(c), a new
Security which is not a Global Security and is issued in exchange for another
Security (including a Global Security) or any portion thereof, upon transfer or
otherwise, shall bear the Securities Act Legend borne by such other Security,
provided that, if such new Security is required pursuant to Section 306(b)(3) to
be issued in the form of a Restricted Security, it shall bear a Restricted
Securities Legend and, if such new Security is so required to be issued in the
form of a Regulation S Security, it shall bear a Regulation S Legend;
(3) Registered Securities shall not bear a Securities Act Legend;
(4) at any time after the Securities may be freely transferred without
registration under the Securities Act or without being subject to transfer
restrictions pursuant to the Securities Act, a new Security which does not bear
a Securities Act Legend may be issued in exchange for or in lieu of a Security
(other than a Global Security) or any portion thereof which bears such a legend
if the Trustee has received an Unrestricted Securities Certificate, satisfactory
to the Trustee and duly executed by the Holder of such legended Security or his
attorney duly authorized in writing, and after such date and receipt of such
certificate, the Trustee shall authenticate and make available for delivery such
a new Security in exchange for or in lieu of such other Security as provided in
this Article Three;
(5) a new Security which does not bear a Securities Act Legend may be
issued in exchange for or in lieu of a Security (other than a Global Security)
or any portion thereof which bears such a legend if, in the Issuer's judgment,
placing such a legend upon such new Security is not necessary to ensure
compliance with the registration requirements of the Securities Act, and the
Trustee, at the direction of the Issuer, shall authenticate and deliver such a
new Security as provided in this Article Three provided that, the Trustee, if it
deems reasonably necessary or appropriate, may request an Opinion of Counsel in
connection with such direction; and
Notwithstanding the foregoing provisions of this Section 306(c), a
Successor Security of a Security that does not bear a particular form of
Securities Act Legend shall not bear such form of legend unless the Issuer has
reasonable cause to believe that such Successor Security is a "restricted
security" within the meaning of Rule 144, in which case the Trustee, at the
direction of the Issuer, shall authenticate and make available for delivery a
new Security bearing a Restricted Securities Legend in exchange for such
Successor Security as provided in this Article Three.
Each Holder of a Security agrees to indemnify the Trustee against any
liability that may result from the transfer, exchange or assignment of such
Holder's Security in violation of any provision of this Indenture and/or
applicable United States federal or state securities law.
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The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Security (including any transfers between or among Depositary
participants or beneficial owners of interests in any Global Security) other
than to require delivery of such certificates and other documentation or
evidence as are expressly required by, and to do so if and when expressly
required by the terms of, this Indenture, and to examine the same to determine
substantial compliance as to form with the express requirements hereof.
SECTION 307. Mutilated, Destroyed, Lost and Stolen Securities. If any
------------------------------------------------
mutilated Security is surrendered to the Trustee, the Issuer shall execute and
the Trustee shall authenticate and make available for delivery in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Issuer and the Trustee (i) evidence to
its satisfaction of the destruction, loss or theft of any Security and (ii) such
security or indemnity as may be required by either of them to save each of them
and any agent of either of them completely harmless, then, in the absence of
notice to the Issuer or the Trustee that such Security has been acquired by a
bona fide purchaser, the Issuer shall execute and upon its written request the
Trustee shall authenticate and make available for delivery, in lieu of any such
destroyed, lost or stolen Security, a new Security of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Issuer in its discretion may, instead
of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Issuer and
the Trustee (without duplication) may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Trustee
and reasonable attorneys' fees) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Issuer, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 308. Payment of Interest; Interest Rights Preserved. Interest on
----------------------------------------------
any Security which is payable, and is punctually paid or duly provided for, on
any Interest Payment Date shall be paid to the Person in whose name that
Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest.
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Any interest on any Security which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date (herein called "Defaulted
Interest") shall forthwith cease to be payable to the Holder on the relevant
Regular Record Date by virtue of having been such Holder on such date, and such
Defaulted Interest may be paid by the Issuer, at its election in each case, as
provided in Clause (1) or (2) below:
(1) The Issuer may elect to make payment of any Defaulted Interest to the
Persons in whose names the Securities (or its respective Predecessor Securities)
are registered at the close of business on a Special Record Date for the payment
of such Defaulted Interest, which shall be fixed in the following manner: The
Issuer shall notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each Security and the date of the proposed payment, and
at the same time the Issuer shall deposit with the Trustee an amount of money
equal to the aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be held
in trust for the benefit of the Persons entitled to such Defaulted Interest as
in this Clause provided. Thereupon the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not less
than 10 days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Issuer of such Special Record
Date and, in the name and at the sole expense of the Issuer, shall cause notice
of the proposed payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first-class postage prepaid, to each Holder at his
address as it appears in the Security Register, not less than 10 days prior to
such Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so mailed, such
Defaulted Interest shall be paid to the Persons in whose names the Securities
(or its respective Predecessor Securities) are registered at the close of
business on such Special Record Date and shall no longer be payable pursuant to
the following Clause (2).
(2) The Issuer may make payment of any Defaulted Interest in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities may be listed, and upon such notice as may be required
by such exchange, if, after written notice given by the Issuer to the Trustee of
the proposed payment pursuant to this Clause, such manner of payment shall be
deemed practicable by the Trustee in its reasonable judgment.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 309. Persons Deemed Owners. Prior to due presentment of a
---------------------
Security for registration of transfer, the Issuer, the Trustee and any agent of
the Issuer or the Trustee may treat the Person in whose name such Security is
registered as the owner of such Security for the purpose of receiving payment of
principal of (and premium, if any) and (subject to Section 308) interest on such
Security and for all other purposes whatsoever, whether or not such Security be
overdue, and neither
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the Issuer, the Trustee nor any agent of the Issuer or the Trustee shall be
affected by notice to the contrary.
None of the Issuer, the Trustee or any agent of the Issuer or the Trustee
shall have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests of a
Security in global form, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests. Notwithstanding the
foregoing, with respect to any Security in global form, nothing herein shall
prevent the Issuer or the Trustee, or any agent of the Issuer or the Trustee,
from giving effect to any written certification, proxy or other authorization
furnished by any Depositary (or its nominee), as a Holder, with respect to such
Security in global form or impair, as between such Depositary and owners of
beneficial interests in such Security in global form, the operation of customary
practices governing the exercise of the rights of such Depositary (or its
nominee) as a Holder of such Security in global form.
SECTION 310. Cancellation. All Securities surrendered for payment,
------------
redemption, registration of transfer or exchange or pursuant to any Offer to
Purchase pursuant to Section 1015 or 1016 shall, if surrendered to any Person
other than the Trustee, be delivered to the Trustee and shall be promptly
canceled by it and only by it. The Issuer may at any time deliver to the Trustee
for cancellation any Securities previously authenticated and delivered hereunder
which the Issuer may have acquired in any manner whatsoever, and all Securities
so delivered shall be promptly canceled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities canceled as provided
in this Section, except as expressly permitted by this Indenture. All canceled
Securities held by the Trustee shall be disposed of as directed by an Issuer
order, provided, that in no event shall the Trustee be required to destroy such
canceled Securities.
SECTION 311. CUSIP Numbers. The Issuer in issuing the Securities may use
-------------
"CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use
"CUSIP" numbers in notices as a convenience to Holders; provided that any such
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Securities or as contained in any notice and
that reliance may be placed only on the other identification numbers printed on
the Securities, and any such redemption shall not be affected by any defect in
or omission of such numbers. The Issuer will promptly notify the Trustee of any
change in the "CUSIP" numbers.
SECTION 312. Computation of Interest. Interest on the Securities shall
-----------------------
be computed on the basis of a 360-day year of twelve 30-day months.
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture. This Indenture
---------------------------------------
shall cease to be of further effect (except as to any surviving rights of
registration of transfer or exchange of Securities herein expressly provided
for), and the Trustee, on written demand of and at the sole expense of the
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Issuer, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture (including, but not limited to, Article Twelve
hereof), when
(1) either
(A) all Securities theretofore authenticated and delivered (other than
(i) Securities which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 307 and (ii) Securities for whose
payment money has theretofore been deposited in trust or segregated and held in
trust by the Issuer and thereafter repaid to the Issuer or discharged from such
trust, as provided in Section 1003) have been delivered to the Trustee for
cancellation; or
(B) all such Securities not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at its Stated Maturity within
one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of redemption
by the Trustee in the name, and at the sole expense, of the Issuer,
and the Issuer, in the case of (i), (ii) or (iii) above, has irrevocably
deposited or caused to be deposited with the Trustee as trust funds in trust for
the purpose an amount in cash or U.S. Government Securities sufficient to pay
and discharge the entire indebtedness on such Securities not theretofore
delivered to the Trustee for cancellation, for principal (and premium, if any)
and interest to the date of such deposit (in the case of Securities which have
become due and payable) or to the Stated Maturity or Redemption Date, as the
case may be including, without limitation, the payment of all fees and expenses
of the Trustee, its agents and counsel;
(2) the Issuer has paid or caused to be paid all other sums payable
hereunder by the Issuer including, without limitation, the payment of all fees
and expenses of the Trustee, its agents and counsel; and
(3) the Issuer has delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent herein provided
for relating to the satisfaction and discharge of this Indenture have been
complied with.
Notwithstanding the satisfaction and discharge of this Indenture pursuant to
this Article Four, the obligations of the Issuer to the Trustee under Section
607 and, if money shall have been deposited with the Trustee pursuant to
subclause (B) of Clause (i) of this Section, the obligations of the Trustee
under Section 402 and the last paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money. Subject to the provisions of
--------------------------
the last paragraph of Section 1003, all money deposited with the Trustee
pursuant to Section 401 shall be held in trust
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and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Issuer acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee.
ARTICLE FIVE
Remedies
SECTION 501. Events of Default. "Event of Default", wherever used
-----------------
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body) (a
"Default" as such term is used in this Indenture shall mean the occurrence and
continuation of an Event of Default):
(1) failure to pay principal of (or premium, if any, on) any Security when
due (upon acceleration, optional or mandatory redemption, required repurchase or
otherwise);
(2) failure to pay interest on any Security when due, and such default
continues for a period of 30 days;
(3) default in the payment of principal and interest on Securities required
to be purchased pursuant to an Offer to Purchase pursuant to Sections 1015 or
1016 when due and payable;
(4) failure to perform or comply with the provisions contained in Article
Eight;
(5) failure to perform any other covenant or agreement of the Issuer under
the Indenture or the Securities and such failure continues for 60 days after
written notice to the Issuer by the Trustee or Holders of at least 25% in
aggregate principal amount of outstanding Securities;
(6) (i) any default by the Issuer or any Material Restricted Subsidiary in
the payment of the principal, premium, if any, or interest has occurred with
respect to amounts in excess of $10.0 million under any agreement, indenture or
instrument evidencing Debt when the same shall become due and payable in full
and such default shall have continued after any applicable grace period and
shall not have been cured or waived and, if not already matured at its final
maturity in accordance with its terms, the holders of such Debt shall have the
right to accelerate such Debt, or (ii) any event of default as defined in any
agreement, indenture or instrument of the Issuer or any Restricted Subsidiary
evidencing Debt in excess of $10.0 million shall have occurred and the Debt
thereunder, if not already matured at its final maturity in accordance with its
terms, shall have been accelerated;
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(7) the rendering of a final judgment or judgments against the Issuer or
any Material Restricted Subsidiary in an amount in excess of $10.0 million which
remains undischarged or unstayed for a period of 60 days after the date on which
the right to appeal has expired;
(8) the Issuer shall challenge the Lien on the Collateral under the Escrow
Agreement prior to the time that the Collateral is to be released to the Issuer
or the Escrow Agreement becomes, or the Issuer asserts that the Escrow Agreement
is, invalid or unenforceable, otherwise than in accordance with its terms;
(9) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Issuer or any Material Restricted
Subsidiary in an involuntary case or proceeding under any applicable U.S.
Federal or State or other applicable bankruptcy, insolvency, reorganization or
other similar law or (B) a decree or order adjudging the Issuer or any Material
Restricted Subsidiary a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition of or in
respect of the Issuer or any Material Restricted Subsidiary under any applicable
U.S. Federal or State, or other applicable law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar official
of the Issuer or any Material Restricted Subsidiary or of any substantial part
of the property of the Issuer or any Material Restricted Subsidiary, or ordering
the winding up or liquidation of the affairs of the Issuer or any Material
Restricted Subsidiary, and the continuance of any such decree or order for
relief or any such other decree or order unstayed and in effect for a period of
60 consecutive days; or
(10) the commencement by the Issuer or any Material Restricted Subsidiary
of a voluntary case or proceeding under any applicable U.S. Federal or State, or
other applicable bankruptcy, insolvency, reorganization or other similar law or
of any other case or proceeding to be adjudicated a bankrupt or insolvent, or
the consent by the Issuer or any Material Restricted Subsidiary to the entry of
a decree or order for relief in respect of the Issuer or such Material
Restricted Subsidiary in an involuntary case or proceeding under any applicable
U.S. Federal or State, or other applicable bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against the Issuer or a Material Restricted
Subsidiary, or the filing by the Issuer or any Material Restricted Subsidiary of
a petition or answer or consent seeking reorganization or relief under any
applicable U.S. Federal or State, or other applicable law, or the consent by the
Issuer or any Material Restricted Subsidiary to the filing of such petition or
to the appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of the Issuer or any
Material Restricted Subsidiary or of substantially all of the property of the
Issuer or any Material Restricted Subsidiary, or the making by the Issuer or any
Material Restricted Subsidiary of an assignment for the benefit of creditors, or
the admission by the Issuer or any Material Restricted Subsidiary in writing of
its inability to pay its debts generally as they become due, or the taking of
corporate action by the Issuer or any Material Restricted Subsidiary in
furtherance of any such action.
SECTION 502. Acceleration of Maturity; Rescission and Annulment. If an
--------------------------------------------------
Event of Default (other than an Event of Default specified in Section 501(9) or
(10)) occurs and is continuing, then and in every such case the Trustee or the
Holders of not less than 25% in principal amount of the
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Outstanding Securities may declare the Securities to be due and payable
immediately, by a notice in writing to the Issuer (and to the Trustee if given
by Holders), and upon any such declaration the principal and any accrued
interest on all Outstanding Securities shall become immediately due and payable.
If an Event of Default specified in Section 501(9) or (10) occurs, the principal
of and any accrued interest on the Securities then Outstanding shall ipso facto
become immediately due and payable without any declaration or other Act on the
part of the Trustee or any Holder.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in principal amount of the Outstanding Securities, by written notice to the
Issuer and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Issuer has paid or deposited with the Trustee a sum sufficient to
pay
(A) the principal of (and premium, if any, on) any Securities which
have become due otherwise than by such declaration of acceleration (including
any Securities required to have been purchased on the Purchase Date pursuant to
an Offer to Purchase made by the Issuer) and, to the extent that payment of such
interest is lawful, any interest thereon at the rate provided therefor in the
Securities,
(B) to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate provided therefor in the Securities, and
(C) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel; and
(2) all Events of Default, other than the non-payment of the principal of
(and premium, if any) or interest on, the Securities which have become due
solely by such declaration of acceleration, have been cured or waived as
provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Trustee. The Issuer covenants that if
- -------
(1) default is made in the payment of any interest on any Security when
such interest becomes due and payable and such default continues for a period of
30 days, or
(2) default is made in the payment of the principal of (or premium, if any,
on) any Security at the Maturity thereof or, with respect to any Security
required to have been purchased pursuant to an Offer to Purchase made by the
Issuer, at the Purchase Date thereof, the Issuer will, upon demand of the
Trustee, pay to it, for the benefit of the Holders of such Securities, the whole
amount then due and payable on such Securities for principal (and premium, if
any) and interest, and, to the extent that payment of such interest shall be
legally enforceable, interest on any overdue
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principal (and premium, if any) and on any overdue interest, at the rate
provided therefor in the Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel and any amounts due the Trustee under
Section 607 hereof.
If the Issuer fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Issuer or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Issuer or any other obligor upon the Securities, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim. In case of any judicial
--------------------------------
proceeding relative to the Issuer or any other obligor upon the Securities, or
its property or its creditors, the Trustee shall be entitled and empowered, by
intervention in such proceeding or otherwise, to take any and all actions
authorized under the Trust Indenture Act in order to have claims of the Holders
and the Trustee allowed in any such proceeding. In particular, the Trustee
shall be authorized to collect, receive and distribute any moneys or other
property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 607.
No provision of this Indenture shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of Securities.
-----------------------------------------------------------
All rights of action and claims under this Indenture or the Securities may be
prosecuted and enforced by the Trustee without the possession of any of the
Securities or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and
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counsel, and any amounts due the Trustee under Section 607 hereof, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. Application of Money Collected. Subject to Article Thirteen,
------------------------------
any money collected by the Trustee pursuant to this Article or pursuant to the
Escrow Agreement shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of such money on account
of principal (or premium, if any) or interest, upon presentation of the
Securities and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: To the payment of all amounts (including, without limitation, the
reasonable compensation, expenses, disbursements and advances due the Trustee,
its agents and counsel and any other amounts) due the Trustee under Section 607;
and
SECOND: To the payment of the amounts then due and unpaid for principal of
(and premium, if any) and interest on the Securities due the Holders in respect
of which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due and
payable on such Securities for principal (and premium, if any) and interest,
respectively.
SECTION 507. Limitation on Suits. No Holder of any Security shall have
-------------------
any right to institute any proceeding, judicial or otherwise, with respect to
this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of a
continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the Outstanding
Securities shall have made written request to the Trustee to institute
proceedings or pursue remedies in respect of such Event of Default in its own
name as Trustee hereunder;
(3) such Holder or Holders have offered and provided to the Trustee
reasonable indemnity satisfactory to the Trustee against the costs, expenses and
liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request and
offer of indemnity has failed to institute any such proceeding or pursued any
remedies; and
(5) no direction which is inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice
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the rights of any other Holders, or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any right under this Indenture,
except in the manner herein provided and for the equal and ratable benefit of
all the Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium
------------------------------------------------------------
and Interest. Notwithstanding any other provision in this Indenture, the Holder
- ------------
of any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to
Section 308) interest on such Security on the respective Stated Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date or in the case of an Offer to Purchase made by the Issuer and required to
be accepted as to such Security, on the Purchase Date) and to institute suit for
the enforcement of any such payment, and such rights shall not be impaired or
affected without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies. If the Trustee or any
----------------------------------
Holder has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any reason,
or has been determined adversely to the Trustee or to such Holder, then and in
every such case, subject to any determination in such proceeding, the Issuer,
the Trustee and the Holders shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.
SECTION 510. Rights and Remedies Cumulative. Except as otherwise provided
------------------------------
with respect to the replacement or payment of mutilated, destroyed, lost or
stolen Securities in the last paragraph of Section 307, no right or remedy
herein conferred upon or reserved to the Trustee or to the Holders is intended
to be exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver. No delay or omission of the
----------------------------
Trustee or of any Holder of any Security to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee or to the
Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
SECTION 512. Control by Holders. The Holders of a majority in principal
------------------
amount of the Outstanding Securities shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee, provided that
(1) the Trustee may refuse to follow any direction which
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(i) conflicts with any rule of law or with the Escrow Agreement or
this Indenture,
or
(ii) the Trustee, in its reasonable judgment, determines may be unduly
prejudicial to the rights of other Holders of Securities, or may expose the
Trustee to personal liability, or does not provide adequate indemnification
against any loss or expense resulting from the compliance therewith, and
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults. The Holders of not less than a
-----------------------
majority in principal amount of the Outstanding Securities may on behalf of the
Holders of all the Securities, by written notice to the Trustee, waive any past
default hereunder and its consequences, except a default
(1) in the payment of the principal of (or premium, if any) or interest on
any Security (including any Security which is required to have been purchased
pursuant to an Offer to Purchase which has been made by the Issuer), or
(2) in respect of a covenant or provision hereof which under Article Nine
cannot be modified or amended without the consent of the Holder of each
Outstanding Security affected.
Upon any such waiver, such default shall be cured and shall cease to exist,
and any Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs. In any suit for the enforcement of
---------------------
any right or remedy under this Indenture, or in any suit against the Trustee for
any action taken, suffered or omitted by it as Trustee, a court may require any
party litigant in such suit to file an undertaking to pay the reasonable costs
of such suit, and may assess reasonable costs against any such party litigant,
in the manner and to the extent provided in the Trust Indenture Act; provided,
that this Section shall not be deemed to authorize any court to require such an
undertaking or to make such an assessment in any suit instituted by the Trustee
and provided, further that, subject to a court's discretion, this Section shall
not apply to a suit by the Trustee, and as provided in the Trust Indenture Act.
SECTION 515. Waiver of Stay, or Extension Laws. The Issuer covenants (to
---------------------------------
the extent that they may lawfully do so) that they will not at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture; and the Issuer (to the extent that they may lawfully do so) hereby
expressly waives all benefit or advantage of any such law and covenants that
they will not hinder, delay or impede the
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execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities.
-----------------------------------
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only those
duties that are specifically set forth in this Indenture and no others, and no
implied covenants or obligations shall be read into this Indenture against the
Trustee, and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture. However, the
Trustee shall examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture (but need not confirm or
investigate the accuracy of mathematical calculations or other facts stated
therein).
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(1) this paragraph does not limit the effect of paragraph (b) of this
Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction received by
it pursuant to Section 512 hereof; and
(4) no provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
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repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), and (c) of this Section.
SECTION 602. Notice of Defaults. The Trustee shall give the Holders
------------------
notice of any default hereunder (a "Notice of Default") of which it has
knowledge as and to the extent provided by the Trust Indenture Act; provided,
however, that in the case of any default specified in Section 501(5), no such
notice to Holders shall be given until at least 30 days after the occurrence of
such default (without regard to any Notice of Default). For the purpose of this
Section, the term "default" means any event which is, or after notice or lapse
of time or both would become, an Event of Default.
Except in the case of an Event of Default in payment of principal of
(premium, if any) or interest on any Security, the Trustee may withhold notice
if and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of the Holders.
SECTION 603. Certain Rights of Trustee. Subject to the provisions of
-------------------------
Section 601:
(a) the Trustee may conclusively rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties, without any independent investigation of any fact or matter therein;
(b) any request or direction of the Issuer mentioned herein shall be
sufficiently evidenced by an Issuer request or Issuer Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall deem
it desirable that a matter be proved or established prior to taking, suffering
or omitting any action hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its part, request
and rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel of its selection and the advice of
such counsel or any Opinion of Counsel, shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders pursuant to this Indenture, unless such Holders shall have offered
to the Trustee reasonable security or indemnity satisfactory to the Trustee
against the costs, expenses and liabilities which might be incurred by it in
compliance with such request or direction;
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(f) the Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Issuer, personally or by agent or attorney
upon reasonable advance notice to the Issuer;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder;
(h) the Trustee shall not be liable for any action it takes, suffers to be
taken, or omits in good faith; and
(i) the Trustee shall not be deemed to have notice of any Default or Event
of Default unless a Responsible Officer of the Trustee has actual knowledge
thereof or unless written notice of any event which is in fact such a default is
received by the Trustee at the Corporate Trust Office of the Trustee, and such
notice references the Securities or this Indenture.
SECTION 604. Not Responsible for Recitals or Issuance of Securities. The
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recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the Issuer,
and the Trustee assumes no responsibility for its correctness. The Trustee
makes no representations as to the validity or sufficiency of this Indenture or
of the Securities. The Trustee shall not be accountable for the use or
application by the Issuer of Securities or the proceeds thereof.
SECTION 605. May Hold Securities. The Trustee, any Authenticating Agent,
-------------------
any Paying Agent, any Security Registrar or any other agent of the Issuer, in
its individual or any other capacity, may become the owner or pledgee of
Securities and, subject to Sections 608 and 613, may otherwise deal with the
Issuer and any other obligor upon the Securities with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Security
Registrar or such other agent.
SECTION 606. Money Held in Trust. Money held by the Trustee in trust
-------------------
hereunder need not be segregated from other funds except to the extent required
by law. The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed in writing with the Issuer.
SECTION 607. Compensation and Reimbursement. The Issuer agrees
------------------------------
(1) to pay to the Trustee from time to time such reasonable compensation
for all services rendered by it hereunder as may be agreed in writing from time
to time (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);
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(2) except as otherwise expressly provided herein, to reimburse the Trustee
upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any provision of this
Indenture (including the reasonable compensation and the compensation, expenses
and disbursements of its agents, accountants, experts and counsel), except any
such expense, disbursement or advance as may be attributable to its negligence
or bad faith; and
(3) to indemnify the Trustee and any predecessor Trustee and their agents
for, and to hold them harmless against, any loss, damage, claims, liability or
expense (including, without limitation, reasonable attorneys' fees and expenses
and taxes (other than taxes based upon, measured by or determined by the income
of such Person) incurred without negligence or bad faith on its part, arising
out of or in connection with the acceptance or administration of this trust,
including the costs and expenses of defending itself against any claim or
liability (not arising from negligence or bad faith) in connection with the
exercise or performance of any of its powers or duties hereunder.
The Trustee shall notify the Issuer promptly upon acquiring knowledge of
any claim for which it is entitled to be indemnified hereunder. Failure by the
Trustee to so notify the Issuer shall not relieve the Issuer of its obligations
hereunder unless the Issuer are prejudiced thereby. If the Issuer elect to
defend the claim, the Issuer shall be entitled to control the defense of such
claim and the Trustee shall cooperate in such defense. The Trustee may have
separate counsel, and the Issuer shall pay the reasonable fees and expenses of
such counsel until such time as the Issuer assumes the defense of such claim,
and thereafter, to the extent that in the Trustee's reasonable judgment its
interests conflict with or differ from those of the Issuer under such claim.
The Issuer need not pay for any settlement made without its consent, which
consent shall not be unreasonably withheld.
The Trustee shall have a lien prior to the Securities as to all property
and funds held by it hereunder for any amount owing it or any predecessor
Trustee pursuant to this Section 607, except with respect to funds held in trust
for the benefit of the Holders of particular Securities.
The obligations of the Issuer under this Section 607 shall survive the
resignation or removal of the Trustee and/or satisfaction and discharge of this
Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 501(9) or (10) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
applicable bankruptcy law.
SECTION 608. Disqualification; Conflicting Interests. If the Trustee has
---------------------------------------
or shall acquire a conflicting interest within the meaning of the Trust
Indenture Act, the Trustee shall either eliminate such interest within 90 days,
apply to the Commission for permission to continue, or resign, to the extent and
in the manner provided by, and subject to the provisions of, the Trust Indenture
Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility. There shall at all
---------------------------------------
times be a Trustee hereunder which shall be a Person that is eligible pursuant
to the Trust Indenture Act to act as such
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and has (or, in the case of a corporation included in a bank holding company
system, the related bank holding company has) a combined capital and surplus of
at least $50.0 million and its Corporate Trust Office or agency in The Borough
of Manhattan, City of New York. If such Person or bank holding company publishes
reports of condition at least annually, pursuant to law or to the requirements
of said supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Person or bank holding company
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section, it shall
resign immediately in the manner and with the effect hereinafter specified in
this Article.
SECTION 610. Resignation and Removal; Appointment of Successor.
-------------------------------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 611.
(b) The Trustee may resign at any time by giving written notice thereof to
the Issuer.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Issuer.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after written
request therefor by the Issuer or by any Holder who has been a bona fide Holder
of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and shall
fail to resign after written request therefor by the Issuer or by any such
Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property shall be
appointed or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then, in any such case, (i) the Issuer by Board Resolutions of the
Issuer may remove the Trustee, or (ii) subject to Section 514, any Holder who
has been a bona fide Holder of a Security for at least six months may, on behalf
of himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
(e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, the Issuer,
by Board Resolution of the Issuer, shall promptly appoint a successor Trustee.
If, within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Issuer and
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the retiring Trustee, the successor Trustee so appointed shall, forthwith upon
its acceptance of such appointment, become the successor Trustee and supersede
the successor Trustee appointed by the Issuer. If, within 30 days after the
retiring Trustee resigns, no successor Trustee shall have been so appointed by
the Issuer or the Holders of a majority in principal amount of the Outstanding
Securities and accepted appointment in the manner hereinafter provided, the
retiring Trustee or any Holder who has been a bona fide Holder of a Security for
at least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(f) The Issuer shall give notice of each resignation and each removal of
the Trustee and each appointment of a successor Trustee to all Holders in the
manner provided in Section 106. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor. Every successor
--------------------------------------
Trustee appointed hereunder shall execute, acknowledge and deliver to the Issuer
and to the retiring Trustee a written instrument accepting such appointment, and
thereupon the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee; but, on request of the Issuer or the successor Trustee,
such retiring Trustee shall, upon payment of all sums owing to the retiring
Trustee hereunder and subject to the Lien provided for in Section 607 hereof,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee,
the Issuer shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts. Notwithstanding the replacement of the Trustee pursuant to this Section
611, the Issuer's obligations under Section 607 hereof shall continue for the
benefit of the retiring Trustee.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to Business.
-----------------------------------------------------------
Any corporation into which the Trustee may be merged or converted or with which
it may be consolidated, or any corporation resulting from any merger, conversion
or consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee, or any corporation
into which all or substantially all of its corporate trust business is
transferred, may adopt such authentication and deliver the Securities so
authenticated with the same effect as if such successor Trustee had itself
authenticated such Securities.
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SECTION 613. Preferential Collection of Claims Against Issuer. If and
------------------------------------------------
when the Trustee shall be or become a creditor of the Issuer (or any other
obligor upon the Securities), the Trustee shall be subject to the provisions of
the Trust Indenture Act regarding the collection of claims against the Issuer(or
any such other obligor).
SECTION 614. Appointment of Authenticating Agent. The Trustee may appoint
-----------------------------------
an Authenticating Agent or Agents which shall be authorized to act on behalf of
the Trustee to authenticate Securities issued upon original issue and upon
exchange, registration of transfer, partial conversion or partial redemption or
pursuant to Section 307, and Securities so authenticated shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
reasonably acceptable to the Issuer and shall at all times be a corporation
organized and doing business under the laws of the United States of America, any
State thereof or the District of Columbia, authorized under such laws to act as
Authenticating Agent, having (or, in the case of a corporation included in a
bank holding company system, the related bank holding company has) a combined
capital and surplus of not less than $50.0 million and subject to supervision or
examination by Federal or State authority. If such Authenticating Agent or bank
holding company publishes reports of condition at least annually, pursuant to
law or to the requirements of said supervising or examining authority, then for
the purposes of this Section, the combined capital and surplus of such
Authenticating Agent or bank holding company shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time an Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, such Authenticating Agent shall
resign immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Issuer. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Issuer. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be reasonably acceptable to the Issuer and shall mail written
notice of such appointment by first-class mail, postage prepaid, to all Holders
as its names and addresses appear in the Security Register. Any successor
Authenticating
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Agent upon acceptance of its appointment hereunder shall become vested with all
the rights, powers and duties of its predecessor hereunder, with like effect as
if originally named as an Authenticating Agent. No successor Authenticating
Agent shall be appointed unless eligible under the provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section, and the Trustee
shall be entitled to be reimbursed for such payments from the Issuer, subject to
the provisions of Section 607.
If an appointment is made pursuant to this Section, the Securities may have
endorsed thereon, in addition to the Trustee's certificate of authentication, an
alternative certificate of authentication in the following form:
This is one of the Securities described in the within-mentioned Indenture.
[NAME OF AUTHENTICATING AGENT]
By___________________________
Authorized Signatory
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Issuer
SECTION 701. Issuer to Furnish Trustee Names and Addresses of Holders.
--------------------------------------------------------
The Issuer will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 15 days after each June 15 and December
15, commencing December 15, 1998, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders as of such Regular
Record Date, and
(b) at such other times as the Trustee may request in writing, within 30
days after the receipt by the Issuer of any such request, a list of similar form
and content as of a date not more than 15 days prior to the time such list is
furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
SECTION 702. Preservation of Information; Communications to Holders.
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(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with respect to
its rights under this Indenture or under the Securities and the corresponding
rights and duties of the Trustee shall be provided by the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same, agrees
with the Issuer and the Trustee that neither the Issuer nor the Trustee nor any
agent of either of them shall be held accountable by reason of any disclosure of
information as to the names and addresses of Holders made pursuant to the Trust
Indenture Act.
SECTION 703. Reports by Trustee.
------------------
(a) The Trustee shall mail or transmit to Holders such reports concerning
the Trustee and its actions under this Indenture as may be required pursuant to
the Trust Indenture Act at the times and in the manner provided pursuant
thereto.
(b) A copy of each such report shall, at the time of such mailing or
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, if any, with the Commission and with the
Issuer. The Issuer will notify the Trustee when the Securities are listed on any
stock exchange, or any delisting thereof.
SECTION 704. Reports by the Issuer. The Issuer shall file with the
---------------------
Trustee and the Commission, and mail or transmit to Holders, such information,
documents and other reports, and such summaries thereof, as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant to, the Trust Indenture Act; provided that any such information,
documents or reports required to be filed with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within
15 days after the same is so required to be filed with the Commission. Delivery
of such reports, information and documents to the Trustee is for informational
purposes only and the Trustee's receipt of such shall not constitute
constructive notice of any information contained therein or determinable from
information contained therein, including the Issuer's compliance with any of its
covenants hereunder (as to which the Trustee is entitled to rely exclusively on
Officers' Certificates and written notices delivered to the Trustee in
accordance with the terms of this Indenture).
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ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Issuer may Consolidate, Etc. Only on Certain Terms. The
--------------------------------------------------
Issuer may not, in a single transaction or a series of related transactions, (i)
consolidate or merge with or into any other Person or permit any other Person to
consolidate or merge with or into the Issuer or (ii) directly or indirectly,
transfer, sell, lease or otherwise dispose of all or substantially all of its
assets, unless:
(1) in a transaction in which the Issuer does not survive or in which
the Issuer transfers, sells, leases or otherwise disposes of all or
substantially all of its assets, the successor entity to the Issuer (for
purposes of this Article Eight, a "Successor Entity"), shall be organized and
validly existing under the laws of the United States of America, any State
thereof, or the District of Columbia, and shall expressly assume by an indenture
supplemental hereto executed and delivered to the Trustee, in form satisfactory
to the Trustee, all of the Issuer's obligations under the Indenture;
(2) immediately before and after giving effect to such transaction and
treating any Debt which becomes an obligation of the Issuer or a Restricted
Subsidiary as a result of such transaction as having been Incurred by the Issuer
or such Restricted Subsidiary at the time of the transaction, no Event of
Default or event that with the passing of time or the giving of notice, or both,
would constitute an Event of Default shall have occurred and be continuing;
(3) except in the case of any such consolidation or merger of the
Issuer with or into, or any such transfer, sale, lease or other disposition of
assets to, a Wholly Owned Restricted Subsidiary, immediately after giving effect
to such transaction, the Consolidated Net Worth of the Issuer (or other
successor entity to the Issuer) is equal to or greater than that of the Issuer
immediately prior to the transaction;
(4) except in the case of any such consolidation or merger of the
Issuer with or into, or any such transfer, sale, lease or other disposition of
assets to, a Wholly Owned Restricted Subsidiary, immediately after giving effect
to such transaction and treating any Debt which becomes an obligation of the
Issuer or a Restricted Subsidiary as a result of such transaction as having been
Incurred by the Issuer or such Restricted Subsidiary at the time of the
transaction, the Issuer (including any successor entity to the Issuer) could
Incur at least $1.00 of additional Debt pursuant to the provisions of the
Indenture described in the first paragraph of Section 1008; and
(5) the Issuer has delivered to the Trustee an Officer's Certificate
and an Opinion of Counsel, each stating that such amalgamation, consolidation,
merger, conveyance, transfer, sale, lease or disposition and, if a supplemental
indenture is required in connection with such transaction, such supplemental
indenture, complies with this Article and that all conditions precedent herein
provided for relating to such transaction have been complied with, and, with
respect to such Officer's Certificate, setting forth the manner of determination
of the Consolidated Net Worth and the ability to Incur Debt in accordance with
Clauses (3) and (4) of this Section 801, of the Issuer or, if applicable, of the
Successor Entity as required pursuant to the foregoing.
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SECTION 802. Successor Substituted. Upon any consolidation of the Issuer
---------------------
with, or merger of the Issuer into, any other Person or any transfer,
conveyance, sale, lease or other disposition of all or substantially all of the
properties and assets of the Issuer as an entirety in accordance with Section
801, the Successor Entity shall succeed to, and be substituted for, and may
exercise every right and power of, the Issuer under this Indenture with the same
effect as if such successor Person had been named herein as the Issuer herein,
and thereafter, except in the case of a lease, the predecessor Person shall be
relieved of all obligations and covenants under this Indenture and the
Securities.
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent of Holders. Without
--------------------------------------------------
the consent of any Holders, the Issuer, when authorized by a Board Resolution,
and the Trustee, at any time and from time to time, may enter into one or more
indentures supplemental hereto, in form satisfactory to the Trustee, for any of
the following purposes:
(1) to evidence the succession of another Person to an Issuer and the
assumption by any such successor of the covenants of the Issuer herein and in
the Securities; or
(2) to add to the covenants of the Issuer for the benefit of the Holders,
or to surrender any right or power herein conferred upon the Issuer; or
(3) to secure the Securities pursuant to the requirements of Section 1013
or otherwise; or
(4) to comply with any requirements of the Commission in order to effect
and maintain the qualification of this Indenture under the Trust Indenture Act;
or
(5) to cure any ambiguity, to correct or supplement any provision herein
which may be inconsistent with any other provision herein, or to make any other
provisions with respect to matters or questions arising under this Indenture
which shall not be inconsistent with the provisions of this Indenture, provided
that such action pursuant to this Clause (5) shall not adversely affect the
interests of the Holders in any material respect; or
(6) to evidence and provide for the acceptance and appointment hereunder of
a successor Trustee with respect to the Securities.
SECTION 902. Supplemental Indentures with Consent of Holders. With the
-----------------------------------------------
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities, by Act of said Holders delivered to the Issuer and the
Trustee, the Issuer, when authorized by Board Resolutions of the Issuer, and the
Trustee may enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or of modifying in any manner the rights of
the Holders under this Indenture;
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provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any installment of
interest on, any Security, or reduce the principal amount thereof or the rate of
interest thereon or any premium payable thereon, or change the place of payment
where, or the coin or currency in which, any Security or any premium or the
interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof (or, in
the case of redemption, on or after the Redemption Date or, in the case of an
Offer to Purchase which has been made, on or after the applicable Purchase
Date), or
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such supplemental
indenture, or the consent of whose Holders is required for any waiver (of
compliance with certain provisions of this Indenture or certain defaults
hereunder and its consequences) provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 513 or Section
1022, except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the consent of
the Holder of each Outstanding Security affected thereby, or
(4) following the mailing of an Offer with respect to an Offer to Purchase
pursuant to Section 1015 or 1016, modify the provisions of this Indenture with
respect to such Offer to Purchase in a manner adverse to such Holder.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures. In executing, or
------------------------------------
accepting the additional trusts created by, any supplemental indenture permitted
by this Article or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and (subject to Section
601) shall be fully protected in relying upon, an Opinion of Counsel stating
that the execution of such supplemental indenture is authorized or permitted by
this Indenture. The Trustee may, but shall not be obligated to, enter into any
such supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures. Upon the execution of any
---------------------------------
supplemental indenture under this Article, this Indenture shall be modified in
accordance therewith, and such supplemental indenture shall form a part of this
Indenture for all purposes; and every Holder of Securities theretofore or
thereafter authenticated and delivered hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act. Every supplemental
-----------------------------------
indenture executed pursuant to this Article shall conform to the requirements of
the Trust Indenture Act.
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SECTION 906. Reference in Securities to Supplemental Indentures.
--------------------------------------------------
Securities authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article may, and shall if required by the Trustee,
bear a notation in form approved by the Trustee as to any matter provided for in
such supplemental indenture. If the Issuer shall so determine, new Securities so
modified as to conform, in the opinion of the Trustee and the Issuer, to any
such supplemental indenture may be prepared and executed by the Issuer and
authenticated and delivered by the Trustee in exchange for Outstanding
Securities.
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and Interest. The Issuer will
------------------------------------------
duly and punctually pay the principal of (and premium, if any) and interest on
the Securities in accordance with the terms of the Securities and this
Indenture.
SECTION 1002. Maintenance of Office or Agency. The Issuer will maintain
-------------------------------
in the Borough of Manhattan, The City of New York, an office or agency where
Securities may be presented or surrendered for payment, where Securities may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Issuer in respect of the Securities and this Indenture
may be served. The Issuer will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Issuer shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Issuer hereby appoints the Trustee as its agent
to receive all such presentations, surrenders, notices and demands.
The Issuer may also from time to time designate one or more other offices
or agencies (in or outside the Borough of Manhattan, The City of New York) where
the Securities may be presented or surrendered for any or all such purposes and
may from time to time rescind such designations; provided, however, that no such
designation or rescission shall in any manner relieve the Issuer of its
obligation to maintain an office or agency in the Borough of Manhattan, The City
of New York, for such purposes. The Issuer will give prompt written notice to
the Trustee of any such designation or rescission and of any change in the
location of any such other office or agency.
SECTION 1003. Money for Security Payments to Be Held in Trust. If the
-----------------------------------------------
Issuer shall at any time act as its own Paying Agent, it will, on or before each
due date of the principal of (and premium, if any) or interest on any of the
Securities, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal (and premium, if any) or interest
so becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and will promptly notify the Trustee of its
action or failure so to act.
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Whenever the Issuer shall have one or more Paying Agents, it will, on or
before each due date of the principal of (and premium, if any) or interest on
any Securities, deposit with a Paying Agent a sum sufficient to pay the
principal (and premium, if any) or interest so becoming due, such sum to be held
as provided by the Trust Indenture Act, and (unless such Paying Agent is the
Trustee) the Issuer will promptly notify the Trustee of its action or failure so
to act.
The Issuer will cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee, subject to the provisions of this Section, that such Paying
Agent will (i) comply with the provisions of the Trust Indenture Act applicable
to it as a Paying Agent (or, until such time as this Indenture shall be
qualified under the Trust Indenture Act, which would be applicable to it as
Paying Agent if this Indenture were so qualified) and (ii) in the event and
during the continuance of any default by the Issuer (or any other obligor upon
the Securities) in the making of any payment in respect of the Securities, upon
the written request of the Trustee, forthwith pay to the Trustee all sums held
in trust by such Paying Agent as such.
The Issuer may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Issuer
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Issuer or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Issuer or such Paying
Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Issuer, in trust for the payment of the principal of (and premium, if any)
or interest on any Security and remaining unclaimed for two years after such
principal (and premium, if any) or interest has become due and payable shall be
paid to the Issuer on Issuer request, or (if then held by the Issuer) shall be
discharged from such trust; and the Holder of such Security shall thereafter, as
an unsecured general creditor, look only to the Issuer for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Issuer trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Issuer cause to be
published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in The City of New
York, notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to the Issuer.
SECTION 1004. Existence. Subject to Article Eight and Section 1015, the
---------
Issuer will do or cause to be done all things necessary to preserve and keep in
full force and effect its existence, rights (charter and statutory) and
franchises; provided, however, that Issuer shall not be required to preserve any
such right or franchise if the Issuer in good faith shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Issuer and that the loss thereof is not disadvantageous in any material
respect to the Holders.
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SECTION 1005. Maintenance of Properties. The Issuer will cause all
-------------------------
material properties used or useful in the conduct of its business or the
business of any Restricted Subsidiary of the Issuer to be maintained and kept in
good condition, repair and working order (reasonable wear and tear excepted) and
supplied with all necessary equipment and will cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
the judgment of the Issuer may be necessary so that the business carried on in
connection therewith may be properly conducted at all times; provided, however,
that nothing in this Section shall prevent an Issuer or any of its Restricted
Subsidiaries from discontinuing the operation or maintenance of any of such
properties if such discontinuance is, as determined by the Issuer or Restricted
Subsidiary in good faith, desirable in (or not adverse to) the conduct of its
business or the business of any Restricted Subsidiary and not adverse in any
material respect to the Holders.
SECTION 1006. Payment of Taxes and Other Claims. The Issuer will pay or
---------------------------------
discharge or cause to be paid or discharged, before the same shall become
delinquent, (1) all material taxes, assessments and governmental charges levied
or imposed upon the Issuer or any of its Restricted Subsidiaries or upon the
income, profits or property of the Issuer or any of its Restricted Subsidiaries,
and (2) all material lawful claims for labor, materials and supplies which, if
unpaid, might by law become a lien upon the property of the Issuer or any of its
Restricted Subsidiaries; provided, however, that the Issuer shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate negotiations or proceedings.
SECTION 1007. Maintenance of Insurance. The Issuer shall, and the Issuer
------------------------
shall cause its Restricted Subsidiaries to, keep at all times all of its
properties which are of an insurable nature insured (which may include self-
insurance) against loss or damage with insurers believed by the Issuer to be
responsible to the extent that property of similar character is usually so
insured by corporations similarly situated and owning like properties in
accordance with good business practice.
SECTION 1008. Limitation on Debt. The Issuer will not, and will not
------------------
permit any of its Restricted Subsidiaries to, Incur any Debt; provided that the
Issuer may Incur Debt if, after giving effect to the incurrence of such Debt and
the receipt and application of the proceeds therefrom, the Consolidated Debt to
EBITDA Ratio would be greater than zero and less than 6:1.
Notwithstanding the foregoing limitation, the following Debt may be
Incurred, each item to be given independent effect:
(1) Permitted Senior Bank Debt;
(2) Debt owed (A) to the Issuer evidenced by a promissory note, or (B)
to any Restricted Subsidiary; provided that any event which results in any such
Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent
transfer of such Debt (other than to the Issuer or another Restricted
Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such
Debt not permitted by this clause (2);
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(3) Debt of the Issuer or any Restricted Subsidiary (A) in respect of
performance, surety or appeal bonds or letters of credit in the ordinary course
of business, (B) under Permitted Interest Rate or Currency Protection
Agreements, or (C) arising under, or arising from, agreements providing for
indemnification, adjustment of purchase price or similar obligations, or from
Guarantees or letters of credit, surety bonds or performance bonds securing any
obligations of the Issuer Incurred in connection with the disposition of any
business, assets (other than Guarantees of Debt Incurred by any Person acquiring
all or any portion of such business, assets or Restricted Subsidiary for the
purpose of financing such acquisition), in a principal amount not to exceed the
gross proceeds actually received by the Issuer or any Restricted Subsidiary in
connection with such disposition;
(4) Debt which is exchanged for or the proceeds of which are used to
refinance or refund, or any extension or renewal of (each a "refinancing"), (a)
the Securities, (b) Debt incurred pursuant to clauses (3), (5), (6), (8) and (9)
of this paragraph and this clause (4), in each case in an aggregate principal
amount not to exceed the principal amount of the Debt so refinanced (together
with any accrued interest and any premium and other payment required to be made
with respect to the Debt being refinanced or refunded, and any fees, costs,
expenses, underwriting discounts or commissions and other payments paid or
payable with respect to the Debt incurred pursuant to this clause (4));
provided, however, that (A) Debt, the proceeds of which are used to refinance
the Securities, or Debt which is pari passu with or subordinate in right of
payment to the Securities, shall only be permitted if (x) in the case of any
refinancing of the Securities or Debt which is pari passu to the Securities, the
refinancing Debt is Incurred by the Issuer and made pari passu to the Securities
or subordinated to the Securities, and (y) in the case of any refinancing of
Debt which is subordinated to the Securities, the refinancing Debt is Incurred
by the Issuer and is subordinated to the Securities in a manner that is at least
as favorable to the Holders as that of the Debt refinanced; (B) the refinancing
Debt by its terms, or by the terms of any agreement or instrument pursuant to
which such Debt is issued, does not have a final maturity prior to the final
maturity of the Debt being refinanced and has an Average Life longer than the
Average Life of the Debt being refinanced; and (C) in the case of any
refinancing of Debt Incurred by the Issuer, the refinancing of Debt may be
Incurred only by the Issuer, and in the case of any refinancing of Debt Incurred
by a Restricted Subsidiary, the refinancing Debt may be Incurred only by such
Restricted Subsidiary or the Issuer;
(5) Acquisition Debt of the Issuer or any Restricted Subsidiary;
(6) Exchange Securities and Additional Securities;
(7) Debt of the Issuer not to exceed, at any time outstanding, two
times the Net Cash Proceeds received by the Issuer after the Closing Date from
the issuance and sale of its Capital Stock (other than Disqualified Stock) to a
Person that is not a Subsidiary of the Issuer, to the extent that such Net Cash
Proceeds have not been used pursuant to clause (C)(3) of the first paragraph or
clauses (iii), (iv) or (vii) of the second paragraph of Section 1011 to make a
Restricted Payment; provided that such Debt does not have a final maturity prior
to the final maturity of the Securities and has an Average Life longer than the
Average Life of the Securities;
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(8) Existing Debt of the Issuer;
(9) Debt of the Issuer or any Restricted Subsidiary Incurred to
finance the purchase or other acquisition of any property, inventory, asset or
business directly or indirectly, by the Issuer or any Restricted Subsidiary used
in, or to be used in, the System and Network Management Business;
(10) Subordinated Debt of the Issuer not to exceed $300.0 million in
principal outstanding at any time; and
(11) other Debt of the Issuer or any Restricted Subsidiary not to
exceed $50.0 million at any one time outstanding.
For purposes of determining compliance with this Section 1008, in the event
that an item of Debt meets the criteria of more than one of the types of Debt
described in the above clauses, or is permitted in part under the first
paragraph of this Section 1008 and in part under one or more of the above
clauses, the Issuer, in its sole discretion, shall classify, and from time to
time may reclassify, such item of Debt.
For purposes of determining any particular amount of Debt under Section
1008, Guarantees, Liens or obligations with respect to letters of credit
supporting Debt otherwise included in the determination of such particular
amount shall not be included.
SECTION 1009. Limitation on Sale-Leaseback Transactions. The Issuer will
-----------------------------------------
not, and will not permit any Restricted Subsidiary to, enter into any sale-
leaseback transaction involving any of its assets or properties, whether now
owned or hereafter acquired, whereby the Issuer or a Restricted Subsidiary sells
or transfers such assets or properties and then or thereafter leases such assets
or properties or any part thereof or any other assets or properties that the
Issuer or such Restricted Subsidiary, as the case may be, intends to use for
substantially the same purpose or purposes as the assets or properties sold or
transferred.
The foregoing restriction does not apply to any sale-leaseback transaction
if (i) the lease is for a period, including renewal rights, of not in excess of
three years; (ii) the sale-leaseback transaction is consummated within 180 days
after the purchase of the assets subject to such transaction; (iii) the
transaction is solely between the Issuer and any Wholly Owned Restricted
Subsidiary or solely between Wholly Owned Restricted Subsidiaries; or (iv) the
Issuer or such Restricted Subsidiary, within 12 months after the sale or
transfer of any assets or properties is completed, applies an amount no less
than the Net Cash Proceeds received from such sale in accordance with clause (A)
or (B) of the second paragraph of Section 1015(1).
SECTION 1010. Limitation on Guarantees of Issuer Debt by Restricted
-----------------------------------------------------
Subsidiaries. The Issuer may not permit any Restricted Subsidiary, directly or
- ------------
indirectly, to Guarantee, assume or in any other manner become liable for the
payment of any Debt of the Issuer (other than Debt of the Issuer Incurred
pursuant to clauses (1), (3), (5), (9) or (11) of the second paragraph of
Section 1008
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or refinanced pursuant to clause (4) of the second paragraph of Section 1008 of
Debt originally incurred under clause (3), (5) or (9) of the second paragraph of
Section 1008) that is pari passu with or subordinate in right of payment to the
Securities unless: (i) (A) such Restricted Subsidiary simultaneously executes
and delivers a supplemental indenture providing for a Guarantee of payment of
the Securities by such Restricted Subsidiary; and (B) with respect to any
Guarantee of Debt of the Issuer that is subordinate in right of payment to the
Securities, such Guarantee shall be subordinated to such Restricted Subsidiary's
Guarantee with respect to the Securities at least to the same extent as such
Debt is subordinated to the Securities, and (ii) such Restricted Subsidiary
waives, and will not in any manner whatsoever claim or take the benefit or
advantage of, any rights of reimbursement, indemnity or subrogation or any other
rights against the Issuer or any other Restricted Subsidiary as a result of any
payment by such Restricted Subsidiary under its Guarantee until the Securities
have been paid in full.
Notwithstanding the foregoing, any Guarantee by a Restricted Subsidiary may
provide by its terms that it shall be automatically and unconditionally released
and discharged upon (i) any sale, exchange or transfer, to any Person not an
Affiliate of the Issuer, of all of the Issuers and each Restricted Subsidiary's
Capital Stock in, or all or substantially all of the assets of, such Restricted
Subsidiary (which sale, exchange or transfer is not prohibited by this
Indenture) or (ii) the release or discharge of the Guarantee which resulted in
the creation of such Restricted Subsidiary's Guarantee with respect to the
Securities, except a discharge or release by or as a result of payment under
such Guarantee.
SECTION 1011. Limitation on Restricted Payments. The Issuer will not, and
---------------------------------
will not permit any Restricted Subsidiary directly or indirectly to:
(1) declare or pay any dividend or make any distribution on or with
respect to its Capital Stock to Persons other than the Issuer or any of its
Restricted Subsidiaries, (other than (x) dividends or distributions payable
solely in shares of its Capital Stock (other than Disqualified Stock), or in
options, warrants or other rights to acquire shares of such Capital Stock; (y)
pro rata dividends or distributions on Common Stock of Restricted Subsidiaries
held by minority stockholders; or (z) dividends in respect of Disqualified
Stock);
(2) purchase, redeem, retire or otherwise acquire for value any shares
of Capital Stock of (A) the Issuer or an Unrestricted Subsidiary (including
options, warrants or other rights to acquire such shares of Capital Stock) held
by any Person, or (B) a Restricted Subsidiary (including options, warrants or
other rights to acquire such shares of Capital Stock) held by any Person other
than the Issuer or a Wholly Owned Restricted Subsidiary of the Issuer;
(3) make any voluntary or optional principal payment, or voluntary or
optional redemption, repurchase, defeasance, or other acquisition or retirement
for value, of Debt of the Issuer that is subordinated in right of payment to the
Securities; or
(4) make any Investment, other than a Permitted Investment, in any
Person,
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(such payments or any other actions described in clauses (1) through (4) above
being collectively "Restricted Payments") if, at the time of, and after giving
effect to, the proposed Restricted Payment:
(A) a Default or Event of Default shall have occurred and be
continuing;
(B) the Issuer could not Incur at least $1.00 of Debt under the
first paragraph of Section 1008; or
(C) the aggregate amount of all Restricted Payments (the amount,
if other than in cash, to be determined in good faith by the Board of Directors,
whose determination shall be conclusive and evidenced by a Board Resolution)
made after the Closing Date shall exceed the sum of: (1) cumulative Consolidated
EBITDA since the date of original issuance of the Securities through the last
day of the last full fiscal quarter ending immediately preceding the date of
such Restricted Payment for which quarterly or annual financial statements are
available; minus (2) 1.5 times cumulative Consolidated Interest Expense of the
Issuer since the date of original issuance of the Securities through the last
day of the last full fiscal quarter ending immediately preceding the date of
such Restricted Payment for which quarterly or annual financial statements are
available, plus (3) the aggregate Net Cash Proceeds received by the Issuer after
the Closing Date from the issuance and sale permitted by this Indenture of its
Capital Stock (other than Disqualified Stock) to a Person who is not a
Subsidiary of the Issuer, including an issuance or sale permitted by this
Indenture of Debt of the Issuer for cash subsequent to the Closing Date upon the
conversion of such Debt into Capital Stock (other than Disqualified Stock) of
the Issuer, or from the issuance to a Person who is not a Subsidiary of the
Issuer of any options, warrants or other rights to acquire Capital Stock of the
Issuer (in each case, exclusive of any Disqualified Stock or any options,
warrants or other rights that are redeemable at the option of the holder, or are
required to be redeemed, prior to the stated final maturity date of the
Securities), in each case except to the extent such Net Cash Proceeds are used
to Incur Debt pursuant to clause (vii) of the second paragraph of Section 1008,
plus (4) an amount equal to the net reduction in Investments (other than
reductions in Permitted Investments) in any Person resulting from payments of
interest on Debt, dividends, repayments of loans or advances, or other transfers
of assets, in each case to the Issuer or any Restricted Subsidiary or from the
Net Cash Proceeds from the sale of any such Investment (except, in each case, to
the extent any such payment or proceeds are included in the calculation of
Consolidated EBITDA), or from redesignations of Unrestricted Subsidiaries as
Restricted Subsidiaries, not to exceed, in each case, the amount of Investments
previously made by the Issuer or any Restricted Subsidiary in such Person or
Unrestricted Subsidiary.
The foregoing provision shall not be violated by reason of:
(i) the payment of any dividend within 60 days after the date of
declaration thereof if, at said date of declaration, such payment would comply
with the foregoing paragraph;
(ii) the redemption, repurchase, defeasance or other acquisition or
retirement for value of Debt that is subordinated in right of payment to the
Securities including premium, if any,
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and accrued and unpaid interest, with the proceeds of, Debt Incurred under
clause (ii) of the second paragraph of Section 1008.
(iii) the repurchase, redemption or other acquisition of Capital
Stock of the Issuer or a Subsidiary of the Issuer (or options, warrants or other
rights to acquire such Capital Stock) in exchange for (including upon exercise
of a conversion right), or out of the proceeds of a capital contribution or a
substantially concurrent offering of, shares of Capital Stock (other than
Disqualified Stock) of the Issuer (or options, warrants or other rights to
acquire such Capital Stock);
(iv) the making of any principal payment or the repurchase,
redemption, retirement, defeasance or other acquisition for value of Debt of the
Issuer which is subordinated in right of payment to the Securities in exchange
for, or out of the proceeds of, a capital contribution or a substantially
concurrent offering of, shares of the Capital Stock (other than Disqualified
Stock) of the Issuer (or options, warrants or other rights to acquire such
Capital Stock);
(v) payments or distributions, to dissenting stockholders pursuant to
applicable law, pursuant to or in connection with a consolidation, merger or
transfer of assets that complies with the provisions of this Indenture
applicable to mergers, consolidations and transfers of all or substantially all
of the property and assets of the Issuer, and payments of cash in lieu of
fractional shares;
(vi) Investments in any Person; provided that the aggregate amount of
Investments made pursuant to this clause (vi) does not exceed the sum of (a)
$50.0 million, plus (b) the amount of Net Cash Proceeds received by the Issuer
after the Closing Date from the sale of its Capital Stock (other than
Disqualified Stock) to a Person who is not a Subsidiary of the Issuer, except to
the extent such Net Cash Proceeds are used to Incur Debt pursuant to clause (7)
of the second paragraph of Section 1008 or to make Restricted Payments pursuant
to clause (C)(3) of the first paragraph, or clauses (iii) or (iv) of this
paragraph, of this Section 1011, plus (c) the net reduction in Investments made
pursuant to this clause (vi) resulting from distributions on or repayments of
such Investments or from the Net Cash Proceeds from the sale of any such
Investment (except in each case to the extent any such payment or proceeds is
included in the calculation of Consolidated EBITDA) or from such Person becoming
a Restricted Subsidiary; provided that the net reduction in any Investment shall
not exceed the amount of such Investment;
(vii) Investments acquired in exchange for Capital Stock (other than
Disqualified Stock) of the Issuer;
(viii) the purchase, redemption or other acquisition or retirement of
Common Stock Of the Issuer or any option or other right to acquire shares of
Common Stock of the Issuer (I) if such Common Stock, option or other right was
issued pursuant to a plan or arrangement approved by the Issuer's Board of
Directors, and such purchase, redemption or other acquisition or retirement, (x)
occurs in accordance with the terms of such plan or arrangement, from former
employees of the Issuer and its Subsidiaries or their estates or (y) is from an
employee of the Issuer and the price paid by the Issuer to such employee is
equal to the exercise or purchase price paid by such employee and
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(II) from employees of the Issuer or its Subsidiaries in an amount not to exceed
$5.0 million in any fiscal year; provided that, in the case of clause (II),
amounts not paid for any such purchase, redemption or other acquisition or
retirement in any fiscal year may be accumulated and paid in any subsequent
fiscal year;
(ix) additional Restricted Payments not to exceed $50.0 million in the
aggregate; or
(x) the acquisition of Capital Stock of the Issuer by the Issuer in
connection with the cashless exercise of any options, warrants or similar rights
issued by the Issuer.
Each Restricted Payment permitted pursuant to the preceding paragraph
(other than the Restricted Payment referred to in clause (2) thereof and an
exchange of Capital Stock for Capital Stock or Debt referred to in clause (3) or
(4) thereof), and the Net Cash Proceeds from any issuance of Capital Stock
referred to in clauses (iii), (iv) and (vi), shall be included in calculating
whether the conditions of clause (C) of the first paragraph of this Section 1011
have been met with respect to any subsequent Restricted Payments. In the event
the proceeds of an issuance of Capital Stock of the Issuer are used for the
redemption, repurchase or other acquisition of the Securities, or Debt that is
pari passu with the Securities, then the Net Cash Proceeds of such issuance
shall be included in clause (C) of the first paragraph of this Section 1011 only
to the extent such proceeds are not used for such redemption, repurchase or
other acquisition of Debt.
SECTION 1012. Limitation on Dividend and Other Payment Restrictions
-----------------------------------------------------
Affecting Restricted Subsidiaries. The Issuer may not, and may not permit any
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Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary (i) to pay dividends (in cash or otherwise)
or make any other distributions in respect of its Capital Stock owned by the
Issuer or any other Restricted Subsidiary or pay any Debt or other obligation
owed to the Issuer or any other Restricted Subsidiary; (ii) to make loans or
advances to the Issuer or any other Restricted Subsidiary; or (iii) to transfer
any of its property or assets to the Issuer or any other Restricted Subsidiary.
Notwithstanding the foregoing, the Issuer may, and may permit any Restricted
Subsidiary to, suffer to exist any such encumbrance or restriction:
(1) pursuant to any agreement in effect on the date of original issuance of
the Securities, and any amendments, extensions, refinancings, renewals or
replacements of such agreements, provided that the amendments, encumbrances and
restrictions in any such extensions, refinancings, renewals or replacements are
no less favorable in any material respect to the Holders, than those
encumbrances or restrictions that are then in effect and that are being
extended, refinanced, renewed or replaced;
(2) existing under or by reason of applicable law;
(3) existing in connection with any Permitted Senior Bank Debt or any Debt
incurred pursuant to clause (5) of the second paragraph of Section 1008;
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(4) pursuant to an agreement existing prior to the date on which such
Person became a Restricted Subsidiary and not Incurred in anticipation of
becoming a Restricted Subsidiary, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person so acquired;
(5) pursuant to an agreement entered into in connection with Debt Incurred
under clause (4) of the second paragraph of Section 1008; provided, however,
that the provisions contained in such agreement related to such encumbrance or
restriction are no more restrictive in any material respect than the provisions
contained in the agreement the subject of the refinancing such clause (4) of the
second paragraph of Section 1008;
(6) restrictions contained in any agreement relating to a Lien of a
Restricted Subsidiary or the Issuer otherwise permitted under this Indenture,
but only to the extent such restrictions restrict the transfer of the property
subject to such Lien;
(7) customary nonassignment provisions entered into in the ordinary course
of business in leases, licenses and other contracts to the extent such
provisions restrict the transfer, sublicensing or any such license or subletting
of any such lease or the assignment of rights under any such contract;
(8) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement which has been entered into for the sale or disposition
of all or substantially all of the Capital Stock or assets of such Restricted
Subsidiary; provided that consummation of such transaction would not result in
an Event of Default or an event that, with the passing of time or the giving of
notice or both, would constitute an Event of Default, that such restriction
terminates if such transaction is closed or abandoned and that the closing or
abandonment of such transaction occurs within one year of the date such
agreement was entered into;
(9) any restriction imposed pursuant to contracts for the sale of assets
with respect to the transfer of the assets to be sold pursuant to such contract;
(10) arising or agreed to in the ordinary course of business, not relating
to any Debt, and that do not, individually, or in the aggregate, detract from
the value of property or assets of the Issuer or any Restricted Subsidiary in
any manner material to the Issuer or any Restricted Subsidiary; or
(11) such encumbrance or restriction is contained in the terms of any
agreement pursuant to which such Debt was issued if (A) the encumbrance or
restriction applies only in the event of a payment default or a default with
respect to a financial covenant contained in such Debt or agreement, (B) the
encumbrance or restriction is not materially more disadvantageous to the Holders
of the Securities than is customary in comparable financings, and (C) the Issuer
determines that any such encumbrance or restriction will not materially affect
the Issuer's ability to make principal or interest payments on the Securities.
SECTION 1013. Limitation on Liens. The Issuer may not, and may not permit
-------------------
any Restricted Subsidiary to, Incur or suffer to exist any Lien, on or with
respect to any property or assets now
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owned or hereafter acquired to secure any Debt without making, or causing such
Restricted Subsidiary to make, effective provision for securing the Securities
(x) equally and ratably with such Debt as to such property or assets for so long
as such Debt will be so secured or (y) in the event such Debt is Debt of the
Issuer which is subordinate in right of payment to the Securities, prior to such
Debt as to such property or assets for so long as such Debt will be so secured.
The foregoing restrictions shall not apply to:
(1) Liens in existence on the date of original issuance of the
Securities;
(2) Liens securing only the Securities and any Lien in favor of the
Trustee for the benefit of the Holders arising under the provisions in this
Indenture or the Escrow Agreement;
(3) Liens granted by a Restricted Subsidiary in favor of the Issuer or
any Restricted Subsidiary;
(4) Liens to secure Permitted Senior Bank Debt;
(5) Liens securing Purchase Money Secured Debt;
(6) Liens on property existing immediately prior to the time of
acquisition thereof (and not Incurred in anticipation of the financing of such
acquisition);
(7) Liens on property of a Person existing at the time such Person
becomes a Restricted Subsidiary and not incurred in anticipation of becoming a
Restricted Subsidiary;
(8) any interest in or title of a lessor to any property subject to a
Capital Lease Obligation which is permitted under this Indenture; or
(9) Liens to secure Debt Incurred pursuant to clause (4) of the second
paragraph of Section 1008; provided that such Lien does not extend to any
property other than the property securing the Debt being refinanced pursuant to
clause (4) of the second paragraph of Section 1008.
SECTION 1014. Limitation on Issuance of Capital Stock of Restricted
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Subsidiaries. The Issuer will not sell, and will not permit any Restricted
- ------------
Subsidiary, directly or indirectly, to issue or sell, any shares of Capital
Stock of a Restricted Subsidiary (including options, warrants or other rights to
purchase shares of such Capital Stock) except (i) to the Issuer or a Wholly
Owned Restricted Subsidiary; (ii) issuances of director's qualifying shares or
sales to foreign nationals of shares of Capital Stock of foreign Restricted
Subsidiaries, to the extent required by applicable law; (iii) if, immediately
after giving effect to such issuance or sale, such Restricted Subsidiary would
no longer constitute a Restricted Subsidiary and any Investment in such Person
remaining after giving effect to such issuance or sale would have been permitted
under Section 1011 if made on the date of such issuance or sale; or (iv)
issuances or sales of Common Stock of a Restricted Subsidiary.
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SECTION 1015. Asset Sales.
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(1) The Issuer will not, and will not permit any Restricted Subsidiary to,
consummate an Asset Sale unless (i) the Issuer or the applicable Restricted
Subsidiary, as the case may be, receives consideration at the time of such Asset
Sale at least equal to the fair market value of the assets sold or otherwise
disposed of (as evidenced by a resolution of the Board of Directors), and (ii)
at least 75% of the consideration received by the Issuer or the Restricted
Subsidiary, as the case may be, from such Asset Sale shall be cash or other
Qualified Consideration.
The Issuer or any Restricted Subsidiary may, within 365 days of the Asset
Sale, invest the Net Cash Proceeds thereof (A) in property or assets used, or to
be used, in the System and Network Management Business, or in a company engaged
primarily in the System and Network Management Business (if and to the extent
otherwise permitted under this Indenture), or (B) to repay Secured Debt of the
Issuer or any Restricted Subsidiary. The amount of such Net Cash Proceeds not
used or invested within 365 days of the Asset Sale in the manner described in
clauses (A) and (B) above shall constitute "Excess Proceeds."
In the event that Excess Proceeds exceed $10.0 million, the Issuer shall
make an Offer to Purchase that amount of Securities equal to the amount of
Excess Proceeds at a price equal to 100% of the principal amount of the
Securities to be purchased, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the date of purchase and, to the extent required by
the terms thereof, any other Debt of the Issuer that is pari passu with the
Securities or Debt of a Restricted Subsidiary. Each Offer to Purchase shall be
mailed within 30 days following the date that the Issuer shall become obligated
to purchase Securities with any Excess Proceeds. Following the completion of an
Offer to Purchase, the amount of Excess Proceeds shall be deemed to be reset at
zero and, to the extent there are any remaining Excess Proceeds the Issuer may
use such Excess Proceeds for any use which is not otherwise prohibited by this
Indenture.
The Issuer will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the purchase
of Securities pursuant to such Offer to Purchase.
(2) Not later than the date of the Offer with respect to an Offer to
Purchase pursuant to this Section 1015, the Issuer shall deliver to the Trustee
an Officers' Certificate as to (i) the Purchase Amount, (ii) the allocation of
the Net Cash Proceeds from the Asset Sale(s) pursuant to which such Offer is
being made, including, if amounts are invested in assets related to the business
of the Issuers, the actual assets acquired and a statement indicating the
relationship of such assets to the business of the Issuer and (iii) the
compliance of such allocation with the provisions of Section 1015(1).
The Issuer shall perform its obligations specified in the Offer for the
Offer to Purchase. On or prior to the Purchase Date, the Issuer shall (i)
accept for payment (on a pro rata basis, if necessary) Securities or portions
thereof tendered pursuant to the Offer, (ii) deposit with the paying agent (or,
if the Issuer is acting as its own paying agent, segregate and hold in trust as
provided in Section 1003)
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money sufficient to pay the purchase price of all Securities or portions thereof
so accepted and (iii) deliver or cause to be delivered to the Trustee all
Securities so accepted together with an Officers' Certificate stating the
Securities or portions thereof accepted for payment by the Issuers. The Paying
Agent (or the Issuers, if so acting) shall promptly mail or deliver to Holders
of Securities so accepted payment in an amount equal to the purchase price, and
the Trustee shall promptly authenticate and mail or deliver to such Holders a
new Security equal in principal amount to any unpurchased portion of the
Security surrendered. Any Security not accepted for payment shall be promptly
mailed or delivered by the Issuer to the Holder thereof. The Issuer shall
publicly announce the results of the Offer on or as soon as practicable after
the Purchase Date.
SECTION 1016. Change of Control.
-----------------
(1) If a Change of Control shall occur at any time, then each Holder of
Securities shall have the right to require that the Issuer purchase such
Holder's Securities, in whole or in part in integral multiples of $1,000, at a
purchase price in cash, in an amount equal to 101% of the principal amount of
such Securities or portion thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of purchase, pursuant to the Offer to
Purchase and in accordance with the other procedures set forth in this
Indenture. Within 30 days following the Change of Control, the Issuer will mail
an Offer to Purchase to each Holder describing the transaction or transactions
that constitute the Change of Control and offering to purchase Securities on the
date specified in the Offer to Purchase. The Issuer will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the purchase of the Securities pursuant to the
Offer to Purchase.
(2) The Issuer shall perform its obligations specified in the Offer to
Purchase and the Trustee shall perform its obligations arising hereunder in
connection therewith. Prior to the Purchase Date, the Issuer shall (i) accept
for payment Securities or portions thereof tendered pursuant to the Offer, (ii)
deposit with the Paying Agent (or, if the Issuer is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) money sufficient
to pay the purchase price of all Securities or portions thereof so accepted and
(iii) deliver or cause to be delivered to the Trustee all Securities so accepted
together with an Officers' Certificate stating the Securities or portions
thereof accepted for payment by the Issuer. The Paying Agent shall promptly
mail or deliver to Holders of Securities so accepted payment in an amount equal
to the purchase price, and the Trustee shall promptly authenticate and mail or
deliver to such Holders a new Security or Securities equal in principal amount
to any unpurchased portion of the Security surrendered as requested by the
Holder. Any Security not accepted for payment shall be promptly mailed or
delivered by the Issuer to the Holder thereof. The Issuer shall publicly
announce the results of the Offer on or as soon as practicable after the
Purchase Date.
(3) Notwithstanding the foregoing, the Issuer will not be required to make
an Offer to Purchase upon a Change of Control if a third party makes the Offer
to Purchase in the manner, at the times and otherwise in compliance with the
requirements set forth in this Section 1016 and this Indenture applicable to the
Offer to Purchase made by the Issuer and purchases all Securities validly
tendered and not withdrawn under such Offer to Purchase.
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SECTION 1017. Transactions with Affiliates and Related Persons. The
------------------------------------------------
Issuer may not, and may not permit any Restricted Subsidiary to, enter into any
transaction (or series of related transactions) not in the ordinary course of
business with an Affiliate or Related Person of the Issuer (other than the
Issuer or a Wholly Owned Restricted Subsidiary) involving aggregate
consideration in excess of $5.0 million, including any Investment, either
directly or indirectly, unless such transaction is on terms no less favorable to
the Issuer or such Restricted Subsidiary than those that could be obtained in a
comparable arm's-length transaction with an entity that is not an Affiliate or
Related Person and is in the best interests of the Issuer or such Restricted
Subsidiary. For any transaction (or series of related transactions) that
involves less than or equal to $10.0 million, the Chief Executive Officer,
President or Chief Operating Officer of the Issuer shall determine that the
transaction satisfies the above criteria and shall evidence such a determination
by an Officer's Certificate filed with the Trustee. For any transaction that
involves in excess of $10.0 million, (a) a majority of the disinterested members
of the Board of Directors shall determine that the transaction satisfies the
above criteria or (b) the Issuer shall obtain a written opinion of a nationally
recognized investment banking or appraisal firm stating that the transaction is
fair to the Issuer or such Restricted Subsidiary.
The foregoing limitation does not apply, and shall not apply, to (i) any
transaction solely between the Issuer and any Restricted Subsidiary or solely
between any Restricted Subsidiaries; (ii) the payment of reasonable and
customary regular fees to directors of the Issuer who are not employees of the
Issuer; (iii) any payments or other transactions pursuant to any tax-sharing
agreement between the Issuer and any other Person with which the Issuer files a
consolidated tax return or with which the Issuer is part of a consolidated group
for tax purposes; (iv) licensing or sublicensing or the use of any intellectual
property by the Issuer or any Restricted Subsidiary to the Issuer or any
Restricted Subsidiary; (v) any transaction entered into for the purpose of
granting or altering registration rights with respect to any Capital Stock of
the Issuer; (vi) any Restricted Payments not prohibited by Section 1011 or (vii)
compensation, severance and employee benefit arrangements with any officer,
director or employee of the Issuer or any Restricted Subsidiary, including under
any stock option or stock incentive plans, in the ordinary course of business.
SECTION 1018. Unrestricted Subsidiaries. The Issuer may designate any
-------------------------
Subsidiary of the Issuer to be an "Unrestricted Subsidiary" as provided below in
which event such Subsidiary and each other Person that is then, or thereafter
becomes, a Subsidiary of such Subsidiary will be deemed to be an Unrestricted
Subsidiary. "Unrestricted Subsidiary" means (1) any Subsidiary designated as
such by the Board of Directors as set forth below where (a) no default with
respect to any Debt of such Subsidiary or any Subsidiary of such Subsidiary
(including any right which the holders thereof may have to take enforcement
action against such Subsidiary) would permit (upon notice, lapse of time or
both) any holder of any other Debt in a principal amount in excess of $10.0
million of the Issuer and its Subsidiaries (other than another Unrestricted
Subsidiary) to declare a default on such other Debt or cause the payment thereof
to be accelerated or payable prior to its final scheduled maturity and (b) the
Issuer could make a Restricted Payment in an amount equal to the greater of the
fair market value and book value of such Subsidiary pursuant to Section 1011 and
such amount is thereafter treated as a Restricted Payment for the purpose of
calculating the aggregate amount available for Restricted Payments thereunder
and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors
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may not designate a Subsidiary to be an Unrestricted Subsidiary if such
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property
of, any other Subsidiary of the Issuer which is not a Subsidiary of the
Subsidiary to be so designated or otherwise an Unrestricted Subsidiary. The
Board of Directors may designate any Unrestricted Subsidiary a Restricted
Subsidiary and shall be deemed to have made such designation if at such time the
condition set forth in clause (a) in the definition of "Unrestricted Subsidiary"
shall cease to be true.
SECTION 1019. Provision of Financial Information. Whether or not the Issuer
----------------------------------
is required to be subject to Section 13(a) or 15(d) of the Exchange Act, the
Issuer shall file with the Commission the annual reports, quarterly reports and
other documents which the Issuer would have been required to file with the
Commission pursuant to such Section 13(a) or 15(d) or any successor provision
thereto if the Issuer were so required, such documents to be filed with the
Commission on or prior to the respective dates (each a "Required Filing Date,"
collectively, the "Required Filing Dates") by which the Issuer would have been
required so to file such documents if the Issuer were so required. The Issuer
shall also in any event (a) within 15 days of each Required Filing Date (i)
transmit by mail to all Holders, as their names and addresses appear in the
Security Register, without cost to such Holders, and (ii) file with the Trustee,
copies of the annual reports, quarterly reports and other documents which the
Issuer files with the Commission pursuant to such Section 13(a) or 15(d) or any
successor provision thereto or would have been required to file with the
Commission pursuant to such Section 13(a) or 15(d) or any successor provisions
thereto if the Issuer were required to be subject to such Sections and (b) if
filing such documents by the Issuer with the Commission is not permitted under
the Exchange Act, promptly upon written request supply copies of such documents
to any prospective Holder.
SECTION 1020. Deposit of Funds with Escrow Agent. On the Closing Date, the
----------------------------------
Issuer shall deposit with the Escrow Agent funds that together with the proceeds
from the investment thereof will be sufficient to pay the first four scheduled
interest payments on the Securities (excluding any Liquidated Damages). All
Collateral shall be held in the Escrow Account until permitted to be disbursed
pursuant to the Escrow Agreement and then shall be disbursed strictly in
accordance with the terms thereof.
SECTION 1021. Statement by Officers as to Default; Compliance Certificates.
------------------------------------------------------------
(1) The Issuer will deliver to the Trustee, within 90 days after the end of
its fiscal year, which initially shall be December 31, and within 60 days after
the end of each fiscal quarter (other than the fourth fiscal quarter), of the
Issuer ending after the date hereof an Officers' Certificate, stating whether or
not to the best knowledge of the signers thereof the Issuer is in default in the
performance and observance of any of the terms, provisions and conditions of
Section 801 or Sections 1004 to 1018, inclusive, and if an Issuer shall be in
default, specifying all such defaults and the nature and status thereof of which
they may have knowledge.
(2) The Issuer shall deliver to the Trustee, as soon as possible and in any
event within 10 days after an Issuer becomes aware of the occurrence of an Event
of Default or an event which, with notice or the lapse of time or both, would
constitute an Event of Default, an Officers' Certificate
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setting forth the details of such Event of Default or default, and the action
which the Issuer proposes to take with respect thereto.
(3) The Issuer shall deliver to the Trustee within 90 days after the end of
each fiscal year a written statement by the Issuer's independent public
accountants stating (A) that their audit examination has included a review of
the terms of this Indenture and the Securities as they relate to accounting
matters, and (B) whether, in connection with their audit examination, any event
which, with notice or the lapse of time or both, would constitute an Event of
Default under Section 1008 and Section 1011 has come to their attention and, if
such a default has come to their attention, specifying the nature and period of
the existence thereof.
SECTION 1022. Waiver of Certain Covenants. The Issuer may omit in any
---------------------------
particular instance to comply with any covenant or condition set forth in
Section 801 and Sections 1004 to 1018, if before the time for such compliance
the Holders of at least a majority in principal amount of the Outstanding
Securities shall, by Act of such Holders, either waive such compliance in such
instance or generally waive compliance with such covenant or condition, but no
such waiver shall extend to or affect such covenant or condition except to the
extent so expressly waived, and, until such waiver shall become effective, the
obligations of the Issuer and the duties of the Trustee in respect of any such
covenant or condition shall remain in full force and effect; provided, however,
with respect to an Offer to Purchase as to which an Offer has been mailed, no
such waiver may be made or shall be effective against any Holder tendering
Securities pursuant to such Offer, and the Issuer may not omit to comply with
the terms of such Offer as to such Holder.
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. Right of Redemption.
-------------------
(a) At any time prior to July 1, 2001, the Issuer may redeem up to 35% of
the aggregate Outstanding principal amount of the Securities with the Net Cash
Proceeds of one or more sales of Capital Stock (other than Disqualified Stock)
at a Redemption Price equal to 111.25% of the aggregate principal amount
thereof, plus accrued and unpaid interest thereon and Liquidated Damages, if
any, to the date of redemption; provided that at least 65% of the original
principal amount of the Securities remains Outstanding immediately following
such redemption. In order to effect the foregoing redemption, the Issuer must
mail a notice of redemption no later than 45 days after the related sale of
Capital Stock and must consummate such redemption within 60 days of the closing
of the sale of Capital Stock.
(b) The Securities further may be redeemed at the election of the Issuer,
as a whole or from time to time in part, at any time on or after July 1, 2003,
at the Redemption Prices specified in the form of Security hereinbefore set
forth together with accrued interest to the Redemption Date.
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SECTION 1102. Applicability of Article. Redemption of Securities at the
------------------------
election of the Issuer, as permitted by any provision of this Indenture, shall
be made in accordance with such provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee. The election of the
-------------------------------------
Issuer to redeem any Securities pursuant to Section 1101 shall be evidenced by a
Board Resolution of the Issuer. In case of any redemption at the election of
the Issuer of the Securities, the Issuer shall, at least 40 days prior to the
Redemption Date fixed by the Issuer (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee in writing of such Redemption
Date and of the principal amount of Securities to be redeemed (except that in
the case of a redemption pursuant to Section 1101(a), notice shall be given by
the Issuer to the Trustee not less than 15 days prior to the Redemption Date).
In the case of any redemption pursuant to Section 1101(a), the Issuer shall also
furnish the Trustee an Officers' Certificate stating that the Issuer is entitled
to effect such redemption and setting forth a statement of facts showing that
the condition or conditions precedent to the right of the Issuer to redeem have
occurred or been satisfied.
SECTION 1104. Selection by Trustee of Securities to Be Redeemed. If less
-------------------------------------------------
than all the Securities are to be redeemed, the particular Securities to be
redeemed shall be selected not more than 60 days prior to the Redemption Date by
the Trustee, from the Outstanding Securities not previously called for
redemption, by such method as the Trustee shall deem fair and appropriate and
which may provide for the selection for redemption of portions (equal to $1,000
or any integral multiple thereof) of the principal amount of Securities of a
denomination larger than $1,000.
The Trustee shall promptly notify the Issuer and each Security Registrar in
writing of the Securities selected for redemption and, in the case of any
Securities selected for partial redemption, the principal amount thereof to be
redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Securities shall relate, in the
case of any Securities redeemed or to be redeemed only in part, to the portion
of the principal amount of such Securities which has been or is to be redeemed.
SECTION 1105. Notice of Redemption. Notice of redemption shall be given
--------------------
by first-class mail, postage prepaid, mailed not less than 30 nor more than 60
days prior to the Redemption Date by the Issuer, or at its request by the
Trustee (except that in the case of a redemption pursuant to Section 1101(a),
the Issuer shall give notice and such notice shall be given not less than 15 nor
more than 60 days prior to the Redemption Date), to each Holder of Securities to
be redeemed, (with a copy to the Trustee, delivered or mailed to the Corporate
Trust Office) at his address appearing in the Security Register.
All notices of redemption shall include the CUSIP number and shall state:
(1) the Redemption Date,
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(2) the Redemption Price,
(3) whether the redemption is being made pursuant to Section 1101(a)
or (b) and, if being made pursuant to Section 1101(a), a brief statement setting
forth the Issuer's right to effect such redemption and the Issuer's basis
therefor,
(4) if less than all the Outstanding Securities are to be redeemed,
the identification (and, in the case of partial redemption, the principal
amounts) of the particular Securities to be redeemed,
(5) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and that interest thereon
will cease to accrue on and after said date, and
(6) the place or places where such Securities are to be surrendered
for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of the
Issuer shall be given by the Issuer or, at the Issuer's request, by the Trustee
in the name and at the sole expense of the Issuer.
SECTION 1106. Deposit of Redemption Price. On or prior to any Redemption
---------------------------
Date, the Issuer shall deposit with the Trustee or with a Paying Agent (or, if
the Issuer is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 1003) an amount of money sufficient to pay the Redemption
Price of, and (except if the Redemption Date shall be an Interest Payment Date)
accrued interest on, all the Securities which are to be redeemed on that date.
SECTION 1107. Securities Payable on Redemption Date. Notice of redemption
-------------------------------------
having been given as aforesaid, the Securities so to be redeemed shall, on the
Redemption Date, become due and payable at the Redemption Price therein
specified, and from and any after such date (unless the Issuer shall default in
the payment of the Redemption Price and any accrued interest) such Securities
shall cease to bear interest. Upon surrender of any such Security for
redemption in accordance with said notice, such Security shall be paid by the
Issuer at the Redemption Price, together with any applicable accrued interest to
the Redemption Date; provided, however, that installments of interest whose
Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities, registered as
such at the close of business on the relevant Record Dates according to its
terms and the provisions of Section 308.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until paid,
bear interest from the Redemption Date at the rate provided by the Security.
SECTION 1108. Securities Redeemed in Part. Any Security which is to be
---------------------------
redeemed only in part shall be surrendered at an office or agency of the Issuer
designated for that purpose pursuant to
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Section 1002 (with, if the Issuer or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Issuer and
the Trustee duly executed by, the Holder thereof or his attorney duly authorized
in writing), and the Issuer shall execute, and the Trustee shall authenticate
and deliver to the Holder of such Security without service charge, a new
Security or Securities, of any authorized denomination as requested by such
Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered.
ARTICLE TWELVE
Defeasance and Covenant Defeasance
SECTION 1201. Issuer's Option to Effect Defeasance or Covenant Defeasance.
-----------------------------------------------------------
The Issuer may at its option by Board Resolution, at any time, elect to have
either Section 1202 or Section 1203 applied to the Outstanding Securities upon
compliance with the conditions set forth below in this Article Twelve.
SECTION 1202. Defeasance and Discharge. Upon the Issuer's exercise of the
------------------------
option provided in Section 1201 applicable to this Section, the Issuer shall be
deemed to have been discharged from its obligations with respect to the
Outstanding Securities on the date the conditions set forth below are satisfied
(hereinafter, "defeasance"). For this purpose, such defeasance means that the
Issuer shall be deemed to have paid and discharged the entire indebtedness
represented by the Outstanding Securities and to have satisfied all its other
obligations under such Securities and this Indenture insofar as such Securities
are concerned (and the Trustee, at the expense of the Issuer, shall execute
proper instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (A) the rights of
Holders of such Securities to receive, solely from the trust fund described in
Section 1204 and as more fully set forth in such Section, payments in respect of
the principal of (and premium, if any) and interest on such Securities when such
payments are due, (B) the Issuer's obligations with respect to such Securities
under Sections 304, 305, 306, 1002 and 1003, (C) the rights, powers, trusts,
duties and immunities of the Trustee hereunder and (D) this Article Twelve.
Subject to compliance with this Article Twelve, the Issuer may exercise its
option under this Section 1202 notwithstanding the prior exercise of its option
under Section 1203.
SECTION 1203. Covenant Defeasance. Upon the Issuer's exercise of the
-------------------
option provided in Section 1201 applicable to this Section, (i) the Issuer shall
be released from its obligations under Sections 1005 through 1018, inclusive,
and Clauses (3), (4) and (5) of Section 801 and (ii) the occurrence of an event
specified in Sections 501(3), 501(4) (with respect to Clauses (3), (4) or (5) of
Section 801), 501(5) (with respect to any of Sections 1005 through 1018,
inclusive), 501(6) and 501(7) shall not be deemed to be an Event of Default on
and after the date the conditions set forth below are satisfied (hereinafter,
"covenant defeasance"). For this purpose, such covenant defeasance means that
the Issuer may omit to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such Section or Clause, whether
directly or indirectly by
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<PAGE>
reason of any reference elsewhere herein to any such Section or Clause or by
reason of any reference in any such Section or Clause to any other provision
herein or in any other document, but the remainder of this Indenture and such
Securities shall be unaffected thereby.
SECTION 1204. Conditions to Defeasance or Covenant Defeasance. The
-----------------------------------------------
following shall be the conditions to application of either Section 1202 or
Section 1203 to the then Outstanding Securities:
(1) The Issuer shall irrevocably have deposited or caused to be deposited
with the Trustee (or another trustee satisfying the requirements of Section 609
who shall agree to comply with the provisions of this Article Twelve applicable
to it) as trust funds in trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to, the benefit of
the Holders of such Securities, (A) money in an amount, or (B) U.S. Government
Obligations which through the scheduled payment of principal and interest in
respect thereof in accordance with their terms will provide, not later than one
day before the due date of any payment, money in an amount, or (C) a combination
thereof, sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and which shall be applied by
the Trustee (or other qualifying trustee) to pay and discharge, the principal
of, premium, if any, and each instalment of interest on the Securities on the
Stated Maturity of such principal or instalment of interest in accordance with
the terms of this Indenture and of such Securities. For this purpose, "U.S.
Government Obligations" means securities that are (x) direct obligations of the
United States of America for the payment of which its full faith and credit is
pledged or (y) obligations of a Person controlled or supervised by and acting as
an agency or instrumentality of the United States of America the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America, which, in either case, are not callable or redeemable
at the option of the issuer thereof, and shall also include a depository receipt
issued by a bank (as defined in Section 3(a)(2) of the Securities Act as
custodian with respect to any such U.S. Government Obligation or a specific
payment of principal of or interest on any such U.S. Government Obligation held
by such custodian for the account of the holder of such depository receipt,
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of principal of or interest on the
U.S. Government Obligation evidenced by such depository receipt.
(2) In the case of an election under Section 1202, the Issuer shall have
delivered to the Trustee an Opinion of Counsel stating that (x) the Issuer has
received from, or there has been published by, the Internal Revenue Service a
ruling, or (y) since the date of this Indenture there has been a change in the
applicable Federal income tax law, in either case to the effect that, and based
thereon such opinion shall confirm that, the Holders of the Outstanding
Securities will not recognize gain or loss for Federal income tax purposes as a
result of such deposit, defeasance and discharge and will be subject to Federal
income tax on the same amount, in the same manner and at the same times as would
have been the case if such deposit, defeasance and discharge had not occurred.
-85-
<PAGE>
(3) In the case of an election under Section 1203, the Issuer shall have
delivered to the Trustee an Opinion of Counsel to the effect that the Holders of
the Outstanding Securities will not recognize gain or loss for Federal income
tax purposes as a result of such deposit and covenant defeasance and will be
subject to Federal income tax on the same amount, in the same manner and at the
same times as would have been the case if such deposit and covenant defeasance
had not occurred.
(4) The Issuer shall have delivered to the Trustee an Officer's Certificate
to the effect that the Securities, if then listed on any securities exchange,
will not be delisted as a result of such deposit.
(5) Such defeasance or covenant defeasance shall not cause the Trustee to
have a conflicting interest as defined in Section 608 and for purposes of the
Trust Indenture Act with respect to any securities of the Issuer.
(6) No Event of Default or event which with notice or lapse of time or both
would become an Event of Default shall have occurred and be continuing on the
date of such deposit or, insofar as subsections 501(9) and (10) are concerned,
at any time during the period ending on the 121st day after the date of such
deposit (it being understood that this condition shall not be deemed satisfied
until the expiration of such period).
(7) Such defeasance or covenant defeasance shall not result in a breach or
violation of, or constitute a default under, any other agreement or instrument
to which the Issuer or any Restricted Subsidiaries is a party or by which it is
bound.
(8) The Issuer shall have delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent provided
for relating to either the defeasance under Section 1202 or the covenant
defeasance under Section 1203 (as the case may be) have been complied with.
(9) Such defeasance or covenant defeasance shall not result in the trust
arising from such deposit constituting an investment company as defined in the
Investment Issuer Act of 1940, as amended, or such trust shall be qualified
under such act or exempt from regulation thereunder.
SECTION 1205. Deposited Money and U.S. Government Obligations to Be Held
----------------------------------------------------------
in Trust; Other Miscellaneous Provisions. Subject to the provisions of the last
- ----------------------------------------
paragraph of Section 1003, all money and U.S. Government Obligations (including
the proceeds thereof) deposited with the Trustee (or other qualifying trustee--
collectively, for purposes of this Section 1205, the "Trustee") pursuant to
Section 1204 in respect of the Securities shall be held in trust and applied by
the Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Issuer acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities, of all sums due and to become due
thereon in respect of principal (and premium, if any) and interest, but such
money need not be segregated from other funds except to the extent required by
law.
-86-
<PAGE>
The Issuer shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 1204 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Outstanding Securities.
Anything in this Article Twelve to the contrary notwithstanding, the
Trustee shall deliver or pay to the Issuer from time to time upon Issuer Request
any money or U.S. Government Obligations held by it as provided in Section 1204
which, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, are in excess of the amount thereof which would then be required to be
deposited to effect an equivalent defeasance or covenant defeasance.
SECTION 1206. Reinstatement. If the Trustee or the Paying Agent is unable
-------------
to apply any money in accordance with Section 1202 or 1203 by reason of any
order or judgment of any court or governmental authority enjoining, restraining
or otherwise prohibiting such application, then the Issuer's obligations under
this Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article Twelve until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 1202 or 1203; provided, however, that if the Issuer makes any payment of
principal of (and premium, if any) or interest on any Security following the
reinstatement of its obligations, the Issuer shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the money held by
the Trustee or the Paying Agent.
ARTICLE THIRTEEN
Collateral and Security
SECTION 1301. Escrow Agreement.
----------------
The Issuer and the Trustee have entered into the Escrow Agreement
simultaneously with the execution of this Indenture. Upon the acceleration of
the Maturity of the Securities prior to the payment in full of the first four
scheduled interest payments, the Trustee may foreclosure upon the Collateral.
Each Holder of Securities, by its acceptance thereof, consents and agrees to the
terms of the Escrow Agreement (including, without limitation, the provisions
providing for foreclosure and disbursement of Collateral) as the same may be in
effect or may be amended from time to time in accordance with its terms and the
terms hereof and authorizes and directs the Escrow Agent and the Trustee to
enter into the Escrow Agreement and to perform its obligations and exercise its
rights thereunder in accordance therewith. The Issuer shall deliver to the
Trustee copies of the Escrow Agreement, and shall do or cause to be done all
such acts and things as may be required by the provisions of the Escrow
Agreement to assure and confirm to the Trustee the security interest in the
Collateral contemplated by the Escrow Agreement or any part thereof, as from
time to time constituted, so as to render the same available for the security
and benefit of this Indenture with respect to, and of, the Securities in
accordance with the Escrow Agreement. The Issuer shall take
-87-
<PAGE>
any and all actions reasonably required to cause the Escrow Agreement to create
and maintain (to the extent possible under applicable law), as security for the
obligations of the Issuer hereunder, a first priority and exclusive security
interest in and on all the Collateral, in favor of the Trustee for the benefit
of the Holders of Securities, superior to and prior to the rights of all third
Persons and subject to no other Liens. The Trustee shall have no responsibility
for perfecting or maintaining the perfection of the Trustee's security interest
in the Collateral or for filing any instrument, document or notice in any public
office at any time or times.
SECTION 1302. Recording and Opinions.
----------------------
(1) The Issuer shall furnish to the Trustee simultaneously with the
execution and delivery of this Indenture an Opinion of Counsel either (i)
stating that in the opinion of such counsel all action has been taken with
respect to the recording, registering and filing of this Indenture, financing
statements or other instruments necessary to make effective the security
interest intended to be created by the Escrow Agreement and reciting the details
of such action, or (ii) stating that in the opinion of such counsel no such
action is necessary to make such security interest effective.
(2) The Issuer shall furnish to the Trustee immediately following the
issuance of any Exchange Notes and on each anniversary of the Closing Date until
the date upon which the balance of Escrow Funds shall have been reduced to zero,
an Opinion of Counsel, dated as of such date, to the extent required by and
complying in all respects with Section 314(b) of the Trust Indenture Act.
SECTION 1303. Release of Collateral.
---------------------
(1) Subject to subsections (2), (3) and (4) of this Section 1303 and
Section 1306, the Collateral may be released from the security interest created
by the Escrow Agreement only in accordance with the provisions of the Escrow
Agreement.
(2) Except to the extent that any security interest on proceeds of
Collateral is automatically released by operation of Section 9-306 of the
Uniform Commercial Code as adopted by the State of New York or other similar
law, no Collateral shall be released from the security interest created by the
Escrow Agreement pursuant to the provisions of the Escrow Agreement, other than
pursuant to the terms thereof.
(3) At any time when an Event of Default shall have occurred and be
continuing and the Maturity of the Securities shall have been accelerated
(whether by declaration or otherwise), no Collateral shall be released pursuant
to the provisions of the Escrow Agreement, and no release of Collateral in
contravention of this Section 1303(3) shall be effective as against the Holders
of Securities, except for the disbursement of all Escrow Funds (as defined in
the Escrow Agreement) and other Collateral to the Trustee pursuant to Section
6(c) of the Escrow Agreement.
(4) To the extent applicable, the Issuer shall comply with Section 314(d)
of the Trust Indenture Act, relating to the release of property or securities
from the security interest of the Escrow
-88-
<PAGE>
Agreement, and shall comply in all material respects with the terms and
conditions of the Escrow Agreement.
SECTION 1304. Authorization of Actions to Be Taken by the Trustee Under
---------------------------------------------------------
the Escrow Agreement.
- --------------------
Subject to the provisions of Section 601 and Section 603, the Trustee may,
without the consent of the Holders of Securities, on behalf of the Holders of
Securities, take all actions it deems necessary or appropriate in order to (a)
enforce any of the terms of the Escrow Agreement and (b) collect and receive any
and all amounts payable in respect of the obligations of the Issuer hereunder.
The Trustee shall have power to institute and maintain such suits and
proceedings as it may deem expedient to prevent any impairment of the Collateral
by any acts that may be unlawful or in violation of the Escrow Agreement or this
Indenture, and such suits and proceedings as the Trustee may deem expedient to
preserve or protect its interests and the interests of the Holders in the
Collateral (including power to institute and maintain suits or proceedings to
restrain the enforcement of or compliance with any legislative or other
governmental enactment, rule or order that may be unconstitutional or otherwise
invalid if the enforcement of, or compliance with, such enactment, rule or order
would impair the security interest hereunder or be prejudicial to the interests
of the Holders of Securities or of the Trustee).
SECTION 1305. Authorization of Receipt of Funds by the Trustee Under the
----------------------------------------------------------
Escrow Agreement.
- ----------------
The Trustee is authorized to receive any funds for the benefit of the
Holders of Securities disbursed under the Escrow Agreement, and to make further
distributions of such funds to the Holders of Securities according to the
provisions of this Indenture.
SECTION 1306. Termination of Security Interest.
--------------------------------
Upon the earliest to occur of (i) the date upon which the balance of Escrow
Funds and other Collateral shall have been reduced to zero, (ii) the payment of
the first four scheduled interest payments on the Securities, (iii) defeasance
of all Outstanding Securities pursuant to Section 1202 and (iv) covenant
defeasance of all Outstanding Securities pursuant to Section 1203, the Trustee
shall, at the written request of the Issuer, release the security interest in
the Collateral pursuant to this Indenture and the Escrow Agreement upon the
Issuer's compliance with any applicable provisions of the Trust Indenture Act
pertaining to release of collateral.
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<PAGE>
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.
EXODUS COMMUNICATIONS, INC.
/s/ Richard S. Stoltz
By _____________________________________
Name: Richard S. Stoltz
Title: COO & CFO
CHASE MANHATTAN BANK AND TRUST
COMPANY, NATIONAL ASSOCIATION,
as Trustee
/s/ Cecil D. Bobey
By ______________________________________
Name: Cecil D. Bobey
Title: AVP
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<PAGE>
ANNEX A -- Form of
Regulation S Certificate
REGULATION S CERTIFICATE
(For transfers pursuant to Section 306(b)(1) of the Indenture)
Chase Manhattan Bank and Trust Company,
National Association
101 California Street, Suite 2725
San Francisco, CA 94111
Attention: Corporate Trust Administration
Re: % Senior Notes due 2008 of
Exodus Communications, Inc. (the "Securities")
----------------------------------------------
Reference is made to the Indenture, dated as of July 1, 1998 (the
"Indenture"), between Exodus Communications, Inc. (the "Issuer") and Chase
Manhattan Bank and Trust Company, National Association, as Trustee. Terms used
herein and defined in the Indenture or in Regulation S or Rule 144 under the
U.S. Securities Act of 1933 (the "Securities Act") are used herein as so
defined.
This certificate relates to U.S. $____________ principal amount of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s). ___________________________
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the Depositary or an Agent Member in the name of the Undersigned, as or
on behalf of the Owner. If the Specified Securities are not represented by a
Global Security, they are registered in the name of the Under signed, as or on
behalf of the Owner.
The Owner has requested that the Specified Securities be transferred to a
person (the "Transferee") who will take delivery in the form of a Regulation S
Security or an interest therein. In connection with such transfer, the Owner
hereby certifies that, unless such transfer is being effected pursuant to an
effective registration statement under the Securities Act, it is being effected
in accordance with Rule 904 or Rule 144 under the Securities Act and with all
applicable securities
<PAGE>
laws of the states of the United States and other jurisdictions. Accordingly,
the Owner hereby further certifies as follows:
(1) Rule 904 Transfers. If the transfer is being effected in accordance
------------------
with Rule 904:
(A) the Owner is not a distributor of the Securities, an affiliate of
the Issuer or any such distributor or a person acting on behalf of any of the
foregoing;
(B) the offer of the Specified Securities was not made to a person in
the United States;
(C) either:
(i) at the time the buy order was originated, the Transferee was
outside the United States or the Owner and any person acting on its behalf
reasonably believed that the Transferee was outside the United States, or
(ii) the transaction is being executed in, on or through the
facilities of the Eurobond market, as regulated by the Association of
International Bond Dealers, or another designated offshore securities market and
neither the Owner nor any person acting on its behalf knows that the transaction
has been prearranged with a buyer in the United States;
(D) no directed selling efforts in contravention of Rule 904(a)(2)
have been made in the United States by or on behalf of the Owner or any
affiliate thereof;
(E) if the Owner is a dealer in securities or has received a selling
concession, fee or other remuneration in respect of the Specified Securities,
and the transfer is to occur during the Distribution Compliance Period, then the
requirements of Rule 904(b)(1) have been satisfied; and
(F) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
(2) Rule 144 Transfers. If the transfer is being effected pursuant to Rule
------------------
144:
(A) the transfer is occurring
(i) after a holding period of at least one year (computed in
accordance with paragraph (d) of Rule 144) has elapsed since the Specified
Securities were last acquired from an Issuer or from an affiliate of the Issuer,
whichever is later, and is being effected in accordance with the applicable
amount, manner of sale and notice requirements of Rule 144; or
(i) after a holding period of at least two years has elapsed
since the Specified Securities were last acquired from the Issuer or from an
affiliate of the Issuer, whichever is
<PAGE>
later, and the Owner is not, and during the preceding three months has not been,
an affiliate of the Issuer; and
(B) the Specified Securities are being transferred in compliance with
any applicable "blue sky" securities laws of all applicable states of the United
States.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuer and the Initial Purchasers.
Dated:
_______________________________________________________________
(Print the name of the Undersigned, as such term is defined in
the second paragraph of this certificate.)
By: _______________________________________ *
Name:
Title:
(If the Undersigned is a corporation, partnership or fiduciary, the title
of the person signing on behalf of the Undersigned must be stated.)
* Signature must be guaranteed by an eligible Guarantor Institution (banks,
stockbrokers, savings and loan associations and credit unions) with
membership in an approved signature medallion program pursuant to
Securities and Exchange Commission Rule 17Ad-15.
<PAGE>
ANNEX B -- Form of Restricted
Securities Certificate
RESTRICTED SECURITIES CERTIFICATE
(For transfers pursuant to Section 306(b)(2) of the Indenture)
Chase Manhattan Bank and Trust Company,
National Association
101 California Street, Suite 2725
San Francisco, California 94111
Attention: Corporate Trust Administration
Re: % Senior Notes due 2008
of Exodus Communications, Inc. (the "Securities")
-------------------------------------------------
Reference is made to the Indenture, dated as of July 1, 1998 (the
"Indenture"), between Exodus Communications, Inc. (the "Issuer") and Chase
Manhattan Bank and Trust Company, National Association, as Trustee. Terms used
herein and defined in the Indenture or in Rule 144A or Rule 144 under the U.S.
Securities Act of 1933 (the "Securities Act") are used herein as so defined.
This certificate relates to U.S. $_____________ principal amount of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s). ___________________________
ISIN No(s), If any. ____________________
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the Depositary or an Agent Member in the name of the Undersigned, as or
on behalf of the Owner. If the Specified Securities are not represented by a
Global Security, they are registered in the name of the Undersigned, as or on
behalf of the Owner.
The Owner has requested that the Specified Securities be transferred to a
person (the "Transferee") who will take delivery in the form of a Restricted
Security or an interest in a Restricted Global Security. In connection with
such transfer, the Owner hereby certifies that, unless such transfer is being
effected pursuant to an effective registration statement under the Securities
Act, (i)
<PAGE>
the Owner is not a U.S. Person (as defined in the Indenture) and (ii) such
transfer is being effected in accordance with Rule 144A or Rule 144 under the
Securities Act and all applicable securities laws of the states of the United
States and other jurisdictions. Accordingly, the Owner hereby further certifies
as follows:
(1) Rule 144A Transfers. If the transfer is being effected in accordance
-------------------
with Rule 144A:
(A) the Specified Securities are being transferred to a person that
the Owner and any person acting on its behalf reasonably believe is a "qualified
institutional buyer" within the meaning of Rule 144A, acquiring for its own
account or for the account of a qualified institutional buyer; and
(B) the Owner and any person acting on its behalf have taken
reasonable steps to ensure that the Transferee is aware that the Owner may be
relying on Rule 144A in connection with the transfer; and
(C) the Specified Securities are being transferred in compliance with
any applicable "blue sky" securities laws of all applicable states of the United
States.
(2) Rule 144 Transfers. If the transfer is being effected pursuant to Rule
------------------
144:
(A) the transfer is occurring
(i) after a holding period of at least one year (computed in
accordance with paragraph (d) of Rule 144) has elapsed since the Specified
Securities were last acquired from an Issuer or from an affiliate of the Issuer,
whichever is later, and is being effected in accordance with the applicable
amount, manner of sale and notice requirements of Rule 144; or
(ii) after a holding period of at least two years has elapsed
since the Specified Securities were last acquired from an Issuer or from an
affiliate of the Issuer, whichever is later, and the Owner is not, and during
the preceding three months has not been, an affiliate of the Issuer; and
(B) the Specified Securities are being transferred in compliance with
any applicable "blue sky" securities laws of all applicable states of the United
States.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuer, and the Initial Purchasers.
<PAGE>
Dated: ___________________________________________________
(Print the name of the Undersigned, as such term is
defined in the second paragraph of this certificate.)
By:_______________________________ *
Name:
Title:
(If the Undersigned is a corporation, partnership or
fiduciary, the title of the person signing on behalf of
the Undersigned must be stated.)
* Signature must be guaranteed by an eligible Guarantor Institution (banks,
stockbrokers, savings and loan associations and credit unions) with
membership in an approved signature medallion program pursuant to
Securities and Exchange Commission Rule 17Ad-15.
<PAGE>
ANNEX C -- Form of Unrestricted
Securities Certificate
UNRESTRICTED SECURITIES CERTIFICATE
(For removal of Securities Act Legends pursuant to Section 306(c) of the
Indenture)
Chase Manhattan Bank and Trust Company,
National Association
101 California Street, Suite 2725
San Francisco, California 94111
Attention: Corporate Trust Trustee Administration
Re: % Senior Notes due 2008
of Exodus Communications, Inc. (the "Securities")
-------------------------------------------------
Reference is made to the Indenture, dated as of July 1, 1998 (the
"Indenture"), between Exodus Communications, Inc. (the "Issuer") and Chase
Manhattan Bank and Trust Company, National Association, as Trustee. Terms used
herein and defined in the Indenture or in Rule 144 under the U.S. Securities Act
of 1933 (the "Securities Act") are used herein as so defined.
This certificate relates to U.S. $_____________ principal amount of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s). ___________________________
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the Depositary or an Agent Member in the name of the Undersigned, as or
on behalf of the Owner. If the Specified Securities are not represented by a
Global Security, they are registered in the name of the Under signed, as or on
behalf of the Owner.
The Owner has requested that the Specified Securities be exchanged for
Securities bearing no Securities Act Legend pursuant to Section 306(c) of the
Indenture. In connection with such exchange, the Owner hereby certifies that
the exchange is occurring after a holding period of at least two years (computed
in accordance with paragraph (d) of Rule 144) has elapsed since the Specified
Securities were last acquired from an Issuer or from an affiliate of the Issuer,
whichever is later, and
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<PAGE>
the Owner is not, and during the preceding three months has not been, an
affiliate of the Issuer. The Owner also acknowledges that any future transfers
of the Specified Securities must comply with all applicable securities laws of
the states of the United States and other jurisdictions.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuer, and the Initial Purchasers.
Dated: ___________________________________________________
(Print the name of the Undersigned, as such term is
defined in the second paragraph of this certificate.)
By: _____________________________________*
Name:
Title:
(If the Undersigned is a corporation, partnership or
fiduciary, the title of the person signing on behalf of
the Undersigned must be stated.)
* Signature must be guaranteed by an eligible Guarantor Institution (banks,
stockbrokers, savings and loan associations and credit unions) with
membership in an approved signature medallion program pursuant to
Securities and Exchange Commission Rule 17Ad-15.
-98-
<PAGE>
EXHIBIT A
---------
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT, dated as of July 1, 1998, among
Exodus Communications, Inc., a Delaware corporation (the "Company"), Goldman,
Sachs & Co., Donaldson Lufkin & Jenrette Securities Corporation, BT Alex. Brown
Incorporated and NationsBanc Montgomery Securities LLC (each an "Initial
Purchaser" and, collectively, the "Initial Purchasers") each of whom has agreed
to purchase the Company's 11 1/4% Senior Notes due 2008 (collectively, the
"Securities") pursuant to the Purchase Agreement, dated June 26, 1998, by and
among the Company and Initial Purchasers (the "Purchase Agreement").
The Company proposes to issue and sell and the Initial Purchasers propose
to purchase the Securities upon the terms set forth in the Purchase Agreement.
As an inducement to the Initial Purchasers to enter into the Purchase Agreement
and in satisfaction of a condition to the obligations of the Initial Purchasers
thereunder, the Company agrees with the Initial Purchasers for the benefit of
holders (as defined herein) from time to time of the Transfer Restricted
Securities as follows:
1. Certain Definitions.
For purposes of this Exchange and Registration Rights Agreement, the
following terms shall have the following respective meanings:
"Act" shall mean the Securities Act of 1933, as amended.
"Affiliate" shall have the meaning ascribed thereto by Rule 144 of the
Act.
"Business Days" shall mean each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in the City of
New York, New York are authorized or obligated by law or executive order to
close.
"Broker-Dealer" shall mean any broker or dealer registered with the
Commission under the Exchange Act.
"Closing Date" shall mean the date hereof.
"Commission" shall mean the United States Securities and Exchange
Commission, or any other federal agency at the time administering the
Exchange Act or the Securities Act, whichever is the relevant statute for
the particular purpose.
"Effective Time" shall mean (i) with regard to the Exchange
Registration, the time and date as of which the Commission declares the
Exchange Offer Registration Statement effective or as of which the Exchange
Offer Registration Statement otherwise becomes effective and (ii) with
regard to the Shelf Registration, the time and date as of which the
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Commission declares the Shelf Registration Statement effective or as of
which the Shelf Registration Statement otherwise becomes effective.
"Electing Holder" shall mean any holder of Transfer Restricted
Securities that has returned a completed and signed Notice and
Questionnaire to the Company in accordance with Section 3(d)(ii) or
3(d)(iii) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, or any
successor thereto, as the same shall be amended from time to time.
"Exchange Offer" shall have the meaning assigned thereto in Section
2(a) hereof.
"Exchange Offer Registration Statement" shall have the meaning
assigned thereto in Section 2(a) hereof.
"Exchange Registration" shall have the meaning assigned thereto in
Section 3(c) hereof.
"Exchange Securities" shall have the meaning assigned thereto in
Section 2(a) hereof.
"holder" shall mean with respect to the Transfer Restricted
Securities, each of the Initial Purchasers and other persons who acquire
Transfer Restricted Securities from time to time (including any successors
or assigns), in each case for so long as such person owns any Transfer
Restricted Securities.
"Indenture" shall mean the Indenture, dated as of July 1, 1998,
between the Company and Chase Manhattan Bank and Trust Company, National
Association, as Trustee, as the same shall be amended from time to time.
"Liquidated Damages" shall have the meaning assigned thereto in
Section 2(c) hereof.
"Notice and Questionnaire" means a Notice of Registration Statement
and Selling Securityholder Questionnaire substantially in the form of
Exhibit A hereto.
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"person" shall mean a corporation, association, partnership,
organization, business, individual, government or political subdivision
thereof or governmental agency.
"Prospectus" shall have the meaning ascribed to it in Section 2(a)(10)
of the Act.
"Registration Default" shall have the meaning assigned thereto in
Section 2(c) hereof.
"Registration Expenses" shall have the meaning assigned thereto in
Section 4 hereof.
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"Resale Period" shall have the meaning assigned thereto in Section
2(a) hereof.
"Restricted Holder" shall mean (i) a holder that is an affiliate of
the Company within the meaning of Rule 405, (ii) a holder who acquires
Exchange Securities outside the ordinary course of such holder's business,
(iii) a holder who has arrangements or understandings with any person to
participate in the Exchange Offer for the purpose of a distribution within
the meaning of the Act of Exchange Securities and (iv) a holder that is a
Broker-Dealer, but only with respect to Exchange Securities received by
such Broker-Dealer pursuant to an Exchange Offer in exchange for Transfer
Restricted Securities acquired by the Broker-Dealer directly from the
Company.
"Rule 144," "Rule 405" and "Rule 415" shall mean, in each case, such
rule promulgated under the Act (or any successor provision), as the same
shall be amended from time to time.
"Securities" shall mean, collectively, the 11 1/4% Senior Notes due
2008 of the Company to be issued and sold to the Initial Purchasers, and
securities issued in exchange therefor or in lieu thereof pursuant to the
Indenture.
"Shelf Registration" shall have the meaning assigned thereto in
Section 2(b) hereof.
"Shelf Registration Statement" shall have the meaning assigned thereto
in Section 2(b) hereof.
"Transfer Restricted Securities" shall mean each Security until the
earliest of (i) the date on which such Security has been exchanged by a
person other than a Broker-Dealer for an Exchange Security in an Exchange
Offer, (ii) following the exchange by a Broker-Dealer in the Exchange Offer
of a Security for an Exchange Security, the date on which such Exchange
Security is sold to a purchaser who receives from such Broker-Dealer on or
prior to the date of such sale a copy of the Prospectus used in connection
with such Exchange Offer, (iii) the date on which such Security has been
effectively registered under the Act and disposed of in accordance with a
Shelf Registration Statement or (iv) the date on which such Security is
distributed to the public pursuant to Rule 144 under the Act.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939, or
any successor thereto, and the rules, regulations and forms promulgated
thereunder, all as the same shall be amended from time to time.
Unless the context otherwise requires, any reference herein to a "Section"
or "clause" refers to a Section or clause, as the case may be, of this Exchange
and Registration Rights Agreement, and the words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Exchange and
Registration Rights Agreement as a whole and not to any particular Section or
other subdivision.
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2. Registration Under the Securities Act.
(a) Except as set forth in Section 2(b) below, the Company agrees to file
with the Commission, as soon as practicable after the Closing Date, but no later
than 60 days after the Closing Date, a registration statement relating to an
offer to exchange (such registration statement, the "Exchange Offer Registration
Statement", and such offer, the "Exchange Offer") any and all of the Securities
for a like aggregate principal amount of debt securities issued by the Company,
which debt securities are substantially identical to the Securities (and are
entitled to the benefits of a trust indenture which is substantially identical
to the Indenture or is the Indenture and which has been qualified under the
Trust Indenture Act), except that they have been registered pursuant to an
effective registration statement under the Act and do not contain provisions for
liquidated damages contemplated in Section 2(c) below (such new debt securities
hereinafter called "Exchange Securities"). The Company agrees to use its best
efforts to cause the Exchange Offer Registration Statement to become effective
under the Act as soon as practicable, but no later than 150 days after the
Closing Date. The Exchange Offer will be registered under the Act on the
appropriate form and will comply with all applicable tender offer rules and
regulations under the Exchange Act. Unless the Exchange Offer would not be
permitted by applicable law or Commission policy, the Company further agrees to
use its best efforts (i) to complete the Exchange Offer promptly, but no later
than 30 Business Days after the Exchange Offer Registration Statement becomes
effective or is declared effective by the Commission, (ii) to hold the Exchange
Offer open for a period of not less than the minimum period required under
applicable federal and state securities laws, provided however, that in no event
shall such period be less than 20 Business Days, and (iii) to issue Exchange
Securities for all Transfer Restricted Securities that have been properly
tendered and not withdrawn on or prior to the expiration of the Exchange Offer.
The Exchange Offer will be deemed to have been "completed" only if the debt
securities received by holders other than Restricted Holders in the Exchange
Offer for Transfer Restricted Securities are, upon receipt, transferable by each
such holder without need for further compliance with Section 5 of the Act and
the Exchange Act (except for the requirement to deliver a Prospectus included in
the Exchange Offer Registration Statement applicable to resales by Broker-
Dealers of Exchange Securities received by such Broker-Dealer pursuant to an
Exchange Offer in exchange for Transfer Restricted Securities other than those
acquired by the Broker-Dealer directly from the Company), and without material
restrictions under the blue sky or securities laws of a substantial majority of
the States of the United States of America. The Exchange Offer shall be deemed
to have been completed upon the earlier to occur of (i) the Company having
exchanged the Exchange Securities for all outstanding Transfer Restricted
Securities pursuant to the Exchange Offer and (ii) the Company having exchanged,
pursuant to the Exchange Offer, Exchange Securities for all Transfer Restricted
Securities that have been properly tendered and not withdrawn before the
expiration of the Exchange Offer. If the Company is notified prior to the
completion of the Exchange Offer by a Broker-Dealer that is a holder of Transfer
Restricted Securities (other than Transfer Restricted Securities received by the
Broker-Dealer directly from the Company), then the Company agrees (x) to include
in the Exchange Offer Registration Statement a Prospectus for use in connection
with any resales of Exchange Securities by a Broker-Dealer, other than resales
of Exchange Securities received by a Broker-Dealer pursuant to an Exchange Offer
in exchange for Transfer Restricted Securities acquired by the Broker-Dealer
directly from the Company, and (y) to keep such Exchange Offer Registration
Statement effective for a period (the "Resale Period")
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beginning when Exchange Securities are first issued in the Exchange Offer and
ending upon the earlier of the expiration of the 180th day after the Exchange
Offer has been completed or such time as such Broker-Dealers no longer own any
Transfer Restricted Securities. With respect to such Exchange Offer Registration
Statement, each Broker-Dealer that holds Exchange Securities received in an
Exchange Offer in exchange for Transfer Restricted Securities not acquired by it
directly from the Company shall have the benefit of the rights of
indemnification and contribution set forth in Sections 6(a), (c), (d) and (e)
hereof.
(b) If (i) the Company is not permitted to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy or (ii) any holder of Transfer Restricted Securities notifies the Company
prior to the 20th day following completion of the Exchange Offer that (A) it is
prohibited by law or Commission policy from participating in the Exchange Offer
or (B) that it may not resell in compliance with the Act or Commission policy
the Exchange Securities acquired by it in the Exchange Offer to the public
without delivering a Prospectus and the Prospectus contained in the Exchange
Offer Registration Statement is not appropriate or available for such resales or
(C) that it is a Broker-Dealer and owns Securities acquired directly from the
Company or an Affiliate, then in lieu of conducting the Exchange Offer for such
Transfer Restricted Securities contemplated by Section 2(a) the Company shall
use its best efforts to file with the Commission as soon as practicable, but no
later than 45 days after the date on which the Company determines that it is not
permitted to file the Exchange Offer Registration Statement pursuant to clause
(i) above or 45 days after the date on which the Company receives the notice
specified in clause (ii) above (but in either case, in no event less than 60
days after the Closing Date), a "shelf" registration statement providing for the
registration of, and the sale on a continuous or delayed basis by the holders
of, all of the Transfer Restricted Securities, pursuant to Rule 415 or any
similar rule that may be adopted by the Commission, which may be an amendment to
the Exchange Offer Registration Statement (such filing, the "Shelf Registration"
and such registration statement, the "Shelf Registration Statement"). The
Company agrees to use its best efforts (i) to cause the Shelf Registration
Statement to become or be declared effective by the Commission on or prior to 90
days after such obligation arises (but in no event less than 150 days after the
Closing Date) and to keep such Shelf Registration Statement continuously
effective in order to permit the Prospectus forming a part thereof to be usable
by holders for resales of Transfer Restricted Securities for a period ending on
the earlier of the second anniversary of the Effective Time or such time as
there are no longer any Transfer Restricted Securities outstanding, provided,
however, that no holder shall be entitled to be named as a selling
securityholder in the Shelf Registration Statement or to use the Prospectus
forming a part thereof for resales of Transfer Restricted Securities unless such
holder is an Electing Holder, and (ii) after the Effective Time of the Shelf
Registration Statement, promptly upon the request of any holder of Transfer
Restricted Securities that is not then an Electing Holder, to take any action
reasonably necessary to enable such holder to use the Prospectus forming a part
thereof for resales of Transfer Restricted Securities, including, without
limitation, any action necessary to identify such holder as a selling
securityholder in the Shelf Registration Statement, provided, however, that
nothing in this Clause (ii) shall relieve any such holder of the obligation to
return a completed and signed Notice and Questionnaire to the Company in
accordance with Section 3(d)(iii) hereof. No holder of Securities shall be
entitled to Liquidated Damages pursuant to 2(c) hereof unless and until such
holder shall have provided all such information. The Company further
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agrees to supplement or make amendments to the Shelf Registration Statement, as
and when required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration Statement or
by the Act or rules and regulations thereunder for shelf registration, and the
Company agrees to furnish to each Electing Holder copies of any such supplement
or amendment prior to its being used or promptly following its filing with the
Commission.
(c) In the event that (i) the Company has not filed the Exchange Offer
Registration Statement or Shelf Registration Statement on or before the date on
which such registration statement is required to be filed pursuant to Section
2(a) or 2(b), respectively, or (ii) such Exchange Offer Registration Statement
or Shelf Registration Statement has not become effective or been declared
effective by the Commission on or before the date on which such registration
statement is required to become or be declared effective pursuant to Section
2(a) or 2(b), respectively, or (iii) the Exchange Offer has not been completed
within 30 Business Days after the initial effective date of the Exchange Offer
Registration Statement relating to the Exchange Offer (if the Exchange Offer is
then required to be made) or (iv) any Exchange Offer Registration Statement or
Shelf Registration Statement required by Section 2(a) or 2(b) hereof is filed
and declared effective, but shall thereafter cease to be effective or usable in
connection with resales of Transfer Restricted Securities during the periods
specified in Section 2(a) or 2(b), respectively, (except as specifically
permitted herein, including pursuant to Sections 3(c)(ii) and (iv) and 3(d)(iv)
and 3(e)) without being succeeded immediately by an additional registration
statement filed and declared effective (each such event referred to in clauses
(i) through (iv), a "Registration Default" and each period during which a
Registration Default has occurred and is continuing, a "Registration Default
Period"), then, the Company will pay liquidated damages to each holder of
Transfer Restricted Securities affected thereby (such liquidated damages, the
"Liquidated Damages"), with respect to the first 90-day period immediately
following the occurrence of the first Registration Default in an amount equal to
$0.05 per week such Registration Default continues per $1,000 principal amount
of Transfer Restricted Securities held by such holder. The amount of the
Liquidated Damages will increase by an additional $0.05 per week such
Registration Default continues per $1,000 principal amount of Transfer
Restricted Securities with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of Liquidated
Damages for all Registration Defaults of $0.25 per week per $1,000 principal
amount of Transfer Restricted Securities. Notwithstanding the foregoing, the
Company shall in no event be required to pay Liquidated Damages for more than
one Registration Default at any time. All accrued Liquidated Damages will be
paid by the Company on each Interest Payment Date (as defined in the Indenture)
to each holder of any Transfer Restricted Securities by wire transfer of
immediately available funds or by federal funds check and to holders of Transfer
Restricted Securities by wire transfer to the accounts specified by them or by
mailing checks to their registered addresses if no such accounts have been
specified. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease. No other damages shall be available to holders
of Transfer Restricted Securities for any Registration Default.
(d) Any reference herein to a registration statement as of any time shall
be deemed to include any document incorporated, or deemed to be incorporated,
therein by reference as of such time and any reference herein to any post-
effective amendment to a registration statement as of any time shall
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be deemed to include any document incorporated, or deemed to be incorporated,
therein by reference as of such time.
3. Registration Procedures.
If the Company files a registration statement pursuant to Section 2(a) or
Section 2(b), the following provisions shall apply:
(a) At or before the Effective Time of the Exchange Offer or the Shelf
Registration, as the case may be, the Company shall qualify the Indenture under
the Trust Indenture Act of 1939.
(b) In the event that such qualification would require the appointment of a
new trustee under the Indenture, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.
(c) In connection with the Company's obligations with respect to the
registration of Exchange Securities as contemplated by Section 2(a) (the
"Exchange Registration"), if applicable, the Company shall, as soon as
practicable (or as otherwise specified):
(i) prepare and file with the Commission, as soon as practicable but
no later than 60 days after the Closing Date, an Exchange Offer
Registration Statement on any form which may be utilized by the Company and
which shall permit the Exchange Offer and, if applicable, resales of
Exchange Securities by Broker-Dealers during the Resale Period to be
effected as contemplated by Section 2(a), and use its best efforts to cause
such Exchange Offer Registration Statement to become effective as soon as
practicable thereafter, but no later than 150 days after the Closing Date;
(ii) as soon as practicable prepare and file with the Commission such
amendments and supplements to such Exchange Offer Registration Statement
and the Prospectus included therein as may be necessary to effect and
maintain the effectiveness of such Exchange Offer Registration Statement
for the periods and purposes contemplated in Section 2(a) hereof and as may
be required by the applicable rules and regulations of the Commission and
the instructions applicable to the form of such Exchange Offer Registration
Statement, and promptly provide each Broker-Dealer holding Exchange
Securities with such number of copies of the Prospectus included therein
(as then amended or supplemented), in conformity in all material respects
with the requirements of the Act and the Trust Indenture Act and the rules
and regulations of the Commission thereunder, as such Broker-Dealer
reasonably may request prior to the expiration of the Resale Period, for
use in connection with resales of Exchange Securities; provided that upon
the occurrence of any event that would cause any such Exchange Offer
Registration Statement or the Prospectus contained therein (A) to contain a
material misstatement or omission or (B) not to be effective and usable for
resale of Transfer Restricted Securities, either of which occurs during the
period that the Company is required to maintain an effective and usable
Exchange Offer Registration Statement and Prospectus pursuant to this
Agreement, the Company shall file promptly an appropriate
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amendment or supplement to such Registration Statement or Prospectus, (1)
in the case of clause (A), correcting any such misstatement or omission,
and (2) in the case of clauses (A) and (B) use its best efforts to cause
any amendment to be declared effective and such Exchange Offer Registration
Statement and the Prospectus to become usable for their intended purpose(s)
as soon as practicable thereafter; provided further notwithstanding
anything to the contrary set forth in this Agreement, during the 180 day
period following completion of the Exchange Offer, the Company's
obligations to use its best efforts to keep the Exchange-Offer Registration
Statement continuously effective, supplemented and amended shall be
suspended in the event continued effectiveness of the Exchange-Offer
Registration Statement would, with the advice of counsel to the Company,
make it advisable for the Company to disclose a material financing,
acquisition or other corporate transaction, and the Board of Directors
shall have determined in good faith that such disclosure is not in the best
interests of the Company, but in no event will any such suspension,
individually or in the aggregate, exceed sixty (60) days (such suspensions
being referred to herein as an "Exchange Suspension Period");
(iii) promptly notify in writing each Broker-Dealer that has requested
or received from the Company copies of the Prospectus included in such
Exchange Offer Registration Statement, (A) when such Exchange Offer
Registration Statement or the Prospectus included therein or any Prospectus
amendment or supplement or post-effective amendment has been filed, and,
with respect to such Exchange Offer Registration Statement or any post-
effective amendment, when the same has become effective, (B) of the
issuance by the Commission of any stop order suspending the effectiveness
of such Exchange Offer Registration Statement or the initiation or
threatening of any proceedings for that purpose, (C) of the receipt by the
Company of any notification with respect to the suspension of the
qualification of the Exchange Securities for sale in any jurisdiction or
the initiation or threatening of any proceeding for such purpose, or (D) at
any time during the Resale Period when a Prospectus is required to be
delivered under the Act, that such Exchange Offer Registration Statement,
Prospectus, Prospectus amendment or supplement or post-effective amendment
does not conform in all material respects to the applicable requirements of
the Act and the Trust Indenture Act and the rules and regulations of the
Commission thereunder or contains an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the circumstances
then existing. Each holder of Transfer Restricted Securitiesagrees that
upon receipt of any notice from the Company pursuant to this Section
3(c)(iii)(D), such holder shall forthwith discontinue the disposition of
Transfer Restricted Securities pursuant to the Exchange Offer Registration
Statement applicable to such Transfer Restricted Securities until such
Broker-Dealer shall have received copies of such amended or supplemented
Prospectus, and if so directed by the Company, such Broker-Dealer shall
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such Broker-Dealer's possession of the
Prospectus covering such Transfer Restricted Securities at the time of
receipt of such notice;
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(iv) in the event that the Company would be required, pursuant to
Section 3(c)(iii)(D) above, to notify any Broker-Dealers holding Exchange
Securities, without unreasonable delay, subject to Section 3(c)(ii),
prepare and furnish to each such holder a reasonable number of copies of a
Prospectus supplemented or amended so that, as thereafter delivered to
purchasers of such Exchange Securities during the Resale Period, such
Prospectus shall conform in all material respects to the applicable
requirements of the Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder and shall not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing;
(v) subject to the provisos in (ii) above, use its best efforts to
obtain the withdrawal of any order suspending the effectiveness of such
Exchange Offer Registration Statement or any post-effective amendment
thereto at the earliest practicable date;
(vi) use its best efforts to (A) register or qualify the Exchange
Securities under the securities laws or blue sky laws of such jurisdictions
as are contemplated by Section 2(a) no later than the commencement of the
Exchange Offer, (B) if applicable, keep such registrations or
qualifications in effect and comply with such laws so as to permit the
continuance of offers, sales and dealings therein in such jurisdictions
until the expiration of the Resale Period and (C) take any and all other
actions as may be reasonably necessary or advisable to enable each Broker-
Dealer holding Exchange Securities to consummate the disposition thereof in
such jurisdictions; provided, however, that the Company shall not be
required for any such purpose to (1) qualify as a foreign corporation in
any jurisdiction wherein it would not otherwise be required to qualify but
for the requirements of this Section 3(c)(vi), (2) consent to general
service of process in any such jurisdiction or (3) make any changes to its
certificate of incorporation or by-laws or any agreement between it and its
stockholders;
(vii) use its best efforts to obtain the consent or approval of each
governmental agency or authority, whether federal, state or local, which
may be required to effect the Exchange Registration, the Exchange Offer and
the offering and sale of Exchange Securities by Broker-Dealers during the
Resale Period;
(viii) provide a CUSIP number for all Exchange Securities, not later
than the applicable Effective Time;
(ix) comply with all applicable rules and regulations of the
Commission, and make generally available to its securityholders as soon as
practicable but no later than eighteen months after the effective date of
such Exchange Offer Registration Statement, an earning statement of the
Company and its subsidiaries complying with Section 11(a) of the Act
(including, at the option of the Company, Rule 158 thereunder).
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(d) In connection with the Company's obligations with respect to the
registration of the Transfer Restricted Securities as contemplated by Section
2(b) pursuant to the Shelf Registration, if applicable, the Company shall, as
soon as practicable (or as otherwise specified):
(i) prepare and file with the Commission, as soon as practicable but
in any case within the time periods specified in Section 2(b), a Shelf
Registration Statement on any form which may be utilized by the Company and
which shall register all of the Transfer Restricted Securities for resale
by the holders thereof in accordance with such method or methods of
disposition as may be specified by such of the holders as, from time to
time, may be Electing Holders and use its best efforts to cause such Shelf
Registration Statement to become effective as soon as practicable but in
any case within the time periods specified in Section 2(b);
(ii) not less than 30 calendar days prior to the Effective Time of
the Shelf Registration Statement, mail the Notice and Questionnaire, in the
form of Exhibit A hereto, to the holders of Transfer Restricted Securities;
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no holder shall be entitled to be named as a selling securityholder in the
Shelf Registration Statement as of the Effective Time, and no holder shall
be entitled to use the Prospectus forming a part thereof for resales of
Transfer Restricted Securities at any time, unless such holder has returned
a completed and signed Notice and Questionnaire to the Company by the
deadline for response set forth therein; provided, however, holders of
Transfer Restricted Securities shall have at least 28 calendar days from
the date on which the Notice and Questionnaire is first mailed to such
holders to return a completed and signed Notice and Questionnaire to the
Company;
(iii) after the Effective Time of the Shelf Registration Statement,
upon the request of any holder of Transfer Restricted Securities that is
not then an Electing Holder, promptly send a Notice and Questionnaire to
such holder; provided that the Company shall not be required to take any
action to name such holder as a selling securityholder in the Shelf
Registration Statement or to enable such holder to use the Prospectus
forming a part thereof for resales of Transfer Restricted Securities until
such holder has returned a completed and signed Notice and Questionnaire to
the Company;
(iv) as soon as practicable prepare and file with the Commission
such amendments and supplements to such Shelf Registration Statement and
the Prospectus included therein, and take any other action, as may be
necessary to effect and maintain the effectiveness of such Shelf
Registration Statement for the period specified in Section 2(b) hereof and
as may be required by the applicable rules and regulations of the
Commission and the instructions applicable to the form of such Shelf
Registration Statement, and furnish to the Electing Holders copies of any
such supplement or amendment simultaneously with or prior to its being used
or filed with the Commission; provided that upon the occurrence of any
event that would cause any such Shelf Registration Statement or the
Prospectus contained therein (A) to contain a material misstatement or
omission or (B) not to be effective and usable for resale of Transfer
Restricted Securities, either of which occurs during the period that the
Company is required to maintain an effective and usable Shelf Registration
Statement and Prospectus
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pursuant to this Agreement, the Company shall file promptly an appropriate
amendment or supplement to such Registration Statement or Prospectus, (1)
in the case of clause (A), correcting any such misstatement or omission,
and (2) in the case of clauses (A) and (B) use its best efforts to cause
any amendment to be declared effective and such Shelf Registration
Statement and the related Prospectus to become usable for their intended
purpose(s) as soon as practicable thereafter; provided further
notwithstanding anything to the contrary set forth in this Agreement, the
Company's obligations to use its best efforts to keep the Shelf
Registration Statement continuously effective, supplemented and amended
shall be suspended in the event continued effectiveness of the Shelf
Registration Statement would, with the advice of counsel to the Company,
make it advisable for the Company to disclose a material financing,
acquisition or other corporate transaction, and the Board of Directors
shall have determined in good faith that such disclosure is not in the best
interests of the Company, but in no event will any such suspension,
individually or in the aggregate, exceed ninety (90) days in any calendar
year (such suspensions being referred to herein as a "Shelf Suspension
Period");
(v) comply with the provisions of the Act with respect to the
disposition of all of the Transfer Restricted Securities covered by such
Shelf Registration Statement in accordance with the intended methods of
disposition by the Electing Holders provided for in such Shelf Registration
Statement;
(vi) provide (A) the Electing Holders, (B) the underwriters (which
term, for purposes of this Exchange and Registration Rights Agreement,
shall include a person deemed to be an underwriter within the meaning of
Section 2(11) of the Act), if any, thereof, (C) any sales or placement
agent therefor, (D) counsel for any such underwriters or agents and (E) not
more than one counsel for all the Electing Holders the opportunity to
participate in the preparation of such Shelf Registration Statement, each
Prospectus included therein or filed with the Commission and each amendment
or supplement thereto;
(vii) for a reasonable period prior to the filing of such Shelf
Registration Statement, and throughout the period specified in Section
2(b), make available at reasonable times at the Company's principal place
of business or such other reasonable place for inspection by the persons
referred to in Section 3(d)(vi) who shall certify to the Company that they
have a current intention to sell the Transfer Restricted Securities
pursuant to the Shelf Registration such financial and other information and
books and records of the Company, and cause the officers, employees,
counsel and independent certified public accountants of the Company to
respond to such inquiries, as shall be reasonably necessary, in the
judgment of the respective counsel referred to in such Section, to conduct
a reasonable investigation within the meaning of Section 11 of the Act;
provided, however, that each such party shall be required to maintain in
confidence and not to disclose to any other person any information or
records reasonably designated by the Company as being confidential, until
such time as (A) such information becomes a matter of public record
(whether by virtue of its inclusion in such registration statement or
otherwise), or (B) such person shall be required so to disclose such
information pursuant to a subpoena or order of any court or other
governmental agency or
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body having jurisdiction over the matter (subject to the requirements of
such order, and only after such person shall have given the Company prompt
prior written notice of such require ment), or (C) after the Effective Time
and after having requested, in writing, that the Company include such
information in such Shelf Registration Statement or an amendment or
supplement thereto, and such request has not been accepted by the Company
within 15 days of such request, such information, in the reasonable
judgment of such party pursuant to advice of counsel, is required to be set
forth in such Shelf Registration Statement or the Prospectus included
therein or in an amendment to such Shelf Registration Statement or an
amendment or supplement to such Prospectus in order that such Shelf
Registration Statement, Prospectus, amendment or supplement, as the case
may be, complies with applicable requirements of the federal securities
laws and the rules and regulations of the Commission and does not contain
an untrue statement of a material fact or omit to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(viii) promptly notify in writing each of the Electing Holders, any
sales or placement agent therefor and any underwriter thereof (which
notification may be made through any managing underwriter that is a
representative of such underwriter for such purpose), (A) when such Shelf
Registration Statement or the Prospectus included therein or any Prospectus
amendment or supplement or post-effective amendment has been filed, and,
with respect to such Shelf Registration Statement or any post-effective
amendment, when the same has become effective, (B) of the issuance by the
Commission of any stop order suspending the effectiveness of such Shelf
Registration Statement or the initiation or threatening of any proceedings
for that purpose, (C) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Transfer
Restricted Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, or (D) (I) if at any time
when a Prospectus is required to be delivered under the Act, such Shelf
Registration Statement, Prospectus, Prospectus amendment or supplement or
post-effective amendment does not conform in all material respects to the
applicable requirements of the Act and the Trust Indenture Act and the
rules and regulations of the Commission thereunder or contains an untrue
statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing; or (II) the
occurrence of a Shelf Suspension Period;
(ix) subject to the provisos in (iv) above, use its best efforts to
obtain the withdrawal of any order suspending the effectiveness of such
registration statement or any post-effective amendment thereto at the
earliest practicable date;
(x) if requested by any managing underwriter or underwriters, any
placement or sales agent or any Electing Holder, promptly incorporate in a
Prospectus supplement or post-effective amendment such information as is
required by the applicable rules and regulations of the Commission and as
such managing underwriter or underwriters, such agent or such Electing
Holder specifies should be included therein relating to the terms of the
sale of such Transfer Restricted Securities, including information with
respect to the principal
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<PAGE>
amount of Transfer Restricted Securities being sold by such Electing Holder
or agent or to any underwriters, the name and description of such Electing
Holder, agent or underwriter, the offering price of such Transfer
Restricted Securities and any discount, commission or other compensation
payable in respect thereof, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the offering of the
Transfer Restricted Securities to be sold by such Electing Holder or agent
or to such underwriters; and make all required filings of such Prospectus
supplement or post-effective amendment promptly after notification of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment;
(xi) furnish to each Electing Holder, each placement or sales agent,
if any, therefor, each underwriter, if any, thereof and the respective
counsel referred to in Section 3(d)(vi) an executed copy (or, in the case
of an Electing Holder, a conformed copy) of such Shelf Registration
Statement, each such amendment and supplement thereto (in each case
including all exhibits thereto (in the case of an Electing Holder of
Transfer Restricted Securities, upon request) and documents incorporated by
reference therein) and such number of copies of such Shelf Registration
Statement (excluding exhibits thereto and documents incorporated by
reference therein unless specifically so requested by such Electing Holder,
agent or underwriter, as the case may be) and of the Prospectus included in
such Shelf Registration Statement (including each preliminary Prospectus
and any summary Prospectus), in conformity in all material respects with
the applicable requirements of the Act and the Trust Indenture Act and the
rules and regulations of the Commission thereunder, and such other
documents, as such Electing Holder, agent, if any, and underwriter, if any,
may reasonably request in order to facilitate the offering and disposition
of the Transfer Restricted Securities owned by such Electing Holder,
offered or sold by such agent or underwritten by such underwriter and to
permit such Electing Holder, agent and underwriter to satisfy the
Prospectus delivery requirements of the Act; and the Company hereby
consents, unless it has otherwise notified the Electing Holder under
Section 3(d)(iv) or (viii) hereof, to the use of such Prospectus (including
such preliminary and summary Prospectus) and any amendment or supplement
thereto by each such Electing Holder and by any such agent and underwriter,
in each case in the form most recently provided to such person by the
Company, in connection with the offering and sale of the Transfer
Restricted Securities covered by the Prospectus (including such preliminary
and summary Prospectus) or any supplement or amendment thereto;
(xii) use its best efforts to (A) register or qualify the Transfer
Restricted Securities to be included in such Shelf Registration Statement
under such securities laws or blue sky laws of such jurisdictions as any
Electing Holder and each placement or sales agent, if any, therefor and
underwriter, if any, thereof shall reasonably request, (B) keep such
registrations or qualifications in effect and comply with such laws so as
to permit the continuance of offers, sales and dealings therein in such
jurisdictions during the period the Shelf Registration is required to
remain effective under Section 2(b) above and for so long as may be
necessary to enable any such Electing Holder, agent or underwriter to
complete its distribution of Securities pursuant to such Shelf Registration
Statement and (C) take any and all other
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actions as may be reasonably necessary or advisable to enable each such
Electing Holder, agent, if any, and underwriter, if any, to consummate the
disposition in such jurisdictions of such Transfer Restricted Securities;
provided, however, that the Company shall not be required for any such
purpose to (1) qualify as a foreign corporation in any jurisdiction wherein
it would not otherwise be required to qualify but for the requirements of
this Section 3(d)(xii), (2) consent to general service of process in any
such jurisdiction or (3) make any changes to its certificate of
incorporation or by-laws or any agreement between it and its stockholders;
(xiii) use its best efforts to obtain the consent or approval of each
governmental agency or authority, whether federal, state or local, which
may be required to effect the Shelf Registration or the offering or sale in
connection therewith or to enable the selling holder or holders to offer,
or to consummate the disposition of, their Transfer Restricted Securities;
(xiv) cooperate with the Electing Holders and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Securities to be sold, which
certificates shall be printed, lithographed or engraved, or produced by any
combination of such methods, and which shall not bear any restrictive
legends; and, in the case of an underwritten offering, enable such Transfer
Restricted Securities to be in such denominations and registered in such
names as the managing underwriters may request at least two business days
prior to any sale of the Transfer Restricted Securities;
(xv) provide a CUSIP number for all Transfer Restricted Securities,
not later than the applicable Effective Time;
(xvi) enter into one or more underwriting agreements, engagement
letters, agency agreements, "best efforts" underwriting agreements or
similar agreements, as appropriate, including customary provisions relating
to indemnification and contribution, and take such other actions in
connection therewith as any Electing Holders aggregating at least 20% in
aggregate principal amount of the Transfer Restricted Securities at the
time outstanding shall reasonably request in order to expedite or
facilitate the disposition of such Transfer Restricted Securities;
(xvii) whether or not an agreement of the type referred to in Section
3(d)(xvi) hereof is entered into and whether or not any portion of the
offering contemplated by the Shelf Registration is an underwritten offering
or is made through a placement or sales agent or any other entity, (A) make
such representations and warranties to the Electing Holders and the
placement or sales agent, if any, therefor and the underwriters, if any,
thereof in form, substance and scope as are customarily made in connection
with an offering of debt securities pursuant to any appropriate agreement
or to a registration statement filed on the form applicable to the Shelf
Registration; (B) obtain an opinion of counsel to the Company in customary
form and covering such matters, of the type customarily covered by such an
opinion, as the managing underwriters, if any, or as any Electing Holders
of at least 20% in
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<PAGE>
aggregate principal amount of the Transfer Restricted Securities at the
time outstanding may reasonably request, addressed to such Electing Holder
or Electing Holders and the placement or sales agent, if any, therefor and
the underwriters, if any, thereof and dated the effective date of such
Shelf Registration Statement (and if such Shelf Registration Statement
contemplates an underwritten offering of a part or all of the Transfer
Restricted Securities, dated the date of the closing under the underwriting
agreement relating thereto) (it being agreed that the matters to be covered
by such opinion shall include the due incorporation and good standing of
the Company and its subsidiaries; the qualification of the Company and its
subsidiaries to transact business as foreign corporations; the due
authorization, execution and delivery by the Company of the relevant
agreement of the type referred to in Section 3(d)(xvi) hereof; the due
authorization, execution, authentication and issuance by the Company, and
the validity and enforceability, of the Securities; the absence of
knowledge of such counsel of material legal or governmental proceedings
involving the Company; the absence of governmental approvals required to be
obtained in connection with the Shelf Registration, the offering and sale
of the Transfer Restricted Securities, this Exchange and Registration
Rights Agreement or any agreement of the type referred to in Section
3(d)(xvi) hereof, except such approvals as are referenced in the Shelf
Registration Statement or as may be required under state securities or blue
sky laws; the material compliance as to form of such Shelf Registration
Statement and any documents incorporated by reference therein and of the
Indenture with the requirements of the Act and the Trust Indenture Act and
the rules and regulations of the Commission thereunder, respectively; and
the expression of the belief of such counsel as to the absence of any facts
having come to the attention of such counsel that have caused them to
believe that such Shelf Registration Statement and the Prospectus included
therein, as then amended or supplemented, as of the date of the opinion and
of the Shelf Registration Statement or most recent post-effective amendment
thereto, as the case may be, and from the documents incorporated by
reference therein as of the dates of such documents (in each case other
than the financial statements, related notes, related schedules and other
financial data contained therein) contained an untrue statement of a
material fact or omitted to state therein a material fact necessary to make
the statements therein in light of the circumstances under which they were
made, and in the case of the documents incorporated by reference, in the
light of the circumstances existing at the time that such documents were
filed with the Commission under the Exchange Act, not misleading); (C)
obtain a "comfort" letter or letters from the independent certified public
accountants of the Company addressed to the selling Electing Holders, the
placement or sales agent, if any, therefor or the underwriters, if any,
thereof, dated (i) the effective date of such Shelf Registration Statement
and (ii) the effective date of any Prospectus supplement to the Prospectus
included in such Shelf Registration Statement or post-effective amendment
to such Shelf Registration Statement which includes unaudited or audited
financial statements as of a date or for a period subsequent to that of the
latest such statements included in such Prospectus (and, if such Shelf
Registration Statement contemplates an underwritten offering pursuant to
any Prospectus supplement to the Prospectus included in such Shelf
Registration Statement or post-effective amendment to such Shelf
Registration Statement which includes unaudited or audited financial
statements as of a date or for a period subsequent to that of the latest
such statements included in such Prospectus, dated the date of the closing
under the underwriting
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<PAGE>
agreement relating thereto), such letter or letters to be in customary form
and covering such matters of the type customarily covered by letters of
such type; (D) deliver such documents and certificates, including officers'
certificates, as may be reasonably requested by any Electing Holders of at
least 20% in aggregate principal amount of the Transfer Restricted
Securities at the time outstanding or the placement or sales agent, if any,
therefor and the managing underwriters, if any, thereof to evidence the
accuracy of the representations and warranties made pursuant to clause (A)
above or those contained in Section 5(a) hereof and the compliance with or
satisfaction of any agreements or conditions contained in the underwriting
agreement or other agreement entered into by the Company; and (E) undertake
such obligations relating to expense reimbursement, indemnification and
contribution as are provided in Section 6 hereof;
(xviii) notify in writing each holder of Transfer Restricted
Securities of any proposal by the Company to amend or waive any provision
of this Exchange and Registration Rights Agreement pursuant to Section 9(h)
hereof and of any amendment or waiver effected pursuant thereto, each of
which notices shall contain the text of the amendment or waiver proposed or
effected, as the case may be;
(xix) in the event that any broker-dealer registered under the
Exchange Act shall underwrite any Transfer Restricted Securities or
participate as a member of an underwriting syndicate or selling group or
"assist in the distribution" (within the meaning of the Rules of Fair
Practice and the By-Laws of the National Association of Securities Dealers,
Inc. ("NASD") or any successor thereto, as amended from time to time)
thereof, whether as a holder of such Transfer Restricted Securities or as
an underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, assist such broker-dealer in complying with the
requirements of such Rules and By-Laws, including by (A) if such Rules or
By-Laws shall so require, engaging a "qualified independent underwriter"
(as defined in such Schedule (or any successor thereto)) to participate in
the preparation of the Shelf Registration Statement relating to such
Transfer Restricted Securities, to exercise usual standards of due
diligence in respect thereto and, if any portion of the offering
contemplated by such Shelf Registration Statement is an underwritten
offering or is made through a placement or sales agent, to recommend the
yield of such Transfer Restricted Securities, (B) indemnifying any such
qualified independent underwriter to the extent of the indemnification of
underwriters provided in Section 6 hereof (or to such other customary
extent as may be requested by such underwriter), and (C) providing such
information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the Rules of Fair Practice
of the NASD; and
(xx) comply with all applicable rules and regulations of the
Commission, and make generally available to its securityholders as soon as
practicable but in any event not later than eighteen months after the
effective date of such Shelf Registration Statement, an earning statement
of the Company and its subsidiaries complying with Section 11(a) of the Act
(including, at the option of the Company, Rule 158 thereunder).
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<PAGE>
(e) In the event that the Company would be required, pursuant to Section
3(d)(viii)(D) above, to notify the Electing Holders, the placement or sales
agent, if any, therefor and the managing underwriters, if any, thereof, the
Company shall without unreasonable delay, subject to Section 3(d)(iv), prepare
and furnish to each of the Electing Holders, to each placement or sales agent,
if any, and to each such underwriter, if any, a reasonable number of copies of a
Prospectus supplemented or amended so that, as thereafter delivered to
purchasers of Transfer Restricted Securities, such Prospectus shall conform in
all material respects to the applicable requirements of the Act and the Trust
Indenture Act and the rules and regulations of the Commission thereunder and
shall not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing. Each
Electing Holder agrees that upon receipt of any notice from the Company pursuant
to Section 3(d)(viii)(D) hereof, such Electing Holder shall forthwith
discontinue the disposition of Transfer Restricted Securities pursuant to the
Shelf Registration Statement applicable to such Transfer Restricted Securities
until such Electing Holder shall have received copies of such amended or
supplemented Prospectus, and if so directed by the Company, such Electing Holder
shall deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such Electing Holder's possession of the
Prospectus covering such Transfer Restricted Securities at the time of receipt
of such notice.
(f) In the event of a Shelf Registration, in addition to the information
required to be provided by each Electing Holder in its Notice and Questionnaire,
the Company may require such Electing Holder to furnish to the Company such
additional information regarding such Electing Holder and such Electing Holder's
intended method of distribution of Transfer Restricted Securities as may be
required in order to comply with the Act. Each such Electing Holder agrees to
notify the Company as promptly as practicable of any inaccuracy or change in
information previously furnished by such Electing Holder to the Company or of
the occurrence of any event in either case as a result of which any Prospectus
relating to such Shelf Registration contains or would contain an untrue
statement of a material fact regarding such Electing Holder or such Electing
Holder's intended method of disposition of such Transfer Restricted Securities
or omits to state any material fact regarding such Electing Holder or such
Electing Holder's intended method of disposition of such Transfer Restricted
Securities required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and promptly
to furnish to the Company any additional information required to correct and
update any previously furnished information or required so that such Prospectus
shall not contain, with respect to such Electing Holder or the disposition of
such Transfer Restricted Securities, an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances then
existing.
(g) Until the expiration of two years after the Closing Date, the Company
will not resell, and will use its best efforts to prevent any of its Affiliates
from reselling, any of the Securities that have been reacquired by any of them
except pursuant to an effective registration statement under the Act.
(h) As a condition to its participation in the Exchange Offer pursuant to
the terms of this Agreement, each holder of Transfer Restricted Securities shall
furnish, upon the written request of
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the Company, prior to the completion of the Exchange Offer, a written
representation to the Company, (which may be contained in the letter of
transmittal contemplated by the Exchange Offer Registration Statement) to the
effect that (A) it is not an affiliate of the Company, (B) it is not engaged in,
and does not intend to engage in, and has no arrangement or understanding with
any person to participate in, a distribution of the Exchange Securities to be
issued in the Exchange Offer and (C) it is acquiring the Exchange Securities in
its ordinary course of business. Each Holder hereby acknowledges and agrees that
any Broker-Dealer and any such holder using the Exchange Offer to participate in
a distribution of the securities to be acquired in the Exchange Offer (1) could
not under Commission policy as in effect on the date of this Agreement rely on
the position of the Commission enunciated in Morgan Stanley and Co., Inc.
(available June 5, 1991) and Exxon Capital Holdings Corporation (available May
13, 1988), as interpreted in the Commission's letter to Shearman & Sterling
dated July 2, 1993, and similar no-action letters, and (2) must comply with the
registration and prospectus delivery requirements of the Act in connection with
a secondary resale transaction and that such a secondary resale transaction must
be covered by an effective registration statement (which may be the Exchange
Offer Registration Statement) containing the selling security holder information
required by Item 507 or 508, as applicable, of Regulation S-K if the resales are
of Exchange Securities obtained by such Holder in exchange for securities
acquired by such holder directly from the Company or an affiliate thereof.
4. Registration Expenses.
The Company agrees to bear and to pay or cause to be paid promptly all
expenses incident to the Company's performance of or compliance with this
Exchange and Registration Rights Agreement, including (a) all Commission and any
NASD registration, filing and review fees and expenses including fees and
disbursements of counsel for the placement or sales agent or underwriters in
connection with such NASD registration, filing and review, (b) all fees and
expenses in connection with the qualification of the Securities for offering and
sale under the State securities and blue sky laws referred to in Section
3(d)(xii) hereof and determination of their eligibility for investment under the
laws of such jurisdictions as any managing underwriters or the Electing Holders
may designate, including any fees and disbursements of counsel for the Electing
Holders (subject to the limitations of Clause (i) below) or underwriters in
connection with such qualification and determination, (c) all expenses relating
to the preparation, printing, production, distribution and reproduction of each
registration statement required to be filed hereunder, each Prospectus included
therein or prepared for distribution pursuant hereto, each amendment or
supplement to the foregoing, the expenses of preparing the Securities for
delivery and the expenses of printing or producing any underwriting agreements,
agreements among underwriters, selling agreements and blue sky or legal
investment memoranda and all other documents in connection with the offering,
sale or delivery of Securities to be disposed of (including certificates
representing the Securities), (d) messenger, telephone and delivery expenses
relating to the offering, sale or delivery of Securities and the preparation of
documents referred in clause (c) above, (e) fees and expenses of the Trustee
under the Indenture, any agent of the Trustee and any counsel for the Trustee
and of any collateral agent or custodian, (f) internal expenses (including all
salaries and expenses of the Company's officers and employees performing legal
or accounting duties), (g) fees, disbursements and expenses of counsel and
independent certified public accountants of the Company (including the expenses
of any
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opinions or "comfort" letters required by or incident to such performance and
compliance), (h) fees, disbursements and expenses of any "qualified independent
underwriter" engaged pursuant to Section 3(d)(xix) hereof, (i) fees,
disbursements and expenses of one counsel for the Electing Holders retained in
connection with a Shelf Registration, as selected by the Electing Holders of at
least a majority in aggregate principal amount of the Transfer Restricted
Securities held by Electing Holders (which counsel shall be reasonably
satisfactory to the Company), (j) any fees charged by securities rating services
for rating the Securities, and (k) fees, expenses and disbursements of any other
persons, including special experts, retained by the Company in connection with
such registration (collectively, the "Registration Expenses"). To the extent
that any Registration Expenses are incurred, assumed or paid by any holder of
Transfer Restricted Securities or any placement or sales agent therefor or
underwriter thereof, the Company shall reimburse such person for the full amount
of the Registration Expenses so incurred, assumed or paid promptly after receipt
of a request therefor. Notwithstanding the foregoing, the holders of the
Transfer Restricted Securities being registered shall pay all agency fees and
commissions and underwriting discounts and commissions attributable to the sale
of such Transfer Restricted Securities and the fees and disbursements of any
counsel or other advisors or experts retained by such holders (severally or
jointly), other than the counsel and experts specifically referred to above.
5. Representations and Warranties.
The Company represents and warrants to, and agrees with, each Initial
Purchaser and each of the holders from time to time of Transfer Restricted
Securities that:
(a) Each registration statement covering Transfer Restricted
Securities and each Prospectus (including any preliminary or summary
Prospectus) contained therein or furnished pursuant to Section 3(d) or
Section 3(c) hereof and any further amendments or supplements to any such
registration statement or Prospectus, when it becomes effective or is filed
with the Commission, as the case may be, and, in the case of an
underwritten offering of Transfer Restricted Securities, at the time of the
closing under the underwriting agreement relating thereto, will conform in
all material respects to the applicable requirements of the Act and the
Trust Indenture Act and the rules and regulations of the Commission
thereunder and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and at all times subsequent to
the Effective Time when a Prospectus would be required to be delivered
under the Act, other than from (i) such time as a notice has been given to
holders of Transfer Restricted Securities pursuant to Section 3(d)(viii)(D)
or Section 3(c)(iii)(D) hereof until (ii) such time as the Company
furnishes an amended or supplemented Prospectus pursuant to Section 3(e) or
Section 3(c)(iv) hereof, each such registration statement, and each
Prospectus (including any summary Prospectus) contained therein or
furnished pursuant to Section 3(d) or Section 3(c) hereof, as then amended
or supplemented, will conform in all material respects to the applicable
requirements of the Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder and will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
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<PAGE>
provided, however, that this representation and warranty shall not apply to
any statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by a holder of Transfer
Restricted Securities expressly for use therein.
(b) Any documents incorporated by reference in any Prospectus referred
to in Section 5(a) hereof, when they become or became effective or are or
were filed with the Commission, as the case may be, will conform or
conformed in all material respects to the requirements of the Act or the
Exchange Act, as applicable, and none of such documents will at such time
contain or contained an untrue statement of a material fact or will omit or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by a holder of Transfer Restricted Securities
expressly for use therein.
(c) The compliance by the Company with all of the provisions of this
Exchange and Registration Rights Agreement and the consummation of the
transactions herein contemplated will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default under,
any material indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any subsidiary of the
Company is a party or by which the Company or any subsidiary of the Company
is bound or to which any of the property or assets of the Company or any
subsidiary of the Company is subject, nor will such action result in any
violation of the provisions of the certificate of incorporation, as
amended, or the by-laws of the Company or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction
over the Company or any subsidiary of the Company or any of their
properties; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the consummation by the Company of the transactions
contemplated by this Exchange and Registration Rights Agreement, except the
registration under the Act of the Securities, qualification of the
Indenture under the Trust Indenture Act and such consents, approvals,
authorizations, registrations or qualifications as may be required under
State securities or blue sky laws in connection with the offering and
distribution of the Securities.
(d) This Exchange and Registration Rights Agreement has been duly
authorized, executed and delivered by the Company.
6. Indemnification.
(a) Indemnification by the Company. The Company shall indemnify and hold
harmless each of the holders of Transfer Restricted Securities included in an
Exchange Offer Registration Statement, each of the Electing Holders of Transfer
Restricted Securities included in a Shelf Registration Statement and each person
who participates as a placement or sales agent or as an underwriter in any
offering or sale of such Transfer Restricted Securities against any losses,
claims, damages or liabilities, joint or several, to which such holder, agent or
underwriter may become
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subject under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Exchange Offer Registration Statement or Shelf Registration Statement, as the
case may be, under which such Transfer Restricted Securities were registered
under the Act, or any preliminary, final or summary Prospectus contained therein
or furnished by the Company to any such holder, Electing Holder, agent or
underwriter, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and the Company shall, and it hereby agrees to, reimburse such
holder, such Electing Holder, such agent and such underwriter for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such action or claim as such expenses are incurred; provided,
however, that the Company shall not be liable to any such person in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, or preliminary, final or
summary Prospectus, or amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by such person
expressly for use therein;
(b) Indemnification by the Holders and any Agents and Underwriters. The
Company may require, as a condition to including any Transfer Restricted
Securities in any registration statement filed pursuant to Section 2(b) hereof
and to entering into any underwriting agreement with respect thereto, that the
Company shall have received an undertaking reasonably satisfactory to it from
the Electing Holder of such Transfer Restricted Securities and from each
underwriter named in any such underwriting agreement, severally and not jointly,
to (i) indemnify and hold harmless the Company, and all other holders of
Transfer Restricted Securities, against any losses, claims, damages or
liabilities to which the Company or such other holders of Transfer Restricted
Securities may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in such registration statement, or any preliminary,
final or summary Prospectus contained therein or furnished by the Company to any
such Electing Holder, agent or underwriter, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Electing Holder or underwriter
expressly for use therein, and (ii) reimburse the Company for any legal or other
expenses reasonably incurred by the Company in connection with investigating or
defending any such action or claim as such expenses are incurred; provided,
however, that no such Electing Holder shall be required to undertake liability
to any person under this Section 6(b) for any amounts in excess of the dollar
amount of the proceeds to be received by such Electing Holder from the sale of
such Electing Holder's Transfer Restricted Securities pursuant to such
registration.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified party
under subsection (a) or (b) above of written notice of the commencement of any
action, such indemnified party shall,
-21-
<PAGE>
if a claim in respect thereof is to be made against an indemnifying party
pursuant to the indemnification provisions of or contemplated by this Section 6,
notify such indemnifying party in writing of the commencement of such action;
but the omission so to notify the indemnifying party shall not relieve it from
any liability which it may have to any indemnified party other than under the
indemnification provisions of or contemplated by Section 6(a) or 6(b) hereof. In
case any such action shall be brought against any indemnified party and it shall
notify an indemnifying party of the commencement thereof, such indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party (who shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and, after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, such indemnifying party shall not be liable to such indemnified party
for any legal expenses of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party, in connection with the defense
thereof other than reasonable costs of investigation. No indemnifying party
shall, without the written consent of the indemnified party, effect the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(d) Contribution. If for any reason the indemnification provisions
contemplated by Section 6(a) or Section 6(b) are unavailable to or insufficient
to hold harmless an indemnified party in respect of any losses, claims, damages
or liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the indemnified party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such indemnifying party or by such indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contributions pursuant to this Section 6(d) were determined by
pro rata allocation (even if the holders or any agents or underwriters or all of
them were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to in this Section 6(d). The amount paid or payable by an indemnified party as
a result of the losses, claims, damages, or liabilities (or actions in respect
thereof) referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6(d), no holder shall be required to contribute any
amount in excess of the amount by which the dollar amount of the proceeds
received by such
-22-
<PAGE>
holder from the sale of any Transfer Restricted Securities (after deducting any
fees, discounts and commissions applicable thereto) exceeds the amount of any
damages which such holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission, and no
underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Transfer Restricted Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The holders'
and any underwriters' obligations in this Section 6(d) to contribute shall be
several in proportion to the principal amount of Transfer Restricted Securities
registered or underwritten, as the case may be, by them and not joint.
(e) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each officer, director and partner of
each holder, agent and underwriter and each person, if any, who controls any
holder, agent or underwriter within the meaning of the Act; and the obligations
of the holders and any agents or underwriters contemplated by this Section 6
shall be in addition to any liability which the respective holder, agent or
underwriter may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company (including any person
who, with his consent, is named in any registration statement as about to become
a director of the Company) and to each person, if any, who controls the Company
within the meaning of the Act.
7. Underwritten Offerings.
(a) Selection of Underwriters. If any of the Transfer Restricted
Securities covered by the Shelf Registration are to be sold pursuant to an
underwritten offering, the managing underwriter or underwriters thereof shall be
designated by Electing Holders holding at least a majority in aggregate
principal amount of the Transfer Restricted Securities to be included in such
offering, provided that such designated managing underwriter or underwriters is
or are reasonably acceptable to the Company.
(b) Participation by Holders. Each holder of Transfer Restricted
Securities hereby agrees with each other such holder that no such holder may
participate in any underwritten offering hereunder unless such holder (i) agrees
to sell such holder's Transfer Restricted Securities on the basis provided in
any underwriting arrangements approved by the persons entitled hereunder to
approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements.
8. Rule 144.
The Company covenants to the holders of Transfer Restricted Securities that
to the extent it shall be required
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<PAGE>
to do so under the Exchange Act, the Company shall timely file the reports
required to be filed by it under the Exchange Act or the Act (including the
reports under Section 13 and 15(d) of the Exchange Act referred to in
subparagraph (c)(1) of Rule 144 adopted by the Commission under the Act) and the
rules and regulations adopted by the Commission thereunder, and shall take such
further action as any holder of Transfer Restricted Securities may reasonably
request, all to the extent required from time to time to enable such holder to
sell Transfer Restricted Securities without registration under the Act within
the limitations of the exemption provided by Rule 144 under the Act, as such
Rule may be amended from time to time, or any similar or successor rule or
regulation hereafter adopted by the Commission. Upon the request of any holder
of Transfer Restricted Securities in connection with that holder's sale pursuant
to Rule 144, the Company shall deliver to such holder a written statement as to
whether it has complied with such requirements.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company represents, warrants,
covenants and agrees that it has not granted, and shall not grant, registration
rights with respect to Transfer Restricted Securities or any other securities
which would be inconsistent with the terms contained in this Exchange and
Registration Rights Agreement.
(b) Specific Performance. The parties hereto acknowledge that there would
be no adequate remedy at law if the Company fails to perform any of their
respective obligations hereunder and that the Initial Purchasers and the holders
from time to time of the Transfer Restricted Securities may be irreparably
harmed by any such failure, and accordingly agree that the Initial Purchasers
and such holders, in addition to any other remedy to which they may be entitled
at law or in equity, shall be entitled to compel specific performance of the
respective obligations of the Company under this Exchange and Registration
Rights Agreement in accordance with the terms and conditions of this Exchange
and Registration Rights Agreement, in any court of the United States or any
State thereof having jurisdiction.
(c) Notices. All notices, requests, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand, if delivered personally or by courier, or
three days after being deposited in the mail (registered or certified mail,
postage prepaid, return receipt requested) as follows:
To the Company:
Exodus Communications, Inc.
2650 San Tomas Expressway
Santa Clara, California 95051
Attention: General Counsel
Phone: (408) 346-2200
Fax: (408) 346-2206
-24-
<PAGE>
To the Initial Purchasers:
Goldman, Sachs & Co.
Donaldson Lufkin & Jenrette Securities Corporation
BT Alex. Brown Incorporated
NationsBanc Montgomery Securities LLC
c/o Goldman, Sachs & Co.
85 Broad Street
New York, NY 10004
Phone: (212) 902-1000
Fax: (212) 902-3000
To a holder:
to the address of such holder set forth in the security register
or other records of the Company, or to such other address as the
Company or any such holder may have furnished to the other in
writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
(d) Parties in Interest. All the terms and provisions of this Exchange and
Registration Rights Agreement shall be binding upon, shall inure to the benefit
of and shall be enforceable by the parties hereto and the holders from time to
time of the Transfer Restricted Securities and the respective successors and
assigns of the parties hereto and such holders. In the event that any
transferee of any holder of Transfer Restricted Securities shall acquire
Transfer Restricted Securities, in any manner, whether by gift, bequest,
purchase, operation of law or otherwise, such transferee shall, without any
further writing or action of any kind, be deemed a beneficiary hereof for all
purposes and such Transfer Restricted Securities shall be held subject to all of
the terms of this Exchange and Registration Rights Agreement, and by taking and
holding such Transfer Restricted Securities such transferee shall be entitled to
receive the benefits of, and be conclusively deemed to have agreed to be bound
by all of the applicable terms and provisions of this Exchange and Registration
Rights Agreement. If the Company shall so request, any such successor, assign
or transferee shall agree in writing to acquire and hold the Transfer Restricted
Securities subject to all of the applicable terms hereof.
(e) Survival. The respective indemnities, agreements, representations,
warranties and each other provision set forth in this Exchange and Registration
Rights Agreement or made pursuant hereto shall remain in full force and effect
regardless of any investigation (or statement as to the results thereof) made by
or on behalf of any holder of Transfer Restricted Securities, any director,
officer or partner of such holder, any agent or underwriter or any director,
officer or partner thereof, or any controlling person of any of the foregoing,
and shall survive delivery of and payment for the Transfer Restricted Securities
pursuant to the Purchase Agreement and the transfer and registration of Transfer
Restricted Securities by such holder and the consummation of an Exchange Offer.
-25-
<PAGE>
(f) LAW GOVERNING. THIS EXCHANGE AND REGISTRATION RIGHTS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW
YORK.
(g) Headings. The descriptive headings of the several Sections and
paragraphs of this Exchange and Registration Rights Agreement are inserted for
convenience only, do not constitute a part of this Exchange and Registration
Rights Agreement and shall not affect in any way the meaning or interpretation
of this Exchange and Registration Rights Agreement.
(h) Entire Agreement; Amendments. This Exchange and Registration Rights
Agreement and the other writings referred to herein (including the Indenture and
the form of Securities) or delivered pursuant hereto which form a part hereof
contain the entire understanding of the parties with respect to its subject
matter. This Exchange and Registration Rights Agreement supersedes all prior
agreements and understandings between the parties with respect to its subject
matter. This Exchange and Registration Rights Agreement may be amended and the
observance of any term of this Exchange and Registration Rights Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) only by a written instrument duly executed by the Company and the
holders of at least a majority in aggregate principal amount of the Transfer
Restricted Securities at the time outstanding. Each holder of any Transfer
Restricted Securities at the time or thereafter outstanding shall be bound by
any amendment or waiver effected pursuant to this Section 9(h), whether or not
any notice, writing or marking indicating such amendment or waiver appears on
such Transfer Restricted Securities or is delivered to such holder.
(i) Counterparts. This agreement may be executed by the parties in
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
referred to above.
EXODUS COMMUNICATIONS, INC.
By:_________________________________
Name:
Title:
INITIAL PURCHASERS
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION,
BT ALEX. BROWN INCORPORATED
NATIONSBANC MONTGOMERY SECURITIES
LLC
GOLDMAN, SACHS & CO., on behalf of each of
the Initial Purchasers
By:_________________________________
Name:
Title:
-27-
<PAGE>
Exhibit A
EXODUS COMMUNICATIONS, INC.
INSTRUCTION TO DTC PARTICIPANTS
-------------------------------
(Date of Mailing)
URGENT - IMMEDIATE ATTENTION REQUESTED
DEADLINE FOR RESPONSE: [DATE]/1/
-----------------------------
The Depository Trust Company ("DTC") has identified you as a DTC
Participant through which beneficial interests in the Exodus Communications,
Inc. (the "Company") 11 1/4% Senior Notes due 2008 (the "Securities") are held.
The Company is in the process of registering the Securities under the
Securities Act of 1933 for resale by the beneficial owners thereof. In order to
have their Securities included in the registration statement, beneficial owners
must complete and return the enclosed Notice of Registration Statement and
Selling Securityholder Questionnaire.
It is important that beneficial owners of the Securities receive a
------------------------------------------------------------------
copy of the enclosed materials as soon as possible as their rights to have the
- --------------------------------------------------
Securities included in the registration statement depend upon their returning
the Notice and Questionnaire by [DEADLINE FOR RESPONSE]. Please forward a copy
---------------------
of the enclosed documents to each beneficial owner that holds interests in the
Securities through you. If you require more copies of the enclosed materials or
have any questions pertaining to this matter, please contact Exodus
Communications, Inc., 2650 San Tomas Expressway, Santa Clara, CA 95051,
Attention: General Counsel, (408) 346-2200.
- --------------------
/1/ Not less than 28 calendar days from date of mailing.
-1-
<PAGE>
Exodus Communications, Inc.
Notice of Registration Statement
and
Selling Securityholder Questionnaire
------------------------------------
(Date)
Reference is hereby made to the Exchange and Registration Rights
Agreement (the "Exchange and Registration Rights Agreement") between Exodus
Communications, Inc. (the "Company") and the Initial Purchasers named therein.
Pursuant to the Exchange and Registration Rights Agreement, the Company has
filed with the United States Securities and Exchange Commission (the
"Commission") a registration statement on Form [___] (the "Shelf Registration
Statement") for the registration and resale under Rule 415 of the Securities Act
of 1933, as amended (the "Act"), of the Company's 11 1/4% Senior Notes due 2008
(the "Securities"). A copy of the Exchange and Registration Rights Agreement is
attached hereto. All capitalized terms not otherwise defined herein shall have
the meanings ascribed thereto in the Exchange and Registration Rights Agreement.
Each beneficial owner of Transfer Restricted Securities (as defined
below) is entitled to have the Transfer Restricted Securities beneficially owned
by it included in the Shelf Registration Statement. In order to have Transfer
Restricted Securities included in the Shelf Registration Statement, this Notice
of Registration Statement and Selling Securityholder Questionnaire ("Notice and
Questionnaire") must be completed, executed and delivered to the Company's
counsel at the address set forth herein for receipt ON OR BEFORE [DEADLINE FOR
--------------------------
RESPONSE]. Beneficial owners of Transfer Restricted Securities who do not
- ---------
complete, execute and return this Notice and Questionnaire by such date (i) will
not be named as selling securityholders in the Shelf Registration Statement and
(ii) may not use the Prospectus forming a part thereof for resales of Transfer
Restricted Securities.
Certain legal consequences arise from being named as a selling
securityholder in the Shelf Registration Statement and related Prospectus.
Accordingly, holders and beneficial owners of Transfer Restricted Securities are
advised to consult their own securities law counsel regarding the consequences
of being named or not being named as a selling securityholder in the Shelf
Registration Statement and related Prospectus.
The term "Transfer Restricted Securities" is defined in the Exchange
------------------------------
and Registration Rights Agreement.
-2-
<PAGE>
ELECTION
The undersigned holder (the "Selling Securityholder") of Transfer
Restricted Securities hereby elects to include in the Shelf Registration
Statement the Transfer Restricted Securities beneficially owned by it and listed
below in Item (c). The undersigned, by signing and returning this Notice and
Questionnaire, agrees to be bound with respect to such Transfer Restricted
Securities by the terms and conditions of this Notice and Questionnaire and the
Exchange and Registration Rights Agreement, including, without limitation,
Section 6 of the Exchange and Registration Rights Agreement, as if the
undersigned Selling Securityholder were an original party thereto.
Upon any sale of Transfer Restricted Securities pursuant to the Shelf
Registration Statement, the Selling Securityholder will be required to deliver
to the Company and Trustee the Notice of Transfer set forth in Appendix A to the
Prospectus and as Exhibit B to the Exchange and Registration Rights Agreement.
The Selling Securityholder hereby provides the following information
to the Company and represents and warrants that such information is accurate and
complete:
-3-
<PAGE>
QUESTIONNAIRE
(a) Full Legal Name of Selling Securityholder:
- --------------------------------------------------------------------------------
(i) Full Legal Name of Registered Holder (if not the same as in (a) above)
of Transfer Restricted Securities Listed in Item (c) below:
----------------------------------------------------------------------
(ii) Full Legal Name of DTC Participant (if applicable and if not the same
as (a) above) Through Which Transfer Restricted Securities Listed in
Item (c) below are Held:
----------------------------------------------------------------------
(b) Address for Notices to Selling Securityholder:
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Telephone:
-----------------------------------
Fax:
-----------------------------------
Contact Person:
-----------------------------------
(c) Beneficial Ownership of Securities:
Except as set forth below in this Item (c), the undersigned does not
beneficially own any Securities.
(i) Principal amount of Transfer Restricted Securities beneficially owned:
----------------------------------------------------------------------
CUSIP No(s). of such Transfer Restricted Securities:
----------------
(ii) Principal amount of Securities other than Transfer Restricted
Securities beneficially owned:
---------------------------------------
-4-
<PAGE>
CUSIP No(s). of such other Securities: ___________________________
(iii) Principal amount of Transfer Restricted Securities which the
undersigned wishes to be included in the Shelf Registration
Statement: _______________________________________________________
CUSIP No(s). of such Transfer Restricted Securities to be included
in the Shelf Registration Statement: _____________________________
(d) Beneficial Ownership of Other Securities of the Company:
Except as set forth below in this Item (d), the undersigned Selling
Securityholder is not the beneficial or registered owner of any other securities
of the Company, other than the Securities listed above in Item (c).
State any exceptions here:
(e) Relationships with the Company:
Except as set forth below, neither the Selling Securityholder nor any of
its affiliates, officers, directors or principal equity holders (5% or more) has
held any position or office or has had any other material relationship with the
Company (or its predecessors or affiliates) during the past three years.
State any exceptions here:
(f) Plan of Distribution:
Except as set forth below, the undersigned Selling Securityholder
intends to distribute the Transfer Restricted Securities listed above in Item
(c) only as follows (if at all): Such Transfer Restricted Securities may be
sold from time to time directly by the undersigned Selling Securityholder or,
alternatively, through underwriters, Broker-Dealers or agents. Such Transfer
Restricted Securities may be sold in one or more transactions at fixed prices,
at prevailing market prices at the time of sale, at varying prices determined at
the time of sale, or at negotiated prices. Such sales may be effected in
transactions (which may involve crosses or block transactions) (i) on any
national securities exchange or quotation service on which the Transfer
Restricted Securities may be listed or quoted at the time of sale, (ii) in the
over-the-counter market, (iii) in transactions otherwise than on such exchanges
or services or in the over-the-counter market, or (iv) through the
-5-
<PAGE>
writing of options. In connection with sales of the Transfer Restricted
Securities or otherwise, the Selling Securityholder may enter into hedging
transactions with Broker-Dealers, which may in turn engage in short sales of the
Transfer Restricted Securities in the course of hedging the positions they
assume. The Selling Securityholder may also sell Transfer Restricted Securities
short and deliver Transfer Restricted Securities to close out such short
positions, or loan or pledge Transfer Restricted Securities to Broker-Dealers
that in turn may sell such securities.
State any exceptions here:
By signing below, the Selling Securityholder acknowledges that it
understands its obligation to comply, and agrees that it will comply, with the
provisions of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the rules and regulations thereunder, particularly Rule 10b-6.
In the event that the Selling Securityholder transfers all or any portion
of the Transfer Restricted Securities listed in Item (c) above after the date on
which such information is provided to the Company, the Selling Securityholder
agrees to notify the transferee(s) at the time of the transfer of its rights and
obligations under this Notice and Questionnaire and the Exchange and
Registration Rights Agreement.
By signing below, the Selling Securityholder consents to the disclosure of
the information contained herein in its answers to Items (a) through (f) above
and the inclusion of such information in the Shelf Registration Statement and
related Prospectus. The Selling Securityholder understands that such
information will be relied upon by the Company in connection with the
preparation of the Shelf Registration Statement and related Prospectus.
In accordance with the Selling Securityholder's obligation under Section
3(d) and (f) of the Exchange and Registration Rights Agreement to provide such
information as may be required by law for inclusion in the Shelf Registration
Statement, the Selling Securityholder agrees to notify the Company promptly of
any inaccuracies or changes in the information provided herein which may occur
subsequent to the date hereof at any time while the Shelf Registration Statement
remains in effect. All notices hereunder and pursuant to the Exchange and
-6-
<PAGE>
Registration Rights Agreement shall be made in writing, by hand-delivery, first-
class mail, or air courier guaranteeing overnight delivery as follows:
(i) To the Company:
Exodus Communications, Inc.
2650 San Tomas Expressway
Santa Clara, CA 95051
Attention: General Counsel
(408) 346-2200.
(ii) With a copy to:
Fenwick & West, LLP
Two Palo Alto Square
Palo Alto, CA 94306
Attention: Eileen Duffy Robinett
(650) 494-0600
Once this Notice and Questionnaire is executed by the Selling
Securityholder and received by the Company's counsel, the terms of this Notice
and Questionnaire, and the representations and warranties contained herein,
shall be binding on, shall inure to the benefit of and shall be enforceable by
the respective successors, heirs, personal representatives, and assigns of the
Company and the Selling Securityholder (with respect to the Transfer Restricted
Securities beneficially owned by such Selling Securityholder and listed in Item
(c) above). This Agreement shall be governed in all respects by the laws of the
State of New York.
-7-
<PAGE>
IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused
this Notice and Questionnaire to be executed and delivered either in person or
by its duly authorized agent.
Dated: ________________
_____________________________________________
Selling Securityholder
(Print/type full legal name of beneficial
owner of Transfer Restricted Securities)
By: _________________________________________
Name:
Title:
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON
OR BEFORE [DEADLINE FOR RESPONSE] TO THE COMPANY'S COUNSEL AT:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
Attention: Eileen Duffy Robinett
(650) 494-0600
-8-
<PAGE>
Exhibit B
NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT
Chase Manhattan Bank and Trust Company,
National Association
Exodus Communications, Inc.
c/o Chase Manhattan Bank and Trust Company,
National Association
101 Barclay Street
Floor 21 West
New York, NY 10286
Attention: Trust Officer
Re: Exodus Communications, Inc. (the "Company")
11 1/4% Senior Notes due 2008
----------------------------------
Ladies and Gentlemen:
Please be advised that _____________________ has transferred
$___________ aggregate principal amount of the above-referenced Notes pursuant
to an effective Registration Statement on Form [___] (File No. 333-____) filed
by the Company.
We hereby certify that the prospectus delivery requirements, if any,
of the Securities Act of 1933, as amended, have been satisfied and that the
above-named beneficial owner of the Notes is named as a "Selling Holder" in the
Prospectus dated ___________, 199_ or in supplements thereto, and that the
aggregate principal amount of the Notes transferred are the Notes listed in such
Prospectus opposite such owner's name.
Dated:
Very truly yours,
________________________
(Name)
By:________________________
(Authorized Signature)
-1-
<PAGE>
EXHIBIT 10.31
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT, dated as of July 1, 1998, among
Exodus Communications, Inc., a Delaware corporation (the "Company"), Goldman,
Sachs & Co., Donaldson Lufkin & Jenrette Securities Corporation, BT Alex. Brown
Incorporated and NationsBanc Montgomery Securities LLC (each an "Initial
Purchaser" and, collectively, the "Initial Purchasers") each of whom has agreed
to purchase the Company's 11 1/4% Senior Notes due 2008 (collectively, the
"Securities") pursuant to the Purchase Agreement, dated June 26, 1998, by and
among the Company and Initial Purchasers (the "Purchase Agreement").
The Company proposes to issue and sell and the Initial Purchasers propose
to purchase the Securities upon the terms set forth in the Purchase Agreement.
As an inducement to the Initial Purchasers to enter into the Purchase Agreement
and in satisfaction of a condition to the obligations of the Initial Purchasers
thereunder, the Company agrees with the Initial Purchasers for the benefit of
holders (as defined herein) from time to time of the Transfer Restricted
Securities as follows:
1. Certain Definitions.
For purposes of this Exchange and Registration Rights Agreement, the
following terms shall have the following respective meanings:
"Act" shall mean the Securities Act of 1933, as amended.
"Affiliate" shall have the meaning ascribed thereto by Rule 144 of the
Act.
"Business Days" shall mean each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in the City of
New York, New York are authorized or obligated by law or executive order to
close.
"Broker-Dealer" shall mean any broker or dealer registered with the
Commission under the Exchange Act.
"Closing Date" shall mean the date hereof.
"Commission" shall mean the United States Securities and Exchange
Commission, or any other federal agency at the time administering the
Exchange Act or the Securities Act, whichever is the relevant statute for
the particular purpose.
"Effective Time" shall mean (i) with regard to the Exchange
Registration, the time and date as of which the Commission declares the
Exchange Offer Registration Statement effective or as of which the Exchange
Offer Registration Statement otherwise becomes effective and (ii) with
regard to the Shelf Registration, the time and date as of which the
<PAGE>
Commission declares the Shelf Registration Statement effective or as of
which the Shelf Registration Statement otherwise becomes effective.
"Electing Holder" shall mean any holder of Transfer Restricted
Securities that has returned a completed and signed Notice and
Questionnaire to the Company in accordance with Section 3(d)(ii) or
3(d)(iii) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, or any
successor thereto, as the same shall be amended from time to time.
"Exchange Offer" shall have the meaning assigned thereto in Section
2(a) hereof.
"Exchange Offer Registration Statement" shall have the meaning
assigned thereto in Section 2(a) hereof.
"Exchange Registration" shall have the meaning assigned thereto in
Section 3(c) hereof.
"Exchange Securities" shall have the meaning assigned thereto in
Section 2(a) hereof.
"holder" shall mean with respect to the Transfer Restricted
Securities, each of the Initial Purchasers and other persons who acquire
Transfer Restricted Securities from time to time (including any successors
or assigns), in each case for so long as such person owns any Transfer
Restricted Securities.
"Indenture" shall mean the Indenture, dated as of July 1, 1998,
between the Company and Chase Manhattan Bank and Trust Company, National
Association, as Trustee, as the same shall be amended from time to time.
"Liquidated Damages" shall have the meaning assigned thereto in
Section 2(c) hereof.
"Notice and Questionnaire" means a Notice of Registration Statement
and Selling Securityholder Questionnaire substantially in the form of
Exhibit A hereto.
---------
"person" shall mean a corporation, association, partnership,
organization, business, individual, government or political subdivision
thereof or governmental agency.
"Prospectus" shall have the meaning ascribed to it in Section 2(a)(10)
of the Act.
"Registration Default" shall have the meaning assigned thereto in
Section 2(c) hereof.
"Registration Expenses" shall have the meaning assigned thereto in
Section 4 hereof.
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<PAGE>
"Resale Period" shall have the meaning assigned thereto in Section
2(a) hereof.
"Restricted Holder" shall mean (i) a holder that is an affiliate of
the Company within the meaning of Rule 405, (ii) a holder who acquires
Exchange Securities outside the ordinary course of such holder's business,
(iii) a holder who has arrangements or understandings with any person to
participate in the Exchange Offer for the purpose of a distribution within
the meaning of the Act of Exchange Securities and (iv) a holder that is a
Broker-Dealer, but only with respect to Exchange Securities received by
such Broker-Dealer pursuant to an Exchange Offer in exchange for Transfer
Restricted Securities acquired by the Broker-Dealer directly from the
Company.
"Rule 144," "Rule 405" and "Rule 415" shall mean, in each case, such
rule promulgated under the Act (or any successor provision), as the same
shall be amended from time to time.
"Securities" shall mean, collectively, the 11 1/4% Senior Notes due
2008 of the Company to be issued and sold to the Initial Purchasers, and
securities issued in exchange therefor or in lieu thereof pursuant to the
Indenture.
"Shelf Registration" shall have the meaning assigned thereto in
Section 2(b) hereof.
"Shelf Registration Statement" shall have the meaning assigned thereto
in Section 2(b) hereof.
"Transfer Restricted Securities" shall mean each Security until the
earliest of (i) the date on which such Security has been exchanged by a
person other than a Broker-Dealer for an Exchange Security in an Exchange
Offer, (ii) following the exchange by a Broker-Dealer in the Exchange Offer
of a Security for an Exchange Security, the date on which such Exchange
Security is sold to a purchaser who receives from such Broker-Dealer on or
prior to the date of such sale a copy of the Prospectus used in connection
with such Exchange Offer, (iii) the date on which such Security has been
effectively registered under the Act and disposed of in accordance with a
Shelf Registration Statement or (iv) the date on which such Security is
distributed to the public pursuant to Rule 144 under the Act.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939, or
any successor thereto, and the rules, regulations and forms promulgated
thereunder, all as the same shall be amended from time to time.
Unless the context otherwise requires, any reference herein to a "Section"
or "clause" refers to a Section or clause, as the case may be, of this Exchange
and Registration Rights Agreement, and the words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Exchange and
Registration Rights Agreement as a whole and not to any particular Section or
other subdivision.
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2. Registration Under the Securities Act.
(a) Except as set forth in Section 2(b) below, the Company agrees to file
with the Commission, as soon as practicable after the Closing Date, but no later
than 60 days after the Closing Date, a registration statement relating to an
offer to exchange (such registration statement, the "Exchange Offer Registration
Statement", and such offer, the "Exchange Offer") any and all of the Securities
for a like aggregate principal amount of debt securities issued by the Company,
which debt securities are substantially identical to the Securities (and are
entitled to the benefits of a trust indenture which is substantially identical
to the Indenture or is the Indenture and which has been qualified under the
Trust Indenture Act), except that they have been registered pursuant to an
effective registration statement under the Act and do not contain provisions for
liquidated damages contemplated in Section 2(c) below (such new debt securities
hereinafter called "Exchange Securities"). The Company agrees to use its best
efforts to cause the Exchange Offer Registration Statement to become effective
under the Act as soon as practicable, but no later than 150 days after the
Closing Date. The Exchange Offer will be registered under the Act on the
appropriate form and will comply with all applicable tender offer rules and
regulations under the Exchange Act. Unless the Exchange Offer would not be
permitted by applicable law or Commission policy, the Company further agrees to
use its best efforts (i) to complete the Exchange Offer promptly, but no later
than 30 Business Days after the Exchange Offer Registration Statement becomes
effective or is declared effective by the Commission, (ii) to hold the Exchange
Offer open for a period of not less than the minimum period required under
applicable federal and state securities laws, provided however, that in no event
shall such period be less than 20 Business Days, and (iii) to issue Exchange
Securities for all Transfer Restricted Securities that have been properly
tendered and not withdrawn on or prior to the expiration of the Exchange Offer.
The Exchange Offer will be deemed to have been "completed" only if the debt
securities received by holders other than Restricted Holders in the Exchange
Offer for Transfer Restricted Securities are, upon receipt, transferable by each
such holder without need for further compliance with Section 5 of the Act and
the Exchange Act (except for the requirement to deliver a Prospectus included in
the Exchange Offer Registration Statement applicable to resales by Broker-
Dealers of Exchange Securities received by such Broker-Dealer pursuant to an
Exchange Offer in exchange for Transfer Restricted Securities other than those
acquired by the Broker-Dealer directly from the Company), and without material
restrictions under the blue sky or securities laws of a substantial majority of
the States of the United States of America. The Exchange Offer shall be deemed
to have been completed upon the earlier to occur of (i) the Company having
exchanged the Exchange Securities for all outstanding Transfer Restricted
Securities pursuant to the Exchange Offer and (ii) the Company having exchanged,
pursuant to the Exchange Offer, Exchange Securities for all Transfer Restricted
Securities that have been properly tendered and not withdrawn before the
expiration of the Exchange Offer. If the Company is notified prior to the
completion of the Exchange Offer by a Broker-Dealer that is a holder of Transfer
Restricted Securities (other than Transfer Restricted Securities received by the
Broker-Dealer directly from the Company), then the Company agrees (x) to include
in the Exchange Offer Registration Statement a Prospectus for use in connection
with any resales of Exchange Securities by a Broker-Dealer, other than resales
of Exchange Securities received by a Broker-Dealer pursuant to an Exchange Offer
in exchange for Transfer Restricted Securities acquired by the Broker-Dealer
directly from the Company, and (y) to keep such Exchange Offer Registration
Statement effective for a period (the "Resale Period")
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<PAGE>
beginning when Exchange Securities are first issued in the Exchange Offer and
ending upon the earlier of the expiration of the 180th day after the Exchange
Offer has been completed or such time as such Broker-Dealers no longer own any
Transfer Restricted Securities. With respect to such Exchange Offer Registration
Statement, each Broker-Dealer that holds Exchange Securities received in an
Exchange Offer in exchange for Transfer Restricted Securities not acquired by it
directly from the Company shall have the benefit of the rights of
indemnification and contribution set forth in Sections 6(a), (c), (d) and (e)
hereof.
(b) If (i) the Company is not permitted to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy or (ii) any holder of Transfer Restricted Securities notifies the Company
prior to the 20th day following completion of the Exchange Offer that (A) it is
prohibited by law or Commission policy from participating in the Exchange Offer
or (B) that it may not resell in compliance with the Act or Commission policy
the Exchange Securities acquired by it in the Exchange Offer to the public
without delivering a Prospectus and the Prospectus contained in the Exchange
Offer Registration Statement is not appropriate or available for such resales or
(C) that it is a Broker-Dealer and owns Securities acquired directly from the
Company or an Affiliate, then in lieu of conducting the Exchange Offer for such
Transfer Restricted Securities contemplated by Section 2(a) the Company shall
use its best efforts to file with the Commission as soon as practicable, but no
later than 45 days after the date on which the Company determines that it is not
permitted to file the Exchange Offer Registration Statement pursuant to clause
(i) above or 45 days after the date on which the Company receives the notice
specified in clause (ii) above (but in either case, in no event less than 60
days after the Closing Date), a "shelf" registration statement providing for the
registration of, and the sale on a continuous or delayed basis by the holders
of, all of the Transfer Restricted Securities, pursuant to Rule 415 or any
similar rule that may be adopted by the Commission, which may be an amendment to
the Exchange Offer Registration Statement (such filing, the "Shelf Registration"
and such registration statement, the "Shelf Registration Statement"). The
Company agrees to use its best efforts (i) to cause the Shelf Registration
Statement to become or be declared effective by the Commission on or prior to 90
days after such obligation arises (but in no event less than 150 days after the
Closing Date) and to keep such Shelf Registration Statement continuously
effective in order to permit the Prospectus forming a part thereof to be usable
by holders for resales of Transfer Restricted Securities for a period ending on
the earlier of the second anniversary of the Effective Time or such time as
there are no longer any Transfer Restricted Securities outstanding, provided,
however, that no holder shall be entitled to be named as a selling
securityholder in the Shelf Registration Statement or to use the Prospectus
forming a part thereof for resales of Transfer Restricted Securities unless such
holder is an Electing Holder, and (ii) after the Effective Time of the Shelf
Registration Statement, promptly upon the request of any holder of Transfer
Restricted Securities that is not then an Electing Holder, to take any action
reasonably necessary to enable such holder to use the Prospectus forming a part
thereof for resales of Transfer Restricted Securities, including, without
limitation, any action necessary to identify such holder as a selling
securityholder in the Shelf Registration Statement, provided, however, that
nothing in this Clause (ii) shall relieve any such holder of the obligation to
return a completed and signed Notice and Questionnaire to the Company in
accordance with Section 3(d)(iii) hereof. No holder of Securities shall be
entitled to Liquidated Damages pursuant to 2(c) hereof unless and until such
holder shall have provided all such information. The Company further
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<PAGE>
agrees to supplement or make amendments to the Shelf Registration Statement, as
and when required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration Statement or
by the Act or rules and regulations thereunder for shelf registration, and the
Company agrees to furnish to each Electing Holder copies of any such supplement
or amendment prior to its being used or promptly following its filing with the
Commission.
(c) In the event that (i) the Company has not filed the Exchange Offer
Registration Statement or Shelf Registration Statement on or before the date on
which such registration statement is required to be filed pursuant to Section
2(a) or 2(b), respectively, or (ii) such Exchange Offer Registration Statement
or Shelf Registration Statement has not become effective or been declared
effective by the Commission on or before the date on which such registration
statement is required to become or be declared effective pursuant to Section
2(a) or 2(b), respectively, or (iii) the Exchange Offer has not been completed
within 30 Business Days after the initial effective date of the Exchange Offer
Registration Statement relating to the Exchange Offer (if the Exchange Offer is
then required to be made) or (iv) any Exchange Offer Registration Statement or
Shelf Registration Statement required by Section 2(a) or 2(b) hereof is filed
and declared effective, but shall thereafter cease to be effective or usable in
connection with resales of Transfer Restricted Securities during the periods
specified in Section 2(a) or 2(b), respectively, (except as specifically
permitted herein, including pursuant to Sections 3(c)(ii) and (iv) and 3(d)(iv)
and 3(e)) without being succeeded immediately by an additional registration
statement filed and declared effective (each such event referred to in clauses
(i) through (iv), a "Registration Default" and each period during which a
Registration Default has occurred and is continuing, a "Registration Default
Period"), then, the Company will pay liquidated damages to each holder of
Transfer Restricted Securities affected thereby (such liquidated damages, the
"Liquidated Damages"), with respect to the first 90-day period immediately
following the occurrence of the first Registration Default in an amount equal to
$0.05 per week such Registration Default continues per $1,000 principal amount
of Transfer Restricted Securities held by such holder. The amount of the
Liquidated Damages will increase by an additional $0.05 per week such
Registration Default continues per $1,000 principal amount of Transfer
Restricted Securities with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of Liquidated
Damages for all Registration Defaults of $0.25 per week per $1,000 principal
amount of Transfer Restricted Securities. Notwithstanding the foregoing, the
Company shall in no event be required to pay Liquidated Damages for more than
one Registration Default at any time. All accrued Liquidated Damages will be
paid by the Company on each Interest Payment Date (as defined in the Indenture)
to each holder of any Transfer Restricted Securities by wire transfer of
immediately available funds or by federal funds check and to holders of Transfer
Restricted Securities by wire transfer to the accounts specified by them or by
mailing checks to their registered addresses if no such accounts have been
specified. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease. No other damages shall be available to holders
of Transfer Restricted Securities for any Registration Default.
(d) Any reference herein to a registration statement as of any time shall
be deemed to include any document incorporated, or deemed to be incorporated,
therein by reference as of such time and any reference herein to any post-
effective amendment to a registration statement as of any time shall
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<PAGE>
be deemed to include any document incorporated, or deemed to be incorporated,
therein by reference as of such time.
3. Registration Procedures.
If the Company files a registration statement pursuant to Section 2(a) or
Section 2(b), the following provisions shall apply:
(a) At or before the Effective Time of the Exchange Offer or the Shelf
Registration, as the case may be, the Company shall qualify the Indenture under
the Trust Indenture Act of 1939.
(b) In the event that such qualification would require the appointment of a
new trustee under the Indenture, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.
(c) In connection with the Company's obligations with respect to the
registration of Exchange Securities as contemplated by Section 2(a) (the
"Exchange Registration"), if applicable, the Company shall, as soon as
practicable (or as otherwise specified):
(i) prepare and file with the Commission, as soon as practicable but
no later than 60 days after the Closing Date, an Exchange Offer
Registration Statement on any form which may be utilized by the Company and
which shall permit the Exchange Offer and, if applicable, resales of
Exchange Securities by Broker-Dealers during the Resale Period to be
effected as contemplated by Section 2(a), and use its best efforts to cause
such Exchange Offer Registration Statement to become effective as soon as
practicable thereafter, but no later than 150 days after the Closing Date;
(ii) as soon as practicable prepare and file with the Commission such
amendments and supplements to such Exchange Offer Registration Statement
and the Prospectus included therein as may be necessary to effect and
maintain the effectiveness of such Exchange Offer Registration Statement
for the periods and purposes contemplated in Section 2(a) hereof and as may
be required by the applicable rules and regulations of the Commission and
the instructions applicable to the form of such Exchange Offer Registration
Statement, and promptly provide each Broker-Dealer holding Exchange
Securities with such number of copies of the Prospectus included therein
(as then amended or supplemented), in conformity in all material respects
with the requirements of the Act and the Trust Indenture Act and the rules
and regulations of the Commission thereunder, as such Broker-Dealer
reasonably may request prior to the expiration of the Resale Period, for
use in connection with resales of Exchange Securities; provided that upon
the occurrence of any event that would cause any such Exchange Offer
Registration Statement or the Prospectus contained therein (A) to contain a
material misstatement or omission or (B) not to be effective and usable for
resale of Transfer Restricted Securities, either of which occurs during the
period that the Company is required to maintain an effective and usable
Exchange Offer Registration Statement and Prospectus pursuant to this
Agreement, the Company shall file promptly an appropriate
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<PAGE>
amendment or supplement to such Registration Statement or Prospectus, (1)
in the case of clause (A), correcting any such misstatement or omission,
and (2) in the case of clauses (A) and (B) use its best efforts to cause
any amendment to be declared effective and such Exchange Offer Registration
Statement and the Prospectus to become usable for their intended purpose(s)
as soon as practicable thereafter; provided further notwithstanding
anything to the contrary set forth in this Agreement, during the 180 day
period following completion of the Exchange Offer, the Company's
obligations to use its best efforts to keep the Exchange-Offer Registration
Statement continuously effective, supplemented and amended shall be
suspended in the event continued effectiveness of the Exchange-Offer
Registration Statement would, with the advice of counsel to the Company,
make it advisable for the Company to disclose a material financing,
acquisition or other corporate transaction, and the Board of Directors
shall have determined in good faith that such disclosure is not in the best
interests of the Company, but in no event will any such suspension,
individually or in the aggregate, exceed sixty (60) days (such suspensions
being referred to herein as an "Exchange Suspension Period");
(iii) promptly notify in writing each Broker-Dealer that has requested
or received from the Company copies of the Prospectus included in such
Exchange Offer Registration Statement, (A) when such Exchange Offer
Registration Statement or the Prospectus included therein or any Prospectus
amendment or supplement or post-effective amendment has been filed, and,
with respect to such Exchange Offer Registration Statement or any post-
effective amendment, when the same has become effective, (B) of the
issuance by the Commission of any stop order suspending the effectiveness
of such Exchange Offer Registration Statement or the initiation or
threatening of any proceedings for that purpose, (C) of the receipt by the
Company of any notification with respect to the suspension of the
qualification of the Exchange Securities for sale in any jurisdiction or
the initiation or threatening of any proceeding for such purpose, or (D) at
any time during the Resale Period when a Prospectus is required to be
delivered under the Act, that such Exchange Offer Registration Statement,
Prospectus, Prospectus amendment or supplement or post-effective amendment
does not conform in all material respects to the applicable requirements of
the Act and the Trust Indenture Act and the rules and regulations of the
Commission thereunder or contains an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the circumstances
then existing. Each holder of Transfer Restricted Securitiesagrees that
upon receipt of any notice from the Company pursuant to this Section
3(c)(iii)(D), such holder shall forthwith discontinue the disposition of
Transfer Restricted Securities pursuant to the Exchange Offer Registration
Statement applicable to such Transfer Restricted Securities until such
Broker-Dealer shall have received copies of such amended or supplemented
Prospectus, and if so directed by the Company, such Broker-Dealer shall
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such Broker-Dealer's possession of the
Prospectus covering such Transfer Restricted Securities at the time of
receipt of such notice;
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<PAGE>
(iv) in the event that the Company would be required, pursuant to
Section 3(c)(iii)(D) above, to notify any Broker-Dealers holding Exchange
Securities, without unreasonable delay, subject to Section 3(c)(ii),
prepare and furnish to each such holder a reasonable number of copies of a
Prospectus supplemented or amended so that, as thereafter delivered to
purchasers of such Exchange Securities during the Resale Period, such
Prospectus shall conform in all material respects to the applicable
requirements of the Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder and shall not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing;
(v) subject to the provisos in (ii) above, use its best efforts to
obtain the withdrawal of any order suspending the effectiveness of such
Exchange Offer Registration Statement or any post-effective amendment
thereto at the earliest practicable date;
(vi) use its best efforts to (A) register or qualify the Exchange
Securities under the securities laws or blue sky laws of such jurisdictions
as are contemplated by Section 2(a) no later than the commencement of the
Exchange Offer, (B) if applicable, keep such registrations or
qualifications in effect and comply with such laws so as to permit the
continuance of offers, sales and dealings therein in such jurisdictions
until the expiration of the Resale Period and (C) take any and all other
actions as may be reasonably necessary or advisable to enable each Broker-
Dealer holding Exchange Securities to consummate the disposition thereof in
such jurisdictions; provided, however, that the Company shall not be
required for any such purpose to (1) qualify as a foreign corporation in
any jurisdiction wherein it would not otherwise be required to qualify but
for the requirements of this Section 3(c)(vi), (2) consent to general
service of process in any such jurisdiction or (3) make any changes to its
certificate of incorporation or by-laws or any agreement between it and its
stockholders;
(vii) use its best efforts to obtain the consent or approval of each
governmental agency or authority, whether federal, state or local, which
may be required to effect the Exchange Registration, the Exchange Offer and
the offering and sale of Exchange Securities by Broker-Dealers during the
Resale Period;
(viii) provide a CUSIP number for all Exchange Securities, not later
than the applicable Effective Time;
(ix) comply with all applicable rules and regulations of the
Commission, and make generally available to its securityholders as soon as
practicable but no later than eighteen months after the effective date of
such Exchange Offer Registration Statement, an earning statement of the
Company and its subsidiaries complying with Section 11(a) of the Act
(including, at the option of the Company, Rule 158 thereunder).
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<PAGE>
(d) In connection with the Company's obligations with respect to the
registration of the Transfer Restricted Securities as contemplated by Section
2(b) pursuant to the Shelf Registration, if applicable, the Company shall, as
soon as practicable (or as otherwise specified):
(i) prepare and file with the Commission, as soon as practicable but
in any case within the time periods specified in Section 2(b), a Shelf
Registration Statement on any form which may be utilized by the Company and
which shall register all of the Transfer Restricted Securities for resale
by the holders thereof in accordance with such method or methods of
disposition as may be specified by such of the holders as, from time to
time, may be Electing Holders and use its best efforts to cause such Shelf
Registration Statement to become effective as soon as practicable but in
any case within the time periods specified in Section 2(b);
(ii) not less than 30 calendar days prior to the Effective Time of
the Shelf Registration Statement, mail the Notice and Questionnaire, in the
form of Exhibit A hereto, to the holders of Transfer Restricted Securities;
---------
no holder shall be entitled to be named as a selling securityholder in the
Shelf Registration Statement as of the Effective Time, and no holder shall
be entitled to use the Prospectus forming a part thereof for resales of
Transfer Restricted Securities at any time, unless such holder has returned
a completed and signed Notice and Questionnaire to the Company by the
deadline for response set forth therein; provided, however, holders of
Transfer Restricted Securities shall have at least 28 calendar days from
the date on which the Notice and Questionnaire is first mailed to such
holders to return a completed and signed Notice and Questionnaire to the
Company;
(iii) after the Effective Time of the Shelf Registration Statement,
upon the request of any holder of Transfer Restricted Securities that is
not then an Electing Holder, promptly send a Notice and Questionnaire to
such holder; provided that the Company shall not be required to take any
action to name such holder as a selling securityholder in the Shelf
Registration Statement or to enable such holder to use the Prospectus
forming a part thereof for resales of Transfer Restricted Securities until
such holder has returned a completed and signed Notice and Questionnaire to
the Company;
(iv) as soon as practicable prepare and file with the Commission
such amendments and supplements to such Shelf Registration Statement and
the Prospectus included therein, and take any other action, as may be
necessary to effect and maintain the effectiveness of such Shelf
Registration Statement for the period specified in Section 2(b) hereof and
as may be required by the applicable rules and regulations of the
Commission and the instructions applicable to the form of such Shelf
Registration Statement, and furnish to the Electing Holders copies of any
such supplement or amendment simultaneously with or prior to its being used
or filed with the Commission; provided that upon the occurrence of any
event that would cause any such Shelf Registration Statement or the
Prospectus contained therein (A) to contain a material misstatement or
omission or (B) not to be effective and usable for resale of Transfer
Restricted Securities, either of which occurs during the period that the
Company is required to maintain an effective and usable Shelf Registration
Statement and Prospectus
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<PAGE>
pursuant to this Agreement, the Company shall file promptly an appropriate
amendment or supplement to such Registration Statement or Prospectus, (1)
in the case of clause (A), correcting any such misstatement or omission,
and (2) in the case of clauses (A) and (B) use its best efforts to cause
any amendment to be declared effective and such Shelf Registration
Statement and the related Prospectus to become usable for their intended
purpose(s) as soon as practicable thereafter; provided further
notwithstanding anything to the contrary set forth in this Agreement, the
Company's obligations to use its best efforts to keep the Shelf
Registration Statement continuously effective, supplemented and amended
shall be suspended in the event continued effectiveness of the Shelf
Registration Statement would, with the advice of counsel to the Company,
make it advisable for the Company to disclose a material financing,
acquisition or other corporate transaction, and the Board of Directors
shall have determined in good faith that such disclosure is not in the best
interests of the Company, but in no event will any such suspension,
individually or in the aggregate, exceed ninety (90) days in any calendar
year (such suspensions being referred to herein as a "Shelf Suspension
Period");
(v) comply with the provisions of the Act with respect to the
disposition of all of the Transfer Restricted Securities covered by such
Shelf Registration Statement in accordance with the intended methods of
disposition by the Electing Holders provided for in such Shelf Registration
Statement;
(vi) provide (A) the Electing Holders, (B) the underwriters (which
term, for purposes of this Exchange and Registration Rights Agreement,
shall include a person deemed to be an underwriter within the meaning of
Section 2(11) of the Act), if any, thereof, (C) any sales or placement
agent therefor, (D) counsel for any such underwriters or agents and (E) not
more than one counsel for all the Electing Holders the opportunity to
participate in the preparation of such Shelf Registration Statement, each
Prospectus included therein or filed with the Commission and each amendment
or supplement thereto;
(vii) for a reasonable period prior to the filing of such Shelf
Registration Statement, and throughout the period specified in Section
2(b), make available at reasonable times at the Company's principal place
of business or such other reasonable place for inspection by the persons
referred to in Section 3(d)(vi) who shall certify to the Company that they
have a current intention to sell the Transfer Restricted Securities
pursuant to the Shelf Registration such financial and other information and
books and records of the Company, and cause the officers, employees,
counsel and independent certified public accountants of the Company to
respond to such inquiries, as shall be reasonably necessary, in the
judgment of the respective counsel referred to in such Section, to conduct
a reasonable investigation within the meaning of Section 11 of the Act;
provided, however, that each such party shall be required to maintain in
confidence and not to disclose to any other person any information or
records reasonably designated by the Company as being confidential, until
such time as (A) such information becomes a matter of public record
(whether by virtue of its inclusion in such registration statement or
otherwise), or (B) such person shall be required so to disclose such
information pursuant to a subpoena or order of any court or other
governmental agency or
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<PAGE>
body having jurisdiction over the matter (subject to the requirements of
such order, and only after such person shall have given the Company prompt
prior written notice of such require ment), or (C) after the Effective Time
and after having requested, in writing, that the Company include such
information in such Shelf Registration Statement or an amendment or
supplement thereto, and such request has not been accepted by the Company
within 15 days of such request, such information, in the reasonable
judgment of such party pursuant to advice of counsel, is required to be set
forth in such Shelf Registration Statement or the Prospectus included
therein or in an amendment to such Shelf Registration Statement or an
amendment or supplement to such Prospectus in order that such Shelf
Registration Statement, Prospectus, amendment or supplement, as the case
may be, complies with applicable requirements of the federal securities
laws and the rules and regulations of the Commission and does not contain
an untrue statement of a material fact or omit to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(viii) promptly notify in writing each of the Electing Holders, any
sales or placement agent therefor and any underwriter thereof (which
notification may be made through any managing underwriter that is a
representative of such underwriter for such purpose), (A) when such Shelf
Registration Statement or the Prospectus included therein or any Prospectus
amendment or supplement or post-effective amendment has been filed, and,
with respect to such Shelf Registration Statement or any post-effective
amendment, when the same has become effective, (B) of the issuance by the
Commission of any stop order suspending the effectiveness of such Shelf
Registration Statement or the initiation or threatening of any proceedings
for that purpose, (C) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Transfer
Restricted Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, or (D) (I) if at any time
when a Prospectus is required to be delivered under the Act, such Shelf
Registration Statement, Prospectus, Prospectus amendment or supplement or
post-effective amendment does not conform in all material respects to the
applicable requirements of the Act and the Trust Indenture Act and the
rules and regulations of the Commission thereunder or contains an untrue
statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing; or (II) the
occurrence of a Shelf Suspension Period;
(ix) subject to the provisos in (iv) above, use its best efforts to
obtain the withdrawal of any order suspending the effectiveness of such
registration statement or any post-effective amendment thereto at the
earliest practicable date;
(x) if requested by any managing underwriter or underwriters, any
placement or sales agent or any Electing Holder, promptly incorporate in a
Prospectus supplement or post-effective amendment such information as is
required by the applicable rules and regulations of the Commission and as
such managing underwriter or underwriters, such agent or such Electing
Holder specifies should be included therein relating to the terms of the
sale of such Transfer Restricted Securities, including information with
respect to the principal
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<PAGE>
amount of Transfer Restricted Securities being sold by such Electing Holder
or agent or to any underwriters, the name and description of such Electing
Holder, agent or underwriter, the offering price of such Transfer
Restricted Securities and any discount, commission or other compensation
payable in respect thereof, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the offering of the
Transfer Restricted Securities to be sold by such Electing Holder or agent
or to such underwriters; and make all required filings of such Prospectus
supplement or post-effective amendment promptly after notification of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment;
(xi) furnish to each Electing Holder, each placement or sales agent,
if any, therefor, each underwriter, if any, thereof and the respective
counsel referred to in Section 3(d)(vi) an executed copy (or, in the case
of an Electing Holder, a conformed copy) of such Shelf Registration
Statement, each such amendment and supplement thereto (in each case
including all exhibits thereto (in the case of an Electing Holder of
Transfer Restricted Securities, upon request) and documents incorporated by
reference therein) and such number of copies of such Shelf Registration
Statement (excluding exhibits thereto and documents incorporated by
reference therein unless specifically so requested by such Electing Holder,
agent or underwriter, as the case may be) and of the Prospectus included in
such Shelf Registration Statement (including each preliminary Prospectus
and any summary Prospectus), in conformity in all material respects with
the applicable requirements of the Act and the Trust Indenture Act and the
rules and regulations of the Commission thereunder, and such other
documents, as such Electing Holder, agent, if any, and underwriter, if any,
may reasonably request in order to facilitate the offering and disposition
of the Transfer Restricted Securities owned by such Electing Holder,
offered or sold by such agent or underwritten by such underwriter and to
permit such Electing Holder, agent and underwriter to satisfy the
Prospectus delivery requirements of the Act; and the Company hereby
consents, unless it has otherwise notified the Electing Holder under
Section 3(d)(iv) or (viii) hereof, to the use of such Prospectus (including
such preliminary and summary Prospectus) and any amendment or supplement
thereto by each such Electing Holder and by any such agent and underwriter,
in each case in the form most recently provided to such person by the
Company, in connection with the offering and sale of the Transfer
Restricted Securities covered by the Prospectus (including such preliminary
and summary Prospectus) or any supplement or amendment thereto;
(xii) use its best efforts to (A) register or qualify the Transfer
Restricted Securities to be included in such Shelf Registration Statement
under such securities laws or blue sky laws of such jurisdictions as any
Electing Holder and each placement or sales agent, if any, therefor and
underwriter, if any, thereof shall reasonably request, (B) keep such
registrations or qualifications in effect and comply with such laws so as
to permit the continuance of offers, sales and dealings therein in such
jurisdictions during the period the Shelf Registration is required to
remain effective under Section 2(b) above and for so long as may be
necessary to enable any such Electing Holder, agent or underwriter to
complete its distribution of Securities pursuant to such Shelf Registration
Statement and (C) take any and all other
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actions as may be reasonably necessary or advisable to enable each such
Electing Holder, agent, if any, and underwriter, if any, to consummate the
disposition in such jurisdictions of such Transfer Restricted Securities;
provided, however, that the Company shall not be required for any such
purpose to (1) qualify as a foreign corporation in any jurisdiction wherein
it would not otherwise be required to qualify but for the requirements of
this Section 3(d)(xii), (2) consent to general service of process in any
such jurisdiction or (3) make any changes to its certificate of
incorporation or by-laws or any agreement between it and its stockholders;
(xiii) use its best efforts to obtain the consent or approval of each
governmental agency or authority, whether federal, state or local, which
may be required to effect the Shelf Registration or the offering or sale in
connection therewith or to enable the selling holder or holders to offer,
or to consummate the disposition of, their Transfer Restricted Securities;
(xiv) cooperate with the Electing Holders and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Securities to be sold, which
certificates shall be printed, lithographed or engraved, or produced by any
combination of such methods, and which shall not bear any restrictive
legends; and, in the case of an underwritten offering, enable such Transfer
Restricted Securities to be in such denominations and registered in such
names as the managing underwriters may request at least two business days
prior to any sale of the Transfer Restricted Securities;
(xv) provide a CUSIP number for all Transfer Restricted Securities,
not later than the applicable Effective Time;
(xvi) enter into one or more underwriting agreements, engagement
letters, agency agreements, "best efforts" underwriting agreements or
similar agreements, as appropriate, including customary provisions relating
to indemnification and contribution, and take such other actions in
connection therewith as any Electing Holders aggregating at least 20% in
aggregate principal amount of the Transfer Restricted Securities at the
time outstanding shall reasonably request in order to expedite or
facilitate the disposition of such Transfer Restricted Securities;
(xvii) whether or not an agreement of the type referred to in Section
3(d)(xvi) hereof is entered into and whether or not any portion of the
offering contemplated by the Shelf Registration is an underwritten offering
or is made through a placement or sales agent or any other entity, (A) make
such representations and warranties to the Electing Holders and the
placement or sales agent, if any, therefor and the underwriters, if any,
thereof in form, substance and scope as are customarily made in connection
with an offering of debt securities pursuant to any appropriate agreement
or to a registration statement filed on the form applicable to the Shelf
Registration; (B) obtain an opinion of counsel to the Company in customary
form and covering such matters, of the type customarily covered by such an
opinion, as the managing underwriters, if any, or as any Electing Holders
of at least 20% in
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aggregate principal amount of the Transfer Restricted Securities at the
time outstanding may reasonably request, addressed to such Electing Holder
or Electing Holders and the placement or sales agent, if any, therefor and
the underwriters, if any, thereof and dated the effective date of such
Shelf Registration Statement (and if such Shelf Registration Statement
contemplates an underwritten offering of a part or all of the Transfer
Restricted Securities, dated the date of the closing under the underwriting
agreement relating thereto) (it being agreed that the matters to be covered
by such opinion shall include the due incorporation and good standing of
the Company and its subsidiaries; the qualification of the Company and its
subsidiaries to transact business as foreign corporations; the due
authorization, execution and delivery by the Company of the relevant
agreement of the type referred to in Section 3(d)(xvi) hereof; the due
authorization, execution, authentication and issuance by the Company, and
the validity and enforceability, of the Securities; the absence of
knowledge of such counsel of material legal or governmental proceedings
involving the Company; the absence of governmental approvals required to be
obtained in connection with the Shelf Registration, the offering and sale
of the Transfer Restricted Securities, this Exchange and Registration
Rights Agreement or any agreement of the type referred to in Section
3(d)(xvi) hereof, except such approvals as are referenced in the Shelf
Registration Statement or as may be required under state securities or blue
sky laws; the material compliance as to form of such Shelf Registration
Statement and any documents incorporated by reference therein and of the
Indenture with the requirements of the Act and the Trust Indenture Act and
the rules and regulations of the Commission thereunder, respectively; and
the expression of the belief of such counsel as to the absence of any facts
having come to the attention of such counsel that have caused them to
believe that such Shelf Registration Statement and the Prospectus included
therein, as then amended or supplemented, as of the date of the opinion and
of the Shelf Registration Statement or most recent post-effective amendment
thereto, as the case may be, and from the documents incorporated by
reference therein as of the dates of such documents (in each case other
than the financial statements, related notes, related schedules and other
financial data contained therein) contained an untrue statement of a
material fact or omitted to state therein a material fact necessary to make
the statements therein in light of the circumstances under which they were
made, and in the case of the documents incorporated by reference, in the
light of the circumstances existing at the time that such documents were
filed with the Commission under the Exchange Act, not misleading); (C)
obtain a "comfort" letter or letters from the independent certified public
accountants of the Company addressed to the selling Electing Holders, the
placement or sales agent, if any, therefor or the underwriters, if any,
thereof, dated (i) the effective date of such Shelf Registration Statement
and (ii) the effective date of any Prospectus supplement to the Prospectus
included in such Shelf Registration Statement or post-effective amendment
to such Shelf Registration Statement which includes unaudited or audited
financial statements as of a date or for a period subsequent to that of the
latest such statements included in such Prospectus (and, if such Shelf
Registration Statement contemplates an underwritten offering pursuant to
any Prospectus supplement to the Prospectus included in such Shelf
Registration Statement or post-effective amendment to such Shelf
Registration Statement which includes unaudited or audited financial
statements as of a date or for a period subsequent to that of the latest
such statements included in such Prospectus, dated the date of the closing
under the underwriting
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<PAGE>
agreement relating thereto), such letter or letters to be in customary form
and covering such matters of the type customarily covered by letters of
such type; (D) deliver such documents and certificates, including officers'
certificates, as may be reasonably requested by any Electing Holders of at
least 20% in aggregate principal amount of the Transfer Restricted
Securities at the time outstanding or the placement or sales agent, if any,
therefor and the managing underwriters, if any, thereof to evidence the
accuracy of the representations and warranties made pursuant to clause (A)
above or those contained in Section 5(a) hereof and the compliance with or
satisfaction of any agreements or conditions contained in the underwriting
agreement or other agreement entered into by the Company; and (E) undertake
such obligations relating to expense reimbursement, indemnification and
contribution as are provided in Section 6 hereof;
(xviii) notify in writing each holder of Transfer Restricted
Securities of any proposal by the Company to amend or waive any provision
of this Exchange and Registration Rights Agreement pursuant to Section 9(h)
hereof and of any amendment or waiver effected pursuant thereto, each of
which notices shall contain the text of the amendment or waiver proposed or
effected, as the case may be;
(xix) in the event that any broker-dealer registered under the
Exchange Act shall underwrite any Transfer Restricted Securities or
participate as a member of an underwriting syndicate or selling group or
"assist in the distribution" (within the meaning of the Rules of Fair
Practice and the By-Laws of the National Association of Securities Dealers,
Inc. ("NASD") or any successor thereto, as amended from time to time)
thereof, whether as a holder of such Transfer Restricted Securities or as
an underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, assist such broker-dealer in complying with the
requirements of such Rules and By-Laws, including by (A) if such Rules or
By-Laws shall so require, engaging a "qualified independent underwriter"
(as defined in such Schedule (or any successor thereto)) to participate in
the preparation of the Shelf Registration Statement relating to such
Transfer Restricted Securities, to exercise usual standards of due
diligence in respect thereto and, if any portion of the offering
contemplated by such Shelf Registration Statement is an underwritten
offering or is made through a placement or sales agent, to recommend the
yield of such Transfer Restricted Securities, (B) indemnifying any such
qualified independent underwriter to the extent of the indemnification of
underwriters provided in Section 6 hereof (or to such other customary
extent as may be requested by such underwriter), and (C) providing such
information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the Rules of Fair Practice
of the NASD; and
(xx) comply with all applicable rules and regulations of the
Commission, and make generally available to its securityholders as soon as
practicable but in any event not later than eighteen months after the
effective date of such Shelf Registration Statement, an earning statement
of the Company and its subsidiaries complying with Section 11(a) of the Act
(including, at the option of the Company, Rule 158 thereunder).
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<PAGE>
(e) In the event that the Company would be required, pursuant to Section
3(d)(viii)(D) above, to notify the Electing Holders, the placement or sales
agent, if any, therefor and the managing underwriters, if any, thereof, the
Company shall without unreasonable delay, subject to Section 3(d)(iv), prepare
and furnish to each of the Electing Holders, to each placement or sales agent,
if any, and to each such underwriter, if any, a reasonable number of copies of a
Prospectus supplemented or amended so that, as thereafter delivered to
purchasers of Transfer Restricted Securities, such Prospectus shall conform in
all material respects to the applicable requirements of the Act and the Trust
Indenture Act and the rules and regulations of the Commission thereunder and
shall not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing. Each
Electing Holder agrees that upon receipt of any notice from the Company pursuant
to Section 3(d)(viii)(D) hereof, such Electing Holder shall forthwith
discontinue the disposition of Transfer Restricted Securities pursuant to the
Shelf Registration Statement applicable to such Transfer Restricted Securities
until such Electing Holder shall have received copies of such amended or
supplemented Prospectus, and if so directed by the Company, such Electing Holder
shall deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such Electing Holder's possession of the
Prospectus covering such Transfer Restricted Securities at the time of receipt
of such notice.
(f) In the event of a Shelf Registration, in addition to the information
required to be provided by each Electing Holder in its Notice and Questionnaire,
the Company may require such Electing Holder to furnish to the Company such
additional information regarding such Electing Holder and such Electing Holder's
intended method of distribution of Transfer Restricted Securities as may be
required in order to comply with the Act. Each such Electing Holder agrees to
notify the Company as promptly as practicable of any inaccuracy or change in
information previously furnished by such Electing Holder to the Company or of
the occurrence of any event in either case as a result of which any Prospectus
relating to such Shelf Registration contains or would contain an untrue
statement of a material fact regarding such Electing Holder or such Electing
Holder's intended method of disposition of such Transfer Restricted Securities
or omits to state any material fact regarding such Electing Holder or such
Electing Holder's intended method of disposition of such Transfer Restricted
Securities required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and promptly
to furnish to the Company any additional information required to correct and
update any previously furnished information or required so that such Prospectus
shall not contain, with respect to such Electing Holder or the disposition of
such Transfer Restricted Securities, an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances then
existing.
(g) Until the expiration of two years after the Closing Date, the Company
will not resell, and will use its best efforts to prevent any of its Affiliates
from reselling, any of the Securities that have been reacquired by any of them
except pursuant to an effective registration statement under the Act.
(h) As a condition to its participation in the Exchange Offer pursuant to
the terms of this Agreement, each holder of Transfer Restricted Securities shall
furnish, upon the written request of
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the Company, prior to the completion of the Exchange Offer, a written
representation to the Company, (which may be contained in the letter of
transmittal contemplated by the Exchange Offer Registration Statement) to the
effect that (A) it is not an affiliate of the Company, (B) it is not engaged in,
and does not intend to engage in, and has no arrangement or understanding with
any person to participate in, a distribution of the Exchange Securities to be
issued in the Exchange Offer and (C) it is acquiring the Exchange Securities in
its ordinary course of business. Each Holder hereby acknowledges and agrees that
any Broker-Dealer and any such holder using the Exchange Offer to participate in
a distribution of the securities to be acquired in the Exchange Offer (1) could
not under Commission policy as in effect on the date of this Agreement rely on
the position of the Commission enunciated in Morgan Stanley and Co., Inc.
(available June 5, 1991) and Exxon Capital Holdings Corporation (available May
13, 1988), as interpreted in the Commission's letter to Shearman & Sterling
dated July 2, 1993, and similar no-action letters, and (2) must comply with the
registration and prospectus delivery requirements of the Act in connection with
a secondary resale transaction and that such a secondary resale transaction must
be covered by an effective registration statement (which may be the Exchange
Offer Registration Statement) containing the selling security holder information
required by Item 507 or 508, as applicable, of Regulation S-K if the resales are
of Exchange Securities obtained by such Holder in exchange for securities
acquired by such holder directly from the Company or an affiliate thereof.
4. Registration Expenses.
The Company agrees to bear and to pay or cause to be paid promptly all
expenses incident to the Company's performance of or compliance with this
Exchange and Registration Rights Agreement, including (a) all Commission and any
NASD registration, filing and review fees and expenses including fees and
disbursements of counsel for the placement or sales agent or underwriters in
connection with such NASD registration, filing and review, (b) all fees and
expenses in connection with the qualification of the Securities for offering and
sale under the State securities and blue sky laws referred to in Section
3(d)(xii) hereof and determination of their eligibility for investment under the
laws of such jurisdictions as any managing underwriters or the Electing Holders
may designate, including any fees and disbursements of counsel for the Electing
Holders (subject to the limitations of Clause (i) below) or underwriters in
connection with such qualification and determination, (c) all expenses relating
to the preparation, printing, production, distribution and reproduction of each
registration statement required to be filed hereunder, each Prospectus included
therein or prepared for distribution pursuant hereto, each amendment or
supplement to the foregoing, the expenses of preparing the Securities for
delivery and the expenses of printing or producing any underwriting agreements,
agreements among underwriters, selling agreements and blue sky or legal
investment memoranda and all other documents in connection with the offering,
sale or delivery of Securities to be disposed of (including certificates
representing the Securities), (d) messenger, telephone and delivery expenses
relating to the offering, sale or delivery of Securities and the preparation of
documents referred in clause (c) above, (e) fees and expenses of the Trustee
under the Indenture, any agent of the Trustee and any counsel for the Trustee
and of any collateral agent or custodian, (f) internal expenses (including all
salaries and expenses of the Company's officers and employees performing legal
or accounting duties), (g) fees, disbursements and expenses of counsel and
independent certified public accountants of the Company (including the expenses
of any
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<PAGE>
opinions or "comfort" letters required by or incident to such performance and
compliance), (h) fees, disbursements and expenses of any "qualified independent
underwriter" engaged pursuant to Section 3(d)(xix) hereof, (i) fees,
disbursements and expenses of one counsel for the Electing Holders retained in
connection with a Shelf Registration, as selected by the Electing Holders of at
least a majority in aggregate principal amount of the Transfer Restricted
Securities held by Electing Holders (which counsel shall be reasonably
satisfactory to the Company), (j) any fees charged by securities rating services
for rating the Securities, and (k) fees, expenses and disbursements of any other
persons, including special experts, retained by the Company in connection with
such registration (collectively, the "Registration Expenses"). To the extent
that any Registration Expenses are incurred, assumed or paid by any holder of
Transfer Restricted Securities or any placement or sales agent therefor or
underwriter thereof, the Company shall reimburse such person for the full amount
of the Registration Expenses so incurred, assumed or paid promptly after receipt
of a request therefor. Notwithstanding the foregoing, the holders of the
Transfer Restricted Securities being registered shall pay all agency fees and
commissions and underwriting discounts and commissions attributable to the sale
of such Transfer Restricted Securities and the fees and disbursements of any
counsel or other advisors or experts retained by such holders (severally or
jointly), other than the counsel and experts specifically referred to above.
5. Representations and Warranties.
The Company represents and warrants to, and agrees with, each Initial
Purchaser and each of the holders from time to time of Transfer Restricted
Securities that:
(a) Each registration statement covering Transfer Restricted
Securities and each Prospectus (including any preliminary or summary
Prospectus) contained therein or furnished pursuant to Section 3(d) or
Section 3(c) hereof and any further amendments or supplements to any such
registration statement or Prospectus, when it becomes effective or is filed
with the Commission, as the case may be, and, in the case of an
underwritten offering of Transfer Restricted Securities, at the time of the
closing under the underwriting agreement relating thereto, will conform in
all material respects to the applicable requirements of the Act and the
Trust Indenture Act and the rules and regulations of the Commission
thereunder and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and at all times subsequent to
the Effective Time when a Prospectus would be required to be delivered
under the Act, other than from (i) such time as a notice has been given to
holders of Transfer Restricted Securities pursuant to Section 3(d)(viii)(D)
or Section 3(c)(iii)(D) hereof until (ii) such time as the Company
furnishes an amended or supplemented Prospectus pursuant to Section 3(e) or
Section 3(c)(iv) hereof, each such registration statement, and each
Prospectus (including any summary Prospectus) contained therein or
furnished pursuant to Section 3(d) or Section 3(c) hereof, as then amended
or supplemented, will conform in all material respects to the applicable
requirements of the Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder and will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
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<PAGE>
provided, however, that this representation and warranty shall not apply to
any statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by a holder of Transfer
Restricted Securities expressly for use therein.
(b) Any documents incorporated by reference in any Prospectus referred
to in Section 5(a) hereof, when they become or became effective or are or
were filed with the Commission, as the case may be, will conform or
conformed in all material respects to the requirements of the Act or the
Exchange Act, as applicable, and none of such documents will at such time
contain or contained an untrue statement of a material fact or will omit or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by a holder of Transfer Restricted Securities
expressly for use therein.
(c) The compliance by the Company with all of the provisions of this
Exchange and Registration Rights Agreement and the consummation of the
transactions herein contemplated will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default under,
any material indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any subsidiary of the
Company is a party or by which the Company or any subsidiary of the Company
is bound or to which any of the property or assets of the Company or any
subsidiary of the Company is subject, nor will such action result in any
violation of the provisions of the certificate of incorporation, as
amended, or the by-laws of the Company or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction
over the Company or any subsidiary of the Company or any of their
properties; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the consummation by the Company of the transactions
contemplated by this Exchange and Registration Rights Agreement, except the
registration under the Act of the Securities, qualification of the
Indenture under the Trust Indenture Act and such consents, approvals,
authorizations, registrations or qualifications as may be required under
State securities or blue sky laws in connection with the offering and
distribution of the Securities.
(d) This Exchange and Registration Rights Agreement has been duly
authorized, executed and delivered by the Company.
6. Indemnification.
(a) Indemnification by the Company. The Company shall indemnify and hold
harmless each of the holders of Transfer Restricted Securities included in an
Exchange Offer Registration Statement, each of the Electing Holders of Transfer
Restricted Securities included in a Shelf Registration Statement and each person
who participates as a placement or sales agent or as an underwriter in any
offering or sale of such Transfer Restricted Securities against any losses,
claims, damages or liabilities, joint or several, to which such holder, agent or
underwriter may become
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subject under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Exchange Offer Registration Statement or Shelf Registration Statement, as the
case may be, under which such Transfer Restricted Securities were registered
under the Act, or any preliminary, final or summary Prospectus contained therein
or furnished by the Company to any such holder, Electing Holder, agent or
underwriter, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and the Company shall, and it hereby agrees to, reimburse such
holder, such Electing Holder, such agent and such underwriter for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such action or claim as such expenses are incurred; provided,
however, that the Company shall not be liable to any such person in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, or preliminary, final or
summary Prospectus, or amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by such person
expressly for use therein;
(b) Indemnification by the Holders and any Agents and Underwriters. The
Company may require, as a condition to including any Transfer Restricted
Securities in any registration statement filed pursuant to Section 2(b) hereof
and to entering into any underwriting agreement with respect thereto, that the
Company shall have received an undertaking reasonably satisfactory to it from
the Electing Holder of such Transfer Restricted Securities and from each
underwriter named in any such underwriting agreement, severally and not jointly,
to (i) indemnify and hold harmless the Company, and all other holders of
Transfer Restricted Securities, against any losses, claims, damages or
liabilities to which the Company or such other holders of Transfer Restricted
Securities may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in such registration statement, or any preliminary,
final or summary Prospectus contained therein or furnished by the Company to any
such Electing Holder, agent or underwriter, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Electing Holder or underwriter
expressly for use therein, and (ii) reimburse the Company for any legal or other
expenses reasonably incurred by the Company in connection with investigating or
defending any such action or claim as such expenses are incurred; provided,
however, that no such Electing Holder shall be required to undertake liability
to any person under this Section 6(b) for any amounts in excess of the dollar
amount of the proceeds to be received by such Electing Holder from the sale of
such Electing Holder's Transfer Restricted Securities pursuant to such
registration.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified party
under subsection (a) or (b) above of written notice of the commencement of any
action, such indemnified party shall,
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if a claim in respect thereof is to be made against an indemnifying party
pursuant to the indemnification provisions of or contemplated by this Section 6,
notify such indemnifying party in writing of the commencement of such action;
but the omission so to notify the indemnifying party shall not relieve it from
any liability which it may have to any indemnified party other than under the
indemnification provisions of or contemplated by Section 6(a) or 6(b) hereof. In
case any such action shall be brought against any indemnified party and it shall
notify an indemnifying party of the commencement thereof, such indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party (who shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and, after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, such indemnifying party shall not be liable to such indemnified party
for any legal expenses of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party, in connection with the defense
thereof other than reasonable costs of investigation. No indemnifying party
shall, without the written consent of the indemnified party, effect the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(d) Contribution. If for any reason the indemnification provisions
contemplated by Section 6(a) or Section 6(b) are unavailable to or insufficient
to hold harmless an indemnified party in respect of any losses, claims, damages
or liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the indemnified party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such indemnifying party or by such indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contributions pursuant to this Section 6(d) were determined by
pro rata allocation (even if the holders or any agents or underwriters or all of
them were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to in this Section 6(d). The amount paid or payable by an indemnified party as
a result of the losses, claims, damages, or liabilities (or actions in respect
thereof) referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6(d), no holder shall be required to contribute any
amount in excess of the amount by which the dollar amount of the proceeds
received by such
-22-
<PAGE>
holder from the sale of any Transfer Restricted Securities (after deducting any
fees, discounts and commissions applicable thereto) exceeds the amount of any
damages which such holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission, and no
underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Transfer Restricted Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The holders'
and any underwriters' obligations in this Section 6(d) to contribute shall be
several in proportion to the principal amount of Transfer Restricted Securities
registered or underwritten, as the case may be, by them and not joint.
(e) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each officer, director and partner of
each holder, agent and underwriter and each person, if any, who controls any
holder, agent or underwriter within the meaning of the Act; and the obligations
of the holders and any agents or underwriters contemplated by this Section 6
shall be in addition to any liability which the respective holder, agent or
underwriter may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company (including any person
who, with his consent, is named in any registration statement as about to become
a director of the Company) and to each person, if any, who controls the Company
within the meaning of the Act.
7. Underwritten Offerings.
(a) Selection of Underwriters. If any of the Transfer Restricted
Securities covered by the Shelf Registration are to be sold pursuant to an
underwritten offering, the managing underwriter or underwriters thereof shall be
designated by Electing Holders holding at least a majority in aggregate
principal amount of the Transfer Restricted Securities to be included in such
offering, provided that such designated managing underwriter or underwriters is
or are reasonably acceptable to the Company.
(b) Participation by Holders. Each holder of Transfer Restricted
Securities hereby agrees with each other such holder that no such holder may
participate in any underwritten offering hereunder unless such holder (i) agrees
to sell such holder's Transfer Restricted Securities on the basis provided in
any underwriting arrangements approved by the persons entitled hereunder to
approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements.
8. Rule 144.
The Company covenants to the holders of Transfer Restricted Securities that
to the extent it shall be required
-23-
<PAGE>
to do so under the Exchange Act, the Company shall timely file the reports
required to be filed by it under the Exchange Act or the Act (including the
reports under Section 13 and 15(d) of the Exchange Act referred to in
subparagraph (c)(1) of Rule 144 adopted by the Commission under the Act) and the
rules and regulations adopted by the Commission thereunder, and shall take such
further action as any holder of Transfer Restricted Securities may reasonably
request, all to the extent required from time to time to enable such holder to
sell Transfer Restricted Securities without registration under the Act within
the limitations of the exemption provided by Rule 144 under the Act, as such
Rule may be amended from time to time, or any similar or successor rule or
regulation hereafter adopted by the Commission. Upon the request of any holder
of Transfer Restricted Securities in connection with that holder's sale pursuant
to Rule 144, the Company shall deliver to such holder a written statement as to
whether it has complied with such requirements.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company represents, warrants,
covenants and agrees that it has not granted, and shall not grant, registration
rights with respect to Transfer Restricted Securities or any other securities
which would be inconsistent with the terms contained in this Exchange and
Registration Rights Agreement.
(b) Specific Performance. The parties hereto acknowledge that there would
be no adequate remedy at law if the Company fails to perform any of their
respective obligations hereunder and that the Initial Purchasers and the holders
from time to time of the Transfer Restricted Securities may be irreparably
harmed by any such failure, and accordingly agree that the Initial Purchasers
and such holders, in addition to any other remedy to which they may be entitled
at law or in equity, shall be entitled to compel specific performance of the
respective obligations of the Company under this Exchange and Registration
Rights Agreement in accordance with the terms and conditions of this Exchange
and Registration Rights Agreement, in any court of the United States or any
State thereof having jurisdiction.
(c) Notices. All notices, requests, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand, if delivered personally or by courier, or
three days after being deposited in the mail (registered or certified mail,
postage prepaid, return receipt requested) as follows:
To the Company:
Exodus Communications, Inc.
2650 San Tomas Expressway
Santa Clara, California 95051
Attention: General Counsel
Phone: (408) 346-2200
Fax: (408) 346-2206
-24-
<PAGE>
To the Initial Purchasers:
Goldman, Sachs & Co.
Donaldson Lufkin & Jenrette Securities Corporation
BT Alex. Brown Incorporated
NationsBanc Montgomery Securities LLC
c/o Goldman, Sachs & Co.
85 Broad Street
New York, NY 10004
Phone: (212) 902-1000
Fax: (212) 902-3000
To a holder:
to the address of such holder set forth in the security register
or other records of the Company, or to such other address as the
Company or any such holder may have furnished to the other in
writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
(d) Parties in Interest. All the terms and provisions of this Exchange and
Registration Rights Agreement shall be binding upon, shall inure to the benefit
of and shall be enforceable by the parties hereto and the holders from time to
time of the Transfer Restricted Securities and the respective successors and
assigns of the parties hereto and such holders. In the event that any
transferee of any holder of Transfer Restricted Securities shall acquire
Transfer Restricted Securities, in any manner, whether by gift, bequest,
purchase, operation of law or otherwise, such transferee shall, without any
further writing or action of any kind, be deemed a beneficiary hereof for all
purposes and such Transfer Restricted Securities shall be held subject to all of
the terms of this Exchange and Registration Rights Agreement, and by taking and
holding such Transfer Restricted Securities such transferee shall be entitled to
receive the benefits of, and be conclusively deemed to have agreed to be bound
by all of the applicable terms and provisions of this Exchange and Registration
Rights Agreement. If the Company shall so request, any such successor, assign
or transferee shall agree in writing to acquire and hold the Transfer Restricted
Securities subject to all of the applicable terms hereof.
(e) Survival. The respective indemnities, agreements, representations,
warranties and each other provision set forth in this Exchange and Registration
Rights Agreement or made pursuant hereto shall remain in full force and effect
regardless of any investigation (or statement as to the results thereof) made by
or on behalf of any holder of Transfer Restricted Securities, any director,
officer or partner of such holder, any agent or underwriter or any director,
officer or partner thereof, or any controlling person of any of the foregoing,
and shall survive delivery of and payment for the Transfer Restricted Securities
pursuant to the Purchase Agreement and the transfer and registration of Transfer
Restricted Securities by such holder and the consummation of an Exchange Offer.
-25-
<PAGE>
(f) LAW GOVERNING. THIS EXCHANGE AND REGISTRATION RIGHTS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW
YORK.
(g) Headings. The descriptive headings of the several Sections and
paragraphs of this Exchange and Registration Rights Agreement are inserted for
convenience only, do not constitute a part of this Exchange and Registration
Rights Agreement and shall not affect in any way the meaning or interpretation
of this Exchange and Registration Rights Agreement.
(h) Entire Agreement; Amendments. This Exchange and Registration Rights
Agreement and the other writings referred to herein (including the Indenture and
the form of Securities) or delivered pursuant hereto which form a part hereof
contain the entire understanding of the parties with respect to its subject
matter. This Exchange and Registration Rights Agreement supersedes all prior
agreements and understandings between the parties with respect to its subject
matter. This Exchange and Registration Rights Agreement may be amended and the
observance of any term of this Exchange and Registration Rights Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) only by a written instrument duly executed by the Company and the
holders of at least a majority in aggregate principal amount of the Transfer
Restricted Securities at the time outstanding. Each holder of any Transfer
Restricted Securities at the time or thereafter outstanding shall be bound by
any amendment or waiver effected pursuant to this Section 9(h), whether or not
any notice, writing or marking indicating such amendment or waiver appears on
such Transfer Restricted Securities or is delivered to such holder.
(i) Counterparts. This agreement may be executed by the parties in
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute one and the same instrument.
-26-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
referred to above.
EXODUS COMMUNICATIONS, INC.
By: /s/ Richard S. Stoltz
-----------------------------------------
Name: Richard S. Stoltz
Title: Chief Operating Officer and Chief
Financial Officer
INITIAL PURCHASERS
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION,
BT ALEX. BROWN INCORPORATED
NATIONSBANC MONTGOMERY SECURITIES
LLC
GOLDMAN, SACHS & CO., on behalf of each of
the Initial Purchasers
By: /s/ Goldman, Sachs & Co.
-----------------------------------------
Name: Goldman, Sachs & Co.
Title:
-27-
<PAGE>
Exhibit A
EXODUS COMMUNICATIONS, INC.
INSTRUCTION TO DTC PARTICIPANTS
-------------------------------
(Date of Mailing)
URGENT - IMMEDIATE ATTENTION REQUESTED
DEADLINE FOR RESPONSE: [DATE]/1/
-----------------------------
The Depository Trust Company ("DTC") has identified you as a DTC
Participant through which beneficial interests in the Exodus Communications,
Inc. (the "Company") 11 1/4% Senior Notes due 2008 (the "Securities") are held.
The Company is in the process of registering the Securities under the
Securities Act of 1933 for resale by the beneficial owners thereof. In order to
have their Securities included in the registration statement, beneficial owners
must complete and return the enclosed Notice of Registration Statement and
Selling Securityholder Questionnaire.
It is important that beneficial owners of the Securities receive a
------------------------------------------------------------------
copy of the enclosed materials as soon as possible as their rights to have the
- --------------------------------------------------
Securities included in the registration statement depend upon their returning
the Notice and Questionnaire by [DEADLINE FOR RESPONSE]. Please forward a copy
---------------------
of the enclosed documents to each beneficial owner that holds interests in the
Securities through you. If you require more copies of the enclosed materials or
have any questions pertaining to this matter, please contact Exodus
Communications, Inc., 2650 San Tomas Expressway, Santa Clara, CA 95051,
Attention: General Counsel, (408) 346-2200.
- --------------------
/1/ Not less than 28 calendar days from date of mailing.
-1-
<PAGE>
Exodus Communications, Inc.
Notice of Registration Statement
and
Selling Securityholder Questionnaire
------------------------------------
(Date)
Reference is hereby made to the Exchange and Registration Rights
Agreement (the "Exchange and Registration Rights Agreement") between Exodus
Communications, Inc. (the "Company") and the Initial Purchasers named therein.
Pursuant to the Exchange and Registration Rights Agreement, the Company has
filed with the United States Securities and Exchange Commission (the
"Commission") a registration statement on Form [___] (the "Shelf Registration
Statement") for the registration and resale under Rule 415 of the Securities Act
of 1933, as amended (the "Act"), of the Company's 11 1/4% Senior Notes due 2008
(the "Securities"). A copy of the Exchange and Registration Rights Agreement is
attached hereto. All capitalized terms not otherwise defined herein shall have
the meanings ascribed thereto in the Exchange and Registration Rights Agreement.
Each beneficial owner of Transfer Restricted Securities (as defined
below) is entitled to have the Transfer Restricted Securities beneficially owned
by it included in the Shelf Registration Statement. In order to have Transfer
Restricted Securities included in the Shelf Registration Statement, this Notice
of Registration Statement and Selling Securityholder Questionnaire ("Notice and
Questionnaire") must be completed, executed and delivered to the Company's
counsel at the address set forth herein for receipt ON OR BEFORE [DEADLINE FOR
--------------------------
RESPONSE]. Beneficial owners of Transfer Restricted Securities who do not
- ---------
complete, execute and return this Notice and Questionnaire by such date (i) will
not be named as selling securityholders in the Shelf Registration Statement and
(ii) may not use the Prospectus forming a part thereof for resales of Transfer
Restricted Securities.
Certain legal consequences arise from being named as a selling
securityholder in the Shelf Registration Statement and related Prospectus.
Accordingly, holders and beneficial owners of Transfer Restricted Securities are
advised to consult their own securities law counsel regarding the consequences
of being named or not being named as a selling securityholder in the Shelf
Registration Statement and related Prospectus.
The term "Transfer Restricted Securities" is defined in the Exchange
------------------------------
and Registration Rights Agreement.
-2-
<PAGE>
ELECTION
The undersigned holder (the "Selling Securityholder") of Transfer
Restricted Securities hereby elects to include in the Shelf Registration
Statement the Transfer Restricted Securities beneficially owned by it and listed
below in Item (c). The undersigned, by signing and returning this Notice and
Questionnaire, agrees to be bound with respect to such Transfer Restricted
Securities by the terms and conditions of this Notice and Questionnaire and the
Exchange and Registration Rights Agreement, including, without limitation,
Section 6 of the Exchange and Registration Rights Agreement, as if the
undersigned Selling Securityholder were an original party thereto.
Upon any sale of Transfer Restricted Securities pursuant to the Shelf
Registration Statement, the Selling Securityholder will be required to deliver
to the Company and Trustee the Notice of Transfer set forth in Appendix A to the
Prospectus and as Exhibit B to the Exchange and Registration Rights Agreement.
The Selling Securityholder hereby provides the following information
to the Company and represents and warrants that such information is accurate and
complete:
-3-
<PAGE>
QUESTIONNAIRE
(a) Full Legal Name of Selling Securityholder:
- --------------------------------------------------------------------------------
(i) Full Legal Name of Registered Holder (if not the same as in (a) above)
of Transfer Restricted Securities Listed in Item (c) below:
----------------------------------------------------------------------
(ii) Full Legal Name of DTC Participant (if applicable and if not the same
as (a) above) Through Which Transfer Restricted Securities Listed in
Item (c) below are Held:
----------------------------------------------------------------------
(b) Address for Notices to Selling Securityholder:
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Telephone:
-----------------------------------
Fax:
-----------------------------------
Contact Person:
-----------------------------------
(c) Beneficial Ownership of Securities:
Except as set forth below in this Item (c), the undersigned does not
beneficially own any Securities.
(i) Principal amount of Transfer Restricted Securities beneficially owned:
----------------------------------------------------------------------
CUSIP No(s). of such Transfer Restricted Securities:
----------------
(ii) Principal amount of Securities other than Transfer Restricted
Securities beneficially owned:
---------------------------------------
-4-
<PAGE>
CUSIP No(s). of such other Securities: ___________________________
(iii) Principal amount of Transfer Restricted Securities which the
undersigned wishes to be included in the Shelf Registration
Statement: _______________________________________________________
CUSIP No(s). of such Transfer Restricted Securities to be included
in the Shelf Registration Statement: _____________________________
(d) Beneficial Ownership of Other Securities of the Company:
Except as set forth below in this Item (d), the undersigned Selling
Securityholder is not the beneficial or registered owner of any other securities
of the Company, other than the Securities listed above in Item (c).
State any exceptions here:
(e) Relationships with the Company:
Except as set forth below, neither the Selling Securityholder nor any of
its affiliates, officers, directors or principal equity holders (5% or more) has
held any position or office or has had any other material relationship with the
Company (or its predecessors or affiliates) during the past three years.
State any exceptions here:
(f) Plan of Distribution:
Except as set forth below, the undersigned Selling Securityholder
intends to distribute the Transfer Restricted Securities listed above in Item
(c) only as follows (if at all): Such Transfer Restricted Securities may be
sold from time to time directly by the undersigned Selling Securityholder or,
alternatively, through underwriters, Broker-Dealers or agents. Such Transfer
Restricted Securities may be sold in one or more transactions at fixed prices,
at prevailing market prices at the time of sale, at varying prices determined at
the time of sale, or at negotiated prices. Such sales may be effected in
transactions (which may involve crosses or block transactions) (i) on any
national securities exchange or quotation service on which the Transfer
Restricted Securities may be listed or quoted at the time of sale, (ii) in the
over-the-counter market, (iii) in transactions otherwise than on such exchanges
or services or in the over-the-counter market, or (iv) through the
-5-
<PAGE>
writing of options. In connection with sales of the Transfer Restricted
Securities or otherwise, the Selling Securityholder may enter into hedging
transactions with Broker-Dealers, which may in turn engage in short sales of the
Transfer Restricted Securities in the course of hedging the positions they
assume. The Selling Securityholder may also sell Transfer Restricted Securities
short and deliver Transfer Restricted Securities to close out such short
positions, or loan or pledge Transfer Restricted Securities to Broker-Dealers
that in turn may sell such securities.
State any exceptions here:
By signing below, the Selling Securityholder acknowledges that it
understands its obligation to comply, and agrees that it will comply, with the
provisions of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the rules and regulations thereunder, particularly Rule 10b-6.
In the event that the Selling Securityholder transfers all or any portion
of the Transfer Restricted Securities listed in Item (c) above after the date on
which such information is provided to the Company, the Selling Securityholder
agrees to notify the transferee(s) at the time of the transfer of its rights and
obligations under this Notice and Questionnaire and the Exchange and
Registration Rights Agreement.
By signing below, the Selling Securityholder consents to the disclosure of
the information contained herein in its answers to Items (a) through (f) above
and the inclusion of such information in the Shelf Registration Statement and
related Prospectus. The Selling Securityholder understands that such
information will be relied upon by the Company in connection with the
preparation of the Shelf Registration Statement and related Prospectus.
In accordance with the Selling Securityholder's obligation under Section
3(d) and (f) of the Exchange and Registration Rights Agreement to provide such
information as may be required by law for inclusion in the Shelf Registration
Statement, the Selling Securityholder agrees to notify the Company promptly of
any inaccuracies or changes in the information provided herein which may occur
subsequent to the date hereof at any time while the Shelf Registration Statement
remains in effect. All notices hereunder and pursuant to the Exchange and
-6-
<PAGE>
Registration Rights Agreement shall be made in writing, by hand-delivery, first-
class mail, or air courier guaranteeing overnight delivery as follows:
(i) To the Company:
Exodus Communications, Inc.
2650 San Tomas Expressway
Santa Clara, CA 95051
Attention: General Counsel
(408) 346-2200.
(ii) With a copy to:
Fenwick & West, LLP
Two Palo Alto Square
Palo Alto, CA 94306
Attention: Eileen Duffy Robinett
(650) 494-0600
Once this Notice and Questionnaire is executed by the Selling
Securityholder and received by the Company's counsel, the terms of this Notice
and Questionnaire, and the representations and warranties contained herein,
shall be binding on, shall inure to the benefit of and shall be enforceable by
the respective successors, heirs, personal representatives, and assigns of the
Company and the Selling Securityholder (with respect to the Transfer Restricted
Securities beneficially owned by such Selling Securityholder and listed in Item
(c) above). This Agreement shall be governed in all respects by the laws of the
State of New York.
-7-
<PAGE>
IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused
this Notice and Questionnaire to be executed and delivered either in person or
by its duly authorized agent.
Dated: ________________
_____________________________________________
Selling Securityholder
(Print/type full legal name of beneficial
owner of Transfer Restricted Securities)
By: _________________________________________
Name:
Title:
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON
OR BEFORE [DEADLINE FOR RESPONSE] TO THE COMPANY'S COUNSEL AT:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
Attention: Eileen Duffy Robinett
(650) 494-0600
-8-
<PAGE>
Exhibit B
NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT
Chase Manhattan Bank and Trust Company,
National Association
Exodus Communications, Inc.
c/o Chase Manhattan Bank and Trust Company,
National Association
101 Barclay Street
Floor 21 West
New York, NY 10286
Attention: Trust Officer
Re: Exodus Communications, Inc. (the "Company")
11 1/4% Senior Notes due 2008
----------------------------------
Ladies and Gentlemen:
Please be advised that _____________________ has transferred
$___________ aggregate principal amount of the above-referenced Notes pursuant
to an effective Registration Statement on Form [___] (File No. 333-____) filed
by the Company.
We hereby certify that the prospectus delivery requirements, if any,
of the Securities Act of 1933, as amended, have been satisfied and that the
above-named beneficial owner of the Notes is named as a "Selling Holder" in the
Prospectus dated ___________, 199_ or in supplements thereto, and that the
aggregate principal amount of the Notes transferred are the Notes listed in such
Prospectus opposite such owner's name.
Dated:
Very truly yours,
________________________
(Name)
By:________________________
(Authorized Signature)
-1-
<PAGE>
EXHIBIT 10.32
==============================================================================
ESCROW AGREEMENT
DATED AS OF JULY 1, 1998
BY AND AMONG
CHASE MANHATTAN BANK AND TRUST COMPANY,
NATIONAL ASSOCIATION
(AS ESCROW AGENT),
CHASE MANHATTAN BANK AND TRUST COMPANY,
NATIONAL ASSOCIATION
(AS TRUSTEE)
AND
EXODUS COMMUNICATIONS, INC.
===============================================================================
<PAGE>
THIS ESCROW AGREEMENT (this "Agreement"), dated as of July 1, 1998,
among CHASE MANHATTAN BANK AND TRUST COMPANY, NATIONAL ASSOCIATION, as escrow
agent (in such capacity, "Escrow Agent"), CHASE MANHATTAN BANK AND TRUST
COMPANY, NATIONAL ASSOCIATION, as Trustee (in such capacity, "Trustee") under
the Indenture (as defined herein), and EXODUS COMMUNICATIONS, INC., a Delaware
corporation (the "Company").
WHEREAS, pursuant to the Indenture, dated as of July 1, 1998 (the
"Indenture"), between the Company and Trustee, on the Closing Date, the Company
is issuing $200,000,000 aggregate principal amount of 11 1/4% Senior Notes due
2008 (the "Securities").
WHEREAS, as security for its obligations under the Securities and the
Indenture, the Company desires to grant to Trustee, for the benefit of the
Beneficiaries (as defined herein), a security interest in and lien upon the
Collateral (as defined herein).
WHEREAS, the parties have entered into this Agreement in order to set
forth the conditions upon which, and the manner in which, funds will be
disbursed from the Escrow Account and released from the security interest and
lien described above.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Defined Terms. All terms used but not defined herein shall have
-------------
the meanings ascribed to them in the Indenture. In addition to any other
defined terms used herein, the following terms shall constitute defined terms
for purposes of this Agreement and shall have the meanings set forth below:
"Additional Securities" means such senior notes in an aggregate
principal amount not to exceed $75,000,000, issued on or prior to July 1, 1999
by the Company pursuant to its option under the Purchase Agreement, dated June
26, 1998 between the Company and the Initial Purchasers.
"Affiliate" of any specified person means any other person which,
directly or indirectly, controls, is controlled by or is under 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 "affiliated,"
"controlling" and "controlled" have meanings correlative to the foregoing.
"Applied" means that disbursed funds have been applied (i) to the
payment of interest on the Securities, (ii) pursuant to Section 3(c), or (iii)
pursuant to Section 6(b)(iii) hereof.
"Available Funds" means, at any date, (A) the sum of (i) the Pledged
Securities and
<PAGE>
any funds or U.S. Government Securities (ii) interest earned or dividends paid
on the Pledged Securities and any funds or U.S. Government Securities, less (B)
the aggregate disbursements made prior to such date pursuant to this Agreement.
"Beneficiaries" see Section 2(b)(i).
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The City of New York,
New York and San Francisco, California are authorized or obligated by law or
executive order to close.
"Collateral" see Section 6(a).
"Escrow Account" shall mean the escrow account established pursuant to
Section 2(b).
"Escrow Account Statement" see Section 2(f).
"Escrow Funds" see Section 2(b).
"Initial Escrow Deposit" shall mean the Pledged Securities described
on Schedule I hereto.
"Interest" has, other than for purposes of Section 2(d)(iii), the
meaning set forth in the Indenture.
"Interest Payment Date" means January 1 and July 1 of each year,
commencing on January 1, 1999 until the Securities are paid in full.
"Payment Notice and Disbursement Request" means a notice sent by the
Company to Escrow Agent requesting a disbursement of funds from the Escrow
Account, in substantially the form of Exhibit A hereto. Each Payment Notice and
---------
Disbursement Request shall be signed by an officer of the Company.
"Pledged Securities" means any interest in U.S. Government Securities,
including the Initial Escrow Deposit, deposited into the Escrow Account pursuant
to the terms of this Agreement. The scheduled payments of principal and
interest on the Pledged Securities shall be sufficient to provide for the
payment in full of the interest due on the Securities on the first four
scheduled Interest Payment Dates commencing January 1, 1999 and ending July 1,
2000.
"Secured Obligations" see Section 6(a).
"U.S. Government Securities" means securities that are direct
obligations of the United States of America, direct obligations of the Federal
Home Loan Mortgage Corporation, direct
-2-
<PAGE>
obligations of the Federal National Mortgage Association, securities which the
timely payment of whose principal and interest is unconditionally guaranteed by
the full faith and credit of the United States of America, trust receipts or
other evidence of a direct claim upon the instruments described above and money
market mutual funds, which may be funds maintained or managed by the Trustee or
its affiliates, that invest solely in such securities.
2. Escrow Account; Escrow Agent.
----------------------------
(a) Appointment of Escrow Agent. The Company and Trustee hereby
---------------------------
appoint Escrow Agent, and Escrow Agent hereby accepts appointment, as escrow
agent, under the terms and conditions of this Agreement.
(b) Establishment of Escrow Account.
-------------------------------
(i) On or prior to the closing date of the offering of the
Securities, Escrow Agent shall establish an escrow account entitled the "Escrow
Account pledged by Exodus Communications, Inc. to Chase Manhattan Bank and Trust
Company, National Association, as Trustee" (the "Escrow Account") at its office
located at 450 West 33rd Street, 15th Floor, New York, New York 10001. The
Escrow Account shall be a "securities account" as such term is defined in
Section 8-501(a) of the New York Uniform Commercial Code (the "UCC"). All funds
and securities, including the Initial Escrow Deposit, Pledged Securities,
additional funds or securities deposited in the Escrow Account pursuant to
clause (iii) of this Section 2(b) and any U.S. Government Securities accepted by
Escrow Agent pursuant to this Agreement and any proceeds thereof (collectively,
the "Escrow Funds") shall be held for the exclusive benefit of Trustee, any
predecessor Trustee under the Indenture and holders of the Securities or
Additional Securities, as secured parties hereunder (collectively, the
"Beneficiaries"). All Escrow Funds shall be held in the Escrow Account until
disbursed or paid in accordance with the terms hereof. The Escrow Account and
the Escrow Funds, including the Initial Escrow Deposit, the Pledged Securities
and any U.S. Government Securities held by Escrow Agent shall be under the sole
dominion and control of Escrow Agent for the benefit of the Beneficiaries.
(ii) On the closing date of the offering of the Securities,
the Company shall deliver, or cause the delivery of, the Initial Escrow Deposit
to Escrow Agent for deposit into the Escrow Account against Escrow Agent's
written acknowledgment and receipt of the Initial Escrow Deposit. The Initial
Escrow Deposit and any other Pledged Securities shall be held by the Escrow
Agent and deposited into the Escrow Account for the exclusive benefit of the
Beneficiaries. All payments of interest and principal on the Pledged Securities
shall be deposited into the Escrow Account to be paid or disbursed in accordance
with the terms hereof or, to the extent permitted by Section 2(d) hereof,
reinvested in U.S. Government Securities.
(iii) On the closing date of the offering of the Additional
Securities (the "Additional Securities Closing Date"), the Company shall deliver
or cause the delivery of, and Escrow Agent shall accept for deposit into the
Escrow Account, against Escrow Agent's written
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acknowledgment and receipt, the amount (or U.S. Government Securities) set forth
in the Notice of Additional Escrow Deposit in the form of Exhibit B hereto;
---------
provided, however, that each of the following conditions have been met:
- -------- -------
(1) the Escrow Agent shall have received an opinion from a
nationally-recognized accounting firm stating that the funds, or U.S. Government
Securities, being deposited pursuant to this Section 2(b)(iii) are sufficient to
pay, when due, the interest on such Additional Securities on each Interest
Payment Date through and including the Interest Payment Date on July 1, 2000;
(2) the Escrow Agent and the Trustee shall have received a
certificate dated as of the Additional Securities Closing Date signed by an
executive officer of the Company to the effect that the representations and
warranties of the Company contained in this Agreement are true and correct as of
the Additional Securities Closing Date and that the Company has complied with
all of the agreements and satisfied all of the conditional on its part to be
performed or satisfied under this Agreement and the Indenture on or before the
Additional Securities Closing Date; and
(3) the Escrow Agent shall have received a Notice of
Additional Escrow Deposit from the Company substantially in the form of Exhibit
-------
B hereto.
- -
All such Escrow Funds shall be held in the Escrow Account until
disbursed or paid in accordance with the terms hereof. The Escrow Account and
all Escrow Funds, including the funds deposited pursuant to this subsection
(iii), the Pledged Securities and any U.S. Government Securities held by Escrow
Agent shall be under the dominion and control of Escrow Agent for the benefit of
the Beneficiaries.
The Escrow Agent shall purchase, or cause to be purchased, U.S.
Government securities with all funds deposited pursuant to this subsection
(iii). The U.S. Government Securities shall be held by the Escrow Agent and
deposited into the Escrow Account for the exclusive benefit of the
Beneficiaries. All payments of interest and principal on the U.S. Government
Securities shall be deposited into the Escrow Account to be paid or disbursed in
accordance with the terms hereof or, to the extent permitted by Section 2(d)
hereof, reinvested in U.S. Government Securities.
(c) Escrow Agent Compensation. The Company shall pay to Escrow Agent
-------------------------
such compensation for services to be performed by it under this Agreement as the
Company and Escrow Agent may agree in writing from time to time. Escrow Agent
shall be paid any compensation owed to it directly by the Company and shall not
disburse from the Escrow Account any such compensation owed to it nor shall
Escrow Agent have any interest in the Escrow Account with respect to such
compensation owed to it.
The Company shall reimburse Escrow Agent upon request for all
reasonable expenses, disbursements, and advances incurred or made by Escrow
Agent in implementing any of
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the provisions of this Agreement, including compensation and the reasonable
expenses and disbursements of its counsel. Escrow Agent shall be paid any such
expenses owed to it directly by the Company and shall not disburse from the
Escrow Account any such amounts nor shall Escrow Agent have any interest in the
Escrow Account with respect to such amounts.
(d) Investment and Reinvestment of Funds in Escrow Account. Any funds
------------------------------------------------------
on deposit in the Escrow Account which are not invested in U.S. Government
Securities may be reinvested, at the Company's option, only upon the following
terms and conditions:
(i) Acceptable Investments. All funds deposited or held in the
----------------------
Escrow Account at any time shall be invested by Escrow Agent in U.S.
Government Securities in accordance with the Company's written instructions
from time to time to Escrow Agent; provided, however, that (1) the Company
-------- -------
shall only designate investment of funds in U.S. Government Securities
maturing in an amount sufficient to and/or generating interest income
sufficient to, when added to the balance of funds held in the Escrow
Account, provide for the payment of interest on the outstanding Securities
on each Interest Payment Date beginning on and including January 1, 1999
and through and including the Interest Payment Date on July 1, 2000 and (2)
any such written instruction shall specify the particular investment to be
made, shall state that such investment is authorized to be made hereby and
in particular satisfies the requirements of the preceding clause (1) of
this proviso, shall contain the certification referred to in Section
2(d)(ii), if required, and shall be executed by an Officer of the Company.
Escrow Agent shall have no responsibility for determining whether funds
held in the Escrow Account shall have been invested in such a manner so as
to comply with the requirements of this clause (i). All U.S. Government
Securities shall be assigned to and held in the possession of, or, in the
case of U.S. Government Securities maintained in book entry form with the
Federal Reserve Bank, transferred to a book entry account in the name of
Escrow Agent for the benefit of the Beneficiaries, with such guarantees as
are customary, except that U.S. Government Securities maintained in book
entry form with the Federal Reserve Bank shall be transferred to a book
entry account in the name of Escrow Agent at the Federal Reserve Bank that
includes only U.S. Government Securities held by Escrow Agent for its
customers and segregated by separate recordation in the books and records
of Escrow Agent. Escrow Agent shall not be liable for losses on any
investments made by it pursuant to and in compliance with such written
instructions. In the absence of instructions from the Company that meet
the requirements of this Section 2(d)(i), Escrow Agent shall have no
obligation to invest funds held in the Escrow Account.
(ii) Security Interest in Investments. No investment of funds in
--------------------------------
the Escrow Account shall be made unless the Company has certified to Escrow
Agent and Trustee that, upon such investment, Trustee will have a first
priority perfected security interest in the applicable investment in the
form of an officer's certificate substantially in the form of Exhibit C
---------
hereto. If a certificate as to a class of investments has been provided to
Escrow Agent, a certificate need not be issued with respect to individual
investments in securities in that class if the certificate applicable to
the class remains accurate with respect to such individual investments,
which continued accuracy Escrow Agent may conclusively
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assume.
(iii) Interest and Dividends. All interest earned and dividends
----------------------
paid on the Escrow Funds shall be deposited in the Escrow Account as
additional Collateral and, if not required to be disbursed in accordance
with the terms hereof by the Escrow Agent, subject to subsections
6(b)(iii), 6(e) and 6(f), shall be reinvested in accordance with the terms
hereof in U.S. Government Securities unless an Event of Default has
occurred or Trustee has notified Escrow Agent that it should only take
direction from Trustee or should no longer take direction from the Company.
Notwithstanding the foregoing, the Escrow Agent shall be under not
obligation to reinvest any Excess Funds (as defined below) (or fund that
are expected to become Excess Funds within 60 days of their receipt by the
Escrow Agent) held in the Escrow Account from time to time.
(iv) Limitation on Escrow Agent's Responsibilities. Escrow
---------------------------------------------
Agent's sole responsibilities under this Section 2 shall be (A) to retain
possession of certificated U.S. Government Securities (except, however,
that Escrow Agent may surrender possession to the issuer of any such U.S.
Government Securities for the purposes of effecting assignment, crediting
interest, or reinvesting such security or reducing such security to cash)
and to be the registered or designated owner of the Pledged Securities and
any U.S. Government Securities which are not certificated, (B) to follow
the Company's written instructions given in accordance with Section
2(d)(i), (C) to invest and reinvest Escrow Funds pursuant to this Section
2(d) and (D) to use reasonable efforts to reduce to cash such U.S.
Government Securities as may be required to fund any disbursement or
payment in accordance with Section 3. In connection with clause (A) above,
Escrow Agent will maintain continuous possession in the State of New York
of certificated U.S. Government Securities and cash included in the
Collateral and will cause the Pledged Securities and any uncertificated
U.S. Government Securities to be registered in the book-entry system of,
and transferred to an account of Escrow Agent or a sub-agent of Escrow
Agent at, any Federal Reserve Bank. Except as provided in Section 6, Escrow
Agent shall have no other responsibilities with respect to perfecting or
maintaining the perfection of the security interest in the Collateral and
shall not be required to file any instrument, document or notice in any
public office at any time or times. In connection with clause (D) above
and subject to the following sentence, Escrow Agent shall not be required
to reduce to cash any U.S. Government Securities to fund any disbursement
or payment in accordance with Section 3 in the absence of written
instructions signed by an Officer of the Company specifying the particular
investment to liquidate. If no such written instructions are received,
Escrow Agent may liquidate those U.S. Government Securities having the
lowest interest rate per annum or if none such exist, those having the
nearest maturity.
(e) Substitution of Escrow Agent. Escrow Agent may resign by giving
----------------------------
no less than 15 Business Days prior written notice to the Company and Trustee.
Such resignation shall take effect upon the later to occur of (i) delivery of
all Escrow Funds maintained by Escrow Agent hereunder and copies of all books,
records, plans and other documents in Escrow Agent's possession
-6-
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relating to such Escrow Funds, the Pledged Securities or any U.S. Government
Securities or this Agreement to a successor escrow agent mutually approved by
the Company and Trustee (which approvals shall not be unreasonably withheld or
delayed) and the taking of such other steps as may be necessary to give Trustee
a first priority security interest in the Pledged Securities and (ii) the
Company, Trustee and such successor escrow agent entering into this Agreement or
any written successor agreement no less favorable to the interests of the
holders of the Securities and Trustee than this Agreement; and Escrow Agent
shall thereupon be discharged of all obligations under this Agreement and shall
have no further duties, obligations or responsibilities in connection herewith,
except as set forth in Section 4. If a successor escrow agent has not been
appointed or has not accepted such appointment within 20 Business Days after
Escrow Agent has given notice of resignation to the Company, Escrow Agent may
apply to a court of competent jurisdiction for the appointment of a successor
escrow agent. Any corporation or association into which the Escrow Agent may be
merged or with which it may be consolidated, or any corporation or association
resulting from any merger or consolidation to which the Escrow Agent shall be a
party, or any corporation or association succeeding to the business of the
Escrow Agent, shall be the successor of the Escrow Agent hereunder; provided
that such successor Escrow Agent shall take all steps necessary to preserve the
first priority perfected security interest of the Trustee in the Collateral.
(f) Escrow Account Statement. At least 30 days prior to each Interest
------------------------
Payment Date, Escrow Agent shall deliver to the Company and Trustee (if the
Trustee is not also the Escrow Agent) a statement setting forth with reasonable
particularity the balance of Escrow Funds then in the Escrow Account and a
description of the instruments or other investments in which such funds are
invested ("Escrow Account Statement"). The parties hereto irrevocably instruct
Escrow Agent that on the first date upon which the balance in the Escrow Account
(including the holdings of all U.S. Government Securities) is reduced to zero,
Escrow Agent shall deliver to the Company and to Trustee (if the Trustee is not
also the Escrow Agent) a notice that the balance in the Escrow Account has been
reduced to zero.
3. Disbursements.
-------------
(a) Payment Notice and Disbursement Request; Disbursements. At least
------------------------------------------------------
five business days prior to an Interest Payment Date, the Company may submit to
Escrow Agent, with a copy to Trustee a completed Payment Notice and Disbursement
Request substantially in the form of Exhibit A hereto.
---------
Escrow Agent's disbursement pursuant to any Payment Notice and
Disbursement Request shall be subject to the satisfaction of the applicable
conditions set forth in Section 3(b). Provided such Payment Notice and
Disbursement Request is not rejected by it, Escrow Agent, as soon as reasonably
practicable on the Interest Payment Date, but in no event later than 12:00 Noon
(New York City time) on the Interest Payment Date, shall disburse the funds
requested in such Payment Notice and Disbursement Request by wire or book-entry
transfer of immediately available funds to the account of Trustee for the
benefit of the Beneficiaries. Escrow Agent shall notify Trustee as soon as
reasonably possible (but not later than two (2) Business Days from the date of
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<PAGE>
receipt of the Payment Notice and Disbursement Request) if any Payment Notice
and Disbursement Request is rejected and the reason(s) therefor. In the event
such rejection is based upon nonsatisfaction of the condition in Section
3(b)(I), the Company shall thereupon resubmit the Payment Notice and
Disbursement Request with appropriate changes.
(b) Conditions Precedent to Disbursement. Escrow Agent's payment of
------------------------------------
any disbursement pursuant to this Section 3 shall be made only if: (I) the
Company shall have submitted, in accordance with the provisions of Section 3(a),
a completed Payment Notice and Disbursement Request to Escrow Agent
substantially in the form of Exhibit A with blanks appropriately filled in, and
---------
(II) Escrow Agent shall not have received any notice from Trustee prior to such
disbursement that as a result of an Event of Default the indebtedness
represented by the Securities or Additional Securities, as the case may be, has
been accelerated and has become due and payable (in which event Escrow Agent
shall apply all Available Funds as required by Section 6(b)(iii)).
(c) The Company Payments; Excess Funds. If (i) the Company makes any
----------------------------------
interest payment or portion of an interest payment on the Securities from a
source of funds other than the Escrow Account (the "Company Funds"), or (ii)
immediately following an Interest Payment Date, the scheduled payments of
principal and interest on the Pledged Securities maintained in the Escrow
Account shall be sufficient to provide for the payment in full of the interest
due on the Securities on the remaining scheduled Interest Payment Dates on or
before July 1, 2000 and the Escrow Account contains funds in addition to such
Pledged Securities (the "Excess Funds"), then the Company may, (A) with respect
to clause (i) above, after payment in full of such interest payment by the
Company, direct Escrow Agent to release to the Company or at the direction of
the Company an amount of funds from the Escrow Account less than or equal to the
amount of the Company Funds so expended, or (B) with respect to clause (ii)
above, direct Escrow Agent in writing to release to the Company or at the
direction of the Company an amount of funds from the Escrow Account less than or
equal to the amount of Excess Funds. Upon receipt of a request from the Company
(including the certificate described in the following sentence), Escrow Agent
will pay over to the Company or designee of the Company the requested amount.
Concurrently with any release of funds to the Company pursuant to this Section
3(c), the Company will deliver to Escrow Agent a certificate upon which the
Escrow Agent may conclusively rely signed by an authorized signatory of the
Company stating that all conditions under this Agreement and the Indenture have
been satisfied and such release does not contravene, or constitute a default
under, any judgment, injunction, order, or decree binding upon the Company and
is in accordance with the provisions of this Agreement.
(d) If at any time the principal of and interest on the Collateral
exceeds 100% of the amount sufficient, in the written opinion of a nationally
recognized firm of independent accountants selected by the Company and delivered
to Escrow Agent and Trustee, to provide for payment in full of the interest on
outstanding Securities on each Interest Payment Date through and including the
Interest Payment Date on July 1, 2000, the Company may direct Escrow Agent to
release any such overfunded amount to the Company or to such other party as the
Company may direct. Upon receipt of written instructions executed by the Company
in the form of an Officers'
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<PAGE>
Certificate upon which the Escrow Agent may conclusively rely, Escrow Agent
shall pay, or shall cause the payment, over to the Company or the Company's
designee, as the case may be, any such overfunded amount.
4. Limitation of Escrow Agent's Liability; Responsibilities of Escrow
------------------------------------------------------------------
Agent. Escrow Agent's responsibility and liability under this Agreement shall
- -----
be limited as follows: (i) Escrow Agent does not represent, warrant or guaranty
to the holders of the Securities from time to time the performance of the
Company; (ii) Escrow Agent shall have no responsibility to the Company or the
holders of the Securities or Trustee from time to time as a consequence of
performance or non-performance by Escrow Agent hereunder, except for any bad
faith, gross negligence or willful misconduct of Escrow Agent; (iii) the Company
shall remain solely responsible for all aspects of the Company's business and
conduct; and (iv) Escrow Agent is not obligated to supervise, inspect or inform
the Company or any third party of any matter referred to above. In no event
shall Escrow Agent be liable (a) for acting in accordance with or relying upon
any instruction, notice, demand, certificate or document from the Company or any
entity acting on behalf of the Company, (b) for any consequential, punitive or
special damages of any kind whatsoever (including but not limited to lost
profits), even if the Escrow Agent has been advised of the likelihood of such
loss or damage regardless of the form of action, (c) for the acts or omissions
of its nominees, correspondents, designees, subagents or subcustodians, (d) for
an amount in excess of the value of the Escrow Account or (e) for the validity,
sufficiency or priority of this Agreement or any Collateral or other security
furnished hereby.
No implied covenants or obligations shall be inferred from this
Agreement against Escrow Agent, nor shall Escrow Agent be bound by the
provisions of any agreement beyond the specific terms hereof. Specifically and
without limiting the foregoing, Escrow Agent shall in no event have any
liability in connection with its investment, reinvestment or liquidation, in
good faith and in accordance with the terms hereof, of any Escrow Funds held by
it hereunder, including without limitation any liability for any delay not
resulting from gross negligence or willful misconduct in such investment,
reinvestment or liquidation, or for any loss of principal or income incident to
any such delay.
Escrow Agent shall be entitled to rely upon any judicial or
administrative order or judgment, upon any opinion of counsel or upon any
certification, instruction, notice, or other writing delivered to it by the
Company or Trustee in compliance with the provisions of this Agreement without
being required to determine the authenticity or the correctness of any fact
stated therein or the propriety or validity of service thereof. Escrow Agent
may act in reliance upon any instrument comporting with the provisions of this
Agreement or signature believed by it to be genuine and may assume that any
person purporting to give notice or receipt or advice or make any statement or
execute any document in connection with the provisions hereof has been duly
authorized to do so.
At any time Escrow Agent may request in writing an instruction in
writing from the Company (other than any disbursement pursuant to Section
6(b)(iii)), and may at its own option include in such request the course of
action it proposes to take and the date on which it proposes to
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<PAGE>
act, regarding any matter arising in connection with its duties and obligations
hereunder; provided, however, that Escrow Agent shall state in such request
-------- -------
that it believes in good faith that such proposed course of action is consistent
with an identified provision of this Agreement. Escrow Agent shall not be liable
to the Company for acting without the Company's consent in accordance with such
a proposal on or after the date specified therein if (i) the specified date is
at least four Business Days after the Company receives Escrow Agent's request
for instructions and its proposed course of action, and (ii) prior to so acting,
Escrow Agent has not received the written instructions requested from the
Company.
At the expense of the Company, Escrow Agent may act pursuant to the
advice of counsel chosen by it with respect to any matter relating to this
Agreement and (subject to clause (ii) of the first paragraph of this Section 4)
shall not be liable for any action taken or omitted in accordance with such
advice.
Escrow Agent shall not be called upon to advise any party as to
selling or retaining, or taking or refraining from taking any action with
respect to, any securities or other property deposited hereunder.
In the event of any ambiguity in the provisions of this Agreement with
respect to any Escrow Funds property deposited hereunder, Escrow Agent shall be
entitled to refuse to comply with any and all claims, demands or instructions
with respect to such Escrow Funds and Escrow Agent shall not be or become liable
for its failure or refusal to comply with conflicting claims, demands or
instructions. Escrow Agent shall be entitled to refuse to act until either any
conflicting or adverse claims or demands shall have been finally determined by a
court of competent jurisdiction or settled by agreement between the conflicting
claimants as evidenced in a writing, satisfactory to Escrow Agent, or Escrow
Agent shall have received security or an indemnity satisfactory to Escrow Agent
sufficient to hold Escrow Agent harmless from and against any and all loss,
liability or expense which Escrow Agent may incur by reason of its acting.
Escrow Agent may in addition elect in its sole option to commence an
interpleader action or seek other judicial relief or orders as Escrow Agent may
deem necessary. The costs and expenses (including reasonable attorney's fees
and expenses) incurred in connection with such proceedings shall be paid by, and
shall be deemed an obligation of the Company.
No provision of this Agreement shall require Escrow Agent to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder.
Escrow Agent shall not incur any liability for not performing any act
or fulfilling any duty, obligation or responsibility hereunder by reason of any
occurrence beyond the control of Escrow Agent (including but not limited to any
act or provision of any present or future law or regulation or governmental
authority, any act of God or war, or the unavailability of the Federal Reserve
Bank wire or telex or other wire or communication facility).
5. Indemnity. The Company shall indemnify, hold harmless and defend
---------
Trustee
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and Escrow Agent and their respective directors, officers, agents, employees and
controlling persons, from and against any and all claims, actions, obligations,
liabilities and expenses, including reasonable defense costs, reasonable
investigative fees and costs, reasonable legal fees, and claims for damages,
arising from Trustee's or Escrow Agent's performance or non-performance, or in
connection with Escrow Agent's acceptance of appointment as Escrow Agent under
this Agreement, except to the extent that such liability, expense or claim is
solely and directly attributable to the bad faith, gross negligence or willful
misconduct of any of the foregoing persons. The provisions of this Section 5
shall survive any termination, satisfaction or discharge of this Agreement as
well as the resignation or removal of Escrow Agent. Notwithstanding anything to
the contrary in this Agreement, no indemnity claim under this Section 5 shall
constitute a Secured Obligation (as defined below) or entitled to benefit of any
security interest in the Escrow Account.
6. Grant of Security Interest; Instructions to Escrow Agent.
--------------------------------------------------------
(a) The Company hereby irrevocably grants a first priority
security interest in and lien on, and pledges to Trustee for the ratable benefit
of the Beneficiaries, all of the Company's right, title and interest in the
Escrow Account, and all property now or hereafter placed or deposited in, or
delivered to Escrow Agent for placement or deposit in, the Escrow Account,
including, without limitation, the Pledged Securities, all Escrow Funds held
therein, all U.S. Government Securities held by (or otherwise maintained in the
name of) Escrow Agent pursuant to Section 2, and all proceeds thereof as well as
all rights of the Company under this Agreement (collectively, the "Collateral"),
in order to secure all obligations and indebtedness of the Company under the
Indenture, the Securities, or Additional Securities, as the case may be, this
Agreement and any other obligation, now or hereafter arising, of every kind and
nature, owed by the Company under the Indenture or the Securities to the holders
of the Securities or to Trustee or any predecessor Trustee (the "Secured
Obligations"). Escrow Agent hereby acknowledges Trustee's security interest and
lien as set forth above. The Company shall take or direct the Escrow Agent to
take all actions necessary on its part to insure the continuance of a first
priority security interest in the Collateral in favor of Trustee in order to
secure all such obligations and indebtedness.
(b) The Company and Trustee hereby irrevocably instruct Escrow
Agent to, and Escrow Agent shall:
(i) (A) maintain sole dominion and control over the Escrow
Funds in the Escrow Account for the benefit of Trustee to the extent
specifically required herein, (B) maintain, or cause its agent to maintain,
possession of all certificated U.S. Government Securities purchased
hereunder that are physically possessed by Escrow Agent in order for
Trustee to enjoy a continuous perfected first priority security interest
therein under the law of the State of New York (the Company hereby agreeing
that in the event any certificated U.S. Government Securities are in the
possession of the Company or a third party, the Company shall use its best
efforts to deliver all such certificates to Escrow Agent), (C) comply with
all directions furnished by the Company pursuant to paragraph (a) of this
Section 6 to cause Trustee to enjoy a continuous perfected first priority
security interest under any applicable
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<PAGE>
Federal and State of New York law in all U.S. Government Securities
purchased hereunder that are not certificated and (D) maintain the
Collateral free and clear of all liens, security interests, safekeeping or
other charges, demands and claims against Escrow Agent of any nature now or
hereafter existing in favor of anyone other than Trustee;
(ii) promptly notify Trustee if Escrow Agent receives written
notice that any person other than Trustee has a lien or security interest
upon any portion of the Collateral other than as permitted in clause (i) of
this Section 6(b); and
(iii) in addition to disbursing amounts held in escrow pursuant
to any Payment Notice and Disbursement Requests given to it pursuant to
Section 3, upon receipt of written notice from Trustee of the acceleration
of the maturity of the Securities, and direction from Trustee to disburse
all Available Funds to Trustee, as promptly as practicable, the Escrow
Agent shall disburse all funds held in the Escrow Account to Trustee and
transfer title to all Pledged Securities and U.S. Government Securities
held by Escrow Agent hereunder to Trustee. In addition, upon an Event of
Default (as defined in the Indenture) and for so long as such Event of
Default continues, Trustee may, and Escrow Agent shall on behalf of Trustee
when instructed by Trustee, exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party under the
UCC or other applicable law, and Trustee may, and Escrow Agent shall on
behalf of Trustee when instructed by Trustee, also upon obtaining
possession of the Collateral as set forth herein, without notice to the
Company except as specified below, sell the Collateral or any part thereof
in one or more parcels at public or private sale, at any exchange, broker's
board or at any of Trustee's offices or elsewhere, for cash, on credit or
for future delivery, and upon such other terms as Trustee may deem
commercially reasonable. The Company acknowledges and agrees that any such
private sale may result in prices and other terms less favorable to the
seller than if such sale were a public sale. The Company agrees that, to
the extent notice of sale shall be required by law, at least ten (10) days'
notice to the Company of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. Trustee shall not be obligated to make any sale regardless
of notice of sale having been given. Trustee may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
The lien and security interest provided for by this Section 6 shall
automatically terminate and cease as to, and shall not extend or apply to, and
Trustee shall have no security interest in, any funds disbursed by Escrow Agent
whether for payment of interest on the outstanding Securities or to the Company
pursuant to this Agreement to the extent not inconsistent with the terms hereof.
Notwithstanding any other provision contained in this Agreement, Escrow Agent
shall act solely as Trustee's agent in connection with its duties under this
Section 6 or any other duties herein relating to the Escrow Account or the
Escrow Funds held thereunder. Escrow Agent shall not have any right to receive
compensation from Trustee and shall have no authority to obligate Trustee or to
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<PAGE>
compromise or pledge its security interest hereunder. Accordingly, Escrow Agent
is hereby directed to cooperate with Trustee in the exercise of its rights in
the Collateral provided for herein.
(c) Any money and U.S. Government Securities collected by Trustee
pursuant to Section 6(b)(iii) shall be applied as provided in the Indenture.
Any surplus of such cash or cash proceeds held by Escrow Agent and remaining
after indefeasible payment in full of all the obligations under the Indenture
shall be paid over to the Company upon the Company request or as a court of
competent jurisdiction may direct.
(d) The Company will execute and deliver or cause to be executed and
delivered, or use its best efforts to procure, all stock powers, proxies,
assignments, instruments and other documents, deliver any instruments to Escrow
Agent and take any other actions that are necessary or desirable to perfect,
continue the perfection of, or protect the first priority of Trustee's security
interest in and to the Collateral, to protect the Collateral against the rights,
claims, or interests of third persons or to effect the purposes of this
Agreement. The Company also hereby authorizes Trustee to file any financing or
continuation statements with respect to the Collateral without the signature of
the Company (to the extent permitted by applicable law). The Company will pay
all reasonable costs incurred in connection with any of the foregoing. It is
expressly understood and agreed that Escrow Agent has no duty to determine
whether to file or record any document or instrument relating to Collateral.
(e) The Company hereby appoints Trustee as its attorney-in-fact with
full power of substitution to do any act which the Company is obligated
hereunder to do, and Trustee may, but shall not be obligated to, exercise or
perform such rights, actions or obligations as the Company is required hereunder
to exercise with respect to the Collateral and take any such action in the
Company's name to protect Trustee's security interest hereunder.
(f) If at any time Escrow Agent shall receive an "entitlement order"
(within the meaning of Section 8-102(a)(8) of the UCC) issued by Trustee and
relating to the Escrow Account, Escrow Agent shall comply with such entitlement
order without further consent by the Company or any other person.
7. Termination of this Agreement; Termination of Security Interest.
---------------------------------------------------------------
This Agreement and the security interest in the Collateral evidenced by this
Agreement shall terminate automatically and be of no further force or effect
upon the payment in full in cash of all interest (including Liquidated Damages,
as defined in the Indenture) due through and including the Interest Payment Date
occurring on July 1, 2000 and the Collateral shall promptly be paid over and
transferred to the Company upon the termination of this Agreement by wire
transfer to such other accounts as the Company may direct the Trustee in
writing; provided, however, that the obligations of the Company under Section
-------- -------
2(c) and Section 5 (and any existing claims thereunder) shall survive
termination of this Agreement and the resignation of Escrow Agent. Upon payment
in full of all interest (and Liquidated Damages, if any) accruing on or prior to
July 1, 2000, Escrow Agent shall, pursuant to a certificate of an officer of the
Company, reassign and redeliver to the Company all of
-13-
<PAGE>
the Collateral hereunder that has not been sold, disposed of, retained or
applied by Escrow Agent in accordance with the terms of this Agreement and the
Indenture. Such reassignment and delivery shall be without warranty by or
recourse to Escrow Agent in its capacity as such, except as to the absence of
any liens on the Collateral created by or arising through Escrow Agent, and
shall be at the sole expense of the Company.
8. Representations and Warranties. The Company hereby represents and
------------------------------
warrants that:
(a) The execution, delivery and performance by the Company of this
Agreement are within the Company's corporate powers, have been duly authorized
by all necessary corporate action, and do not contravene, or constitute a
default under, any provision of applicable law or regulation or of the
Certificate of Incorporation of the Company or of any material agreement,
judgment, injunction, order, decree or other instrument binding upon the Company
or result in the creation or imposition of any Lien on any assets of the
Company, except for the security interests granted under Section 6 of this
Agreement.
(b) The Company is the beneficial owner of the Collateral, free and
clear of any Lien or claims of any person or entity (except for the security
interest, granted under Section 6 of this Agreement). No financing statement
covering the Collateral is on file in any public office other than the financing
statements, if any, filed pursuant to this Agreement.
(c) This Agreement has been duly executed and delivered by the Company
and assuming the due authorization and valid execution and delivery of this
Agreement by Trustee and Escrow Agent and enforceability of this Agreement
against Escrow Agent and Trustee in accordance with its terms, constitutes a
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by (i)
the effect of any applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally, (ii) general
principles of equity and commercial reasonableness or, (iii) the exculpation
provisions and rights to indemnification hereunder may be limited by U.S.
federal and state securities laws and public policy considerations and (iv) the
waiver of rights and defenses contained in Sections 15(j) and 15(o).
(d) Upon the delivery to Escrow Agent of any certificates or
instruments, if any, representing any Collateral, the filing of financing
statements, if any, required by the UCC, the crediting to the Escrow Account of
any Collateral constituting securities entitlements and the transfer and pledge
to Trustee of the Collateral, the pledge of the Collateral pursuant to Section 6
of this Agreement creates in favor of the Trustee a valid and perfected first
priority security interest in and to the Collateral, securing the payment of the
Secured Obligations for the benefit of the Beneficiaries, enforceable as such
against all creditors of the Company and any persons purporting to purchase any
of the Collateral from the Company other than as permitted by the Indenture.
(e) No consent of any other person and no consent, authorization,
-14-
<PAGE>
approval, or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required either (i) for the pledge by the
Company of the Collateral pursuant to this Agreement or for the execution,
delivery or performance of this Agreement by the Company (except for any filings
necessary to perfect Liens on the Collateral) or (ii) for the exercise by Escrow
Agent or Trustee of the rights provided for in this Agreement or the remedies in
respect of the Collateral pursuant to this Agreement, except, in each case, as
may be required in connection with such disposition by laws affecting the
offering and sale of securities.
(f) No litigation, investigation or proceeding of or before any
arbitrator or governmental authority is pending or, to the knowledge of the
Company, threatened by or against the Company with respect to this Agreement or
any of the transactions contemplated hereby.
(g) The pledge of the Collateral pursuant to this Agreement is not
prohibited by any applicable law or governmental regulation, release,
interpretation or opinion of the Board of Governors of the Federal Reserve
System or other regulatory agency (including, without limitation, Regulations T,
U and X of the Board of Governors of the Federal Reserve System).
9. Covenants. The Company covenants and agrees with the Beneficiaries
---------
from and after the date of this Agreement until the earlier of payment in full
in cash of (A) all interest due through and including the Interest Payment Date
occurring on July 1, 2000 or (B) all obligations due and owing under the
Indenture and the Securities in the event such obligations become due and
payable prior to the payment of the first four scheduled interest payments on
the Securities:
(a) The Company agrees that it will not (i) sell or otherwise dispose
of, or grant any option or warrant with respect to, any of the Collateral or
(ii) create or permit to exist any Lien upon or with respect to any of the
Collateral (except for the lien created pursuant to or permitted under this
Agreement) and at all times will be the sole beneficial owner of the Collateral.
(b) The Company agrees that it will not (i) enter into any agreement
or understanding that restricts or inhibits Escrow Agent's or Trustee's rights
or remedies hereunder, including, without limitation, Trustee's right to sell or
otherwise dispose of the Collateral pursuant to Section 6(b)(iii) of this
Agreement other than any agreement with the Trustee or (ii) fail to pay or
discharge any tax, assessment or levy of any nature not later than five days
prior to the date of any proposed sale under any judgment, writ or warrant of
attachment with regard to the Collateral.
10. Power of Attorney Upon Event of Default. In addition to all of the
---------------------------------------
powers granted to Trustee pursuant to Article 6 of the Indenture, the Company
hereby appoints and constitutes Trustee as the Company's attorney-in-fact to
exercise to the fullest extent permitted by law all of the following powers upon
and at any time after the occurrence and during the continuance of an Event of
Default: (i) collection of proceeds of any Collateral; (ii) conveyance of any
item of Collateral to any purchaser thereof; (iii) giving of any notices or
recording of any Liens under Section 6; (iv) making of any payments or taking
any acts under Section 11; and (v) paying or discharging taxes or Liens levied
or placed upon the Collateral, the legality or validity thereof and the amounts
necessary to discharge the same to be determined by Trustee in its sole
discretion, and
-15-
<PAGE>
such payments made by Trustee to become the obligations of the Company to
Trustee, due and payable immediately upon demand. Trustee's authority hereunder
shall include, without limitation, the authority to endorse and negotiate any
checks or instruments representing proceeds of Collateral in the name of the
Company, execute and give receipt for any certificate of ownership or any
document constituting Collateral, transfer title to any item of Collateral, sign
the Company's name on all financing statements (to the extent permitted by
applicable law) or any other documents deemed necessary or appropriate by
Trustee to preserve, protect or perfect this security interest in the Collateral
and to file the same, prepare, file and sign the Company's name on any notice of
Lien, to take any other actions arising from or incident to the powers granted
to Trustee in this Agreement. This power of attorney is coupled with an interest
and is irrevocable by the Company.
11. Trustee May Perform. If the Company fails to perform any
-------------------
agreement contained herein, Trustee may itself perform, but shall not be
obligated to, or cause performance of, such agreement, and the reasonable
expenses of Trustee incurred in connection therewith shall be payable by the
Company under Section 13 hereof.
12. No Assumption of Duties; Reasonable Care. The rights and powers
----------------------------------------
granted to Escrow Agent and Trustee hereunder are being granted in order to
preserve and protect Trustee's security interest in and to the Collateral
granted hereby and shall not be interpreted to, and shall not, impose any duties
on Escrow Agent or Trustee in connection therewith other than those expressly
imposed under applicable law. Except as provided by applicable law or by the
Indenture, Escrow Agent shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Collateral
is accorded treatment substantially equal to that which Escrow Agent accords
similar property in similar situations, it being understood that Escrow Agent
shall not have any responsibility for (i) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or other matters
relative to any Collateral, whether or not Escrow Agent has or is deemed to have
knowledge of such matters or (ii) taking any necessary steps to preserve rights
against any parties with respect to any Collateral; provided, however, that
-------- -------
nothing contained in this Agreement shall relieve Escrow Agent of any
responsibilities as a securities intermediary under applicable law. The Escrow
Agent is entering into this Agreement solely in its capacity as Escrow Agent and
not in its individual capacity, and shall be entitled to the rights, protections
and exculpations furnished to the Trustee under the Indenture as if set forth
herein in addition to (and not in limitation of) any rights, protections or
exculpations furnished to it under this Agreement.
13. Expenses of the Trustee. The Company will upon demand pay to
-----------------------
Trustee the amount of any and all reasonable expenses, including, without
limitation, the reasonable fees, expenses and disbursements of its counsel,
experts and agents retained by Trustee that Trustee may incur in connection with
(i) the administration of this Agreement, (ii) the custody or preservation of,
or the sale of, collection from, or other realization upon, any of the
Collateral, (iii) the exercise or enforcement of any of the rights of the
Beneficiaries hereunder, or (iv) the failure by the Company to perform or
observe any of the provisions hereof.
-16-
<PAGE>
14. Security Interest Absolute. All rights of the Beneficiaries and
--------------------------
security interests hereunder, and all obligations of the Company hereunder,
shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Indenture or
any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Indenture;
(c) any exchange, surrender, release or nonperfection of any
Liens on any other collateral for all or any of the Secured Obligations; or
(d) to the extent permitted by applicable law, any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, the Company in respect of the Secured Obligations or of this
Agreement.
15. Miscellaneous.
-------------
(a) Waiver. Any party hereto may specifically waive any breach
------
of this Agreement by any other party, but no such waiver shall be deemed to have
been given unless such waiver is in writing, signed by the waiving party and
specifically designating the breach waived, nor shall any such waiver constitute
a continuing waiver of similar or other breaches.
(b) Severability. If for any reason whatsoever any one or more
------------
of the provisions of this Agreement shall be held or deemed to be inoperative,
unenforceable or invalid in a particular case or in all cases, such
circumstances shall not have the effect of rendering any of the other provisions
of this Agreement inoperative, unenforceable or invalid, and the inoperative,
unenforceable or invalid provision shall be construed as if it were written so
as to effectuate, to the maximum extent possible, the parties' intent.
(c) Assignment. This Agreement is personal to the parties
----------
hereto, and the rights and duties of any party hereunder shall not be assignable
except with the prior written consent of the other parties. Notwithstanding the
foregoing, this Agreement shall inure to and be binding upon the parties and
their successors and permitted assigns.
(d) Benefit. The parties hereto and their successors and
-------
permitted assigns, but no others, shall be bound hereby and entitled to the
benefits hereof; provided, however, that the Beneficiaries (including holders of
-------- -------
the Securities) and their assigns shall be entitled to the benefits hereof and
to enforce this Agreement.
(e) Time. Time is of the essence with respect to each provision
----
of this
-17-
<PAGE>
Agreement.
(f) Entire Agreement; Amendments. This Agreement and the Indenture
----------------------------
contain the entire agreement among the parties with respect to the subject
matter hereof and supersede any and all prior agreements, understandings and
commitments, whether oral or written. Any amendment or waiver of any provision
of this Agreement and any consent to any departure by the Company from any
provision of this Agreement shall be effective only if made or duly given in
compliance with all of the terms and provisions of the Indenture, and none of
Escrow Agent, Trustee or any holder of Securities shall be deemed, by any act,
delay, indulgence, omission or otherwise, to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default or in any
breach of any of the terms and conditions hereof. Failure of Escrow Agent,
Trustee or any holder of Securities to exercise, or delay in exercising, any
right, power or privilege hereunder shall not operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver by the Escrow
Agent, Trustee or any holder of Securities of any right or remedy hereunder on
any one occasion shall not be construed as a bar to any right or remedy that
Escrow Agent, Trustee or such holder of Securities would otherwise have on any
future occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any rights or remedies
provided by law. Amendments may be made to this agreement only as follows:
(i) Amendments Without Consent of Holders. Without the consent of any
-------------------------------------
Holders of Securities, the Company, when authorized by a Board Resolution
of the Company, the Escrow Agent and the Trustee, at any time and from time
to time, may enter into one or more amendments hereto, in form satisfactory
to the Trustee and Escrow Agent, for any of the following purposes:
(1) to evidence the succession of another Person to the Company
and the assumption by any such successor of the covenants of the
Company in the Indenture and in the Securities; or
(2) to add to the covenants of the Company or to surrender any
right or power herein conferred upon the Company; or
(3) to comply with any requirements of the Commission in order to
effect and maintain the qualification of the Indenture under the Trust
Indenture Act; or
(4) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein or in
the Indenture, or to make any other provisions with respect to matters
or questions arising under this Agreement which shall not be
inconsistent with the provisions of this Agreement,
-18-
<PAGE>
provided that such action pursuant to this Clause (4) shall not
adversely affect the interests of the Holders in any material respect;
or
(5) to evidence and provide for the acceptance and
appointment hereunder of a successor Escrow Agent.
(ii) Amendments with Consent of Holders. With the consent of the
----------------------------------
Holders of not less than a majority in principal amount of the Outstanding
Securities, by Act of said Holders delivered to the Company, the Escrow Agent
and the Trustee, the Company, when authorized by Board Resolutions of the
Company, the Escrow Agent and the Trustee may enter into an amendment hereto for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement; provided, however, that no such
amendment shall be made, without the consent of the Holder of each Outstanding
Security, if such amendment would have the effect of:
(1) permitting the creation of any Lien on the Collateral
ranking prior to or on a parity with the Trustee's interest therein,
releasing all or any part of the Collateral (except as permitted under
the Escrow Agreement as it exists on the date hereof) or otherwise
depriving any Beneficiary of the security afforded by the granting of
the security interest granted pursuant to this Agreement; or
(2) changing this Section 15(f).
(iii) Execution of Amendments. In executing, or accepting any
-----------------------
amendment permitted by this Section 15(f), the Trustee and the Escrow Agent
shall be fully protected in relying upon an Opinion of Counsel stating that
the execution of such amendment is authorized or permitted by this Escrow
Agreement. The Trustee or the Escrow Agent may, but shall not be obligated
to, enter into any such amendment which affects the Trustee's or the Escrow
Agent's own rights, duties or immunities under this Escrow Agreement or
otherwise.
(g) Notices. All notices and other communications required or
-------
permitted to be given or made under this Agreement shall be in writing and shall
be deemed to have been duly given and received when actually received,
including: (a) on the day of hand delivery; (b) three business days following
the day sent, when sent by United States certified mail, postage and
certification fee prepaid, return receipt requested, addressed as set forth
below; (c) when transmitted by telecopy with verbal confirmation of receipt by
the telecopy operator to the telecopy number set forth below; or (d) one
business day following the day timely delivered to a next-day air courier
addressed as set forth below:
To Escrow Agent:
Chase Manhattan Bank and Trust Company
-19-
<PAGE>
National Association
101 California Street, Suite 2725
San Francisco, California 94111
Attention: Corporate Trust Department
Telecopy: (415) 693-8850
Telephone: (415) 954-9526
To Trustee:
Chase Manhattan Bank and Trust Company
National Association
101 California Street, Suite 2725
San Francisco, California 94111
Attention: Corporate Trust Department
Telecopy: (415) 693-8850
Telephone: (415) 954-9526
To the Company:
Exodus Communications, Inc.
2650 San Tomas Expressway
Santa Clara, California 95051
Attention: General Counsel
Telecopy: (408) 346-2206
Telephone: (408) 346-2200
or at such other address as the specified entity most recently may have
designated in writing in accordance with this Section.
(h) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(i) Captions. Captions in this Agreement are for convenience only and
--------
shall not be considered or referred to in resolving questions of interpretation
of this Agreement.
(j) Governing Law; Submission to Jurisdiction; Waiver of Damages.
------------------------------------------------------------
-20-
<PAGE>
(i) THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED UNDER
THE LAWS OF THE STATE OF NEW YORK, AND ANY DISPUTE ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THE COMPANY, ESCROW AGENT, TRUSTEE AND THE HOLDERS OF SECURITIES IN
CONNECTION WITH THIS AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT,
EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS
(AS OPPOSED TO THE CONFLICTS OF LAWS PROVISIONS) AND DECISIONS OF THE STATE
OF NEW YORK.
(ii) THE COMPANY AGREES THAT TRUSTEE SHALL, IN ITS CAPACITY AS
TRUSTEE OR IN THE NAME AND ON BEHALF OF ANY HOLDER OF SECURITIES, HAVE THE
RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE
COMPANY OR ITS PROPERTY IN A COURT IN ANY LOCATION REASONABLY SELECTED IN
GOOD FAITH (AND HAVING PERSONAL OR IN REM JURISDICTION OVER THE COMPANY OR
ITS PROPERTY, AS THE CASE MAY BE) TO ENABLE TRUSTEE TO REALIZE ON SUCH
PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF
TRUSTEE. THE COMPANY AGREES THAT IT WILL NOT ASSERT ANY COUNTERCLAIMS,
SETOFFS OR CROSSCLAIMS IN ANY PROCEEDING BROUGHT BY TRUSTEE TO REALIZE ON
SUCH PROPERTY OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
TRUSTEE, EXCEPT FOR SUCH COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS WHICH, IF
NOT ASSERTED IN ANY SUCH PROCEEDING, COULD NOT OTHERWISE BE BROUGHT OR
ASSERTED. THE COMPANY WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION
OF THE COURT IN WHICH TRUSTEE HAS COMMENCED A PROCEEDING DESCRIBED IN THIS
PARAGRAPH INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS.
(iii) THE COMPANY AGREES THAT NONE OF ESCROW AGENT, TRUSTEE OR
ANY HOLDER OF SECURITIES SHALL HAVE ANY LIABILITY TO THE COMPANY (WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY THE COMPANY
IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THE
TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED BY THIS
AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH,
UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OF A COURT
THAT IS BINDING ON ESCROW AGENT, TRUSTEE OR SUCH HOLDER OF SECURITIES, AS
THE CASE MAY BE, THAT SUCH LOSSES WERE THE RESULT OF ACTS OR OMISSIONS ON
THE PART OF ESCROW AGENT, TRUSTEE OR SUCH HOLDER OF SECURITIES, AS THE CASE
MAY BE,
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<PAGE>
CONSTITUTING BAD FAITH, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(iv) TO THE EXTENT PERMITTED BY APPLICABLE LAW, AND EXCEPT AS
OTHERWISE PROVIDED IN THIS AGREEMENT, THE COMPANY WAIVES ALL RIGHTS OF
NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE BY THE TRUSTEE OR ANY
HOLDER OF SECURITIES OF ITS RIGHTS DURING THE CONTINUANCE OF AN EVENT OF
DEFAULT TO REPOSSESS THE COLLATERAL WITH JUDICIAL PROCESS OR TO REPLEVY,
ATTACH OR LEVY UPON THE COLLATERAL OR OTHER SECURITY FOR THE SECURED
OBLIGATIONS. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY WAIVES
THE POSTING OF ANY BOND OTHERWISE REQUIRED OF ESCROW AGENT, TRUSTEE OR ANY
HOLDER OF SECURITIES IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING
TO OBTAIN POSSESSION OF, REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL OR
OTHER SECURITY FOR THE SECURED OBLIGATIONS, TO ENFORCE ANY JUDGMENT OR
OTHER COURT ORDER ENTERED IN FAVOR OF ESCROW AGENT, TRUSTEE OR ANY HOLDER
OF SECURITIES, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING
ORDER OR PRELIMINARY OR PERMANENT INJUNCTION, THIS AGREEMENT OR ANY OTHER
AGREEMENT OR DOCUMENT BETWEEN THE COMPANY ON THE ONE HAND AND ESCROW AGENT,
TRUSTEE AND/OR THE HOLDERS OF SECURITIES ON THE OTHER HAND.
(k) No Adverse Interpretation of Other Agreements. This Agreement may
----------------------------------------------
not be used to interpret another pledge, security or debt agreement of the
Company or any subsidiary thereof. No such pledge, security or debt agreement
may be used to interpret this Agreement.
(l) Benefits of Agreement. Nothing in this Agreement, express or
---------------------
implied, shall give to any person, other than the parties hereto and their
successors hereunder, and the holders of Securities, any benefit or any legal or
equitable right, remedy or claim under this Agreement.
(m) Interpretation of Agreement. All terms not defined herein or in
---------------------------
the Indenture shall have the meaning set forth in the UCC, except where the
context otherwise requires. To the extent a term or provision of this Agreement
conflicts with the Indenture, the Indenture shall control with respect to the
subject matter of such term or provision. Acceptance of or acquiescence in a
course of performance rendered under this Agreement shall not be relevant to
determine the meaning of this Agreement even though the accepting or acquiescing
party had knowledge of the nature of the performance and opportunity for
objection.
(n) Survival of Provisions. All representations, warranties and
----------------------
covenants of the Company contained herein shall survive the execution and
delivery of this Agreement, and shall terminate only upon the termination of
this Agreement.
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<PAGE>
(o) Waivers. The Company waives presentment and demand for payment of
-------
any of the Secured Obligations, protest and notice of dishonor or default with
respect to any of the Secured Obligations, and all other notices to which the
Pledgor might otherwise be entitled, except as otherwise expressly provided
herein or in the Indenture.
(p) Agent for Service; Submission to Jurisdiction; Waiver of the
------------------------------------------------------------
Immunities. By the execution and delivery of this Agreement, the Company (i)
- ----------
acknowledges that it has, by separate written instruments, designated and
appointed CT Corporation System, 1633 Broadway, New York, NY 10019 ("CT
Corporation System") (and any successor entity), as its authorized agent upon
which process may be served in any suit or proceeding arising out of or relating
to this Agreement that may be instituted in any federal or state court in the
Borough of Manhattan, City of New York, State of New York or brought under
federal or state securities laws, and represent and warrant that CT Corporation
System has accepted such designation, (ii) submits to the jurisdiction of any
such court in any such suit or proceeding and (iii) agrees that service of
process upon CT Corporation System and written notice of said service to the
Company in accordance with the provisions of this Agreement shall be deemed in
every respect effective service of process upon the Company in any such suit or
proceeding. The Company further agrees to take any and all action, including
the execution and filing of any and all such documents and instruments, as may
be necessary to continue such designation and appointment of CT Corporation
System in full force and effect for as long as the security interest in the
Collateral evidenced by this Agreement continues to exist and has not been
terminated as provided in Section 7 hereof; provided, however, that the Company
-------- -------
may, and to the extent CT Corporation System ceases to be able to be served on
the basis contemplated herein shall, by written notice to the Escrow Agent and
the Trustee, designate such additional or alternative agent for service of
process that (i) maintains an office located in the Borough of Manhattan, City
of New York, State of New York, and (ii) is either (x) United States counsel for
the Company or (y) a corporate service company which acts as agent for service
of process for other persons in the ordinary course of its business. Such
written notice shall identify the name of such agent for service of process and
the address of the office of such agent for service of process in the Borough of
Manhattan, City of New York, State of New York.
To the extent that the Company has or hereafter may acquire any
immunity from jurisdiction of any court of any jurisdiction in which the Company
owns or leases property or assets or the United States or the State of New York,
or from any legal process (whether through service of notice, attachment prior
to judgment, attachment in aid of execution, execution or otherwise) with
respect to itself or its property and assets or this Agreement or the Escrow
Account or actions to enforce judgments in respect of any thereof, the Company
hereby irrevocably waives such immunity in respect of its obligations under the
above-referenced documents, to the extent permitted by law.
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<PAGE>
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-24-
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Escrow Agreement as of the day first above written.
CHASE MANHATTAN BANK AND TRUST
COMPANY, NATIONAL ASSOCIATION
----------------------------------------
as Escrow Agent
By: /s/ Cecil D. Bobey
------------------------------------
Name: Cecil D. Bobey
Title: Assistant Vice President
CHASE MANHATTAN BANK AND TRUST
COMPANY, NATIONAL ASSOCIATION
----------------------------------------
as Trustee
By: /s/ Cecil D. Bobey
------------------------------------
Name: Cecil D. Bobey
Title: Assistant Vice President
EXODUS COMMUNICATIONS, INC.
By: /s/ Richard S. Stoltz
------------------------------------
Name: Richard S. Stoltz
Title: Chief Operating Officer and
Chief Financial Officer
-25-
<PAGE>
EXHIBIT A
---------
Form of Payment Notice and Disbursement Request
[Letterhead of the Company]
[Date]
Chase Manhattan Bank and Trust Company, National Association
101 California Street, Suite 2725
San Francisco, California 94111
Attention: Corporate Trust Department
Re: Disbursement Request No.__________________
[indicate whether revised]
Ladies and Gentlemen:
We refer to the Escrow Agreement, dated as of June ___, 1998 (the
"Escrow Agreement") among you (the "Escrow Agent"), the undersigned as Trustee,
and Exodus Communications, Inc., a Delaware corporation (the "Company").
Capitalized terms used herein shall have the meaning given in the Escrow
Agreement.
This letter constitutes a Payment Notice and Disbursement Request
under the Escrow Agreement.
[choose one of the following, as applicable]
[The undersigned hereby notifies you that a scheduled interest payment
in the amount of $____________ is due and payable on ______________, ______ and
requests a disbursement of funds contained in the Escrow Account in such amount
to Trustee.]
[The undersigned hereby notifies you and certifies you that the
release $__________ of funds in the Escrow Account to the Company (to an
account designated by the Company in writing), is currently permitted to be
released in accordance with Section 3(c) of the Escrow Agreement and such amount
shall be so remitted to the Company.]
[The undersigned hereby notifies you that the Escrow Agreement has
been terminated in accordance with Section 7 thereof and requests that you
release the Escrow Account to the Company.]
[The undersigned hereby notifies you that there has been an
acceleration of the
<PAGE>
maturity of the Securities. Accordingly, you are hereby requested to disburse
all remaining Escrow Funds contained in the Escrow Account to Trustee such that
the balance in the Escrow Account is reduced to zero.]
In connection with the requested disbursement, the undersigned hereby
notifies you that:
1. [The Securities have not, as a result of an Event of Default (as
defined in the Indenture), been accelerated and become due and
payable.]
2. All prior disbursements from the Escrow Account have been Applied.
3. [add wire instructions]
Escrow Agent is entitled to rely on the foregoing in disbursing funds
relating to this Payment Notice and Disbursement Request.
By: _________________________________
Name:
Title:
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<PAGE>
EXHIBIT B
---------
Notice of Additional Escrow Deposit
[Letterhead of the Company]
[Date]
Chase Manhattan Bank and Trust Company,
National Association, as Trustee
101 California Street, Suite 2725
San Francisco, California 94111
Attention: Corporate Trust Department
Ladies and Gentlemen:
We hereby give notice of the closing of Exodus Communications, Inc.'s
(the "Company) offering of senior notes (the "Closing") in an aggregate
principal amount not to exceed $75,000,000 (the "Additional Securities") on
terms and conditions similar to the $200,000,000 11 1/4% Senior Notes due 2008,
pursuant to the requirements of Section 3.03 of the Indenture dated as of July
1, 1998 between the Company and you.
Pursuant to Section 2(b)(iii) of the Escrow Agreement, dated as of
July 1, 1998 (the "Escrow Agreement") by and among the Company, you, as Escrow
Agent, and you, as Trustee, we hereby deliver, or cause the delivery of,
$_________ in immediately available funds (or U.S. Government Securities
described in an attachment hereto) which funds or U.S. Government Securities
shall be sufficient to pay, when due, the interest on such Additional Securities
on each interest payment date through and including July 1, 2000. Please
acknowledge in written form the receipt of these funds or U.S. Government
Securities for deposit in the escrow account established pursuant to the Escrow
Agreement.
EXODUS COMMUNICATIONS, INC.
______________________________________
By:
Title:
<PAGE>
EXHIBIT C
---------
Officer's Certificate
[Letterhead of the Company]
[Date]
Chase Manhattan Bank and Trust Company,
National Association, as Trustee
101 California Street, Suite 2725
San Francisco, California 94111
Chase Manhattan Bank and Trust Company,
National Association, as Escrow Agent
101 California Street, Suite 2725
San Francisco, California 94111
Ladies and Gentlemen:
We reference our earlier written instructions to you pursuant to
Section 2(d)(i) of the Escrow Agreement, dated as of July 1, 1998 (the "Escrow
Agreement") by and among the Company, you, as Escrow Agent, and you, as Trustee,
designating the investment of Escrow Account funds in U.S. Government Securities
(the "Investment").
Pursuant to Section 2(d)(ii) of the Escrow Agreement, the undersigned
duly appointed, qualified and acting [TITLE]
-------------------------------------------
of the Company, hereby certifies to you, as Escrow Agent, and you, as Trustee,
that upon such Investment, you, as Trustee, will have a first priority perfected
security interest in such Investment.
EXODUS COMMUNICATIONS, INC.
----------------------------------------
By:
Title:
<PAGE>
SCHEDULE I
INITIAL ESCROW DEPOSIT
<TABLE>
<CAPTION>
SECURITY MATURITY CUSIP YIELD PRICE COST INTEREST DUE ON
- --------------- --------------- --------------- ---------- ------------ -------------------- FIRST 4 INTEREST
PAYMENT DATES
-------------
<S> <C> <C> <C> <C> <C> <C>
US Strip 11/15/98 912820AQ0 5.340% $98.0510 $ 11,030,737.50 $ 11,250,000.00
US Strip 5/15/99 912820AS6 5.470% $95.4020 $ 10,732,725.00 $ 11,250,000.00
US Strip 11/15/99 912820AU1 5.500% $92.8280 $ 10,442,812.50 $ 11,250,000.00
US Strip 5/15/00 912820AW7 5.460% $90.4060 $ 10,170,675.00 $ 11,250,000.00
---------------
Total Purchase Price: $ 42,376,950.00
===============
</TABLE>
<PAGE>
EXHIBIT 10.33
EXODUS COMMUNICATIONS, INC.
11 1/4% SENIOR NOTES DUE 2008
PURCHASE AGREEMENT
------------------
June 26, 1998
Goldman, Sachs & Co.
Donaldson, Lufkin & Jenrette
Securities Corporation
BT Alex. Brown Incorporated
NationsBanc Montgomery Securities LLC
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Exodus Communications, Inc., a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Purchasers named in Schedule I hereto (the "Purchasers") an aggregate of
$200,000,000 principal amount of the 11 1/4% Senior Notes due 2008 (the
"Securities").
1. The Company represents and warrants to, and agrees with, each of the
Purchasers that:
(a) A preliminary offering circular, dated June 11, 1998 (the
"Preliminary Offering Circular") and an offering circular, dated June 26,
1998 (the "Offering Circular", in each case including the international
supplement thereto have been prepared in connection with the offering of
the Securities. Additionally, the Company has previously prepared the
following documents: the Company's Quarterly Report on Form 10-Q ("Form
10-Q") for the quarter ended March 31, 1998, ("March Form 10-Q"), Amendment
No. 1 to the March Form 10-Q, dated June 11, 1998, and the Company's
Current Reports on Form 8-K, dated June 11, 1998 and June 26, 1998
(together the "Exchange Act Reports"). Any reference (other than in
Sections 7(a) and 7(b) hereof) to the Preliminary Offering Circular or the
Offering Circular shall be deemed to refer to and include the Exchange Act
Reports, and any reference (other than in Sections 7(a) and 7(b) hereof) to
the Preliminary Offering Circular or the Offering Circular as amended or
supplemented as of any specified date after the date hereof shall be deemed
to include (i) the Exchange Act Reports and all subsequent
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<PAGE>
documents filed with the United States Securities and Exchange Commission
(the "Commission") pursuant to Section 13(a), 13(c) or 15(d) of the United
States Securities Exchange Act of 1934, as amended (the "Exchange Act"),
after the date of the Offering Circular and prior to such specified date
and (ii) any Additional Issuer Information (as defined in Section 5(f))
furnished by the Company, prior to the completion of the distribution of
the Securities. The Exchange Act Reports, when they were filed with the
Commission, conformed in all material respects to the applicable
requirements of the Exchange Act and the applicable rules and regulations
of the Commission thereunder. The Preliminary Offering Circular, the
Offering Circular and the Exchange Act Reports did not, as of their
respective dates, contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall not apply to
any statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by a Purchaser through
Goldman, Sachs & Co. expressly for use therein. As of the date hereof, the
Company has not filed any documents with the Commission pursuant to Section
13(a), 13(c) or 15(d) of the Exchange Act other than the Exchange Act
Reports;
(b) Since the date of the latest audited financial statements included
in the Offering Circular, the Company has not sustained any material loss
or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Offering Circular; and, since the respective dates
as of which information is given in the Offering Circular, there has not
been any change in the capital stock or long-term debt of the Company or
any material adverse change, or any development that is reasonably likely
to result in a material adverse change, in or affecting the general
affairs, management, financial position, stockholders' equity or results of
operations of the Company, otherwise than as set forth or contemplated in
the Offering Circular;
(c) The Company has no subsidiaries and owns no real property. The
Company has good and marketable title to all personal property owned by it,
in each case free and clear of all liens, encumbrances and defects except
such as are described in the Offering Circular or such as do not materially
affect the value of such property and do not interfere with the use made
and proposed to be made of such property by the Company; and any real
property and buildings held under lease by the Company are held by it under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of
such property and buildings by the Company;
(d) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware,
with power and
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<PAGE>
authority (corporate and other) to own its properties and conduct its
business as described in the Offering Circular, and has been duly qualified
as a foreign corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it owns or
leases properties or conducts any business so as to require such
qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified in any such jurisdiction;
(e) The execution and delivery of the Agreement and Plan of Merger
dated as of February 23, 1998 (the "Merger Agreement") between Exodus
Communications, Inc., a California corporation (the "California
Corporation"), and the Company, effecting the reincorporation of the
California Corporation under the laws of the State of Delaware, was duly
authorized by all necessary corporate action on the part of each of the
California Corporation and the Company. Each of the California Corporation
and the Company had all corporate power and authority to execute and
deliver the Merger Agreement, to file the Merger Agreement with the
Secretary of State of California and the Secretary of State of Delaware and
to consummate the reincorporation contemplated by the Merger Agreement, and
the Merger Agreement at the time of execution and filing constituted a
valid and binding obligation of each of the California Corporation and the
Company;
(f) The Company has an authorized capitalization as set forth in the
Offering Circular, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued and are fully paid
and non-assessable;
(g) The Securities have been duly authorized and, when issued and
delivered pursuant to this Agreement, will have been duly executed,
authenticated, issued and delivered and will constitute valid and legally
binding obligations of the Company entitled to the benefits provided by the
Indenture to be dated as of July 1, 1998 (the "Indenture") between the
Company and Chase Manhattan Bank and Trust Company, National Association,
as Trustee (the "Trustee"), under which they are to be issued, which will
be substantially in the form previously delivered to you; and the
Securities and the Indenture conform to the descriptions thereof in the
Offering Circular and are in substantially the form previously delivered to
you;
(h) The Indenture has been duly authorized and, when executed and
delivered by the Company and the Trustee, the Indenture will constitute a
valid and legally binding instrument, enforceable in accordance with its
terms, subject as to enforcement to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or affecting creditors'
rights and to general equity principles;
(i) That certain Exchange and Registration Rights Agreement among the
Company and the Purchasers to be dated as of July 1, 1998 (the
-3-
<PAGE>
"Registration Rights Agreement") has been duly authorized and, when
executed and delivered by the Company, the Registration Rights Agreement
will constitute a valid and legally binding instrument, enforceable in
accordance with its terms;
(j) None of the transactions contemplated by this Agreement
(including, without limitation, the use of the proceeds from the sale of
the Securities) will violate or result in a violation of Section 7 of the
Exchange Act, or any regulation promulgated thereunder, including, without
limitation, Regulations G, T, U, and X of the Board of Governors of the
Federal Reserve System;
(k) Prior to the date hereof, neither the Company nor any of its
affiliates (as such term is defined in Rule 144 promulgated under the
Securities Act of 1933, as amended (the "Securities Act")) has taken any
action which is designed to or which has constituted or which might have
reasonably been expected to cause or result in stabilization or
manipulation of the price of any security of the Company in connection with
the offering of the Securities;
(l) The issue and sale of the Securities and the compliance by the
Company with all of the provisions of the Securities, the Indenture, that
certain Escrow Agreement by and among Chase Manhattan Bank and Trust
Company, National Association (as Escrow Agent) and the Company to be dated
as of July 1, 1998 (the "Escrow Agreement"), the Registration Rights
Agreement and this Agreement, and the consummation of the transactions
herein and therein contemplated will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Company is a party or by which
the Company is bound or to which any of the property or assets of the
Company is subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of the Company or
any statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with any such
court or governmental agency or body is required for the issue and sale of
the Securities or the consummation by the Company of the transactions
contemplated by this Agreement or the Indenture, except the filing of a
notice on Form D by the Company with the Commission pursuant to Section
5(h) hereof and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky laws
in connection with the purchase and distribution of the Securities by the
Purchasers;
(m) The Company is not in violation of its Certificate of
Incorporation or Bylaws or in default in the performance or observance of
any material obligation, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or
instrument to which it is a party or by which it
-4-
<PAGE>
or any of its properties may be bound;
(n) The statements set forth in the Offering Circular under the
captions "Description of Notes" insofar as they purport to constitute a
summary of the terms of the Securities, the Indenture, the Escrow Agreement
and the Registration Rights Agreement and under the captions "Certain
United States Federal Income Tax Considerations" and "Underwriting",
insofar as they purport to describe the provisions of the laws and
documents referred to therein, are accurate, complete and fair;
(o) Other than as set forth in the Offering Circular, there are no
legal or governmental proceedings pending to which the Company or any of
its subsidiaries is a party or of which any property of the Company or any
of its subsidiaries is the subject which, if determined adversely to the
Company or any of its subsidiaries, would individually or in the aggregate
have a material adverse effect on the current or future financial position,
stockholders' equity or results of operations of the Company; and, to the
best of the Company's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(p) When the Securities are issued and delivered pursuant to this
Agreement, the Securities will not be of the same class (within the meaning
of Rule 144A under the Securities Act as securities which are listed on a
national securities exchange registered under Section 6 of the Exchange Act
or quoted in a U.S. automated inter-dealer quotation system;
(q) The Company is subject to Section 13 or 15(d) of the Exchange Act;
(r) The Company is not, and after giving effect to the offering and
sale of the Securities, will not be an "investment company", as such term
is defined in the United States Investment Company Act of 1940, as amended
(the "Investment Company Act");
(s) Neither the Company nor any person acting on its behalf has
offered or sold the Securities by means of any general solicitation or
general advertising within the meaning of Rule 502(c) under the Securities
Act or, with respect to Securities sold outside the United States to
persons who are not U.S. persons (as defined in Rule 902 under the
Securities Act), by means of any directed selling efforts within the
meaning of Rule 902 under the Securities Act and the Company, any affiliate
of the Company and any person acting on its or their behalf has complied
with and will implement the "offering restrictions" within the meaning of
such Rule 902, it being understood that the Company makes no
representations in this clause (s) as to the Purchasers;
(t) Within the six months prior to the date hereof, neither the
Company nor
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<PAGE>
any other person acting on behalf of the Company has offered or sold to any
person any Securities, or any substantially similar securities of the
Company, other than Securities offered or sold to the Purchasers hereunder.
The Company will take reasonable precautions designed to insure that any
offer or sale, direct or indirect, in the United States or to any U.S.
person (as defined in Rule 902 under the Securities Act) of any Securities
or any substantially similar security issued by the Company, within six
months subsequent to the date on which the distribution of the Securities
has been completed (as notified to the Company by Goldman, Sachs & Co.), is
made under restrictions and other circumstances reasonably designed not to
affect adversely the status of the offer and sale of the Securities in the
United States and to U.S. persons contemplated by this Agreement as
transactions exempt from the registration provisions of the Securities Act;
(u) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba
within the meaning of Section 517.075, Florida Statutes;
(v) KPMG Peat Marwick LLP, who have certified certain financial
statements of the Company are independent public accountants as required by
the Securities Act and the rules and regulations of the Commission
thereunder;
(w) The Company owns or possesses, or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the business
now operated by it, and the Company has not received any notice of, and is
not otherwise aware of, any infringement of or conflict with asserted
rights of others with respect to any Intellectual Property or of any facts
or circumstances which would render invalid, or otherwise prevent or
materially inhibit the Company from utilizing, any Intellectual Property
necessary to carry on the business now conducted by the Company, and which
infringement or conflict (if the subject of any unfavorable decision,
ruling or finding), invalidity, prevention or inhibition, singly or in the
aggregate, is reasonably likely to result in a material adverse change in
the general affairs, management, financial position, stockholders' equity
or results of operations of the Company;
(x) Except as described in the Offering Circular and except as would
not, singly or in the aggregate, result in a material adverse change in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company, (A) the
Company is not in violation of any federal, state, local or foreign
statute, law, rule, regulation, ordinance, code, policy or rule of common
law or any judicial or
-6-
<PAGE>
administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to pollution or
protection of human health, the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata)
or wildlife, including, without limitation, laws and regulations relating
to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum or
petroleum products (collectively "Hazardous Materials") or to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials (collectively, "Environmental
Laws"), (B) the Company has all permits, authorizations and approvals
required under any applicable Environmental Laws and is in compliance with
their requirements, (C) there are no pending or, to the best of the
Company's knowledge, threatened administrative, regulatory or judicial
action, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigation or proceedings relating to any
Environmental Law against the Company and (D) to the best of the Company's
knowledge, there are no events or circumstances that might reasonably be
expected to form the basis of an order for clean-up or remediation, or an
action, suit or proceeding by any private party or government body or
agency, against or affecting the Company relating to Hazardous Materials or
any Environmental Laws;
(y) To the best of the Company's knowledge after investigation, all of
the products and services of the Company (including products and services
under development) will record, store, process, calculate and present
calendar dates falling on and after (and if applicable, spans of time
including) January 1, 2000, and will calculate any information dependent on
or relating to such dates in the same manner, and with the same
functionality, data integrity and performance, as the products record,
store, process calculate and present calendar dates on or before December
31, 1999, or calculate any information dependent on or relating to such
dates (collectively, "Year 2000 Compliant"). To the best of the Company's
knowledge after investigation, the Company's internal computer and
technology products, equipment and systems are Year 2000 Compliant;
(z) The Company has duly authorized the Escrow Agreement and, when the
Company has duly executed and delivered the Escrow Agreement (assuming the
due authorization, execution and delivery thereof by the Trustee), the
Escrow Agreement will be the legally valid and binding obligation of the
Company, enforceable against it in accordance with its terms, except as the
enforceability thereof may be limited (i) by the effect of bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or other
similar laws by now or hereafter in effect relating to or affecting the
rights and remedies of creditors and (ii) by the effect of general
principles of equity, whether enforcement is considered in a proceeding in
equity or at law, and the discretion of the court before which any
proceeding therefor may be brought. The description of the Escrow
Agreement in the Offering Circular is accurate in all material respects.
Upon
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<PAGE>
the Company's purchase of the Pledged Securities (as such term is defined
in the Escrow Agreement), the Company will be the sole beneficial owner of
the Pledged Securities and no lien will exist upon the Pledged Securities
and the Escrow Account (and no right or option to acquire the same will
exist in favor of any other person or entity) other than the pledge and
security interest in favor the Trustee, for the benefit of the holders of
the Securities, to be created or provided in the Escrow Agreement, which
pledge and security interest constitutes a first priority perfected pledge
and security interest in and to all of the Collateral and the Escrow
Account;
(aa) Neither the Company nor any of its affiliates nor any person
acting on its behalf (other than the Purchasers, as to whom the Company
makes no representation) has engaged or will engage in any directed selling
efforts within the meaning of Regulation S with respect to the Securities;
(bb) The Company and its affiliates and all persons acting on its
behalf (other than the Purchasers, as to whom the Company makes no
representation) have complied in all material respects with the offering
restrictions requirements of Regulation S in connection with the offering
of the Securities outside the United States and, in connection therewith,
the Offering Memorandum contains the disclosure required by Rule 902(h)(2)
under the Securities Act; and
(cc) The Company is a "reporting issuer," as defined in Rule 902(l)
under the Securities Act.
2. (a) Subject to the terms and conditions herein set forth, the Company
agrees to issue and sell to each of the Purchasers, and each of the Purchasers
agrees, severally and not jointly, to purchase from the Company, at a purchase
price of 97% of the principal amount thereof, plus accrued interest, if any,
from July 1, 1998 to the Time of Delivery hereunder, the principal amount of
Securities set forth opposite the name of such Purchaser in Schedule I hereto.
(b) The Company may offer and sell such senior notes in an aggregate
principal amount not to exceed $75,000,000, (the "Additional Securities")
within one year of the Time of Delivery of these Securities and upon
written notice to Goldman, Sachs & Co. of its intention to issue such
Additional Securities; provided, however, that each of the following
-------- -------
conditions have been met:
(i) the Company shall have delivered, or caused the delivery of,
to the Escrow Agent an amount in immediately available funds
sufficient to pay, when due, the interest on such Additional
Securities on each interest payment date through and including the
interest payment date on July 1, 2000;
(ii) the Escrow Agent shall have received a certificate dated as
of the
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<PAGE>
closing date of the offering of the Additional Securities signed by an
executive officer of the Company to the effect that the
representations and warranties of the Company contained in the Escrow
Agreement are true and correct as of the closing date of the offering
of the Additional Securities and that the Company has complied with
all of the agreements and satisfied all of the conditions on its part
to be performed or satisfied under the Escrow Agreement and the
Indenture on or before such closing date; and
(iii) the Company shall have entered into a purchase agreement on
substantially similar terms and conditions as this Agreement and the
Exchange and Registration Rights Agreement with Goldman, Sachs & Co.
(or such other underwriter as the Company shall choose in the event
that Goldman, Sachs & Co. shall decline the representation of the
Company in such offering) and such other of the Purchasers as the
Company and Goldman, Sachs & Co. shall mutually agree upon for the
sale and issuance of the Additional Securities.
3. Upon the authorization by Goldman, Sachs & Co. of the release of the
Securities, the several Purchasers propose to offer the Securities for sale upon
the terms and conditions set forth in this Agreement and the Offering Circular
and each Purchaser hereby represents and warrants to, and agrees with the
Company that:
(a) It will offer and sell the Securities only to: (i) persons which
it reasonably believes are "qualified institutional buyers" ("QIBs") within
the meaning of Rule 144A under the Securities Act in transactions meeting
the requirements of Rule 144A or, (ii) upon the terms and conditions set
forth in Annex I to this Agreement;
(b) Upon request of the Company, it will notify the Company upon
completion of the distribution of the Securities;
(c) It is an Institutional Accredited Investor; and
(d) It has not offered and will not offer or sell the Securities by
any form of general solicitation or general advertising, including but not
limited to the methods described in Rule 502(c) under the Securities Act.
4. (a) The Securities to be purchased by each Purchaser hereunder will be
represented by one or more definitive global Securities in book-entry form which
will be deposited by or on behalf of the Company with The Depository Trust
Company ("DTC") or its designated custodian. The Company will deliver the
Securities to Goldman, Sachs & Co., for the account of each Purchaser, against
payment by or on behalf of such Purchaser of the purchase price therefor by wire
transfer, payable to the order of the Company in Federal (same day) funds, by
causing DTC to credit the Securities to the account of Goldman, Sachs & Co. at
DTC. The Company will cause the certificates representing the Securities to be
-9-
<PAGE>
made available to Goldman, Sachs & Co. for checking at least twenty-four hours
prior to the Time of Delivery (as defined below) at the office of DTC or its
designated custodian (the "Designated Office"). The time and date of such
delivery and payment shall be 9:30 a.m., New York City time, on July 1, 1998 or
such other time and date as Goldman, Sachs & Co. and the Company may agree upon
in writing. Such time and date are herein called the "Time of Delivery".
(b) The documents to be delivered at the Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Securities and any additional documents requested by
the Purchasers pursuant to Section 7(h) hereof, will be delivered at such
time and date at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page
Mill Road, Palo Alto, California 94304 (the "Closing Location"), and the
Securities will be delivered at the Designated Office, all at the Time of
Delivery. A meeting will be held at the Closing Location at 6:00 p.m., New
York City time, on the New York Business Day next preceding the Time of
Delivery, at which meeting the final drafts of the documents to be
delivered pursuant to the preceding sentence will be available for review
by the parties hereto. For the purposes of this Section 4, "New York
Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York are
generally authorized or obligated by law or executive order to close.
5. The Company agrees with each of the Purchasers:
(a) To prepare the Offering Circular in a form approved by you; to
make no amendment or any supplement to the Offering Circular which shall be
disapproved by you promptly after reasonable notice thereof; and to furnish
you with copies thereof;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Securities for offering and sale under
the securities laws of such jurisdictions as you may request and to comply
with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to complete
the distribution of the Securities, provided that in connection therewith
the Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction;
(c) To furnish the Purchasers with four copies of the Offering
Circular and each amendment or supplement thereto signed by an authorized
officer of the Company and with the independent accountants' report(s) in
the Offering Circular, and any amendment or supplement containing
amendments to the financial statements covered by such report(s), signed
by the accountants, and additional copies thereof in such quantities as you
may from time to time reasonably request, and if, at any time prior to the
expiration of nine months after the date of the Offering Circular, any
event
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<PAGE>
shall have occurred as a result of which the Offering Circular as then
amended or supplemented would include an untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made when such Offering Circular is delivered, not misleading, or, if for
any other reason it shall be necessary or desirable during such same period
to amend or supplement the Offering Circular, to notify you and upon your
request to prepare and furnish without charge to each Purchaser and to any
dealer in securities as many copies as you may from time to time reasonably
request of an amended Offering Circular or a supplement to the Offering
Circular which will correct such statement or omission or effect such
compliance;
(d) During the period beginning from the date hereof and continuing
until the date six months after the Time of Delivery, not to offer, sell,
contract to sell or otherwise dispose of, except as provided hereunder any
securities of the Company that are substantially similar to the Securities;
(e) Not to be or become, at any time prior to the expiration of three
years after the Time of Delivery, an open-end investment company, unit
investment trust, closed-end investment company or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act;
(f) At any time when the Company is not subject to Section 13 or 15(d)
of the Exchange Act, for the benefit of holders from time to time of
Securities, to furnish at its expense, upon request, to holders of
Securities and prospective purchasers of securities information (the
"Additional Issuer Information") satisfying the requirements of subsection
(d)(4)(i) of Rule 144A under the Securities Act;
(g) If requested by you, to use its best efforts to cause the
Securities to be eligible for the PORTAL trading system of the National
Association of Securities Dealers, Inc.;
(h) To file with the Commission, not later than 15 days after the Time
of Delivery, five copies of a notice on Form D under the Securities Act
(one of which will be manually signed by a person duly authorized by the
Company); to otherwise comply with the requirements of Rule 503 under the
Securities Act; and to furnish promptly to you evidence of each such
required timely filing (including a copy thereof);
(i) To furnish to the holders of the Securities as soon as practicable
after the end of each fiscal year an annual report (including a balance
sheet and statements of income, stockholders' equity and cash flows of the
Company and its consolidated subsidiaries certified by independent public
accountants) and, as soon as practicable after the end of each of the first
three quarters of each fiscal year (beginning with the fiscal quarter
ending after the date of the Offering Circular),
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consolidated summary financial information of the Company and its
subsidiaries for such quarter in reasonable detail;
(j) During a period of five years from the date of the Offering
Circular, to furnish to you copies of all reports or other communications
(financial or other) furnished to stockholders of the Company, and to
deliver to you (i) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any
securities exchange on which the Securities or any class of securities of
the Company is listed; and (ii) such additional information concerning the
business and financial condition of the Company as you may from time to
time reasonably request (such financial statements to be on a consolidated
basis to the extent the accounts of the Company and its subsidiaries are
consolidated in reports furnished to its stockholders generally or to the
Commission) provided that you agree to hold in confidence any confidential
or non-public information so provided;
(k) To use the net proceeds received by it from the sale of the
Securities pursuant to this Agreement in the manner specified in the
Offering Circular under the caption "Use of Proceeds;" and
(l) The Company and its affiliates and all persons acting on its
behalf (other than the Purchasers, as to whom the Company makes no
representation) will comply in all material respects with the offering
restrictions requirements of Regulation S in connection with the offering
of the Securities outside the United States.
6. The Company covenants and agrees with the several Purchasers that the
Company will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the Company's counsel and accountants in connection with the
issue of the Securities and all other expenses in connection with the
preparation, printing and filing of the Preliminary Offering Circular and the
Offering Circular and any amendments and supplements thereto and the mailing and
delivering of copies thereof to the Purchasers and dealers; (ii) the cost of
printing or producing any Agreement among Purchasers, this Agreement, the
Indenture, the Blue Sky and Legal Investment Memoranda, closing documents
(including any compilations thereof) and any other documents in connection with
the offering, purchase, sale and delivery of the Securities; (iii) all expenses
in connection with the qualification of the Securities for offering and sale
under state securities laws as provided in Section 5(b) hereof, including the
fees and disbursements of counsel for the Purchasers in connection with such
qualification and in connection with the Blue Sky and legal investment surveys;
(iv) any fees charged by securities rating services for rating the Securities;
(v) the cost of preparing the Securities; (vi) the fees and expenses of the
Trustee and any agent of the Trustee and the fees and disbursements of counsel
for the Trustee in connection with the Indenture and the Securities; (vii) any
cost incurred in connection with the designation of the Securities for trading
in PORTAL; and (viii) all other costs and expenses incident to the
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performance of its obligations hereunder which are not otherwise specifically
provided for in this Section. It is understood, however, that, except as
provided in this Section, and Sections 8 and 11 hereof, the Purchasers will pay
all of their own costs and expenses, including the fees of their counsel,
transfer taxes on resale of any of the Securities by them, and any advertising
expenses connected with any offers they may make.
7. The obligations of the Purchasers hereunder shall be subject, in their
discretion, to the condition that all representations and warranties and other
statements of the Company herein are, at and as of the Time of Delivery, true
and correct, the condition that the Company shall have performed all of its
obligations hereunder theretofore to be performed, and the following additional
conditions:
(a) Wilson Sonsini Goodrich & Rosati, Professional Corporation,
counsel for the Purchasers, shall have furnished to you such opinion or
opinions, dated the Time of Delivery, with respect to the matters covered
in paragraphs (i), (ii), (v), (vi), (vii), (xi), (xii), (xiii) and (xiv) of
subsection (b) below as well as such other related matters as you may
reasonably request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon such
matters;
(b) Fenwick & West LLP, counsel for the Company, (or such other
counsel as the Company shall deem appropriate) shall have furnished to you
their written opinion, dated the Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with corporate power and corporate authority to own its
properties and conduct its business as described in the Offering
Circular;
(ii) The Company had, as of the dates specified in the Offering
Circular, duly authorized capital stock as set forth under the caption
"Capitalization" in the Offering Circular, and all of the issued and
outstanding shares of capital stock of the Company described therein
have been duly and validly authorized and issued, are non-assessable
and to such counsel's knowledge, are fully paid;
(iii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each jurisdiction within the United States in which
it owns or leases properties or employs personnel, or where the
failure to be so qualified would have a material adverse effect of the
business, financial condition or results of operations of the Company;
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(iv) To such counsel's knowledge and other than as set forth in
the Offering Circular, there are no legal or governmental proceedings
pending to which the Company is a party or of which any property of
the Company is the subject which, if determined adversely to the
Company, would individually or in the aggregate have a material
adverse effect on the current or future consolidated financial
position, stockholders' equity or results of operations of the
Company; and, to such counsel's knowledge, no such proceedings are
threatened by governmental authorities or threatened by others;
(v) This Agreement has been duly authorized, executed and
delivered by the Company to you;
(vi) The Securities have been duly authorized, executed,
authenticated, issued and delivered and constitute valid and legally
binding obligations of the Company;
(vii) The Indenture, the Escrow Agreement and the Registration
Rights Agreement have been duly authorized, executed and delivered by
the Company and constitute valid and legally binding instruments,
enforceable in accordance with their respective terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws
of general applicability relating to or affecting creditors' rights
and to general equity principles;
(viii) The issue and sale of the Securities being delivered at
the Time of Delivery and the compliance by the Company with all of the
provisions of the Securities, the Indenture, this Agreement, the
Escrow Agreement and the Registration Rights Agreement and the
consummation of the transactions herein and therein contemplated were
they to be completed on or prior to the date of such opinion and
assuming the absence of any applicable cure period, waiting period or
other similar provision, do not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a
default under, any of the agreements filed as exhibits to the
Company's Form S-1 Registration Statement, Reg. No. 333-44469, or to
any Exchange Act Report or any agreements entered into by the Company
after March 31, 1998 that would be required to be filed as a material
agreement exhibit on Form 10-Q or any other Exchange Act Report
(provided that in determining which documents would be required to be
so filed, such counsel may rely on an officer's certificate that
specifies agreements that the Company has entered into since March 31,
1998) nor does such action result in any violation of the provisions
of the Certificate of Incorporation or Bylaws of the Company or any
statute or any order, rule or regulation known to such counsel of any
court or governmental agency or body having jurisdiction over the
Company or any of its properties;
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(ix) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body is
required for the issue and sale of the Securities or the consummation
by the Company of the transactions contemplated by this Agreement, the
Indenture, the Escrow Agreement or the Registration Rights Agreement,
except (A) such consents, approvals, authorizations, orders,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by the Purchasers (as to which such
counsel renders no opinion) or (B) such consents, approvals,
authorizations, orders, registrations or qualifications as are
referenced in the Offering Circular;
(x) The Company is not in violation of its Certificate of
Incorporation or Bylaws or, to such counsel's knowledge, in default in
the performance or observance of any material obligation, agreement,
covenant or condition contained in any Material Agreement;
(xi) The statements set forth in the Offering Circular insofar as
they purport to constitute a summary of the terms of the Securities,
the Indenture, the Escrow Agreement and the Registration Rights
Agreement, and under the captions "Certain United States Federal
Income Tax Considerations" and "Underwriting," insofar as they purport
to describe the provisions of the laws and documents referred to
therein, are accurate and complete in all material respects;
(xii) The Exchange Act Reports (other than the financial
statements and related notes and schedules (and financial data)
therein, as to which such counsel need express no opinion), when they
were filed with the Commission, complied as to form in all material
respects with the requirements of the Exchange Act, and the rules and
regulations of the Commission promulgated thereunder;
(xiii) No registration of the Securities under the Securities
Act, and no qualification of an indenture under the Trust Indenture
Act of 1939 with respect thereto, is required for the offer and sale
to, and initial resale of the Securities by, the Purchasers in the
manner contemplated by this Agreement;
(xiv) The Company is not an "investment company," as such term is
defined in the Investment Company Act;
(xv) The Escrow Agreement has been duly and validly authorized,
executed and delivered by the Company and the Escrow Agreement is the
legally valid and binding obligation of the Company,
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enforceable against it in accordance with its terms, except as the
enforceability thereof may be limited by customary assumptions and
exceptions. Once the Escrow Account has been established as provided
in the Escrow Agreement, the pledge and security interest in the
Escrow Account and the Pledged Securities held in the Escrow Account
(assuming such Pledged Securities constitute securities entitlements
and are carried in such Escrow Account (as to which assumption such
counsel need not express an opinion)) created by the Company under the
Escrow Agreement in favor of the Trustee, for the benefit of the
holders of the Securities, will constitute a perfected security
interest which will be prior to any other security interest in such
account or covering such securities entitlement, the priority of which
is governed by the Uniform Commercial Code as in effect in the State
of New York on the date hereof.
In addition, such counsel shall state that, although they are not
passing upon and do not assume any responsibility for, nor have they
independently verified, the accuracy, completeness or fairness of the
statements contained in the Preliminary Offering Circular and the
Offering Circular, except for and to the extent of those referred to
in the opinion in subsection (xi) of this Section 7(b), they have
participated in certain conferences with officers and other employees
of the Company, representatives of the Company's independent certified
public accountants and representatives of the Purchasers with respect
to the preparation of the Preliminary Offering Circular and the
Offering Circular, and no facts have come to the attention of
attorneys devoting attention to the representation of the Company in
its preparation of the Preliminary Offering Circular and the Offering
Circular that have caused them to believe that, as of their respective
dates and as of the Time of Delivery, the Preliminary Offering
Circular and the Offering Circular or any further amendments thereto
made by the Company prior to such Time of Delivery (other than the
financial statements and related notes, related schedules and
financial data included therein, as to which such counsel need express
no opinion) contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Further,
such counsel shall state that, although they are not passing upon and
do not assume any responsibility for, nor have they independently
verified, the accuracy, completeness or fairness of the statements
contained in the Exchange Act Reports, they have participated in
certain conferences with officers and other employees of the Company,
and representatives of the Company's independent certified public
accountants with respect to the preparation of the respective Exchange
Act Reports, and no facts have come to the attention of attorneys
devoting attention to the representation of the Company in its
preparation of the respective Exchange Act Reports that have caused
them to believe that as of the dates on which the
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respective Exchange Act Reports were filed with the Commission, the
Exchange Act Reports (other than the financial statements and related
notes, related schedules and financial data included therein, as to
which such counsel need express no opinion) contained an untrue
statement of material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made when
such documents were so filed, not misleading.
(c) On the date of the Offering Circular prior to the execution of
this Agreement and also at the Time of Delivery, KPMG Peat Marwick LLP
shall have furnished to you a letter or letters, dated the respective dates
of delivery thereof, in form and substance satisfactory to you, to the
effect set forth in Annex II hereto;
(d) (i) The Company shall not have sustained since the date of the
latest audited financial statements included in the Offering Circular any
loss or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Offering Circular, and (ii) since the respective
dates as of which information is given in the Offering Circular there shall
not have been any change in the capital stock or long-term debt of the
Company or any of its subsidiaries or any change, or any development
involving a prospective change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set forth
or contemplated in the Offering Circular, the effect of which, in any such
case described in Clause (i) or (ii), is in the judgment of the Purchasers
so material and adverse as to make it impracticable or inadvisable to
proceed with the public offering or the delivery of the Securities on the
terms and in the manner contemplated in this Agreement and in the Offering
Circular;
(e) On or after the date hereof (i) no downgrading shall have occurred
in the rating accorded the Company's debt securities by any "nationally
recognized statistical rating organization", as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the Securities Act, and
(ii) no such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of
any of the Company's debt securities;
(f) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange; or on NASDAQ; (ii) a
suspension or material limitation in trading in the Company's securities on
NASDAQ; (iii) a general moratorium on commercial banking activities
declared by either Federal or New York or California State authorities;
(iv) the outbreak or escalation of hostilities involving the United States
or the declaration by the United States of a national emergency or war, if
the
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effect of any such event specified in this Clause (iv) in the judgment of
the Purchasers makes it impracticable or inadvisable to proceed with the
public offering or the delivery of the Securities on the terms and in the
manner contemplated in the Offering Circular; or (v) the occurrence of any
material adverse change in the existing financial, political or economic
conditions in the United States or elsewhere which, in the judgment of the
Purchasers, would materially and adversely affect the financial markets or
markets for the Securities or other debt securities;
(g) The Securities have been designated for trading on PORTAL;
(h) The Company shall have furnished to you executed copies of the
Indenture, the Escrow Agreement and the Registration Rights Agreement; and
(i) The Company shall have furnished or caused to be furnished to you
at the Time of Delivery certificates of officers of the Company
satisfactory to you as to the accuracy of the representations and
warranties of the Company herein at and as of such Time of Delivery, as to
the performance by the Company of all of its obligations hereunder to be
performed at or prior to such Time of Delivery, as to the matters set forth
in subsections (a) and (e) of this Section and as to such other matters as
you may reasonably request.
8. (a) The Company will indemnify and hold harmless each Purchaser
against any losses, claims, damages or liabilities, joint or several, to which
such Purchaser may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Offering Circular or
the Offering Circular, or any amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact necessary to make the statements therein not misleading, and will reimburse
each Purchaser for any legal or other expenses reasonably incurred by such
Purchaser in connection with investigating or defending any such action or claim
as such expenses are incurred; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary Offering
Circular or the Offering Circular or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by any Purchaser through Goldman, Sachs & Co. expressly for use therein.
(b) Each Purchaser will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue
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statement or alleged untrue statement of a material fact contained in any
Preliminary Offering Circular or the Offering Circular, or any amendment or
supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact or necessary to make the
statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in any Preliminary Offering Circular
or the Offering Circular or any such amendment or supplement in reliance
upon and in conformity with written information furnished to the Company by
such Purchaser through Goldman, Sachs & Co. expressly for use therein; and
will reimburse the Company for any legal or other expenses reasonably
incurred by the Company in connection with investigating or defending any
such action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify the
indemnifying party in writing of the commencement thereof; but the omission
so to notify the indemnifying party shall not relieve it from any liability
which it may have to any indemnified party otherwise than under such
subsection. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying
party shall not be liable to such indemnified party under such subsection
for any legal expenses of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party, in connection with the
defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the written consent of the indemnified
party, effect the settlement or compromise of, or consent to the entry of
any judgment with respect to, any pending or threatened action or claim in
respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to
such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to, or an admission of, fault, culpability or a failure to
act, by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof)
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referred to therein, then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of such
losses, claims, damages or liabilities (or actions in respect thereof) in
such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Purchasers on the other from the
offering of the Securities. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under subsection (c)
above, then each indemnifying party shall contribute to such amount paid or
payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company on the one hand and the Purchasers on the other in connection with
the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Purchasers on the other shall be deemed to
be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Purchasers, in each
case as set forth in the Offering Circular. The relative fault shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company on the one hand or the Purchasers on the other and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the
Purchasers agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by pro rata allocation
(even if the Purchasers were treated as one entity for such purpose) or by
any other method of allocation which does not take account of the equitable
considerations referred to above in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages
or liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Purchaser shall be required to
contribute any amount in excess of the amount by which the total price at
which the Securities underwritten by it and distributed to investors were
offered to investors exceeds the amount of any damages which such Purchaser
has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. The Purchasers'
obligations in this subsection (d) to contribute are several in proportion
to their respective underwriting obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who
controls any Purchaser within
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the meaning of the Securities Act; and the obligations of the Purchasers
under this Section 8 shall be in addition to any liability which the
respective Purchasers may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company and to
each person, if any, who controls the Company within the meaning of the
Securities Act.
9. (a) If any Purchaser shall default in its obligation to purchase the
Securities which it has agreed to purchase hereunder, you may in your discretion
arrange for you or another party or other parties to purchase such Securities on
the terms contained herein. If within thirty-six hours after such default by
any Purchaser you do not arrange for the purchase of such Securities, then the
Company shall be entitled to a further period of thirty-six hours within which
to procure another party or other parties satisfactory to you to purchase such
Securities on such terms. In the event that, within the respective prescribed
periods, you notify the Company that you have so arranged for the purchase of
such Securities, or the Company notifies you that it has so arranged for the
purchase of such Securities, you or the Company shall have the right to postpone
the Time of Delivery for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the Offering Circular,
or in any other documents or arrangements, and the Company agrees to prepare
promptly any amendments to the Offering Circular which in your opinion may
thereby be made necessary. The term "Purchaser" as used in this Agreement shall
include any person substituted under this Section with like effect as if such
person had originally been a party to this Agreement with respect to such
Securities.
(b) If, after giving effect to any arrangements for the purchase of
the Securities of a defaulting Purchaser or Purchasers by you and the
Company as provided in subsection (a) above, the aggregate principal amount
of such Securities which remains unpurchased does not exceed one-eleventh
of the aggregate principal amount of all the Securities, then the Company
shall have the right to require each non-defaulting Purchaser to purchase
the principal amount of Securities which such Purchaser agreed to purchase
hereunder and, in addition, to require each non-defaulting Purchaser to
purchase its pro rata share (based on the principal amount of Securities
which such Purchaser agreed to purchase hereunder) of the Securities of
such defaulting Purchaser or Purchasers for which such arrangements have
not been made; but nothing herein shall relieve a defaulting Purchaser from
liability for its default.
(c) If, after giving effect to any arrangements for the purchase of
the Securities of a defaulting Purchaser or Purchasers by you and the
Company as provided in subsection (a) above, the aggregate principal amount
of Securities which remains unpurchased exceeds one-eleventh of the
aggregate principal amount of all the Securities, or if the Company shall
not exercise the right described in subsection (b) above to require non-
defaulting Purchasers to purchase Securities of a defaulting Purchaser or
Purchasers, then this Agreement shall thereupon terminate,
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without liability on the part of any non-defaulting Purchaser or the
Company, except for the expenses to be borne by the Company and the
Purchasers as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall
relieve a defaulting Purchaser from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the several Purchasers, as set forth in
this Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Purchaser or any controlling person of any Purchaser, or the Company, or
any officer or director or controlling person of the Company, and shall survive
delivery of and payment for the Securities.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
the Company shall not then be under any liability to any Purchaser except as
provided in Sections 6 and 8 hereof; but, if for any other reason, the
Securities are not delivered by or on behalf of the Company as provided herein,
the Company will reimburse the Purchasers through you for all out-of-pocket
expenses approved in writing by you, including fees and disbursements of
counsel, reasonably incurred by the Purchasers in making preparations for the
purchase, sale and delivery of the Securities, but the Company shall then be
under no further liability to any Purchaser except as provided in Sections 6 and
8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Purchasers, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Purchaser made or given
by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Purchasers shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 32 Old Slip, 9th Floor, New York, New York 10004, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the Offering
Circular, Attention: Secretary; provided, however, that any notice to a
Purchaser pursuant to Section 8(c) hereof shall be delivered or sent by mail,
telex or facsimile transmission to such Purchaser at its address set forth in
its Purchasers' Questionnaire, or telex constituting such Questionnaire, which
address will be supplied to the Company by you upon request. Any such
statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Purchasers, the Company and, to the extent provided in Sections 8 and 10
hereof, the officers and directors of the Company and each person who controls
the Company or any Purchaser, and their respective heirs, executors,
administrators, successors and assigns,
-22-
<PAGE>
and no other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Securities from any Purchaser shall be
deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such respective counterparts shall together constitute one and
the same instrument.
-23-
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us one for the Company and each of the Purchasers plus one for each
counsel counterparts hereof, and upon the acceptance hereof by you, on behalf of
each of the Purchasers, this letter and such acceptance hereof shall constitute
a binding agreement between each of the Purchasers and the Company. It is
understood that your acceptance of this letter on behalf of each of the
Purchasers is pursuant to the authority set forth in a form of Agreement among
Purchasers, the form of which shall be submitted to the Company for examination
upon request, but without warranty on your part as to the authority of the
signers thereof.
Very truly yours,
EXODUS COMMUNICATIONS, INC.
By: /s/ K.B. Chandrasekhar
--------------------------------
Name: K.B. Chandrasekhar
------------------------------
Title: President & CEO
-----------------------------
Accepted as of the date hereof:
Goldman, Sachs & Co.
Donaldson, Lufkin & Jenrette
Securities Corporation
BT Alex. Brown Incorporated
NationsBanc Montgomery
Securities LLC
By: /s/ Goldman, Sachs & Co.
--------------------------------
Name: Goldman, Sachs & Co.
------------------------------
Title:
On behalf of the Purchasers
-24-
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
SECURITIES
TO BE
PURCHASER PURCHASED
--------- ---------
<S> <C>
Goldman, Sachs & Co. $107,000,000.00
Donaldson, Lufkin & Jenrette Securities Corporation 73,000,000.00
B T Alex Brown Incorporated 10,000,000.00
NationsBanc Montgomery Securities LLC 10,000,000.00
TOTAL $200,000,000.00
===============
</TABLE>
-25-
<PAGE>
ANNEX I
(1) The Securities have not been and will not be registered under the
Securities Act and may not be offered or sold within the United States or to, or
for the account or benefit of, U.S. persons except in accordance with Regulation
S under the Securities Act or pursuant to an exemption from the registration
requirements of the Securities Act. Each Purchaser represents that it has
offered and sold the Securities, and will offer and sell the Securities (i) as
part of their distribution at any time and (ii) otherwise until 40 days after
the later of the commencement of the offering and the Time of Delivery, only in
accordance with Rule 903 of Regulation S or Rule 144A under the Securities Act.
Accordingly, each Purchaser agrees that neither it, its affiliates nor any
persons acting on its or their behalf has engaged or will engage in any directed
selling efforts with respect to the Securities, and it and they have complied
and will comply with the offering restrictions requirement of Regulation S.
Each Purchaser agrees that, at or prior to confirmation of sale of Securities
(other than a sale pursuant to Rule 144A), it will have sent to each
distributor, dealer or person receiving a selling concession, fee or other
remuneration that purchases Securities from it during the distribution
compliance period a confirmation or notice to substantially the following
effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933 (the "Securities Act") and may not be offered and
sold within the United States or to, or for the account or benefit of, U.S.
persons (i) as part of their distribution at any time or (ii) otherwise
until 40 days after the later of the commencement of the offering and the
closing date, except in either case in accordance with Regulation S (or
Rule 144A if available) under the Securities Act. Terms used above have
the meaning given to them by Regulation S."
Terms used in this paragraph have the meanings given to them by Regulation S.
Each Purchaser further agrees that it has not entered and will not enter
into any contractual arrangement with respect to the distribution or delivery of
the Securities, except with its affiliates or with the prior written consent of
the Company.
(2) Notwithstanding the foregoing, Securities may be offered, sold and
delivered by the Purchasers in the United States and to U.S. persons pursuant to
Section 3(a)(i) of this Agreement without delivery of the written statement
required by paragraph (1) above.
(3) Each Purchaser further represents and agrees that (i) it has not
offered or sold and prior to the date six months after the date of issue of the
Securities will not offer or sell any Securities to persons in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995, (b) it
has complied, and will comply, with all applicable provisions of the Financial
Services Act of 1986 of Great Britain with respect to
-26-
<PAGE>
anything done by it in relation to the Securities in, from or otherwise
involving the United Kingdom, and (c) it has only issued or passed on and will
only issue or pass on in the United Kingdom any document received by it in
connection with the issuance of the Securities to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 of Great Britain or is a person to whom
the document may otherwise lawfully be issued or passed on.
(4) Each Purchaser agrees that it will not offer, sell or deliver any of
the Securities in any jurisdiction outside the United States except under
circumstances that will result in compliance with the applicable laws thereof,
and that it will take at its own expense whatever action is required to permit
its purchase and resale of the Securities in such jurisdictions. Each Purchaser
understands that no action has been taken to permit a public offering in any
jurisdiction outside the United States where action would be required for such
purpose. Each Purchaser agrees not to cause any advertisement of the Securities
to be published in any newspaper or periodical or posted in any public place and
not to issue any circular relating to the Securities, except in any such case
with Goldman, Sachs & Co.'s express written consent and then only at its own
risk and expense.
-27-
<PAGE>
ANNEX II
Pursuant to Section 7(d) of the Purchase Agreement, the accountants shall
furnish letters to the Purchasers to the effect that:
(i) They are independent certified public accountants with respect to
the Company and its subsidiaries within the meaning of the Securities
Exchange Act of 1934 (the "Exchange Act") and the applicable published
rules and regulations thereunder;
(ii) In our opinion, the consolidated financial statements and
financial statement schedules audited by us and included in the Offering
Circular comply as to form in all material respects with the applicable
requirements of the Exchange Act and the related published rules and
regulations;
(iii) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company
for the five most recent fiscal years included in the Offering Circular
agrees with the corresponding amounts (after restatements where applicable)
in the audited consolidated financial statements for such five fiscal
years;
(iv) On the basis of limited procedures not constituting an audit in
accordance with generally accepted auditing standards, consisting of a
reading of the unaudited financial statements and other information
referred to below, a reading of the latest available interim financial
statements of the Company and its subsidiaries, inspection of the minute
books of the Company and its subsidiaries since the date of the latest
audited financial statements included in the Offering Circular, inquiries
of officials of the Company and its subsidiaries responsible for financial
and accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused them
to believe that:
(A) the unaudited consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in
the Offering Circular are not in conformity with generally accepted
accounting principles applied on the basis substantially consistent
with the basis for the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated statements of
cash flows included in the Offering Circular;
(B) any other unaudited income statement data and balance sheet
items included in the Offering Circular do not agree with the
corresponding items in the unaudited consolidated financial statements
from which such data and items were derived, and any such unaudited
data and items were not determined on a basis substantially consistent
with the basis for the corresponding amounts in the audited
consolidated financial statements
<PAGE>
included in the Offering Circular;
(C) the unaudited financial statements which were not included in
the Offering Circular but from which were derived any unaudited
condensed financial statements referred to in Clause (A) and any
unaudited income statement data and balance sheet items included in
the Offering Circular and referred to in Clause (B) were not
determined on a basis substantially consistent with the basis for the
audited consolidated financial statements included in the Offering
Circular;
(D) any unaudited pro forma consolidated condensed financial
statements included in the Offering Circular do not comply as to form
in all material respects with the applicable accounting requirements
or the pro forma adjustments have not been properly applied to the
historical amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to the date
of such letter, there have been any changes in the consolidated
capital stock (other than issuances of capital stock upon exercise of
options and stock appreciation rights, upon earn-outs of performance
shares and upon conversions of convertible securities, in each case
which were outstanding on the date of the latest financial statements
included in the Offering Circular or any increase in the consolidated
long-term debt of the Company and its subsidiaries, or any decreases
in consolidated net current assets or stockholders' equity or other
items specified by the Purchasers, or any increases in any items
specified by the Purchasers, in each case as compared with amounts
shown in the latest balance sheet included in the Offering Circular
except in each case for changes, increases or decreases which the
Offering Circular discloses have occurred or may occur or which are
described in such letter; and
(F) for the period from the date of the latest financial statements
included in the Offering Circular to the specified date referred to in
Clause (E) there were any decreases in consolidated net revenues or
operating profit or the total or per share amounts of consolidated net
income or other items specified by the Purchasers, or any increases in
any items specified by the Purchasers, in each case as compared with
the comparable period of the preceding year and with any other period
of corresponding length specified by the Purchasers, except in each
case for decreases or increases which the Offering Circular discloses
have occurred or may occur or which are described in such letter; and
(v) In addition to the examination referred to in their report(s)
included in the Offering Circular and the limited procedures, inspection of
minute books, inquiries and other procedures referred to in paragraphs
(iii) and (iv) above, they have carried out
29
<PAGE>
certain specified procedures, not constituting an audit in accordance with
generally accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the Purchasers, which
are derived from the general accounting records of the Company and its
subsidiaries, which appear in the Offering Circular, and have compared
certain of such amounts, percentages and financial information with the
accounting records of the Company and its subsidiaries and have found them
to be in agreement.
30
<PAGE>
June 26, 1998
Dear KPMG Peat Marwick LLP:
Goldman, Sachs & Co., as representatives of the Purchasers of 11 1/4%
Senior Notes due 2008 to be issued by Exodus Communications, Inc. (the
"Company"), will be reviewing certain information relating to the Company that
will be included (incorporated by reference) in the Offering Circular. This
review process, applied to the information relation to the issue, is (will be)
substantially consistent with the due diligence review process that we would
perform if this placement of securities were being registered pursuant to the
Securities Act of 1933 (the Act). It is recognized however that what is
"substantially consistent" may vary from situation to situation and may not be
the same as that done in a registered offering of the same securities for the
same issuer and whether the procedures being, or to be, followed will be
"substantially consistent" will be determined by us on a case-by-case basis. We
are knowledgeable with respect to the due diligence review process that would be
performed if this placement of securities were being registered pursuant to the
Act. We hereby request that you deliver to us a "comfort" letter concerning the
financial statements of the issuer and certain statistical and other data
included in the offering document. We will contact you to identify the
procedures we wish you to follow and the form we wish the comfort letter to
take.
Very truly yours,
(Goldman, Sachs & Co.)
<PAGE>
EXHIBIT 10.34
NOTICE OF DEBT OFFERING AND
WAIVER OF REGISTRATION RIGHTS
June __, 1998
Exodus Communications, Inc.
2650 San Tomas Expressway
Santa Clara, California 95051
TO ALL HOLDERS OF REGISTRATION RIGHTS FOR SHARES OF EXODUS COMMUNICATIONS, INC.:
This is to notify you that Exodus Communications, Inc. (the "Company")
intends to file a Registration Statement with the Securities and Exchange
Commission (the "SEC") in _____, 1998, in conjunction with a proposed debt
offering (the "Offering") of shares of Common Stock (the "Common Stock"). The
Offering is currently planned to occur in June, 1998, although there can be no
assurance regarding its exact timing.
In connection with the proposed Offering and as an inducement for Goldman
Sachs & Co., Donaldson, Lufkin & Jenrette Securities Corporation, and _________,
as representatives (the "Representatives") of the several underwriters, to enter
into an underwriting agreement with the Company, the undersigned hereby waives
any registration rights relating to the securities of the Company which the
undersigned may have with respect to the Offering, pursuant to that certain
Second Amended and Restated Investors' Rights Agreement dated June 25, 1997, as
amended December 15, 1997 (the "Agreement"), or any other agreement or
arrangement. The undersigned also waives any notice period requirements with
respect to any such registration rights.
The undersigned acknowledges that pursuant to Section 4.7 of the Agreement,
the waiver of registration rights and the notice period by the holders of two-
thirds (2/3) of the Registrable Securities (as defined in the Agreement) then
outstanding, excluding certain shares, will waive such rights for all holders of
Registrable Securities, except for the Significant Common Shareholders (as
defined in the Agreement) who must each waive such registration rights and
notice period on their own behalf.
The Company has not made any public announcement of the Offering, and the
Company is prohibited from doing so under regulations promulgated by the SEC,
until the Company has filed the Registration Statement with the SEC. This
information must remain confidential until the Company's announcement. You are
urged to exercise discretion in discussing the subject matter of this letter
with any person.
The undersigned understands that the Company and the Representatives will
proceed with the Offering in reliance upon this Agreement.
<PAGE>
Date:
-----------------------
By:
-----------------------------
Print Name:
----------------------
Title:
--------------------------
2
<PAGE>
EXHIBIT 10.35
AMENDED AND RESTATED
MASTER LOAN AND SECURITY AGREEMENT
THIS AGREEMENT, originally dated as of September 3, 1997 and amended
and restated as of June 30, 1998, is made by Exodus Communications, Inc. (the
"Borrower"), a Delaware corporation having its principal place of business and
chief executive office at 2650 San Tomas Expressway, Santa Clara, CA, 95051 in
favor of Transamerica Business Credit Corporation, a Delaware corporation (the
"Lender"), having its principal office at Riverway II, West Office Tower, 9399
West Higgins Road, Rosemont, Illinois 60018.
WHEREAS, the Borrower has requested that the Lender make Loans to it
from time to time; and
WHEREAS, the Lender has agreed to make such Loans on the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and to induce the
Lender to extend credit, the Borrower hereby agrees with the Lender as follows:
SECTION 1. DEFINITIONS.
-----------
As used herein, the following terms shall have the following meanings,
and shall be equally applicable to both the singular and plural forms of the
terms defined:
Agreement shall mean this Master Loan and Security Agreement together with all
- ---------
schedules and exhibits hereto, as amended, supplemented, or otherwise modified
from time to time.
Applicable Law shall mean the laws of the State of Illinois (or any other
- --------------
jurisdiction whose laws are mandatorily applicable notwithstanding the parties'
choice of Illinois law) or the laws of the United States of America, whichever
laws allow the greater interest, as such laws now exist or may be changed or
amended or come into effect in the future.
Business Day shall mean any day other than a Saturday, Sunday, or public holiday
- ------------
or the equivalent for banks in New York City.
Code shall have the meaning specified in Section 8(d).
- ----
Collateral shall have the meaning specified in Section 2.
- ----------
Collateral Access Agreement shall mean any landlord waiver, mortgagee waiver,
- ---------------------------
bailee letter, or similar acknowledgement of any warehouseman or processor in
possession of any Equipment, in each case substantially in the form of Exhibit
A.
Effective Date shall mean the date on which all of the conditions specified in
- --------------
Section 3.3 shall have been satisfied.
Equipment shall have the meaning specified in Section 2.
- ---------
Event of Default shall mean any event specified in Section 7.
- ----------------
Financial Statements shall have the meaning specified in Section 6.1.
- --------------------
GAAP shall mean generally accepted accounting principles in the United States of
- ----
America, as in effect from time to time.
<PAGE>
Loans shall mean the loans and financial accommodations made by the Lender to
- -----
the Borrower in accordance with the terms of this Agreement and the Notes.
Loan Documents shall mean, collectively, this Agreement, the Notes, and all
- --------------
other documents, agreements, certificates, instruments, and opinions executed
and delivered in connection herewith and therewith, as the same may be modified,
extended, restated, or supplemented from time to time.
Material Adverse Change shall mean, with respect to any Person, a material
- -----------------------
adverse change in the business, prospects, operations, results of operations,
assets, liabilities, or condition (financial or otherwise) of such Person taken
as a whole.
Material Adverse Effect shall mean, with respect to any Person, a material
- -----------------------
adverse effect on the business, prospects, operations, results of operations,
assets, liabilities, or condition (financial or otherwise) of such Person taken
as a whole.
Note shall mean each Promissory Note made by the Borrower in favor of the
- ----
Lender, as amended, supplemented, or otherwise modified from time to time, in
each case substantially in the form of Exhibit B.
Obligations shall mean all indebtedness, obligations, and liabilities of the
- -----------
Borrower under the Notes and under this Agreement, whether on account of
principal, interest, indemnities, fees (including, without limitation,
attorneys' fees, remarketing fees, origination fees, collection fees, and all
other professionals' fees), costs, expenses, taxes, or otherwise.
Permitted Liens shall mean such of the following as to which no enforcement,
- ---------------
collection, execution, levy, or foreclosure proceeding shall have been
commenced: (a) liens for taxes, assessments, and other governmental charges or
levies or the claims or demands of landlords, carriers, warehousemen, mechanics,
laborers, materialmen, and other like Persons arising by operation of law in the
ordinary course of business for sums which are not yet due and payable, or liens
which are being contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves are maintained to the
extent required by GAAP; (b) deposits or pledges to secure the payment of
worker's compensation, unemployment insurance, or other social security benefits
or obligations, public or statutory obligations, surety or appeal bonds, bid or
performance bonds, or other obligations of a like nature incurred in the
ordinary course of business; (c) licenses, restrictions, or covenants for or on
the use of the Equipment which do not materially impair either the use of the
Equipment in the operation of the business of the Borrower or the value of the
Equipment; and (d) attachment or judgment liens that do not constitute an Event
of Default.
Person shall mean any individual, sole proprietorship, partnership, joint
- ------
venture, trust, unincorporated organization, association, corporation,
institution, entity, party, or government (including any division, agency, or
department thereof), and the successors, heirs, and assigns of each.
Schedule shall mean each Schedule in the form of Schedule A hereto delivered by
- --------
the Borrower to the Lender from time to time.
Solvent means, with respect to any Person, that as of the date as to which such
- -------
Person's solvency is measured:
(a) the fair saleable value of its assets is in excess of the total
amount of its liabilities (including contingent liabilities as valued in
accordance with GAAP) as they become absolute and matured;
(b) it has sufficient capital to conduct its business; and
(c) it is able generally to meet its debts as they mature.
Taxes shall have the meaning specified in Section 5.5.
- -----
2
<PAGE>
SECTION 2. CREATION OF SECURITY INTEREST; COLLATERAL. The Borrower
-----------------------------------------
hereby assigns and grants to the Lender a continuing general, first priority
lien on, and security interest in, all the Borrower's right, title, and interest
in and to the collateral described in the next sentence (the "Collateral") to
secure the payment and performance of all the Obligations. The Collateral
consists of all equipment set forth on all the Schedules delivered from time to
time under the terms of this Agreement (the "Equipment"), together with all
present and future additions, parts, accessories, attachments, substitutions,
repairs, improvements, and replacements thereof or thereto, and any and all
proceeds thereof, including, without limitation, proceeds of insurance and all
manuals, blueprints, know-how, warranties, and records in connection therewith,
all rights against suppliers, warrantors, manufacturers, sellers, or others in
connection therewith, and together with all substitutes for any of the
foregoing.
SECTION 3. THE CREDIT FACILITY.
-------------------
SECTION 3.1. BORROWINGS. Each Loan shall be in an amount not less
than $150,000, and in no event shall the sum of the aggregate Loans made exceed
the amount of the Lender's written commitment to the Borrower in effect from
time to time. Notwithstanding anything herein to the contrary, the Lender shall
be obligated to make the initial Loan and each other Loan only after the Lender,
in its sole discretion, determines that the applicable conditions for borrowing
contained in Sections 3.3 and 3.4 are satisfied. The timing and financial scope
of Lender's obligation to make Loans hereunder are limited as set forth in
commitment letters executed by Lender and Borrower, dated as of August 26, 1997
and June 24, 1998 and attached hereto as Exhibits C and C1 (the "Commitment
Letters").
SECTION 3.2. APPLICATION OF PROCEEDS. The Borrower shall not
directly or indirectly use any proceeds of the Loans, or cause, assist, suffer,
or permit the use of any proceeds of the Loans, for any purpose other than for
the purchase, acquisition, installation, or upgrading of Equipment or the
reimbursement of the Borrower for its purchase, acquisition, installation, or
upgrading of Equipment.
SECTION 3.3. CONDITIONS TO INITIAL LOAN.
(a) The obligation of the Lender to make the initial Loan is subject
to the Lender's receipt of the following, each dated the date of the initial
Loan or as of an earlier date acceptable to the Lender, in form and substance
satisfactory to the Lender and its counsel:
(i) completed requests for information (Form UCC-11) listing
all effective Uniform Commercial Code financing statements naming the
Borrower as debtor and all tax lien, judgment, and litigation searches
for the Borrower as the Lender shall deem necessary or desirable;
(ii) Uniform Commercial Code financing statements (Form UCC-1)
duly executed by the Borrower (naming the Lender as secured party and
the Borrower as debtor and in form acceptable for filing in all
jurisdictions that the Lender deems necessary or desirable to perfect
the security interests granted to it hereunder) and, if applicable,
termination statements or other releases duly filed in all
jurisdictions that the Lender deems necessary or desirable to perfect
and protect the priority of the security interests granted to it
hereunder in the Equipment related to such initial Loan;
(iii) a Note duly executed by the Borrower evidencing the amount
of such Loan;
(iv) a Collateral Access Agreement duly executed by the lessor
or mortgagee, as the case may be, of each premises where the Equipment
is located;
(v) certificates of insurance required under Section 5.4 of
this Agreement together with loss payee endorsements for all such
policies naming the Lender as lender loss payee and as an additional
insured;
3
<PAGE>
(vi) a copy of the resolutions of the Board of Directors of the
Borrower (or a unanimous consent of directors in lieu thereof)
authorizing the execution, delivery, and performance of this
Agreement, the other Loan Documents, and the transactions contemplated
hereby and thereby, attached to which is a certificate of the
Secretary or an Assistant Secretary of the Borrower certifying (A)
that the copy of the resolutions is true, complete, and accurate, that
such resolutions have not been amended or modified since the date of
such certification and are in full force and effect and (B) the
incumbency, names, and true signatures of the officers of the Borrower
authorized to sign the Loan Documents to which it is a party;
(vii) the opinion of counsel for the Borrower covering such
matters incident to the transactions contemplated by this Agreement as
the Lender may reasonably require; and
(viii) such other agreements and instruments as the Lender deems
necessary in its sole and absolute discretion in connection with the
transactions contemplated hereby.
(b) There shall be no pending or, to the knowledge of the Borrower
after due inquiry (but without the search of any docket or court or agency
records), threatened litigation, proceeding, inquiry, or other action (i)
seeking an injunction or other restraining order, damages, or other relief with
respect to the transactions contemplated by this Agreement or the other Loan
Documents or thereby or (ii) which affects or could affect the business,
prospects, operations, assets, liabilities, or condition (financial or
otherwise) of the Borrower, except, in the case of clause (ii), where such
litigation, proceeding, inquiry, or other action could not be expected to have a
Material Adverse Effect in the judgment of the Lender.
(c) The Borrower shall have paid all fees and expenses required to be
paid by it to the Lender as of such date.
(d) The security interests in the Equipment related to the initial
Loan granted in favor of the Lender under this Agreement shall have been duly
perfected and shall constitute first priority liens.
SECTION 3.4. CONDITIONS PRECEDENT TO EACH LOAN. The
obligation of the Lender to make each Loan is subject to the satisfaction of the
following conditions precedent:
(a) the Lender shall have received the documents, agreements, and
instruments set forth in Section 3.3(a)(i) through (v) applicable to such Loan,
each in form and substance satisfactory to the Lender and its counsel and each
dated the date of such Loan or as of an earlier date acceptable to the Lender;
(b) the Lender shall have received a Schedule of the Equipment
related to such Loan, in form and substance satisfactory to the Lender and its
counsel, and the security interests in such Equipment related to such Loan
granted in favor of the Lender under this Agreement shall have been duly
perfected and shall constitute first priority liens;
(c) all representations and warranties contained in this Agreement
and the other Loan Documents shall be true and correct on and as of the date of
such Loan as if then made, other than representations and warranties that
expressly relate solely to an earlier date, in which case they shall have been
true and correct as of such earlier date;
(d) no Event of Default or event which with the giving of notice or
the passage of time, or both, would constitute an Event of Default shall have
occurred and be continuing or would result from the making of the requested Loan
as of the date of such request; and
(e) the Borrower shall be deemed to have hereby reaffirmed and
ratified all security interests, liens, and other encumbrances heretofore
granted by the Borrower to the Lender.
4
<PAGE>
SECTION 4. THE BORROWER'S REPRESENTATIONS AND WARRANTIES.
---------------------------------------------
SECTION 4.1. GOOD STANDING; QUALIFIED TO DO BUSINESS. The
Borrower (a) is duly organized, validly existing, and in good standing under the
laws of the State of its organization, (b) has the power and authority to own
its properties and assets and to transact the businesses in which it is
presently, or proposes to be, engaged, and (c) is duly qualified and authorized
to do business and is in good standing in every jurisdiction in which the
failure to be so qualified could have a Material Adverse Effect on (i) the
Borrower, (ii) the Borrower's ability to perform its obligations under the Loan
Documents, or (iii) the rights of the Lender hereunder.
SECTION 4.2. DUE EXECUTION, ETC. The execution, delivery,
and performance by the Borrower of each of the Loan Documents to which it is a
party are within the powers of the Borrower, do not contravene the
organizational documents, if any, of the Borrower, and do not (a) violate any
law or regulation, or any order or decree of any court or governmental
authority, (b) conflict with or result in a breach of, or constitute a default
under, any material indenture, mortgage, or deed of trust or any material lease,
agreement, or other instrument binding on the Borrower or any of its properties,
or (c) require the consent, authorization by, or approval of or notice to or
filing or registration with any governmental authority or other Person. This
Agreement is, and each of the other Loan Documents to which the Borrower is or
will be a party, when delivered hereunder or thereunder, will be, the legal,
valid, and binding obligation of the Borrower enforceable against the Borrower
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, or similar laws affecting creditors' rights generally
and by general principles of equity.
SECTION 4.3. SOLVENCY; NO LIENS. The Borrower is Solvent and
will be Solvent upon the completion of all transactions contemplated to occur
hereunder (including, without limitation, the Loan to be made on the Effective
Date); the security interests granted herein constitute and shall at all times
constitute the first and only liens on the Collateral other than Permitted
Liens; and the Borrower is, or will be at the time additional Collateral is
acquired by it, the absolute owner of the Collateral with full right to pledge,
sell, consign, transfer, and create a security interest therein, free and clear
of any and all claims or liens in favor of any other Person other than Permitted
Liens.
SECTION 4.4. NO JUDGMENTS, LITIGATION. No judgments are
outstanding against the Borrower nor is there now pending or, to the Borrower's
knowledge after due inquiry (but without the search of any docket or court or
agency records), threatened any litigation, contested claim, or governmental
proceeding by or against the Borrower except judgments and pending or threatened
litigation, contested claims, and governmental proceedings which would not, in
the aggregate, have a Material Adverse Effect on the Borrower.
SECTION 4.5. NO DEFAULTS. The Borrower is not in default or
has not received a notice of default under any material contract, lease, or
commitment to which it is a party or by which it is bound. The Borrower knows of
no dispute regarding any contract, lease, or commitment which could have a
Material Adverse Effect on the Borrower.
SECTION 4.6. COLLATERAL LOCATIONS. On the date hereof, each
item of the Collateral is located at the place of business specified in the
applicable Schedule.
SECTION 4.7. NO EVENTS OF DEFAULT. No Event of Default has
occurred and is continuing nor has any event occurred which, with the giving of
notice or the passage of time, or both, would constitute an Event of Default.
SECTION 4.8. NO LIMITATION ON LENDER'S RIGHTS. Except as
permitted herein, none of the Collateral is subject to contractual obligations
that may restrict or inhibit the Lender's rights or abilities to sell or dispose
of the Collateral or any part thereof after the occurrence of an Event of
Default.
SECTION 4.9. PERFECTION AND PRIORITY OF SECURITY INTEREST.
This Agreement creates a valid and, upon completion of all required filings of
financing statements, perfected first priority and exclusive security interest
in the Collateral, securing the payment of all the Obligations.
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SECTION 4.10. MODEL AND SERIAL NUMBERS. The Schedules set
forth the true and correct model number and serial number of each item of
Equipment that constitutes Collateral.
SECTION 4.11. ACCURACY AND COMPLETENESS OF INFORMATION. All
data, reports, and information heretofore, contemporaneously, or hereafter
furnished by or on behalf of the Borrower in writing to the Lender or for
purposes of or in connection with this Agreement or any other Loan Document, or
any transaction contemplated hereby or thereby, are or will be true and accurate
in all material respects on the date as of which such data, reports, and
information are dated or certified and not incomplete by omitting to state any
material fact necessary to make such data, reports, and information not
misleading at such time. There are no facts now known to the Borrower that
relate specifically and uniquely to the Borrower (i.e., are not generally
applicable to Borrower's industry or the economy in general) which individually
or in the aggregate would reasonably be expected to have a Material Adverse
Effect and which have not been specified herein, in the Financial Statements, or
in any certificate, opinion, or other written statement previously furnished by
the Borrower to the Lender.
SECTION 4.12. PRICE OF EQUIPMENT. The cost of each item of
Equipment does not exceed the fair and usual price for such type of equipment
purchased in like quantity and reflects all discounts, rebates and allowances
for the Equipment (including, without limitation, discounts for advertising,
prompt payment, testing, or other services) given to the Borrower by the
manufacturer, supplier, or any other person.
SECTION 5. COVENANTS OF THE BORROWER.
-------------------------
SECTION 5.1. EXISTENCE, ETC. The Borrower shall: (a) retain
its existence and its current yearly accounting cycle, (b) maintain in full
force and effect all licenses, bonds, franchises, leases, trademarks, patents,
contracts, and other rights necessary or desirable to the profitable conduct of
its business unless the failure to do so could not reasonably be expected to
have a Material Adverse Effect on the Borrower, (c) continue in, and limit its
operations to, the same general lines of business as those presently conducted
by it, and (d) comply with all applicable laws and regulations of any U.S.
federal, state, or local governmental authority, except for such laws and
regulations the violations of which would not, in the aggregate, have a Material
Adverse Effect on the Borrower.
SECTION 5.2. NOTICE TO THE LENDER. As soon as possible, and
in any event within five days after the Borrower learns of the following, the
Borrower will give written notice to the Lender of (a) any proceeding instituted
or threatened to be instituted by or against the Borrower in any federal, state,
local, or foreign court or before any commission or other regulatory body
(federal, state, local, or foreign) involving a sum, together with the sum
involved in all other similar proceedings, in excess of $50,000 in the
aggregate, (b) any contract that is terminated or amended and which has had or
could reasonably be expected to have a Material Adverse Effect on the Borrower,
(c) the occurrence of any Material Adverse Change with respect to the Borrower,
and (d) the occurrence of any Event of Default or event or condition which, with
notice or lapse of time or both, would constitute an Event of Default, together
with a statement of the action which the Borrower has taken or proposes to take
with respect thereto.
SECTION 5.3. MAINTENANCE OF BOOKS AND RECORDS. The Borrower
will maintain books and records pertaining to the Collateral in such detail,
form, and scope as the Lender shall require in its commercially reasonable
judgment. The Borrower agrees that the Lender or its agents may enter upon the
Borrower's premises at any time and from time to time during normal business
hours, and at any time upon the occurrence and continuance of an Event of
Default, for the purpose of inspecting the Collateral and any and all records
pertaining thereto.
SECTION 5.4. INSURANCE. The Borrower will maintain insurance
on the Collateral under such policies of insurance, with such insurance
companies, in such amounts, and covering such risks as are at all times
satisfactory to the Lender. All such policies shall be made payable to the
Lender, in case of loss, under a standard non-contributory "lender" or "secured
party" clause and are to contain such other provisions as the Lender may
reasonably require to protect the Lender's interests in the Collateral and to
any payments to be made under such
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policies. Certificates of insurance policies are to be delivered to the Lender,
premium prepaid, with the loss payable endorsement in the Lender's favor, and
shall provide for not less than thirty days' prior written notice to the Lender,
of any alteration or cancellation of coverage. If the Borrower fails to maintain
such insurance, upon reasonable notice to the Borrower and an opportunity for
Borrower to cure, the Lender may arrange for (at the Borrower's expense and
without any responsibility on the Lender's part for) obtaining the insurance.
Unless the Lender shall otherwise agree with the Borrower in writing, the Lender
shall have the sole right, after reasonable notice to the Borrower, in the name
of the Lender or the Borrower, to file claims under any insurance policies, to
receive and give acquittance for any payments that may be payable thereunder,
and to execute any endorsements, receipts, releases, assignments, reassignments,
or other documents that may be necessary to effect the collection, compromise,
or settlement of any claims under any such insurance policies.
SECTION 5.5. TAXES. The Borrower will pay, when due, all
taxes, assessments, claims, and other charges ("Taxes") lawfully levied or
assessed against the Borrower or the Collateral other than taxes that are being
diligently contested in good faith by the Borrower by appropriate proceedings
promptly instituted and for which an adequate reserve is being maintained by the
Borrower in accordance with GAAP. If any Taxes remain unpaid after the date
fixed for the payment thereof, or if any lien shall be claimed therefor, then,
without notice to the Borrower, but on the Borrower's behalf, the Lender may pay
such Taxes, and the amount thereof shall be included in the Obligations.
SECTION 5.6. BORROWER TO DEFEND COLLATERAL AGAINST CLAIMS;
FEES ON COLLATERAL. The Borrower will defend the Collateral against all claims
and demands of all Persons at any time claiming the same or any interest
therein. The Borrower will not knowingly permit any notice creating or otherwise
relating to liens on the Collateral or any portion thereof to exist or be on
file in any public office other than Permitted Liens. The Borrower shall
promptly pay, when payable, all transportation, storage, and warehousing charges
and license fees, registration fees, assessments, charges, permit fees, and
taxes (municipal, state, and federal) which may now or hereafter be imposed upon
the ownership, leasing, renting, possession, sale, or use of the Collateral,
other than taxes on or measured by the Lender's income and fees, assessments,
charges, and taxes which are being contested in good faith by appropriate
proceedings diligently conducted and with respect to which adequate reserves are
maintained to the extent required by GAAP.
SECTION 5.7. NO CHANGE OF LOCATION, STRUCTURE, OR IDENTITY.
The Borrower will not (a) change the location of its chief executive office or
establish any place of business other than those specified herein or (b) move or
permit the movement of any item of Collateral from the location specified in the
applicable Schedule, except that the Borrower may change its chief executive
office and keep Collateral at other locations within the United States provided
that the Borrower has delivered to the Lender (i) prior written notice thereof
and (ii) duly executed financing statements and other agreements and instruments
(all in form and substance satisfactory to the Lender) necessary or, in the
opinion of the Lender, desirable to perfect and maintain in favor of the Lender
a first priority security interest in the Collateral. Notwithstanding anything
to the contrary in the immediately preceding sentence, the Borrower may keep any
Collateral consisting of motor vehicles or rolling stock at any location in the
United States provided that the Lender's security interest in any such
Collateral is conspicuously marked on the certificate of title thereof and the
Borrower has complied with the provisions of Section 5.9.
SECTION 5.8. USE OF COLLATERAL; LICENSES; REPAIR. The
Collateral shall be operated by competent, qualified personnel in connection
with the Borrower's business purposes, for the purpose for which the Collateral
was designed and in accordance with applicable operating instructions, laws, and
government regulations, and the Borrower shall use every reasonable precaution
to prevent loss or damage to the Collateral from fire and other hazards. The
Collateral shall not be used or operated for personal, family, or household
purposes. The Borrower shall procure and maintain in effect all orders,
licenses, certificates, permits, approvals, and consents required by federal,
state, or local laws or by any governmental body, agency, or authority in
connection with the delivery, installation, use, and operation of the
Collateral. The Borrower shall keep all of the Equipment in a satisfactory state
of repair and satisfactory operating condition in accordance with industry
standards, and will make all repairs and replacements when and where necessary
and practical. The Borrower will not waste or destroy the Equipment or any part
thereof, and will not be negligent in the care or use thereof. The Equipment
shall not be annexed or affixed to or become part of any realty without the
Lender's prior written consent.
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SECTION 5.9. FURTHER ASSURANCES. The Borrower will, promptly
upon request by the Lender, execute and deliver or use its best efforts to
obtain any document reasonably required by the Lender (including, without
limitation, warehouseman or processor disclaimers, mortgagee waivers, landlord
disclaimers, or subordination agreements with respect to the Obligations and the
Collateral), give any notices, execute and file any financing statements,
mortgages, or other documents (all in form and substance satisfactory to the
Lender), mark any chattel paper, deliver any chattel paper or instruments to the
Lender, and take any other actions that are necessary or, in the reasonable
opinion of the Lender, desirable to perfect or continue the perfection and the
first priority of the Lender's security interest in the Collateral, to protect
the Collateral against the rights, claims, or interests of any Persons, or to
effect the purposes of this Agreement. The Borrower hereby authorizes the Lender
to file one or more financing or continuation statements, and amendments
thereto, relating to all or any part of the Collateral without the signature of
the Borrower where permitted by law, provided that lender will use its best
efforts to deliver a copy of same to Borrower concurrently with the filing
thereof. A carbon, photographic, or other reproduction of this Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law. To the extent
required under this Agreement, the Borrower will pay all costs reasonably
incurred in connection with any of the foregoing.
SECTION 5.10. NO DISPOSITION OF COLLATERAL. The Borrower will
not in any way hypothecate or create or permit to exist any lien, security
interest, charge, or encumbrance on or other interest in any of the Collateral,
except for the lien and security interest granted hereby and Permitted Liens
which are junior to the lien and security interest of the Lender, and the
Borrower will not sell, transfer, assign, pledge, collaterally assign, exchange,
or otherwise dispose of any of the Collateral. In the event the Collateral, or
any part thereof, is sold, transferred, assigned, exchanged, or otherwise
disposed of in violation of these provisions, the security interest of the
Lender shall continue in such Collateral or part thereof notwithstanding such
sale, transfer, assignment, exchange, or other disposition, and the Borrower
will hold the proceeds thereof in a separate account for the benefit of the
Lender. Following such a sale, the Borrower will transfer such proceeds to the
Lender in kind.
SECTION 5.11. NO LIMITATION ON LENDER'S RIGHTS. The Borrower
will not enter into any contractual obligations which may restrict or inhibit
the Lender's rights or ability to sell or otherwise dispose of the Collateral or
any part thereof.
SECTION 5.12. PROTECTION OF COLLATERAL. Upon notice to the
Borrower (provided that if an Event of Default has occurred and is continuing
the Lender need not give any notice), the Lender shall have the right at any
time to make any payments and do any other acts the Lender may deem necessary to
protect its security interests in the Collateral, including, without limitation,
the rights to satisfy, purchase, contest, or compromise any encumbrance, charge,
or lien which, in the reasonable judgment of the Lender, appears to be prior to
or superior to the security interests granted hereunder, and appear in, and
defend any action or proceeding purporting to affect its security interests in,
or the value of, any of the Collateral. The Borrower hereby agrees to reimburse
the Lender for all payments made and reasonable expenses incurred under this
Agreement including fees, expenses, and disbursements of attorneys and
paralegals acting for the Lender, including any of the foregoing payments under,
or acts reasonably taken to protect its security interests in, any of the
Collateral, which amounts shall be secured under this Agreement, and agrees it
shall be bound by any payment made or act taken by the Lender hereunder absent
the Lender's gross negligence or willful misconduct. The Lender shall have no
obligation to make any of the foregoing payments or perform any of the foregoing
acts.
SECTION 5.13. DELIVERY OF ITEMS. The Borrower will (a)
promptly (but in no event later than one Business Day) after its receipt
thereof, deliver to the Lender any documents or certificates of title issued
with respect to any property included in the Collateral, and any promissory
notes, letters of credit or instruments related to or otherwise in connection
with any property included in the Collateral, which in any such case come into
the possession of the Borrower, or shall cause the issuer thereof to deliver any
of the same directly to the Lender, in each case with any necessary endorsements
in favor of the Lender and (b) deliver to the Lender as soon as available copies
of any and all press releases and other similar communications issued by the
Borrower.
SECTION 5.14. SOLVENCY. The Borrower shall be and remain
Solvent at all times.
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SECTION 5.15. FUNDAMENTAL CHANGES. The Borrower shall not (a)
amend or modify its name, unless the Borrower delivers to the Lender thirty days
prior to any such proposed amendment or modification written notice of such
amendment or modification and within ten days before such amendment or
modification delivers executed Uniform Commercial Code financing statements (in
form and substance satisfactory to the Lender) or (b) merge or consolidate with
any other entity or make any material change in its capital structure, in each
case without the Lender's prior written consent which shall not be unreasonably
withheld or delayed.
SECTION 5.16. ADDITIONAL REQUIREMENTS. The Borrower shall
take all such further actions and execute all such further documents and
instruments as the Lender may reasonably request.
SECTION 6. FINANCIAL STATEMENTS. Until the payment and satisfaction
--------------------
in full of all Obligations, the Borrower shall deliver to the Lender the
following financial information:
SECTION 6.1. ANNUAL FINANCIAL STATEMENTS. As soon as
available, but not later than 120 days after the end of each fiscal year of the
Borrower and its consolidated subsidiaries, the consolidated balance sheet,
income statement, and statements of cash flows and shareholders equity for the
Borrower and its consolidated subsidiaries (the "Financial Statements") for such
year, reported on by independent certified public accountants without an adverse
qualification; and
SECTION 6.2. QUARTERLY FINANCIAL STATEMENTS. As soon as
available, but not later than 60 days after the end of each of the first three
fiscal quarters in any fiscal year of the Borrower and its consolidated
subsidiaries, the Financial Statements for such fiscal quarter, together with a
certification duly executed by a responsible officer of the Borrower that such
Financial Statements have been prepared in accordance with GAAP and are fairly
stated in all material respects (subject to normal year-end audit adjustments).
SECTION 7. EVENTS OF DEFAULT. The occurrence of any of the
-----------------
following events shall constitute an Event of Default hereunder:
(a) the Borrower shall fail to pay within five days of when due
any amount required to be paid by the Borrower under or in connection with any
Note and this Agreement;
(b) any representation or warranty made or deemed made by the
Borrower under or in connection with any Loan Document or any Financial
Statement shall prove to have been false or incorrect in any material respect
when made;
(c) the Borrower shall fail to perform or observe (i) any of the
terms, covenants or agreements contained in Sections 5.4, 5.7, 5.10, 5.14, or
5.15 hereof or (ii) any other term, covenant, or agreement contained in any Loan
Document (other than the other Events of Default specified in this Section 7)
and such failure remains unremedied for the earlier of fifteen days from (A) the
date on which the Lender has given the Borrower written notice of such failure
and (B) the date on which the Borrower knew of such failure;
(d) any provision of any Loan Document to which the Borrower is a
party shall for any reason cease to be valid and binding on the Borrower, or the
Borrower shall so state;
(e) dissolution, liquidation, winding up, or cessation of the
Borrower's business, failure of the Borrower generally to pay its debts as they
mature, admission in writing by the Borrower of its inability generally to pay
its debts as they mature, or calling of a meeting of the Borrower's creditors
for purposes of compromising any of the Borrower's debts;
(f) the commencement by or against the Borrower of any
bankruptcy, insolvency, arrangement, reorganization, receivership, or similar
proceedings under any federal or state law and, in the case of any such
involuntary proceeding, such proceeding remains undismissed or unstayed for
forty-five days following the commencement thereof, or any action by the
Borrower is taken authorizing any such proceedings;
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(g) an assignment for the benefit of creditors is made by the
Borrower, whether voluntary or involuntary, the appointment of a trustee,
custodian, receiver, or similar official for the Borrower or for any substantial
property of the Borrower, or any action by the Borrower authorizing any such
proceeding;
(h) the Borrower shall default in (i) the payment of principal or
interest on any indebtedness in excess of $50,000 (other than the Obligations)
beyond the period of grace, if any, provided in the instrument or agreement
under which such indebtedness was created or otherwise by the other party
thereto; or (ii) the observance or performance of any other agreement or
condition relating to any such indebtedness or contained in any instrument or
agreement relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the holder or holders of such indebtedness to cause, with the giving of
notice if required, such indebtedness to become due prior to its stated
maturity;
(i) the Borrower suffers or sustains a Material Adverse Change;
(j) any tax lien, other than a Permitted Lien, is filed of record
against the Borrower and is not bonded or discharged within five Business Days;
(k) any judgment which has had or could reasonably be expected to
have a Material Adverse Effect on the Borrower and such judgment shall not be
stayed, vacated, bonded, or discharged within sixty days;
(l) any material covenant, agreement, or obligation, as
determined in the sole discretion of the Lender, made by the Borrower and
contained in or evidenced by any of the Loan Documents shall cease to be
enforceable, or shall be determined to be unenforceable, in accordance with its
terms; the Borrower shall deny or disaffirm the Obligations under any of the
Loan Documents or any liens granted in connection therewith; or any liens
granted on any of the Collateral in favor of the Lender shall be determined to
be void, voidable, or invalid, or shall not be given the priority contemplated
by this Agreement; or
(m) there is a change in more than 35% of the ownership of any
equity interests of the Borrower on the date hereof or more than 35% of such
interests become subject to any contractual, judicial, or statutory lien,
charge, security interest, or encumbrance.
SECTION 8. REMEDIES. If any Event of Default shall have occurred
--------
and be continuing:
(a) The Lender may, without prejudice to any of its other rights
under any Loan Document or Applicable Law, declare all Obligations to be
immediately due and payable (except with respect to any Event of Default set
forth in Section 7(f) hereof, in which case all Obligations shall automatically
become immediately due and payable without necessity of any declaration) without
presentment, representation, demand of payment, or protest, which are hereby
expressly waived.
(b) The Lender may take possession of the Collateral and, for
that purpose may enter, with the aid and assistance of any person or persons,
any premises where the Collateral or any part hereof is, or may be placed, and
remove the same.
(c) The obligation of the Lender, if any, to make additional
Loans or financial accommodations of any kind to the Borrower shall immediately
terminate.
(d) The Lender may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein (or in any Loan
Document) or otherwise available to it, all the rights and remedies of a secured
party under the applicable Uniform Commercial Code (the "Code") whether or not
the Code applies to the affected Collateral and also may (i) require the
Borrower to, and the Borrower hereby agrees that it will at its expense and upon
request of the Lender forthwith, assemble all or part of the Collateral as
directed by the Lender
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and make it available to the Lender at a place to be designated by the Lender
that is reasonably convenient to both parties and (ii) without notice except as
specified below, sell the Collateral or any part thereof in one or more parcels
at public or private sale, at any of the Lender's offices or elsewhere, for
cash, on credit, or for future delivery, and upon such other terms as the Lender
may deem commercially reasonable. The Borrower agrees that, to the extent notice
of sale shall be required by law, at least ten days' notice to the Borrower of
the time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. The Lender shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. The Lender may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
(e) All cash proceeds received by the Lender in respect of any
sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Lender, be held by the Lender as
collateral for, or then or at any time thereafter applied in whole or in part by
the Lender against, all or any part of the Obligations in such order as the
Lender shall elect. Any surplus of such cash or cash proceeds held by the Lender
and remaining after the full and final payment of all the Obligations shall be
paid over to the Borrower or to such other Person to which the Lender may be
required under applicable law, or directed by a court of competent jurisdiction,
to make payment of such surplus.
SECTION 9. MISCELLANEOUS PROVISIONS.
------------------------
SECTION 9.1. NOTICES. Except as otherwise provided herein,
all notices, approvals, consents, correspondence, or other communications
required or desired to be given hereunder shall be given in writing and shall be
delivered by overnight courier, hand delivery, or certified or registered mail,
postage prepaid, if to the Lender, then to Transamerica Technology Finance
Division, 76 Batterson Park Road, Farmington, Connecticut 06032, Attention:
Assistant Vice President, Lease Administration, with a copy to the Lender at
Riverway II, West Office Tower, 9399 West Higgins Road, Rosemont, Illinois
60018, Attention: Legal Department, and if to the Borrower, then to Exodus
Communications, Inc., 2650 San Tomas Expressway, Santa Clara, CA 95051,
Attention: Chief Financial Officer or such other address as shall be designated
by the Borrower or the Lender to the other party in accordance herewith. All
such notices and correspondence shall be effective when received.
SECTION 9.2. HEADINGS. The headings in this Agreement are
for purposes of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
SECTION 9.3. ASSIGNMENTS. The Borrower shall not have the
right to assign any Note or this Agreement or any interest therein unless the
Lender shall have given the Borrower prior written consent and the Borrower and
its assignee shall have delivered assignment documentation in form and substance
satisfactory to the Lender in its sole discretion. The Lender may assign its
rights and delegate its obligations under any Note or this Agreement.
SECTION 9.4. AMENDMENTS, WAIVERS, AND CONSENTS. Any
amendment or waiver of any provision of this Agreement and any consent to any
departure by the Borrower from any provision of this Agreement shall be
effective only by a writing signed by the Lender and shall bind and benefit the
Borrower and the Lender and their respective successors and assigns, subject, in
the case of the Borrower, to the first sentence of Section 9.3.
SECTION 9.5. INTERPRETATION OF AGREEMENT. Time is of the
essence in each provision of this Agreement of which time is an element. All
terms not defined herein or in a Note shall have the meaning set forth in the
applicable Code, except where the context otherwise requires. To the extent a
term or provision of this Agreement conflicts with any Note, or any term or
provision thereof, and is not dealt with herein with more specificity, this
Agreement shall control with respect to the subject matter of such term or
provision. Acceptance of or acquiescence in a course of performance rendered
under this Agreement shall not be relevant in determining the meaning of this
Agreement even though the accepting or acquiescing party had knowledge of the
nature of the performance and opportunity for objection.
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SECTION 9.6. CONTINUING SECURITY INTEREST. This Agreement
shall create a continuing security interest in the Collateral and shall (i)
remain in full force and effect until the indefeasible payment in full of the
Obligations, (ii) be binding upon the Borrower and its successors and assigns
and (iii) inure, together with the rights and remedies of the Lender hereunder,
to the benefit of the Lender and its successors, transferees, and assigns.
SECTION 9.7. REINSTATEMENT. To the extent permitted by law,
this Agreement and the rights and powers granted to the Lender hereunder and
under the Loan Documents shall continue to be effective or be reinstated if at
any time any amount received by the Lender in respect of the Obligations is
rescinded or must otherwise be restored or returned by the Lender upon the
insolvency, bankruptcy, dissolution, liquidation, or reorganization of the
Borrower or upon the appointment of any receiver, intervenor, conservator,
trustee, or similar official for the Borrower or any substantial part of its
assets, or otherwise, all as though such payments had not been made.
SECTION 9.8. SURVIVAL OF PROVISIONS. All representations,
warranties, and covenants of the Borrower contained herein shall survive the
execution and delivery of this Agreement, and shall terminate only upon the full
and final payment and performance by the Borrower of the Obligations secured
hereby.
SECTION 9.9. INDEMNIFICATION. The Borrower agrees to
indemnify and hold harmless the Lender and its directors, officers, agents,
employees, and counsel from and against any and all reasonable costs, expenses,
claims, or liability incurred by the Lender or such Person hereunder and under
any other Loan Document or in connection herewith or therewith, unless such
claim or liability shall be due to willful misconduct or gross negligence on the
part of the Lender or such Person.
SECTION 9.10. COUNTERPARTS; TELECOPIED SIGNATURES. This
Agreement may be executed in counterparts, each of which when so executed and
delivered shall be an original, but both of which shall together constitute one
and the same instrument. This Agreement and each of the other Loan Documents and
any notices given in connection herewith or therewith may be executed and
delivered by telecopier or other facsimile transmission all with the same force
and effect as if the same was a fully executed and delivered original manual
counterpart.
SECTION 9.11. SEVERABILITY. In case any provision in or
obligation under this Agreement or any Note or any other Loan Document shall be
invalid, illegal, or unenforceable in any jurisdiction, the validity, legality,
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 9.12. DELAYS; PARTIAL EXERCISE OF REMEDIES. No delay
or omission of the Lender to exercise any right or remedy hereunder, whether
before or after the happening of any Event of Default, shall impair any such
right or shall operate as a waiver thereof or as a waiver of any such Event of
Default. No single or partial exercise by the Lender of any right or remedy
shall preclude any other or further exercise thereof, or preclude any other
right or remedy.
SECTION 9.13. ENTIRE AGREEMENT. The Borrower and the Lender
agree that this Agreement, the Schedule hereto, and the Commitment Letters are
the complete and exclusive statement and agreement between the parties with
respect to the subject matter hereof, superseding all proposals and prior
agreements, oral or written, and all other communications between the parties
with respect to the subject matter hereof. Should there exist any inconsistency
between the terms of the Commitment Letters and this Agreement, the terms of
this Agreement shall prevail.
SECTION 9.14. SETOFF. In addition to and not in limitation of
all rights of offset that the Lender may have under Applicable Law, and whether
or not the Lender has made any demand or the Obligations of the Borrower have
matured, the Lender shall have the right to appropriate and apply to the payment
of the Obligations of the Borrower all deposits and other obligations then or
thereafter owing by the Lender to or for
12
<PAGE>
the credit or the account of the Borrower.
SECTION 9.15. WAIVER OF JURY TRIAL. THE BORROWER AND THE
LENDER IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING,
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 9.16. GOVERNING LAW. THE VALIDITY, INTERPRETATION, AND
ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAW PRINCIPLES THEREOF.
SECTION 9.17. VENUE; SERVICE OF PROCESS. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS SITUATED IN COOK COUNTY, OR OF
THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF ILLINOIS, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS. THE BORROWER HEREBY IRREVOCABLY WAIVES, IN CONNECTION
WITH ANY SUCH ACTION OR PROCEEDING, (a) ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND (b) THE RIGHT TO
INTERPOSE ANY NONCOMPULSORY SETOFF, COUNTERCLAIM, OR CROSS-CLAIM. THE BORROWER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT THE ADDRESS
FOR IT SPECIFIED IN SECTION 9.1 HEREOF. NOTHING HEREIN SHALL AFFECT THE RIGHT
OF EITHER PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE OTHER PARTY IN ANY
OTHER JURISDICTION, SUBJECT IN EACH INSTANCE TO THE PROVISIONS HEREOF WITH
RESPECT TO RIGHTS AND REMEDIES.
IN WITNESS WHEREOF, the undersigned Borrower has caused this Agreement
to be duly executed and delivered by its proper and duly authorized officer as
of the date first set forth above.
EXODUS COMMUNICATIONS, INC.
BY: /s/ Richard S. Stoltz
_______________________________________
NAME: Richard S. Stoltz
TITLE: COO and CFO
FEDERAL TAX ID:
ACCEPTED AS OF THE
5th DAY OF MAY, 1998
TRANSAMERICA BUSINESS CREDIT CORPORATION
BY: /s/ Meg Lengson
____________________________________________
NAME: Meg Lengson
TITLE: AVP
FORM16
13
<PAGE>
EXHIBIT 10.36
[LOGO]
1 June 1998
Mike Healy
Exodus Communications
2650 San Tomas Expressway
Santa Clara, CA 95051
Dear Mr. Healy
Cisco Systems Capital Corporation ("CSC"), a wholly owned subsidiary of Cisco
Systems, Inc., specializes in providing innovative finance solutions for Cisco
Systems products and services. We are pleased to present this proposal
("Proposal") for the transaction described below:
LESSOR: Cisco Systems Capital Corporation.
LESSEE: Exodus Communications
EQUIPMENT: Cisco Systems Products, presented in quotations
from Cisco Account Manager Tom Packo
EQUIPMENT COST: $4,000,000 (This will be adjusted as necessary per
the needs of Exodus and the credit approval of
CSC)
EQUIPMENT SHIP TO LOCATION: CA, USA.
INITIAL TERM: 36 months.
36 MONTH RENTAL: 36 Month Fair Market Value Lease: The rental
-----------------------
amount, expressed as a percentage of Equipment
Costs, is 2.75% per month, payable on the 1st day
of each month.
Lease Rate Factor: .0275
MONTHLY PAYMENT: In accordance to the pricing and configuration
referenced above, the monthly payment will be the
hardware cost multiplied by the lease rate factor.
ADVANCE PAYMENTS: None, but deemed acceptance of the equipment will
take place 30 days after shipment of the final
piece of equipment per schedule. There is no
interim rent, and commencement will take place the
1st of the month after acceptance.
NET LEASE: This is a net lease transaction under which all
costs, including without limitation, insurance,
maintenance and taxes, are paid by Lessee for the
term of the lease. Manufacturer's guarantees or
warranties will be passed on to Lessee.
ADJUSTMENT OF
RENTAL FACTORS: The rental amount quoted in this proposal will be
adjusted prior to the commencement date of each
schedule in accordance with changes equal to or
greater than one quarter of one percent (.25%) in
the weekly average of the Three Year Treasury Note
interest rate, as specified in Federal Reserve
statistical release H.15 from the week preceding
the date of this proposal to the week preceding
the final shipment date for the Equipment Lease
Schedule(s) herein. Changes to the benchmark rate
of less than one quarter of one percent (.25%)
will not affect the lease rate factor quoted
herein. The Three Year Treasury Note H.15
statistic is updated weekly by the U.S. Federal
Reserve for the preceding week's average yield.
The statistic is publicly available on the
Internet at http://www.bog.frb.fed.us/releases/
h15/.
INVOICING: A single invoice will be furnished monthly,
detailing all Lease Schedules and rental payments
due. Freight charges will added to CSC's invoice
and billed to lessee with the first rental
payment.
END OF LEASE OPTION: Fair Market Value Purchase Option: At the end of
----------------------------------
the Initial Term of the Lease, Lessee may select
one of the following options: (1) purchase the
Equipment for the then Fair Market, or (2) renew
the lease of the Equipment for the then Fair
Rental Value, or (3) return the Equipment to the
Lessor. If both parties do not agree on the FMV,
it will be determined by the average value
provided by three mutually approved appraisers.
FAIR MARKET VALUE CAP: The Fair Market Value Cap will be 22% of the
original invoice.
DOCUMENTATION FEE: None.
<PAGE>
June 4, 1998
Page 2
COMMITMENT FEE: None.
EXPIRATION DATE: This Proposal shall terminate 30 days after the
date hereof.
CREDIT APPROVAL: This Proposal, until credit approved, serves as a
quotation, not a commitment by CSC or Cisco
Systems, Inc. to provide credit. Final acceptance
of this Proposal is subject to credit review and
approval by CSC. You agree to provide two years
audited financial statements, bank references, a
completed credit application and any other
required credit information along with the signed
copy of this proposal. You hereby authorize CSC
and/or its agents to make a complete credit
investigation and to relate this information to
others as necessary to secure credit approval.
The parties acknowledge that the financing contemplated by this Proposal is
subject to the above-referenced conditions and the execution and delivery of all
appropriate documents (in form and substance satisfactory to CSC), including
without limitation, to the extent applicable, the Master Agreement to Lease
Equipment, any Schedule, the Lease Assignment of Purchase Order, financing
statements, legal opinion or other documents or agreements reasonably required
by CSC.
By signing this document, you hereby authorize CSC to order, when appropriate,
for manufacture and delivery, the equipment configuration described herein (or
in the attached or future purchase orders) and to file a financing statement in
accordance with the Uniform Commercial Code signed only by CSC or signed by CSC
as Lessee's attorney in fact with respect to any of the Equipment.
If, for any reason, you and CSC shall fail to consummate the financing
contemplated by this Proposal, you shall be solely responsible for the payment
in full of the purchase price (and all related costs and expenses incurred by
CSC or Cisco Systems, Inc.) associated with any such outstanding orders. All
such orders shall be subject to the standard Terms & Conditions of Sale of Cisco
Systems, Inc., including but not limited to the "net 30" payment terms
commencing from date of shipment. Please indicate your acceptance of all of the
terms and conditions set forth herein by signing and dating this Proposal in the
space provided below by no later than the expiration date referenced above.
Thank you for the opportunity to present this Proposal. We look forward to
doing business with you. If you have any questions, please do not hesitate to
call me at (415) 439-2560.
Sincerely,
CISCO SYSTEMS CAPITAL CORPORATION ACKNOWLEDGED AND AGREED (LESSEE):
Timothy A. Shockley
By: /s/ Richard S. Stoltz
(Authorized Signature)
Name: Richard S. Stoltz
Dated:
<PAGE>
EXHIBIT 10.37
CONFIDENTIAL TREATMENT REQUESTED
QWEST COMMUNICATIONS PRIVATE LINE SERVICE AGREEMENT
BUSINESS SERVICES
This Private Line Services Agreement ("Agreement"), is entered into as of July
17, 1998 (the "Effective Date"), by and between Qwest Communications
Corporation, a Delaware corporation ("Qwest"), and Exodus Communications, Inc.,
a Delaware corporation ("Customer").
1. SERVICES ORDERED AND PRICING: 1.1 Qwest shall supply to Customer its
telecommunications capacity ("Facility" or "Facilities") and related ancillary
services described in Exhibit A to this Agreement and at the prices set forth on
Exhibit A. Facilities requested by Customer shall be requested on Qwest's
service order forms in effect from time to time (hereafter, any such order is a
"Service Order"). Each Service Order shall reference this Agreement and shall
become a part of the Agreement when executed by a duly authorized representative
of Qwest. Qwest reserves the right to reject any Service Order. 1.2 Upon
receipt of a duly executed Service Order, Qwest shall notify Customer of its
target date for the delivery of the Facilities (the "Estimated Availability
Date"). Qwest shall use diligent efforts to install each such Facility on or
before the Estimated Availability Date. In the event that Qwest becomes aware
that the delivery date may be delayed, Qwest will immediately contact Customer
and describe the reasons for the delay and the new delivery date. Qwest will
continue to keep Customer informed of delivery date progress and changes prior
to the installation of each Facility ordered hereunder. The inability of Qwest
to deliver a Facility by such date shall not be a breach of this Agreement. If
Qwest fails to make any Qwest Facility available within 90 days after receipt of
Customer's duly executed Agreement, Customer's sole remedy shall be
cancellation, upon written notice to Qwest, of the individual Facility so
affected. 1.3 Customer shall take and pay for each Facility for the applicable
Minimum Service Term set forth in Exhibit A to this Agreement. The Minimum
Service Terms for each Facility shall begin on the date (the "Start of Service
Date") on which Customer accepts delivery of such Facility or 5 days after Qwest
notifies Customer that the Facility has met all applicable standard Qwest
network specifications ("Specifications") and is available for use, whichever is
sooner, unless (i) Customer notifies Qwest within said 5 day period that the
Facility is in material non-compliance with the Specifications, or (ii) Customer
has delayed the Start of Service Date as provided for below. In the event of
notice of material non-compliance as defined above, Qwest shall promptly take
such reasonable action as necessary to correct any such non-compliance in the
Facility and shall, upon correction, notify Customer of a new Start of Service
Date. Customer may delay the Start of Service Date for any facility for up to
30 days from the Estimated Availability Date by written notification to Qwest at
least 72 hours prior to such date.
2. RENEWAL. Upon the expiration of the Minimum Service Term for each
Facility, and if Customer is not then in default of any of its obligations to
Qwest, each Facility's Minimum Service Terms shall automatically be renewed on a
month-to-month basis (hereinafter the "Renewal Term") until either party
terminates the Facility on 30 days advance written notice to the other. All of
the terms and conditions of this Agreement shall apply during the Renewal Term.
3. CHARGES AND PAYMENT. 3.1 Recurring charges shall be invoiced by Qwest on a
monthly basis in advance and non-recurring charges shall be invoiced in arrears.
Customer shall make all payments due hereunder within 30 days after the date of
Qwest's invoice; provided, however, that Qwest may, upon a failure of Customer
to establish creditworthiness, in its sole discretion, include in its first
invoice to Customer a deposit amount or letter of credit equal and applicable to
the last monthly charge due for Facilities. In the event that the Start of
Service Date for any Facility falls on other than the first day of any month,
the first invoice to Customer shall consist of: (1) the pro-rata portion of the
applicable monthly charge covering the period from the Start of Service Date to
the first day of the subsequent month and (2) the monthly charge for the
following month in the event that any amount is not received by the date due. No
payment due under this Agreement is subject to reduction, set-off or adjustment
of any nature except as specifically provided in Section 19 below. 3.2. Any
applicable sales, use, commercial or other similar taxes or license fees
directly related to the commercial relationship established by
<PAGE>
this Agreement, shall also be payable by Customer (other than taxes based on
Qwest's income in addition to the other charges set forth in the Agreement.
4. TERMINAL EQUIPMENT. At each end of the city pairs on which Customer order
Facilities, Qwest shall provide appropriate equipment in its terminal locations
necessary to connect the Facilities to Customer's Interconnection Facilities (as
defined below). In the event that customer desires to install its own equipment
in one or more of Qwest's terminals and Qwest, in its sole discretion, agrees to
such installation, the parties shall execute Qwest's standard form license
agreement.
5. INTERCONNECTION FACILITIES. 6.1 As used in this Agreement, the term
"Interconnection Facilities" shall mean transmission capacity provided by
Customer or its third party supplier to extend the Facilities provided by Qwest
from a Qwest terminal to any other location (e.g. local access telephone service
provided by a local telephone company). Such Interconnections Facilities shall
connect to the Facilities provided by Qwest hereunder at the Network Interface
points located in the Qwest terminals and defined in Specifications. 6.2 Qwest
will use reasonable efforts to order Interconnection Facilities on behalf of
Customer from Customer's designated supplier provided that Customer furnishes
Qwest with an acceptable Letter of Agency. Customer may, at its election but
subject to Qwest's prior approval, order its own Interconnection Facilities. In
no event will unavailability, delay in installation, or other impairment of
Interconnection Facilities excuse Customer's obligation to pay Qwest the charges
applicable to the Facilities, whether or not such Facilities are useable by
Customer.
6. GOVERNMENTAL AUTHORITY. The obligation of Qwest to provide the Facilities
to customer is subject to the receipt of any required regulatory or other
governmental authorizations. This Agreement may be superseded by a tariff filed
with the appropriate regulatory agency, which tariff may contain such
modifications of the provisions of this Agreement as Qwest deems appropriate.
In the event that such tariff materially affects Customer's rights or
obligations hereunder, Customer may terminate the specific Facilities so
affected.
7. ASSIGNMENT. Neither party may assign, encumber transfer its rights
hereunder without the prior written approval of the other party, which consent
shall not be unreasonably withheld. Either party may transfer, assign, or
otherwise in any manner encumber this Agreement and its rights and obligations
hereunder to any of its affiliates, parent or subsidiaries upon written notice.
8. EVENT OF DEFAULT. 8.1 An "Event of Default" shall occur if: (1) either
party fails to make any payment required to be made by it under this Agreement
and any such failure remains uncorrected for five business days after receipt of
written notice of such failure the date such payment was due; (2) either party
fails to perform or observe any material term or obligation other than making
payment, contained in this Agreement, and any such failure remains uncorrected
for 45 calendar days after receipt of a notice from the non-defaulting party
informing the defaulting party of such failure; or (3) a voluntary proceeding
shall be commenced by or against either party in any jurisdiction seeking
liquidation, reorganization or other relief under any bankruptcy or similar law
which is not dismissed within 60 calendar days of filing, or either party shall
make an assignment for the benefit of creditors; or shall generally not agree to
pay or not be able to pay its debts as they become due. 8.2 The parties
expressly agree that the failure of any particular circuit or any number of
circuits to meet the specifications shall not constitute a material breach of
this Agreement but shall only obligate Qwest to provide Outage Credits as set
forth above, provided, however, that if a failure continues uncured for a period
of more than twenty-four (24) continuous hours for those IOC (as defined in
Section 19 below) Facilities with SONET ring back-up capabilities, Customer may
terminate this Agreement without liability.
9. REMEDIES. 9.1 Upon the happening of any Event of Default, the non-
defaulting party may, in addition to any other rights it has according to law:
(1) suspend its performance under this Agreement so long as such default remains
uncorrected but only after providing written notice of such suspension to the
defaulting party; or (2) terminate this Agreement by providing written notice of
termination to the defaulting party. 9.2 If Customer is the defaulting party,
Qwest may collect the total charges as specified in Section 2)b of the Exhibit A
attached hereto.
10. FORCE MAJEURE. 10.1 Except as provided in Section 19 and subparagraph 10.2
below, Qwest shall not be liable for any failure of performance hereunder due to
causes beyond its reasonable control, including but not
2
<PAGE>
limited to, acts of God, fire, explosion, vandalism, fiber optic cable cut,
storm or other similar catastrophes, any law, order, regulation, direction,
action or request of the United States Government, or of any other government,
including state and local governments having jurisdiction over either of the
parties, or of any department, agency, commission, court, bureau, corporation or
other instrumentality of any one or more said governments, or of any civil or
military authority, national emergencies, insurrections, riots, wars, or
strikes, lock-outs, work stoppages or other labor difficulties. 10.2 If any such
failure of performance on the part of Qwest shall be for (i) 30 days or less,
then this Agreement shall remain in effect but Customer shall be relieved of its
obligation to pay for that portion of the Facilities affected for the period of
such failure of performance; or (ii) more than 30 days, then Customer may
terminate the provisions of this Agreement only insofar as they relate to the
Facilities so affected.
11. LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY OR ANY OF ITS
AFFILIATES BE LIABLE TO THE OTHER PARTY OR ANY OF ITS AFFILIATES FOR ANY LOSS OF
PROFIT OR REVENUE OR FOR ANY INDIRECT, CONSEQUENTIAL, INCIDENTAL, PUNITIVE OR
SIMILAR OR ADDITIONAL DAMAGES INCURRED OR SUFFERED AS A RESULT OF
UNAVAILABILITY, PERFORMANCE, NON-PERFORMANCE, TERMINATION, BREACH, OR OTHER
ACTION OR INACTION UNDER THIS AGREEMENT, EVEN IF A PARTY ADVISES THE OTHER PARTY
OF THE POSSIBILITY OF SUCH LOSS OR DAMAGE EXCEPT AS PROVIDED IN SECTION 19, IN
NO EVENT SHALL QWEST OR ANY OF ITS AFFILIATES BE LIABLE TO CUSTOMER OR TO ANY
THIRD PARTY OR ANY OF EITHER OF ITS AFFILIATES FOR ANY OUTAGE OR INCORRECT OR
DEFECTIVE TRANSMISSIONS, OR ANY DIRECT OR INDIRECT CONSEQUENCES THEREOF,
INCURRED OR SUFFERED WHILE USING THE QWEST NETWORK.
12. INDEMNIFICATION. Each party shall indemnify and hold harmless the other
party, its directors, officers, employees, and agents, successors, and assigns,
from all damages, costs, expenses and liabilities, including reasonable
attorney's fees and disbursements, sustained in any action commenced by any
third party and arising in connection with the indemnifying party's performance
of its obligations and duties under this Agreement. Qwest shall indemnify and
hold customer, its directors, officer, employees, agents, subsidiaries and
affiliates, harmless from any loss, damage, liability or expense on account of
any claim(s) and shall defend any suit and dispose of any claim(s) or other
proceedings based on an allegation that use of the Qwest Facilities, excluding
any Interconnection Services provided by Customer pursuant to Section 5,
infringes any United States or foreign patent or other intellectual property
right. The indemnified party shall promptly notify the other party of any such
suit or claim.
13. TITLE. Customer expressly disclaims any right, title, perpetual right of
use or any other interest in or to any equipment or property used or supplied by
Qwest under this Agreement.
14. DISCLAIMER OF ALL WARRANTIES. QWEST HEREBY DISCLAIMS ANY LIABILITY TO
CUSTOMER FOR INTERRUPTIONS AFFECTING THE FACILITIES FURNISHED HEREUNDER WHICH
ARE ATTRIBUTABLE TO CUSTOMER'S INTERCONNECTION SERVICES OR EQUIPMENT FAILURES.
THERE ARE NO WARRANTIES EITHER EXPRESS, IMPLIED, ORAL OR WRITTEN, WITH RESPECT
TO THE FACILITIES FURNISHED PURSUANT TO THIS SERVICE AGREEMENT, INCLUDING BUT
NOT LIMITED TO ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
15. NON-DISCLOSURE AND PUBLICITY. Neither party shall disclose to any third
party the terms and conditions of this Agreement without the prior written
consent of the other party, which will not be unreasonably withheld. Neither
party shall use the other's name in publicity or press releases without
obtaining that party's prior written approval, which will not be unreasonably
withheld. In addition, the parties agree to incorporate the terms and
conditions of the Mutual Non-Disclosure Agreement, dated July 17, 1998. In the
event of a conflict, this Agreement shall control.
16. ARBITRATION. 16.1 All disputes reasonably anticipated to be in excess of
twenty-five thousand dollars ($25,000.00) arising out of or related to this
Agreement shall be determined and resolved by arbitration at Denver, Colorado,
if brought by Customer, and at Santa Clara, California, if brought by Qwest in
accordance with the rules of the American Arbitration Association ("AAA"). The
arbitrator(s) shall be appointed in accordance with
3
<PAGE>
the rules then prevailing of the AAA. 16.2 The award rendered by the
arbitrator(s) shall be final and binding upon the parties hereto. Neither party
shall have the right to further appeal or redress the matters arbitrated except
for the purposes of obtaining the judgment rendered by the arbitrator(s).
Judgment upon any arbitration award may be entered and enforced in any court of
competent jurisdiction. 16.3 The parties hereto agree that a prevailing party
shall be entitled to recover all reasonable costs and expenses (Including all
reasonable attorney's fees and disbursements) of such arbitration proceeding, as
well as all cost for said proceeding. Such prevailing party shall also be
entitled to reasonable attorney's fees and costs incurred in enforcing a
judgment of the arbitrators separately from and in addition to any other amount
included in such judgment. This subparagraph 16.3 shall be severable from the
other provisions of this Agreement and shall survive and not be merged into any
such judgment.
17. MISCELLANEOUS. 17.1 This Agreement and each provision hereof may be
amended only by an instrument in writing signed by the parties hereto. No
failure or delay on the part of either party in exercising any right hereunder
and no course of dealing between the parties shall operate as a waiver of any
provision hereof. 17.2 In conjunction with this Agreement, each party shall at
all times comply with all applicable federal, state, and local statutes,
ordinances, regulations and orders of any commission or other government body.
17.3 This Service agreement shall be governed by the laws of the State of
Colorado. 17.4 All notices shall be in writing and shall be delivered by
certified mail return receipt requested or any other delivery system which is
capable of providing proof of delivery. Any such notice shall be deemed
effective on the date of actual delivery. All notices shall be addressed to
Qwest or customer as set forth herein. All notices to Qwest shall be addressed
to Qwest Communications Corporation, 555 17th Street, Denver, Colorado 80202.
Facsimile: (303) 291-1724, Attn.: Legal Counsel. All notices to Customer
shall be addressed to Exodus Communications, Inc., 2650 San Tomas Expressway,
Santa Clara, California 95051 Facsimile: 408-346-2206. Attn.: Director,
Backbone Engineering; Copy: General Counsel. The addresses set forth may be
changed by appropriate notice to the other party. 17.5 This Agreement and its
exhibits comprise the complete and exclusive statement of the agreement of the
parties concerning the subject matter hereof, and supersede all previous
statements, representations, and agreements concerning the subject matter
hereof.
18. APPLICATION OF TARIFFS. This Agreement is subject to and governed by the
terms of applicable Qwest tariffs ("Applicable Tariffs"). To the extent the
terms and conditions of this Agreement conflict with Applicable Tariffs, the
terms of the Applicable Tariffs shall control.
19. SERVICE LEVEL GUARANTEE. By utilizing state-of-the-art 4-fiber bi-
directional line switch routing synchronous optical network ("SONET") ring
technology, the Qwest platform will be able to automatically reroute around any
cuts in the transmission paths. Should a problem occur, the network elements
will reroute traffic in as little as 50ms and another 50ms propagation delay,
for a total objective of 100ms time to restore service. QWEST will backup the
systems availability with credits to Customer for outages in accordance with the
provisions of this Section 19. 19.1 Customer understands that this Service
Level Guarantee applies only to the Qwest Inter-Office Channels (IOC) for DS3,
STS-1, OC3 and OC12 level Facilities which have SONET ring back-up capabilities.
IOCs are provisioned between two or more QWEST Long Distance (LD) Points Of
Presence (POPs) and do not include the local access channel to the QWEST POP
from the customer at either origination or termination end of the IOC. Customer
further acknowledges that prior to such Facilities having SONET ring back-up
capabilities, Customer shall receive outage credits in accordance with the terms
and conditions as set forth in the Applicable Tariff. 19.2 For purposes of this
Agreement, an "Outage" shall mean an unscheduled period in which the service is
interrupted and not usable, measured by UAS (Unavailable Seconds) and alarm
indicators of more than TEN MINUTES in duration. UAS is defined in ANSI T1.231.
Customer shall be entitled to an Outage credit determined by the formula below
in the event of an Outage on the long distance portion of the point to point
connection:
Outage Time Credit for the Circuit
-------------------------------------------------------------
10 Minute 1 day per 10 minute Outage
19.3 Credit allowances will be administered on a per circuit basis. Credits for
the affected circuits will not exceed 100% of the monthly rate for that circuit.
Credits will be based on the results of investigation by QWEST for the
individual circuit outage. Credits will only be administered if the outage meets
the outage and reporting period
4
<PAGE>
and persists for a minimum duration of 10 minutes (600 contiguous seconds).
Customer must request a credit within seven (7) days of the existence of the
event that resulted in a credit for Customer to be eligible to receive a credit.
This Service Level Guarantee is not applicable to Outages attributable in whole
or in part from one or more of the following causes:
. Any act or omission on the part of customer, customer contractors, and
customer vendors, scheduled maintenance, and Qwest labor strikes,
natural disasters; or
. force majeure events beyond the reasonable control of QWEST (e.g. acts
of God, government regulation, national emergency, etc.) but excluding
any fiber cuts or other events caused by third parties on Facilities
having SONET ring back-up capabilities.
19.4 An Outage credit shall apply to the charges for the total mileage between
end terminals of any Facility affected by an Outage; provided, however, that if
any portion of the affected Facility remains beneficially used or useable by
Customer between any intermediate terminals (where Customer has installed drop
and insert capability) or end terminals, the Outage credit shall not apply to
that pro-rata portion of the mileage. An Outage shall be deemed to have
commenced upon verifiable notification thereof by Customer to Qwest, or when
indicated by network control information actually known to Qwest network
personnel, whichever is earlier. Each Outage shall be deemed to terminate upon
restoration of the affected service as evidenced by appropriate network tests by
Qwest. 19.5 Outage credits shall not be granted if the malfunction of any end-
to-end circuit is due to an outage or the defect occurring in the
Interconnection Facilities described in Section 5 of this Agreement that is not
within the reasonable control of Qwest. 19.6 All Outage credits shall be
credited on the next monthly invoice for the affected Facility and the total of
all Outage credits applicable to or accruing in a given month shall not exceed
the amount payable by Customer to Qwest for that same month for such Facility.
19.7 The Outage credits described in this Section 19 shall be the sole and
exclusive remedy of Customer in the event of any Outage. 19.8 Qwest shall give
notice to Customer of any scheduled outage as early as is practicable. To the
extent commercially reasonable, Qwest will coordinate with Customer to schedule
any routine maintenance or outage for periods that will minimize any adverse
affect on Customer. Notwithstanding the provisions set forth in this Section
19.8, in the event of an emergency Qwest shall use reasonable efforts to give
Customer advance notice of maintenance or repair of the Facilities.
20. CUSTOMER SERVICES
As partial consideration for the prices of the Facilities being ordered by
Customer hereunder and subject to the parties executing a collocation agreement,
Customer offers to Qwest the following collocation services at the prices set
forth below for a period three (3) years beginning on the Effective Date. Such
prices represent approximately $*** ($*** if the NY to Boston
Facility is ordered) off Customer's retail rates for Facility only services.
Should the parties execute a collocation agreement, such agreement shall
incorporate the following basic terms:
Services*: *** square feet of Internet Data Center
facilitized space to be made available on the
following terms**:
Location: Any Internet Data Center with available space
Minimum commitment per location: 224 square feet (four 7' x 8' cages)
Price: $*** per square foot per month
Installation Charge: $*** per location
*See attached specification sheet describing service in more detail. All
services must be purchased in minimum incremental amounts of 56 square feet (7'
x 8' cages). Additional space ordered for any single Internet Data Center may
not be contiguous, subject to availability.
5
<PAGE>
**In the event Customer purchases an OC-12 circuit from New York to Boston, the
total amount of square feet to be made available shall increase to ***.
***Confidential treatment has been requested for certain portions of this
document. Such omitted portions have been filed separately with the Securities
and Exchange Commission.
Note: Other Customer services (ie, bandwidth and managed services) will be
offered at a to be mutually agreed to price.
21. BILLING RAMP. During the first six (6) months following the installation
of each Facility ordered by Customer hereunder, Qwest will charge Customer the
following MRC: For the first and second full calendar months, Customer shall be
billed twenty-five percent (25%) of the IOC MRC for the Facility; for the third
and forth full calendar months, Customer shall be billed fifty percent (50%) of
the IOC MRC for the Facility; and for the fifth and sixth full calendar months,
Customer shall be billed seventy five percent (75%) of the IOC MRC for the
Facility. For months seven and beyond, Customer shall be billed one hundred
percent (100%) of the MRC for each Facility.
22. ROUTE DIVERSITY; NOTICE OF REGROOMING. Qwest will use commercially
reasonable efforts to notify Customer in writing before provisioning Facilities
that travel along the same geographic route. Qwest further agrees to use
commercially reasonable efforts to notify Customer prior to regrooming any
routes whereby two or more Facilities ordered by Customer hereunder travel along
the same geographic route. For purposes of meeting its obligations under this
Section 23, Qwest hereby notifies Customer that portions of the Santa Clara to
DC and DC to New York Facilities will travel along the same geographic route
until such Facilities have SONET ring back-up capabilities.
23. UPGRADES. Customer may terminate Facility orders without penalty during
the term of each Facility order if Customer orders a replacement Facility from
Qwest for a larger capacity (eg, OC-12 replaced by OC-48). The terms and
conditions of this Agreement shall apply to any such replacement Facilities.
CUSTOMER: EXODUS COMMUNICATIONS, INC. QWEST COMMUNICATIONS CORPORATION
By:____________________ By:______________________
Name:_______________ Name:_________________
Title:______________ Title:________________
DATE:_______________ DATE:_________________
6
<PAGE>
PRICING ADDENDUM - EXHIBIT A
QWEST COMMUNICATIONS
OC-12 INTEREXCHANGE SERVICE FOR
EXODUS
JULY 17, 1998
<TABLE>
<CAPTION>
IOC COC FEE ACCESS LOCAL LOOPS
3 Year Term: MRC NRC MRC NRC MRC NRC
From: to:
<S> <C> <C> <C> <C> <C> <C> <C>
201-222 (1) 617-442 $ *** $ *** $ *** $ *** $ *** $ ***
408-348 714-930 $ *** $ *** $ *** $ *** $ *** $ ***
201-222 703-995 $ *** $ *** $ *** $ *** $ *** $ ***
408-346 703-995 $ *** $ *** $ *** $ *** $ *** $ ***
TOTAL $ *** $ *** $ *** $ *** $ *** $ ***
</TABLE>
(1) This circuit can be ordered at any time during the first year of the service
term. Associated charges will start upon circuit installation.
Terms and Conditions:
1) Contract term is 3 years.
2) Except as otherwise provided in the Agreement, should Customer elect to
terminate service, or a portion of the service, prior to the end of the
term, charges equal to the following are immediately due and payable:
a: Any previously waived installation fees applicable pro
rated by multiplying the number of months remaining in
the agreement and dividing by the number of months in
the original agreement.
b: 50% of the applicable monthly recurring fees (MRC)
remaining in the agreement to a maximum of 12 months
plus 10% of any remaining monthly recurring fees beyond
twelve months.
3) Qwest's Interstate Private Line services tariff is applicable unless
specifically modified by this agreement.
4) Upon prior written notification to Customer and the opportunity to
withdraw its order, Customer is responsible for any special construction
needed for local loop route diversity.
5) Local loops are subject to availability of specific SONET engineering at
LEC serving wire centers.
6) Service is subject to availability of network.
Agreed:
for Exodus Communications; Qwest Communications Corporation
ELLEN HANCOCK STEVEN DICKERSON
- --------------------------- -----------------------------------------
Name Name (Sales Representative)
President Director of Sales
- --------------------------- -----------------------------------------
Title Date Title Date
LEWIS WILKS
-----------------------------------------
Authorized Qwest Marketing Representative
President-Business Markets
-----------------------------------------
Title Date
*** Confidential treatment has been requested for certain portions of this
document. Such omitted portions have been filed separately with the
Securities and Exchange Commission.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 60,720
<SECURITIES> 0
<RECEIVABLES> 4,728
<ALLOWANCES> (344)
<INVENTORY> 207
<CURRENT-ASSETS> 67,186
<PP&E> 51,565
<DEPRECIATION> (8,460)
<TOTAL-ASSETS> 113,040
<CURRENT-LIABILITIES> 27,615
<BONDS> 0
0
0
<COMMON> 19
<OTHER-SE> 55,492
<TOTAL-LIABILITY-AND-EQUITY> 113,040
<SALES> 762
<TOTAL-REVENUES> 17,176
<CGS> 607
<TOTAL-COSTS> 22,864
<OTHER-EXPENSES> 20,601
<LOSS-PROVISION> 437
<INTEREST-EXPENSE> 1,108
<INCOME-PRETAX> (27,397)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (27,397)
<EPS-PRIMARY> (2.57)
<EPS-DILUTED> (2.57)
</TABLE>
